0000950133-95-000518.txt : 19950918 0000950133-95-000518.hdr.sgml : 19950918 ACCESSION NUMBER: 0000950133-95-000518 CONFORMED SUBMISSION TYPE: 10-K405 PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950915 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MICROS SYSTEMS INC CENTRAL INDEX KEY: 0000320345 STANDARD INDUSTRIAL CLASSIFICATION: CALCULATING & ACCOUNTING MACHINES (NO ELECTRONIC COMPUTERS) [3578] IRS NUMBER: 521101488 STATE OF INCORPORATION: MD FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K405 SEC ACT: 1934 Act SEC FILE NUMBER: 000-09993 FILM NUMBER: 95574345 BUSINESS ADDRESS: STREET 1: 12000 BALTIMORE AVE CITY: BELTSVILLE STATE: MD ZIP: 20705 BUSINESS PHONE: 3012016000 MAIL ADDRESS: STREET 1: 12000 BALTIMORE AVE CITY: BELTSVILLE STATE: MD ZIP: 20705-1291 10-K405 1 MICROS SYSTEM FORM 10-K405 FOR PERIOD END 6/30/95 1 FORM 10-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 /x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Fiscal Year Ended June 30, 1995 OR / / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 [FEE REQUIRED] For the Transition Period From __________ to __________ Commission File Number 0-9993 MICROS SYSTEMS, INC. -------------------- (Exact name of registrant as specified in its charter)
Maryland 52-1101488 ------------------------------------- ------------------ State or other jurisdiction of (I.R.S. Employer incorporation or organization Identification No.) 12000 Baltimore Avenue 20705-1291 Beltsville, Maryland (Zip Code) (Address of principal executive offices)
Registrant's telephone number, including area code: 301-210-6000 Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Common Stock, Par Value $.025 per share ------------------------------------------------------------ (Title of Class) Indicate by a check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No --------- ----- Indicate 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. /X/ At the close of business on August 31, 1995, there were issued and outstanding 7,859,261 shares of Registrant's Common Stock at $.025 par value. At such time the aggregate market value of the Registrant's Common Stock held by nonaffiliates of the Registrant was $136,845,959. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Proxy Statement for the 1995 Annual Meeting of Shareholders currently scheduled to be held on November 17, 1995, are incorporated by reference in Part III of this Form 10-K. -1- 2 PART I ITEM 1. BUSINESS INTRODUCTION MICROS Systems, Inc. was incorporated in the State of Maryland in 1977 as Picos Manufacturing, Inc. and, in 1978, changed its name to MICROS Systems, Inc. (References to "MICROS" or the "Company" herein include the operations of MICROS Systems, Inc. and its subsidiaries on a consolidated basis.) MICROS Systems, Inc. is a 49% owned investee of Westinghouse Holdings Corporation, a wholly-owned subsidiary of Westinghouse Electric Corporation ("Westinghouse"), after Westinghouse Holdings Corporation sold 1,000,000 shares of the Company on July 6, 1995. MICROS is a leading worldwide designer, manufacturer, supplier and servicer of point-of-sale ("POS") computer systems for hospitality providers, principally full service and fast food restaurants, including restaurants located in hotels and other lodging establishments. MICROS POS systems consist of terminals, display devices, printers, computers and software which provide transaction processing, in-store control and information management capabilities. The Company's POS systems, which are installed in over 32,000 independent, national and international full service restaurants and over 3,000 fast food restaurants, enable users to control operations and inventory, enhance customer service efficiency, reduce labor costs, increase productivity and improve planning and reporting. MICROS is a major supplier of POS systems to full service restaurants or operators of restaurants such as T.G.I. Friday's, Family Restaurants, Perkins, Planet Hollywood, Ruby Tuesday's, and Whitbread; to fast food restaurants such as Arby's, Burger King and Wendy's; and to full service restaurants in hotels such as Hilton, Hilton International, Hyatt, Inter-Continental, Marriott, Radisson and Ritz-Carlton. New target markets for the Company's POS systems include casinos, cruise ships, sports arenas, theme parks, institutional food service organizations and specialty retail shops. The Company has installed large POS systems in the Luxor Hotel and Casino and the MGM Grand Hotel Casino and Theme Park in Las Vegas, Nevada. The full service restaurant POS market consists of both stand-alone restaurants and restaurants located in lodging operations in which servers use guest checks to take orders at tables. The Company's customers in this market include independent restaurants, franchisees, small chains and large national and international chains. In the fast food restaurant POS market, the typical MICROS customer is a franchisee of a national fast food chain operating multiple restaurants. 2 3 The Company's POS products are sold by approximately 57 employees through a Company-owned sales distribution network consisting of 9 domestic and 4 foreign sales offices and through MICROS' Major Accounts Program to large regional, national and international customers (the "Direct POS Sales Channel"). The Company's POS products are also sold through an independent sales distribution network consisting of 113 U.S. dealers and 48 foreign distributors (the "Indirect POS Sales Channel"). The Company also markets and distributes property management information systems ("PMS") products which provide reservation, guest accounting and other information management capabilities to hotels and other lodging establishments. The PMS products marketed and distributed by the Company are supplied by Fidelio Software GmbH, a German company ("Fidelio"). MICROS owns a 30% interest in Fidelio and has an option to acquire the remaining 70%. The Company has installed over 600 Fidelio PMS systems, including systems installed in various Radisson Hotels, Red Roof Inns, and Wyndham Hotels and Resorts. Fidelio products are installed in over 3,600 sites worldwide, including certain Ciga, Forte, Hilton International, Inter-Continental, Kempinski, Mandarin Oriental, Movenpick, Peninsula, Ramada Europe, Shangri-La and Steigenberger locations. The Company's recently developed POS systems, as well as many POS systems offered by other suppliers, are compatible with Fidelio PMS products. Majority-owned subsidiaries of the Company have the exclusive distribution rights to Fidelio products in the Americas, the United Kingdom and France. Many of the new target markets for the Company's POS systems, including casinos, cruise ships and theme parks, are also new target markets for Fidelio PMS products. MICROS also offers service and support for its POS and PMS products, including installation, training, hardware and software maintenance, spare parts, media supplies and consulting services. Service revenue constituted approximately 23%, 21% and 20% of the Company's total revenue in fiscal 1995, 1994 and 1993, respectively. PRODUCTS Point-of-Sale Systems MICROS markets a wide range of POS systems capable of meeting the functionality and cost control needs of customers in various segments of the hospitality industry. -3- 4 The Company's POS systems consist of terminals, display devices, printers, computers and software which provide transaction processing, in-store control and information management capabilities. All proprietary POS hardware is designed to withstand the elements of the restaurant environment. The Company's principal POS products are the 8700 Hospitality Management System ("HMS"), the 2700 HMS, the 2700 HMS Keyboard and the 2700 HMS Touchscreen System. Other products include the 4700 HMS, the 1700 HMS and the 2400 Fast Food System ("FFS"). The 8700 HMS, introduced in September 1993, is designed for hotels, resorts, casinos, airports, sports arenas, theme parks and large local and chain restaurants. It allows the user the flexibility to configure the system around various hardware and software choices to control restaurant and food service operations at both the server and management levels. Features of the 8700 HMS include customized workstations, including customized keyboard and printer configurations, touchscreen capability, flexible guest check printing, detachable raised or flat keyboards, time and attendance capability with complete time card detail and labor scheduling, training mode by operators, check tracking by table or check, automatic credit card authorization with expiration date verification, extensive revenue center and system-wide reporting which analyzes sales mix, sales balancing, serving periods, table turns, time periods, food cost and operator accountability, the ability to split checks into multiple checks and hardware diagnostic and software confidence tests. The 8700 HMS POS product has been designed with an "open system architecture," which allows its use on industry standard PCs as well as on the Company's proprietary hardware. MICROS made a strategic decision to offer a PC-based platform in order to complement its proprietary hardware and to give its customers a wide range of hardware and software options for MICROS POS systems. The 8700 HMS is operated on an Intel-based PC and utilizes the SCO Unix operating system, which permits multi-tasking and multi-user operations. Its architecture gives it the ability to manage any size restaurant or food service operation. The 2700 HMS, released in March 1989, and the 1700 HMS, introduced in January 1990, are stand-alone intelligent terminals designed for small to large full service restaurants and for certain fast food operations. The 2700 HMS is available in both an entry level and premium platform, relies on proprietary architecture and interfaces with DOS/Windows-based back office support. The 2700 HMS -4- 5 Touchscreen System, released in September 1991, combines advanced touchscreen technology with the Company's 2700 HMS POS system. It offers an easy-touch electronic keypad with up to 60 entry points that can be customized according to size and characters, dual LCD screens to speed up order entry and reduce operator error, PC compatibility, lead-through prompting and reprogramming of the system software and keyboards through remote communications via phone lines. The Company's 4700 HMS, introduced in May 1986, is a DOS-based, PC-driven POS system for operational control of full service dining operations. The system incorporates modular hardware components that allow for customization and includes a number of important features to assist users with daily operations. The Handheld Touchscreen terminal ("HHT"), introduced in March 1993, is a small, handheld, remote order entry touchscreen computer device which allows a server to enter a guest's food and beverage order at the table or seat-side. The HHT is best suited for larger operations with distant seating locations such as sports arenas and pool-side restaurants. The HHT is integrated with the MICROS 4700 HMS and integration with the 8700 HMS is planned by the end of the calendar year. In the fast food restaurant sector, MICROS markets the 2400 FFS, which is based primarily on the hardware platform used in the 2700 HMS with fast food application software. The system, introduced in October 1991, features a networked intelligent terminal architecture. A remote printer and video screen subsystem accommodate a wide variety of kitchen production and order routing schemes. The system's applications software meets fast food requirements in the areas of order entry, drive-thru operation, inventory tracking, employee timekeeping/labor tracking and data communications and produces a variety of management reports through an interface with back office PCs. The Manager Workstation ("MWS") software introduced in June 1993 is a PC-based software product which provides for management analysis of sales and operational trends at fast food restaurants, both at the store and corporate levels, and permits the integration of point-of-sale functions with in-store back office, regional and home office management information system functions. An upgraded MWS which is currently under development is intended to broaden the scope of information management, including multi-store database maintenance capabilities, and to provide a migration path -5- 6 for current users of the 2400 FFS into the next generation of MICROS fast food POS systems. The Company's design architecture allows existing users of many MICROS POS products to access new technologies and applications without losing their investment in their existing MICROS POS system. In addition, many MICROS systems interface to various back office accounting and property management systems, including the Company's Fidelio PMS products. Property Management Systems For the PMS sector, MICROS markets and distributes a complete line of PMS products supplied by Fidelio. The Front Office system, installed worldwide in leading international hotel chains, is available in multiple configurations covering the spectrum of hotels/resorts from the road-side hotel to the large five-star resort. The Front Office PMS product is closely integrated with MICROS POS systems for full service restaurants, including the option for a Guest Folio Print & Check-out from the Company's 8700 HMS User Work Station/3 terminal in a hotel restaurant. Other PMS software products marketed and supported by MICROS include Food & Beverage Management, Sales and Catering, Cruise-line operations and Casino-PMS. SALES, MARKETING AND DISTRIBUTION The Company considers its direct and indirect global distribution network a major strength. This network has been built over the past 18 years, and the Company and its dealers and distributors work closely together in seeking to identify new customers, products, services and markets and to serve the Company's existing customer base with enhanced products and services in accordance with their needs. The Company's POS products are sold by approximately 57 employees through a Company-owned Direct POS Sales Channel consisting of nine domestic and four foreign sales offices serving Germany, Spain, Switzerland and the United Kingdom and MICROS' Major Accounts Program for large regional, national and international customers. The Company's POS products are also sold through its Indirect POS Sales Channel consisting of 113 U.S. dealers, 16 non-U.S. western hemisphere distributors, 14 distributors in the Asia/Pacific region and 18 distributors in the Europe/Africa/Middle East region. The Company owns majority -6- 7 interests in one of its U.S. dealers and one of its international distributors (which was a minority interest as of June 30, 1995. See Recent Developments below). Currently, three majority-owned subsidiaries of the Company have the exclusive distribution rights to Fidelio PMS products in the Americas, the United Kingdom and France. Foreign sales accounted for approximately 33%, 29% and 26% of the Company's total revenue in fiscal 1995, 1994 and 1993, respectively. CUSTOMER SERVICE AND SUPPORT The Company is committed to providing customers with superior service and support, including installation, training, hardware and software maintenance, spare parts, media supplies (ribbons, paper, etc.) and consulting services. The Company has developed a comprehensive MICROS Service Network pursuant to contracts with its dealers and distributors with the goal of providing its customers with uniform service in installing and maintaining systems, on-going training, prompt field service and timely availability of spare parts. The Company believes that services are an important competitive factor and differentiator and has been building its service infrastructure by adding application and technology specialists to support software and hardware systems. Service revenue constituted approximately 23%, 21% and 20% of the Company's total revenue in 1995, 1994 and 1993, respectively. RESEARCH AND DEVELOPMENT The products sold by the Company are subject to rapid and continual technological change. The Company's product development strategy is to provide compatible systems incorporating the newest technologies. This strategy allows users to configure systems around various hardware and software choices, adding new functions to their hospitality information systems that enhance their operations. Products available from the Company, as well as its competitors, have increasingly offered a wider range of features and capabilities. -7- 8 The Company conducts its own product development at its research and development facility located at its corporate headquarters in Beltsville, Maryland. To supplement its own efforts, the Company occasionally utilizes outside design services for product development. In addition, the Company continually examines and evaluates software and hardware products and designs created by third parties and has acquired and may in the future acquire rights to such products and designs. The Company estimated that during fiscal 1995, 1994 and 1993, it expended approximately $5,044,300, $3,589,200 and $3,704,100, respectively, on engineering design and development of new products and enhancements of existing products, before the effect of the capitalization and amortization of software development costs. The Company capitalized $286,200, $196,900 and $802,900 during fiscal 1995, 1994 and 1993, respectively, while amortizing $489,900, $438,800 and $140,700 to cost of sales in the respective years in accordance with Statement of Financial Accounting Standards No. 86. COMPETITION The Company believes that its competitive strengths include its established global distribution and service network, its relationship with Fidelio and its corporate focus on providing information systems solutions principally to the hospitality industry. The markets in which the Company competes are highly competitive. There are worldwide at least 40 competitors that offer some form of sophisticated POS system similar to the Company's and over 100 PMS competitors. Competitors in the POS marketplace include full service providers such as Sulcus (Squirrel POS), Sharp, Positouch, Par Technology and Panasonic and hardware providers such as IBM and AT&T/GIS (formerly NCR) who market their products in conjunction with independent software vendors. There are also numerous smaller companies that market PC-based systems with POS-oriented software. Many of the over 100 competitors in the PMS market are small companies with software designed to run on industry standard personal computers. There are, however, various major competitors including Sulcus (Lodgistix PMS), Hotel Information Systems, Encore and property management systems developed and marketed by major hotel chains for their corporate-owned operations and franchisees. -8- 9 MANUFACTURING The Company's manufacturing program seeks to maintain flexibility and reduce costs by emphasizing the strategic outsourcing of key product components and subassemblies. All lower level assemblies such as printed circuit assemblies, mechanical assemblies and cables are outsourced based on competitive bidding. The outsourcing process includes evaluating supplier processes, quality assurance, test capability and management and technical support structures, as well as price and delivery cycle. Whenever feasible, a second source is developed to reduce one-supplier dependence. Outsourcing reduces requirements for manpower, capital equipment and facilities, thus lowering overhead costs. Most outsourcing contracts are short term (two years or less) based on quality points or strategic requirements with key price components traced to monitor cost competitiveness. The Company believes it maintains excellent relationships with its suppliers. The Company's manufacturing operation is located at its corporate headquarters in Beltsville, Maryland and consists primarily of assembly and testing of various purchased components, parts and subassemblies. Product reliability and quality are emphasized through stringent design reviews, sophisticated computer testing of printed circuit assemblies, final product testing and numerous quality control audits. Material sourcing is based on availability, service, cost, delivery and quality of the purchased items from domestic and international suppliers. Some items are custom manufactured to the Company's design specifications. MICROS believes that the loss of its current sources for components would not have a material adverse effect on the Company's business since other sources of supply are generally available. EMPLOYEES As of June 30, 1995, the Company had approximately 653 full-time employees, of whom approximately 525 were based in the U.S. and approximately 128 were based internationally serving Europe, the Middle East, Africa and Asia/Pacific. Approximately 72 employees are engaged in product development, 85 in operations, 456 in marketing, sales and customer support services and 40 in administration and finance. The Company is not a party to any collective bargaining agreement and none of its employees is -9- 10 represented by a labor union. MICROS believes its relations with its employees to be good. FOREIGN SALES The Company recorded foreign sales of approximately $37,100,000 during fiscal 1995 to customers located primarily in Europe, Africa, the Middle East, Australia, Asia, and Canada. Comparable sales in fiscal 1994 were approximately $22,700,000 and in fiscal 1993 were approximately $14,600,000. See Note 13 of Notes to Consolidated Financial Statements. PATENTS The Company holds no patents and believes that its competitive position is not materially dependent upon patent protection. The technology used in the design and manufacture of most of the Company's products is generally known and available to others. See Item 3 -- Legal Proceedings, for an adverse claim. FLUCTUATIONS AND CUSTOMERS The Company's quarterly operating results have varied in the past and may vary in the future depending upon such factors as the timing of new product introductions, changes in the pricing and promotion policies of the Company and its competitors, market acceptance of new products and enhanced versions of existing products and the capital expenditure budgets of its customers. Although the Company does not consider its business to be seasonal, for a variety of reasons as noted above, certain quarters have historically been stronger than other quarters. The Company believes that quarter-to-quarter comparisons of its results are not necessarily meaningful or indicative of future performance. No single customer accounts for 10% or more of the Company's consolidated revenues, nor is a portion of the Company's business subject to renegotiation of profits or termination of contracts or subcontracts at the election of the Government. ENVIRONMENTAL MATTERS The Company believes that it is in compliance in all material respects with all applicable environmental laws and does not anticipate that such compliance will have a -10- 11 material effect on its future capital expenditures, earnings or competitive position with respect to any of its operations. BACKLOG The Company generally has a backlog of less than one month's revenue, substantially all of which is cancelable at any time prior to shipment, although historically few orders have been canceled. As of June 30, 1995 and 1994 the backlog totaled approximately $10.8 million and $7.9 million, respectively. OTHER The Company has not used its revolving credit line during the past several years due to its substantial cash balances and ability to fund the expansion of its business through operations. RECENT DEVELOPMENTS On August 25, 1995, the Company purchased from Daniel Cohen (a director of the Company) and his family (the "Cohen Family"), the remaining 77% of D.A.C. Systemes/MICROS France and AD-Maintenance Informatique ("ADMI") for FF 14.0 million (approximately $2.8 million at exchange rates in effect at the date of purchase), payable FF 8.0 million at closing and FF 6.0 million over the next four years, plus potential additional payments based on earnings over the next four years. In addition, Mr. Cohen was granted a five year employment contract at FF 600,000 (approximately $119,000 at exchange rates in effect at the date of purchase) per year plus a bonus based on future operating results. Merger of D.A.C. Systemes/MICROS France and ADMI, previously 23% owned equity investees, and Fidelio France, currently a 51% owned consolidated subsidiary, is in the process of being consummated, after which the Company will own 97% of the merged Fidelio/MICROS France entity, and Fidelio GmbH, a 30% owned equity investee of the Company, will own the remaining 3%. Fidelio/MICROS France will be consolidated into the Company's accounts from the date of purchase. See Note 15 of Notes to Consolidated Financial Statements. See Part III, Item 12--Changes in Control, for additional recent developments. -11- 12 ITEM 2. PROPERTIES The Company's executive offices and its main administrative, manufacturing, sales, marketing, customer service and product development facilities are located in Beltsville, Maryland in three buildings; (i) one building is approximately 60,000 square feet and is owned by the Company; (ii) a second building is approximately 90,000 square feet, approximately 44,900 of which is leased by the Company through 2009, with options to increase its leased space during that period and an option to purchase the entire building for ten dollars in the year 2009; and (iii) a third building of 21,600 square feet which is leased under an operating lease by the Company through September 30, 1998. The Company leases 9 domestic and 7 foreign sales, service and support offices located in Boston, Chicago, Dallas, Denver, Las Vegas, Los Angeles, Miami, Portland (Oregon), San Francisco, Dusseldorf, Frankfurt, London, Madrid, Paris, Singapore and Zurich. The Company believes that additional space will be available as needed. ITEM 3. LEGAL PROCEEDINGS MICROS is and has been involved in legal proceedings arising in the normal course of business. The Company is of the opinion, based upon presently available information and the advice of counsel concerning pertinent legal matters, that any resulting liability would not have a material adverse effect on the Company's results of operations or financial position. See Note 7 of Notes to Consolidated Financial Statements. In December 1994, the Company received a claim that its touchscreen product line infringes certain patents in several European countries, including France, Germany and the United Kingdom. Preliminary investigation indicates that the asserted patents may be unenforceable because similar products were known and available in the market prior to the relevant filing dates. While the ultimate outcome of this matter is uncertain, the Company does not believe that the claim will have a material adverse effect on its business, financial condition or results of operations. -12- 13 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS During the fourth quarter of fiscal 1995, no matters were submitted to a vote of security holders. -13- 14 PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED STOCKHOLDER MATTERS Price Range of Common Stock As of June 30, 1995, there were approximately 491 record holders of the Company's Common Stock, $.025 par value. Bid and ask prices for the Company's Common Stock (symbol "MCRS") have been quoted on the National Association of Securities Dealers Automated Quotation ("NASDAQ") system. The following table shows the range of closing bid prices for the period indicated, as reported by NASDAQ. The quotations represent prices in the over-the-counter market between dealers in securities, do not include retail markup, markdown, or commission, and may not necessarily represent actual transactions. On August 31, 1995 the closing bid price for the stock was $34-1/8.
Bid Prices ----------------- (in dollars) ----------------- Year Ended June 30, 1995 High Low ------------------------ ---- --- 7/01/94 - 9/30/94 (First Quarter) 33-1/2 26-1/4 10/01/94 - 12/31/94 (Second Quarter) 41-1/4 28-3/4 1/01/95 - 3/31/95 (Third Quarter) 38-1/8 28 4/01/95 - 6/30/95 (Fourth Quarter) 35 27-3/4 Year Ended June 30, 1994 ------------------------ 7/01/93 - 9/30/93 (First Quarter) 20-1/2 13-1/2 10/01/93 - 12/31/93 (Second Quarter) 26 14-3/4 1/01/94 - 3/31/94 (Third Quarter) 29-1/2 23-1/4 4/01/94 - 6/30/94 (Fourth Quarter) 27-3/4 22-1/2
-14- 15 Year Ended June 30, 1993 ------------------------ 7/01/92 - 9/30/92 (First Quarter) 10 7-1/4 10/01/92 - 12/31/92 (Second Quarter) 22-3/4 9-1/8 1/01/93 - 3/31/93 (Third Quarter) 22-3/4 11-3/4 4/01/93 - 6/30/93 (Fourth Quarter) 16 13-1/4
The Company has never paid a dividend. The Company has no current intention to pay any dividends. Its current policy is to retain earnings and use funds for the operation and expansion of its business. In addition, certain indebtedness restricts the amount of cash dividends which may be payable. The Company is a party to a Loan Agreement expiring December 31, 1996, which restricts the payment of dividends other than stock dividends (see Note 4 of Notes to Consolidated Financial Statements). Future dividend policy will be determined by the Board of Directors based on the Company's earnings, financial condition, capital requirements and other existing conditions. ITEM 6. SELECTED CONSOLIDATED FINANCIAL DATA (in thousands except per share amounts)
Fiscal Years Ended June 30, ----------------------------------------------------------------------- 1995 1994 1993 1992 1991 ----------- ----------- ----------- ----------- ----------- Statement of Operations Data ------------------------------------- Revenue $ 112,021 $79,265 $55,314 $44,328 $39,626 Income from operations $ 16,542 $12,322 $ 9,409 $ 5,784 $ 4,606 Net income $ 11,577 $ 8,687 $ 5,760 $ 4,019 $ 3,280 Net income per common and common equivalent share $ 1.46 $ 1.10 $ 0.74 $ 0.53 $ 0.44 Cash dividends - - - - - Balance Sheet Data ------------------------------------- Working capital $ 37,029 $27,126 $18,216 $18,400 $15,411 Total assets $ 89,644 $66,191 $48,207 $37,404 $30,707 Long-term debt (1) $ 5,614 $ 5,803 $ 1,780 $ 1,779 $ 1,952 Shareholders' equity $ 53,450 $39,938 $29,970 $23,559 $19,208
-15- 16 Book value per share $ 6.72 $ 5.05 $ 3.84 $ 3.08 $ 2.55 Additional Data ------------------------------------- Weighted average number of common and common equivalent shares outstanding 7,952 7,911 7,807 7,640 7,531
(1) Including current portion. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Results of Operations Comparison of Fiscal 1995 to Fiscal 1994: Revenue for fiscal year 1995 was $112.0 million, an increase of $32.8 million, or 41.3%, compared to last year. Sales increased in every distribution channel worldwide, with a substantial portion of the increase attributable to the Company's 8700 HMS. Sales through the Company's direct sales channels increased $26.7 million over fiscal 1994, including sales of POS hardware, software and services through the Major Accounts channel which increased $9.9 million compared to fiscal 1994 and Property Management System sales through the Company's three Fidelio subsidiaries which increased $4.6 million. Sales by the nine North American district offices increased $6.1 million over fiscal 1994, including $1.8 million due to the addition of the Denver and Portland district offices. Continued market share gains in the Company's four European POS subsidiaries added $6.0 million in fiscal 1995 compared to fiscal 1994. Sales through the indirect sales channels to independent dealers and distributors worldwide increased $6.1 million in fiscal 1995. Hardware and software sales increased 37.6% while service related revenues increased 55.1%. Cost of sales, as a percentage of revenue, increased to 50.2% for fiscal 1995 compared to 49.8% for fiscal 1994. Cost of sales for hardware and software products, as a percentage of related revenue, decreased to 51.8% for fiscal 1995 compared to 52.0% for fiscal 1994, primarily due to higher software sales as a percent of total sales. Service costs, as a percentage of related revenue, increased in fiscal 1995 to 45.0% from 41.5% in fiscal 1994. -16- 17 Such increases are primarily due to higher labor costs related to subcontracting and training labor to meet the volume of 8700 HMS and Fidelio installations and increased material costs to service maintenance contracts. Selling, general and administrative expenses increased $10.0 million, or 43.6%, in fiscal 1995 compared to the prior year. As a percentage of revenue, selling, general and administrative expenses increased to 29.3% in fiscal 1995 compared to 28.8% in fiscal 1994. The increases are primarily the result of the increased emphasis on the Company's sales and service organizations, including the addition of three U.S. sales and service offices and increased sales and service staffing worldwide. In addition, the Company incurred approximately $437,000 or .4% of revenue in expenses due to the Westinghouse incentive bonus payments to 11 key officers of the Company. (See Note 11 of Notes to Consolidated Financial Statements). Research and development expenses (exclusive of capitalized software development costs), which consist primarily of labor costs, increased $1.4 million, or 40.3%, in fiscal 1995 compared to fiscal 1994. Actual research and development expenditures, including capitalized software development costs of $286,200 in fiscal 1995 and $196,900 in fiscal 1994, increased $1.5 million, or 40.5% in fiscal 1995 compared to fiscal 1994. Income from operations was $16.5 million, or 14.8% of revenue in fiscal 1995, an increase of 34.2% over the prior year when income from operations was $12.3 million, or 15.5% of revenue. Income from operations in fiscal 1995, as a percentage of revenue, excluding the additional $437,000 in costs incurred due to the Westinghouse incentive bonus payments, was 15.2%. Interest income increased $521,300 or 80.0%, in fiscal 1995 as a result of an increase in interest rates on investments and an increase in investment balances. Interest expense increased $180,500 to $368,800 in fiscal 1995 from $188,300 in fiscal 1994, primarily as a result of interest on the capital lease entered into by the Company in January 1994. The Company has recently experienced rapid revenue growth at a rate that it believes has significantly exceeded that of the global market for point-of-sale computer systems and property management information systems products for the hospitality industry. Although the Company currently -17- 18 anticipates continued revenue growth at a rate in excess of such market, and therefore an increase in its overall market share, it does not expect to maintain growth at recent levels and there can be no assurance that any particular level of growth can be achieved. In addition, due to the competitive nature of the market, the Company recently has experienced greater gross margin pressure on its products than it has in the past, and the Company expects this trend to continue. There can be no assurance that the Company will be able to increase sufficiently sales of its higher margin products, including software and services, to prevent declines in the Company's overall gross margin. Comparison of Fiscal 1994 to Fiscal 1993 Revenue increased $24.0 million, or 43.3%, over fiscal 1993 with all distribution channels showing increases. Sales of POS hardware, software and services to North American dealers grew $6.9 million and to North American Major Account customers grew $5.2 million over fiscal 1993 on the strength of the Company's newly introduced 8700 HMS and continued success of the 2000 series HMS. Sales through the Company's six foreign subsidiaries increased $5.5 million over fiscal 1993, and sales through foreign distributors in the Europe/Africa/Middle East and Asia/Pacific regions increased $1.9 million. Cost of sales, as a percentage of revenue, increased from 45.5% in fiscal 1993 to 49.8% in fiscal 1994. Cost of sales for hardware and software products, as a percentage of related revenue, increased to 52.0% in fiscal 1994 from 46.5% in fiscal 1993. The increase was due to a strategic price reduction on certain products and an increase in volume of lower margin products, partially offset by a favorable shift in sales distribution from the indirect to direct sales channels. Cost of service, as a percentage of related revenue, decreased slightly to 41.5% in fiscal 1994 from 41.6% in fiscal 1993. Selling, general and administrative expenses increased $6.0 million, or 35.4%, in fiscal 1994 compared to fiscal 1993, primarily as a result of increased sales and support activities, including those of the Company's PMS subsidiaries, with the largest portion attributable to increased staffing costs. However, as a percentage of revenue, such expenses decreased to 28.8% in fiscal 1994 from 30.5% in fiscal 1993. The decrease was due to effectively controlling the growth in expenses as the Company expanded its operations. -18- 19 Research and development expenses (exclusive of capitalized software development costs) increased $491,100, or 16.9%, to $3.4 million in fiscal 1994. Actual research and development expenditures decreased $114,900, or 3.1%, in fiscal 1994. The decrease was primarily due to the higher level of labor and material expenditures in fiscal 1993 to prepare the Company's 8700 HMS released in the first quarter of fiscal 1994. Income from operations increased $2.9 million, or 31.0%, in fiscal 1994 to $12.3 million. As a percentage of revenue, income from operations decreased from 17.0% in fiscal 1993 to 15.5% in fiscal 1994 due to a decline in hardware and related software margins offset to some extent primarily by lower selling, general and administrative expenses as a percentage of revenue. Interest income increased $284,900, or 77.7%, in fiscal 1994 as a result of interest earned on a loan to Fidelio and a shift in certain investments from those earning dividends to interest-bearing investments. Interest expense increased to $188,300 in fiscal 1994 from $54,600 in fiscal 1993 due to the interest on the capital lease entered into by the Company in January 1994. Other non-operating expense, net, decreased $730,500, to $201,100, in fiscal 1994 primarily due to foreign currency translation gains in fiscal 1994, versus losses in fiscal 1993, from the investment in and loan to Fidelio. Liquidity and Capital Resources Effective January 1, 1994, the Company had a $10.0 million unsecured committed line of credit with its bank which expired February 9, 1995. On February 9, 1995, the Company obtained a $15.0 million unsecured committed line of credit with its bank which expires December 31, 1996 and which replaces the expired $10.0 million line of credit. There were no borrowings under either line of credit facility during fiscal 1994 or fiscal 1995. The Company has generated sufficient cash flow through its operations during these periods and has significant funds available in cash and highly-liquid investments to meet its immediate needs. Net cash provided by operating activities was $13.0 million for fiscal 1995 and $4.6 million for fiscal -19- 20 1994. Proceeds from the issuance of stock under the Company's incentive stock option plan provided $353,400 for fiscal 1995 and $680,200 for fiscal 1994. The income tax benefit from the exercise of disqualified stock options provided $361,100 for fiscal 1995 and $356,700 for fiscal 1994. During fiscal 1995, the Company used cash of $11.8 million in investing activities, including $2.6 million for the purchase of property, plant and equipment, $8.1 million for the purchase of short-term investments, $205,700 for the purchase of net district assets and $3.5 million primarily for the purchase of an additional 15% interest in Fidelio, offset by $3.2 million in net proceeds from the repayment of a loan to Fidelio and $210,100 in dividends from affiliates. The Company has the right to acquire all or part of the remaining shares of Fidelio on or before December 31, 1999, at a price to be determined based on an agreed upon formula. See Note 3 of Notes to Consolidated Financial Statements. The Company used $1.2 million in fiscal 1994 for the purchase of property, plant and equipment and $653,600 to purchase district assets and equity interests in investees. In addition, capitalized software development costs were $286,200 in fiscal 1995 compared to $196,900 in fiscal 1994. The Company made debt repayments of $321,600 on its building loan and capital lease in fiscal 1995 and $257,100 during fiscal 1994. As a result, the cash position of the Company at June 30, 1995 was $18.3 million. All cash is being held for the operation and expansion of the business. In connection with the Company's increase in ownership of Fidelio in fiscal 1995 from 15% to 30%, the Company loaned Fidelio DM 900,000 (approximately $600,000), which bears interest at a variable rate, and is obligated to -20- 21 make additional loans of up to DM 600,000 (approximately $400,000), all of which loans are to be repaid by December 31, 2000. The obligation of the Company to make the further loans to Fidelio is conditioned on Fidelio's other shareholders increasing their current loans to Fidelio from DM 2.1 million (approximately $1.4 million) to an aggregate amount of up to DM 3.5 million (approximately $2.3 million). As a result of the fiscal 1993 investment in and loan to Fidelio being realizable only in Deutsche Marks, MICROS was subject to currency risks between the Deutsche Mark and the U.S. Dollar through September 30, 1994. As a result of this investment and loan, a currency translation gain of $187,800 and $446,000 were recognized as Other Income in fiscal 1995 and 1994, respectively, and a currency translation loss of $462,200 was recognized as Other Expense in fiscal 1993. MICROS continues to be subject to currency risks between the Deutsche Mark and the U.S. Dollar with respect to the DM 900,000 loan which is realizable only in Deutsche Marks and which is to be repaid by December 31, 2000. The Company does not engage in any foreign exchange hedging. Financial indicators of the Company's liquidity and capital resources as of June 30, 1995 and 1994 were:
In thousands, except ratios 1995 1994 --------------------------- ---- ---- Cash and cash equivalents $18,315 $16,339 ======= ======= Short term investments $ 8,070 -- ======= ======= Available line of credit $15,000 $10,000 Outstanding letters of credit -- -- ------- ------- Unused bank line of credit $15,000 $10,000 ======= ======= Working capital $37,029 $27,126 ======= ======= Long-term debt and capital lease obligation: Current $ 363 $ 307 Non-current 5,251 5,496 ------- ------- Total $ 5,614 $ 5,803 ======= ======= Shareholders' equity $53,450 $39,938 ======= =======
-21- 22 Current ratio 2.25 2.39 ==== ====
Inflation The Company has not experienced any significant impact as a result of inflation. Effect of SFAS 109 - Accounting For Income Taxes In February, 1992, the Financial Accounting Standards Board issued its Statement No. 109 (SFAS 109), Accounting for Income Taxes. SFAS 109 changed the method of accounting for income taxes from the deferred method (APB 11) to an asset and liability approach. The asset and liability approach requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. MICROS adopted the Statement effective for the first quarter of fiscal 1994. Adoption did not have a material effect on the Company's consolidated financial position. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Item 14(a) 1 in Part IV. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. -22- 23 PART III ITEM 10. DIRECTORS AND OFFICERS OF THE REGISTRANT
Name Position ---------------------------- --------------------------------------- Donny N. Anderson Vice President, Dealer Sales-Americas T. Paul Armstrong Senior Vice President, Research and Development Louis M. Brown, Jr. Director and Chairman of the Board William N. Buckley Vice President, Manufacturing Daniel A. Cohen Director Kenneth M. Fisher Vice President and Product Manager, Fast Service Products A.L. Giannopoulos Director, President and Chief Executive Officer Daniel G. Interlandi Senior Vice President, Sales and Marketing Bernard Jammet Senior Vice President, International Operations Carroll H. Johnson Director (resigned as of August 23, 1995)* Gary C. Kaufman Vice President, Finance and Administration/Chief Financial Officer Ronald J. Kolson Executive Vice President/Chief Operating Officer Richard B. Lamy Vice President of Major Accounts E. Michael Mahoney Vice President of Customer Service Claudia E. Morf Director* Fredric G. Reynolds Director* Alan M. Voorhees Director James T. Walsh Vice President, Quality Engineering Roberta J. Watson Vice President and Controller Judith F. Wilbert Corporate Secretary Edward T. Wilson Director
Directors of the Registrant are elected for a term of one year. ---------------------------------- * As of August 23, 1995, Mr. Johnson resigned as a Director of the Company. Two new directors, Fredric G. Reynolds and Claudia E. Morf, were appointed at a Board of Directors meeting on August 23, 1995. See Part III, Item 13 -- Certain Relationships and Related Transactions. -23- 24 Directors and Executive Officers of the Registrant during fiscal year 1995: Donny N. Anderson, 50, who joined the Company in January 1984 as a District Manager. He was appointed to the position of Dealer Sales Manager in July 1985, and was promoted to Managing Director for the Western Region in May 1988. In July 1990, he became the Managing Director of Dealer Sales, a position he held until May 1994, when he was promoted to the position of Vice President, Dealer Sales--Americas. Prior to joining the Company, Mr. Anderson was employed at Malloy Cash Register and held the position of Branch Manager. T. Paul Armstrong, 37, joined the Company in July, 1981 as a software engineer. In December, 1983 he was promoted to the position of Director, Systems Engineering until November, 1989 when he became Vice President, Research and Development. In October, 1993, Mr. Armstrong was promoted to Vice President and Product Manager, Full Service Products, and in July 1995 Mr. Armstrong was made Senior Vice President, Research and Development. Mr. Armstrong is a graduate of Cambridge University, England. Louis M. Brown, Jr., 52, has been a Director of the Company since 1977. Mr. Brown held the position of President/Chief Executive Officer from January, 1986 until his appointment as Chairman of the Board in January, 1987. He is also Chairman of IDEAS, Inc., a supplier of high technology, custom-engineered products and services with whom the Company has a product purchasing agreement, through Granite Communications, Inc., a corporation in which IDEAS currently holds a minority interest. Mr. Brown also serves as President/Chief Executive Officer and as a Director of Autometric, Inc. and Chairman of Planning Systems, Inc. Mr. Brown also serves as a board member of Integral Systems, Inc. He is a graduate of The Johns Hopkins University (B.E.S.-E.E.). William N. Buckley, 53, joined the Company as Vice President, Manufacturing, in June, 1985. Mr. Buckley previously held various manufacturing and engineering management positions prior to joining the Company. Mr. Buckley holds a B.S. Degree in Business Management from the State University of New York and an A.A.S. in Electronics from Erie Community College. Daniel A. Cohen, 40, is Managing Director and was a principal shareholder of D.A.C. Systemes/MICROS France, a current distributor of the Company's products (see Part I, Item 1 -- Recent Developments) and is Managing Director of Fidelio France S.A. In 1983, Mr. Cohen had worked for the former MICROS distributor in France, prior to starting the representation of MICROS in Israel. In 1986, he founded D.A.C. Systemes and took over the distribution of MICROS products in France. In 1992, the Company acquired a 15% equity interest in Mr. Cohen's company and the name was changed to D.A.C. Systemes/MICROS France. An additional 8% equity interest was acquired by the Company in fiscal 1994, and the remainder of the stock acquired by the Company in -24- 25 fiscal 1996. Mr. Cohen is a graduate of the Hotel School of Lausanne, Switzerland, from which he holds a Masters degree in Hotel Administration. Kenneth M. Fisher, 41, joined the Company in January, 1978 as Director of New Product Development. In September, 1980 he was promoted to Vice President, Research and Development, a position he held until October, 1989 when he became Vice President and Product Manager, Fast Service Products. Mr. Fisher is a graduate of the Capitol Institute of Technology with a Bachelor of Science degree in Electrical Engineering Technology. A.L. Giannopoulos, 55, has been a Director since March, 1992 and was elected President and Chief Executive Officer in May, 1993. Effective as of June 1, 1995, Mr. Giannopoulos resigned as General Manager of the Westinghouse Information and Security Systems Divisions having been with Westinghouse for 30 years and was hired by the Company pursuant to an Employment Agreement to terminate December 31, 1999. In prior assignments at Westinghouse, Mr. Giannopoulos was General Manager of the Automation Division and National Industrial Systems Sales Force, Industries Group. Mr. Giannopoulos is a graduate of Lamar University with a Bachelor of Science degree in Electrical Engineering. Daniel G. Interlandi, 42, began his career with MICROS in 1980. He has held key sales and management positions at the Company involving district operations, distributors, major accounts, customer service, and served as Product Manager for Full Service Products. He was promoted to Vice President, Full Service Products in May, 1993 and to Senior Vice President, Sales and Marketing in October, 1993. Mr. Interlandi is a 1975 graduate of Knox College. Bernard Jammet, 36, joined the Company in July, 1984 as European Sales Manager. In 1988, he was named Managing Director for Europe/Africa/Middle East Operations and was promoted to Vice President in November, 1990. In November, 1994, he was promoted to his current position of Senior Vice President, International Operations. Before joining MICROS, he was employed with the former MICROS distributor for France. Mr. Jammet is a graduate of the Hotel School of Lausanne, Switzerland, with a Masters degree in Hotel Administration. Carroll H. Johnson, 48, had been a Director since May, 1994. Mr. Johnson resigned as a Director of the -25- 26 Company on August 23, 1995. Mr. Johnson is a Divisions Controller for Westinghouse Information and Security Systems Divisions. He has been with Westinghouse for 26 years holding positions of increasing responsibility in the financial arena including the positions of Controller for the Commercial Systems Divisions and the Marine & Electrical Systems Divisions. Mr. Johnson is a graduate of the University of Baltimore and currently serves on its Alumni Board of Governors. Gary C. Kaufman, 45, served as a Director of the Company from January, 1991 until May, 1994 when he was appointed to his present position of Vice President, Finance and Administration/Chief Financial Officer. Previously, Mr. Kaufman was Division Controller for Westinghouse Security and Network Services Divisions, having been with Westinghouse for 20 years in various financial positions. Mr. Kaufman is a graduate of the University of Dayton with a Bachelor of Science degree in Accounting and is also a Certified Public Accountant. Ronald J. Kolson, 41, joined the Company in April, 1984 as Controller. In September, 1987 he was promoted to Vice President, Finance and Administration/Chief Financial Officer. In 1994, he was promoted to his present position of Executive Vice President/Chief Operating Officer. Mr. Kolson is a graduate of The Pennsylvania State University with a Bachelor of Science Degree in Accounting and is also a Certified Public Accountant. Richard B. Lamy, 35, who joined the Company in November 1991 as Director of Major Accounts. In July 1994, he was promoted to the position of Vice President of Major Accounts. For the ten years prior to coming to MICROS, Mr. Lamy was employed at NCR Corporation where he held various management positions in their hospitality division. Mr. Lamy is a graduate of Providence College with a Bachelor of Science degree in Marketing and Management. E. Michael Mahoney, 53, joined the Company in February 1995 as Vice President, Customer Service. Previously, Mr. Mahoney for 11 years held various positions, including most recently that of Vice President, Open Systems Services, with Bull Worldwide Information Systems, Inc. Mr. Mahoney attended Delta College and completed his Masters level studies at the CEFRI School of International Business Management, Paris, France. Alan M. Voorhees, 72, has been a Director of the Company since 1982. He is Chairman of Summit Enterprises, Inc. of Virginia, a privately-held investment company. Mr. Voorhees also is the Chairman of the Board of Autometric, Inc., and a member of the Board of Directors of both Atlantic Southeast Airlines, Inc., and IDEAS, Inc. with whom the Company has a product purchasing agreement, through Granite Communications, Inc., a corporation in which IDEAS currently holds a minority interest. Mr. Voorhees is a -26- 27 graduate of Rensselaer Polytechnic Institute and holds a Masters degree from Massachusetts Institute of Technology. James T. Walsh, 37, joined the Company in October, 1990 as a Dealer Maintenance Coordinator. Mr. Walsh was promoted to the position of Director of Field Services in April, 1991 and was again promoted to Vice President and Product Manager, Customer Service in September, 1991. Mr. Walsh was named Vice President, Quality Engineering, in February 1995. Previously, Mr. Walsh held the position of National Service Manager for Fasfax Corporation, a privately-held point-of-sale manufacturer based in New Hampshire. Roberta J. Watson, 33, who joined the Company in November 1987 as Manager of Accounting. In March 1990, she was promoted to the position of Controller, and in November 1994, she was promoted to Vice President and Controller. Ms. Watson holds a Bachelor of Science degree in Accounting from the State University of New York and is a Certified Public Accountant. Judith F. Wilbert, 50, joined the Company in May, 1987. Ms. Wilbert is Executive Assistant to the President/CEO of MICROS. She was appointed Assistant Corporate Secretary in November, 1988 and was promoted to Corporate Secretary in November, 1990. Edward T. Wilson, 54, has been a Director of the Company since 1981. He is currently a private investment advisor and President of the Fund for Fine Arts, Inc. Previously, Mr. Wilson held senior management positions in domestic and international banking with Riggs National Bank and The Bank of America and in trade relations with the U.S. Chamber of Commerce and the U.S. Commerce Department. Mr. Wilson holds a doctorate in international relations from The Johns Hopkins University. New Directors of the Registrant: Claudia E. Morf, 43, has been a Director since August 1995 when she was appointed by the Board to serve as one of the two Westinghouse representatives on the Board. Ms. Morf is Vice President and Treasurer of Westinghouse, a position she has held since July of 1994. Before joining Westinghouse, Ms. Morf was Assistant Treasurer and Vice President of PepsiCo, Inc., where she worked for 12 years in the corporate finance area. Ms. Morf holds a bachelor's degree in business administration from Bucknell University and an MBA in finance from the Wharton Graduate School of the University of Pennsylvania. Fredric G. Reynolds, 44, has been a Director since August 1995 when he was appointed by the Board to serve as one of the two Westinghouse representatives on the Board. Mr. Reynolds is Executive Vice President and Chief Financial Officer of Westinghouse, a position he has held since -27- 28 February of 1994. For the 12 years before joining Westinghouse, Mr. Reynolds held senior management positions at PepsiCo, Inc., most recently as Senior Vice President and Chief Financial Officer for PepsiCo Foods International. A certified public accountant, Mr. Reynolds holds a BBA in accounting and finance from the University of Miami. Information relating to filings made pursuant to Section 16 of the Securities Exchange Act of 1934 will be set forth in the Company's Proxy Statement, and is incorporated herein by reference. ITEM 11. EXECUTIVE COMPENSATION AND TRANSACTIONS The information required by Item 11 will be set forth in the Company's Proxy Statement under the caption "Executive Compensation", and such information is incorporated herein by reference. -28- 29 ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Set forth below is the number of shares of the Company's Common Stock and the percentage of the total outstanding shares beneficially owned by each director of the Company, the Chief Executive Officer, the four other most highly compensated executive officers, all directors and executive officers as a group, and all persons beneficially owning 5% or more of the Company's Common Stock as of August 31, 1995. Also set forth below is the address of each 5% beneficial owner.
Number of Shares of Common Stock Beneficially Owned as Individual or Group (1) of August 31, 1995 (2) Percent of Class ----------------------- ---------------------- ----------------- Louis M. Brown, Jr. 21,000 Less than 1% Director, Chairman of the Board Daniel Cohen 2,400 Less than 1% Director Alan M. Voorhees 20,000(3) Less than 1% Director Edward T. Wilson 16,000(4) Less than 1% Director T. Paul Armstrong 16,334(5) Less than 1% Senior Vice President, Research and Development Daniel Interlandi 10,050(6) Less than 1% Senior Vice President Sales and Marketing Gary C. Kaufman 600 Less than 1% Vice President, Finance and Administration, Chief Financial Officer
-29- 30 Ronald J. Kolson 48,000(7) Less than 1% Executive Vice President Chief Operating Officer Directors and Executive 201,999(8) 2.5% Officers as a Group (17 persons, including the above-named persons) Westinghouse Holdings 3,849,123 49.0% Corporation Westinghouse Building Gateway Center Pittsburgh, PA 15222
A.L. Giannopoulos, Director, President and Chief Executive Officer does not beneficially own any shares of common stock at August 31, 1995. (1) As of August 31, 1995, CEDE & Co., nominee for Stock Clearing Corporation, Box 20, Bowling Green Station, New York, New York, a central certificate service, held of record 3,659,304 shares (46.6%) of the outstanding shares of Common Stock. Those shares are believed to be owned beneficially by a large number of beneficial owners and, except as indicated in this table, the Company is not aware of any other individual or group owning beneficially more than 5% of the outstanding Common Stock. (2) Information with respect to beneficial ownership is based on information furnished by each shareholder. Sole voting and sole investing power is exercised by each individual. (3) Does not include 30,000 shares held by irrevocable trusts created for the benefit of the adult children of Mr. Voorhees, with respect to which he disclaims any beneficial interest. (4) Mr. Wilson disclaims any beneficial interest in 23,500 shares of Common Stock, not included here, held in custody for his dependent children. (5) Represents options to purchase 16,334 shares exercisable within 60 days. -30- 31 (6) Includes options to purchase 10,000 shares exercisable within 60 days. (7) Includes options to purchase 20,500 shares exercisable within 60 days. (8) Includes stock options for the purchase of 46,834 shares of Common Stock which are exercisable as of or within sixty days of August 31, 1995 and assumes 7,906,065 shares outstanding upon the exercise of such options. Gary C. Kaufman beneficially owns 2,400 shares of Westinghouse common stock (less than 1%). A.L. Giannopoulos beneficially owns 1,550 shares of Westinghouse common stock and has options, currently exercisable, to purchase 55,000 shares of Westinghouse stock. Changes in Control As of June 19, 1995, Westinghouse transferred to Westinghouse Holdings Corporation, a wholly-owned subsidiary of Westinghouse (the "Selling Stockholder"), all 4,849,123 shares of the common stock of the Company owned by it. As of June 30, 1995, 4,849,123 shares of the common stock of the Company, representing 61.7% of the outstanding common stock of the Company as of June 30, 1995, held by the Selling Stockholder were registered under the Securities Act of 1933, as amended, pursuant to the exercise by Westinghouse of its rights to request such registration under a Stock Unit Purchase Agreement dated October 30, 1986, as amended by a letter agreement dated May 2, 1995 between Westinghouse and the Company (collectively, the "Purchase Agreement"). On July 6, 1995 the Selling Stockholder sold 1,000,000 shares of the common stock of the Company to certain underwriters and currently owns 3,849,123 shares, representing approximately 49% of the outstanding common stock of the Company as of June 30, 1995. The remaining shares of the Company held by the Selling -31- 32 Stockholder may from time to time be offered and sold by the Selling Stockholder to or through underwriters, through one or more agents or directly to purchasers. In addition, the Selling Stockholder has the right under the Purchase Agreement to request an additional registration under the Securities Act for the sale of all or a portion (subject to a minimum of 100,000 shares) of its shares, as well as the right to include such shares in a registration statement filed by the Company under the Securities Act for the sale of shares by the Company. In the Purchase Agreement, the Company has agreed to indemnify Westinghouse and the Selling Stockholder, in respect of certain liabilities, including liabilities under the federal securities laws. Pursuant to the terms of the Purchase Agreement, Westinghouse shall pay the expenses incurred by the Company in connection with such registration and sale. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The Company's President and Chief Executive Officer, Mr. Giannopoulos, was formerly a full-time employee of Westinghouse. In connection with his departure from Westinghouse, Mr. Giannopoulos and Westinghouse entered into a severance agreement, which provides for, among other things, a severance payment and continued participation in certain aspects of Westinghouse's stock option and pension plans. In addition, Westinghouse, as an incentive to 11 key officers to remain with the Company for a period of two years following June 1, 1995, agreed to make payments to such officers aggregating up to approximately $1.25 million, payable in three equal installments promptly after such date and on the first and second anniversaries of such date (subject to the officer remaining employed by the Company on the relevant payment date). In June 1995, the first installment of $409,100 was paid for these key officers of the Company. Even though such payments are entirely funded by Westinghouse and will not require any use of the Company's cash, for accounting purposes, one-third of such payments are required to be reflected as compensation expense in the Company's financial statements on the first payment date with the remainder to be reflected as compensation expense over the 24-month period following June 1, 1995. Pursuant to the Purchase Agreement for so long as the Selling Stockholder holds not less than 18% of the then issued and outstanding shares of Common Stock, the Company shall use its best efforts to cause the Board of Directors of the Company to nominate as Directors of the Company such -32- 33 two representatives as the Selling Stockholder may designate. During the years of its affiliation with Westinghouse, the Company has obtained certain insurance coverage and other services through arrangements negotiated by Westinghouse for itself and its subsidiaries and affiliates. Many of these arrangements will be replaced by the Company with its own contracts as and when the Company elects to do so or is no longer eligible to participate in such arrangements. The Company has already replaced certain of these arrangements, including the Westinghouse provided legal services and insurance coverage. The Company estimates that the incremental cost to it of purchasing all such services without the benefit of participating in programs of Westinghouse could total approximately $1.0 million per year on a pre-tax basis. The Company has purchased certain raw materials and has contracted for certain sub-assembly operations through Westinghouse to take advantage of more competitive pricing available through off-shore manufacturing locations. The Company estimates that it has purchased approximately $964,700, $1,691,200, and $1,543,000 in such materials and labor from Westinghouse during fiscal 1995, 1994, and 1993, respectively. During fiscal 1995, 1994, and 1993, the Company also purchased from Westinghouse and its subsidiaries approximately $877,600, $667,400, and $673,400, respectively, for other products and services provided to the Company, including insurance coverage, office space, consulting, office furniture, and telecommunications services. During fiscal 1993, the Company sold approximately $779,200 in products to Hugin Sweda-Austria, under the same terms and conditions offered to other independently-owned dealers/distributors of the Company. Hugin Sweda-Austria is owned, in part, by Peter Unterweger, a Director of the Company until October, 1992. During fiscal 1995, 1994, and 1993, the Company sold approximately $1,208,200, $1,107,500, and $946,600, respectively, in products to D.A.C. Systemes/MICROS France, under the same terms and conditions offered to other independently-owned dealers/distributors of the Company. D.A.C. Systemes/MICROS France was principally owned by Daniel Cohen, a Director of the Company, as of June 30, -33- 34 1995. See Note 15 of Notes to Consolidated Financial Statements. During fiscal 1992, the Company entered into an agreement with Granite Communications, Inc. ("Granite") to purchase certain hardware and communications software for the Company's handheld products to be sold in conjunction with its internally-developed applications software. Granite is an entity affiliated with the Chairman of the Board, Louis M. Brown, Jr., and another Director of the Company, Alan Voorhees, since it was acquired by IDEAS, Inc. in fiscal 1992. During fiscal 1995, after a series of transactions, IDEAS' once majority interest in Granite was reduced to approximately a 17% interest. In fiscal 1991, the Company had advanced the sum of $220,000 to the predecessor of Granite for the development of a product, and advanced $150,000 in fiscal 1994 to Granite for the development of an additional product. Under the current agreements with Granite, the crediting of the advances is being reflected in product purchases through a reduced price for each unit purchased. During fiscal 1995, 1994 and 1993, the Company purchased products from Granite in the amount of $487,600, $1,301,500 and $863,500, respectively, net of $127,500 and $92,500 in fiscal 1994 and 1993, respectively, in credits against the advance payment made in 1991. The $150,000 advance made in fiscal 1994 will reduce the price of products purchased subsequent to fiscal 1995. In fiscal 1995 (for a license fee payable over time in the amount of $300,000, and a royalty payment per unit sold into certain designated markets), the Company acquired a license for the technology to develop, manufacture and market the products exclusively in the Hospitality Food Service field, and non-exclusively in the Lodging field and certain Retail and General Merchandise locations. Additionally, pursuant to an asset purchase agreement entered into in fiscal 1995, the Company purchased from Granite $144,500 of machinery and equipment designed for the manufacture of certain handheld products. During fiscal 1993, the Company assumed a liability in the amount of $180,000 to a minority shareholder, payable in equal installments over the next 3 fiscal years. The liability was assumed as a part of the purchase of a majority interest in Fidelio Software Corporation. In addition, the Company has entered into certain software licensing and royalty agreements with -34- 35 Fidelio through the Company's majority-owned subsidiaries in the U.S., France and the U.K. which distribute Fidelio software products. The terms and conditions of the licensing and royalty agreements are substantially similar to agreements which Fidelio has with its other distributors. MICROS owns a minority interest in Fidelio. See Note 3 of Notes to Consolidated Financial Statements. During fiscal 1995, 1994, and 1993, the Company compensated Louis M. Brown, Jr., Chairman of the Board, $182,900, $154,000, and $35,000, respectively, for consulting services provided to the Company. On June 30, 1995, the Company and Mr. Brown entered into a Consulting Agreement pursuant to which Mr. Brown is to provide on the average 20 hours per week of consulting services to the Company terminating on June 30, 2000 in exchange for a base salary commencing at $150,000 plus a target bonus of $70,000, with annual adjustments. -35- 36 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
Page No. -------- (a) The following documents are filed as a part of this report: 1. Financial Statements: Report of Independent Accountants 39 Consolidated balance sheets as of June 30, 1995 and 1994 40 Consolidated statements of operations for the years ended June 30, 1995, 1994, and 1993 42 Consolidated statements of shareholders' equity for the years ended June 30, 1995, 1994, and 1993 43 Consolidated statements of cash flows for the years ended June 30, 1995, 1994, and 1993 45 Notes to consolidated financial statements 49 2. Financial Statement Schedules: Schedule V, Property and equipment 67 Schedule VI, Accumulated depreciation, depletion, and amortization of property and equipment 68 Schedule VIII, Valuation and qualifying accounts and reserves 69 All other schedules are omitted because they are not applicable, or not required, or the required information is included in the financial statements or notes thereto.
3. Exhibits: 3(i). Articles of Incorporation of the Company as in effect on the date hereof is incorporated herein by reference to Exhibit 3 to the Annual Report on Form 10-K of the Company for the Fiscal Year ended June 30, 1990. 3(ii). By-laws of the Company as in effect on the date hereof is incorporated herein by reference to Exhibit 3 to the Annual Report on Form 10-K of the Company for the Fiscal Year ended June 30, 1990. 10a1. Amendment and Restatement of MICROS Systems, Inc. Stock Option Plan is incorporated herein by reference to Exhibit 4.1 to the Registration Statement on Form S-8 of the Company filed on February 16, 1990.* ------------------ * Indicates that exhibit is a management contract or compensatory plan or arrangement. -36- 37 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (continued) 10a2. First Amendment to the Amendment and Restatement of MICROS Systems, Inc. Stock Option Plan constituting Exhibit 10a1 hereto is incorporated herein by reference to Exhibit 4.2 to the Registration Statement on Form S-8 of the Company filed on February 16, 1990.* 10b. MICROS Systems, Inc. 1991 Stock Option Plan, as amended, is incorporated herein by reference to Exhibit A to the Proxy Statement of the Company for the 1993 Annual Meeting of Shareholders.* 10c1. Stock Unit Purchase Agreement dated October 30, 1986 between Westinghouse Electric Corporation and MICROS Systems, Inc. is incorporated herein by reference to Exhibit 4d to the Registration Statement on Form S-3 of the Company filed on January 25, 1995. 10c2. Letter Agreement dated May 2, 1995 between Westinghouse Electric Corporation and MICROS Systems, Inc. is incorporated herein by reference to Exhibit 4e to Amendment No. 4 to the Registration Statement on Form S-3 of the Company filed on May 3, 1995. 10d. Underwriting Agreement dated July 6, 1995 by and among MICROS Systems, Inc., Westinghouse Electric Corporation, Westinghouse Holdings Corporation and J.P. Morgan Securities, Inc., Morgan Stanley & Co. Incorporated and Smith Barney Inc. 10e. Employment Agreement dated June 1, 1995 between MICROS Systems, Inc. and A.L. Giannopoulos.* 10f. Consulting Agreement dated June 30, 1995 between MICROS Systems, Inc. and Louis M. Brown, Jr.* 10g. Employment Agreement dated August 25, 1995 between MICROS Systems, Inc. and Daniel Cohen.* 10h. MICROS Systems, Inc. Bonus and Incentive Plan is incorporated by reference to Exhibit 10 to the Quarterly Report on Form 10-Q of the Company for the period ended September 30, 1994.* 11. Statement Regarding Computation of Earnings Per Share. 21. Subsidiaries of the Company. 23. Consent of Independent Accountants. -37- 38 ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (continued) 24. Power of Attorney. 27. Financial Data Schedule. (b) Reports on form 8-K: No reports on Form 8-K have been filed during the fourth quarter of the fiscal year ended June 30, 1995. The annual report will be submitted to shareholders prior to the annual meeting scheduled for November 17, 1995. -38- 39 REPORT OF INDEPENDENT ACCOUNTANTS TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF MICROS SYSTEMS, INC. In our opinion, the consolidated financial statements listed in the index appearing under Item 14(a)(1) and (2) on page 36 present fairly, in all material respects, the financial position of MICROS Systems, Inc. and its subsidiaries at June 30, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended June 30, 1995, in conformity with generally accepted accounting principles. 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 of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for the opinion expressed above. As discussed in Note 1 to the consolidated financial statements, the Company changed its method of accounting for income taxes in fiscal year 1994. Price Waterhouse LLP Baltimore, Maryland August 21, 1995 -39- 40 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS as of June 30, 1995 and 1994
1995 1994 ------------ ------------ ASSETS Current assets: Cash and cash equivalents $18,315,400 $16,339,100 Short term investments 8,070,000 - Accounts receivable, net of allowance for doubtful accounts of $1,229,200 in 1995 and $764,300 in 1994 25,184,900 17,690,200 Inventories 11,343,500 10,186,800 Deferred income taxes 1,890,100 1,393,200 Prepaid expenses and other current assets 1,820,300 1,090,000 ------------ ------------ Total current assets 66,624,200 46,699,300 ------------ ------------ Property, plant and equipment: Land 1,582,700 1,582,700 Buildings 4,820,600 4,820,600 Building improvements 320,300 320,300 Machinery and equipment 7,577,900 5,687,200 Furniture and fixtures 2,871,900 2,293,300 Leasehold improvements 338,800 236,700 ------------ ------------ 17,512,200 14,940,800 Accumulated depreciation and amortization (7,350,400) (6,176,600) ------------ ------------ Net property, plant and equipment 10,161,800 8,764,200 ------------ ------------ Note receivable 649,400 3,151,500 Investments in affiliates, including related goodwill 8,508,600 4,205,100 Other assets: Capitalized computer software develop- 1,544,300 1,748,000 ment costs, net of accumulated amortization of $1,684,400 in 1995 and $1,371,900 in 1994 Goodwill and district intangible 1,719,100 1,395,300 assets, net of accumulated amortization of $707,600 in 1995 and $472,400 in 1994 Other 436,300 227,200 ------------ ------------ Total assets $89,643,700 $66,190,600 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. -40- 41 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS as of June 30, 1995 and 1994
1995 1994 ------------ ------------ LIABILITIES AND SHAREHOLDERS' EQUITY Current liabilities: Current portion of long-term debt $ 257,900 $ 218,900 Current portion of capital lease obligation 105,600 88,400 Accounts payable 8,504,500 5,864,400 Accrued expenses and other current liabilities 16,214,700 10,583,200 Income taxes payable 361,500 412,800 Deferred service revenue 4,150,600 2,405,500 ------------ ------------ Total current liabilities 29,594,800 19,573,200 ------------ ------------ Long-term debt, net of current portion 1,668,800 1,807,800 Capital lease obligation, net of current portion 3,582,100 3,687,700 Deferred income taxes payable 932,500 952,200 Minority interest 415,300 231,800 ------------ ------------ Total liabilities 36,193,500 26,252,700 ------------ ------------ Commitments and contingencies Shareholders' equity: Common stock, $.025 par; authorized 10,000,000 shares; issued and outstanding 7,859,095 shares in 1995 and 7,787,577 shares in 1994 196,500 194,700 Capital in excess of par 14,882,600 13,760,800 Retained earnings 37,402,000 25,825,200 Accumulated foreign currency translation adjustments 969,100 157,200 ------------ ------------ Total shareholders' equity 53,450,200 39,937,900 ------------ ------------ Total liabilities and shareholders' equity $ 89,643,700 $ 66,190,600 ============ ============
The accompanying notes are an integral part of the consolidated financial statements. -41- 42 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS for the years ended June 30, 1995, 1994, and 1993
1995 1994 1993 ------------ ------------ ------------ Revenue: Hardware and related software $ 85,928,800 $ 62,440,700 $ 44,214,500 Service 26,091,900 16,823,800 11,099,100 ------------ ------------ ------------ 112,020,700 79,264,500 55,313,600 ------------ ------------ ------------ Costs and expenses: Cost of sales Hardware and related software 44,513,100 32,466,600 20,574,200 Service 11,750,100 6,980,900 4,617,400 ------------ ------------ ------------ 56,263,200 39,447,500 25,191,600 Selling, general and administrative expenses 32,817,000 22,858,800 16,880,600 Research and development expenses 4,758,100 3,392,300 2,901,200 Depreciation and amortization 1,640,300 1,244,000 931,100 ------------ ------------ ------------ 95,478,600 66,942,600 45,904,500 ------------ ------------ ------------ Income from operations 16,542,100 12,321,900 9,409,100 Non-operating income (expense): Interest income 1,172,700 651,400 366,500 Interest expense (368,800) (188,300) (54,600) Minority interest (146,500) (12,700) (41,600) Other income (expense), net 475,600 (201,100) (931,600) ------------ ------------ ------------ Income before taxes and equity in net earnings of affiliates 17,675,100 12,571,200 8,747,800 Income taxes 6,175,000 3,982,200 3,033,900 ------------ ------------ ------------ Income before equity in net earnings of affiliates 11,500,100 8,589,000 5,713,900 Equity in net earnings of affiliates 76,700 98,300 46,000 ------------ ------------ ------------ Net income $ 11,576,800 $ 8,687,300 $ 5,759,900 ============ ============ ============ Net income per common and common equivalent share $ 1.46 $ 1.10 $ 0.74 ============ ============ ============ Weighted-average number of common and common equivalent shares outstanding 7,951,593 7,910,619 7,806,773 ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements. -42- 43 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY for the years ended June 30, 1995, 1994, and 1993
Common Stock Capital Accum. Foreign -------------------------- in Excess Retained Currency Shares Amount of Par Earnings Transl. Adjust. Total ---------- ---------- ----------- ------------- ---------------- ---------- Balance, June 30, 1992 7,479,070 $ 187,000 $11,993,800 $11,378,000 $ - $23,558,800 Stock issued upon exercise of options 175,391 4,400 439,100 - - 443,500 Income tax benefit from stock options exercised - - 294,300 - - 294,300 Net income for the year - - - 5,759,900 - 5,759,900 Accumulated for- eign currency translation adjustment - - - - (86,100) (86,100) ---------- ---------- ----------- ----------- ------------- ----------- Balance, June 30, 1993 7,654,461 191,400 12,727,200 17,137,900 (86,100) 29,970,400 Stock issued upon exercise of options 133,116 3,300 676,900 - - 680,200 Income tax benefit from stock options exercised - - 356,700 - - 356,700 Net income for the year - - - 8,687,300 - 8,687,300 Accumulated for- eign currency translation adjustment - - - - 243,300 243,300 ---------- ---------- ----------- ----------- ------------- ----------- Balance, June 30, 1994 7,787,577 $ 194,700 $13,760,800 $25,825,200 $ 157,200 $39,937,900
The accompanying notes are an integral part of the consolidated financial statements. -43- 44 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (continued) for the years ended June 30, 1995, 1994, and 1993
Common Stock Capital Accum. Foreign -------------------------- in Excess Retained Currency Shares Amount of Par Earnings Transl. Adjust. Total ---------- ---------- ----------- ------------- ---------------- ---------- Balance, June 30, 1994 7,787,577 $ 194,700 $13,760,800 $25,825,200 $ 157,200 $39,937,900 Stock issued upon exercise of options 71,518 1,800 351,600 - - 353,400 Income tax benefit from stock options exercised - - 361,100 - - 361,100 Net income for the year - - - 11,576,800 - 11,576,800 Accumulated for- eign currency translation adjustment - - - - 811,900 811,900 Capital contribution from Westinghouse - - 409,100 - - 409,100 ---------- ---------- ----------- ----------- ------------ ----------- Balance, June 30, 1995 7,859,095 $ 196,500 $14,882,600 $37,402,000 $ 969,100 $53,450,200 ========== ========== =========== =========== ============ ===========
The accompanying notes are an integral part of the consolidated financial statements. -44- 45 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended June 30, 1995, 1994 and 1993
1995 1994 1993 ----------- ---------- ---------- Cash flows from operating activities: Net income $11,576,800 $8,687,300 $5,759,900 ----------- ---------- ---------- Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,640,300 1,244,000 931,100 Amortization of capitalized software 489,900 438,800 140,700 Provision for losses on accounts receivable 697,000 273,700 240,100 Provision for inventory obsolescence 502,400 564,200 150,000 Provision for loss on short-term investment - - 148,400 Undistributed earnings from equity investment (76,700) (98,300) (46,000) Provision for deferred income taxes (260,600) (398,500) 368,500 Currency (gain)/loss on equity investment and loan receivable (187,800) (446,000) 462,200 Changes in assets and liabilities: (Increase) in accounts receivable (8,240,000) (5,837,100) (2,378,300) (Increase) in inventories (1,528,600) (3,633,100) (2,241,500) (Increase) decrease in prepaid expenses and other assets (1,066,400) 407,300 (115,000) Increase in accounts payable 2,612,200 605,300 1,338,200 Increase in accrued expenses and other current liabilities 5,471,700 2,732,900 1,105,800 (Decrease) in income taxes payable (314,400) (653,200) (176,500) Increase (decrease) in deferred service revenue 1,660,400 680,400 (485,100) ----------- ---------- ---------- Total adjustments 1,399,400 (4,119,600) (557,400) ----------- ---------- ---------- Net cash provided by operating activities 12,976,200 4,567,700 5,202,500 ----------- ---------- ----------
The accompanying notes are an integral part of the consolidated financial statements. -45- 46 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) for the years ended June 30, 1995, 1994 and 1993
1995 1994 1993 ----------- ---------- ---------- Cash flows from investing activities: Purchases of property, plant and equipment (2,588,800) (1,224,900) (653,400) Dispositions of property, plant and equipment 2,000 87,600 (400) Capitalized software development costs (286,200) (196,900) (802,900) Purchase of net district assets (205,700) (245,300) - Purchase of equity interest in investees (3,481,700) (408,300) (3,374,500) (Purchase) sale of short-term investments (8,070,000) - 5,846,600 Sale of long-term investments - - 1,000,100 Proceeds from loan to affiliates 3,223,000 - - Loan to investee (604,600) - (3,159,600) Dividends received from affiliates 210,100 31,500 - Proceeds from sale of affiliate stock - 108,500 - Net cash received in acquisitions - - 262,100 ----------- ---------- ---------- Net cash used in investing activities (11,801,900) (1,847,800) (882,000) ----------- ---------- ---------- Cash flows from financing activities: Principal payments on long-term debt (233,200) (186,600) (130,000) Principal payments on capital lease obligation (88,400) (70,500) (48,900) Proceeds from issuance of stock 353,400 680,200 443,500 Income tax benefit from stock options exercised 361,100 356,700 294,300 Capital contribution from Westinghouse 409,100 ----------- ---------- ---------- Net cash provided by financing activities 802,000 779,800 558,900 ----------- ---------- ----------
The accompanying notes are an integral part of the consolidated financial statements. -46- 47 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) for the years ended June 30, 1995, 1994 and 1993
1995 1994 1993 ------------ ------------ ------------ Net increase in cash and cash equivalents $ 1,976,300 $ 3,499,700 $ 4,879,400 Cash and cash equivalents at beginning of year 16,339,100 12,839,400 7,960,000 ------------ ------------ ------------ Cash and cash equivalents at end of year $ 18,315,400 $ 16,339,100 $ 12,839,400 ============ ============ ============
Supplemental disclosures of cash flow information: Cash paid during the year for: Interest $ 367,500 $ 171,100 $ 46,100 =========== =========== ============ Income taxes $ 6,470,100 $ 4,729,400 $ 2,534,100 =========== =========== ============
Supplemental schedule of noncash financing and investing activities: The purchase of district assets during 1995 included cash payments of $205,700 and the issuance of a promissory note in the amount of $235,300, with annual payments through April 1999. The unamortized discount on the note, based on an imputed annual interest rate of 8.75%, is $40,800 at June 30, 1995. The purchase of district assets in September 1993 included a cash payment of $245,300 and the issuance of a promissory note in the amount of $500,000. Payments in the amount of $100,000 are due beginning September 30, 1994, and on the same day of each succeeding year thereafter through September 30, 1998. The unamortized discount on the note, based on an imputed annual interest rate of 5.75% is $36,500 at June 30, 1995. In fiscal 1993, the Company acquired majority interests in Fidelio Software Corporation, Fidelio Software U.K. Limited, and Fidelio France S.A. for an aggregate purchase price of $1,737,700. The fair value of assets acquired of $4,187,900 included cash of $1,999,800. Liabilities assumed as part of the acquisitions were $2,419,000. A capital lease obligation of $3,837,800 was incurred in January 1994 when the Company entered into a lease for office space. -47- 48 MICROS SYSTEMS, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS (continued) for the years ended June 30, 1995, 1994 and 1993 Disclosure of accounting policy: For purposes of the statement of cash flows, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Short term investments are those with maturities in excess of 3 months, but less than 1 year from the date of purchase. These interest bearing investments are readily convertible to cash, and are valued at cost which approximates fair value. The accompanying notes are an integral part of the consolidated financial statements. -48- 49 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of business and summary of significant accounting policies: Description of business MICROS Systems, Inc. is a worldwide designer, manufacturer, supplier and servicer of point-of-sale (POS) and property management systems, related peripheral equipment and software. (References to "MICROS" or the "Company" herein include the operations of MICROS Systems, Inc. and its subsidiaries on a consolidated basis.) MICROS' customers are principally hospitality providers operating full service and fast food restaurants, including restaurants located in hotels and other lodging establishments. On January 25, 1995, the Company filed with the Securities and Exchange Commission a Registration Statement on Form S-3 ("Registration Statement") for the sale of up to 4,849,123 shares of Common Stock of the Company held directly or indirectly by Westinghouse, with all of the proceeds going to Westinghouse. On May 2, 1995, the Company filed an amendment to the Registration Statement to permit the delayed offering of the shares of Common Stock owned by Westinghouse. As of June 19, 1995, Westinghouse transferred to Westinghouse Holdings Corporation, a wholly-owned subsidiary of Westinghouse (the "Selling Stockholders") all 4,849,123 shares of the Common Stock of the Company owned by it. At June 30, 1995, the Selling Stockholder owned 4,849,123 shares of Common Stock, representing 61.7% of the outstanding Common Stock. If all of the shares of Common Stock to which the Registration Statement relates are sold, Westinghouse and the Selling Stockholder will not own any shares of Common Stock (see Note 15). Principles of consolidation The consolidated financial statements include the accounts of the Company and its majority-owned subsidiaries. Investments in 20%- through 50%-owned affiliated companies are included under the equity method where the Company exercises significant influence over operating and financial affairs. Otherwise, investments are included at cost. Differences between the carrying amounts of equity investments and the Company's interest in underlying net assets are amortized over periods benefited. All significant intercompany accounts and transactions have been eliminated. Minority Interest The Company owns 60% of the capital stock of Micros Systems AG (Ltd.), a company organized under the laws of Switzerland. On May 12, 1993, MICROS acquired a majority interest in three subsidiaries of Fidelio Software GmbH ("Fidelio GmbH"), a supplier of hotel property management systems, which control the distribution rights of Fidelio GmbH products in North, South and Central America, France and the United Kingdom. The total purchase price, including net liabilities assumed and capitalized expenses, was $1,926,900, of which $1,226,100 represents goodwill which is being amortized over 10 years, for 90% of the capital stock of Fidelio Software Corporation, a Delaware corporation, 80% of Fidelio France S.A. ("Fidelio France"), a company organized under the laws of France, and 80% of Fidelio Software UK Limited, a company organized under the laws of England and Wales. -49- 50 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of business and summary of significant accounting policies (continued): Minority Interest (continued) In October, 1993, the Company sold a 29% interest in Fidelio France to an affiliate. At June 30, 1995 and 1994, the Company owns 51% of the stock of Fidelio France directly, and has additional interests of 9.67% indirectly through affiliate investments (see Note 15). In addition, a capital contribution of $296,800 was made in fiscal 1994 to Fidelio France by an affiliate. Foreign currency translation The financial statements of MICROS' non-U.S. operations are translated into U.S. dollars for financial reporting purposes. The assets and liabilities of non-U.S. operations whose functional currencies are other than the U.S. dollar are translated at rates of exchange at fiscal year-end, and revenues and expenses are translated at average exchange rates for the fiscal year. The cumulative translation effects are reflected in shareholders' equity. Gains and losses on transactions denominated in other than the functional currency of an operation are reflected in other income (expense). Revenue recognition Revenue from product sales is recognized at the time of shipment with a provision for estimated returns and allowances. Revenue from the installation of products is recognized upon the completion of the installation of the product as acknowledged by the customer. Service contract revenue is initially recorded as deferred service revenue and is reflected in operating income on a pro rata basis over the contract term, which is generally one year. Short term investments Short term investments are comprised of tax-free and taxable variable rate bonds that can be readily purchased or sold using established markets. Short term investments are stated at cost, which approximates fair value. Inventories Inventories are stated at the lower of cost or market. Cost is determined principally by the first-in, first-out method. Property, plant and equipment Property, plant and equipment are stated at cost. Maintenance and repairs are charged to expense as incurred, and the costs of additions and betterments are capitalized. Depreciation is provided in amounts which amortize costs over the useful lives of the related assets, generally three to ten years for equipment and forty years for building and building improvements, utilizing the straight-line method. -50- 51 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Description of business and summary of significant accounting policies (continued): Property, plant and equipment (continued) Leasehold improvements are amortized over the terms of the respective leases or useful lives of the improvements, whichever is shorter. Warranties A majority of the Company's products are under warranty for defects in material and workmanship for a one-year period. The Company establishes an accrual for estimated warranty costs at the time of sale. Capitalized computer software development costs The Company capitalizes software development costs in accordance with Statement of Financial Accounting Standards No. 86. Software development costs incurred prior to establishing technological feasibility are charged to operations and included in research and development costs. Software development costs incurred after establishing technological feasibility, and purchased software costs, are capitalized and amortized on a product-by-product basis when the product is available for general release to customers. Annual amortization, charged to cost of sales, is the greater of the amount computed using the ratio that current gross revenues for a product bear to the total of current and anticipated future gross revenues for that product, or the straight-line method over the remaining estimated economic life of the product. The total computer software development costs capitalized in fiscal 1995, 1994, and 1993 were $286,200, $196,900 and $802,900, respectively. The total costs amortized and charged to operations in fiscal 1995, 1994, and 1993 were $489,900, $438,800 and $140,700, respectively. Research and development costs Expenditures for research and development not capitalized as described above are charged to operations as incurred. Goodwill The excess of cost over fair market value of net assets acquired is amortized on a straight-line basis over periods ranging from three to ten years. -51- 52 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 1. Description of business and summary of significant accounting policies (continued): Financing costs related to long-term debt Costs associated with financing long-term debt are amortized over the term of the related debt. Advertising costs The Company's policy for accounting for advertising is to expense costs as incurred. Advertising expenses for fiscal 1995, 1994, and 1993, were $1,600,500, $1,224,800, and $820,100, respectively. Income taxes Deferred taxes have been provided to reflect temporary differences between the financial statement and the tax return recognition of certain items. Financial Accounting Standards Board Statement No. 109 (SFAS 109), Accounting for Income Taxes is an asset and liability approach that requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between the carrying amounts and the tax basis of assets and liabilities. MICROS adopted the Statement effective for the first quarter of fiscal 1994. Adoption did not have a material effect on the Company's consolidated financial position or results of operations. Net income per common and common equivalent share Net income per common and common equivalent share is computed based on the weighted-average number of common and common equivalent shares outstanding during each year. For purposes of this computation, the Company's outstanding stock options are considered common stock equivalents. Reclassifications Certain prior year reclassifications have been made to conform to 1995 classifications. 2. Inventories: The components of inventories are as follows:
1995 1994 ----------- ----------- Raw materials $ 2,533,500 $ 1,915,700 Work-in-process 2,784,600 1,319,400 Finished goods 6,025,400 6,951,700 ----------- ----------- $11,343,500 $10,186,800 =========== ===========
-52- 53 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 3. Investments and note receivable: In fiscal 1992 the Company purchased a 15% interest in D.A.C. Systemes of Paris, France (now D.A.C. Systemes/MICROS France), a MICROS distributor marketing and maintaining hospitality related products to hotels and restaurants throughout France. An additional 8% interest was purchased in October, 1993. The equity interests were acquired at an aggregate cost of $628,300, of which $383,300 represents goodwill which is being amortized over 10 years. The total goodwill amortized in fiscal years 1995, 1994, and 1993 was $38,100, $32,300, and $15,100, respectively (see Note 15). In fiscal 1993, MICROS GmbH purchased 15% of the capital stock of Fidelio Software GmbH ("Fidelio GmbH") of Munich, Germany for $3,374,500 and received an option to buy an additional 15% interest from individual shareholders for a fixed amount of DM 5,000,000, which was exercised on October 4, 1994. Additionally, the Company has the right to acquire all or part of the remaining shares of Fidelio GmbH on or before December 31, 1999, at a price to be determined based on an agreed upon formula. MICROS had accounted for its 15% investment as of September 30, 1994 under the cost method. However, effective October 4, 1994, the 30% investment is accounted for under the equity method. Included in the aggregate purchase price of the Company's 30% investment in Fidelio GmbH is approximately $5.7 million representing goodwill at October 4, 1994, which is being amortized over 10 years beginning on that date. The investment was not restated since it would not have produced a materially different result. Additionally, in fiscal 1993, MICROS granted a loan to Fidelio GmbH in the amount of DM 5,000,000. The loan bore interest at 7% per annum and was repaid upon exercise of the option to acquire the additional 15% interest in Fidelio GmbH. In connection with its increase in ownership of Fidelio GmbH in October 1994 from 15% to 30%, the Company loaned Fidelio GmbH DM 900,000, which bears interest at a variable rate, and is obligated to make additional loans of up to DM 600,000, all of which are to be repaid by December 31, 2000. The obligation of the Company to make the further loans to Fidelio GmbH is conditioned on Fidelio GmbH's other shareholders increasing their current loans to Fidelio GmbH from DM 2.1 million to an aggregate amount of up to DM 3.5 million. The Company received dividends from Fidelio GmbH of $384,800 in fiscal 1995. As a result of the fiscal 1993 DM 10.0 million combined investment and loan being realizable only in Deutsche Marks, MICROS was subject to currency risks between the Deutsche Mark and U.S. dollar through September 30, 1994. MICROS continues to be subject to currency risks between the Deutsche Mark and U.S. dollar with respect to the DM 900,000 loan which is realizable only in Deutsche Marks and which must be repaid by December 31, 2000. As a result of the investment and loans, a foreign currency translation gain of $187,800 and $446,000 and a loss of $462,200 were recognized in fiscal 1995, 1994, and 1993, respectively. The Company has not engaged in any foreign exchange hedging. -53- 54 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 4. Line of credit: The Company has a $15 million unsecured committed line of credit, effective February 9, 1995, at the bank's prime rate minus one quarter of one percent, which expires December 31, 1996. Prior to February 9, 1995, the Company had a similar line of credit with the same bank with a borrowing capacity of $10 million. There were no borrowings under the $10 million line of credit during fiscal 1994 or subsequent thereto. There have been no borrowings under the current line of credit. Under the terms of the current loan agreement, the Company may borrow up to $15 million less the amount of outstanding letters of credit. Amounts outstanding under the line are payable on demand and are not secured by the assets of the Company. The agreement requires the Company to maintain certain levels of working capital and tangible net worth and a minimum debt to tangible net worth ratio. In addition, the agreement limits the incurrence of additional indebtedness and restricts the Company's payment of dividends other than stock dividends. 5. Long-term debt: The components of long-term debt are as follows:
1995 1994 ----------- ---------- Note payable to bank $1,331,000 $1,461,000 Notes payable for net district assets 534,600 442,400 Obligation to minority share- holder (Note 11) 61,100 123,300 ---------- ---------- 1,926,700 2,026,700 Less current portion 257,900 218,900 ---------- ---------- $1,668,800 $1,807,800 ========== ==========
In June, 1989, the Company refinanced its Industrial Revenue Bond (IRB) obligation. Variable Rate Revenue Refunding Bonds were issued by Prince George's County, Maryland in the amount of $2,111,000, the then outstanding principal balance of the IRB, and were sold to a bank who acts as the remarketing agent of the bonds. The interest rate on the debt is a variable rate set weekly by the bank based on prevailing market conditions with a maximum rate of 15%. On June 30, 1995, the effective interest rate was approximately 5.60%. The Company is repaying the debt in equal monthly principal payments plus interest through January, 2006. The loan, which is collateralized by property, plant and equipment, is subject to certain debt covenants similar to those contained in the line of credit agreement (see Note 4). In September, 1993, as part of the purchase of district assets, the Company issued a promissory note in the amount of $500,000. Payments in the amount of $100,000 are due on September 30 of each year through September 30, 1998. The unamortized discount on the note, based on an imputed annual interest rate of 5.75%, is $36,500 at June 30, 1995. -54- 55 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 5. Long-term debt (continued): In April, 1995, as part of the purchase of district assets, the Company issued a promissory note in the amount of $235,300, payable in annual installments through April, 1999. The unamortized discount on the note, based on an imputed annual interest rate of 8.75%, is $40,800 at June 30, 1995. Annual maturities of long-term debt, are as follows:
Year ending June 30, Amount -------------------- ---------- 1996 $ 257,900 1997 258,700 1998 271,300 1999 262,800 2000 130,000 2001 and thereafter 746,000 ---------- $1,926,700 ==========
6. Accrued expenses and other current liabilities: The components of accrued expenses and other current liabilities are as follows:
1995 1994 ----------- ----------- Compensation and related taxes $ 3,707,600 $ 2,868,400 Commissions 2,199,100 1,895,900 Quantity discounts and credits due customers 2,782,300 2,291,800 Deposits received from customers 2,809,200 1,091,700 Other 4,716,500 2,435,400 ----------- ----------- $16,214,700 $10,583,200 =========== ===========
7. Commitments and contingencies: Leases The Company and its subsidiaries lease office space and equipment under operating leases expiring at various dates through 2004. Rent expense under these leases for fiscal 1995, 1994, and 1993 was $1,348,000, $1,170,700, and $777,100, respectively. The Company leases office and warehouse space under a 15 year capital lease beginning January, 1994. The cost of the asset is included in land and building at $1,000,000 and $2,837,800, respectively, at June 30, 1995 and 1994. Accumulated depreciation on the building at June 30, 1995 and 1994 was $106,400 and $35,400, respectively. -55- 56 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 7. Commitments and contingencies (continued): Future minimum lease commitments at June 30, 1995, are as follows:
Operating Capital Year ending June 30, Leases Leases -------------------- ---------- ---------- 1996 $1,681,700 $ 360,500 1997 1,437,800 371,300 1998 1,161,600 382,400 1999 628,300 393,900 2000 383,300 405,700 2001 and thereafter 1,151,400 3,976,800 ---------- ----------- $6,444,100 5,890,600 ========== Less amount representing interest at 7% 2,202,900 ----------- 3,687,700 Current portion 105,600 ----------- Long-term obligations under capital leases $ 3,582,100 ===========
Legal proceedings MICROS is and has been involved in legal proceedings arising in the normal course of business. The Company is of the opinion, based upon presently available information and the advice of counsel concerning pertinent legal matters, that any resulting liability would not have a material effect on the Company's results of operations or financial position. In December 1994, the Company received a claim that its touchscreen product line infringes certain patents in several European countries, including France, Germany and the United Kingdom. Preliminary investigation indicates that the asserted patents may be unenforceable because similar products were known and available in the market prior to the relevant filing dates. While the ultimate outcome of this matter is uncertain, the Company does not believe that the claim will have a material adverse effect on its business, financial condition or results of operations. 8. Stock options: The Company has incentive stock options outstanding which were granted to a director, officers and other key employees pursuant to authorization by the Board of Directors. The exercise price of all options equals the market value on the date of the grant. The options granted are exercisable one year from date of grant, vest over a three-year period, and expire five years from date of grant. The Company has reserved 349,691 shares for exercise pursuant to these options. A summary of changes in outstanding stock options follows: -56- 57 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 8. Stock options (continued):
Incentive Option Price Stock Options per Share ------------- -------------- Balance, June 30, 1992 397,384 $ 1.375- 7.125 Options granted 117,000 $ 8.625-12.125 Options cancelled (10,334) $ 5.875- 8.625 Options exercised (175,391) $ 1.375- 6.875 ------- --------------- Balance, June 30, 1993 328,659 $ 1.75 -12.125 Options granted - Options cancelled - Options exercised (133,116) $ 1.75 - 8.625 ------- --------------- Balance, June 30, 1994 195,543 $ 3.00 -12.125 Options granted 216,000 $29.75 -31.50 Options cancelled (3,334) $ 5.875- 8.625 Options exercised (71,518) $ 3.00 -12.125 ------- -------------- Balance, June 30, 1995 336,691 $ 3.00 -31.50 ======= ============== Options exercisable at June 30, 1995 97,524 $ 3.00 -12.125 ======= ==============
On June 2, 1995, pursuant to the Company's 1991 Stock Option Plan, the Company granted options to purchase an aggregate of 186,000 shares of Common Stock at an exercise price equal to the closing sale price of the Common Stock on the date of grant to certain plan participants. 9. Income taxes: The components of income tax expense are:
1995 1994 1993 ---------- ---------- ---------- Current: Federal $5,206,900 $3,200,700 $2,112,500 State 654,400 719,700 465,800 Foreign 574,300 460,300 87,100 ---------- ---------- ---------- 6,435,600 4,380,700 2,665,400 ---------- ---------- ---------- Deferred: Federal (220,400) (366,900) 307,100 State (40,200) (31,600) 61,400 Foreign - - - ---------- ---------- ---------- (260,600) (398,500) 368,500 ---------- ---------- ---------- $6,175,000 $3,982,200 $3,033,900 ========== ========== ==========
-57- 58 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. Income taxes (continued): The total tax provision is different from the amount that would have been recorded by applying the U.S. statutory federal income tax rate to income before taxes. The reconciliation of these differences is as follows:
1995 1994 1993 ------ ------ ------ At statutory rate 35.0% 35.0% 34.0% Increase (decrease) resulting from: U.S. federal surtax reduction (.6) (.9) - State taxes, net of federal tax benefit 2.4 3.8 4.0 Research tax credits (1.5) (2.9) - Foreign Sales Corporation tax benefit (1.6) (1.2) (.9) Effect of tax rates in foreign jurisdictions 1.1 1.6 1.3 Other .1 (3.7) (3.9) ------ ------ ------ Effective tax rate 34.9% 31.7% 34.5% ====== ======= ======
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. At June 30, 1995 and 1994, the Company had potential tax benefits of $386,700 related to U.S. net operating loss carryforwards for income tax purposes. The tax loss carryforwards (if not utilized against taxable income) expire beginning 2005 and continue through 2009. A valuation allowance of $386,700 has been provided at June 30, 1995 and 1994 to offset the related deferred tax assets due to uncertainty of realizing the benefit of the loss carryforwards. The operating loss carryforwards were acquired as part of a purchase of a subsidiary, and any realization of the operating loss carryforwards will result in a reduction of goodwill recorded as part of that acquisition. The following summarizes the significant components of the Company's deferred tax assets and liabilities: -58- 59 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 9. Income taxes (continued):
1995 1994 ------------ ----------- Bad debt $ 441,100 $ 266,500 Accruals not deductible for tax 615,700 479,500 Inventory 724,500 468,400 Net operating loss carryforward 386,700 386,700 Other 233,000 263,600 ------------ ----------- Total deferred tax assets 2,401,000 1,864,700 ------------ ----------- Depreciation (392,100) (357,000) Capitalized software development costs (600,800) (680,000) Other (63,800) - ------------ ----------- Total deferred tax liabilities (1,056,700) (1,037,000) ------------ ----------- Net operating loss carryforward valuation allowance (386,700) (386,700) ------------ ----------- Net deferred tax asset $ 957,600 $ 441,000 ============ ===========
-59- 60 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 10. Other income (expense) net: Other income (expense) is comprised of the following items:
1995 1994 1993 -------- --------- --------- Service charges on accounts receivable $336,100 $ 269,500 $ 253,500 Prompt payment discounts (466,300) (422,100) (287,200) Foreign exchange gain (loss) 327,700 402,500 (633,300) Legal settlements - - (157,000) Other, net 278,100 (451,000) (107,600) -------- ---------- --------- $475,600 $(201,100) $(931,600) ======== ========= =========
-60- 61 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. Related party transactions: Westinghouse, as an incentive to 11 key officers to remain with the Company for a period of two years following June 1, 1995, the effective date of the Registration Statement, has agreed to make payments to such officers aggregating up to approximately $1.25 million, payable in three equal installments promptly after the effective date of the Registration Statement and on the first and second anniversaries of the effective date (subject to the officer remaining employed by the Company on the relevant payment date). In June 1995, the first installment of $409,100 was paid for these key officers of the Company. Even though such payments will be entirely funded by Westinghouse and will not require any use of the Company's cash, for accounting purposes, one-third of such payments are required to be reflected as compensation expense in the Company's financial statements on the first payment date with the remainder to be reflected as compensation expense over the 24-month period following June 1, 1995. During the years of its affiliation with Westinghouse, the Company has obtained certain insurance coverage and other services through arrangements negotiated by Westinghouse for itself and its subsidiaries and affiliates. Many of these arrangements will be replaced by the Company with its own contracts as and when the Company elects to do so or is no longer eligible to participate in such arrangements. The Company has already replaced certain of these arrangements, including the Westinghouse provided legal services and insurance coverage. The Company estimates that the incremental cost to it of purchasing all such services without the benefit of participating in programs of Westinghouse could total approximately $1.0 million per year on a pre-tax basis. The Company has purchased certain raw materials and has contracted for certain sub-assembly operations through Westinghouse to take advantage of more competitive pricing available through off-shore manufacturing locations. The Company estimates that it has purchased approximately $964,700, $1,691,200, and $1,543,000 in such materials and labor from Westinghouse during fiscal 1995, 1994, and 1993, respectively. During fiscal 1995, 1994, and 1993, the Company also purchased from Westinghouse and its subsidiaries approximately $877,600, $667,400, and $673,400, respectively, for other products and services provided to the Company, including insurance coverage, office space, consulting, office furniture, and telecommunications services. During fiscal 1993, the Company sold approximately $779,200 in products to Hugin Sweda-Austria, under the same terms and conditions offered to other independently-owned dealers/distributors of the Company. Hugin Sweda-Austria is owned, in part, by Peter Unterweger, a Director of the Company until October, 1992. -61- 62 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 11. Related party transactions (continued): During fiscal 1995, 1994, and 1993, the Company sold approximately $1,208,200, $1,107,500, and $946,600, respectively, in products to D.A.C. Systemes/MICROS France, under the same terms and conditions offered to other independently-owned dealers/distributors of the Company. D.A.C. Systemes/MICROS France was principally owned by Daniel Cohen, a Director of the Company, as of June 30, 1995 (see Note 15). During fiscal 1992, the Company entered into an agreement with Granite Communications, Inc. ("Granite") to purchase certain hardware and communications software for the Company's handheld products to be sold in conjunction with its internally-developed applications software. Granite is an entity affiliated with the Chairman of the Board, Louis M. Brown, Jr., and another Director of the Company, Alan Voorhees, since it was acquired by IDEAS, Inc. in fiscal 1992. During fiscal 1995, after a series of transactions, IDEAS' once majority interest in Granite was reduced to approximately a 17% interest. In fiscal 1991, the Company had advanced the sum of $220,000 to the predecessor of Granite for the development of a product, and advanced $150,000 in fiscal 1994 to Granite for the development of an additional product. Under the current agreements with Granite, the crediting of the advances is being reflected in product purchases through a reduced price for each unit purchased. During fiscal 1995, 1994, and 1993, the Company purchased products from Granite in the amount of $487,600, $1,301,500, and $863,500, respectively, net of $127,500 and $92,500 in fiscal 1994 and 1993, respectively, in credits against the advance payment made in 1991. The $150,000 advance made in fiscal 1994 will reduce the price of products purchased subsequent to fiscal 1995. In fiscal 1995 (for a license fee payable over time in the amount of $300,000, and a royalty payment per unit sold into certain designated markets), the Company acquired a license for the technology to develop, manufacture and market the products exclusively in the Hospitality Food Service field, and nonexclusively in the lodging field and certain Retail and General Merchandise locations. Additionally, pursuant to an asset purchase agreement entered into in fiscal 1995, the Company purchased from Granite $144,500 of machinery and equipment designed for the manufacture of certain handheld products. During fiscal 1993, the Company assumed a liability in the amount of $180,000 to a minority shareholder, payable in equal installments over the next 3 fiscal years. The liability was assumed as part of the purchase of a majority interest in Fidelio Software Corporation. In addition, the Company has entered into certain software licensing and royalty agreements with Fidelio GmbH through the Company's majority-owned subsidiaries in the U.S., France and the U.K. which distribute Fidelio GmbH software products. The terms and conditions of the licensing and royalty agreements are substantially similar to agreements which Fidelio GmbH has with its other distributors. MICROS owns a minority interest in Fidelio GmbH (see Note 3). -62- 63 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued) 11. Related party transactions (continued): During fiscal 1995, 1994, and 1993, the Company compensated Louis M. Brown, Jr., Chairman of the Board, $182,900, $154,000, and $35,300, respectively, for consulting services provided to the Company. 12. Employee benefit plan: The Company sponsors an employee savings plan which conforms to the provisions of Section 401(k) of the Internal Revenue Code. The Plan covers substantially all full-time employees and allows employees to voluntarily defer a certain percentage of their income through contributions to the Plan. Prior to January 1, 1995, the Company elected to contribute to the Plan at its discretion. Effective January 1, 1995, the Company changed its policy to guarantee a contribution of one percent of the salary of all eligible, non-highly compensated employees and to match fifty percent of the first five percent of each participating employee's voluntary contributions. The Company may elect to make additional contributions, at its discretion. Company contributions were made during the years ended June 30, 1995, 1994, and 1993 totalling $346,100, $241,200, and $163,800, respectively. The Company does not have any obligations to past or present employees related to post employment benefits. 13. Geographic information: The Company develops, manufactures, sells and services point-of-sale computer systems and distributes property management system software products for the hotel/lodging industry. Foreign sales aggregated approximately 33%, 29%, and 26% of revenue in fiscal 1995, 1994, and 1993, respectively. MICROS products are distributed in the U.S. and internationally, primarily in Europe, through independent Dealer/Distributors and company-owned sales and service offices. The Company's principal customers are lodging and food service-related businesses. Economic risks are similar for these businesses in that consumers generally spend more time lodging and dining away from home in robust economies and less time in slow or recessionary economies. The Company's experience with the collections of trade receivables and the sales growth pattern follow general economic conditions. No significant concentration of credit risk exists within any geographic area. -63- 64 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 13. Geographic information (continued): Operations in different geographic areas are as follows:
Net Revenue (1) ---------------------------------------------------------- 1995 1994 1993 ------------ ----------- ----------- United States $ 78,310,800 $59,640,800 $43,117,700 International (2) 33,709,900 19,623,700 12,195,900 ------------ ----------- ----------- Net revenue $112,020,700 $79,264,500 $55,313,600 ============ =========== =========== Income From Operations ---------------------------------------------------------- 1995 1994 1993 ------------ ----------- ----------- United States $ 13,271,500 $10,604,100 $ 8,338,200 International (2) 3,270,600 1,717,800 1,070,900 ------------ ----------- ----------- Income from operations $ 16,542,100 $12,321,900 $ 9,409,100 ============ =========== =========== Identifiable Assets ---------------------------------------------------------- 1995 1994 1993 ------------ ----------- ----------- United States $ 74,418,500 $55,904,800 $41,617,800 International (2) 15,225,200 10,285,800 6,588,900 ------------ ----------- ----------- Total assets $ 89,643,700 $66,190,600 $48,206,700 ============ =========== ===========
(1) Included in United States Net Revenue are export sales amounting to $3,419,600, $3,076,300, and $2,404,100, for each of the respective years. (2) The International geographic area is principally comprised of European operations. -64- 65 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. Quarterly financial information (unaudited): Quarterly financial information for fiscal 1995 and 1994 is presented in the following tables:
First Second Third Fourth 1995 Quarter Quarter Quarter Quarter ----------- ----------- ----------- ----------- ----------- Revenue $24,474,400 $27,121,600 $25,186,200 $35,238,500 =========== =========== =========== =========== Gross margin $12,393,000 $13,348,200 $12,636,200 $17,380,100 =========== =========== =========== =========== Income from operations $ 4,104,300 $ 4,466,400 $ 3,086,600 $ 4,884,800 =========== =========== =========== =========== Net income $ 3,035,700 $ 2,879,900 $ 2,223,800 $ 3,437,400 =========== =========== =========== =========== Net income per common and common equiv- alent share $ 0.38 $ 0.36 $ 0.28 $ 0.43 =========== =========== =========== =========== Stock Prices ------------ ----------- ----------- ----------- ----------- High 33-1/2 41-1/4 38-1/8 35 Low 26-1/4 28-3/4 28 27-3/4 ===================================================================================================
First Second Third Fourth 1994 Quarter Quarter Quarter Quarter ----------- ----------- ----------- ----------- ----------- Revenue $16,395,600 $19,318,900 $19,281,000 $24,269,000 =========== =========== =========== =========== Gross margin $ 8,470,700 $ 9,484,900 $ 9,615,000 $12,246,400 =========== =========== =========== =========== Income from operations $ 2,427,600 $ 2,932,400 $ 2,877,800 $ 4,084,100 =========== =========== =========== =========== Net income $ 2,014,800 $ 1,803,800 $ 2,000,000 $ 2,868,700 =========== =========== =========== =========== Net income per common and common equiv- alent share $ 0.26 $ 0.23 $ 0.25 $ 0.36 =========== =========== =========== =========== Stock Prices ------------- ----------- ----------- ---------- ----------- High 20-1/2 26 29-1/2 27-3/4 Low 13-1/2 14-3/4 23-1/4 22-1/2 ==================================================================================================
-65- 66 MICROS SYSTEMS, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) 14. Quarterly financial information (unaudited) (continued): The Company has never paid a dividend. Its current policy is to retain earnings and use funds for the operation and expansion of its business. In addition, certain indebtedness restricts the amount of dividends which may be payable. The Company is a party to a Loan and Security Agreement expiring December 31, 1996, which restricts the payment of dividends, other than stock dividends. 15. Subsequent events (unaudited): On July 6, 1995, 1 million shares of the Company's stock were sold by the Selling Stockholder under the Registration Statement, at a price of $30.70 per share. As a result of the sale, the Selling Stockholder owns 3,849,123 shares of Common Stock, representing 49% of the outstanding Common Stock as of July 6, 1995. On August 25, 1995, the Company purchased from Daniel Cohen (a director of the Company) and his family, the remaining 77% of D.A.C. Systemes/MICROS France and AD-Maintenance Informatique ("ADMI") for FF 14.0 million (approximately $2.8 million at exchange rates in effect at the date of purchase), payable FF 8.0 million at closing and FF 6.0 million over the next four years, plus potential additional payments based on earnings over the next four years. In addition, Mr. Cohen was granted a five year employment contract at FF 600,000 (approximately $119,000 at exchange rates in effect at the date of purchase) per year plus a bonus based on future operating results. Merger of D.A.C. Systemes/MICROS France and ADMI, previously 23% owned equity investees, and Fidelio France, currently a 51% owned consolidated subsidiary, is in the process of being consummated, after which the Company will own 97% of the merged Fidelio/MICROS France entity, and Fidelio GmbH, a 30% owned equity investee of the Company will own the remaining 3%. Fidelio/MICROS France will be consolidated into the Company's accounts from the date of purchase. Assuming the purchase and merger had occurred on July 1, 1994, revenue and net income for fiscal 1995 on a pro forma basis are $119.0 million and $11.8 million ($1.49 per share), respectively. -66- 67 MICROS SYSTEMS, INC. AND SUBSIDIARIES SCHEDULE V - PROPERTY AND EQUIPMENT for the years ended June 30, 1995, 1994, and 1993
Balance at Balance at beginning Additions Other end of Description of period at cost Retirements changes period ------------------------- ----------- ---------- ----------- ---------- ----------- Year ended June 30, 1995: Land $ 1,582,700 $ - $ - $ - $ 1,582,700 Building 4,820,600 - - - 4,820,600 Building improvements 320,300 - - - 320,300 Machinery and equipment 5,687,200 1,946,200 (85,800) 30,300 7,577,900 Furniture and fixtures 2,293,300 576,900 (9,200) 10,900 2,871,900 Leasehold improvements 236,700 102,100 - - 338,800 ----------- ---------- ----------- ---------- ----------- $14,940,800 $2,625,200 $ (95,000) $ 41,200 $17,512,200 =========== ========== =========== ========== =========== Year ended June 30, 1994: Land $ 582,700 $1,000,000 $ - $ - $ 1,582,700 Building 1,980,600 2,840,000 - - 4,820,600 Building improvements 320,300 - - - 320,300 Machinery and equipment 4,951,800 799,400 (60,100) (3,900) 5,687,200 Furniture and fixtures 2,057,600 346,200 (151,500) 41,000 2,293,300 Leasehold improvements 153,200 87,400 (3,900) - 236,700 ----------- ---------- ----------- ---------- ----------- $10,046,200 $5,073,000 $ (215,500) $ 37,100 $14,940,800 =========== ========== =========== ========== =========== Year ended June 30, 1993: Land $ 582,700 $ - $ - $ - $ 582,700 Building 1,980,600 - - - 1,980,600 Building improvements 320,300 - - - 320,300 Machinery and equipment 4,158,300 791,200 (5,100) 7,400 4,951,800 Furniture and fixtures 1,943,400 127,500 - (13,300) 2,057,600 Leasehold improvements 132,400 20,800 - - 153,200 ---------- ---------- ----------- ---------- ----------- $ 9,117,700 $ 939,500 $ (5,100) $ (5,900) $10,046,200 =========== ========== =========== ========== ===========
-67- 68 MICROS SYSTEMS, INC. AND SUBSIDIARIES SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION, AND AMORTIZATION OF PROPERTY AND EQUIPMENT for the years ended June 30, 1995, 1994, and 1993
Additions Balance at charged to Balance at beginning costs and Other end of Description of period expenses Retirements changes period ------------------------- ----------- ---------- ----------- ---------- ---------- Year ended June 30, 1995: Building $ 480,800 $ 120,500 $ - $ - $ 601,300 Building improvements 35,500 9,200 - - 44,700 Machinery and equipment 4,267,100 870,800 (68,900) 9,700 5,078,700 Furniture and fixtures 1,311,500 200,000 (8,200) 4,200 1,507,500 Leasehold improvements 81,700 36,500 - - 118,200 ---------- ---------- ----------- ---------- ---------- $6,176,600 $1,237,000 $ (77,100) $ 13,900 $7,350,400 ========== ========== =========== ========== ========== Year ended June 30, 1994: Building $ 395,900 $ 84,900 $ - $ - $ 480,800 Building improvements 26,300 9,200 - - 35,500 Machinery and equipment 3,713,600 521,400 (13,600) 45,700 4,267,100 Furniture and fixtures 1,197,600 241,500 (113,200) (14,400) 1,311,500 Leasehold improvements 56,200 28,400 (1,100) (1,800) 81,700 ---------- ---------- ----------- ---------- ---------- $5,389,600 $ 885,400 $ (127,900) $ 29,500 $6,176,600 ========== ========== =========== ========== ========== Year ended June 30, 1993: Building $ 346,400 $ 49,500 $ - $ - $ 395,900 Building improvements 17,200 9,100 - - 26,300 Machinery and equipment 3,247,900 469,700 (4,000) - 3,713,600 Furniture and fixtures 985,800 213,300 (1,500) - 1,197,600 Leasehold improvements 31,200 25,000 - - 56,200 ---------- ---------- ----------- ---------- ---------- $4,628,500 $ 766,600 $ (5,500) $ -0- $5,389,600 ========== ========== =========== ========== ==========
-68- 69 MICROS SYSTEMS, INC. AND SUBSIDIARIES SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES for the years ended June 30, 1995, 1994, and 1993
Balance at Charged Charges Balance beginning to to other at end Description of period expenses accounts Deductions of period --------------------------------- ---------- ---------- -------- ---------- ---------- Year ended June 30, 1995: Allowance for doubtful accounts $ 764,300 $ 697,000 $ - $ 232,100 $1,229,200 Reserve for inventory obsolescence 973,300 502,400 - 158,100(1) 1,317,600 ---------- ---------- -------- ---------- ---------- $1,737,600 $1,199,400 $ -0- $ 390,200 $2,546,800 ========== ========== ======== ========== ========== Year ended June 30, 1994: Allowance for doubtful accounts $ 696,200 $ 273,700 $ - $ 205,600 $ 764,300 Reserve for inventory obsolescence 475,800 564,200 - 66,700(1) 973,300 ---------- ---------- -------- ---------- ---------- $1,172,000 $ 837,900 $ -0- $ 272,300 $1,737,600 ========== ========== ======== ========== ========== Year ended June 30, 1993: Allowance for doubtful accounts $ 705,400 $ 244,200 $ - $ 253,400 $ 696,200 Reserve for inventory obsolescence 486,700 150,000 - 160,900(1) 475,800 ---------- ---------- -------- ---------- ---------- $1,192,100 $ 394,200 $ -0- $ 414,300 $1,172,000 ========== ========== ======== ========== ==========
(1) Material scrapped or otherwise disposed. -69- 70 Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. MICROS SYSTEMS, INC. Date: 9-15-95 By: s/Gary C. Kaufman -------------------- ----------------------- Gary C. Kaufman Vice President, Finance and Administration/Chief Financial Officer
-70- 71 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant, and in the capacities and on the dates indicated.
Name Title ------------------------ ---------------------------- ----------- s/Louis M. Brown, Jr. 9-15-95 ------------------------ Director and ----------- Louis M. Brown, Jr. Chairman of the Board s/A. L. Giannopoulos Director and President 9-15-95 ------------------------ Chief Executive Officer ----------- A. L. Giannopoulos s/Ronald J. Kolson Executive Vice President 9-15-95 ------------------------ Chief Operating Officer ----------- Ronald J. Kolson s/Gary C. Kaufman Vice President 9-15-95 ------------------------ Finance and Administration ----------- Gary C. Kaufman Chief Financial Officer s/Daniel Cohen 9-15-95 ------------------------ Director ----------- Daniel Cohen s/Claudia E. Morf 9-15-95 ------------------------ Director ----------- Claudia E. Morf s/Frederic G. Reynolds 9-15-95 ------------------------ Director ----------- Frederic G. Reynolds s/Alan M. Voorhees 9-15-95 ------------------------ Director ----------- Alan M. Voorhees s/Edward T. Wilson 9-15-95 ------------------------ Director ----------- Edward T. Wilson
-71- 72 EXHIBIT INDEX 10d. Underwriting Agreement dated July 6, 1995 by and among MICROS Systems, Inc., Westinghouse Electric Corporation, Westinghouse Holdings Corporation and J.P. Morgan Securities, Inc., Morgan Stanley & Co. Incorporated and Smith Barney Inc. 10e. Employment Agreement dated June 1, 1995 between MICROS Systems, Inc. and A.L. Giannopoulos. 10f. Consulting Agreement dated June 30, 1995 between MICROS Systems, Inc. and Louis M. Brown, Jr. 10g. Management Agreement dated August 25, 1995 between MICROS Systems, Inc. and Daniel Cohen. 11. Statement Regarding Computation of Earnings Per Share. 21. Subsidiaries of the Company. 23. Consent of Independent Accountants. 24. Power of Attorney. 27. Financial Data Schedule. 72 EX-10.D 2 UNDERWRITING AGREEMENT 1 EXHIBIT 10d UNDERWRITING AGREEMENT MICROS Systems, Inc. Common Stock (Par Value $.025 Per Share) Dated the date set forth on the signature page hereto To the Underwriter or Underwriters listed in Schedule I hereto Ladies and Gentlemen: Westinghouse Electric Corporation, a Pennsylvania corporation ("Westinghouse"), or Westinghouse Holdings Corporation, a Delaware corporation and a wholly-owned subsidiary of Westinghouse ("Transferee") (Westinghouse or, if the Transferee has executed the signature page hereto, the Transferee being hereinafter referred to as the "Selling Stockholder"), proposes to sell to the underwriter or underwriters listed in Schedule I hereto (the "Underwriters"), for whom the representative or representatives designated on Schedule I hereto, if any, are acting as representatives (in such capacity, the "Representatives"), and the Underwriters propose to purchase from the Selling Stockholder, the number of shares (the "Underwritten Securities") of common stock, par value $.025 per share (the "Common Stock"), of MICROS Systems, Inc., a Maryland corporation (the "Company"), set forth in Schedule I hereto as the Total Number of Underwritten Securities. In addition, if a number of shares of Common Stock is set forth on Schedule I hereto as the Total Number of Option Securities, then, for the sole purpose of covering over-allotments in connection with the sale of the Underwritten Securities, the Selling Stockholder proposes to sell to the Underwriters, at the option of the Underwriters, up to such number of shares of Common Stock (the "Option Securities"). The Underwritten Securities and any Option Securities purchased by the Underwriters are herein referred to as the "Securities." If the Securities have been transferred to Transferee prior to the execution of this Agreement, then Transferee shall execute this Agreement in addition 2 -2- to Westinghouse. If no Representatives are designated as such on Schedule I hereto, then the term "Representatives" as used herein shall mean the Underwriters. The Company has prepared and filed with the Securities and Exchange Commission (the "Commission"), in accordance with the provisions of the Securities Act of 1933, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Securities Act"), a registration statement on Form S-3 (File No. 33-88768), including a prospectus, relating to the Securities, which has become effective. The registration statement as amended at the time when it became effective, or, if post-effective amendments are filed with respect thereto, as amended by such post-effective amendments at the time of their effectiveness, is hereinafter referred to as the "Registration Statement"; the prospectus in the form in which it appears in the Registration Statement is hereinafter referred to as the "Basic Prospectus"; the supplement thereto prepared by the Company relating to the Securities and the plan of distribution thereof, to be filed pursuant to Rule 424(b) under the Securities Act, is hereinafter referred to as the "Prospectus Supplement"; and the Basic Prospectus, as supplemented by the Prospectus Supplement, in the form first used to confirm sales of Securities is hereinafter referred to as the "Prospectus." The term "preliminary prospectus" means a preliminary prospectus supplement specifically relating to the Securities, together with the Basic Prospectus. Any reference in this Agreement to the Registration Statement, the Basic Prospectus, any preliminary prospectus, the Prospectus Supplement or the Prospectus shall be deemed to refer to and include the documents incorporated by reference therein pursuant to Item 12 of Form S-3 under the Securities Act, as of the effective date of the Registration Statement, or the date of the Basic Prospectus, such preliminary prospectus or the Prospectus Supplement, as the case may be, and any reference to "amend," "amendment" or "supplement" with respect to the Registration Statement, the Basic Prospectus, any preliminary prospectus, the Prospectus Supplement or the Prospectus shall be deemed to refer to and include any documents filed after such date under the Securities Exchange Act of 1934, as amended, and the rules and regulations of the Commission thereunder (collectively, the "Exchange Act") that are deemed to be incorporated by reference therein. 1. Agreements to Sell and Purchase. The Selling Stockholder hereby agrees to sell the Underwritten Securities to the several Underwriters as hereinafter provided, and each 3 -3- Underwriter, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, agrees to purchase, severally and not jointly, from the Selling Stockholder the respective number of shares of Common Stock constituting Underwritten Securities set forth opposite such Underwriter's name in Schedule I hereto (or such number of Underwritten Securities increased as set forth in Section 13 hereof, subject to such adjustments to eliminate any fractional interests as the Representatives in their sole discretion shall make) at the price per share of Common Stock set forth on Schedule I hereto (the "Purchase Price"). In addition, if a Total Number of Option Securities is set forth on Schedule I hereto, the Selling Stockholder agrees to sell the Option Securities to the several Underwriters as hereinafter provided, and the Underwriters, upon the basis of the representations and warranties herein contained, but subject to the conditions hereinafter stated, shall have the option to purchase, severally and not jointly, from the Selling Stockholder up to such number of shares of Common Stock at the Purchase Price, for the sole purpose of covering over-allotments (if any) in connection with the sale of the Underwritten Securities by the several Underwriters. If any Option Securities are to be purchased, the number of Option Securities to be purchased by each Underwriter shall be the number of Option Securities which bears the same ratio to the aggregate number of Option Securities being purchased as the number of Underwritten Securities set forth opposite the name of such Underwriter in Schedule I hereto bears to the aggregate number of Underwritten Securities, subject, however, to such adjustments to eliminate any fractional interests as the Representatives in their sole discretion shall make. The Underwriters may exercise the option to purchase the Option Securities at any time (but not more than once) on or before the last day of the period indicated on Schedule I hereto as the period for exercise of such option, by written notice from the Representatives to the Company and the Selling Stockholder. Such notice shall set forth the aggregate number of Option Securities as to which the option is being exercised and the date and time when such Option Securities are to be delivered and paid for, which may be the same date and time as the Closing Date (as hereinafter defined) but shall not be earlier than the Closing Date or later than the tenth full Business Day (as hereinafter defined) after the date of such notice (unless such date and time are postponed in accordance with the 4 -4- provisions of Section 13 hereof). Any such notice shall be given at least two Business Days prior to the date and time of delivery specified therein. 2. Terms of Public Offering. Each of the Company, Westinghouse and, if Transferee is a party hereto, Transferee understands that the Underwriters intend (i) to make a public offering of the Securities as soon as the Representatives deem advisable after this Agreement has become effective and the Prospectus Supplement has been filed and (ii) initially to offer the Securities upon the terms set forth in the Prospectus. 3. Delivery of the Securities and Payment Therefor. Payment for the Securities shall be made to the Selling Stockholder by certified or official bank check or checks payable in New York Clearing House or other next-day funds at the offices of Cahill Gordon & Reindel, 80 Pine Street, New York, New York at 10:00 A.M., New York City time, (i) in the case of the Underwritten Securities, on the date set forth on Schedule I hereto as the Closing Date, or at such other time on the same or such other date, not later than the fifth Business Day thereafter, as the Underwriters, the Selling Stockholder and the Company may agree upon in writing, or (ii) in the case of the Option Securities, on the date and time specified by the Representatives in the written notice of the Underwriters' election to purchase such Option Securities. The time and date of such payment for the Underwritten Securities are referred to herein as the "Closing Date," and the time and date of such payment for the Option Securities, if other than the Closing Date, are herein referred to as the "Additional Closing Date." As used herein, the term "Business Day" means any day other than a day on which banks are permitted or required to be closed in New York City. Payment for the Securities to be purchased on the Closing Date or the Additional Closing Date, as the case may be, shall be made against delivery to the Underwriters of the certificates for the Securities to be purchased on such date, in the case of certificates representing the Securities currently registered in the name of Westinghouse or Transferee, endorsed in blank or with blank stock powers attached, and, in the case of the replacement certificates referred to below, registered in such names and in such denominations as the Underwriters shall request in writing not later than two full Business Days prior to the Closing Date or the Additional Closing Date, as the case may be. The certificates for the 5 -5- Securities will be made available by the Selling Stockholder for inspection and packaging by the Underwriters in New York, New York not later than 1:00 P.M., New York City time, on the Business Day prior to the Closing Date or the Additional Closing Date, as the case may be. For purposes of expediting the foregoing matters, the Company agrees to make available certificates representing shares of Common Stock in replacement of the certificate(s) representing the Securities currently registered in the name of Westinghouse or Transferee to be delivered by or on behalf of the Selling Stockholder on the Closing Date and the Additional Closing Date, as the case may be. The Selling Stockholder will pay all applicable transfer taxes, if any, involved in the transfer to the Underwriters of the Securities. 4. Representations and Warranties of the Company. The Company hereby represents and warrants to each of the Underwriters, to Westinghouse and, if Transferee is a party hereto, to Transferee that: (a) no order preventing or suspending the use of any preliminary prospectus has been issued by the Commission, and each preliminary prospectus filed as part of the Registration Statement, as originally filed or as part of any amendment thereto, or filed pursuant to Rule 424 under the Securities Act, complied when so filed in all material respects with the Securities Act; (b) the Registration Statement has become effective under the Securities Act; no stop order suspending the effectiveness of the Registration Statement has been issued and no proceeding for that purpose has been instituted or, to the knowledge of the Company, threatened by the Commission; the Registration Statement and the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto to the Underwriters) comply, or will comply, as the case may be, in all material respects with the Securities Act; the Registration Statement, as of the date of the original filing thereof and as of the applicable effective date as to the Registration Statement and any amendment thereto, did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading; and the Prospectus, as of the date of the Prospectus Supplement, as of the date of any 6 -6- amendment or further supplement thereto and as amended or supplemented at the Closing Date and the Additional Closing Date, if applicable, did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the foregoing representations and warranties shall not apply to statements or omissions in the Registration Statement or the Prospectus made in reliance upon and in conformity with (i) information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein or (ii) information relating to Westinghouse and, if Transferee is a party hereto, Transferee furnished to the Company in writing by Westinghouse and, if Transferee is a party hereto, Transferee expressly for use therein. For purposes of this paragraph (b), the only written information furnished by Westinghouse and, if Transferee is a party hereto, Transferee to the Company expressly for use in the Registration Statement and the Prospectus is the information in the second sentence of the first paragraph and the first sentence of the second paragraph under the caption "Management Compensation and Changes" and the first paragraph and the last sentence of the second paragraph under the caption "Principal and Selling Stockholder" in the Basic Prospectus (it being understood and agreed that the reference herein to the last sentence of the second paragraph should not be deemed to be an indication of the ability of Westinghouse to establish new service arrangements or its ability to minimize any incremental costs thereof) and the information referred to on Schedule I hereto under the heading "Information Provided by Westinghouse and Transferee"; (c) the Company and the offering of the Securities contemplated hereby meet all conditions and requirements for registration on a Form S-3 registration statement under the Securities Act; (d) the documents incorporated by reference in the Prospectus, when they were filed with the Commission, conformed in all material respects to the requirements of the Exchange Act; none of such documents contained an untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the 7 -7- circumstances under which they were made, not misleading; and any further documents so filed and incorporated by reference in the Prospectus, when such documents are filed by the Company with the Commission, will conform in all material respects to the requirements of the Exchange Act and will not contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; (e) Price Waterhouse LLP, who are reporting upon the audited consolidated financial statements of the Company and its subsidiaries and the related schedules included or incorporated by reference in the Registration Statement, are independent public accountants as required by the Securities Act; (f) the financial statements and related notes thereto included or incorporated by reference in the Registration Statement and the Prospectus present fairly the consolidated financial position of the Company and its subsidiaries taken as a whole as of the dates indicated and the consolidated results of their operations and changes in their consolidated shareholders' equity and cash flows for the periods specified; the financial statement schedules included or incorporated by reference in the Registration Statement and the Prospectus present fairly the information required to be included therein; the financial statements of the Company (including the related notes and schedules) included or incorporated by reference in the Registration Statement and the Prospectus have been prepared in accordance with the applicable accounting requirements of Regulation S-X under the Securities Act and the Exchange Act ("Regulation S-X") and with generally accepted accounting principles in the United States of America ("GAAP") applied on a consistent basis throughout the periods included (subject in the case of interim statements to normal year end adjustments), except as stated therein or in the reports related thereto; (g) the statistical and market-related data included or incorporated by reference in the Registration Statement and the Prospectus are based on or derived from sources which are believed by the Company to be reliable and accurate; 8 -8- (h) there are no contracts or other documents that are required to be described or referred to in the Registration Statement or the Prospectus, or to be filed as exhibits to the Registration Statement, that are not described, referred to or filed as required; (i) since the date of the latest consolidated financial statements included or incorporated by reference in the Registration Statement and the Prospectus, except as disclosed or contemplated therein, there has not been (i) any change in the Company's issued capital stock or options except pursuant to the terms of the instruments governing the same or pursuant to the exercise of such options, or (ii) any material adverse change in the general affairs, business, prospects, management, operations or condition, financial or otherwise, of the Company and its subsidiaries (the "Subsidiaries," the names of which are listed on Annex A hereto) taken as a whole (a "Material Adverse Change") or any development involving an event or state of facts which could reasonably be expected to result in a Material Adverse Change (a "Prospective Material Adverse Change"); (j) since the respective dates as of which information is given in the Registration Statement and the Prospectus, except as disclosed or contemplated therein, (i) there have been no transactions entered into by the Company or any of the Subsidiaries, whether or not in the ordinary course of business, which are material to the Company and the Subsidiaries taken as a whole, and (ii) there has been no dividend or distribution of any kind declared, paid or made by the Company on any class of its capital stock; (k) each of the Company and the Subsidiaries has been duly organized under the laws of its jurisdiction of incorporation; and each of the Company and the Subsidiaries is a validly existing corporation in good standing under the laws of its jurisdiction of incorporation, has full corporate power and authority to own its properties and conduct its business and is duly qualified to do business as a foreign corporation and is in good standing in all other jurisdictions where the ownership of its property or the conduct of its business requires such qualification, except where the failure so to qualify or be in good standing would not, individually or in the aggregate, have a material adverse effect on the general affairs, 9 -9- business, prospects, management, operations or condition, financial or otherwise, of the Company and the Subsidiaries taken as a whole (a "Material Adverse Effect"); (l) all of the issued and outstanding shares of Common Stock (including the Securities) have been duly authorized by the Company, are validly issued and are fully paid and nonassessable and are not subject to any preemptive or other similar rights other than those contained in the Company's charter as amended and in effect on the date hereof (the "Charter"); the authorized capital stock of the Company consists solely of the Common Stock, which Common Stock conforms as to legal matters to the description thereof contained in the Registration Statement and the Prospectus; (m) this Agreement has been duly authorized, executed and delivered by the Company; (n) the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement, and the consummation by the Company of the transactions contemplated herein, (i) have been duly authorized by all necessary corporate action on the part of the Company, (ii) do not and will not result in any violation of the Charter or the Company's by-laws as amended and in effect on the date hereof (the "By-laws") and (iii) do not and will not conflict with, or result in a breach or violation of, any of the terms or provisions of, or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or give rise to any right to accelerate the maturity or require the prepayment of any indebtedness or any right of termination under, or result in the creation or imposition of any lien, charge or encumbrance upon any material property or assets of the Company or any Subsidiary under, (A) any material indenture, mortgage, loan agreement, note, lease, partnership agreement or other agreement or instrument to which the Company or any Subsidiary is a party or by which any of them may be bound or to which any of their properties or assets may be subject, (B) any existing applicable law, rule or regulation (subject to obtaining such approvals as may be required under the securities or Blue Sky laws of the various states and other jurisdictions of the United States of America) or (C) any judgment, order or decree of any government, governmental instrumentality or court, 10 -10- domestic or foreign, having jurisdiction over the Company or any Subsidiary or any of their respective properties or assets; (o) no authorization, approval, consent or license of, or filing with, any government, governmental instrumentality or court, domestic or foreign (other than as have been made and obtained and are in full force and effect under the Securities Act or as may be required under the securities or Blue Sky laws of the various states and other jurisdictions of the United States of America), is required for the performance by the Company of its obligations under this Agreement and the provisions of Section 3-602 of the Maryland General Corporation Law are not currently applicable to the Company; (p) (i) the Company is not in violation of the Charter or the By-laws nor is any Subsidiary in violation of its charter or by-laws or other organizational documents and (ii) neither the Company nor any Subsidiary is or with notice or lapse of time or both would be in breach or violation of, or in default under, any obligation, agreement, covenant or condition contained in any indenture, mortgage, loan agreement, note, lease, partnership agreement or other agreement or instrument to which it is a party or by which it may be bound or to which any of its properties or assets may be subject or affected or of any permit, order, decree, judgment, statute, rule or regulation applicable to the Company or any Subsidiary, except for such breaches, violations or defaults that, individually or in the aggregate, would not have a Material Adverse Effect; (q) except as described in the Registration Statement and the Prospectus, there is no investigation, action, suit or proceeding before or by any government, governmental instrumentality or court, domestic or foreign, now pending or, to the knowledge of the Company, threatened against or affecting the Company or any Subsidiary that (i) if determined adversely to the Company or such Subsidiary, could individually or in the aggregate reasonably be expected to have a Material Adverse Effect or a material adverse effect on the consummation of the transactions contemplated in this Agreement or (ii) is required to be described in the Registration Statement or the Prospectus and is not so described; 11 -11- (r) except as set forth on Annex B hereto, the Company owns, beneficially and of record, free and clear of any mortgage, pledge, security interest, lien, claim or other encumbrance or restriction on transferability or voting, directly or indirectly, the percentage of the outstanding equity securities of each of the Subsidiaries as listed on Annex A hereto, which constitute all of the subsidiaries of the Company; the Subsidiaries not marked with an asterisk on Annex A hereto (other than Fidelio Software Corporation ("Fidelio U.S.") and MSI Delaware, Inc. ("MSI")), when considered in the aggregate a single subsidiary, do not constitute a "significant subsidiary" within the meaning of Regulation S-X; all of the outstanding capital stock of each Subsidiary owned by the Company has been duly authorized and validly issued and is fully paid and nonassessable; and there are no outstanding (i) securities or obligations convertible into or exchangeable for any shares of capital stock of the Company or any Subsidiary, (ii) rights, warrants or options to acquire or purchase any shares of capital stock of the Company or any Subsidiary (except for options to purchase Common Stock outstanding under the Company's 1991 Stock Option Plan and 1981 Stock Option Plan as disclosed in its most recent annual proxy statement filed pursuant to Regulation 14A under the Exchange Act (the "Proxy Statement") or in the Registration Statement and the Prospectus) or any such convertible or exchangeable securities or obligations or (iii) obligations or understandings of the Company or any Subsidiary to issue or sell any shares of capital stock of the Company or any Subsidiary, any such convertible or exchangeable securities or obligations, or any such warrants, rights or options (except as set forth on Annex B hereto); (s) each of the Company and the Subsidiaries has good and marketable title to all properties and assets described in the Registration Statement and the Prospectus as owned by it, free and clear of all liens, charges, encumbrances or restrictions, except (i) as described or reflected in the Registration Statement and the Prospectus or (ii) for such liens, charges, encumbrances or restrictions which, individually or in the aggregate, would not be material to the Company and the Subsidiaries taken as a whole; all of the leases and subleases material to the business of the Company and the Subsidiaries are in full force and effect, with such exceptions as, individually or 12 -12- in the aggregate, would not be material to the Company and the Subsidiaries taken as a whole; (t) each of the Company and the Subsidiaries owns, possesses or has obtained all licenses, permits, certificates, consents, orders, approvals and other authorizations from, and has made all declarations and filings with, all federal, state, local and other governmental authorities (including foreign regulatory agencies), all self-regulatory organizations and all courts and other tribunals, domestic or foreign, necessary to own or lease, as the case may be, and to operate its properties and to carry on its business as conducted as of the date hereof, except, in each case, where the failure to obtain licenses, permits, certificates, consents, orders, approvals and other authorizations, or to make all declarations and filings, would not have a Material Adverse Effect, and neither the Company nor any Subsidiary has received any actual notice of any proceeding relating to revocation or modification of any such license, permit, certificate, consent, order, approval or other authorization, except as described in the Registration Statement and the Prospectus and except, in each case, where such revocation or modification would not have a Material Adverse Effect; and each of the Company and the Subsidiaries is in compliance with all laws and regulations relating to the conduct of its business as conducted as of the date hereof, except where noncompliance with such laws or regulations would not have a Material Adverse Effect; (u) each of the Company and the Subsidiaries owns, possesses or has the right to use the trademarks, service marks, trade names, copyrights and know-how (including trade secrets and other unpatented and/or unpatentable proprietary or confidential information, systems or procedures) (collectively, the "Intellectual Property") employed by it in connection with the business conducted by it as of the date hereof, except to the extent that the failure to own, possess or have the right to use such Intellectual Property would not have a Material Adverse Effect, and except as described in the Registration Statement and the Prospectus, neither the Company nor any Subsidiary has received any actual notice of infringement of or conflict with asserted rights of others with respect to any Intellectual Property or patent, except where such infringement or conflict would not have a Material Adverse Effect; 13 -13- (v) there are no labor disputes with the employees of the Company or any of the Subsidiaries which are likely to have a Material Adverse Effect; (w) each of the Company and the Subsidiaries is in compliance with all applicable existing federal, state, local and foreign laws and regulations relating to protection of human health or the environment or imposing liability or standards of conduct concerning any Hazardous Material (as hereinafter defined) (collectively, the "Environmental Laws"), except, in each case, where noncompliance, individually or in the aggregate, would not have a Material Adverse Effect. The term "Hazardous Material" means (i) any "hazardous substance" as defined by the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended, (ii) any "hazardous waste" as defined by the Resource Conservation and Recovery Act, as amended, and (iii) any pollutant or contaminant or hazardous, dangerous or toxic chemical, material, waste or substance regulated under or within the meaning of any other Environmental Law. There are no legal or governmental proceedings pending or, to the knowledge of the Company, threatened against or affecting the Company or any of the Subsidiaries under any Environmental Law which, individually or in the aggregate, could reasonably be expected to have a Material Adverse Effect; (x) no authorization, approval or consent of any governmental authority or agency is required (other than those which have already been obtained) under the laws of any jurisdiction in which the Company and the Subsidiaries conduct their respective businesses in connection with the ownership by the Company of capital stock of any Subsidiary, any foreign exchange controls or the repatriation of any amount from or to the Company and the Subsidiaries, except to the extent that the failure to obtain such authorization, approval or consent will not have a Material Adverse Effect; (y) the Company and the Subsidiaries have filed all federal, state, local and material foreign tax returns which have been required to be filed and have paid all taxes shown thereon and all assessments received by them or any of them to the extent that such taxes have become due and are not being contested in good faith; and there is no tax deficiency which has been or might reasonably be expected to be asserted or threatened against the Company 14 -14- or any Subsidiary which could have a Material Adverse Effect; (z) the Company is not an "investment company" as such term is defined in the Investment Company Act of 1940, as amended, or a holding company under the Public Utility Holding Company Act of 1935; (aa) the Company does not know of any outstanding claims for services, either in the nature of a finder's fee or origination fee, with respect to any of the transactions contemplated hereby; (bb) the Company has not taken nor will it take, directly or indirectly, any action designed to, or that might be reasonably expected to, cause or result in stabilization or manipulation of the price of the Common Stock, and the Company has not distributed nor will it distribute any prospectus or other offering material in connection with the offering and sale of the Securities other than any preliminary prospectus filed with the Commission, the Basic Prospectus or the Prospectus; (cc) neither the filing of the Registration Statement or any amendment thereto nor the offer or sale of the Securities as contemplated by this Agreement gives rise to any rights for or relating to the registration under the Securities Act of any securities of the Company or any Subsidiary; and (dd) the Company has delivered to the Underwriters written agreements, in form and substance satisfactory to the Underwriters, of each of its directors and principal executive officers, pursuant to which each has agreed not to, directly or indirectly, offer, sell, contract to sell or otherwise dispose of any shares of Common Stock or any securities exercisable for or convertible into Common Stock for the period of days set forth on Schedule I hereto as the Lock-up Period, without the prior written consent of the Underwriter or Representative, as the case may be, executing this Agreement on behalf of the Under- writers. 5. Representations and Warranties of Westinghouse and Transferee. Westinghouse, as to itself and each of Westinghouse and Transferee, as to Transferee if Transferee is 15 -15- a party hereto, represents and warrants to each of the Underwriters and to the Company that: (a) such entity has been duly organized and is validly existing as a corporation in good standing under the laws of its jurisdiction of incorporation; (b) this Agreement has been duly authorized, executed and delivered by such entity; (c) Westinghouse, or, if Transferee has executed this Agreement, Transferee, is the beneficial and lawful owner of all of the Securities and has valid and marketable title to the Securities, and upon delivery of and payment for the Securities, the Underwriters will acquire valid and marketable title to the Securities, free and clear of any mortgage, pledge, security interest, lien, claim or other encumbrance or restriction on transferability or any adverse claim within the meaning of Section 8-302 of the Uniform Commercial Code in effect in the State of New York (the "UCC"); (d) the execution and delivery by such entity of, and the performance by it of its obligations under, this Agreement, and the consummation of the transactions contemplated herein, (i) have been duly authorized by all necessary corporate action on its part, (ii) do not and will not result in any violation of its articles of incorporation or by-laws and (iii) do not and will not conflict with, or result in a breach or violation of, any of the terms or provisions of, or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or give rise to any right to accelerate the maturity or require the prepayment of any indebtedness under, or result in the creation or imposition of any lien, charge or encumbrance upon any of its material property or assets under, (A) any material indenture, mortgage, loan agreement, note, lease, partnership agreement or other agreement or instrument to which it is a party or by which it may be bound or to which any of its properties or assets may be subject, (B) any existing applicable law, rule or regulation (subject to obtaining such approvals as may be required under the securities or Blue Sky laws of the various states and other jurisdictions of the United States of America) or (C) any judgment, order or decree of any government, governmental 16 -16- instrumentality or court, domestic or foreign, having jurisdiction over it or any of its properties or assets; (e) no authorization, approval, consent or license of, or filing with, any government, governmental instrumentality or court, domestic or foreign (other than as have been made and obtained and are in full force and effect under the Securities Act or as may be required under the securities or Blue Sky laws of the various states and other jurisdictions of the United States of America), is required for the sale and delivery of the Securities by such entity or the performance by it of its obligations under this Agreement; (f) such entity has not taken nor will it take, directly or indirectly, any action designed to, or that might be reasonably expected to, cause or result in stabilization or manipulation of the price of the Common Stock, and it has not distributed nor will it distribute any prospectus or other offering material in connection with the offering and sale of the Securities other than any preliminary prospectus filed with the Commission, the Basic Prospectus or the Prospectus; and (g) to the extent that any statements or omissions in the Registration Statement or the Prospectus are made in reliance upon and in conformity with information relating to such entity furnished to the Company in writing by it expressly for use therein, the Registration Statement, as of the date of the original filing thereof and as of the applicable effective date as to the Registration Statement and any amendment thereto, did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and the Prospectus, as of its date, as of the date of any amendment or supplement thereto and as amended or supplemented at the Closing Date and the Additional Closing Date, if applicable, did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading. For purposes of this paragraph (g), the only written information furnished by Westinghouse and, if Transferee is a party hereto, Transferee to the Company expressly for use in the Registration Statement and the Prospectus is 17 -17- the information in the second sentence of the first paragraph and the first sentence of the second paragraph under the caption "Management Compensation and Changes" and the first paragraph and the last sentence of the second paragraph under the caption "Principal and Selling Stockholder" in the Basic Prospectus (it being understood and agreed that the reference herein to the last sentence of the second paragraph should not be deemed to be an indication of the ability of Westinghouse to establish new service arrangements or its ability to minimize any incremental costs thereof) and the information referred to on Schedule I hereto under the heading "Information Provided by Westinghouse and Transferee." (h) If on the date hereof Westinghouse owns, directly or indirectly (whether through Transferee or otherwise), more than 50% of the then outstanding shares of Common Stock as indicated on the signature page hereto, Westinghouse, as to itself, and each of Westinghouse and Transferee, as to Transferee if Transferee is a party hereto, also represents and warrants to each of the Underwriters and to the Company that, other than statements or omissions in the Registration Statement or the Prospectus related to information furnished by Westinghouse and, if Transferee is a party hereto, Transferee referred to in the foregoing paragraph (g), to the best knowledge of such entity, the Registration Statement, as of the date of the original filing thereof and as of the applicable effective date as to the Registration Statement and any amendment thereto, did not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein or necessary to make the statements therein not misleading, and the Prospectus, as of the date of the Prospectus Supplement, as of the date of any amendment or supplement thereto and as amended or supplemented at the Closing Date and the Additional Closing Date, if applicable, did not and will not contain any untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; provided that the foregoing representations and warranties shall not apply to statements or omissions in the Registration Statement or the Prospectus made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Under- 18 -18- writer through the Representatives expressly for use therein. 6. Covenants of the Company. The Company covenants and agrees with the several Underwriters and with Westinghouse and, if Transferee is a party hereto, with Transferee as follows: (a) to use its best efforts to cause any amendment to the Registration Statement to become effective at the earliest possible time, and to file the Prospectus Supplement and, if not previously so filed, the Basic Prospectus with the Commission within the time period specified by Rule 424(b) under the Securities Act; (b) to deliver to each Representative and to Cahill Gordon & Reindel, counsel for the Underwriters, a signed copy of the Registration Statement (as originally filed) and each amendment thereto, in each case including exhibits and all documents incorporated by reference therein, and to each other Underwriter a conformed copy of the Registration Statement (as originally filed) and each amendment thereto, in each case without exhibits but including the documents incorporated by reference therein and, during the period mentioned in paragraph (e) below, to each of the Underwriters and to dealers effecting transactions in the Common Stock as many copies of the Prospectus (including all amendments and supplements thereto) and documents incorporated by reference therein as the Underwriters and such dealers may reasonably request; (c) prior to the termination of the public offering of the Securities, before filing any Prospectus Supplement or any amendment or supplement to the Registration Statement, the Basic Prospectus or the Prospectus, to furnish to the Representatives and the Selling Stockholder a copy of the proposed amendment or supplement for review and not to file any such proposed Prospectus Supplement, amendment or supplement to which the Representatives or the Selling Stockholder reasonably objects; (d) to advise the Representatives and the Selling Stockholder promptly, and to confirm such advice in writing, (i) when the Prospectus Supplement shall have been filed pursuant to Rule 424(b) under the Securities Act and (ii) prior to the termination of the public offering of the Securities, (A) when any amendment to the Registration 19 -19- Statement shall have become effective, (B) of any request by the Commission for any amendment to the Registration Statement or any amendment or supplement to the Prospectus or for any additional information, (C) of the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement or the initiation or threatening of any proceeding for that purpose and (D) of the receipt by the Company of any notification with respect to any suspension of the qualification of the Securities for offer and sale in any jurisdiction or the initiation or threatening of any proceeding for such purpose; and to use its reasonable best efforts to prevent the issuance of any such stop order or notification and, if issued, to obtain as soon as practicable the withdrawal thereof; (e) if, during such period of time after the first date of the public offering of the Securities as in the opinion of counsel for the Underwriters a prospectus relating to the Securities is required by law to be delivered in connection with sales by an Underwriter or dealer, any event shall occur as a result of which it is necessary to amend or supplement the Prospectus in order to make the statements therein, in the light of the circumstances when the Prospectus is delivered to a purchaser, not misleading, or if it is necessary to amend or supplement the Prospectus to comply with law, forthwith to prepare and furnish, at the expense of the Selling Stockholder, to the Underwriters and to the dealers (whose names and addresses the Representatives will furnish to the Company) to which Securities may have been sold by the Underwriters and to any other dealers upon written request, such amendments or supplements to the Prospectus as may be necessary so that the statements in the Prospectus as so amended or supplemented will not, in the light of the circumstances when the Prospectus is delivered to a purchaser, be misleading or so that the Prospectus will comply with law; (f) to use its reasonable best efforts to register or qualify the Securities for offer and sale under the securities or Blue Sky laws of such jurisdictions as the Representatives shall reasonably request and to continue such registration or qualification in effect so long as reasonably required for distribution of the Securities; provided that the Company shall not be required to qualify the Securities in any jurisdiction where, as a result of such qualification, the Company would be required to 20 -20- qualify as a foreign corporation or to file a general consent to service of process in any jurisdiction; (g) to make generally available to its security holders and to the Underwriters as soon as practicable an earning statement covering a period of at least twelve months beginning with the first fiscal quarter of the Company occurring after the effective date of the Registration Statement (as such effective date is determined pursuant to Rule 158 of the Commission), which shall satisfy the provisions of Section 11(a) of the Securities Act and Rule 158 of the Commission promulgated thereunder; (h) for a period of four years after the date hereof, to furnish to the Representatives copies of all reports or other communications (financial or other) furnished to holders of the Common Stock, and copies of any reports and financial statements furnished to or filed with the Commission, the National Association of Securities Dealers, Inc. (the "NASD") or any national securities exchange; (i) for the period of days set forth on Schedule I hereto as the Lock-up Period, without the prior written consent of the Underwriter or Representative, as the case may be, executing this Agreement on behalf of the Underwriters, not to, directly or indirectly, offer, sell, contract to sell or otherwise dispose of any shares of Common Stock or any securities convertible into or exchangeable or exercisable for shares of Common Stock (except for shares issuable upon the exercise of currently outstanding options under the Company's 1981 Stock Option Plan or its 1991 Stock Option Plan and the grant of options pursuant to the Company's 1991 Stock Option Plan); and (j) if, in connection with the purchase of the Securities, any Underwriter could own 10% or more of the outstanding Common Stock (including, but not limited to, after giving effect to any purchase of Option Securities pursuant hereto) then, for a period of 90 days following the date hereof or, if earlier, until no Underwriter individually owns or could so own 10% or more of the outstanding Common Stock, not to, directly or indirectly, take any action or omit to take any action the effect of which act or omission would be to make the provisions of Section 3-602 of the Maryland General Corporation Law applicable to the Company. 21 -21- 7. Covenants of Westinghouse and Transferee. Each of Westinghouse and, if Transferee is a party hereto, Transferee covenants and agrees with the several Underwriters that for the period of days set forth on Schedule I hereto as the Lock-up Period, without the prior written consent of the Underwriter or Representative, as the case may be, executing this Agreement on behalf of the Underwriters, it will not, directly or indirectly, offer, sell, contract to sell or otherwise dispose of any shares of Common Stock or any securities convertible into or exchangeable or exercisable for shares of Common Stock (except for the Securities). 8. Expenses. Westinghouse agrees with each Under-writer and with the Company to pay all costs and expenses incident to the performance of the obligations of the Company, Westinghouse and, if Transferee is a party hereto, Transferee hereunder, including, without limiting the generality of the foregoing, all costs and expenses (i) incident to the preparation, transfer, execution and delivery of the Securities referred to in Section 3, (ii) incident to the preparation, printing and filing under the Securities Act of the Registration Statement, the Basic Prospectus, the Prospectus Supplement, the Prospectus and any preliminary prospectus (including in each case all exhibits, amendments and supplements thereto), (iii) incurred in connection with the registration or qualification of the Securities under the laws of such jurisdictions as the Representatives may designate (including reasonable fees of counsel for the Underwriters and their disbursements related to such registration or qualification), (iv) related to any filing with, and review by, the NASD and (v) in connection with the printing (including word processing and duplication costs) and delivery of this Agreement, all other agreements relating to underwriting and syndication arrangements, the Blue Sky Survey and the furnishing to the Underwriters and dealers of copies of the Registration Statement and the Prospectus, including mailing and shipping, as herein provided. 9. Conditions of Underwriters' Obligations. The several obligations of the Underwriters hereunder to purchase the Underwritten Securities are subject to the performance by each of the Company, Westinghouse and, if Transferee is a party hereto, Transferee of its obligations hereunder and to the following additional conditions: (a) If any post-effective amendment to the Registration Statement shall not have been declared effective prior to the execution hereof, such post-effective 22 -22- amendment shall have become effective not later than 5:00 P.M., New York City time, on the date hereof; no stop order suspending the effectiveness of the Registration Statement shall be in effect, and no proceedings for such purpose shall be pending before or threatened by the Commission; and any requests for additional information by the Commission shall have been complied with to the satisfaction of the Representatives. (b) The representations and warranties of the Company, Westinghouse and, if Transferee is a party hereto, Transferee contained herein shall be true and correct on and as of the Closing Date as if made on and as of the Closing Date, and each of the Company, Westinghouse and, if Transferee is a party hereto, Transferee shall have complied with all agreements and all conditions on its part to be performed or satisfied hereunder at or prior to the Closing Date. (c) Since the respective dates as of which information is given in the Registration Statement and the Prospectus, there shall not have been any Material Adverse Change or any development involving a Prospective Material Adverse Change, other than as set forth or contemplated in the Registration Statement and the Prospectus, the effect of which in the judgment of the Representatives makes it impracticable to proceed with the public offering or the delivery of the Underwritten Securities on the terms and in the manner contemplated in the Registration Statement and the Prospectus. (d) The Underwriters shall have received on and as of the Closing Date a certificate of an executive officer of the Company reasonably satisfactory to the Representatives to the effect set forth in subsections (a) and (b) (insofar as subsection (b) pertains to the Company) of this Section 9 and to the further effect that since the respective dates as of which information is given in the Registration Statement and the Prospectus there has not occurred any Material Adverse Change or any development involving a Prospective Material Adverse Change, other than as set forth or contemplated in the Registration Statement and the Prospectus. (e) The Underwriters shall have received on and as of the Closing Date a certificate of an executive officer of each of Westinghouse and, if Transferee is a party 23 -23- hereto, Transferee reasonably satisfactory to the Representatives to the effect set forth in subsection (b) (insofar as subsection (b) pertains to such entity) of this Section 9. (f) The Underwriters shall have received on the Closing Date a signed opinion of Ballard Spahr Andrews & Ingersoll, Maryland counsel for the Company, dated the Closing Date, addressed to the Underwriters and satisfactory to Cahill Gordon & Reindel, counsel for the Underwriters, to the effect that: (i) the Company has been duly organized and is validly existing under the laws of the State of Maryland, is in good standing with the State Department of Assessments and Taxation of Maryland and has the corporate power to own, lease and operate its properties and to conduct its business substantially as described in the Registration Statement and the Prospectus; (ii) each of Fidelio U.S. and MSI has been duly organized and is validly existing and in good standing under the laws of the State of Delaware and has the corporate power and corporate authority to own, lease and operate its properties and to conduct its business; (iii) all of the issued and outstanding shares of Common Stock (including the Securities) have been duly authorized by the Company, are validly issued and are fully paid and nonassessable and are not subject to any preemptive or, so far as is known to such counsel, other similar rights other than those contained in the Charter; (iv) (1) except for the items listed on Annex B attached hereto and so far as is known to such counsel, all of the outstanding shares of capital stock of the Subsidiaries owned by the Company are owned free and clear of any mortgage, pledge, security interest, lien, claim or other encumbrance or restriction on transfer; (2) all of the outstanding capital stock of each of Fidelio U.S. and MSI has been duly authorized and validly issued and is fully paid and nonassessable; and (3) so far as is known to such counsel, there are no outstanding (a) securities 24 -24- or obligations convertible into or exchangeable for any shares of capital stock of the Company, Fidelio U.S. or MSI, (b) rights, warrants or options to acquire or purchase from the Company, Fidelio U.S. or MSI any shares of capital stock of the Company, Fidelio U.S. or MSI (except for outstanding options under the Company's 1991 Stock Option Plan and 1981 Stock Option Plan as disclosed in the Proxy Statement or in the Registration Statement and the Prospectus) or any such convertible or exchangeable securities or obligations or (c) obligations or understandings of the Company, Fidelio U.S. or MSI to issue or sell any shares of capital stock of the Company, Fidelio U.S. or MSI, any such convertible or exchangeable securities or obligations, or any such rights, warrants or options, except as set forth on Annex B; (v) this Agreement has been duly authorized, executed and delivered by the Company; (vi) the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement, and the consummation by the Company of the transactions contemplated herein, do not and will not (a) result in any violation of any provision of the Charter, the By-laws or the certificate of incorporation or by-laws of Fidelio U.S. or MSI; (b) contravene any provision of any applicable law, rule or regulation of the State of Maryland, except such as would not have a Material Adverse Effect; (c) contravene any judgment, order or decree known to such counsel by which the Company or Fidelio U.S. or MSI is bound or by which their properties or assets may be affected; or (d) require any authorization, approval, consent or license of, or filing with, any government, governmental instrumentality or court of the State of Maryland or the State of Delaware, except such as may be required under the securities or Blue Sky laws of the State of Maryland or the State of Delaware; (vii) the issued and outstanding stock of the Company is as set forth on the signature page hereto; and (viii) the statements under the caption "Description of Capital Stock" in the Registration Statement 25 -25- and the Prospectus, insofar as such statements constitute a summary of the legal matters or documents referred to therein, fairly present in all material respects the information required by the Securities Act with respect to such legal matters or documents. In rendering such opinions, such counsel may rely, as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of the Company and each of its Subsidiaries and certificates or other written statements of officials of jurisdictions having custody of documents respecting the corporate existence or good standing of the Company, Fidelio U.S. and MSI. (g) The Underwriters shall have received on the Closing Date a signed opinion of Chadbourne & Parke, counsel for the Company, dated the Closing Date, addressed to the Underwriters and satisfactory to Cahill Gordon & Reindel, counsel for the Underwriters, to the effect that: (i) the execution and delivery by the Company of, and the performance by the Company of its obligations under, this Agreement, and the consummation by the Company of the transactions contemplated herein, do not and will not (a) conflict with, or result in a breach or violation of, any terms or provisions of or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or give rise to any right to accelerate the maturity or require the prepayment of any indebtedness or any right of termination under, or result in the creation or imposition of any lien, charge or encumbrance upon any properties or assets of the Company, Fidelio U.S. and MSI pursuant to the terms of, any document filed as an exhibit to the Registration Statement or to any document incorporated by reference therein or any other material agreement known to such counsel to which the Company, Fidelio U.S. or MSI is a party or by which any of their properties or assets may be subject; (b) contravene any provision of any applicable law, rule or regulation (the "Applicable Laws") (subject to obtaining such approvals as may be required under the securities or Blue Sky laws of the various states and other jurisdictions of the United States of America), except such as would not have a Material 26 -26- Adverse Effect; (c) contravene any judgment, order or decree known to such counsel by which the Company, Fidelio U.S. or MSI is bound or by which their properties or assets may be affected; or (d) require any authorization, approval, consent or license of, or filing with, any government, governmental instrumentality or court, domestic or foreign, except such as have been obtained and are in full force and effect under the Securities Act or as may be required under the securities or Blue Sky laws of the various states and other jurisdictions of the United States; (ii) except as described in the Registration Statement and the Prospectus, to such counsel's knowledge, there is no (A) investigation, action, suit or proceeding before or by any government, governmental instrumentality or court now pending or threatened against or affecting the Company, Fidelio U.S. or MSI or any of their respective properties or assets that is required by the Securities Act to be described in the Registration Statement or the Prospectus and is not so described or (B) contract or other document that is required by the Securities Act to be described in or referred to in the Registration Statement or the Prospectus, or to be filed as an exhibit to the Registration Statement, that is not described, referred to or filed as required; (iii) to such counsel's knowledge, neither the filing of the Registration Statement nor the offer or sale of the Securities to the Underwriters in the manner contemplated in this Agreement gives rise to any rights for or relating to the registration under the Securities Act of any other securities of the Company, Fidelio U.S. or MSI; (iv) the Registration Statement and the Prospectus and all amendments and supplements thereto (except for the financial statements, schedules and other financial and statistical data included or incorporated by reference in the Registration Statement and the Prospectus, as to which counsel need not express an opinion) comply as to form in all material respects with the requirements of the Securities Act, and each document filed pursuant to the Exchange Act and incorporated by reference in the Registration Statement and the Prospectus (except for the 27 -27- financial statements, schedules and other financial and statistical data included therein, as to which counsel need not express an opinion) complied as to form in all material respects with the requirements of the Exchange Act when filed with the Commission; (v) the Company is not an "investment company" as such term is defined in the Investment Company Act of 1940, as amended, or a holding company under the Public Utility Holding Company Act of 1935; and (vi) each of the Company, Fidelio U.S. and MSI is qualified to do business and is in good standing as a foreign corporation under the laws of each jurisdiction of the United States in which its ownership or leasing of property requires such qualification, except to the extent that the failure to be so qualified or to be in good standing, individually or in the aggregate, would not have a Material Adverse Effect. In rendering such opinions, such counsel may rely (A) as to matters involving the application of the laws of the State of Maryland, to the extent such counsel deems proper and to the extent specified in such opinion, if at all, upon the opinion of Ballard Spahr Andrews & Ingersoll rendered pursuant to paragraph (f) of this Section 9; and (B) as to matters of fact, to the extent such counsel deems proper, on certificates of responsible officers of the Company and each of its Subsidiaries and certificates or other written statements of officials of jurisdictions having custody of documents respecting the corporate existence or good standing of the Company, Fidelio U.S. and MSI. The opinion of such counsel for the Company shall state that the opinion of any such other counsel is in form satisfactory to such counsel and, in such counsel's opinion, the Underwriters and they are justified in relying thereon. Such counsel shall also state that it has been advised by the Commission that the Registration Statement became effective under the Securities Act; that any required filings of the Prospectus pursuant to Rule 424(b) have been made in the manner and within the time period required by Rule 424(b); and that, to its knowledge, no stop order suspending the effectiveness of the Registration Statement has been issued and no proceedings for that 28 -28- purpose have been instituted, are pending or threatened under the Securities Act. Such counsel shall also state that, although such counsel does not assume any responsibility for the accuracy, completeness or fairness of the statements contained in the Registration Statement or the Prospectus, no facts have come to such counsel's attention which would lead such counsel to believe that the Registration Statement (including the documents incorporated by reference therein), at the time it became effective, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading or that the Prospectus (including the documents incorporated by reference therein), as of the date of the Prospectus Supplement and as of the Closing Date, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading (but such counsel need not comment with respect to the financial statements, schedules and other financial and statistical data included or incorporated by reference in the Registration Statement and the Prospectus). (h) The Underwriters shall have received on the Closing Date signed opinions (in form and substance satisfactory to Cahill Gordon & Reindel, counsel for the Underwriters), as to such matters as the Representatives may reasonably request involving the Subsidiaries marked with an asterisk on Annex A hereto, of additional counsel reasonably acceptable to Cahill Gordon & Reindel, counsel for the Underwriters, familiar with the applicable laws. (i) The Underwriters shall have received on the Closing Date a signed opinion of Louis J. Briskman, Esq., General Counsel of Westinghouse, or other counsel reasonably acceptable to the Underwriters, dated the Closing Date, addressed to the Underwriters and satisfactory to Cahill Gordon & Reindel, counsel for the Underwriters, to the effect that: (i) each of Westinghouse and, if Transferee is a party hereto, Transferee has been duly organized and is validly existing and in good standing under the laws of its jurisdiction of incorporation; 29 -29- (ii) this Agreement has been duly authorized, executed and delivered by each of the entities comprising the Selling Stockholder, and each of Westinghouse and, if Transferee is a party hereto, Transferee has the corporate power and authority to sell, transfer and deliver the Underwritten Securities in the manner provided in this Agreement; and (iii) the execution and delivery by each of Westinghouse and, if Transferee is a party hereto, Transferee of, and the performance by it of its obligations under, this Agreement, and the consummation by it of the transactions contemplated herein, do not and will not (a) result in any violation of any provision of its articles of incorporation or by-laws; (b) conflict with, or result in a breach or violation of, any terms or provisions of, or constitute a default (or an event which, with notice or lapse of time, or both, would constitute a default) under, or give rise to any right to accelerate the maturity or require the prepayment of any indebtedness under, or result in the creation or imposition of any lien, charge or encumbrance upon any of its properties or assets pursuant to the terms of, any material agreement known to such counsel to which it is a party or by which any of its properties or assets may be subject; (c) contravene any Applicable Laws (subject to obtaining such approvals as may be required under the securities or Blue Sky laws of the various states and other jurisdictions of the United States of America); (d) contravene any judgment, order or decree known to such counsel by which such entity is bound or by which its properties or assets may be affected; or (e) require any authorization, approval, consent or license of, or filing with, any government, governmental instrumentality or court, domestic or foreign, except such as have been obtained and are in full force and effect under the Securities Act or as may be required under the securities or Blue Sky laws of the various states and other jurisdictions of the United States. (j) The Underwriters shall have received on the Closing Date a signed opinion of Cravath, Swaine & Moore, counsel for the Selling Stockholder, dated the Closing Date, addressed to the Underwriters and satisfactory to Cahill Gordon & Reindel, counsel for the Underwriters, to 30 -30- the effect that upon delivery of the certificates for the Underwritten Securities to the Underwriters endorsed to them or in blank and payment therefor by the Underwriters in accordance with the terms of this Agreement, each Underwriter will acquire beneficial ownership of the Underwritten Securities being purchased by it free of any adverse claim within the meaning of Section 8-302 of the UCC, assuming that such Underwriter is acting in good faith and has no notice of any adverse claim. Such counsel may state that, although each Underwriter will acquire beneficial ownership of the Underwritten Securities being purchased by it as described in the immediately preceding sentence, such Underwriter will not acquire record title to such Underwritten Securities until such Underwritten Securities are registered in the share records of the Company in the name of such Underwriter (or a nominee thereof). (k) At the time this Agreement is executed and also on the Closing Date, Price Waterhouse LLP shall have furnished to the Underwriters letters, dated the respective dates of delivery thereof, in form and substance satisfactory to the Representatives, containing statements and information of the type customarily included in accountants' "comfort letters" to underwriters with respect to certain financial information relating to the Company and the Subsidiaries contained in the Registration Statement and the Prospectus or incorporated by reference therein; such letters shall also be addressed and delivered to the Selling Stockholder. (l) The Underwriters shall have received on the Closing Date an opinion of Cahill Gordon & Reindel, counsel for the Underwriters, with respect to the Registration Statement, the Prospectus and other related matters as the Representatives may reasonably request, and such counsel shall have received such papers and information as they may reasonably request to enable them to pass upon such matters. (m) The Securities shall continue to be qualified for quotation on the Nasdaq National Market. (n) On or prior to the Closing Date, the Company shall have furnished to the Representatives such further certificates and documents as the Representatives shall reasonably request. 31 -31- The several obligations of the Underwriters to purchase Option Securities hereunder are subject to satisfaction of the conditions set forth in paragraphs (a) through (g) and (i) through (n) above on and as of the Additional Closing Date, except that the certificates called for by paragraphs (d) and (e), the opinions called for by paragraphs (f), (g), (i), (j) and (l) and the letter called for by paragraph (k) shall be dated the Additional Closing Date and any reference to Underwritten Securities shall be deemed to be a reference to Option Securities. 10. Indemnification and Contribution. The Company and, if on the date hereof Westinghouse owns, directly or indirectly (whether through Transferee or otherwise), more than 50% of the then outstanding shares of Common Stock as indicated on the signature page hereto, Westinghouse agree, jointly and severally, to indemnify and hold harmless each Underwriter, its officers and directors, and each person, if any, who controls such Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act from and against any and all losses, claims, damages and liabilities (including, without limitation, the reasonable legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted) caused by any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement or the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto to the Underwriters) or any preliminary prospectus, or caused by any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein not misleading, except insofar as such losses, claims, damages or liabilities are caused by any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with information relating to any Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use therein; provided that the foregoing indemnity with respect to any preliminary prospectus shall not inure to the benefit of any Underwriter (or to the benefit of any person controlling such Underwriter) from whom the person asserting any such losses, claims, damages or liabilities purchased Securities if such untrue statement or omission or alleged untrue statement or omission made in such preliminary prospectus is eliminated or remedied in the Prospectus (as amended or supplemented if the Company shall have furnished any amendments or supplements thereto to the Underwriters) and, if required by law to be furnished, a copy of the Prospectus (as 32 -32- so amended or supplemented) shall not have been furnished to such person at or prior to the written confirmation of the sale of such Securities to such person. Each Underwriter agrees, severally and not jointly, to indemnify and hold harmless the Company, its directors, its officers who sign the Registration Statement, each person who controls the Company within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act and Westinghouse to the same extent as the foregoing indemnity from the Company and Westinghouse to each Underwriter, but only with reference to information relating to such Underwriter furnished to the Company in writing by such Underwriter through the Representatives expressly for use in the Registration Statement, the Prospectus, any amendment or supplement thereto, or any preliminary prospectus. For purposes of this Section 10, the only written information furnished by the Underwriters to the Company expressly for use in the Registration Statement and the Prospectus is the information referred to on Schedule I hereto under the heading "Information Provided by the Underwriters." If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any person in respect of which indemnity may be sought pursuant to either of the two preceding paragraphs, such person (the "Indemnified Person") shall promptly notify in writing the person or persons against whom such indemnity may be sought (each an "Indemnifying Person"), and such Indemnifying Person, upon request of the Indemnified Person, shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others the Indemnifying Person may designate in such proceeding and shall pay the reasonable fees and expenses incurred by such counsel related to such proceeding. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) such Indemnifying Person and such Indemnified Person shall have mutually agreed to the contrary, (ii) such Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to such Indemnified Person or (iii) the named parties in any such proceeding (including any impleaded parties) include both an Indemnifying Person and an Indemnified Person and representation of each such party by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood that an Indemnifying Person shall not, in connection with any proceeding or related 33 -33- proceedings in the same jurisdiction, be liable for (a) the fees and expenses of more than one separate firm (in addition to any local counsel) for all Underwriters, their officers and directors and all persons, if any, who control any Underwriter within the meaning of either Section 15 of the Securities Act or Section 20 of the Exchange Act, (b) the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for the Company, its directors, its officers who sign the Registration Statement and each person, if any, who controls the Company within the meaning of either such Section and (c) the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for the Selling Stockholder, and that all such fees and expenses shall be reimbursed as they are incurred. Any such separate firm for the Underwriters and such control persons of the Underwriters shall be designated in writing by the Underwriter or Representative, as the case may be, executing this Agreement on behalf of the Underwriters; any such separate firm for the Company, its directors, its officers who sign the Registration Statement and such control persons of the Company (other than Westinghouse and, if Transferee is a party hereto, Transferee) shall be designated in writing by the Company; and any such separate firm for Westinghouse shall be designated in writing by Westinghouse. No Indemnifying Person shall be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, such Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested an Indemnifying Person to reimburse the Indemnified Person for reasonable fees and expenses incurred by counsel as contemplated by the third sentence of this paragraph, such Indemnifying Person agrees that it shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 30 days after receipt by such Indemnifying Person of the aforesaid request and (ii) such Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement; provided, however, that such Indemnified Person shall not have the right to enter into such settlement if there is a good faith dispute between such Indemnified Person and such Indemnifying Person regarding such Indemnifying Person's obligation to reimburse such Indemnified Person for such fees and expenses of counsel. No Indemnifying Person shall, without the prior written consent of the Indemnified Person, effect any settlement of any pending 34 -34- or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnity could have been sought hereunder by such Indemnified Person, unless such settlement includes an unconditional release of such Indemnified Person from all liability on claims that are the subject matter of such proceeding. If the indemnification provided for in the first, second and third paragraphs of this Section 10 is unavailable to an Indemnified Person in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and Westinghouse in the aggregate on the one hand and the Underwriters on the other hand from the offering of the Securities or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of the Company and Westinghouse in the aggregate on the one hand and the Underwriters on the other hand in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative benefits received by the Company and Westinghouse in the aggregate on the one hand and the Underwriters on the other hand shall be deemed to be in the same respective proportions as the net proceeds from the offering (before deducting expenses) received by the Selling Stockholder and the total underwriting discounts received by the Underwriters, in each case as set forth on the cover of the Prospectus, bear to the aggregate public offering price of the Securities. The relative fault of the Company and Westinghouse in the aggregate on the one hand and the Underwriters on the other hand shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company, Westinghouse or Transferee or by the Underwriters and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. Each of the Company, Westinghouse and the Underwriters agrees that it would not be just and equitable if contribution pursuant to this Section 10 were determined by pro rata 35 -35- allocation (even if the Underwriters were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in the immediately preceding paragraph. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in the immediately preceding paragraph shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with investigating or defending any such action or claim. Notwithstanding the provisions of this Section 10, in no event shall an Underwriter be required to contribute any amount in excess of the amount by which the total price at which the Securities underwritten by it and distributed to the public were offered to the public exceeds the amount of any damages that such Underwriter has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations to contribute pursuant to this Section 10 are several in proportion to the respective number of shares of Common Stock constituting Underwritten Securities set forth opposite their names in Schedule I hereto, and not joint. The indemnity and contribution agreements contained in this Section 10 are in addition to any liability which any Indemnifying Person may otherwise have to any other Indemnifying Person or any Indemnified Person, including pursuant to the Stock Unit Purchase Agreement between the Company and Westinghouse, dated as of October 30, 1986, as amended by that certain letter agreement dated May 2, 1995 between the Company and Westinghouse (which agreement, as so amended, shall not be deemed or considered amended or superseded by this Section 10). The Company and Westinghouse agree that any indemnity or contribution payments made by Westinghouse to any Indemnified Person pursuant to this Section 10 will be treated by the Company and Westinghouse as liabilities of Westinghouse that are subject to the Company's indemnification contained in Section 7.04 of such Stock Unit Purchase Agreement (subject to the limitation contained in the proviso to the first paragraph of clause (d) thereof), and any indemnity or contribution payments made by the Company to any Indemnified Person pursuant to this Section 10 will be treated by Westinghouse and the Company as liabilities of the Company that are subject to Westinghouse's indemnification contained in Section 7.04 of such Stock Unit 36 -36- Purchase Agreement (subject to the limitation contained therein with respect to written information furnished to the Company by Westinghouse and, if Transferee is a party hereto, Transferee). The indemnity and contribution agreements contained in this Section 10 and the representations and warranties of the Company, Westinghouse and, if Transferee is a party hereto, Transferee as set forth in this Agreement shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of any Underwriter or any person controlling any Underwriter or by or on behalf of the Company, Westinghouse or Transferee or the officers or directors or any other person controlling the Company, Westinghouse or Transferee and (iii) acceptance of and payment for any of the Securities. 11. Termination of This Agreement. Notwithstanding anything herein contained, this Agreement (or the obligations of the several Underwriters with respect to the Option Securities) may be terminated in the absolute discretion of the Representatives, by notice given to the Company and Westinghouse, if after the execution and delivery of this Agreement and prior to the Closing Date (or, in the case of the Option Securities, prior to the Additional Closing Date) (i) trading generally shall have been suspended or materially limited on or by, as the case may be, either the New York Stock Exchange or the Nasdaq National Market, (ii) trading of any securities of the Company shall have been suspended or materially limited on any exchange or in any over-the-counter market, (iii) a general moratorium on commercial banking activities in New York shall have been declared by Federal or New York State authorities, or (iv) there shall have occurred an outbreak of hostilities or an escalation of hostilities or any change in financial markets or any calamity or crisis that, in the reasonable judgment of the Representatives, is material and adverse and which, in the reasonable judgment of the Representatives, makes it impracticable to market the Securities on the terms and in the manner contemplated in the Prospectus. 12. Reimbursement upon Occurrence of Certain Events. If this Agreement shall be terminated by the Representatives because of any failure or refusal on the part of the Company, Westinghouse or Transferee (if it is a party hereto) to comply with the terms or to fulfill any of the conditions of this Agreement, or if for any reason any of the Company, Westinghouse or Transferee (if it is a party hereto) shall be unable to perform its obligations under this Agreement or any 37 -37- condition of the Underwriters' obligations cannot be fulfilled, Westinghouse agrees to reimburse the Underwriters for all out-of-pocket expenses (including the fees and expenses of their counsel) incurred by the Underwriters in connection with this Agreement or the offering contemplated hereunder. 13. Effectiveness of This Agreement; Additional Obligations of the Underwriters. This Agreement shall become effective upon the later of (x) the execution and delivery hereof by the parties hereto and (y) release of notification by the Commission of the effectiveness of the most recent post-effective amendment to the Registration Statement filed prior to the Closing Date. If, on the Closing Date or the Additional Closing Date, as the case may be, any one or more of the Underwriters shall fail or refuse to purchase the Securities which it or they have agreed to purchase hereunder on such date, and the aggregate number of Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase is not more than one-tenth of the number of Securities to be purchased on such date, the other Underwriters, if any, shall be obligated severally in the proportions that the number of Underwritten Securities set forth opposite their respective names in Schedule I hereto bears to the aggregate number of Underwritten Securities set forth opposite the names of all such nondefaulting Underwriters, or in such other proportions as the Representatives may specify, to purchase the Securities which such defaulting Underwriter or Underwriters agreed but failed or refused to purchase on such date; provided that in no event shall the number of Securities that any Underwriter has agreed to purchase pursuant to Section 1 be increased pursuant to this Section 13 by an amount in excess of one-ninth of the number of shares of Common Stock constituting Securities which such Underwriter is obligated to purchase hereunder without the written consent of such Underwriter. If, on the Closing Date or the Additional Closing Date, as the case may be, any Underwriter or Underwriters shall fail or refuse to purchase Securities which it or they have agreed to purchase hereunder on such date, and the aggregate number of Securities with respect to which such default occurs is more than one-tenth of the aggregate number of Securities to be purchased on such date, and arrangements satisfactory to the Representatives and the Selling Stockholder for the purchase of such Securities are not made within 36 hours after such default, this Agreement (or the obligations of the several Underwriters to purchase the Option Securities, as the case may be) shall terminate without 38 -38- liability on the part of any non-defaulting Underwriter, the Company or the Selling Stockholder. In any such case the Representatives, the Company or the Selling Stockholder shall have the right to postpone the Closing Date (or, in the case of the Option Securities, the Additional Closing Date), but in no event for longer than seven days, in order that the required changes, if any, in the Registration Statement and in the Prospectus or in any other documents or arrangements may be effected. Any action taken under this paragraph shall not relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement. 14. Notice. Any action by the Underwriters or the Representatives hereunder may be taken by the Representatives jointly or by the Underwriter or Representative, as the case may be, executing this Agreement acting alone on behalf of the Underwriters or the Representatives, as the case may be, and any such action taken by the Representatives jointly or by such Underwriter or Representative alone shall be binding upon the Underwriters and the Representatives. All notices and other communications hereunder shall be in writing and shall be deemed to have been duly given if mailed or transmitted by any standard form of telecommunication. Notices to the Underwriters shall be given to the Representatives at the address set forth on Schedule I hereto. Notices to the Company shall be given to it at 12000 Baltimore Avenue, Beltsville, Maryland 20705-1291, Attention: President (facsimile (301) 210-3334). Notices to Westinghouse or the Selling Stockholder shall be given to it at Westinghouse Building, Gateway Center, Pittsburgh, Pennsylvania 15222, Attention: Louis J. Briskman, Esq., General Counsel (facsimile (412) 642-5224). 15. Miscellaneous. This Agreement shall inure to the benefit of and be binding upon the Underwriters, the Company, Westinghouse and, if Transferee is a party hereto, Transferee and any controlling person referred to herein and their respective successors, heirs and legal representatives. Nothing expressed or mentioned in this Agreement is intended or shall be construed to give any person, firm or corporation, other than the Underwriters, the Company, Westinghouse and, if Transferee is a party hereto, Transferee and their respective successors, heirs and legal representatives and the controlling persons and officers and directors referred to in Section 10 and their heirs and legal representatives, any legal or equitable right, remedy or claim under or in respect of this Agreement or any provision herein contained. No purchaser of 39 -39- Securities from any Underwriter shall be deemed to be a successor by reason merely of such purchase. 16. Counterparts; Applicable Law. This Agreement may be signed in counterparts, each of which shall be an original and all of which together shall constitute one and the same instrument. This Agreement shall be governed by and construed in accordance with the laws of the State of New York, without giving effect to the conflicts of laws provisions thereof. 40 If the foregoing is in accordance with your understanding, please sign and return six counterparts hereof. Very truly yours, MICROS SYSTEMS, INC. By: /s/ Ronald J. Kolson ----------------------------------- Name: Ronald J. Kolson Title: Executive Vice President and Chief Operating Officer WESTINGHOUSE ELECTRIC CORPORATION By: /s/ Claudia E. Morf ----------------------------------- Name: Claudia E. Morf Title: Treasurer WESTINGHOUSE HOLDINGS CORPORATION By: /s/ Claudia E. Morf ----------------------------------- Name: Claudia E. Morf Title: Treasurer Number of shares of Common Stock owned by the Selling Stockholder: 4,849,123 ----------- Number of shares of Common Stock outstanding: 7,859,095 ----------- 41 Accepted: July 6, 1995 J.P. MORGAN SECURITIES INC. MORGAN STANLEY & CO. INCORPORATED SMITH BARNEY INC. By: J.P. MORGAN SECURITIES INC. By: /s/ Michael Tiedemann -------------------------------- Name: Michael Tiedemann Title: Vice President 42 SCHEDULE I
Number of Shares of Common Stock Constituting Underwritten Securities Underwriter(1) To Be Purchased ----------- --------------- J.P. Morgan Securities Inc. 700,000 Morgan Stanley & Co. Incorporated 150,000 Smith Barney Inc. 150,000 --------- Total Number of Underwritten Securities................... 1,000,000 ========= Total Number of Option Securities, if any... 0 =========
Purchase Price per share: $ 30.07 ----- Period for Exercise of Option to Purchase Option Securities: n/a Lock-up Period: 60 days following the date of the Prospectus Supplement Closing Date: July 11, 1995 Information Provided by the Underwriters: The information in the last paragraph on the outside front cover page of the Prospectus Supplement, the stabilization legend in the forepart of the Prospectus Supplement and the third paragraph under the caption "Underwriting" in the Prospectus Supplement. Information Provided by Westinghouse and Transferee: The information in the last sentence of the first paragraph of the Prospectus Supplement. -------------------------- (1) The notice address for the Underwriters is as follows: J.P. Morgan Securities Inc. Morgan Stanley & Co. Incorporated Smith Barney Inc. c/o J.P. Morgan Securities Inc. 60 Wall Street New York, New York 10260 43 ANNEX A SUBSIDIARIES
Percentage Owned by Immediate Parent Entity ---------------- MICROS Canada Inc. (Ontario) 100% MICROS Foreign Sales Corporation (Barbados) 100% MICROS of South Florida, Inc. (Maryland) 100% MICROS POS Pty. Limited (Australia) 100% *MICROS Systems (U.K.) Ltd. (United Kingdom) 100% *MICROS Systems Hispania, S.L. (Spain) 100% MSI Delaware, Inc. (Delaware) 100% MICROS of Delaware, Inc. (Delaware) 100% *MICROS Systems Holding GmbH (Germany) 100% *MICROS Systems Deutschland GmbH (Germany) 100% *MICROS Systems Services GmbH (Germany) 100% Fidelio Software Corporation (Delaware) 90% Marblehead Systems International, Inc. (Delaware) 50% *Fidelio Software U.K. Limited (England and Wales) 80% *MICROS System AG (Ltd.) (Switzerland) 60% *Fidelio France S.A. (France) 51% (direct) 12.67% (indirect) Merchants Information Systems, Inc. (Maryland) 49% (direct) 24.48% (indirect)
44 ANNEX B MICROS Canada Inc.: 1. The Articles of Incorporation require transfers of stock of MICROS Canada Inc. to be approved by the directors of MICROS Canada Inc. or to be approved by the holders of at least 51% of the outstanding common shares of MICROS Canada Inc. 2. A Management Agreement, dated February 12, 1993, among David Quinn and others (referred to therein as the "Management Group"), the Company and MICROS Canada Inc., provides that the Management Group would earn shares of common stock of MICROS Canada Inc. (referred to as "Performance Shares" therein) based upon the realization of certain goals relating to the sales and income of MICROS Canada Inc. The Management Agreement further provides that within 60 days following the occurrence of a Triggering Event (as defined in the Management Agreement), the Management Group may request the Company to redeem the Performance Shares for cash or, if the Company agrees, for stock of the Company. An officer of MICROS Canada Inc. and an officer of the Company have certified that the sales and income of MICROS Canada Inc. have never been at a level which would require MICROS Canada Inc. to issue Performance Shares pursuant to the Management Agreement, that no Performance Shares have ever been issued by MICROS Canada Inc. and that, other than David Quinn, there are no other parties entitled to Performance Shares pursuant to this Management Agreement. MICROS Foreign Sales Corporation: 1. The Articles of Incorporation provide that no shares of MICROS Foreign Sales Corporation may be transferred without the approval of the directors of MICROS Foreign Sales Corporation or a committee of such directors. The Articles of Association also provide that the directors may, in their absolute discretion and without assigning any reason therefor, decline to register any transfer of any share. MICROS of Delaware, Inc.: 1. A Subscription Agreement, dated February 5, 1993, between MICROS of Delaware, Inc. and the Company, provides that stock of MICROS of Delaware, Inc. purchased by the Company pursuant to this Subscription Agreement may not 45 be offered, sold, pledged or otherwise disposed of, except pursuant to (i) an effective registration statement under the Securities Act of 1933 (the "1933 Act") and qualification under applicable state and foreign securities laws, or (ii) an opinion of counsel satisfactory to MICROS of Delaware, Inc. that such registration and qualification are not required. MICROS of South Florida, Inc.: 1. A Management Agreement, dated April 1993 (the "Williams Management Agreement"), among Thomas S. Williams ("Williams") and others (referred to therein as the "Management Group"), the Company and MICROS of South Florida, Inc. ("MSF"), provides that the Management Group would earn shares of common stock of MSF (referred to as "Performance Shares" therein) based upon the realization of certain goals relating to the sales and income of MSF. The Williams Management Agreement further provides that within 60 days following the occurrence of a Triggering Event (as defined in the Williams Management Agreement), the Management Group may request the Company to redeem the Performance Shares for cash or, if the Company agrees, for stock of the Company. An officer of MSF and an officer of the Company have certified (a) that as of July 11, 1995, no such Triggering Event has occurred, (b) that the sales and income of MSF have never been at a level which would require MSF to issue Performance Shares pursuant to the Williams Management Agreement, other than sales for the fiscal year 1993 which required MSF to issue 16 Performance Shares to Williams pursuant to the Williams Management Agreement, (c) that no Performance Shares have ever been issued by MSF, other than such 16 Performance Shares and other than as set forth in paragraph 2 below and (d) that, other than Williams and Read Kirkpatrick, there are no other parties entitled to Performance Shares pursuant to the Williams Management Agreement. 2. A Management Agreement, dated July 1, 1992 (the "Kirkpatrick Management Agreement"), among Read Kirkpatrick ("Kirkpatrick")and others (referred to therein as the "Management Group"), the Company and MICROS of South Florida, Inc.("MSF"), provides that the Management Group would earn shares of common stock of MSF (referred to as "Performance Shares" therein) based upon the realization of certain goals relating to the sales and income of MSF The Kirkpatrick Management Agreement further provides that within 60 days following the occurrence of a Triggering Event (as defined in the Kirkpatrick Management Agreement), the Management Group may request the Company to redeem the 2 46 Performance Shares for cash or, if the Company agrees, for stock of the Company. An officer of MSF and an officer of the Company have certified (a) that as of July 11, 1995, no such Triggering Event has occurred, (b) that the sales and income of MSF have never been at a level which would require MSF to issue Performance Shares pursuant to the Kirkpatrick Management Agreement, other than sales for the fiscal year 1993 which required MSF to issue 24 Performance Shares to Kirkpatrick pursuant to the Kirkpatrick Management Agreement, (c) that no Performance Shares have ever been issued by MSF, other than such 24 Performance Shares and other than as set forth in paragraph 1 above, (d) that such 24 Performance Shares have been redeemed for cash, (e) that as of July 11, 1995, there are no outstanding Performance Shares issued pursuant to the Kirkpatrick Management Agreement and (f) that, other than Thomas S. Williams and Kirkpatrick, there are no other parties entitled to Performance Shares pursuant to the Kirkpatrick Management Agreement. MICROS POS Pty. Limited: 1. The Articles of Association provide that the directors of MICROS POS Pty. Limited may decline to register any transfer of shares of MICROS POS Pty. Limited to any person of whom they do not approve and shall not be called upon to assign any reason for such refusal. 2. The Articles of Association of MICROS POS Pty. Limited provide the following: "89. (a) The Company shall have a first and paramount lien upon every share (whether fully paid or not) for all moneys whether presently payable or not or payable at a fixed time with interest and expenses owing to the Company in respect of that share but the Directors may at any time declare any share to be wholly or in part exempt from the provisions of this Article. "(b) The Company shall have a first and paramount lien for unpaid calls and installments upon the specific shares in respect of which such moneys are due and unpaid. Such lien shall extend to all dividends from time to time declared in respect of such shares. If the Company shall register a transfer of any share upon which it has a claim without first giving to the 3 47 transferee a notice of the claim that share shall be freed and discharged from the lien. "90. Whenever any law imposes a liability or possible liability upon the Company to make any payment whether in respect of dividends or in respect of the member's ownership of shares in the Company in consequence of his death non-payment of income tax or other tax or estate Probate death or succession duties the Company in every such case shall be fully indemnified by the member or his executor or administrator from all liabilities and shall have a lien for all moneys and liabilities due or chargeable in respect of any such law together with interest at the rate of 10% per annum to the same extent as for other moneys payable at a fixed time in respect of the member's shares. The provisions of this Article shall not prejudice any right or remedy conferred on the Company as between the Company and every such member his executors administrators or estate. "91. The Company may sell in such manner as the Directors think fit any shares on which the Company has a lien but no sale shall be made unless some sum in respect of which the lien exists is presently payable nor until the expiration of 14 days after a notice in writing stating and demanding payment of such part of the amount in respect of which the lien exists as is presently payable has been given to the registered holder for the time being of the share or the persons entitled thereto by reason of his death or bankruptcy. * * * "94. The Directors may from time to time make calls upon the members in respect of any money unpaid on their shares (whether on account of the nominal value of the shares or by way of premium) and not by the conditions of allotment thereof made payable at fixed times and each member shall pay the amount called on his shares to the Company at the times specified by the Directors. A call may be revoked or postponed as the Directors may determine." MICROS Systems (U.K.) Limited: 4 48 1. Section 3 of the Articles of Association of MICROS Systems (U.K.) Limited ("MICROS-U.K.") states "The lien conferred by Clause 8 in [Table A in the Schedule to the Companies (Tables A to F) Regulations 1985 as amended by the Companies (Tables A to F) (Amendment) Regulations 1985 ("Table A")] shall attach also to fully paid-up shares, and [MICROS-U.K.] shall also have a first and paramount lien on all shares, whether fully paid or not, standing registered in the name of any person indebted or under liability to [MICROS-U.K.], whether he shall be the sole registered holder thereof or shall be one of two or more joint holders, for all monies presently payable by him or his estate to [MICROS-U.K.]. Clause 8 in Table A shall be modified accordingly." 2. The Articles of Association provide that the directors of MICROS-U.K. may, in their absolute discretion and without assigning any reason therefor, decline to register the transfer of a share, whether or not such share is fully paid. MSI Delaware, Inc.: 1. A Subscription Agreement, dated February 5, 1993, between MSI Delaware, Inc. and the Company, provides that stock of MSI Delaware, Inc. may not be offered, sold, pledged or otherwise disposed of, except pursuant to (i) an effective registration statement under the Securities Act of 1933 (the "1933 Act") and qualification under the applicable state and foreign securities laws, or (ii) an opinion of counsel satisfactory to MSI Delaware, Inc. that such registration and qualification are not required. MICROS Systems Deutschland GmbH: 1. The Articles of Association require that a quotaholder who desires to transfer his or her shares in MICROS Systems Deutschland GmbH must obtain the written consent of the other quotaholders of MICROS Systems Deutschland GmbH and the consent of the Executive Board of MICROS Systems Deutschland GmbH prior to such transfer. The Articles of Association provide an exception from this consent requirement if a transfer is made (i) to another existing quotaholder of MICROS Systems Deutschland GmbH or (ii) to a related party of the transferring quotaholder. MICROS Systems Services GmbH: 1. Article 6.1 of the Articles Association of MICROS Systems Services GmbH provides that a quota in MICROS 5 49 Systems Services GmbH may not be transferred or made subject to a lien or any similar third-party interest without the prior written consent of a majority of quotaholders who hold greater than a 50% interest in the share capital of MICROS Systems Services GmbH. Such consent is not required if the parties to the quota transfer are either other quotaholders of MICROS Systems Services GmbH or related companies, as defined in the German Stock Corporation Statute (Aktiengesetz). Article 6.2 of the Articles of Association of MICROS Systems Services GmbH provides that (i) a transfer of a quota in MICROS Systems Services GmbH and (ii) an encumbrance of a lien or a similar third-party interest upon a quota to the benefit of a non-quotaholder or an unrelated party must be approved by a majority of votes cast at a duly convened quotaholders' meeting. Article 6.3 of the Articles of Association of MICROS Systems Services GmbH provides for a preemption right in the case of an increase in the number of outstanding quotas in MICROS Systems Services GmbH. Fidelio Software U.K. Limited: 1. Section 6 of the Articles of Association states "In regulation 8 of Table A, the words '(not being a fully paid share)' shall be omitted. The Company shall have a first and paramount lien on all shares standing registered in the name of any person (whether he be the sole registered holder thereof or one of two or more joint holders) for all moneys presently payable by him or his estate to the Company." 2. The Articles of Association provide that the directors of Fidelio Software U.K. Limited may, in their sole discretion and without assigning any reason therefor, decline to register the transfer of any share of Fidelio Software U.K. Limited, whether or not such share is fully paid. MICROS Systems AG: 1. A Joint Venture Contract between the Company and Host AG, Zurich, an entity not yet formed as of the time of the execution of the Joint Venture Contract, requires that a shareholder of MICROS Systems AG obtain the consent of the other shareholders prior to the transfer of stock of MICROS Systems AG. Fidelio France SA: 1. The Articles of Association/By-laws of Fidelio France SA provide for a right of first refusal to 6 50 the non-transferring shareholders prior to transfer of stock of Fidelio France SA. Marblehead Systems International, Inc.: 1. A Shareholders' Agreement, dated February 22, 1994, between Fidelio Software Corporation and Joseph A. Marko provides a right of first refusal to non-transferring shareholders prior to transfer of stock. Merchants Information Systems, Inc.: 1. A Shareholders' Agreement, dated July 30, 1993, between the Company and Merchants Systems, Inc., a Washington State corporation, provides a right of first refusal to the non-transferring shareholders prior to a transfer of stock of Merchants Information Systems, Inc. 7 EX-10.E 3 EMPLOYMENT AGREEMENT BETWEEM MICROS/GIANNOPOULOS 1 EXHIBIT 10e EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT ("Agreement") is made this 1st day of June, 1995, by and between MICROS SYSTEMS, INC., a Maryland corporation, with offices located at 12000 Baltimore Avenue, Greenbelt, Maryland 20705 (hereinafter referred to as the "Company"), and A. L. GIANNOPOULOS, whose address is 6125 Wooded Run Drive, Columbia, Maryland 21044 (hereinafter referred to as the "Executive"). W I T N E S S E T H: WHEREAS, the Company desires to employ the Executive and the Executive desires to accept such employment; WHEREAS, the Executive possesses skills and experience which the Company believes are of substantial value and importance to the success of the Company's business operations; WHEREAS, the Executive is willing to make his services available to the Company on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual promises and the conditions and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged, the parties hereto agree as follows: 1. Employment. The Company hereby employs the Executive and the Executive hereby accepts employment with the Company upon the terms and conditions hereinafter set forth. 2 2. Duties. During the term of employment, the Executive shall serve as the President and Chief Executive Officer of the Company and as such, he shall have general responsibility for the management and direction of the business of the Company in all departments and he shall perform such other reasonable duties as the Board of Directors may assign, from time to time. 3. Term. The term of this Agreement shall commence upon the day and year first above written ("Commencement Date") and shall continue until December 31, 1999, unless sooner terminated, as provided herein. 4. Salary. The Executive's salary for the term of this Agreement shall be in the amounts set forth below, payable in equal bi-weekly installments:
Period Salary ------ ------ Commencement Date through June 30, 1995 $ 32,170 July 1, 1995 through June 30, 1996 $203,000 July 1, 1996 through June 30, 1997 $213,000 July 1, 1997 through June 30, 1998 $223,000 July 1, 1998 through June 30, 1999 $233,000 July 1, 1999 through December 31, 1999 $121,500
5. Bonuses. In addition to his salary, the Executive shall be entitled to receive a bonus for each fiscal year of the Company (July 1 - June 30). The Executive's bonus for each fiscal year, or portion of a fiscal year, during the term hereof shall be in the amounts set forth below ("Target Bonus") if the fiscal year bonus 2 3 objectives of the Executive ("Objectives"), as determined by the Board of Directors prior to the commencement of each such fiscal year, are met; provided, that, consistent with the Company's executive bonus plan, the bonus may be increased for any fiscal year in which the Company performance exceeds Objectives or decreased for any fiscal year in which the Company performance falls below Objectives, and provided further that in no event shall the bonus paid to the Executive for any fiscal year of the Company exceed 200% of Target Bonus:
Fiscal Year Ending Target Bonus ------------------ ------------ June 30, 1995 $110,000 June 30, 1996 $120,000 June 30, 1997 $130,000 June 30, 1998 $140,000 June 30, 1999 $150,000 June 30, 2000 $ 80,000
Any bonus required to be paid pursuant to this Section 5 shall be paid by the Company to the Executive within ninety (90) days following the close of the fiscal year of the Company to which such bonus applies, except that the bonus due for the period ending December 31, 1999 shall be paid on or before March 31, 2000. 6. Stock Option. Upon the Commencement Date, the Executive shall be granted the unrestricted right to acquire up to twenty-two thousand (22,000) shares of the Company's common stock ("Option"). The Company and the Executive shall enter into a stock option 3 4 agreement evidencing the grant of said Option, which agreement shall contain such other terms and provisions as are customarily contained in the Company's executive employee Incentive Stock Option Agreement ("Company Plan"). In addition to the Option granted above, within ninety (90) days following the commencement of each fiscal year of the Term, the Company shall grant to the Executive the right to purchase additional common stock of the Company ("Common Stock") for such consideration and in such amounts as is consistent with the terms of the Company Plan or a successor employee stock option plan. Notwithstanding the right herein granted, the Executive acknowledges that, except for the Common Stock exercisable under the Option, no additional Common Stock is currently available to the Company to issue under the Company Plan. In recognition thereof, the Company's obligation to grant to the Executive the right to purchase the additional Common Stock shall not arise until such time as the shares of Common Stock become available under the Company Plan or a successor employee stock option plan. The Company agrees to use its best efforts to take such steps or cause the required steps to be taken which will enable the Common Stock to become available for option grants. 7. Expenses. The Company shall reimburse the Executive for all expenses incurred in connection with the performance of his duties on behalf of the Company, provided that the Executive shall keep, and present to the Company, records and receipts relating to 4 5 reimbursable expenses incurred by him. Such records and receipts shall be maintained and presented in a format, and with such regularity, as the Company reasonably may require in order to substantiate the Company's right to claim income tax deductions for such expenses. Without limiting the generality of the foregoing, the Executive shall be entitled to reimbursement for any business-related travel, business-related entertainment whether at his residence or otherwise, and other costs and expenses reasonably incident to the performance of his duties on behalf of the Company. 8. Fringe Benefits. During the term of this Agreement, the Executive shall be entitled to participate in any and all fringe benefit plans, programs and practices sponsored by the Company for the benefit of its executive employees, and shall be furnished with other services and perquisites appropriate to his position. Without limiting the generality of the foregoing, the Executive shall be entitled to the following benefits (regardless of whether such benefits are provided to other executives): (a) Comprehensive medical insurance for the Executive, his spouse, and his dependent children. (b) Dental insurance for the Executive, his spouse, and his dependent children. (c) Group term life insurance. (d) Long-term disability insurance. 5 6 9. Vacation Leave, etc. (a) Vacation Leave. The Executive shall be entitled to a total of four (4) weeks of vacation each year. Unused vacation time shall not accumulate from year to year. The Executive may take his vacation at such time or times as shall not interfere with the performance of his duties under this Agreement. (b) Sick Leave and Holidays. The Executive shall be entitled to paid sick leave and holidays in accordance with the Company's announced policy for executive employees, as in effect from time to time. 10. Restrictive Covenant. The Executive agrees that during his employment with the Company, and for a period of one (1) year following the termination of his employment for any reason whatsoever, he shall not (a) engage, directly or indirectly, in any computer hardware or computer software business which is competitive with the business now, or at any time during the term of the Executive's employment, conducted by the Company; or (b) solicit (directly or indirectly, for his own account, or for the account of others) orders for services or products of a kind or nature like or similar to services performed or products sold by the Company during the term of the Executive's employment with the Company, from any party that was a client (or customer) of the Company, or which the Company was soliciting to be its client (or customer) during the twelve (12) month period preceding the date of the Executive's termination of employment. The Executive further 6 7 agrees that he shall not, at any time, directly or indirectly, urge any client (or customer) of the Company to discontinue business, in whole or in part, or not to do business, with the Company. For the purposes of this Section 10, the Executive will be deemed directly or indirectly engaged in a business if he participates in such business as proprietor, partner, joint venturer, stockholder, director, officer, lender, manager, employee, consultant, advisor or agent or if he controls such business. The Executive shall not for purposes of this Section 10 be deemed a stockholder or lender if he holds less than two percent (2%) of the outstanding equity or debt of any publicly owned corporation engaged in the same or similar business to that of the Company, provided that the Executive shall not be in a control position with regard to such corporation. 11. Maintaining Confidential Information. (a) Company Information. The Executive agrees at all times during the term of his employment and for a period of one (1) year thereafter to hold in strictest confidence, and not to use, or to disclose to any person, firm or corporation, without the written authorization of the Board of Directors of the Company except if such is to be used or disclosed for the benefit of the Company, any trade secrets, confidential knowledge, data or other proprietary information of the Company. By way of illustration and not limitation, such shall include information relating to products, processes, know-how, designs, formulas, methods, developmental or 7 8 experimental work, improvements, discoveries, plans for research, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers, and information regarding the skills and compensation of other employees of the Company. (b) Third Party Information. The Executive recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and, in some cases, to use it only for certain limited purposes. The Executive agrees that he owes the Company and such third parties, both during the term of his employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation (except in a manner that is consistent with the Company's agreement with the third party) or use it for the benefit of anyone other than the Company or such third party (consistent with the Company's agreement with the third party). 12. Prior Employees. For a period of one (1) year following the termination of the Executive's employment with the Company for any reason whatsoever, with or without cause, the Executive shall not, whether as an individual or as a proprietor, stockholder, partner, officer, director, employer, employee, agent, consultant, independent contractor or otherwise, recruit or employ, directly or 8 9 indirectly, for his own business or any business in which he has an ownership interest, is employed with, or is otherwise affiliated with, any individual who was an employee of the Company within the period of twelve (12) months preceding the effective date of termination of the employment of the Executive. 13. Overbreadth of Restrictive Covenant. It is the intention of the parties that if any restrictive covenant contained in this Agreement is determined by a court of competent jurisdiction to be overly broad, then the court should enforce such restrictive covenant to the maximum extent permitted under the law as to scope, geographic area and duration. 14. Other Employment. For valuable consideration received by the Executive (without regard to his continued employment by the Company), the Executive agrees that during the period of his employment by the Company he will devote his full time and energy to the performance of his duties under this Agreement, and will not, without the Company's express written consent, engage in any other employment or business activity directly related to the business in which the Company is now involved, or becomes involved, nor will he engage in any other activities which directly conflict with his obligations to the Company. 15. Prior Agreements. The Executive warrants that he is not prohibited from performing any of the services required by his employment with the Company under the terms of any prior employment agreement or restrictive covenant. 9 10 16. Termination of Employment. (a) Certain Defined Terms. (1) "Disability" shall mean the continuous and uninterrupted inability of the Executive to perform his duties hereunder due to the sickness or injury of the Executive which persists for a period of one hundred eighty (180) days or more. (2) "Good Cause" shall mean (i) the criminal acts of the Executive which result in the Executive being charged with and convicted of a felony and which are intended to result directly or indirectly in substantial gain or personal enhancement of the Executive at the expense of the Company, or (ii) the determination by a court of competent jurisdiction that there has been a willful or intentional breach by the Executive of either Section 10 hereof (restrictive covenant) or Section 11 hereof (maintaining confidential information) in a manner which results in material and substantial direct economic harm or damage to the Company. (3) "Good Reason" shall mean: a) An assignment by the Company to the Executive, without his express written consent, of any material duties which are inconsistent with his position, duties, responsibilities and status as President and Chief Executive Officer of the Company; b) Any action taken by the Company or its Board of Directors to reduce the Executive's salary, Target Bonus 10 11 (if inconsistent with the terms of Section 5 above) or fringe benefits, without the express written consent of the Executive; c) The Company's failure to obtain the agreement of any successor in interest of the Company to assume the obligations of the Company under this Agreement; or d) A change in control of the Company such that any person, firm or group (other than Westinghouse Electric Corporation, or any of its affiliates, or another person, firm or group approved by Executive) , by virtue of his or their acquisition or ownership of at least twenty percent (20%) of the Common Stock of the Company, shall have the power to control and direct the management and business affairs of the Company. (b) Termination Events. (1) Death. The Executive's employment shall be terminated upon his death. (2) Disability. The Executive's employment shall be terminated upon his Disability. (3) By the Company for Good Cause or Other Reasons. The Executive's employment may be terminated by the Company for (i) Good Cause or (ii) upon fifteen (15) days written notice, for any other reason. (4) By the Executive for Good Reason or Other Reasons. The Executive may terminate this Agreement (i) for Good Reason or (ii) upon fifteen (15) days prior written notice, for any other reason. 11 12 (c) Termination Payments. (1) Payment Upon Death. Upon the termination of employment of the Executive due to his death, the Company shall cause to be paid over to the designated beneficiary or to the personal representative of the estate of the Executive, any and all proceeds of life insurance policies maintained by the Company for the benefit of the Executive. Any and all salary and Target Bonus payments shall thereupon cease and terminate. (2) Payment Upon Disability. Upon the termination of employment of the Executive due to his Disability, the Executive shall be entitled to the payments paid pursuant to the disability insurance policies maintained by the Company for the benefit of the Executive. Any and all salary and Target Bonus payments shall thereupon cease and terminate. (3) Payment Upon Termination By The Company. If the Company terminates the Executive's employment for any reason other than Good Cause, the Executive shall be entitled to receive from the Company and the Company shall pay to the Executive in one lump sum, within fifteen (15) days following the Executive's termination of employment, all of the salary and Target Bonus payments provided for in Sections 4 and 5 of this Agreement for the period beginning on the date of the Executive's termination of employment and ending on December 31, 1999. If the Company terminates Executive's employment for Good Cause, the Executive shall be entitled to 12 13 salary through the date of termination. Any and all salary and Target Bonus payments shall thereupon cease and terminate. (4) Payment Upon Termination By The Executive. If the Executive terminates his employment with the Company for Good Reason, other than Good Reason described in Section 16(a)(3)a), he shall be entitled to receive from the Company and the Company shall pay to the Executive in one lump sum, within fifteen (15) days following the date of the Executive's termination of employment, all of the salary and Target Bonus payments provided for in Sections 4 and 5 of this Agreement for the period beginning on the date of the Executive's termination and ending on December 31, 1999. If the Executive terminates his employment with the Company for the Good Reason described in Section 16(a)(3)a), then and in such event, he shall be entitled to receive from the Company and the Company shall pay to the Executive in one lump sum, within fifteen (15) days following the date of the Executive's termination of employment, an amount equal to the lesser of (i) all of the salary and Target Bonus payments provided for in Sections 4 and 5 of this Agreement for the period beginning on the date of the Executive's termination and ending on December 31, 1999, or (ii) all of the salary and Target Bonus payments provided for in Sections 4 and 5 of this Agreement for the period commencing on the date of the Executive's termination and ending on the third anniversary of the date of the Executive's termination. 13 14 If the Executive terminates this Agreement for any reason other than Good Reason, he shall be entitled to salary through the date of termination. Any and all salary and Target Bonus payments shall thereupon cease and terminate. 17. Remedies. The parties hereto acknowledge that a breach of any of the terms of the provisions set forth in this Agreement may not be fully or adequately compensable by the award or payment of monetary damages and may cause immediate, substantial and irreparable injury to the non-breaching party. The parties hereto therefore agree and consent that in addition to any award of damages that the non-breaching party may be entitled to recover, the non-breaching party shall also be entitled to such ex parte, preliminary, interlocutory, temporary or permanent injunctive, or any other equitable relief, including the entry of a decree of specific performance, or any other applicable order, which shall require performance and/or limit activities in accordance with the terms of this Agreement. The Executive expressly acknowledges and agrees: (a) that the restrictions set forth in this Agreement are reasonable, in terms of scope, duration, and otherwise, (b) that the protections afforded to the Company in this Agreement are necessary to protect its legitimate business interest, (c) that the restrictions set forth in this Agreement will not adversely affect the Executive's ability to obtain gainful employment in his field of expertise or other related employment comparable to the Executive's employment with the Company, and (d) that this 14 15 agreement to observe such restrictions forms a material part of the consideration for this Agreement and his employment by the Company. 18. Notices. Any notice required or permitted to be given hereunder shall be deemed sufficient if in writing, and if delivered personally or sent by registered or certified mail, return receipt requested, to the addresses of the respective parties set forth herein, or such other address as either party so notifies the other of in writing from time to time. 19. Waiver of Breach. The waiver of any breach of any provision hereunder by either party shall not be construed or operate as a waiver of any subsequent breach. 20. Benefits and Burdens. This Agreement shall inure to the benefit of and be binding upon the Company, its successors and assigns, and the Executive, his heirs, personal representatives, successors and assigns. Because the duties of the Executive hereunder are special, personal and unique in nature, the Executive may not transfer, sell or otherwise assign his obligations under this Agreement. 21. Governing Law. This Agreement shall be construed in accordance with and be governed by the laws of the State of Maryland, excepting the conflict of law rules of the State of Maryland, as if this contract were made and to be performed entirely within the State of Maryland. 22. Entire Agreement. This Agreement contains the entire agreement of the parties and may not be amended, modified or 15 16 terminated except by a written instrument executed by both parties hereto. 23. Captions. Paragraph captions shall be used exclusively for purposes of reference and shall not be considered part of the substantive agreement of the parties. 24. Severability. The restrictions and the rights and remedies contained in this Agreement are cumulative and severable. If any term or provision of this Agreement shall to any extent be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby, and each term and provision of this Agreement shall be enforced to the fullest extent permitted by law. 25. Costs of Breach. The parties hereto agree that in the event of any breach by either the Company or the Executive of any covenant, agreement, term, condition or obligation contained in this Agreement, the non-breaching party shall be entitled to all attorneys' fees, court costs and other litigation expenses incurred by the non-breaching party as a result of such breach. 26. Notice of Employment. During the period of restraint imposed by this Agreement, the Executive shall provide immediate written notice to the Company of each instance of employment, agency or consultancy in which the Executive becomes involved, including, but not limited to, the location and nature of the services rendered and the identity of the person or entity on whose behalf the services are rendered. 16 17 27. Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall together constitute but one document. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the day and year first written above. COMPANY: ATTEST: MICROS SYSTEMS, INC. /s/ JUDITH F. WILBERT By: /s/ LOUIS M. BROWN, JR. (SEAL) --------------------- ---------------------------- Louis M. Brown, Jr. Chairman [Corporate Seal] EXECUTIVE: WITNESS: /s/ JUDITH F. WILBERT /s/ A. L. GIANNOPOULOS (SEAL) --------------------- ------------------------------- A. L. GIANNOPOULOS 17 EX-10.F 4 CONSULTING AGREEMENT BETWEENMICROS/BROWN 1 EXHIBIT 10f CONSULTING AGREEMENT THIS CONSULTING AGREEMENT ("Agreement") is made this 30th day of June, 1995, by and between MICROS SYSTEMS, INC., a Maryland corporation with offices located at 12000 Baltimore Avenue, Greenbelt, Maryland 20705 (hereinafter referred to as the "Company"), and LOUIS M. BROWN, JR., whose address is 1665 Kenwood Avenue, Alexandria, Virginia 22312 (hereinafter referred to as the "Consultant"). W I T N E S S E T H: WHEREAS, the Company and the Consultant desire that Consultant be appointed and engaged to provide services as described in this Agreement; WHEREAS, the Consultant possesses skills and experience which the Company believes are of substantial value and importance to the success of the Company's business operations; WHEREAS, the Consultant is willing to make his services available to the Company on the terms and conditions set forth in this Agreement. NOW, THEREFORE, in consideration of the mutual promises and the conditions and agreements contained herein and other good and valuable consideration, the receipt and sufficiency of which hereby is acknowledged, the parties hereto agree as follows: 1. Consulting Services. (a) The Company hereby appoints and engages Consultant, and Consultant hereby accepts this appointment and engagement, to provide services as described in this Agreement. 2 (b) Consultant agrees to provide consultation and advice to the Company on matters of operations, administration, and other matters important to the functioning and business of the Company, as requested by the Company's President and Chief Executive Officer or his designee. (c) Consultant agrees to provide, on the average, approximately 20 hours per week of consulting services at the Company and/or devoted to Company business and the Company will exercise its best efforts to ensure that the services he is asked to provide do not require him to devote more than 20 hours per week. As set forth in Section 2(b) Consultant will control the manner, methods and details of performance of his services. (d) The Company acknowledges that Consultant's availability for consultation is valuable, even during periods in which Consultant is not actually called on for such consultation. Accordingly, the amount of compensation Consultant will receive under Section 4 of this Agreement is independent of the amount of time Consultant is actually required to devote in rendering consulting services. 2. Independent Contractor Relationship. (a) Consultant agrees to provide these consulting services as an independent contractor to the Company. Consultant will not be, and will not be deemed to be, an employee of the Company. (b) Consultant will control the manner, methods and details of performance of his services. 2 3 (c) Consultant will not be entitled to any benefits the Company may provide for its employees. (d) Consultant will not be an agent of the Company for any purpose and will not have any authority to bind or commit the Company in any way unless and to the extent expressly authorized in writing by the Company's President and Chief Executive Officer. (e) Consultant will be responsible for reporting his income and paying any applicable taxes (including but not limited to federal, state, and local income taxes, Social Security and Medicare taxes, and unemployment taxes) to federal, state, and local taxing agencies, as required by law. (f) Consultant may perform consulting services for or accept employment with other persons during the term of this Agreement, provided that Consultant shall not permit such other services or employment to conflict or interfere unreasonably with his performance of services under this Agreement. This provision includes, but is not limited to, any engagement or employment whose time or effort requirements would interfere unreasonably with Consultant's performance of services for the Company, and any engagement or employment that would raise an actual or potential conflict of interest. It is acknowledged and agreed that simultaneously herewith Consultant is performing duties for other companies as set forth on page 4 of the Company's Proxy Statement dated October 24, 1994 and, that such duties will not interfere unreasonably with Consultant's performance of services for the Company. 3 4 3. Term. The term of this Agreement shall commence on July 1, 1995 ("Commencement Date") and shall continue until June 30, 2000, unless sooner terminated, as provided herein. 4. Compensation. The Consultant's compensation for the term of this Agreement shall be in the amounts set forth below, payable in bi-weekly installments:
Period Compensation ------ ------------ July 1, 1995 through June 30, 1996 $150,000 July 1, 1996 through June 30, 1997 $160,000 July 1, 1997 through June 30, 1998 $170,000 July 1, 1998 through June 30, 1999 $180,000 July 1, 1999 through June 30, 2000 $190,000
5. Bonuses. In addition to the above compensation, the Consultant shall be entitled to receive a bonus for each fiscal year of the Company (July 1 - June 30). The Consultant's bonus for each fiscal year, or portion of a fiscal year, during the term hereof shall be in the amounts set forth below ("Target Bonus") if the fiscal year bonus objectives of the Consultant ("Objectives"), as determined by the Board of Directors prior to the commencement of each such fiscal year, are met; provided, that, consistent with the Company's standard bonus plan in effect during fiscal 1995, the bonus may be increased for any fiscal year in which the Company performance exceeds Objectives or decreased for any fiscal year in which the Company performance falls below Objectives, and provided further that in no event shall the bonus paid to the Consultant for any fiscal year of the Company exceed 200% of Target Bonus: 4 5
Fiscal Year Ending Target Bonus ------------------ ------------ June 30, 1996 $70,000 June 30, 1997 $80,000 June 30, 1998 $90,000 June 30, 1999 $100,000 June 30, 2000 $110,000
Any bonus required to be paid pursuant to this Section 5 shall be paid by the Company to the Consultant within ninety (90) days following the close of the fiscal year of the Company to which such bonus applies. 6. Stock Option. Upon the Commencement Date, the Consultant shall be granted the unrestricted right to acquire up to fifteen thousand (15,000) shares of the Company's common stock ("Option"). The Company and the Consultant shall enter into a stock option agreement evidencing the grant of said Option, which agreement shall contain such other terms and provisions as are customarily contained in the Company's executive employee Incentive Stock Option Agreement ("Company Plan"). Consultant acknowledges receipt of said Option on June 2, 1995. In addition to the Option granted above, within ninety (90) days following the commencement of each fiscal year of the Term, the Company shall grant to the Consultant the right to purchase additional common stock of the Company ("Common Stock") for such consideration and in such amounts as is consistent with the terms of the Company Plan or a successor employee stock option plan. Notwithstanding the right herein granted, the Consultant acknowledges that, except for the Common Stock exercisable under 5 6 the Option, no additional Common Stock is currently available to the Company to issue under the Company Plan. In recognition thereof, the Company's obligation to grant to the Consultant the right to purchase the additional Common Stock shall not arise until such time as the shares of Common Stock become available under the Company Plan or a successor employee stock option plan. The Company agrees to use its best efforts to take such steps or cause the required steps to be taken which will enable the Common Stock to become available for option grants. 7. Expenses. The Company shall reimburse the Consultant for all expenses incurred in connection with the performance of his duties on behalf of the Company, provided that the Consultant shall keep, and present to the Company, records and receipts relating to reimbursable expenses incurred by him. Such records and receipts shall be maintained and presented in a format, and with such regularity, as the Company reasonably may require in order to substantiate the Company's right to claim income tax deductions for such expenses. Without limiting the generality of the foregoing, the Consultant shall be entitled to reimbursement for any business-related travel, business-related entertainment whether at his residence or otherwise, and other costs and expenses reasonably incident to the performance of his duties on behalf of the Company. 8. Restrictive Covenant. The Consultant agrees that during the term of this Agreement, and for a period of one (1) year following the termination of this Agreement for any reason whatsoever, he shall not (i) engage, directly or indirectly, in any 6 7 computer hardware or computer software business which is competitive with the business now, or at any time during the Term of this Agreement, conducted by the Company; or (ii) solicit (directly or indirectly, for his own account, or for the account of others) orders for services or products of a kind or nature like or similar to services performed or products sold by the Company during the term of this Agreement, from any party that was a client (or customer) of the Company, or which the Company was soliciting to be its client (or customer) during the twelve (12) month period preceding the date of the termination of this Agreement. The Consultant further agrees that he shall not, at any time, directly or indirectly, urge any client (or customer) of the Company with whom the Company is desirous of doing business to discontinue business, in whole or in part, or not to do business, with the Company. For the purposes of this Section 8, the Consultant will be deemed directly or indirectly engaged in a business if he participates in such business as proprietor, partner, joint venturer, stockholder, director, officer, lender, manager, employee, consultant, advisor or agent or if he controls such business. The Consultant shall not for purposes of this Section 8 be deemed a stockholder or lender if he holds less than two percent (2%) of the outstanding equity or debt of any publicly owned corporation engaged in the same or similar business to that of the Company, provided that the Consultant shall not be in a control position with regard to such corporation. 7 8 Provided, however, that (a) it is acknowledged and agreed that, in his various other capacities as referenced in paragraph 2(f) above, Consultant has directly or indirectly participated in certain transactions as set forth on page 10 of such Proxy Statement, it being contemplated that any further such transactions, if entered into, will be pursuant to the law of the State of Maryland, and will be similarly disclosed in future proxy statements of the Company; and (b) Consultant may invest in equity securities of any Competitive Business (but without participating in such Competitive Business) if (i) such equity securities are listed on any recognized securities exchange or are registered under Section 12(g) of the Securities Exchange Act of 1934; and (ii) the total number of such shares owned or controlled, directly or indirectly, by Consultant, his spouse and his minor children does not exceed in total an amount equal to 2% of the outstanding shares of such class of equity securities of any such Competitive Business. 9. Maintaining Confidential Information. (a) Company Information. The Consultant agrees at all times during the term of this Agreement and for a period of one (1) year thereafter to hold in strictest confidence, and not to use, or to disclose to any person, firm or corporation, without the written authorization of the Board of Directors of the Company except if such is to be used or disclosed for the benefit of the Company, any trade secrets, confidential knowledge, data or other proprietary information of the Company. By way of illustration and not 8 9 limitation, such shall include information relating to products, processes, know-how, designs, formulas, methods, developmental or experimental work, improvements, discoveries, plans for research, new products, marketing and selling, business plans, budgets and unpublished financial statements, licenses, prices and costs, suppliers and customers, and information regarding the skills and compensation of other employees of the Company. (b) Third Party Information. The Consultant recognizes that the Company has received and in the future will receive from third parties their confidential or proprietary information subject to a duty on the Company's part to maintain the confidentiality of such information and, in some cases, to use it only for certain limited purposes. The Consultant agrees that he owes the Company and such third parties, both during the term of his employment and thereafter, a duty to hold all such confidential or proprietary information in the strictest confidence and not to disclose it to any person, firm or corporation (except in a manner that is consistent with the Company's agreement with the third party) or use it for the benefit of anyone other than the Company or such third party (consistent with the Company's agreement with the third party). 10. Prior Employees. For a period of one (1) year following the termination of this Agreement for any reason whatsoever, with or without cause, the Consultant shall not, whether as an individual or as a proprietor, stockholder, partner, officer, director, employer, employee, agent, consultant, independent 9 10 contractor or otherwise, recruit or employ, directly or indirectly, for his own business or any business in which he has an ownership interest, is employed with, or is otherwise affiliated with, any individual who was an employee of the Company within the period of twelve (12) months preceding the termination of this Agreement. 11. Overbreadth of Restrictive Covenant. It is the intention of the parties that if any restrictive covenant contained in this Agreement is determined by a court of competent jurisdiction to be overly broad, then the court should enforce such restrictive covenant to the maximum extent permitted under the law as to scope, geographic area and duration. 12. Prior Agreements. The Consultant warrants that he is not prohibited from performing any of the services required by this Agreement under the terms of any prior employment agreement or restrictive covenant. 13. Termination Agreement. (a) Certain Defined Terms. (1) "Disability" shall mean the continuous and uninterrupted inability of the Consultant to perform his duties hereunder due to the sickness or injury of the Consultant which persists for a period of one hundred eighty (180) days or more. (2) "Good Cause" shall mean (i) the criminal acts of the Consultant which result in the Consultant being charged with and convicted of a felony and which are intended to result directly or indirectly in substantial gain or personal enhancement of the 10 11 Consultant at the expense of the Company, or (ii) the determination by a court of competent jurisdiction that there has been a willful or intentional breach by the Consultant of either Section 8 hereof (restrictive covenant) or Section 9 hereof (maintaining confidential information) in a manner which results in material and substantial direct economic harm or damage to the Company. (3) "Good Reason" shall mean: a) An assignment by the Company to the Consultant, without his express written consent, of any material duties which are inconsistent with this Agreement; b) Any action taken by the Company or its Board of Directors to reduce the Consultants compensation or Target Bonus (if inconsistent with the terms of Section 5 above) without the express written consent of the Consultant; c) The Company's failure to obtain the agreement of any successor in interest of the Company to assume the obligations of the Company under this Agreement. (b) Termination Events. (1) Death. This Agreement shall be terminated upon Consultant's death. (2) Disability. This Agreement shall be terminated upon Consultant's Disability. (3) By the Company for Good Cause or Other Reasons. This Agreement may be terminated by the Company for (i) Good Cause or (ii) upon fifteen (15) days written notice, for any other reason. 11 12 (4) By the Consultant for Good Reason or Other Reasons. The Consultant may terminate this Agreement (i) for Good Reason or (ii) upon fifteen (15) days prior written notice, for any other reason. (c) Termination Payments. (1) Payment Upon Death. Upon the termination of this Agreement due to Consultant's death, the Company shall cause to be paid over to the designated beneficiary or to the personal representative of the estate of the Consultant, all compensation provided hereunder through the date of death, any Target Bonus payments then due and any Target Bonus, prorated to the date of death with respect to the period in which the death occurs. All such payments shall thereupon cease and terminate. (2) Payment Upon Disability. Upon the termination of this Agreement due to Consultant's Disability, the Consultant shall be entitled to all compensation provided hereunder through the date of Disability, any Target Bonus payments then due and any Target Bonus, prorated to the date of Disability with respect to the period in which Disability occurs. All such payments shall thereupon cease and terminate. (3) Payment Upon Termination By The Company. If the Company terminates this Agreement for any reason other than Good Cause, the Consultant shall be entitled to receive from the Company and the Company shall pay to the Consultant in one lump sum, within fifteen (15) days following the termination of this Agreement, all of the compensation and Target Bonus payments 12 13 provided for in Sections 4 and 5 of this Agreement for the period beginning on the date of the termination of the Agreement and ending on June 30, 2000. If the Company terminates this Agreement for Good Cause, the Consultant shall be entitled to compensation through the date of termination and any due, but unpaid, Target Bonus. Any and all compensation and Target Bonus payments with respect to subsequent periods shall thereupon cease and terminate. (4) Payment Upon Termination By The Consultant. If the Consultant terminates this Agreement for Good Reason, other than Good Reason described in Section 13(a)(3)a), he shall be entitled to receive from the Company and the Company shall pay to the Consultant in one lump sum, within fifteen (15) days following the date of the Consultant's termination of this Agreement, all of the salary and Target Bonus payments provided for in Sections 4 and 5 of this Agreement for the period beginning on the date of the Consultant's termination and ending on June 30, 2000. If the Consultant terminates this Agreement for the Good Reason described in Section 13(a)(3)a), then and in such event, he shall be entitled to receive from the Company and the Company shall pay to the Consultant in one lump sum, within fifteen (15) days following the date of the Consultant's termination of this Agreement, an amount equal to the lesser of (i) all of the salary and Target Bonus payments provided for in Sections 4 and 5 of this Agreement for the period beginning on the date of the Consultant's termination and ending on June 30, 2000, or (ii) all of the salary and Target Bonus 13 14 payments provided for in Sections 4 and 5 of this Agreement for the period commencing on the date of the Consultant's termination and ending on the third anniversary of the date of the Consultant's termination. If the Consultant terminates this Agreement for any reason other than Good Reason, he shall be entitled to compensation through the date of termination and any due, but unpaid, Target Bonus. Any and all compensation and Target Bonus payments with respect to subsequent periods shall thereupon cease and terminate. 14. Arbitration. Except as set forth in paragraph 15, any dispute arising under this Agreement or the termination of this Agreement shall be resolved by arbitration in the District of Columbia, in accordance with the then prevailing rules of the American Arbitration Association, before an arbitrator or arbitrators appointed pursuant to such rules, and the determination of such arbitrator or arbitrators shall be final, binding and conclusive on the parties. 15. Remedies. The parties hereto acknowledge that a breach of certain terms of this Agreement may not be fully or adequately compensable by the award or payment of monetary damages and may cause immediate, substantial and irreparable injury to the non-breaching party. The parties therefore agree and consent that in addition to any award of damages that the non-breaching party may be entitled to recover, the non-breaching party shall also be entitled to such ex parte, preliminary, interlocutory, temporary or 14 15 permanent injunctive, or any other equitable relief, including the entry of a decree of specific performance, or any other applicable order, which shall require performance and/or limit activities in accordance with the terms of this Agreement. The Consultant expressly acknowledges and agrees: (a) that the restrictions set forth in this Agreement are reasonable, in terms of scope, duration, and otherwise, (b) that the protections afforded to the Company in this Agreement are necessary to protect its legitimate business interest, (c) that the restrictions set forth in this Agreement will not adversely affect the Consultant's ability to obtain gainful employment in his field of expertise or other related employment comparable to that provided for herein, and (d) that this agreement to observe such restrictions forms a material part of the consideration for this Agreement and his services provided to the Company. 16. Notices. Any notice required or permitted to be given hereunder shall be deemed sufficient if in writing, and if delivered personally or sent by registered or certified mail, return receipt requested, to the addresses of the respective parties set forth herein, or such other address as either party so notifies the other of in writing from time to time. 17. Waiver of Breach. The waiver of any breach of any provision hereunder by either party shall not be construed or operate as a waiver of any subsequent breach. 18. Benefits and Burdens. This Agreement shall inure to the benefit of and be binding upon the Company, its successors and 15 16 assigns, and the Consultant, his heirs, personal representatives, successors and assigns. Because the duties of the Consultant hereunder are special, personal and unique in nature, the Consultant may not transfer, sell or otherwise assign his obligations under this Agreement. 19. Governing Law. This Agreement shall be construed in accordance with and be governed by the laws of the State of Maryland, excepting the conflict of law rules of the State of Maryland, as if this contract were made and to be performed entirely within the State of Maryland. 20. Entire Agreement. This Agreement contains the entire agreement of the parties and may not be amended, modified or terminated except by a written instrument executed by both parties hereto. 21. Captions. Paragraph captions shall be used exclusively for purposes of reference and shall not be considered part of the substantive agreement of the parties. 22. Severability. The restrictions and the rights and remedies contained in this Agreement are cumulative and severable. If any term or provision of this Agreement shall to any extent be invalid or unenforceable, the remainder of this Agreement shall not be affected thereby, and each term and provision of this Agreement shall be enforced to the fullest extent permitted by law. 23. Costs of Breach. The parties hereto agree that in the event of any breach by either the Company or the Consultant of any covenant, agreement, term, condition or obligation contained in 16 17 this Agreement, the non-breaching party shall be entitled to all attorneys' fees, court costs and other litigation expenses incurred by the non-breaching party as a result of such breach. 24. Counterparts. This Agreement may be executed in counterparts, each of which shall be an original, but all of which shall together constitute but one document. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as of the day and year first written above. COMPANY: ATTEST: MICROS SYSTEMS, INC. By (SEAL) ------------------------- ----------------------- [Corporate Seal] WITNESS: CONSULTANT: /s/ LOUIS M. BROWN, JR. (SEAL) ------------------------- ------------------------- Louis M. Brown, Jr. 17 EX-10.G 5 EMPLOYMENT AGREEMENT BEWTEEN MICROS/COHEN 1 EXHIBIT 10g MANAGEMENT AGREEMENT BETWEEN THE UNDERSIGNED: (1) MICROS SYSTEMS, INC., a Maryland corporation having its principal office at 12000 Baltimore Avenue, Beltsville, MD 20705, U.S.A. (hereinafter referred to as "Micros"), AND (2) MR. DANIEL COHEN, a French citizen having his business address c/o DAC SYSTEMES Micros FRANCE, 18/20, rue des Bas Rogers, 92800 Puteaux, France (hereinafter referred to as the "Manager"). WHEREAS: Subject to the terms and conditions of the Share Purchase Agreement of even date between the Manager and Micros, Micros has agreed to acquire from the Manager 77% of the issued and outstanding shares of DAC SYSTEMES Micros FRANCE ("DSMF") and of AD-Maintenance Informatique ("ADMI"), French corporations controlled by the Manager (the "Change of Control"). DSMF in turn owns 725 out of 2,500 shares of Fidelio France, a French corporation ("Fidelio France"). DSMF, ADMI and Fidelio France are hereinafter collectively referred to as the "Companies." The Manager currently serves as the President-Directeur General (Chairman and Chief Executive Officer) of DSMF and Fidelio France, and the Gerant (Managing Director) of ADMI. Micros and the Manager wish to define the terms of the Manager's continued participation in the management of the Companies, which shall be subject to the terms and conditions of this Agreement. NOW THEREFORE, IT HAS BEEN AGREED AS FOLLOWS: ARTICLE 1 - MANAGEMENT 1.1 Following the Change of Control, the Manager shall continue to serve as the President-Directeur General (Chairman and Chief Executive Officer) of DSMF and Fidelio France, and the Gerant (Managing Director) of ADMI. 1.2 Subject to Articles 3 and 4 herein, Micros shall cause the Manager to be re-elected annually to the positions referred to in Article 1.1 above. 2 2 ARTICLE 2 - COMPENSATION AND EXPENSES 2.1 Micros shall cause the Manager to be compensated as Chairman and Chief Executive Officer of DSMF and Fidelio France and Managing Director of ADMI an aggregate amount equal to 7% of the Companies' Net Income Before Taxes (as hereinafter defined), plus six hundred thousand French francs (600,000 FF) per year. 2.2 For purposes of this Agreement, the term "Net Income Before Taxes" means the accounting post "Resultat Courant Avant Impots", as set forth in the audited accounts of each of the Companies (or their respective successors) for the fiscal years most recently concluded at the time that each of such additional payments is to be made, and as determined in accordance with generally accepted accounting principles in effect in the French Republic applied on a consistent basis. 2.3 The Manager is authorized to incur reasonable expenses in performing services under this Agreement and for promoting the business of Micros, including expenses for entertainment, travel and similar items, consistent with such policies as may from time to time be established by Micros. ARTICLE 3 - TERMINATION INDEMNITIES 3.1 Micros is free at any time in its sole discretion to cause the Manager to be dismissed from or not be re-elected to one or more of his posts as Chairman and Chief Executive Officer / Managing Director of the Companies. In such event, except for termination for the reasons provided in Article 3.3 below, Micros shall pay the Manager liquidated damages equivalent to one million French francs (1,000,000 FF) per year, pro rata temporis from the date such dismissal or non re-election occurs to the fifth anniversary of the Closing Date (as defined in Article 4.1 below). Thereafter, any dismissal or failure to re-elect shall continue to be at Micros' sole discretion without indemnities or any damages, liquidated or others, to the Manager. 3.2 The Manager is free at any time in his sole discretion to resign from his post as Chairman and Chief Executive Officer / General Manager of the Companies. In such event, no indemnities shall be due by either of the Parties hereto to the other. In such case, the obligations under Article 5 of this Agreement shall remain in effect as provided therein. 3.3 If Micros decides to terminate the Manager's employment for cause, this Agreement shall terminate and the Manager shall no longer be employed by Micros effective on the date Micros notifies the Manager of such termination. For purposes of this Agreement, the term "cause" shall mean any of the following: (i) the Manager has been convicted or pleaded guilty or no contest to any felony involving monies, securities or any other property; (ii) Micros proves that the Manager has committed a willful or grossly negligent act which causes material harm to Micros or any of its affiliates or subsidiaries; 3 3 (iii) Micros proves that the Manager has committed fraud or embezzlement affecting Micros or any of its property. Upon any termination pursuant to this Section 3.3, all rights of the Manager under this Agreement shall cease to be effective as the date of the termination, the Manager shall no longer be manager of Micros, and, to the extent permitted by law, the Manager shall have no right to receive any payments or benefits hereunder, including under Section 3.1 above. ARTICLE 4 - TERM 4.1 Subject to Article 4.2 below, this Agreement shall enter into effect upon the occurrence of the Change of Control (such date being hereinafter referred to as the "Closing Date"), and shall continue until the fifth anniversary of the Closing Date. 4.2 This Agreement shall automatically terminate upon the occurrence of either of the events referred to in Articles 3.1 and 3.2 above. The payment obligations of Micros pursuant to Article 3.1 shall survive such termination and remain subject to the terms of Article 5 as provided below. ARTICLE 5 - NON-COMPETITION / CONFIDENTIALITY 5.1 The Manager agrees and undertakes not to, either directly or indirectly, as an individual or under the veil of a company, manage or carry or otherwise conduct any business in competition with the business of DSMF and/or Fidelio France and/or ADMI during the term of this Agreement and for a period of two years from the moment at which he ceases to serve as the Chairman and Chief Executive Officer of DSMF and/or Fidelio France and/or the Gerant (Managing Director) of ADMI. 5.2 The Manager acknowledges that the services to be rendered by him are of a special, unique and extraordinary character and, in connection with such services, the Manager will have access to confidential information vital to Micros' and DSMF's and Fidelio France's businesses. By reason of this, the Manager consents and agrees that if the Manager breaches any of the provisions of this Section 5.2, Micros would sustain irreparable harm and, therefore, in addition to any other right or remedy available to Micros, Micros shall be entitled to an injunction restraining the Manager from committing or continuing any such breach. The Manager acknowledges that a violation of this Section 5.2 could not adequately be compensated by money, damages, and the Manager therefore agrees that the provisions of this Section 5.2 may be specifically enforced against the Manager in any court of competent jurisdiction, irrespective of the arbitration provisions contained herein. No bond or other security shall be required of Micros. Nothing herein shall be construed as prohibiting Micros from pursuing any other remedies available to Micros for such breach, including the recovery of damages from the Manager in accordance with Article 6 hereof. The provisions of this Section 5.2 shall survive the termination of this Agreement, irrespective of the reason therefor, for a period of five (5) years. 4 4 ARTICLE 6 - APPLICABLE LAW; ARBITRATION 6.1 This Agreement shall be governed by, and construed in accordance with, the laws of the state of New York, U.S.A., without giving effect to the conflict of laws principles thereof, and in accordance with the United States Arbitration Act, 9 U.S.C. Sections 1 et seq. 6.2 Any dispute, controversy or claim arising out of or relating to this contract, or the breach, termination or invalidity thereof, shall be finally settled by arbitration in accordance with the UNCITRAL Arbitration Rules as at present in force. The number of arbitrators shall be three. One arbitrator shall be appointed by each of the Parties hereto and the third by agreement of the aforesaid two arbitrators or, failing such agreement, the president of the arbitration tribunal shall be designated by the International Chamber of Commerce as appointing authority. ARTICLE 7 - RESIDENCY / LEAVE OF ABSENCE 7.1 Manager agrees to remain a legal resident of France during the term of this Agreement. 7.2 Micros agrees to allow Manager a period of up to three (3) consecutive months leave without pay during the term of this Agreement to attend a college or university level course of his choosing. ARTICLE 8 - MISCELLANEOUS 8.1 Any notices under this Agreement shall be deemed to be sufficiently given if hand-delivered in person and/or sent by telefax followed by certified airmail with return receipt requested addressed to the Parties at their respective addresses set forth at the head of this Agreement. Either Party may change its address for receipt of notices by notice duly given to the other Party. 8.2 Except as otherwise expressly provided herein, each of the Parties shall pay its own expenses resulting herefrom. 8.3 This Agreement shall be binding upon and inure to the benefit of the Parties and their respective successors and assigns, and all successors to Micros shall be jointly and severally liable for the obligations hereunder. 8.4 No change in, addition to, or waiver of the terms and provisions of this Agreement shall be binding unless approved in writing by the Parties. 8.5 If at any time any part, any article, or any part of such article of this Agreement is adjudged invalid, unenforceable or illegal by any court, public authority, governmental department or agency, or other forum, such adjudication shall not effect the remaining portions of this Agreement, and the Agreement shall be construed as if such invalid, enforceable or illegal provision had never been contained herein. 5 5 8.6 The descriptive words or phrases at the head of the various Articles of this Agreement are inserted only as a convenience and for reference and are in no way intended to be a part or this Agreement, or in any way define, limit or describe the scope or intent of the particular Article to which they refer. 8.7 Except as otherwise required by law, this Agreement shall be held in confidentiality by the Parties hereto. The nature and timing of any public announcements concerning the transactions contemplated in this Agreement shall be subject to prior agreement between the Parties. IN WITNESS WHEREOF, the Parties have signed this Agreement in 2 originals in the place and on the date set out below. Beltsville, Maryland, U.S.A. Date: August 25, 1995 DANIEL COHEN MICROS SYSTEMS, INC. /s/ Daniel Cohen By: /s/ Ronald J. Kolson ------------------------- ----------------------------------- Name: Ronald J. Kolson Title: Executive Vice President Witnessed by: Witnessed by: /s/ A. L. Giannopoulos /s/ Deana Angelastro ------------------------- ---------------------- Name: A. L. Giannopoulos Name: Deana Angelastro Title: President & CEO Title: Executive Assistant EX-11 6 STATEMENT REGARDING COMPUTATION PER SHARE/EARNINGS 1 EXHIBIT 11 - COMPUTATION OF EARNINGS PER SHARE MICROS SYSTEMS, INC. AND SUBSIDIARIES years ended June 30, 1995, 1994, and 1993
1995 1994 1993 ----------- ---------- ---------- Weighted-average number of common shares 7,835,147 7,734,667 7,554,223 Dilutive effect of outstanding stock options 116,446 175,952 252,550 ----------- ---------- ---------- Weighted-average number of common and common equivalent shares outstanding 7,951,593 7,910,619 7,806,773 =========== ========== ========== Net income $11,576,800 $8,687,300 $5,759,900 =========== ========== ========== Net income per common and common equivalent share $ 1.46 $ 1.10 $ 0.74 =========== ========== ==========
-49- EX-21 7 SUBSIDIARIES OF THE COMPANY 1 EXHIBIT 21 - SUBSIDIARIES MICROS SYSTEMS, INC. AND SUBSIDIARIES
Jurisdiction of Name of Subsidiary Incorporation ------------------ ------------- Fidelio France S.A. France Fidelio Software Delaware Corporation Fidelio Software U.K. England & Wales Limited MICROS of Delaware, Inc. Delaware MICROS Foreign Sales Barbados Corporation MICROS of South Florida, Inc. Maryland MICROS Systems AG Switzerland (Ltd.) MICROS Systems Federal Republic Deutschland GmbH of Germany MICROS Systems Hispania Spain MICROS Systems Holdings Federal Republic GmbH of Germany MICROS Systems (U.K.) United Kingdom Ltd. MICROS Systems Services Federal Republic GmbH of Germany MSI Delaware, Inc. Delaware
The Company has additional subsidiaries, which considered in the aggregate as a single subsidiary, do not constitute a significant subsidiary. -50- EX-23 8 CONSENT OF INDEPENDENT ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We hereby consent to the incorporation by reference in the Registration Statements on Forms S-8 (No. 33-69782, No. 33-44481 and No. 33-33535) and in the Prospectus constituting part of the Registration Statement on Form S-3 (No. 33-88768) of MICROS Systems, Inc. of our report dated August 21, 1995, appearing on page 39 of this Form 10-K. Price Waterhouse LLP Baltimore, Maryland August 21, 1995 EX-24 9 POWER OF ATTORNEY 1 EXHIBIT 24 MICROS SYSTEMS, INC. 12000 BALTIMORE AVENUE BELTSVILLE, MD 20705 POWER OF ATTORNEY The undersigned, acting in the capacity or capacities with respect to MICROS Systems, Inc. stated with their respective names below, hereby constitute and appoint JOHN T. CONNOR, JR., RONALD J. KOLSON and GARY C. KAUFMAN, and each of them severally, the attorneys-in-fact of the undersigned with full power to them and each of them to sign for and in the name of the undersigned in the capacities indicated below the Annual Report of MICROS Systems, Inc. on Form 10-K for fiscal year 1995 and (b) any and all amendments and supplements thereto; NAME TITLE /s/ LOUIS M. BROWN, JR. Director and Chairman of the Board ---------------------------------- Louis M. Brown, Jr. /s/ A.L. GIANNOPOULOS Director, President and Chief ---------------------------------- Executive Officer A.L. Giannopoulos /s/ DANIEL A. COHEN Director ---------------------------------- Daniel A. Cohen /s/ CLAUDIA E. MORF Director ---------------------------------- Claudia E. Morf /s/ FREDRIC G. REYNOLDS Director ---------------------------------- Fredric G. Reynolds /s/ ALAN M. VOORHEES Director ---------------------------------- Alan M. Voorhees /s/ EDWARD T. WILSON Director ---------------------------------- Edward T. Wilson EX-27 10 FINANCIAL DATA SCHEDULE
5 THIS FINANCIAL DATA SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONDENSED CONSOLIDATED BALANCE SHEET AND RELATED STATEMENT OF INCOME AS OF JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. YEAR JUN-30-1995 JUN-30-1995 1,881,100 24,504,300 26,414,100 1,229,200 11,343,500 66,624,200 17,512,200 7,350,400 89,643,700 29,594,800 5,250,900 196,500 0 0 53,253,700 89,643,700 85,928,800 112,020,700 44,513,100 50,965,500 0 0 368,800 17,675,100 6,175,000 11,576,800 0 0 0 11,576,800 1.46 1.46