As filed with the Securities and Exchange Commission
On March 29, 1996
Registration No.333-00907
_________________________________________________________________
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
Amendment No. 1
to
FORM S-4A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
STRUCTURAL DYNAMICS RESEARCH CORPORATION
(Exact name of registrant as specified in its charter)
Ohio 31-0733928
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
7372
(Primary Standard Industrial Classification Code Number)
2000 Eastman Drive, Milford, Ohio 45150
(513) 576-2400
(Address, including Zip Code, and telephone number, including area
code, of registrant's principal executive offices)
John A. Mongelluzzo, Esq.
Vice President, Secretary and General Counsel
Structural Dynamics Research Corporation
2000 Eastman Drive
Milford, Ohio 45150
(513) 576-2400
(Name, address, including Zip Code and telephone
number, including area code, of agent for service)
Copy to:
Charles F. Hertlein, Jr., Esq. David J. Lubben, Esq.
Dinsmore & Shohl Dorsey & Whitney, LLP
1900 Chemed Center Pillsbury Center South
255 East Fifth Street 220 South Sixth Street
Cincinnati, Ohio 45202 Minneapolis, Minnesota 55402
Telephone: 513-977-8315 Telephone: 612-340-2904
Telecopy: 513-977-8141 Telecopy: 612-340-8738
Approximate date of commencement of proposed sale of the securities
to the public:
As soon as practicable after this Registration Statement becomes
effective.
If any of the securities being offered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under
the Securities Act of 1933, check the following box: ___X___
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is
compliance with General Instruction G, check the following box. ____
<PAGE>
<TABLE>
CALCULATION OF REGISTRATION FEE
<CAPTION>
Title of Amount to be Proposed Proposed Amount of
each class Registered* Maximum Maximum Registration
of securities Registered Offering Aggregate Fee
to be Price Per Offering
registered Unit Price
<S> <C> <C> <C> <C>
___________________________________________________________________
Common Stock, 2,000,000 $15.00 $30,000,000 $10,345**
no par value
<FN>
* Pursuant to Rule 457(a) of the Securities Act of 1933, the amount
to be registered represents the estimated number of shares based
upon a bona fide estimate of the maximum offering price of the
shares of the Registrant's Common Stock to be issued in the Merger.
** Previously paid.
</FN>
</TABLE>
The Registrant hereby amends this Registration Statement on such
date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically
states that this Registration Statement shall thereafter become
effective in accordance with Section 8(a) of the Securities Act of
1933, as amended, or until this Registration Statement shall become
effective on such date as the Securities and Exchange Commission,
acting pursuant to said Section 8(a), may determine.<PAGE>
STRUCTURAL DYNAMICS RESEARCH CORPORATION
Cross Reference Sheet Required by Item 501(b) of Regulation S-K
CAPTION - CAPTION IN PROSPECTUS
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of the Registration Statement and Outside Front Cover
Page of Prospectus - Facing Page; Notice of Special Meeting
2. Inside Front and Outside Back Cover Pages of Prospectus -
Available Information; Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and Other
Information - Summary of the Proxy Statement/Prospectus; Voting and
Proxies; Comparative Per Share Data
4. Terms of the Transaction - Summary of the Proxy
Statement/Prospectus; Terms and Conditions of the Proposed Merger;
Description of Capital Stock; Comparison of Rights of Shareholders
5. Proforma Financial Information - Proforma Financial Statements
6. Materials Contracts with the Company Being Acquired - Not
Applicable
7. Additional Information Required for Reoffering by Persons and
Parties Deemed to be Underwriters - Not Applicable.
8. Interests of Named Experts and Counsel - Legal Matters
9. Disclosure of Commission Position on Indemnification for
Securities Act Liabilities - Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants - Structural
Dynamics Research Corporation; Selected Historical Financial Data of
SDRC; Description of Capital Stock; Comparison of Rights of
Shareholders; Proforma Financial Statements
11. Incorporation of Certain Information by Reference -
Incorporation of Certain Documents by Reference; Available
Information; Description of Capital Stock
12. Information with Respect to S-2 or S-3 Registrants - Not
Applicable
13. Incorporation of Certain Information by Reference - Not
Applicable
14. Information With Respect to Registrants Other Than S-2 or S-3
Registrants - Not Applicable.
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies - Not Applicable
16. Information with Respect to S-2 or S-3 Companies - Not
Applicable
17. Information with Respect to Companies Other Than S-2 or S-3
Companies - CAMAX Manufacturing Technologies, Inc.; Selected
Historical Financial Data of CAMAX; Description of Capital Stock;
Comparison of Rights of Shareholders; Proforma Financial Statements;
Certain Transactions; Management's Discussion and Analysis of
CAMAX's Financial Condition and Results of Operations; CAMAX
Financial Statements.
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations Are to Be
Solicited - Summary of the Proxy Statement/Prospectus; Terms and
Conditions of the Proposed Merger; General Information;
Incorporation of Certain Documents by Reference; CAMAX Manufacturing
Technologies, Inc.; CAMAX Manufacturing Technologies, Inc. Board of
Directors.
19. Information if Proxies, Consents or Authorizations Are Not To
Be Solicited or in an Exchange Offer - Not Applicable.
CAMAX MANUFACTURING TECHNOLOGIES, INC.
7851 Metro Parkway
Minneapolis, Minnesota 554425
Dear Shareholder:
A Special Meeting of Shareholders (the "Special Meeting") of
CAMAX Manufacturing Technologies, Inc. ("CAMAX") will be held at
CAMAX's headquarters at 7851 Metro Parkway, Minneapolis, Minnesota
55425 on _________, May __, 1996, at ____ a.m.
At the Special Meeting, you will be asked to consider and vote upon
the adoption of an Agreement of Merger and Plan of Reorganization
dated January 16, 1996 (the "Merger Agreement"), by and among CAMAX,
Structural Dynamics Research Corporation ("SDRC") and SDRC Systems,
Inc. ("Acquisition Corp.") and the merger of CAMAX with and into the
Acquisition Corp. (the "Merger").
Pursuant to the Merger Agreement, upon consummation of the Merger,
all outstanding shares of capital stock of CAMAX will be converted
into that number of shares of SDRC Common Stock having a value equal
to $30 million. Following consummation of the Merger, assuming
exercise of all outstanding options to purchase CAMAX Common Stock,
CAMAX shareholders immediately prior to the Merger will hold
approximately ___% of the outstanding capital stock of SDRC, the
parent corporation of Acquisition Corp.
Approval of the Merger and the Merger Agreement will constitute
approval of an amendment to Acquisition Corp.'s Articles of
Incorporation to change the name of the corporation to CAMAX
Manufacturing Technologies, Inc., an Ohio corporation.
CAMAX's Board of Directors has unanimously approved the Merger and
the Merger Agreement and has determined that they are fair to, and
in the best interests of, CAMAX and its shareholders. The Board of
Directors recommends a vote FOR the Merger and the Merger Agreement.
In the material accompanying this letter, you will find a Notice of
Special Meeting of Shareholders, a Proxy Statement/Prospectus
relating to the actions to be taken at the Special Meeting and a
proxy card. The Proxy Statement/Prospectus provides more detailed
information regarding the proposed Merger and related matters,
includes information about CAMAX, SDRC and the Acquisition Corp. and
discusses the Board of Directors' reasons for recommending the
Merger.
ALL SHAREHOLDERS ARE INVITED TO ATTEND THE SPECIAL MEETING IN
PERSON. HOWEVER, WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL
MEETING, PLEASE COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE
ENCLOSED ENVELOPE. IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE
IN PERSON IF YOU WISH, EVEN THOUGH YOU HAVE PREVIOUSLY RETURNED YOUR
PROXY. IT IS IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT
THE SPECIAL MEETING.
April __, 1996
Sincerely,
Robert J. Majteles,
President and Chief Executive Officer
If you have any questions or need any help in voting your shares,
please telephone Gregory S. Furness, Secretary at CAMAX, (612) 854-5300.
<PAGE>
CAMAX MANUFACTURING TECHNOLOGIES, INC.
7851 Metro Parkway
Minneapolis, Minnesota 55425
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On May ___, 1996
TO THE SHAREHOLDERS OF CAMAX:
NOTICE IS HEREBY GIVEN that a special meeting of the shareholders
(the "Special Meeting") of CAMAX Manufacturing Technologies, Inc.,
a Minnesota corporation ("CAMAX"), will be held on May __, 1996, at
___ o'clock a.m. at CAMAX's headquarters at 7851 Metro Parkway,
Minneapolis, Minnesota 55425.
A Proxy Card and Proxy Statement/Prospectus for the Special Meeting
are enclosed.
The Special Meeting is for the purpose of considering and acting
upon:
1. The adoption of an Agreement of Merger and Plan of
Reorganization dated January 16, 1996 (the "Merger Agreement"), by
and among CAMAX, Structural Dynamics Research Corporation, an Ohio
corporation ("SDRC"), and SDRC Systems, Inc., an Ohio corporation
("Acquisition Corp."), and the merger of CAMAX with and into
Acquisition Corp. (the "Merger"); and
2. Such other business as may properly come before the meeting.
The Merger is more fully described in, and the Merger Agreement is
attached in its entirety to, the Proxy Statement/Prospectus
accompanying this Notice.
Only the shareholders of record at the close of business on March
__, 1996 (the "Record Date") are entitled to notice of, and to vote
at, the Special Meeting or at any postponement(s) or adjournment(s)
thereof.
Approval of the Merger and the Merger Agreement will require the
affirmative vote of the holders of a majority of the shares of CAMAX
Common Stock outstanding on the Record Date. If the Merger is
consummated, shareholders of CAMAX who do not vote in favor of the
Merger and the Merger Agreement and who otherwise comply with
Sections 302A.471 and 302A.473 of the Minnesota Business Corporation
Act will be entitled to statutory dissenters' appraisal rights.
IMPORTANT
WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING, PLEASE
COMPLETE, SIGN, DATE AND RETURN YOUR PROXY IN THE ENCLOSED ENVELOPE.
IF YOU ATTEND THE SPECIAL MEETING, YOU MAY VOTE IN PERSON IF YOU
WISH, EVEN THOUGH YOU HAVE PREVIOUSLY RETURNED YOUR PROXY. IT IS
IMPORTANT THAT YOUR SHARES BE REPRESENTED AND VOTED AT THE SPECIAL
MEETING.
April __, 1996
By Order of the Board of Directors,
Gregory S. Furness
Secretary
<PAGE>
CAMAX MANUFACTURING STRUCTURAL DYNAMICS
TECHNOLOGIES, INC. RESEARCH CORPORATION
7851 Metro Parkway 2000 Eastman Drive
Minneapolis, Minnesota 55425 Milford, Ohio 45150
(612) 854-5300 (513) 576-2400
PROXY STATEMENT/PROSPECTUS
This Proxy Statement of CAMAX Manufacturing Technologies, Inc.,
a Minnesota corporation ("CAMAX"), and Prospectus of Structural
Dynamics Research Corporation, an Ohio corporation ("SDRC"), (the
"Proxy Statement/Prospectus") is being furnished to the shareholders
of CAMAX in connection with the solicitation of proxies by the Board
of Directors of CAMAX for use at a special meeting of shareholders
to be held on May ___, 1996 (the "Special Meeting").
This Proxy Statement/Prospectus also constitutes a prospectus of
SDRC in respect of up to 2 million shares of the common stock of
SDRC, no par value ("SDRC Common Stock") to be issued in connection
with the proposed Merger (as defined herein).
The SDRC Common Stock offered hereby involves a certain degree of
risk. See "Risk Factors" beginning on Page 24.
At the Special Meeting, holders of shares of CAMAX common stock, no
par value ("CAMAX Common Stock"), will be asked to adopt an
Agreement of Merger and Plan of Reorganization dated as of January
16, 1996 by and among CAMAX, SDRC and SDRC Systems, Inc.
("Acquisition Corp.") (the "Merger Agreement"). Pursuant to the
Merger Agreement, CAMAX will merge with and into Acquisition Corp.
(the "Merger"), and the Articles of Incorporation of Acquisition
Corp. will be amended to change the name of Acquisition Corp. to
CAMAX Manufacturing Technologies, Inc. At the time the Merger
becomes effective, the CAMAX shareholders will receive, in the
aggregate, shares of SDRC Common Stock, having a total value of $30
million (the "Total Value") in exchange for all of the shares of
CAMAX Common Stock issued and outstanding on the effective date of
the Merger (the "Effective Date"). The total number of shares of
SDRC Common Stock to be issued in the Merger shall be determined by
dividing the Total Value by the Applicable Market Value Per Share of
SDRC Common Stock. The "Applicable Market Value Per Share of SDRC
Common Stock" will be the average of the per share closing price of
SDRC Common Stock as reported on the Nasdaq National Market for the
twenty trading days ending on the fifth trading day prior to the
Effective Date.
Ten percent of the total shares to be issued to the CAMAX
shareholders in the Merger will be placed in escrow at the Effective
Date until the earlier of the date SDRC files with the Commission
its Report on Form 10-K for the year ended December 31, 1996 or the
first anniversary of the Effective Date, which shares SDRC will have
the right to redeem pursuant to the indemnification obligations of
CAMAX set forth in the Merger Agreement. However, because such
retained shares are subject to redemption for claims for
indemnification by SDRC, there can be no assurance that at the
expiration of the Retention Period (as defined below) there will be
any retained shares remaining for distribution to CAMAX
shareholders.
Each CAMAX shareholder will receive that number of shares of SDRC
Common Stock to be issued in the Merger (less the number of shares
to be retained under the Merger Agreement) which represents each
shareholder's pro rata percentage of the CAMAX Common Stock owned
immediately prior to the Merger. Only whole shares of SDRC Common
Stock will be issued in connection with the Merger. No fractional
shares will be issued. Any shareholder otherwise entitled to
receive a fractional share will receive cash in lieu thereof based
upon the Applicable Market Value Per Share of SDRC Common Stock,
determined as provided above.
The SDRC Common Stock is quoted on the Nasdaq National Market.
The closing sales price of SDRC Common Stock reported on NASDAQ on
March ____, 1996 was $_________ per share. The market price over
the 52-week period ended _________, 1996 has ranged from a low of
$________ to a high of $_______. Based on the range of per share
closing prices of SDRC Common Stock over the 52-week period ended
______________, 1996, the CAMAX shareholders could receive in the
Merger in the aggregate from __________ shares to ______ shares of
SDRC Common Stock. If the Merger had been consummated on _________,
1996, the CAMAX shareholders would have received a total of
___________ shares of SDRC Common Stock, of which _________ shares
would have been placed in escrow pursuant to the Merger Agreement.
As of April ________, 1996, a total of ________ shares of CAMAX
Common Stock were outstanding. Based on that amount (which is
subject to change prior to Closing), the number of shares of SDRC
Common Stock issuable in the Merger with respect to each outstanding
share of CAMAX Common Stock could vary from ________ to __________
based on the range of SDRC market prices and would have been _____
shares of SDRC Common Stock had the Merger closed on ________,
1996.
Under the rules and regulations of the Securities and Exchange
Commission (the "Commission"), the solicitation of CAMAX's
shareholders to approve the Merger constitutes an offering of SDRC
Common Stock to be issued in connection with the Merger.
Accordingly, SDRC has filed with the Commission a Registration
Statement on Form S-4 under the Securities Act of 1933, as amended
(the "Securities Act"), with respect to such offering, and this
Proxy Statement/Prospectus does not contain all of the information
set forth in such Registration Statement, certain parts of which are
omitted in accordance with the rules and regulations of the
Commission.
This Proxy Statement/Prospectus shall not constitute a prospectus
for public reoffering of the SDRC Common Stock issuable pursuant to
the Merger.
THE SECURITIES OF SDRC TO BE ISSUED IN THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR
ANY STATE SECURITIES COMMISSION, NOR HAS THE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY STATEMENT/PROSPECTUS, ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is _______________,
1996.
<PAGE>
AVAILABLE INFORMATION
This Proxy Statement/Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. See
"INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE." These documents
(excluding exhibits unless specifically incorporated therein) are
available without charge upon written or oral request to John A.
Mongelluzzo, Vice President, Secretary and General Counsel,
Structural Dynamics Research Corporation, 2000 Eastman Drive,
Milford, Ohio 45150 (telephone number: (513) 576-2400) with respect
to documents concerning SDRC. In order to ensure timely delivery of
the documents, any request should be made by
, 1996.
No person has been authorized to give any information or to make any
representation in connection with this offering other than those
contained in this Proxy Statement/Prospectus, and, if given or made,
such information or representation must not be relied upon as having
been authorized by SDRC or CAMAX. This Proxy Statement/Prospectus
shall not constitute an offer to sell or a solicitation of an offer
to buy any securities in any jurisdiction in which it would be
unlawful to make such an offer or solicitation. Neither the
delivery of this Proxy Statement/Prospectus at any time, nor any
offer or solicitation made hereunder, shall under any circumstances
imply that the information set forth herein or incorporated herein
is correct as of any time subsequent to its date.
SDRC is subject to the information requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith, files reports, proxy statements and other
information with the Commission. Reports, proxy statements and
other information filed by SDRC can be inspected and copied at Room
1024 of the Offices of the Commission at 450 Fifth Street, N. W.,
Washington, D.C. 20549, and at the Commission's Regional Offices in
New York (7 World Trade Center, 13th Floor, New York, New York
10048) and Chicago (Northwestern Atrium Center, 500 West Madison
Street, Suite 1400, Chicago, Illinois 60661-2511), and copies of
such material can be obtained from the Public Reference Section of
the Commission, 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates.
SDRC Common Stock is traded in the over-the-counter market and
quoted on the Nasdaq National Market under the symbol "SDRC."
Documents filed by SDRC with the Commission can also be inspected at
the offices of the National Association of Securities Dealers, Inc.,
1735 K Street, N.W., Washington, D.C. 20006.
All information contained in this Proxy Statement/Prospectus with
respect to CAMAX was supplied by CAMAX and all information contained
or incorporated in this Proxy Statement/Prospectus with respect to
SDRC was supplied by SDRC.
Although neither CAMAX nor SDRC has any knowledge that would
indicate that any statements or information relating to the other
party contained herein is inaccurate or incomplete, neither CAMAX
nor SDRC can warrant the accuracy or completeness of such statements
or information as they relate to the other party.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents are hereby incorporated into this Proxy
Statement/Prospectus by reference.
(a) SDRC's Annual Report on Form 10-K for the year ended December
31, 1995;
(b) Pages 18-40 of SDRC's 1995 Annual Report to Shareholders;
(c) SDRC's Proxy Statement dated March 26, 1996;
(d) SDRC's Quarterly Reports on Form 10-Q for the periods ended
March 30, 1995, June 30, 1995, and September 30, 1995; and
(e) The description of SDRC's Common Stock contained in SDRC's
Registration Statement on Form 8-A filed with the Commission on
September 18, 1987.
In addition, all documents subsequently filed with the Commission
by SDRC pursuant to Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act prior to the date the offering is terminated are
incorporated herein by reference. Any statement contained in a
document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of
this Proxy Statement/Prospectus to the extent that a statement
contained herein (or in any other subsequently filed document which
also is deemed to be incorporated by reference herein) modifies or
supersedes such statement. Any statement so modified or superseded
shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement/Prospectus.
<PAGE>
TABLE OF CONTENTS
AVAILABLE INFORMATION
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
RISK FACTORS
MARKET PRICE FOR COMMON STOCK
SELECTED HISTORICAL AND PROFORMA CONSOLIDATED FINANCIAL DATA
COMPARATIVE PER SHARE DATA
VOTING AND PROXIES
Date, Time and Place of Special Meeting of Shareholders
Proposal to Merge CAMAX into Acquisition Corp.
Record Date and Outstanding Shares
Voting and Revocability of Proxies
Shareholder Votes Required
Solicitation of Proxies; Expenses
MARKET PRICE AND DIVIDEND DATA
TERMS AND CONDITIONS OF THE PROPOSED MERGER
Background and Reasons for the Merger
Effective Date
Conversion of Shares of CAMAX Common Stock
Exchange Ratio
Indemnification
Retention of Shares and Redemption by SDRC
Escrow Agreement
Stock Options and Stock Ownership Plans
No Fractional Shares
Exchange of Certificates
Federal Income Tax Consequences
Accounting Treatment
Stock Exchange Listing
Regulatory Approvals
Limitations on Negotiations by CAMAX
Rights of Dissenting Shareholders
Conduct Pending Merger; Representations and Warranties
Conditions to Closing
Amendment; Termination
Effect on CAMAX Employees
Interests of Certain Persons in the Merger
CAMAX's Financial Advisors
Opinion of Wessels, Arnold & Henderson
Effects of Merger
RESALE OF SDRC COMMON STOCK ISSUED IN THE MERGER
STRUCTURAL DYNAMICS RESEARCH CORPORATION
Description of Business
Software Products and Services
Legal Proceedings
CAMAX MANUFACTURING TECHNOLOGIES, INC.
The CAD/CAM Industry
Recent Developments
CAMAX Products
CAMAX Market and Customers
Competition
Marketing and Sales
Customer Support Services
Sources of Supply
Copyrights, Trade Secrets and Trademarks
Employees
Property
Legal Proceedings
Principal Shareholders of CAMAX
Management of CAMAX
Employment Agreement
Stock Plans
PROFORMA FINANCIAL STATEMENTS
DESCRIPTION OF CAPITAL STOCK
COMPARISON OF SHAREHOLDER RIGHTS
Voting Rights
Shareholders' Dissenters' Rights
Board of Directors
Removal of Directors
Amendments to Bylaws
Amendments to Articles
Dividends
Indemnification and Personal Liability of Directors and Officers
Shareholder Right to Inspect
Shareholder Meetings
Fair Price Requirement for Takeover Offers
Mergers and Consolidations
Business Combinations
Other Anti-Takeover Provisions
CERTAIN TRANSACTIONS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CAMAX'S FINANCIALCONDITION
AND RESULTS OF OPERATIONS
LEGAL MATTERS
EXPERTS
OTHER MATTERS
INDEX TO CAMAX CONSOLIDATED FINANCIAL STATEMENTS
* * *
Annex A: Agreement of Merger and Plan of Reorganization dated as of
January 16, 1996 by and among CAMAX Manufacturing Technologies,
Inc., Structural Dynamics Research Corporation and SDRC Systems,
Inc.
Annex B: Fairness Opinion of Wessels, Arnold & Henderson, L.L.C.
Annex C: Dissenters' Rights Statute (Sections 302A.471 and 302A.473
of the Minnesota Business Corporation Act)
Annex D: Form of Escrow Agreement by and among CAMAX, SDRC,
Terrence W. Glarner, Raymond A. Lipkin and First Trust National
Association<PAGE>
SUMMARY OF THE PROXY STATEMENT/PROSPECTUS
The following is a summary of certain information contained
elsewhere in this Proxy Statement/Prospectus and the documents
incorporated herein by reference. This is not intended to be a
summary of all information relating to the Merger and is qualified
in its entirety by reference to the more detailed information
contained elsewhere in this Proxy Statement/Prospectus, including
the Annexes hereto, and the documents incorporated by reference in
this Proxy Statement/Prospectus.
Introduction:
The Boards of Directors of CAMAX and SDRC have each unanimously
approved the Agreement of Merger and Plan of Reorganization dated as
of January 16, 1996 (the "Merger Agreement") pursuant to which CAMAX
will be merged with and into Acquisition Corp., a wholly-owned
subsidiary of SDRC, if the shareholders of CAMAX approve the Merger
by the requisite shareholder vote and certain other conditions are
satisfied. The CAMAX Board of Directors, at meetings held on
January 13, and January 16, 1996, at which all directors were
present, determined that the Merger is fair to and in the best
interests of CAMAX and its shareholders and unanimously approved the
Merger Agreement and unanimously resolved to recommend that the
shareholders of CAMAX vote for the adoption of the Merger and Merger
Agreement. In connection with this decision, the CAMAX Board of
Directors received advice from CAMAX management, Deloitte & Touche
LLP, its accounting advisor, Wessels, Arnold & Henderson, LLC
("WA&H"), its financial advisor, and Dorsey & Whitney, LLP, its
legal advisor.
At the January 13, 1996 meeting, WA&H rendered to the CAMAX Board
of Directors its oral opinion (subsequently confirmed in writing at
the January 16, 1996 meeting) that as of January 16, 1996 and based
on the procedures followed, factors considered and assumptions made
by WA&H, the consideration to be received by the holders of CAMAX
Common Stock pursuant to the Merger Agreement is fair from a
financial point of view to the holders of Camax Common Stock. See
"TERMS AND CONDITIONS OF THE PROPOSED MERGER - Background and
Reasons for the Merger."
On January 16, 1996 the SDRC Board of Directors met and
unanimously approved the Merger and Merger Agreement. The SDRC
Board of Directors relied upon the advice of its management, Price
Waterhouse LLP, its accounting advisor, and Dinsmore & Shohl, its
legal advisor, to make the determination to approve the Merger and
Merger Agreement. SDRC did not retain an outside financial advisor
for this transaction.
Parties to the Transaction:
SDRC: SDRC, an Ohio corporation, is a leading international
supplier of mechanical design automation software, product data
management software and related services. SDRC's products and
services help manufacturers optimize product concepts early in the
design process, enabling them to significantly improve product
quality while reducing product development time and cost. At
December 31, 1995, SDRC had consolidated assets, liabilities and
shareholders' equity of approximately $193.5 million, $116.1 million
and $77.4 million, respectively. SDRC's voting stock is traded over-the-counter
and is listed on the Nasdaq National Market under the
symbol "SDRC." SDRC's principal executive offices are located at
2000 Eastman Drive, Milford, Ohio 45150, and its telephone number is
(513) 576-2400.
Acquisition Corp.: SDRC Systems, Inc., an Ohio corporation, was
formed on April 20, 1970, is a wholly-owned subsidiary of SDRC and
is currently inactive.
CAMAX: CAMAX is the world's largest company focused exclusively on
the development and support of computer aided manufacturing ("CAM")
software for computerized numerical control ("NC" or "CNC")
applications. CAMAX develops and markets software designed to
enhance the craftsmanship of its customers, increase the speed of
manufacturing and lower the cost of NC processes. CAMAX originated
as a division of National Computer Systems, Inc. in 1977 and was
incorporated in Minnesota as CompuTool Corporation in August 1981.
In May 1983, CAMAX changed its name to CAMAX Systems, Inc. In
December 1994, CAMAX changed its name to CAMAX Manufacturing
Technologies, Inc. Point Control Co., an Oregon corporation, is a
wholly-owned subsidiary of CAMAX. Point Control Co. and the other
subsidiaries of CAMAX are collectively defined herein as
"Subsidiaries." CAMAX's headquarters are located at 7851 Metro
Parkway, Minneapolis, Minnesota 55425, and its telephone number is
(612) 854-5300.
Special Meeting of CAMAX Shareholders:
Time and Date: ___a.m., Central Standard Time, on May __, 1996.
Place: CAMAX's headquarters at 7851 Metro Parkway, Minneapolis,
Minnesota 55425
Purpose: To consider and vote upon a proposal to approve and adopt
the Merger and the Merger Agreement which provides for the Merger of
CAMAX with and into Acquisition Corp. Pursuant to the Merger
Agreement, CAMAX's shareholders will receive shares of SDRC Common
Stock in exchange for shares of CAMAX Common Stock. A copy of the
Merger Agreement is attached hereto as Annex A and is incorporated
herein by reference. See "VOTING AND PROXIES - Proposal to Merge
CAMAX into the Acquisition Corp."
Record Date; Shares Entitled to Vote: Holders of record of
shares of CAMAX Common Stock outstanding at the close of business on
April __, 1996 (the "Record Date"), are entitled to notice of and to
vote at the Special Meeting. At that date, __________ shares of
CAMAX Common Stock were outstanding, each of which will be entitled
to one vote on each matter to be acted upon or which may properly
come before the Special Meeting. See "VOTING AND PROXIES - Record
Date and Outstanding Shares."
A list of shareholders entitled to vote at the Special Meeting may
be examined at the offices of CAMAX, 7851 Metro Parkway,
Minneapolis, Minnesota 55425, during the 20 day period preceding the
Special Meeting.
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Votes Required; Quorum: The adoption of the Merger and the Merger
Agreement by the shareholders of CAMAX will require the affirmative
vote of the holders of a majority of the shares of CAMAX Common
Stock outstanding on the Record Date. The presence, in person or by
properly executed proxy, of the holders of a majority of the
outstanding shares of CAMAX Common Stock entitled to vote at the
Special Meeting is necessary to constitute a quorum at the Special
Meeting. The officers and directors of CAMAX, who own in the
aggregate _____ shares of CAMAX Common Stock (or approximately __%
of the outstanding CAMAX Common Stock as of the Record Date), have
indicated that they intend to vote all such shares for adoption of
the Merger and the Merger Agreement. See "VOTING AND PROXIES -
Shareholder Votes Required," "- Record Date and Outstanding Shares"
and "- Voting and Revocability of Proxies."
CAMAX Accountants: CAMAX's principal accountants for the current
year, Deloitte & Touche LLP, are expected to be present at the
Special Meeting, will have an opportunity to make a statement if
they desire to do so and are expected to be available to respond to
appropriate questions.
Beneficial Ownership by Officers and Directors: As of the close of
business on _____________________, 1996, the executive officers and
directors of CAMAX and their affiliates beneficially owned _____
shares, or approximately __________%, of the outstanding shares of
CAMAX Common Stock. This figure includes options for the purchase
of shares of CAMAX Common Stock which were exercisable on that date.
See "CAMAX MANUFACTURING TECHNOLOGIES, INC. - Principal Shareholders
of CAMAX."
Background of the Merger:
Early in 1995, management of CAMAX embarked on an aggressive
strategic planning effort to ensure that CAMAX would be in a
position to assert its computer-aided manufacturing ("CAM")
leadership in the computer-aided design/computer-aided manufacturing
industry and bring change and improvement to such industry.
Management of CAMAX determined that it needed a partner to reach its
goal of being the CAM leader in the industry and believed that the
solutions for success in the mechanical engineering marketplace
would be to possess technical expertise in certain key areas:
computer-aided design ("CAD"), CAM, computer-aided engineering
("CAE") and product data management ("PDM").
SDRC, consistent with its strategic objective of becoming the
leading world-wide supplier of team engineering solutions that
encompass CAD, CAM, CAE and PDM, early in 1995 initiated an in-depth
evaluation of the CAM segment of the mechanical design automation
industry for the purpose of assessing the CAM industry. From this
in-depth strategic analysis, SDRC determined that a cornerstone of
its long-term strategy would be to offer concurrent engineering
solutions with balanced strength in CAD, CAM, CAE and PDM.
Recognizing the opportunities to further strengthen and expand its
CAM offering, SDRC began to look at ways to improve its position in
the CAM industry. SDRC evaluated the various competitors in the CAM
market and found that CAMAX was the company that most closely met
its ideal profile.
On July 26, 1995, management of CAMAX and Wayne McClelland, Vice
President-Product Management-I-DEAS, of SDRC, met in Minneapolis,
Minnesota and reviewed the architecture of CAMAX's products and
discussed CAMAX's business operations in general. On August 3, and
August 4, 1995, Robert J. Majteles, the Chief Executive Officer of
CAMAX, Al Peter, the Chief Executive Officer of SDRC, and Mr.
McClelland met at SDRC's headquarters in Milford, Ohio and discussed
SDRC's products and business as well as SDRC's product architecture.
On August 10, 1995, Messrs. Peter and McClelland traveled to
Minneapolis, Minnesota and met with Mr. Majteles to discuss CAMAX's
products and business in greater detail. Messrs. Majteles and
McClelland had a telephone conference on August 22, 1995 during
which they discussed a potential purchase by CAMAX of all of SDRC's
CAM assets and possible joint ventures. On August 24, 1995, Mr.
McClelland met with Mr. Majteles and Thomas A. Greene, CAMAX's Vice
President-Engineering, in Minneapolis, Minnesota to further discuss
potential asset acquisitions and joint ventures. On September 19,
1995, Messrs. McClelland, Majteles and Greene had a telephone
conference during which it was decided to terminate negotiations
regarding (i) CAMAX's purchase of SDRC's assets, and (ii) a possible
joint venture between CAMAX and SDRC. On October 9 and October 10,
1995 at SDRC's headquarters in Milford, Ohio, Messrs. Peter,
McClelland and Majteles discussed a proposal for SDRC to acquire
CAMAX. On October 20, 1995, the CAMAX executive team met in
Minneapolis, Minnesota to discuss a potential acquisition of CAMAX
by SDRC. On October 23, 1995, SDRC made an offer to acquire all of
the capital stock of CAMAX in exchange for $20 million of SDRC
Common Stock. At its regularly scheduled meeting on October 27,
1995, the Board of Directors of CAMAX considered SDRC's offer to
acquire CAMAX. At the October 27 board meeting, management of CAMAX
summarized its opinions regarding the SDRC offer and discussed with
the Board of Directors the relevant terms of the SDRC offer. The
Board of Directors of CAMAX rejected SDRC's $20 million offer for
CAMAX and directed management of CAMAX to convey such rejection to
management of SDRC.
On October 21, 1995, Mr. Majteles requested that Mike Ogborne of
WA&H contact another corporation concerning CAMAX's interest in
discussing the possibility of an acquisition, joint venture or other
form of transaction to further CAMAX's strategic plan. On November
4, 1995, Messrs. Majteles and Ogborne met in Minneapolis, Minnesota
to discuss the results of Mr. Ogborne's contact and to prepare for
a trip by Mr. Majteles to explore possible transactions with such
corporation. On November 8 and November 9, 1995, Messrs. Majteles
and Ogborne met with certain executive officers of such corporation
to discuss a potential acquisition of CAMAX. CAMAX retained WA&H
pursuant to an engagement letter dated November 10, 1995. On
November 13, 1995, a group of such corporation's employees gathered
at CAMAX's headquarters in Minneapolis, Minnesota to conduct due
diligence on CAMAX and to discuss further a potential
acquisition.
The Board of Directors of CAMAX met at CAMAX's headquarters in
Minneapolis, Minnesota on November 22, 1995 at which time it was
decided to terminate all contact with the other corporation and to
pursue a transaction with SDRC if SDRC was willing to offer $30
million for the acquisition of all of the outstanding capital stock
of CAMAX. On December 1, 1995, Messrs. Majteles and Peter had a
telephone conference during which time they discussed the structure
of a transaction whereby SDRC would acquire CAMAX. Between December
1, 1995 and December 7, 1995, members of management of both SDRC and
CAMAX, with the assistance of outside legal counsel, reviewed
numerous drafts of letters of intent and negotiated the terms of
such letter of intent. On December 7, 1995, SDRC and CAMAX entered
into a letter of intent (the "Letter of Intent") whereby SDRC agreed
to acquire all of the capital stock of CAMAX in exchange for $30
million of SDRC Common Stock. The Letter of Intent prohibited CAMAX
from initiating or holding discussions or entertaining offers from
any other parties concerning the acquisition or change in control of
CAMAX, however structured.
During the first week of January 1996, representatives of CAMAX
and SDRC commenced negotiations of the Merger Agreement. The Chief
Financial Officer of CAMAX and CAMAX's outside legal counsel met in
Cincinnati, Ohio on January 14, 15 and 16, 1996 with SDRC's Vice
President and General Counsel and SDRC's outside legal counsel to
complete negotiation of the Merger Agreement.
The terms of the Merger Agreement were negotiated with the
objective of structuring the transaction in a manner that would be
advantageous from a tax, financial and accounting standpoint to each
of SDRC, CAMAX and CAMAX's shareholders. See "TERMS AND CONDITIONS
OF THE MERGER -- Federal Income Tax Consequence." SDRC and CAMAX
determined, upon the advice of their financial, legal and accounting
advisors, that a merger transaction accounted for as a pooling of
interests would allow the companies to achieve their objectives.
Following the approval by the respective boards of directors of SDRC
and CAMAX, the parties signed the Merger Agreement on January 16,
1996.
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Terms of the Merger; Conversion of CAMAX Common Stock; Stock
Consideration: Upon consummation of the Merger, the shareholders of
CAMAX will receive, in the aggregate, shares of SDRC Common Stock
having a total value of $30 million (the "Total Value"), in exchange
for all of the shares of CAMAX Common Stock issued and outstanding
on the Effective Date. The total number of shares of SDRC Common
Stock to be issued in the Merger shall be determined by dividing the
Total Value by the Applicable Market Value Per Share of SDRC Common
Stock. The "Applicable Market Value Per Share of SDRC Common Stock"
will be the average of the per share closing prices of SDRC Common
Stock as reported on the Nasdaq National Market for the twenty
trading days ending on the fifth trading day prior to the Effective
Date. Ten percent of the total shares to be issued to the CAMAX
shareholders in the Merger will be placed in escrow at the Effective
Date pursuant to the Merger Agreement until the earlier of the date
SDRC files with the Commission its Report on Form 10-K for the year
ended December 31, 1996 or the first anniversary of the Effective
Date, which shares SDRC will have the right to redeem pursuant to
the indemnification provisions of the Merger Agreement and Escrow
Agreement (as defined below). Both companies determined that the
merger of CAMAX with and into SDRC would be beneficial to the
companies and their shareholders. Among the reasons for
consummating the Merger are that CAMAX shareholders will receive a
fair price for their stock in the Merger and SDRC, by acquiring a
company to broaden and enhance its computer-aided manufacturing
business, will be able to meet certain of its strategic corporate
objectives. See "TERMS AND CONDITIONS OF THE PROPOSED MERGER -
Conversion of Shares of CAMAX Common Stock"; "- Exchange Ratio"; "-
Retention of Shares and Redemption by SDRC"; "- Escrow Agreement",
and "- Background and Reasons for the Merger."
No Fractional Shares: No fractional shares will be issued in
connection with the Merger. CAMAX shareholders will receive cash in
lieu of any fractional shares which they would otherwise be entitled
to receive, based on the Applicable Market Value Per Share of SDRC
Common Stock as defined above. See "TERMS AND CONDITIONS OF THE
PROPOSED MERGER - No Fractional Shares."
Conditions of Closing: The Merger is subject to several significant
conditions, including, but not limited to, CAMAX shareholder
approval and other regulatory approvals, including the filing of a
pre-merger notification under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976 ("HSR Act"), SDRC's registration under the
Securities Act of the SDRC Common Stock to be issued in the Merger,
a tax opinion provided to the parties by SDRC's counsel,
identification of CAMAX employees to be employed by SDRC, the SDRC
Common Stock to be issued is approved for listing on the Nasdaq
National Market, no order of any court preventing consummation of
the Merger and the execution and delivery of an Escrow Agreement as
of the Effective Date.
SDRC and CAMAX each filed an HSR Act pre-merger notification on
February 8, 1996. Under the HSR Act, the Merger may not be
consummated until the expiration of a waiting period of at least 30
days following the receipt of each filing, unless the waiting period
is earlier terminated by the Antitrust Division or FTC (as defined
herein). On February 28, 1996, notice of early termination under
the Act was received by the parties. See "TERMS AND CONDITIONS OF
THE PROPOSED MERGER - Regulatory Approvals."
SDRC's obligation to consummate the Merger is conditioned,
without limitation, upon the following: CAMAX's representations and
warranties being true and correct as of the dates set forth in the
Merger Agreement; CAMAX having performed all of its covenants and
obligations on or prior to the Effective Date; delivery and review
of CAMAX's audited financial statements for the year ended December
31, 1995; assurances by letter from SDRC's and CAMAX's accountants
that the Merger may be accounted for as a pooling of interests;
holders of not more than 10% of the outstanding shares of CAMAX
Common Stock having exercised dissenters' rights; CAMAX's
liabilities on the December 31, 1995 audited balance sheet not
exceeding by 20% the liabilities on CAMAX's audited balance sheet
dated December 31, 1994; CAMAX's shareholders equity on the audited
balance sheet dated December 31, 1995 being not less than the
shareholders' equity on the audited balance sheet dated December 31,
1994; receipt of an opinion from CAMAX's corporate counsel; receipt
of an opinion from CAMAX's intellectual property counsel; receipt of
consents necessary to permit SDRC to continue CAMAX's business after
the Effective Date; severance arrangements in place for non-retained
CAMAX employees and the provision by CAMAX of certain closing
documents. SDRC has no present intention to waive or modify any of
the conditions to Closing.
CAMAX's obligation to consummate the Merger is conditioned,
without limitation, upon the following: SDRC's representations and
warranties being true and correct as of the dates set forth in the
Merger Agreement; SDRC having performed all of its covenants and
obligations on or prior to the Effective Date; receipt of an opinion
from SDRC's corporate counsel and the provision by SDRC of certain
closing documents. CAMAX has no present intention to waive or
modify any of the conditions to Closing. See "TERMS AND CONDITIONS
OF THE PROPOSED MERGER - Conditions to Closing."
Merger: Upon consummation of the Merger, CAMAX will merge with and
into Acquisition Corp. and CAMAX will cease to exist as a separate
entity. See "TERMS AND CONDITIONS OF THE PROPOSED MERGER - Effects
of Merger."
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Effective Date; Right to Terminate: The Effective Date will, unless
the parties agree otherwise, occur as soon as practicable after all
of the conditions precedent to the closing required by the Merger
Agreement, including receipt of all regulatory approvals and the
expiration of any applicable waiting periods, have been fully met or
effectively waived. CAMAX and SDRC each will have the right to
terminate the Merger Agreement if the other party does not satisfy,
on or before the Effective Date, the conditions set forth in the
Merger Agreement, or if the Effective Date does not occur on or
before June 30, 1996. The Merger Agreement automatically terminates
if the CAMAX shareholders do not approve the Merger and Merger
Agreement. See "TERMS AND CONDITIONS OF THE PROPOSED MERGER -
Effective Date"; and " - Conditions to Closing."
Procedure for Exchange of Shares: Promptly after the Effective
Date, SDRC's exchange agent will mail to each shareholder of CAMAX
a form of transmittal letter and instructions for the surrender of
CAMAX Common Stock certificates for certificates representing the
shares of SDRC Common Stock to which such shareholder is entitled.
Certificates for shares of SDRC Common Stock will be issued to
shareholders of CAMAX only after their certificates of CAMAX Common
Stock have been surrendered in accordance with such instructions.
See "TERMS AND CONDITIONS OF THE PROPOSED MERGER - Exchange of
Certificates."
Federal Income Tax Consequences: The Merger is conditioned, in
part, upon receipt of an opinion of SDRC's counsel with respect to
certain tax matters, including an opinion that no gain or loss
(other than with respect to cash received in lieu of fractional
shares or cash received upon the exercise of dissenters' rights)
will be recognized by CAMAX's shareholders upon the exchange of
their CAMAX Common Stock for SDRC Common Stock. See "TERMS AND
CONDITIONS OF THE PROPOSED MERGER - Federal Income Tax
Consequences." Shareholders are urged to consult their own tax
advisors as to the specific consequences to them of the Merger under
federal, state, local and any other applicable tax laws.
Accounting: It is intended that the Merger will be accounted for by
the pooling-of-interests method in accordance with generally
accepted accounting principles. See "TERMS AND CONDITIONS OF THE
PROPOSED MERGER - Accounting Treatment."
Effect of the Merger on CAMAX Stock Options: At the Effective Date,
SDRC will assume the obligations of CAMAX under the CAMAX Systems,
Inc. 1985 Incentive Stock Option Plan, the Point Control Co. 1987
Incentive Stock Option Plan, the CAMAX Systems, Inc. 1987
Non-Qualified Stock Option Plan, the CAMAX Manufacturing
Technologies, Inc. 1995 Long-Term Incentive and Stock Option Plan
and the CAMAX Manufacturing Technologies, Inc. 1995 Directors' Stock
Option Plan (individually, a "CAMAX Option Plan" and, collectively,
the "CAMAX Option Plans"), and each outstanding option to purchase
CAMAX Common Stock ("CAMAX Stock Options") granted under the CAMAX
Option Plans will become an option to acquire SDRC Common Stock on
the same terms and conditions as were applicable under the CAMAX
Option Plans, except that the number of shares subject to each
option and the exercise price will be appropriately adjusted to give
effect to the ratio at which shares of CAMAX Common Stock will be
converted into shares of SDRC Common Stock as a result of the
Merger. See "TERMS AND CONDITIONS OF THE PROPOSED MERGER - Exchange
Ratio." At the Effective Date, SDRC will also assume the
obligations of CAMAX under three individual non-qualified stock
options granted by Point Control Co. to certain individuals prior to
the 1994 merger between Point Control Co. and CAMAX (the "CAMAX
Non-Qualified Options"), which represent the right to purchase
106,500 shares of CAMAX Common Stock. The CAMAX Non-Qualified
Options will become options to acquire SDRC Common Stock on the same
terms and conditions as were applicable under the CAMAX
Non-Qualified Options, except that the number of shares subject to
each option and the exercise price will be appropriately adjusted to
give effect to the ratio at which shares of CAMAX Common Stock will
be converted into shares of SDRC Common Stock as a result of the
Merger. See "TERMS AND CONDITIONS OF THE PROPOSED MERGER - Exchange
Ratio" and "- Stock Options and Stock Ownership Plan."
Interests of Certain Persons in the Merger: Pursuant to the Merger
Agreement, SDRC will choose prior to the Effective Date those CAMAX
employees it determines it will retain after the Effective Date.
Each employee of CAMAX who becomes an employee of SDRC or its
subsidiaries subsequent to the Merger will be entitled to
participate in all employee benefit plans sponsored by SDRC or its
subsidiaries on the same terms and to the same extent as similarly
situated employees of SDRC. See "TERMS AND CONDITIONS OF THE
PROPOSED MERGER - Effect on CAMAX Employees" and "- Interests of
Certain Persons in the Merger."
Recommendation of the Board of Directors of CAMAX: The Board of
Directors of CAMAX believes that the Merger is in the best interests
of CAMAX and its shareholders and has unanimously approved the
Merger and the Merger Agreement. The Board of Directors of CAMAX
unanimously recommends adoption of the Merger and Merger Agreement
to its shareholders. This recommendation is based on a number of
factors discussed in this Proxy Statement/Prospectus. See "TERMS
AND CONDITIONS OF THE PROPOSED MERGER - Background and Reasons for
the Merger."
Securities Involved: For a comparative analysis of CAMAX Common
Stock and SDRC Common Stock, see "DESCRIPTION OF CAPITAL STOCK" and
"COMPARISON OF RIGHTS OF SHAREHOLDERS."
Opinion of Wessels, Arnold & Henderson: Wessels, Arnold & Henderson
L.L.C. ("WA&H"), a financial advisor hired by CAMAX, has delivered
its written opinion dated January 16, 1996, to the Board of
Directors of CAMAX that, as of such date, the Total Value to be
received by the shareholders of CAMAX in the Merger is fair to the
holders of CAMAX Common Stock from a financial point of view. WA&H
has updated such opinion in an opinion dated the date of this Proxy
Statement/Prospectus. A copy of the opinion of WA&H dated the date
of this Proxy Statement/Prospectus, which sets forth the assumptions
made, matters considered and limits on the review undertaken, is
attached as Annex B to this Proxy Statement/Prospectus and is
incorporated herein by reference. Shareholders of CAMAX are urged
to read the opinion in its entirety. See "TERMS AND CONDITIONS OF
THE PROPOSED MERGER - CAMAX's Financial Advisors", " - Opinion of
Wessels, Arnold and Henderson"; and Annex B.
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Management of Acquisition Corp. after the Merger; Effects of the
Merger: Acquisition Corp., as the surviving corporation in the
Merger (the "Surviving Corporation"), will remain a direct, wholly
owned subsidiary of SDRC upon consummation of the Merger and will be
renamed "CAMAX Manufacturing Technologies, Inc." at the Effective
Date. The directors of Acquisition Corp. immediately prior to the
Effective Date will be the initial directors of the Surviving
Corporation, and the officers of Acquisition Corp. immediately prior
to the Effective Date will be the initial officers of the Surviving
Corporation. SDRC has agreed in the Merger Agreement to assume all
CAMAX Stock Options granted under the CAMAX Option Plans and the
CAMAX Non-Qualified Options. Certain members of the management of
CAMAX have certain interests in connection with the Merger that are
in addition to the interests of shareholders of CAMAX generally.
See "TERMS AND CONDITIONS OF THE PROPOSED MERGER - Interests of
Certain Persons in the Merger;" and " - Stock Options and Stock
Ownership Plan."
Dissenters' Rights of Appraisal: Under Sections 302A.471 and
302A.473 of the Minnesota Business Corporation Act, copies of which
are attached hereto as Annex C, shareholders of CAMAX, under certain
circumstances and by following prescribed statutory procedures, have
the right to seek appraisal for the "fair value" of such holders'
shares. The failure of a shareholder choosing to execute such right
to follow such procedures may result in termination or waiver of
dissenters' appraisal rights. See "TERMS AND CONDITIONS OF THE
PROPOSED MERGER - Rights of Dissenting Shareholders" and Annex C.
The obligations of SDRC and Acquisition Corp. to consummate the
Merger are subject to the condition that the holders of not more
than 10% of the CAMAX Common Stock entitled to vote at the Special
Meeting shall have asserted and not effectively withdrawn or lost
the right to obtain the fair value of such holders' shares pursuant
to applicable provisions of the Minnesota Business Corporation Act.
See "TERMS AND CONDITIONS OF THE PROPOSED MERGER - Conditions to
Closing."
Resales of SDRC Common Stock: The shares of SDRC Common Stock to be
issued to shareholders of CAMAX in connection with the Merger have
been registered under the Securities Act. All shares of SDRC Common
Stock received by holders of CAMAX Common Stock upon consummation of
the Merger will be freely transferable by those shareholders of
CAMAX not deemed to be "affiliates" of CAMAX or SDRC. Shares of
SDRC Common Stock held by those CAMAX shareholders who are deemed to
be "affiliates" will be subject to restrictions on transferability.
See "RESALE OF SDRC COMMON STOCK ISSUED IN THE MERGER."
Comparison of Holders of SDRC Common Stock and CAMAX Common
Stock: The rights of holders of CAMAX Common Stock are currently
governed by Minnesota law, CAMAX's Articles of Incorporation, and
its Bylaws. At the Effective time, CAMAX shareholders (except
holders who perfect their dissenters rights) will become
shareholders of SDRC, and their rights will be governed by Ohio law
and by SDRC's Amended Articles of Incorporation and Amended Code of
Regulations. The rights of a holder of SDRC Common Stock are
similar in some respects and different in other respects from the
rights of a holder of CAMAX Common Stock. For a detailed explanation
of these rights, see "COMPARISON OF RIGHTS OF SHAREHOLDERS."
RISK FACTORS
The following factors regarding the Merger and SDRC should be
carefully considered:
Shares Held in Escrow. Of the total number of shares of SDRC
Common Stock to the issued in the Merger, 10% will be held in escrow
as the sole source from which any claims by SDRC for indemnification
under the Merger Agreement may be satisfied. Accordingly, up to 10%
of the total consideration to be received by CAMAX shareholders is
subject to the risk of forfeiture in the event SDRC becomes entitled
to indemnification, for example as the result of CAMAX's breach of
representations and warranties contained in the Merger Agreement.
Further, during the term of the escrow, which runs until the earlier
of the first anniversary of the Effective Date or the date SDRC
files its Report on Form 10-K for the year ending December 31, 1996,
the shares held in escrow are non-transferable and cannot be pledged
as security for loans. See "TERMS AND CONDITIONS OF THE PROPOSED
MERGER -- Escrow Agreement."
Highly Competitive Industry. SDRC is engaged in the development
and marketing of software products that include CAE, CAD, CAM and
PDM. The market for CAE, CAD, CAM and PDM software is intensely
competitive. Certain of SDRC's existing and potential competitors
may have more extensive technical, marketing and financial resources
than SDRC. There can be no assurance that competitive pressures
will not adversely affect SDRC's business in the future.
Rapid Technological Change. The CAE, CAD, CAM and PDM industries
are characterized by rapid technological advances in both software
and hardware. Consequently, to maintain its competitive position,
SDRC must continually enhance its existing products, pursue the
development and introduction of new products and remain on the
forefront of a number of advanced technologies. To respond to
rapidly changing technology, SDRC will be required to continue to
make substantial investments in research and development, and there
can be no assurance that its efforts will continue to be
successful.
Recent Management Changes; Dependence on Key Personnel. In late
1994 and early 1995, SDRC affected a number of changes in its
management team which is now almost entirely new. Although the
Company's first fiscal year under the direction of the new
management was very successful operationally from a financial
performance standpoint, there can be no assurance that such success
will continue. SDRC's continued success is dependent upon its
continued ability to attract and retain qualified management and
other employees. Competition for such employees is intense, and the
loss of certain employees or SDRC's inability to attract, retain and
motivate highly skilled employees in the future could adversely
affect its business.
MARKET PRICE FOR COMMON STOCK
SDRC Common Stock is traded on the Nasdaq National Market under
the symbol "SDRC." There is no public market for the CAMAX Common
Stock. The following table sets forth the closing price per share
of SDRC Common Stock and the "equivalent per share price" (as
defined below) of the CAMAX Common Stock as of (a) January 16, 1996,
the last day of trading of SDRC Common Stock before the announcement
of the Merger, and (b) March 20, 1996, the latest practicable
trading day before the filing of this Proxy Statement/Prospectus
with the Commission. The "equivalent per share price" of CAMAX
Common Stock as of such dates equals the closing price per share of
SDRC Common Stock on such dates multiplied by .0531, which is the
assumed number of shares of SDRC Common Stock into which each share
of CAMAX Common Stock is to be converted based upon the number of
shares of CAMAX Common Stock issued and outstanding as of the date
of this Proxy Statement/Prospectus as though March 20, 1996 was the
Effective Date and the price was calculated as set forth in the
Merger Agreement. There can be no assurance that the prices
indicated for the SDRC Common Stock will be indicative of the future
market prices of SDRC Common Stock following consummation of the
Merger.
Market Price SDRC Equivalent Per Share Price
Per Share At Common Stock of CAMAX Common Stock
January 16, 1996 $23.75 $1.2611
March 20, 1996 $33.88 $1.7977
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SELECTED HISTORICAL AND PROFORMA CONSOLIDATED FINANCIAL DATA
The following tables set forth selected historical consolidated
financial data of SDRC and CAMAX and unaudited combined proforma
financial data giving effect to the Merger using the pooling-of-interests
method of accounting and reflecting the Exchange Ratio and
the proforma adjustments described in the accompanying notes.
The selected consolidated financial information as of December
31, 1995 and 1994 and for each of the three years in the period
ended December 31, 1995 for SDRC and CAMAX has been derived from the
consolidated financial statements of SDRC and CAMAX, which
statements have been audited by Price Waterhouse LLP and Deloitte &
Touche LLP, respectively, independent accountants. The selected
consolidated financial information as of December 31, 1992 and 1991
and for each of the two years in the period ended December 31, 1992
for SDRC and CAMAX has been derived from the consolidated financial
statements of SDRC and CAMAX as of and for those periods.
The historical consolidated financial information and selected
financial data for CAMAX reflect the merger between CAMAX and Point
Control Co. (the "Point Control Co. Merger") which was accounted for
as a pooling-of-interests. The Point Control Co. Merger was
effected in September 1994 through the exchange of 17.75 shares of
CAMAX Common Stock for each share (approximately 395,000 shares) of
Point Control Co. common stock held.
The proforma information set forth below is for illustrative
purposes only and is not necessarily indicative of the operating
results or financial position that would have occurred if the Merger
had been consummated as of the dates specified, nor is it
necessarily indicative of future operating results or financial
position. No provision has been reflected in the unaudited proforma
combined condensed operating data for direct expenses related to the
Merger, which are expected to approximate $800,000. The unaudited
proforma combined condensed financial information also excludes any
benefits from synergies that may result from the Merger. The
unaudited proforma combined selected financial information should be
read in conjunction with "Proforma Combined Financial Information."
See "PROFORMA FINANCIAL STATEMENTS."
Comparative net income (loss) and book value per share data of
SDRC and CAMAX are also set forth below on both a historical and a
proforma combined basis and on a per share equivalent proforma
basis. CAMAX data reflects the Point Control Co. Merger accounted
for as a pooling-of-interests. Proforma combined net income (loss)
per share is derived from the proforma combined information
presented elsewhere herein, which gives effect to the Merger under
the pooling-of-interests accounting method as if the Merger had
occurred at the beginning of each period and combines the results of
SDRC and CAMAX for the periods presented. The per share equivalent
proforma combined data is based upon the estimated ratio of shares
of CAMAX Common Stock exchanged for shares of SDRC Common Stock
pursuant to the Merger Agreement. Book value per share for the
proforma combined presentation is based upon the number of
outstanding shares of SDRC Common Stock, adjusted to include the
estimated number of shares of SDRC Common Stock to be issued as a
result of the Merger. The adjusted share amounts are based on
historical share amounts after giving effect to the proforma
adjustments described elsewhere herein and converting each share of
CAMAX Common Stock into .0531 shares of SDRC Common Stock. As
stated in the Merger Agreement, the Exchange Ratio is based upon the
market value of SDRC's Common Stock for the twenty day trading
period ending five days prior to the Effective Date.
[THE BALANCE OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
<PAGE>
<TABLE>
STRUCTURAL DYNAMICS RESEARCH CORPORATION
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>
Year Ended December 31,
1995 1994 1993 1992 1991
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of operations data:
Net Revenue $204,084 $167,547 $147,605 $149,041 $129,932
Income (loss) before income
taxes and cumulative effect
of accounting changes (1,917) (5,168) (7,356) 13,907 14,525
Income (loss) before
cumulative effect of
accounting changes (8,467) (9,001) (11,732) 8,775 9,279
Net income (loss) (8,467) (12,897) (11,732) 9,475 9,279
Earnings (loss) per share:
Before cumulative effect
of accounting changes (.28) (.31) (.39) .29 .31
Net income (loss) (.28) (.45) (.39) .31 .31
Common and common
equivalent shares 29,921 28,844 29,876 30,093 29,817
Balance sheet data:
Working capital $ 35,695 $ 27,590 $ 27,474 $ 48,440 $ 45,207
Total assets 193,522 142,699 134,549 136,130 119,339
Long-term liabilities 8,163 10,219 326 -- --
Total shareholders' equity 77,409 72,152 84,581 92,447 80,359
</TABLE>
During 1993-1994, the Company's level of expenses increased to support
technological development and revenue growth. As anticipated revenue
growth did not materialize, the Company's expenses exceeded revenue
resulting in operating and net losses. In 1995, the anticipated
cost of the class action lawsuit settlement, net of estimated insurance
proceeds, was included in the results of the operations.
<PAGE>
<PAGE>
<TABLE>
CAMAX Manufacturing Technologies, Inc.
Selected Consolidated Financial Data
<CAPTION>
Year ended December 31,
1995 1994 1993 1992 1991
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Consolidated statement of operations data:
Net Sales $20,054 $17,811 $18,288 $18,064 $15,515
Income (loss) before income taxes and
cumulative effect of accounting change 1,626 (2,528) 306 1,115 676
Income (loss) before cumulative effect of
accounting change 1,560 (2,576) 368 973 603
Net income (loss) 1,560 (2,576) 1,343 973 603
Earnings (loss) per share:
Before cumulative effect of accounting change 0.08 (0.15) 0.02 0.05 0.03
Net income (loss) 0.08 (0.15) 0.07 0.05 0.03
Common and common equivalent shares 18,596 16,892 18,471 18,121 18,231
Consolidated balance sheet data:
Working capital $2,777 $2,098 $3,419 $2,997 $2,229
Total assets 11,862 9,674 11,146 9,610 7,818
Long-term liabilities 879 1,304 703 639 591
Total shareholders' equity 4,963 3,164 5,758 4,590 3,589
/TABLE
<PAGE>
UNAUDITED SELECTED PROFORMA COMBINED FINANCIAL DATA
The following table sets forth Unaudited Selected Proforma
Combined Financial Data as of and for the years then ended December
31, 1995, 1994 and 1993 as if the Merger had been effected January
1, 1993.
The Unaudited Selected Proforma Combined Financial Data is
provided for illustrative purposes only and is not necessarily
indicative of the combined financial position or combined results of
operations that would have been reported had the Merger occurred on
January 1, 1993, nor do they represent a forecast of the combined
financial position or operating results as of or for any future
period. No proforma adjustments have been included herein to
reflect potential effects of (a) efficiencies which may be obtained
by combining CAMAX and SDRC operations, or (b) costs of
restructuring, integration or consolidation of their operations.
The Unaudited Selected Proforma Combined Financial Data should be
read in conjunction with the Proforma Financial Statements and
related notes, and the historical consolidated financial statements
and related notes of SDRC and CAMAX which are incorporated by
reference and included elsewhere herein, respectively.
<PAGE>
<TABLE>
<CAPTION>
Year Ended
December 31,
1995 1994 1993
(in thousands, except per share data)
<S> <C> <C> <C>
Statement of operations data:
Net revenue $224,138 $185,358 $165,893
Income (loss) before income
taxes and cumulative effect
of accounting changes (292) (7,696) (7,050)
Income (loss) before cumulative
effect of accounting changes (7,471) (11,577) (11,365)
Earnings (loss) per share:
Before cumulative effect of
accounting changes (.24) (.39) (.37)
Common and common equivalent
shares 30,888 29,811 30,843
</TABLE>
<TABLE>
<CAPTION>
Year Ended
December 31,
1995 1994 1993
(in thousands, except per share data)
<S> <C> <C> <C>
Balance sheet data:
Working capital $ 37,688 $ 29,801 $ 30,623
Total assets 205,184 151,937 145,258
Long-term liabilities 8,675 11,523 1,029
Total shareholders' equity 81,372 74,879 89,902
/TABLE
<PAGE>
COMPARATIVE PER SHARE DATA
<TABLE>
The following table sets forth certain historical per share data
of CAMAX and SDRC and CAMAX equivalent and proforma combined per
share data based on the assumption that the Merger was effective
January 1, 1993 and that the Merger was accounted for by the
pooling-of-interests accounting method. The proforma combined per
share data is derived from the financial information in the Proforma
Financial Statements. The number of shares used for calculating
CAMAX equivalent per share amounts is based on the exchange ratio of
.0531 for CAMAX Common Stock which is based on the assumption of
18,211,692 shares of CAMAX Common Stock issued and outstanding as of
December 31, 1995. The proforma data is not necessarily indicative
of amounts which would have been achieved had the Merger been
consummated at the beginning of the periods presented and should not
be construed as representative of future operations. This data
should be read in conjunction with the Proforma Combined Financial
Statements and notes thereto included elsewhere herein, and the
separate historical consolidated financial statements and notes
thereto of CAMAX and SDRC, included elsewhere and incorporated by
reference herein, respectively.
<CAPTION>
SDRC CAMAX CAMAX Proforma
Historical Historical Equivalent Combined
<S> <C> <C> <C> <C>
Net Income (Loss) Per Share
From Continuing Operations
For the Year Ended
December 31, 1993 $(.39) $ .02 $(.02) $(.37)
For the Year Ended
December 31, 1994 (.31) (.15) (.02) (.39)
For the Year Ended
December 31, 1995 (.28) .08 (.01) (.24)
Book Value Per Share
December 31, 1995 $2.53 .27 .14 $2.58
Tangible Book Value Per Share
December 31, 1995 $1.53 .27 .09 $1.61
Market Value Per Share
on January 16, 1996(1) $23.75 $.80(2)
Market Value Per Share $33.88 $1.40(2)
on March 20, 1996(3)
<FN>
(1) January 16, 1996 was the last day of trading preceding the
public announcement of the Merger.
(2) Fair market value is determined by the Board of Directors of
CAMAX.
(3) March 20, 1996 was the latest practicable trading day before
the filing of the Proxy Statement/Prospectus with the Commission.
</FN>
</TABLE>
VOTING AND PROXIES
Date, Time and Place of Special Meeting of Shareholders
This Proxy Statement/Prospectus is being furnished to the
shareholders of CAMAX Manufacturing Technologies, Inc., a Minnesota
corporation ("CAMAX"), in connection with the solicitation by the
Board of Directors of CAMAX of proxies to be used at a special
meeting of shareholders (the "Special Meeting") to be held on
________________, 1996, at __________ a.m., Central Standard Time,
at CAMAX's headquarters at 7851 Metro Parkway, Minneapolis,
Minnesota 55425, and at any adjournments thereof. This Proxy
Statement/Prospectus and the enclosed form of proxy are first being
sent to shareholders of CAMAX on or about _______________, 1996.
Proposal to Merge CAMAX into Acquisition Corp.
At the Special Meeting, shareholders of CAMAX will be asked to adopt
a Merger and an Agreement of Merger and Plan of Reorganization dated
as of January 16, 1996, by and among CAMAX, Structural Dynamics
Research Corporation ("SDRC") and SDRC Systems, Inc. ("Acquisition
Corp.") (the "Merger Agreement"). Pursuant to the Merger Agreement,
CAMAX will merge with and into Acquisition Corp. (the "Merger").
See "TERMS AND CONDITIONS OF THE PROPOSED MERGER" below.
Record Date and Outstanding Shares
Shareholders of record of CAMAX Common Stock at the close of
business on April __, 1996 (the "Record Date") are entitled to
notice of and to vote at the Special Meeting. As of the Record
Date, there were approximately _____ shareholders of record of CAMAX
Common Stock. As of the Record Date there were ____________ shares
of CAMAX Common Stock outstanding. However, due to the potential
exercise of options to purchase CAMAX Common Stock, it is possible
that there may be additional shares of CAMAX Common Stock
outstanding as of the Effective Date. Except for the shareholders
identified below under "CAMAX MANUFACTURING TECHNOLOGIES, INC. -
Principal Shareholders of CAMAX," there were no persons known to the
management of CAMAX to be the beneficial owners of more than 5% of
the outstanding shares of CAMAX Common Stock.
Voting and Revocability of Proxies
All properly executed proxies that are not revoked will be voted at
the Special Meeting and any postponement or adjournment thereof, in
accordance with the instructions contained therein. Proxies
containing no instructions regarding the proposals specified in the
form of proxy will be voted for approval of the Merger and the
Merger Agreement at the Special Meeting. Each record holder of
CAMAX Common Stock on the Record Date is entitled to cast one vote
per share, exercisable in person or by properly executed proxy, on
each matter properly submitted for a vote of the shareholders at the
Special Meeting.
It is not expected that any matter not referred to herein will be
presented for action at the Special Meeting. If any other matters
are properly brought before the Special Meeting, the persons named
in the proxies will have discretion to vote on such matters in
accordance with their best judgment. However, shares represented by
proxies will not be used to vote "FOR" postponement or adjournment
of the Special Meeting for the purpose of allowing additional time
for soliciting additional votes "FOR" the approval of the Merger and
the Merger Agreement. Only those shares represented in person at
the Special Meeting will be entitled to vote "FOR" postponement or
adjournment of the Special Meeting for the purpose of allowing
additional time for soliciting additional votes "FOR" the approval
of the Merger and the Merger Agreement. The grant of a proxy will
also confer discretionary authority on the persons named in the
proxy as proxy appointees to vote in accordance with their best
judgment on matters incident to the conduct of the Special Meeting,
except as stated in the preceding sentence.
If an executed proxy card is returned and a shareholder has
abstained from voting on any matter, the shares represented by such
proxy will be considered present at the Special Meeting for purposes
of determining a quorum and for purposes of calculating the vote,
but will not be considered to have been voted in favor as to such
matter.
The presence of a shareholder at the Special Meeting for which such
shareholder has executed a proxy will not automatically revoke such
shareholder's proxy. A shareholder may, however, revoke a proxy at
any time prior to its exercise by filing a written notice of
revocation with, or by delivering a duly executed proxy bearing a
later date to, the Secretary of CAMAX at the address of the
principal executive offices of CAMAX, or by attending the Special
Meeting and voting in person.
Shareholder Votes Required
The presence, in person or by proxy, of a majority of the shares of
CAMAX Common Stock outstanding on the Record Date is necessary to
constitute a quorum at the Special Meeting. Approval of the Merger
and the Merger Agreement requires the affirmative vote of holders of
a majority of the shares of CAMAX Common Stock outstanding on the
Record Date.
It is expected that all of the _______ shares of CAMAX Common
Stock (excluding shares subject to stock options) beneficially owned
by directors and executive officers of CAMAX and their affiliates at
the Record Date (___% of the total number of outstanding shares of
CAMAX Common Stock at such date) will be voted for approval of the
Merger and the Merger Agreement.
Solicitation of Proxies; Expenses
CAMAX will bear the costs of soliciting proxies from its
shareholders, and will bear all printing and mailing costs in
connection with the preparation and mailing of this Proxy
Statement/Prospectus to CAMAX shareholders. In addition to
solicitation by mail, the directors, officers and employees of CAMAX
may solicit proxies from shareholders by telephone, facsimile or
letter or in person, but will not be specially compensated for such
activities.
MARKET PRICE AND DIVIDEND DATA
SDRC Common Stock is traded in the over-the-counter market and
quoted on the Nasdaq National Market. CAMAX Common Stock is
privately held, and, therefore, does not have a market price. In
the past five years, SDRC has not declared or paid dividends on
their common stock and CAMAX has never declared or paid dividends on
their common stock. The following table sets forth (in per share
amounts), for the quarterly periods indicated, the high and low
closing sale prices of SDRC Common Stock:
SDRC Common Stock
High Low
Year Ended December 31, 1994:
First Calendar Quarter $17.13 $12.00
Second Calendar Quarter 13.88 9.13
Third Calendar Quarter 10.00 3.63
Fourth Calendar Quarter 6.75 3.75
Year Ended December 31, 1995:
First Calendar Quarter $ 9.63 $ 5.13
Second Calendar Quarter 15.00 8.38
Third Calendar Quarter 20.25 10.38
Fourth Calendar Quarter 30.50 16.00
CAMAX is a privately held company with ______ shareholders of
record. No established trading market exists for CAMAX Common
Stock. See "Description of Capital Stock."
TERMS AND CONDITIONS OF THE PROPOSED MERGER
The following description contains, among other information, a
summary of certain provisions of the Merger Agreement and is
qualified in its entirety by reference to the full text thereof, a
copy of which is appended as Annex A to this Proxy
Statement/Prospectus and is incorporated herein by reference.
Background and Reasons for the Merger
CAMAX Background of the Merger. Early in 1995, management of
CAMAX embarked on an aggressive strategic planning effort to ensure
that CAMAX would be in a position to assert its CAM leadership in
the computer-aided design ("CAD")/CAM industry and bring change and
improvement to such industry. Early in the strategic planning
effort, management of CAMAX decided that it needed a partner to
obtain its goal of being the CAM leader in the industry. Management
of CAMAX believed that the solutions for success in the mechanical
engineering marketplace would be to possess excellence in certain
key areas: CAD, CAM, computer-aided engineering ("CAE") and Product
Data Management ("PDM") and to take that know-how and develop tools
and services that can improve a customer's ability to make higher
quality products more quickly. CAMAX believes it possesses
unquestioned excellence in the CAM industry, however, CAMAX also
believes that it needs to combine its expertise with other technical
areas of the mechanical engineering marketplace to best serve its
customers.
On July 26, 1995, management of CAMAX and Wayne McClelland, Vice
President-Product Management-I-DEAS, of SDRC, met in Minneapolis,
Minnesota and reviewed the architecture of CAMAX's products and
discussed CAMAX's business operations in general. On August 3, and
August 4, 1995, Robert J. Majteles, the Chief Executive Officer of
CAMAX, Al Peter, the Chief Executive Officer of SDRC, and Mr.
McClelland met at SDRC's headquarters in Milford, Ohio and discussed
SDRC's products and business as well as SDRC's product architecture.
On August 10, 1995, Messrs. Peter and McClelland traveled to
Minneapolis, Minnesota and met with Mr. Majteles to discuss CAMAX's
products and business in greater detail. Messrs. Majteles and
McClelland had a telephone conference on August 22, 1995 during
which they discussed a potential purchase by CAMAX of all of SDRC's
CAM assets and possible joint ventures. On August 24, 1995, Mr.
McClelland met with Mr. Majteles and Thomas A. Greene, CAMAX's Vice
President-Engineering, in Minneapolis, Minnesota to further discuss
potential asset acquisitions and joint ventures. On September 19,
1995, Messrs. McClelland, Majteles and Greene had a telephone
conference during which it was decided to terminate negotiations
regarding (i) CAMAX's purchase of SDRC's assets, and (ii) a possible
joint venture between CAMAX and SDRC. On October 9 and October 10,
1995 at SDRC's headquarters in Milford, Ohio, Messrs. Peter,
McClelland and Majteles discussed a proposal for SDRC to acquire
CAMAX. On October 20, 1995, the CAMAX executive team met in
Minneapolis, Minnesota to discuss a potential acquisition of CAMAX
by SDRC. On October 23, 1995, SDRC made an offer to acquire all of
the capital stock of CAMAX in exchange for $20 million of SDRC
Common Stock. At its regularly scheduled meeting on October 27,
1995, the Board of Directors of CAMAX considered SDRC's offer to
acquire CAMAX. At the October 27 board meeting, management of CAMAX
summarized its opinions regarding the SDRC offer and discussed with
the Board of Directors the relevant terms of the SDRC offer. The
Board of Directors of CAMAX rejected SDRC's $20 million offer for
CAMAX and directed management of CAMAX to convey such rejection to
management of SDRC.
On October 21, 1995, Mr. Majteles requested that Mike Ogborne of
WA&H contact another corporation concerning CAMAX's interest in
discussing the possibility of an acquisition, joint venture or other
form of transaction to further CAMAX's strategic plan. On November
4, 1995, Messrs. Majteles and Ogborne met in Minneapolis, Minnesota
to discuss the results of Mr. Ogborne's contact and to prepare for
a trip by Mr. Majteles to explore possible transactions with such
corporation. On November 8 and November 9, 1995, Messrs. Majteles
and Ogborne met with certain executive officers of such corporation
to discuss a potential acquisition of CAMAX. On November 13, 1995,
a group of such corporation's employees gathered at CAMAX's
headquarters in Minneapolis, Minnesota to conduct due diligence on
CAMAX and to discuss further a potential acquisition.
The Board of Directors of CAMAX met at CAMAX's headquarters in
Minneapolis, Minnesota on November 22, 1995 at which time it was
decided to terminate all contact with the other corporation and to
pursue a transaction with SDRC if SDRC was willing to offer $30
million for the acquisition of all of the outstanding capital stock
of CAMAX. On December 1, 1995, Messrs. Majteles and Peter had a
telephone conference during which time they discussed the structure
of a transaction whereby SDRC would acquire CAMAX. Between December
1, 1995 and December 7, 1995, members of management of both SDRC and
CAMAX, with the assistance of outside counsel, reviewed numerous
drafts of letters of intent and negotiated the terms of such letter
of intent. On December 7, 1995, SDRC and CAMAX entered into a
letter of intent (the "Letter of Intent") whereby SDRC agreed to
acquire all of the capital stock of CAMAX in exchange for $30
million of SDRC Common Stock. The Letter of Intent prohibited CAMAX
from initiating or holding discussions or entertaining offers from
any other parties concerning the acquisition or change in control of
CAMAX, however structured.
CAMAX's Reasons for the Merger; Approval by CAMAX Board of
Directors. At a special meeting of the Board of Directors of CAMAX
held on Saturday, January 13, 1996, at which all directors were
present, the Board of Directors of CAMAX unanimously determined that
the Merger is fair to and in the best interests of CAMAX and its
shareholders, unanimously approved the Merger Agreement and the
transactions contemplated by the Merger Agreement (subject to the
resolution of open issues by CAMAX's management and to the
completion of satisfactory documentation) and unanimously resolved
to recommend that the shareholders of CAMAX vote for adoption of the
Merger and the Merger Agreement. The Board of Directors of CAMAX
held another special meeting on Tuesday, January 16, 1996, at which
all directors were present except for Messrs. Blakely, Carlson and
Lipkin, at which time the Board of Directors were informed of the
resolution of the open issues surrounding the Merger and reaffirmed
its approval of the Merger and the Merger Agreement and its
recommendation to the shareholders of CAMAX. At the meetings held
on January 13 and January 16, 1996, CAMAX's Board of Directors
received advice or presentations from, and reviewed the then-current
terms of the Merger Agreement with, CAMAX's management and
accounting, financial and legal advisors. The presentation by WA&H
at the meeting held on January 13, 1996 is described below under "-
Opinion of Wessels, Arnold and Henderson." The presentations by
Dorsey & Whitney P.L.L.P. and Deloitte & Touche LLP, CAMAX's legal
and accounting advisors, respectively, described and explained (i)
the terms and conditions of the proposed Merger as set forth in the
drafts of the Merger Agreement, (ii) the fiduciary duties applicable
to CAMAX's Board of Directors in the evaluation of the proposed
transaction, (iii) the results of Dorsey & Whitney LLP's legal due
diligence, and (iv) the results of Deloitte & Touche LLP's
accounting due diligence.
In reaching its conclusion to enter into the Merger Agreement and
recommend adoption of the Merger Agreement by CAMAX's shareholders,
CAMAX's Board of Directors considered a number of factors,
including, without limitation, the following:
- The consideration to be received by CAMAX's shareholders in the
Merger, including the fact that the Applicable Value Per Share of
SDRC Common Stock represented a substantial premium over the
then-current fair market value of CAMAX Common Stock, and the
relationship between the market value of SDRC Common Stock and
CAMAX's earnings and certain other measures.
- The presentation by WA&H to CAMAX's Board of Directors at its
meeting on January 13, 1996, including WA&H's opinion dated January
16, 1996 to the effect that, as of such date, the consideration to
be received by the CAMAX shareholders was fair from a financial
point of view. WA&H has updated such opinion in a written opinion
dated as of the date of this Proxy Statement/Prospectus. See "-
Opinion of Wessels, Arnold & Henderson."
- CAMAX's and SDRC's respective businesses, assets, management,
financial condition, results of operations and prospects.
- The earnings per share of CAMAX Common Stock and SDRC Common
Stock.
- The opportunity for holders of CAMAX Common Stock to continue
to share in the potential for long-term gains from their investment
in CAMAX through the ownership of SDRC Common Stock following the
Merger.
- The terms and conditions of the Merger and the Merger
Agreement, including the amount and the form of the consideration,
as well as the parties' representations, warranties and covenants,
and the conditions to their respective obligations.
- The expectation that the Merger will afford CAMAX's shareholders
the opportunity to receive SDRC Common Stock in a non-taxable
transaction for federal income tax purposes.
- The expectation that the Merger will be accounted for as a
pooling of interests.
- The products currently being developed by CAMAX are, to a
large extent, complementary with those offered by SDRC. The markets
into which CAMAX and SDRC products could be sold are similar.
- The CAMAX Common Stock is unregistered and no public market
exists for the CAMAX Common Stock. Following the Merger, CAMAX's
shareholders will hold SDRC Common Stock which may be sold on an
established market.
In view of the wide variety of factors considered in connection with
its evaluation of the terms of the Merger, CAMAX's Board of
Directors did not find it practicable to, and did not, quantify or
otherwise attempt to assign relative weights to the specific factors
considered in reaching its determinations. Based on the factors
described above, CAMAX's Board of Directors unanimously determined
that the Merger is fair and in the best interests of CAMAX and its
shareholders, unanimously approved the Merger Agreement and the
transactions contemplated by the Merger Agreement and unanimously
resolved to recommend that the shareholders of CAMAX vote for
adoption of the Merger Agreement.
The Board of Directors of CAMAX has unanimously approved the Merger
and the Merger Agreement and recommends a vote for the adoption of
the Merger and the Merger Agreement.
SDRC Background and Reasons for the Merger. Consistent with its
strategic objective of becoming the leading world-wide supplier of
team engineering solutions that encompass CAD, CAM, CAE and PDM,
early in 1995 SDRC initiated an in-depth evaluation of the CAM
segment of the mechanical design automation industry for the purpose
of assessing not only where the CAM industry was at that time but
where it was heading in the future. From this in-depth strategic
analysis, SDRC determined that a cornerstone of its long term
strategy and differentiation in the marketplace would be to offer
concurrent engineering solutions with balanced strength in CAD, CAM,
CAE and PDM At the time, SDRC marketed (and still markets) a CAM
product called Generative Machining, an advanced technology product
that has a number of areas of uniqueness and strength. Generative
Machining is the only CAD/CAM product with generative machining
capability, it is based on current architecture, the user interface
is highly regarded and it is integrated with SDRC's main product
line, I-DEAS Master Series. SDRC's Generative Machining product,
while considered in the industry as a quality product, had
acknowledged opportunities for enhancement, particularly in the area
of 3- and 5-axis milling capabilities.
During the course of this evaluation, SDRC made the following
observations about trends in the CAM industry:
- - The CAM market is viable, demonstrating double-digit growth in
recent years. SDRC attributed this to the acceptance of concurrent
engineering, which positions manufacturing operations as of equal
import to design;
- - SDRC's main competitors have competitive CAM products;
- - In SDRC's experience, most medium to large companies want an
integrated solution. Companies buy numerical control (NC) software
either as a component in an integrated CAD/CAM solution or as a best
of class product. As a general rule, most mid- to large-size
companies prefer an integrated solution and most small companies
prefer a best of class solution;
- A strong CAM offering could have a positive spill-over effect
on the CAD and PDM segments of SDRC's business. Since many companies
want an integrated solution, there would be an opportunity to gain
CAD and PDM business on the strength of a more comprehensive CAM
offering; and
- - Quality CAM software is very difficult to produce and support.
Programming today's NC machines is a difficult task and tomorrow's
machines will be even more complex. CAM software is going to require
an increasing degree of specialization, particularly as
manufacturers want to improve productivity.
Recognizing the opportunities to further strengthen and expand its
CAM offering, SDRC began to look at ways to move to improve its
position in the CAM industry. As the evaluation proceeded, it
became clear that there were three main ways for SDRC to accomplish
its goal. First, SDRC could maintain the status quo, hoping to
leverage its strength in the CAD business while offsetting its
product enhancement requirements. SDRC recognized that this
approach might hinder its ability to provide integrated CAE/CAD/CAM
solutions to its customers and place significant revenue at risk in
the short and long term. Second, SDRC could further refine its
Generative Machining product internally to bring functionality to
the level of other leaders in the CAM industry. This alternative
presented a timing obstacle in that SDRC would first have to recruit
qualified developers. Then, the development effort would take a
significant investment of time, creating some risk that SDRC would
fall behind in a rapidly moving market and be unable to meet current
customer demands. The final alternative was to grow in the CAM
industry through acquisition. While there could be short term
issues to be resolved in acquiring and integrating another business
with SDRC's, growth through acquisition would provide SDRC with
instant resources, an immediate revenue stream and market impact.
Given SDRC's assessment that growth through acquisition would
provide swift and effective augmentation of its own CAM offering,
SDRC then embarked on a review and evaluation of the various
competitors in the CAM market. The CAM marketplace is very
fragmented. There are more than 100 companies providing CAM
products to end users. Given its interest in rapidly improving its
position in the CAM segment, SDRC was primarily interested in the
market leaders. SDRC spent months assessing the respective
strengths and weaknesses of the leaders in the CAM industry. It
evaluated product offerings, revenues, customer base, market focus
and product development personnel. Most importantly, SDRC evaluated
how it could most effectively capitalize on potential synergies
between a target company and SDRC.
It became clear to SDRC that the company that most met its profile
of an ideal CAM offering was CAMAX. First, CAMAX's products, Camand
and SmartCAM, provide a broad NC software capability. Camand offers
strong surface modeling and multi-axis milling capabilities.
SmartCAM, which CAMAX acquired when it merged with Point Control Co.
in 1994, has strong production and 2 and 2 1/2 axis milling
capabilities. As compared to other NC vendors, CAMAX provides a
wide range of product capability. If these products were combined
with SDRC's own Generative Machining, essentially all of the
important functions of NC would be covered. Additionally, CAMAX
products would present little difficulty in transition and
integration into the standard SDRC product offering.
Secondly, in terms of revenue, CAMAX is the leading independent NC
software vendor. CAMAX has a strong market presence and a large
installed base of customers. For SDRC, market presence and customer
loyalty were of utmost importance. CAMAX has a very positive image
in the CAM market. According to an independent industry analyst,
SmartCAM ranks number two and CAMAND ranks number eight among all
similar products. CAMAX is well known and respected in the CAM
industry. As regards customer loyalty, it was essential for SDRC
that the company it acquired provided immediate and long-term
customer relationships. With its 12,000 customer sites and 22,000
installed users worldwide, CAMAX best fit this element of SDRC's
profile.
Thirdly, CAMAX has talented personnel with particular emphasis on
its product development staff. A talented development staff would
be necessary to meet the ongoing demands of SDRC's CAM customers.
CAMAX's and SDRC's development staffs could integrate their shared
knowledge of each other's products strengths and weaknesses to
produce a complete CAM offering.
In July and August of 1995, senior management of SDRC met with
management of CAMAX to discuss CAMAX's business and product
architecture, and how they might be integrated with SDRC's.
Management representatives of both companies had a number of face-to-face and
telephonic meetings during this time period. The main
focus of the discussions was the mechanism for combining the
strengths of both parties' CAM products. SDRC and CAMAX considered
many alternatives, including a joint venture and an asset
acquisition. As the discussions progressed and continued into
September, it became apparent to SDRC that the best way for it to
meet its strategic objective of enhancing the CAM piece of its
integrated offering would be to acquire ownership of CAMAX. An
acquisition of the assets alone would give SDRC only the software,
but not the development staff to work with it, and the relative
risks of a joint venture made that alternative unattractive.
Throughout this period, SDRC engaged in an intensive internal
valuation of CAMAX. The analysis included a number of factors,
including historical revenue, margins, product functionality and
capability, strength and size of customer base, sales volume,
strength and size of reseller channels, comparable transactions in
the industry and strategic fit. In connection with its evaluation
of CAMAX, SDRC's Board of Directors did not find it practicable to,
and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its
determinations.
On October 23, 1995, SDRC made a written offer to acquire all of the
capital stock of CAMAX in exchange for $20 million of SDRC Common
Stock. The written offer contained the customary contingencies and
qualifications of such an offer. SDRC received written notice from
CAMAX on or about October 27, 1995 that its Board of Directors had
reviewed the offer and determined that it was insufficient, thereby
rejecting the offer.
SDRC continued to assess the importance of the acquisition of CAMAX
to its strategic objectives. In light of the internal valuation it
had performed for CAMAX, SDRC management reopened discussions with
CAMAX management in late November and early December 1995 about the
possibility of an acquisition of CAMAX by SDRC. The discussions at
this point focused mainly on price. Management of both companies
agreed in principle on a purchase price of $30 million. Between
December 1, 1995 and December 7, 1995, members of management of both
SDRC and CAMAX, with the assistance of outside counsel, reviewed
numerous drafts of letters of intent and negotiated the terms of
such letter of intent. On December 7, 1995, SDRC made a written
offer to acquire all of the capital stock of CAMAX in exchange for
$30 million of SDRC Common Stock. The written offer contained the
customary contingencies and qualifications of such an offer. CAMAX
accepted the written offer of $30 million and signed the Letter of
Intent, which was contingent upon negotiation of a definitive merger
agreement.
During the first week in January 1996, representatives of CAMAX and
SDRC commenced negotiations of the Merger Agreement. The Chief
Financial Officer of CAMAX and CAMAX's outside legal counsel met in
Cincinnati, Ohio on January 14, 15 and 16, 1996 with representatives
from SDRC and its outside legal counsel to complete the negotiation
of the Merger Agreement. Following approval by the respective
boards of directors of SDRC and CAMAX, the parties signed the Merger
Agreement on January 16, 1996.
Effective Date
The Effective Date of the Merger will occur as soon as practicable
after all conditions precedent contained in the Merger Agreement
have been met or waived, including the expiration of all applicable
waiting periods. CAMAX and SDRC each will have the right, but not
the obligation, to terminate the Merger Agreement if the Effective
Date does not occur on or before June 30, 1996.
Conversion of Shares of CAMAX Common Stock
Each share of CAMAX Common Stock which is issued and outstanding
immediately prior to the Effective Date will be converted at the
Effective Date into SDRC Common Stock and cash in lieu of any
fractional shares of SDRC Common Stock. See "Exchange Ratio" below.
The Exchange Ratio will be adjusted so as to give CAMAX shareholders
the economic benefit of any stock dividends, reclassifications,
recapitalizations, split-ups, exchanges of shares, distributions or
combinations or subdivisions of SDRC Common Stock or CAMAX Common
Stock effected between the date of the Merger Agreement and the
Effective Date.
Exchange Ratio
At the Effective Date of the Merger, all of the shares of CAMAX
Common Stock that are issued and outstanding immediately prior to
the Effective Date will be converted by virtue of the Merger and
without further action into that number of shares of SDRC Common
Stock determined by dividing $30 million (the "Total Value") by the
Applicable Market Value Per Share of SDRC Common Stock (the
"Exchange Ratio"). The "Applicable Market Value Per Share of SDRC
Common Stock" will be the average of the per share closing prices of
SDRC Common Stock as reported on the Nasdaq National Market for the
twenty trading days ending on the fifth trading day prior to the
Effective Date. Each CAMAX shareholder will receive that number of
shares of SDRC Common Stock to be issued in the Merger (less that
number of shares to be retained by SDRC under the Merger Agreement
and Escrow Agreement) which represents each shareholder's pro rata
percentage of the CAMAX Common Stock owned immediately prior to the
Merger.
Assuming the aggregate number of outstanding shares of CAMAX
Common Stock were equal to ________ shares and the Effective Date
would have been April ____, 1996, the Applicable Market Value Per
Share of SDRC Common Stock would have been $__________, and each
share of CAMAX Common Stock outstanding would have been converted
into and become the right to receive ________ shares of SDRC Common
Stock. Assuming the aggregate number of outstanding shares of CAMAX
Common Stock were equal to __________ shares and the Effective Date
were to occur early in April 1996, SDRC would expect the actual
conversion ratio to fall within a range between _____ shares
(representing an Applicable Market Value Per Share of SDRC Common
Stock of $______) and _______ shares (representing an Applicable
Market Value Per Share of SDRC Common Stock of $_______) of SDRC
Common Stock for each share of CAMAX Common Stock outstanding on the
Effective Date. However, it should be noted that consummation of
the Merger is not contingent on the achievement of any particular
Applicable Market Value Per Share of SDRC Common Stock. The
foregoing examples are presented for informational purposes only to
illustrate the conversion ratios for shares of SDRC Common Stock to
be issued to shareholders of CAMAX Common Stock in connection with
the Merger. The information presented above is not intended as an
estimate or projection of any of the data that will be used to
determine the conversion ratio or of the number of shares of SDRC
Common Stock that a CAMAX shareholder may ultimately receive in the
Merger. The actual conversion ratio may be higher or lower than the
amount presented above. If the actual conversion ratio were
determined to be materially outside of the foregoing range, SDRC and
CAMAX would amend and recirculate the Proxy Statement/Prospectus
containing updated conversion ratio information, and would offer all
shareholders of CAMAX who were entitled to vote on the Merger as of
the Record Date an opportunity to change their votes prior to the
Special Meeting (in which case, the Special Meeting would be delayed
to permit such recirculation). Such recirculation, if it occurs,
would cause the Effective Date of the Merger to be delayed.
Certificates representing shares of SDRC Common Stock will be
distributed to CAMAX shareholders upon the surrender of their
certificates for shares of CAMAX Common Stock to SDRC. See
"Exchange of Certificates" herein.
Indemnification
CAMAX has agreed that, from and after the Effective Date until the
end of the Retention Period (as defined below), CAMAX will indemnify
and hold harmless SDRC and/or the Surviving Corporation against any
expense, loss, damage, deficiency and/or cost, in the aggregate
cumulative amount in excess of $175,000 during the Retention Period,
resulting from any misrepresentation or breach by CAMAX of any
representation, warranty or covenant made by CAMAX in the Merger
Agreement (except that any liability or potential liability which
accrues to CAMAX as a result of its compliance with any of the
covenants or conditions to closing specified in the Merger Agreement
shall not constitute a breach of any of CAMAX's representations and
warranties under the Merger Agreement). Claims for indemnification
made by SDRC and/or the Surviving Corporation are to be made in
accordance with the Escrow Agreement and the shares of SDRC Common
Stock held in escrow under the terms of the Escrow Agreement are to
be the sole remedy of SDRC and/or the Surviving Corporation for
indemnification under the Merger Agreement. See "-Escrow
Agreement," and "- Retention of Shares and Redemption by SDRC."
Retention of Shares and Redemption by SDRC
From and after the Effective Date until the earlier of the date SDRC
files with the Commission its Report on Form 10-K for the year ended
December 31, 1996 or the first anniversary of the Effective Date
(the "Retention Period"), SDRC Common Stock which represents 10% of
the total shares to be issued to the CAMAX shareholders upon
consummation of the Merger will be placed into escrow pursuant to
the terms of the Merger Agreement and the Escrow Agreement. SDRC
will have the right to redeem such retained shares as payment for
any amounts due SDRC or Surviving Corporation pursuant to the
indemnification obligations of CAMAX set forth in the Merger
Agreement. For the purposes of a redemption by SDRC, the redeemed
shares will be valued at a price per share equal to the Applicable
Market Value Per Share of SDRC Common Stock as of the Effective
Date.
The procedures for redemption by SDRC of all or part of the
Retention Shares from escrow is set forth in the Escrow Agreement,
a copy of which is appended hereto as Annex D (the "Escrow
Agreement"). The Escrow Agreement provides that whenever either (a)
a certificate signed by SDRC and the representatives named in the
Escrow Agreement or (b) a certified copy of a final non-appealable
judgment of a court of competent jurisdiction is delivered to the
Escrow Agent determining that an amount is due to SDRC pursuant to
the indemnification provisions of the Merger Agreement and further
specifying the number of shares of SDRC Common Stock, valued as
described in the preceding paragraph, to be transferred, the Escrow
Agent shall promptly cause certificates representing the appropriate
number of retained shares to be delivered to SDRC. The items in the
Merger Agreement which would cause SDRC to seek redemption of the
Retention Shares are losses, damages, expenses, deficiencies or
costs resulting from any breach or misrepresentation by CAMAX of any
representation, warranty or covenant made by CAMAX in the Merger
Agreement.
Upon the earlier of the date SDRC files with the Commission its
Report on Form 10-K for the year ended December 31, 1996 or the
first anniversary of the Effective Date, any retained shares not
subject to redemption by SDRC will be distributed to the CAMAX
shareholders on a pro rata basis based upon their percentage
ownership of CAMAX Common Stock immediately prior to the Effective
Date in the same manner as for the Exchange Ratio. Because the
Retention Shares are subject to redemption for claims for
indemnification by SDRC, there can be no assurance that at the
expiration of the Retention Period, there will be any Retention
Shares remaining for distribution to the CAMAX shareholders.
Escrow Agreement
The Merger Agreement provides that 10% of the total shares of SDRC
Common Stock to be issued in the Merger to CAMAX shareholders will
be placed into escrow at the Effective Date pursuant to an Escrow
Agreement by and among CAMAX, SDRC, Terrence W. Glarner and Raymond
A. Lipkin (the "Representatives"), and First Trust National
Association, a national banking association (the "Escrow Agent")
(the "Escrow Agreement"). The shares of SDRC Common Stock to be
retained in the Merger (the "Retention Shares") will establish the
escrow fund (the "Escrow Fund") and the Escrow Fund will fund and be
the sole source of securing the indemnification rights set forth in
the Merger Agreement.
Once the shares of SDRC Common Stock are in the Escrow Fund,
CAMAX shareholders will retain all voting rights with respect to
such shares in accordance with their proportionate interests in the
shares and any cash dividends paid on the Retention Shares will be
distributed currently to the CAMAX shareholders. Neither the
Retention Shares nor each CAMAX shareholder's respective interest in
the Retention Shares is transferable until the expiration of the
Retention Period. The Escrow Agreement also provides for the
appointment of Messrs. Glarner and Lipkin as Representatives to act
by and on behalf of the CAMAX shareholders following the Merger.
The Representatives will be authorized to respond to the assertion
of any and all claims for indemnification by SDRC pursuant to the
terms of the Escrow Agreement.
The shares retained in the Escrow Fund will be disbursed to
satisfy a claim for indemnification when either of the following is
delivered to the Escrow Agent: (a) a certificate signed by SDRC and
the Representatives certifying, or (b) a certified copy of a final
non-appealable judgment of a court of competent jurisdiction
determining, that an amount is due to SDRC pursuant to the Merger
Agreement and further specifying the number of shares of SDRC Common
Stock to be transferred thereunder. The value of the stock to be
disbursed will be based upon the Applicable Market Value Per Share
of SDRC Common Stock as utilized in the Merger Agreement. Upon
receipt of the foregoing, the Escrow Agent is required to promptly
cause certificates representing the appropriate number of shares,
with duly executed stock powers and signatures guaranteed, to be
delivered to SDRC. No fractional shares will be disbursed. The
right of a CAMAX shareholder to receive and transfer the Retention
Shares, if any, at the termination of the Retention Period will not
be affected by such shareholder's disposition, prior to the
termination of the Retention Period, of any or all of the shares of
SDRC Common Stock issued to such shareholder upon consummation of
the Merger. Pursuant to the terms of the Merger Agreement, each
CAMAX shareholder, upon consummation of the Merger, will become the
beneficial owner of that aggregate number of shares of SDRC Common
Stock which includes that proportion of the Retention Shares
attributable to such shareholder.
Upon the expiration of the Retention Period, SDRC will authorize the
Escrow Agent to deliver to the Representatives, on behalf of the
CAMAX shareholders, any shares remaining in the Escrow Fund, subject
only to shares which will continue to be retained pursuant to the
Escrow Agreement for claims which are in process at the time of the
expiration of the Retention Period.
Stock Options and Stock Ownership Plans
As of December 31, 1995, there were outstanding options to purchase
3,290,238 shares of CAMAX Common Stock held by certain directors,
officers and employees of CAMAX pursuant to the CAMAX Option Plans
and the CAMAX Non-Qualified Options.
Pursuant to the Merger Agreement, the CAMAX Option Plans and the
CAMAX Non-Qualified Options shall be assumed by SDRC and
participants of such CAMAX Option Plans and owners of CAMAX Non-Qualified
Options shall be entitled to receive, upon the exercise of
options outstanding under the CAMAX Option Plans and the CAMAX Non-Qualified
Options, SDRC Common Stock on the same terms and
conditions as were applicable under the CAMAX Option Plans and the
CAMAX Non-Qualified Options on a pro-rata basis consistent with the
Exchange Ratio.
No Fractional Shares
Only whole shares of SDRC Common Stock will be issued in connection
with the Merger. In lieu of fractional shares, each shareholder of
CAMAX Common Stock otherwise entitled to a fractional share of SDRC
Common Stock will be paid in cash an amount equal to the amount of
such fraction multiplied by the Applicable Market Value Per Share of
SDRC Common Stock. No such shareholder will be entitled to
dividends, voting rights or other rights in respect of any such
fractional share.
Exchange of Certificates
After the Effective Date, holders of certificates previously
representing shares of CAMAX Common Stock will cease to have any
rights as shareholders of CAMAX and their sole rights will pertain
to the shares of SDRC Common Stock into which their shares of CAMAX
Common Stock will have been converted pursuant to the Merger
Agreement. As soon as practicable after the Effective Date, SDRC's
stock transfer agent (the "Exchange Agent") will send to each former
CAMAX shareholder a letter of transmittal for use in submitting to
the Exchange Agent certificates (or with instructions for handling
lost CAMAX stock certificates) formerly representing shares of CAMAX
Common Stock to be exchanged for certificates representing SDRC
Common Stock (and, to the extent applicable, cash in lieu of
fractional shares of SDRC Common Stock) which the former
shareholders of CAMAX are entitled to receive as a result of the
Merger. Shareholders who become holders of SDRC Common Stock in the
Merger will not be entitled to receive any dividends or other
distributions which may be payable to holders of record of SDRC
Common Stock following the Effective Date until they have
surrendered and exchanged their certificates evidencing ownership of
shares of CAMAX Common Stock. Any dividends payable on SDRC Common
Stock after the Effective Date will be paid to the Exchange Agent
and, upon receipt of the certificates representing shares of CAMAX
Common Stock, the Exchange Agent will forward to CAMAX shareholders
(i) certificates representing their shares of SDRC Common Stock,
(ii) dividends declared thereon subsequent to the Effective Date
(without interest) and (iii) the cash value of any fractional shares
(without interest). CAMAX'S SHAREHOLDERS ARE REQUESTED NOT TO
SUBMIT STOCK CERTIFICATES UNTIL THEY HAVE RECEIVED WRITTEN
INSTRUCTIONS FROM THE EXCHANGE AGENT TO DO SO.
At the Effective Date, the stock transfer books of CAMAX will be
closed and no transfer of CAMAX Common Stock will thereafter be made
on such books. If a certificate formerly representing shares of
CAMAX Common Stock is presented to SDRC, it will be forwarded to the
Exchange Agent for cancellation and exchanged for a certificate
representing shares of SDRC Common Stock.
Federal Income Tax Consequences
Pursuant to the Merger Agreement, SDRC and CAMAX will receive a tax
opinion of Dinsmore & Shohl, SDRC's principal outside counsel,
substantially to the effect that the federal income tax consequences
of the Merger will be as follows:
(a) the Merger will qualify as a tax free reorganization under
368(a)(1)(A) and 368(a)(2)(D) of the Internal Revenue Code of 1986,
as amended (the "Code") and SDRC, Acquisition Corp. and CAMAX will
each be a party to the reorganization;
(b) no gain or loss will be recognized by SDRC, Acquisition Corp.
or CAMAX as a result of the consummation of the Merger;
(c) no gain or loss will be recognized by a shareholder of CAMAX
upon the exchange of shares of CAMAX Common Stock for shares of SDRC
Common Stock pursuant to the Merger, except that gain or loss will
be recognized by a CAMAX shareholder on the receipt of cash in lieu
of a fractional share of SDRC Common Stock;
(d) the adjusted tax basis of the SDRC Common Stock (including
fractional share interests deemed received) received by the CAMAX
shareholders pursuant to the Merger will be the same as the adjusted
tax basis of the CAMAX Common Stock surrendered in exchange
therefor;
(e) the holding period of SDRC Common Stock (including fractional
share interests deemed received) received by the CAMAX shareholders
as a result of the Merger will include the holding period of the
shares of CAMAX Common Stock surrendered therefor, provided that
such CAMAX Common Stock is held as a capital asset by the CAMAX
shareholder at the consummation of the Merger; and
(f) a shareholder of CAMAX who receives cash in lieu of a
fractional shares of SDRC Common Stock will be treated as if the
fractional share were distributed as part of the exchange and then
as having received a cash distribution in redemption of such
fractional share, resulting in gain or loss upon receipt of such
cash taxed as provided in Section 302 of the Code.
The above tax opinion will be based upon certain customary
representations and assumptions referred to in the opinion letter
and is expressly contingent upon satisfaction of the continuity of
interest requirement of the Treasury Regulations. This requirement
will be satisfied if the shareholders of CAMAX receive and retain
SDRC Common Stock equal in value, as of the Effective Date, to at
least 50% of the value of all of the formerly outstanding shares of
CAMAX Common Stock, as of that date. In order to ensure that the
CAMAX shareholders meet the continuity of interest requirements of
the Treasury Regulations, CAMAX will solicit from its management and
shareholders holding 1% or more of the CAMAX Common Stock
representation letters to the effect that such shareholders will
retain their shares for the requisite period of time. However,
there can be no assurance that CAMAX will be able to obtain such
letters from its management or 1% or greater shareholders.
In addition, any cash payment to a shareholder who exercises his
dissenters' rights will be a taxable transaction. Any cash payment
received by a dissenting holder of CAMAX Common Stock who has
perfected dissenters' rights in exchange for such shareholder's
shares will be treated as having been received as a distribution in
redemption of such shareholder's shares, the consequences of which
will be determined in accordance with Section 302 of the Code.
Because of the complexity of the tax laws, and because the tax
consequences to any particular shareholder may be affected by
specific matters not common to all shareholders, it is recommended
that CAMAX shareholders consult their personal tax advisors
concerning the consequences of the Merger to them, including the
consequences of the application of state and local tax laws, if any.
The federal income tax discussion set forth above is based on
current law but may not be specific to the situation of a particular
shareholder. Each of CAMAX's shareholders should consult his or her
own tax advisor as to the specific tax consequences of the merger to
him or her, including the application and effect of federal, state,
local and other tax laws.
Accounting Treatment
The Merger, if completed as proposed, is expected to qualify as a
pooling of interests for accounting and financial reporting
purposes. Accordingly, under generally accepted accounting
principles, as of the Effective Date, the assets and liabilities of
CAMAX will be combined with those of SDRC at their recorded book
values and the shareholders' equity account of CAMAX will be
included as such in SDRC's consolidated balance sheet. The
financial statements of CAMAX will be combined with the financial
statements of SDRC on a retroactive basis for all prior periods.
Stock Exchange Listing
SDRC has agreed that the SDRC Common Stock to be issued pursuant to
the Merger will be approved for listing on the Nasdaq National
Market, subject to official notice of issuance. An application will
be made for listing such SDRC Common Stock on the Nasdaq National
Market.
Regulatory Approvals
Under the HSR Act and the rules promulgated thereunder by the
Federal Trade Commission (the "FTC"), certain acquisition
transactions may not be consummated unless notice has been given and
certain information has been furnished to the Antitrust Division of
the United States Department of Justice (the "Antitrust Division")
and the FTC and certain waiting period requirements have been
satisfied. The Merger is subject to these requirements.
SDRC and CAMAX each filed with the Antitrust Division and the FTC
a Notification and Report Form with respect to the Merger on
February 8, 1996. Under the HSR Act, the Merger may not be
consummated until the expiration of a waiting period of at least 30
days following the receipt of each filing, unless the waiting period
is earlier terminated by the FTC and the Antitrust Division. On
February 28, 1996, notice of early termination under the HSR Act was
received by the parties.
The FTC and the Antitrust Division frequently scrutinize the
legality of transactions such as the Merger under the antitrust
laws. At any time before or after the Effective Date, the FTC or
the Antitrust Division could take such action under the antitrust
laws as it deems necessary or desirable in the public interest,
including seeking to enjoin the Merger or seeking the divestiture of
certain assets of the parties. State Attorneys General and private
parties may also bring legal actions under the federal or state
antitrust laws under certain circumstances. Based upon an
examination of information available to SDRC and CAMAX relating to
the businesses in which SDRC, CAMAX and their respective
subsidiaries are engaged, SDRC and CAMAX believe that the
consummation of the Merger will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the
proposed Merger on antitrust grounds will not be made or, if such a
challenge is made, that SDRC and CAMAX will prevail.
Limitations on Negotiations by CAMAX
Under the terms of the Merger Agreement, CAMAX has agreed that
neither CAMAX, its subsidiaries nor their respective officers,
directors, employees or agents will initiate or hold discussions,
negotiate or bargain with or entertain offers from any other party
concerning the acquisition or change in control of CAMAX, however
structured. CAMAX has further agreed that in the event CAMAX
receives an unsolicited offer relating to the type of transaction
contemplated by the Merger Agreement, CAMAX will immediately notify
SDRC in writing of the existence and contents of such offer, the
identity of the offeror and will provide SDRC with a copy of the
offer and any related correspondence. CAMAX has further agreed to
immediately inform any offeror of the existence of the Merger
Agreement and that CAMAX will reject any such third party offer.
Rights of Dissenting Shareholders
The following summary of the applicable provisions of Sections
302A.471 and 302A.473 of the Minnesota Business Corporation Act
("MBCA") is not intended to be a complete statement of such
provisions and is qualified in its entirety by reference to such
sections, the full texts of which are attached as Annex C to this
Proxy Statement/Prospectus. These sections should be reviewed
carefully by any holder who wishes to exercise dissenters' rights or
who wishes to preserve the right to do so, since failure to comply
with the procedures set forth herein or therein will result in the
loss of dissenters' rights.
Sections 302A.471 and 302A.473 of the MBCA provide for rights of
shareholders to dissent and obtain payment of the "fair value" of
their shares, as defined in the statute, in the event of a merger.
The procedures for asserting dissenters' rights are set forth in
such sections, the full texts of which are reprinted as Annex C to
this Proxy Statement/Prospectus. All references in Sections
302A.471 and 302A.473 and in this summary to a "shareholder" are to
the record holder of the Common Stock as to which rights are
asserted. A person having beneficial ownership of CAMAX Common
Stock that is held of record in the name of another person, such as
a broker, nominee, trustee or custodian, must act promptly to cause
the record holder to follow the steps summarized below properly and
in a timely manner in order to perfect whatever dissenters' rights
the beneficial owner may have. Shareholders who wish to assert
their dissenters' rights must fully comply with the statutory
requirements in order to preserve the right to obtain payment for
their shares.
Any shareholder who wishes to dissent and obtain payment for his or
her shares (i) must file with CAMAX, before the taking of the
shareholder vote on the Merger and the Merger Agreement at the
Special Meeting, a written notice stating the shareholder's
intention to demand payment of the fair value of his or her shares
if the Merger is effectuated, and (ii) must not vote his or her
shares for adoption of the Merger and the Merger Agreement. Such
notice must be filed at CAMAX's executive offices, 7851 Metro
Parkway, Minneapolis, Minnesota 55425, and should specify the
shareholder's name and mailing address, the number of shares of
CAMAX Common Stock owned and that the shareholder intends to demand
the value of his or her shares. This written demand must be in
addition to and separate from any proxy or vote against the Merger
and the Merger Agreement. Voting against, abstaining from voting or
failing to vote on the Merger will not constitute a demand for
appraisal or the required written notice described in (i) above. A
shareholder must satisfy requirement (ii) above by voting against
approval of the Merger in person at the Special Meeting or by proxy.
In addition, a shareholder may satisfy requirement (ii) above by
abstaining from voting his or her shares. The shareholder can so
abstain by not voting in favor of approval of the Merger and the
Merger Agreement at the Special Meeting. A shareholder's failure
to vote against the Merger will not constitute a waiver of
dissenters' rights. However, if a shareholder returns a signed
proxy but does not specify a vote against adoption of the Merger and
the Merger Agreement or direction to abstain, the proxy will be
voted for adoption of the Merger and the Merger Agreement, which
will have the effect of waiving that shareholder's dissenters'
rights.
A shareholder of CAMAX may not assert dissenters' rights as to less
than all of the shares of CAMAX Common Stock registered in such
holder's name except where certain shares are beneficially owned by
another person but registered in such holder's name. If a record
owner, such as a broker, nominee, trustee or custodian, wishes to
dissent with respect to shares beneficially owned by another person,
such shareholder must dissent with respect to all of such shares and
must disclose the name and address of the beneficial owner on whose
behalf the dissent is made. A beneficial owner of CAMAX Common
Stock who is not the record owner may assert dissenters' rights as
to shares held on such person's behalf, provided that such
beneficial owner submits a written consent of the record owner to
CAMAX at or before the time such rights are asserted.
After approval of the Merger and the Merger Agreement by the
shareholders at the Special Meeting, the Surviving Corporation will
send a written notice to each shareholder who filed a written demand
for dissenters' rights. The notice will contain the address to
which the shareholder must send a demand for payment and the stock
certificates in order to obtain payment and the date by which they
must be received, a form to be used in connection therewith and
other related information.
In order to receive fair value for his or her shares, a dissenting
shareholder must, within 30 days after the date such notice was
given, send his or her stock certificates and all other information
specified in the notice from Surviving Corporation to the address
specified in such notice. A dissenting shareholder will retain all
rights as a shareholder until the Effective Date. After a valid
demand for payment, the related stock certificates and other
information are received, or after the Effective Date, whichever is
later, Surviving Corporation will remit to each dissenting
shareholder who has complied with statutory requirements the amount
Surviving Corporation estimates to be the fair value of such
shareholder's CAMAX Common Stock, with interest commencing five days
after the Effective Date at a rate prescribed by statute. Such
remittance will be accompanied by Surviving Corporation's closing
balance sheet and statement of income for a fiscal year ending not
more than 16 months before the Effective Date, together with the
latest available interim financial data, an estimate of the fair
value of the shareholder's shares and a brief description of the
method used to reach the estimate, a brief description of the
procedure to be followed demanding supplemental payment, and copies
of Sections 302A.471 and 302A.473.
If the dissenting shareholder believes that the amount remitted by
the Surviving Corporation is less than the fair value of such
holder's shares, plus interest, the shareholder may give written
notice to the Surviving Corporation of such holder's own estimate of
the fair value of the shares, plus interest, within 30 days after
the mailing date of the remittance and demand payment of the
difference. Such notice must be given at the Surviving
Corporation's executive offices at the address set forth above. A
shareholder who fails to give such written notice within this time
period is entitled only to the amount remitted by the Surviving
Corporation.
Within 60 days after receipt of a demand for supplemental payment,
the Surviving Corporation must either pay the shareholder the amount
demanded or agreed to by such shareholder after discussion with the
Surviving Corporation or petition a court for the determination of
the fair value of the shares, plus interest. The petition shall
name as parties all shareholders who have demanded supplemental
payment and have not reached an agreement with the Surviving
Corporation. The court, after determining that the shareholder or
shareholders in question have complied with all statutory
requirements, may use any valuation method or combination of methods
it deems appropriate to use, whether or not used by the Surviving
Corporation or the dissenting shareholder, and may appoint
appraisers to recommend the amount of the fair value of the shares.
The court's determination will be binding on all shareholders of the
Surviving Corporation who properly exercised dissenters' rights and
did not agree with the Surviving Corporation as to the fair value of
the shares. Dissenting shareholders are entitled to judgment for
the amount by which the court-determined fair value per share, plus
interest, exceeds the amount per share, plus interest, remitted to
the shareholders by the Surviving Corporation. The shareholders
shall not be liable to the Surviving Corporation for any amounts
paid by the Surviving Corporation which exceed the fair value of the
shares as determined by the court, plus interest. The costs and
expenses of such a proceeding, including the expenses and
compensation of any appraisers, will be determined by the court and
assessed against the Surviving Corporation, except that the court
may, in its discretion, assess part or all of those costs and
expenses against any shareholder whose action in demanding
supplemental payment is found to be arbitrary, vexatious or not in
good faith. The court may award fees and expenses to an attorney
for the dissenting shareholders out of the amount, if any, awarded
to such shareholders. Fees and expenses of experts or attorneys may
also be assessed against any person who acted arbitrarily,
vexatiously or not in good faith in bringing the proceeding.
The Surviving Corporation may withhold the remittance of the
estimated fair value, plus interest, for any shares owned by any
person who was not a shareholder or who is dissenting on behalf of
a person who was not a beneficial owner on January 17, 1996, the
date on which the proposed Merger was first announced to the public
(the "Public Announcement Date"). The Surviving Corporation will
forward to any such dissenting shareholder who has complied with all
requirements in exercising dissenters' rights the notice and all
other materials sent after shareholder approval of the Merger and
the Merger Agreement to all shareholders who have properly exercised
dissenters' rights, together with a statement of the reason for
withholding the remittance and an offer to pay the dissenting
shareholder the amount listed in the materials if the shareholder
agrees to accept that amount in full satisfaction. The shareholder
may decline this offer and demand payment by following the same
procedure as that described for demand of supplemental payment by
shareholders who owned their shares as of the Public Announcement
Date. Any shareholder who did not own shares on the Public
Announcement Date and who fails properly to demand payment will be
entitled only to the amount offered by the Surviving Corporation.
Upon proper demand by any such shareholder, rules and procedures
applicable in connection with receipt by the Surviving Corporation
of the demand for supplemental payment given by a dissenting
shareholder who owned shares on the Public Announcement Date will
also apply to any shareholder properly giving a demand but who did
not own shares of record or beneficially on the Public Announcement
Date, except that any such shareholder is not entitled to receive
any remittance from the Surviving Corporation until the fair value
of the shares, plus interest, has been determined pursuant to such
rules and procedures.
Shareholders considering exercising dissenters' rights should bear
in mind that the fair value of their shares determined under
Sections 302A.471 and 302A.473 could be more than, the same as or,
in certain circumstances, less than the consideration they would
receive pursuant to the Merger Agreement if they do not seek
appraisal of their shares, and that the opinion of any investment
banking firm as to fairness, from a financial point of view, is not
an opinion as to fair value under such Sections.
Conduct Pending Merger; Representations and Warranties
The Merger Agreement contains certain covenants of the parties which
must be performed as a condition to the parties' consummation of the
Merger. Both SDRC and CAMAX have agreed to cooperate with each
other; allow access to each of their business operations, corporate
information and personnel, and use reasonable efforts to cause the
Merger to qualify for pooling of interests accounting. CAMAX has
further agreed to the following: (i) until the Effective Date,
CAMAX will conduct its business in the ordinary course and will
refrain from making any individual disbursements or commitments in
excess of $150,000 subject only to planned disbursements or those
made in accordance with CAMAX's Bonus Plan; (ii) all of CAMAX's
subsidiaries will be wholly-owned by CAMAX or Point Control Co.;
(iii) until the Effective Date and except for the valid exercise of
options granted under the CAMAX Option Plans or the CAMAX Non-Qualified Options,
CAMAX's capital structure will not change, nor
will CAMAX pay any dividends or make any distributions on its stock,
without SDRC's prior written consent; (iv) until the Effective Date,
CAMAX will not negotiate with any other party concerning the
acquisition or change of control of CAMAX; (v) CAMAX will not grant
any new options under the CAMAX Option Plans or otherwise; (vi)
CAMAX will call a meeting of its shareholders for the purpose of
voting on the Merger and the Merger Agreement; (vii) CAMAX must use
its best efforts to cause its directors, officers and affiliates not
to sell any shares of SDRC Common Stock until it is legally
appropriate to do so; and (viii) CAMAX will make available to SDRC
for review certain of its tax files and returns.
In addition, SDRC has agreed to the following: (i) SDRC will
prepare and file registration statements to register its stock to be
issued in the Merger and the stock to be issued on the exercise of
options; (ii) SDRC may continue or terminate CAMAX's employee
benefit plans, but such plans will continue in force until
terminated and SDRC will honor previously vested rights and credits
for service under CAMAX's employee benefit plans; (iii) SDRC will
file all reports with the Commission necessary to allow CAMAX
shareholders who are deemed affiliates to sell their SDRC Common
Stock; (iv) SDRC will indemnify CAMAX's or its Subsidiaries'
officers, directors or employees for acts or omissions which
occurred prior to the Effective Date to the extent such
indemnification would be required under Minnesota law; (v) SDRC will
provide CAMAX with copies of all Commission reports and filings; and
(vi) listing on Nasdaq National Market the shares of SDRC Common
Stock to be issued in the Merger.
SDRC, Acquisition Corp. and CAMAX have also made numerous
representations and warranties to each other with respect to
financial and other matters. These include, without limitation,
representations and warranties to the effect that both SDRC and
CAMAX have the corporate power and authorization to enter into the
proposed transaction, that each will have provided the other with
financial statements, and that SDRC has enough authorized SDRC
Common Stock with which to accomplish the proposed transaction.
CAMAX also represented and warranted, without limitation, that (i)
it has good title to its assets and properties and that its leases
are in order; (ii) there are no undisclosed violations of ERISA,
tax, securities, environmental laws or other laws; (iii) it has made
full disclosure of all of CAMAX's inventory, contracts, intellectual
property, insurance policies, bank matters, employee benefit plans,
employee matters and international business matters; (iv) CAMAX has
appropriate intellectual property protections; and (v) CAMAX has
received a fairness opinion and tax opinion in connection with the
Merger. SDRC and Acquisition Corp. also represented and warranted
that (i) they had completed their due diligence of CAMAX; (ii) they
had delivered to CAMAX copies of all of their periodic reports
prepared and filed with the Commission pursuant to the Exchange Act,
and that such reports are complete and accurate; (iii) except as
disclosed, there has been no material adverse change in SDRC's
business; and (iv) to SDRC's knowledge, neither it nor Acquisition
Corp. has taken or agreed to take any actions which would prevent
the Merger from qualifying as a tax free transaction.
No representations or warranties made by either CAMAX or SDRC and
Acquisition Corp. will survive beyond the Retention Period described
in the Escrow Agreement. Thereafter, neither CAMAX, SDRC,
Acquisition Corp. nor any officer or director of any of them will
have any liability or obligation with respect to such
representations or warranties, with the exception of any
misrepresentations, breaches of warranties or violations of
covenants that were made with intent to defraud. See "Annex A -
Agreement of Merger and Plan of Reorganization."
Where any of the representations and warranties of CAMAX or other
covenants and conditions are qualified in the Merger Agreement by
"knowledge" or "best knowledge," such term has been defined in the
Merger Agreement to mean the actual knowledge of the current members
of the board of directors and officers through and including the
vice president level of CAMAX and its subsidiaries, as that
knowledge has been obtained in the normal conduct of business and
following a reasonable investigation by such individuals. In the
Merger Agreement, where the term "Material Adverse Effect" is used
to qualify a representation and warranty, covenant or condition with
respect to any party, it means any single or a series of related
conditions, events, changes or occurrences that have or may
reasonably be expected to have a financially adverse effect on the
business, operations, results of operations and/or financial
condition of such party and its subsidiaries, if taken as a whole,
in the amount of $125,000 or more.
Conditions to Closing
The Merger Agreement must be approved by the affirmative vote of a
majority of the shares of CAMAX Common Stock outstanding on the
Record Date.
In addition, the obligations of CAMAX and SDRC to consummate the
Merger are also subject to receipt of an opinion of SDRC's counsel
with respect to certain tax matters. See "Federal Income Tax
Consequences" herein.
The obligations of SDRC and CAMAX to consummate the Merger are
further subject to various other conditions set forth in the Merger
Agreement, including, but not limited to, the receipt by all parties
of all necessary corporate approvals, receipt of all necessary
governmental and regulatory approvals, the Securities Act
registration of SDRC Common Stock and compliance with all applicable
state securities laws, identification of those CAMAX employees who
will be retained by SDRC, SDRC Common Stock being approved for
listing on the Nasdaq National Market, the execution of the Escrow
Agreement, the absence at the Effective Date of any material
actions, proceedings or investigations of any kind pending or
threatened with respect to the transactions contemplated by the
Merger Agreement and the filing of a pre-merger notification with
the Department of Justice and the Federal Trade Commission under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 and the
expiration of all applicable waiting periods.
SDRC's obligation to consummate the Merger is further conditioned,
without limitation, upon the following: CAMAX's representations and
warranties being true and correct as of the dates set forth in the
Merger Agreement; CAMAX having performed all of its covenants and
obligations on or prior to the Effective Date; delivery and review
of CAMAX's audited financial statements for the year ended December
31, 1995; assurances by letter from SDRC's and CAMAX's accountants
that the Merger may be accounted for as a pooling of interests;
holders of not more than 10% of the outstanding shares of CAMAX
Common Stock having exercised dissenters' rights; CAMAX's
liabilities on the December 31, 1995 audited balance sheet not
exceeding by 20% the liabilities on CAMAX's audited balance sheet
dated December 31, 1994; CAMAX shareholders' equity on the audited
balance sheet dated December 31, 1995 being not less than the
shareholders' equity on the audited balance sheet dated December 31,
1994; receipt of an opinion from CAMAX's intellectual property
counsel; receipt of an opinion from CAMAX's corporate counsel;
receipt of material consents necessary to permit SDRC to continue
CAMAX's business after the Effective Date; severance arrangements
being in place for non-retained CAMAX employees and the provision by
CAMAX of certain closing documents.
CAMAX's obligation to consummate the Merger is further conditioned,
without limitation, upon the following: SDRC's representations and
warranties being true and correct as of the dates set forth in the
Merger Agreement; SDRC having performed all of its covenants and
obligations on or prior to the Effective Date; receipt of an opinion
from SDRC's corporate counsel and the provision by SDRC of certain
closing documents.
In the event certain material conditions to the parties'
obligations to close, including, but not limited to, receipt of
certain legal opinions, tax opinions or accountants' letters with
respect to the treatment of the Merger as a pooling of interests,
are waived by the parties, SDRC and CAMAX undertake to file a post-effective
amendment to its Registration Statement and will re-solicit the approval of the
Merger by the CAMAX shareholders
pursuant to an amended Proxy Statement/Prospectus contained in the
amended Registration Statement.
Amendment; Termination
The Merger Agreement may be amended, modified or supplemented by the
written agreement of each of the parties, upon the authorization of
each company's respective Board of Directors and without further
approval of CAMAX's shareholders, except that no amendment,
modification or supplement may be effected without CAMAX shareholder
approval if to do so would violate any applicable provisions of law.
The Merger Agreement may be terminated and the Merger abandoned at
any time prior to the Effective Date by written notice delivered by
SDRC to CAMAX or by CAMAX to SDRC in the following instances: (a) by
SDRC and Acquisition Corp. if any conditions precedent to closing
the transaction to be satisfied or performed by CAMAX have not been
satisfied or waived on or before the Effective Date; (b) by CAMAX if
any conditions precedent to closing the transaction to be satisfied
or performed by SDRC or Acquisition Corp. have not been satisfied or
waived on or before the Effective Date; (c) by either SDRC or CAMAX
if the Merger is not consummated by June 30, 1996; or (d)
automatically if the CAMAX shareholders fail to approve the Merger
Agreement.
Effect on CAMAX Employees
SDRC intends to employ some number of the employees of CAMAX but is
not obligated to do so. In this regard, SDRC shall, prior to the
Effective Date, identify those employees of CAMAX to be retained by
SDRC subsequent to the Effective Date. After the Effective Date,
pursuant to the Merger Agreement, SDRC will have the right to
continue, amend or terminate any or all of the CAMAX employee
benefit plans ("Benefit Plans") in accordance with their terms and
applicable law; however, until SDRC takes such action, the Benefit
Plans will continue in force for the benefit of any CAMAX employees
who have any present or future entitlement to benefits under such
Benefit Plans. SDRC will honor the obligations of CAMAX with
respect to vested rights under Benefit Plans and agreements of CAMAX
relating to CAMAX employees in accordance with the terms of such
vested rights. SDRC will also credit all employees of CAMAX and its
Subsidiaries with all service with CAMAX and its Subsidiaries for
purposes of eligibility to participate, eligibility for benefits,
calculation of benefits and vesting under any of Surviving
Corporation's or SDRC's existing or future employee benefit plans,
programs or arrangements under which the right to or the amount of
benefits is based on the service of such employees. See "Interests
of Certain Persons in the Merger" herein.
Interests of Certain Persons in the Merger
The Board of Directors of CAMAX was aware of the interests of
certain persons in the Merger described below and considered them,
among other matters, in approving the Merger Agreement and the
transactions contemplated thereby.
CAMAX's Directors and Officers. Acquisition Corp. will be the
Surviving Corporation of the Merger, will change its name to CAMAX
Manufacturing Technologies, Inc, an Ohio corporation, and will be a
wholly owned subsidiary of SDRC upon consummation of the Merger.
The directors of Acquisition Corp. immediately prior to the
Effective Date will continue as the directors after the Effective
Date, and the officers of Acquisition Corp. immediately prior to the
Effective Date will continue as the initial officers of Surviving
Corporation after the Effective Date. After the Effective Date, no
current officer or director of CAMAX will remain as an officer or
director of Surviving Corporation.
Stock Options. The Agreement provides that outstanding options
issued pursuant to the CAMAX Option Plans and the CAMAX Non-Qualified Options
(including options held by CAMAX's executive
officers and directors) will be exercisable for shares of SDRC
Common Stock after the Effective Date of the Merger. Of the
___________ options outstanding on the Record Date, __________ were
held by Mr. Majteles, __________ were held by Mr. Furness and
__________ were held by other directors and officers of CAMAX.
Indemnification of Directors and Officers. SDRC has agreed that,
from and after the Effective Date, SDRC and Surviving Corporation
will indemnify each person who is at the Effective Date, or has been
at any time prior to the Effective Date, an officer, director or
employee of CAMAX or any of the Subsidiaries, for judgments,
penalties, fines, including, without limitation, excise taxes
against such officers, directors or employees, with respect to an
employee benefit plan settlement, and reasonable expenses, including
attorneys' fees and disbursements, incurred by such person in
connection with a proceeding, to the extent such indemnification
would be required under Section 302A.521 of the MBCA as in effect on
the Effective Date.
Employment Offer Letters. In connection with the Merger, SDRC has
entered into letter agreements (the "Offer Letters") with Mr.
Furness, all Vice Presidents of CAMAX and the Controller of CAMAX
concerning each such individual's employment with SDRC following the
Merger. The Offer Letters provide for a severance payment to each
of the Vice Presidents and Controller of CAMAX equal to one-year's
salary if such employee is terminated other than for cause during
the first 24 months following the Effective Date. Mr. Furness's
Offer Letter states that he will be employed through December 31,
1996, unless earlier terminated by SDRC, and at that time, if his
employment is not continued with SDRC and provided he is not
terminated for cause, he shall be entitled to a severance payment
equal to 18 months' salary. The Offer Letters also state that Mr.
Furness, the Vice Presidents and the Controller of CAMAX will be
employed by SDRC at their current salary and be entitled to
participate in a management bonus plan similar to the plan each such
employee participated in during 1995.
Severance Arrangement. Following the Merger, Mr. Majteles will not
be employed by SDRC or the Surviving Corporation. SDRC has agreed
to offer Mr. Majteles, upon consummation of the Merger, the
following severance package: (i) SDRC will ratify the payment to Mr.
Majteles of the maximum executive bonus award by CAMAX for the year
ended December 31, 1995 which is estimated to be $80,000, (ii) SDRC
will ratify payment to Mr. Majteles of a lump sum severance payment
equal to three years of Mr. Majteles' current annualized base pay
amount of $135,000, (iii) SDRC will ratify payment to Mr. Majteles
of a lump sum of $17,300 for use in obtaining the assistance of a
reputable executive out-placement firm, (iv) SDRC has agreed to
engage Mr. Majteles as a consultant for a period of six months
following the Effective Date for consideration of $11,250 per month,
and (v) SDRC has agreed to compensate Mr. Majteles at the rate of
$11,250 per month for his agreement not to compete with SDRC in the
CAD/CAM/CAE marketplace for 24 months.
CAMAX's Financial Advisors
WA&H has acted as financial advisor to CAMAX in connection with
the Merger. Pursuant to an engagement letter dated November 10,
1995 (the "Engagement Letter"), CAMAX retained WA&H to furnish
financial advisory and investment banking services with respect to
a possible sale or merger of CAMAX and to render an opinion as to
the fairness, from a financial point of view, to the CAMAX
shareholders of the consideration offered in any proposed sale or
merger. CAMAX selected WA&H as its financial advisor because of
WA&H's reputation and experience in the technical software industry.
In connection with its engagement of a financial advisor, CAMAX did
not interview any other financial advisors. The amount of
consideration to be received by CAMAX shareholders in the Merger was
determined through negotiations between CAMAX management and SDRC
and not by WA&H, although WA&H did assist CAMAX management in these
negotiations.
WA&H is a nationally recognized investment banking firm and is
regularly engaged in the valuation of businesses and securities in
connection with mergers and acquisitions, negotiated underwritings,
secondary distributions of listed and unlisted securities, private
placements and valuations for corporations.
Pursuant to the Engagement Letter, CAMAX has agreed to pay WA&H,
upon consummation of the Merger, a transaction fee (the "Transaction
Fee") of $250,000. Also pursuant to the Engagement Letter, CAMAX
paid WA&H a nonrefundable retainer fee (the "Retainer Fee") of
$25,000 upon execution of the Engagement Letter and a nonfundable
opinion fee (the "Opinion Fee") of $125,000 upon the rendering of
WA&H's opinion. The Retainer Fee and the Opinion Fee will be
credited against the Transaction Fee. Payment of the Transaction
Fee is contingent upon consummation of the Merger. CAMAX has also
agreed to reimburse WA&H for its reasonable out-of-pocket expenses,
up to $15,000, and to indemnify WA&H against certain liabilities
relating to or arising out of services performed by WA&H as
financial advisor to CAMAX. The terms of the Engagement Letter,
which are customary in transactions of this nature, were negotiated
at arm's length between CAMAX and WA&H, and the CAMAX Board of
Directors was aware of such fee arrangement at the time of its
approval of the Merger Agreement.
Opinion of Wessels, Arnold & Henderson
WA&H rendered its oral opinion (subsequently confirmed in writing on
January 16, 1996) on January 13, 1996 to the CAMAX Board of
Directors that, as of such date and based on the procedures
followed, factors considered and assumptions made by WA&H as set
forth therein, the consideration to be received by the holders of
CAMAX Common Stock pursuant to the Merger Agreement is fair from a
financial point of view to the holders of CAMAX Common Stock. A
copy of the WA&H opinion dated as of the date of this Proxy
Statement/Prospectus (the "Wessels Opinion"), which sets forth the
assumptions made, factors considered, the scope and limitations of
the review undertaken and the procedures followed by WA&H is
attached to this Proxy Statement/Prospectus as Annex B. CAMAX
shareholders are urged to read the Wessels Opinion in its entirety.
The summary of the Wessels Opinion set forth herein is qualified in
its entirety by reference to the Wessels Opinion. The Wessels
Opinion applies only to the fairness of the consideration to be
received by the CAMAX shareholders as provided by the terms of the
Merger Agreement and should not be deemed to constitute a
recommendation by WA&H to CAMAX shareholders to vote in favor of any
matter presented in this Proxy Statement/Prospectus. The CAMAX
Board of Directors did not impose any limitations on the scope of
the investigation of WA&H with respect to rendering its opinion.
In connection with its review of the Merger, and in arriving at
its opinion, WA&H has: (i) reviewed and analyzed the financial
terms of the Merger Agreement and various related documents, (ii)
reviewed and analyzed certain historical and projected financial
statements of CAMAX provided by CAMAX's management, (iii) reviewed
and analyzed certain historical and projected financial statements
provided by SDRC's management, (iv) reviewed and analyzed certain
historical business and financial information relating to both CAMAX
and SDRC, (v) conducted discussions with members of the senior
management of CAMAX and SDRC with respect to the business prospects
of CAMAX and SDRC, (vi) reviewed and analyzed certain other
information related to the Merger, (vii) reviewed the financial
terms, to the extent publicly available, of certain comparable
merger transactions, and (viii) participated in discussions and
negotiations among representatives of CAMAX and SDRC and their
respective financial and legal advisors. With respect to the
financial projections for SDRC, WA&H relied upon the estimates
verbally provided by SDRC. With respect to the financial
projections for CAMAX, WA&H compared CAMAX's historical financial
budgets to CAMAX's actual historical financial results. WA&H found
that CAMAX's budgeting process had been reasonably accurate in
predicting its forward-looking results. Therefore, in its analysis,
WA&H made no adjustments to CAMAX's projected financial
performance.
Based on this information, WA&H performed a variety of analyses and
examinations of the Merger and considered such financial, economic
and market criteria as it deemed necessary in arriving at its
opinion. The following is a summary of the financial analyses
performed by WA&H in connection with the delivery of the Wessels
Opinion.
Comparable Company Analysis. WA&H used a comparable company
analysis to analyze CAMAX's operating performance relative to a
group of publicly traded companies which WA&H deemed for purposes of
its analysis to be comparable to CAMAX. In such analysis, WA&H
compared multiples of selected financial data for CAMAX with those
of the following publicly traded companies in the technical software
industry: Autodesk, Inc., MacNeal-Schwendler Corporation, Parametric
Technology Corporation, Softdesk, Inc. and SDRC (collectively, the
"Comparable Companies"). The Comparable Companies are all engaged
in the development, support and marketing of CAD software. The
comparable companies generally sell their products and services to
designers and engineers. Although such companies were considered
comparable to CAMAX for the purpose of this analysis based on
certain characteristics of their respective businesses, none of such
companies possessed characteristics identical to those of CAMAX.
WA&H calculated the following valuation multiples based on, as to
CAMAX, $32,600,000 (which assumes as of the date of the Wessels
Opinion, the exercise of all options issued pursuant to the CAMAX
Option Plans and the CAMAX Non-Qualified Options, except the
unvested options held by Mr. Majteles) to be offered as
consideration in the Merger, and, as to the Comparable Companies, on
market prices and other information available as of the date of the
Wessels Opinion. Multiples of future earnings were based on
projected earnings as estimated publicly by WA&H and First Call
Consensus, a Thompson Financial Services company. The mean and
median for market capitalization as a multiple of each of the
indicated statistics for CAMAX and the Comparable Companies is as
follows: (i) projected calendar year 1995 earnings per share, 33.4x
for CAMAX as compared to a mean of 26.0x and a median of 17.7x for
the Comparable Companies, and (ii) projected calendar year 1996
earnings per share, 16.7x for CAMAX, as compared to a mean of 17.8x
and a median of 14.3x for the Comparable Companies. In each of the
comparisons of the value to be achieved by the CAMAX shareholders in
the Merger as compared to the mean and median of the market values
realized by the shareholders of the Comparable Companies, the
multiples of operation results achieved by the CAMAX shareholders
was approximately equal to that realized by the shareholders of the
Comparable Companies.
Comparable Transactions. WA&H compared multiples of selected
financial data and other financial data relating to the proposed
Merger with multiples paid in, and other financial data from, 10
selected acquisitions ("Comparable Transactions") since 1991 of
technical software companies (i.e., companies in the markets for
computer-aided design, computer-aided engineering and electronic
design automation software). The Comparable Transactions were
selected based primarily on the target company's involvement in the
technical software industry. The Comparable Transactions all
involve companies that develop, support and market software products
that are used by engineers and designers for CAD, CAE or electronic
design. WA&H categorizes software companies that develop, support
and market software products that are used by engineers and
designers as "technical software" companies. In analyzing the
Comparable Transactions, WA&H examined the multiples of transaction
values to the latest twelve months' operating results in relation to
the projected growth rate of the target company at the time of the
acquisition. Although the multiples paid in the Comparable
Transactions were, on average, higher than the multiples proposed to
be paid to CAMAX by SDRC, the multiples paid in the Comparable
Transactions were lower when adjusted for the expected growth rate
of the respective target companies. WA&H believes that there is a
direct correlation between the expected growth rate of the target
company and the price that the acquiring company is willing to pay.
WA&H calculated the following valuation multiples based on
$32,600,000 to be offered as consideration in the Merger, and, as to
the Comparable Transactions, on the consideration paid to the target
company. Multiples of latest twelve month revenue, latest twelve
month operating income and latest twelve month net income, were
based on data provided by Securities Data Corporation and WA&H. The
mean and median for the value of the transaction as a multiple of
each of the indicated statistics for CAMAX and the Comparable
Transactions is as follows: (i) latest twelve months revenue, 1.6x
for CAMAX as compared to a mean of 4.5x and a median of 3.2x for the
Comparable Transactions, (ii) latest twelve months operating income,
22.0x for CAMAX, as compared to a mean of 33.8x and a median of
23.5x for the Comparable Transactions, (iii) latest twelve months
net income, 33.4x for CAMAX as compared to a mean of 50.3x and a
median of 40.7x for the Comparable Transactions. WA&H then compared
the multiple of operating income and the multiple of net income for
each of the selected transactions to the estimated growth rate for
each target company at the time of the transaction. The growth
rates used were based on information provided by WA&H. The mean and
median for the value of the multiple of operating income divided by
the company's estimated growth rate for CAMAX and the Comparable
Transactions is 1.5x for CAMAX as compared to a mean of 1.3x and a
median of 1.2x for the Comparable Transactions. The mean and median
for the value of the multiple of net income divided by the estimated
growth rate for CAMAX and the Comparable Transactions is 2.2x for
CAMAX as compared to a mean of 1.9x and a median of 1.5x for the
Comparable Transactions. In each of the comparisons of the value to
be achieved by the CAMAX shareholders in the Merger as compared to
the mean and median of the market values realized by the
shareholders of the target companies in the Comparable Transactions,
the multiples of operation results achieved by the CAMAX
shareholders was approximately equal to that realized by the
shareholders of the target companies in the Comparable
Transactions.
Discounted Cash Flow Analysis. WA&H estimated present values of
CAMAX using a discounted cash flow analysis based on projections of
future operations prepared by CAMAX's management. WA&H calculated
present values of projected operating cash flows after net changes
to working capital over the period between March 31, 1996 and
December 31, 1999 using discount rates ranging from 14% to 22%.
WA&H calculated approximate terminal values of CAMAX as of December
31, 1999 of 7.5x CAMAX's calendar year 1999 operating income. WA&H
determined this multiple by analyzing the relationship between the
Comparable Companies' current projected growth rate and the
Comparable Companies' projected 1996 operating income multiple and
applying this relationship to CAMAX's estimated future growth rate
as of 1999. The terminal value was discounted to present value
using the same discount rates as the cash flows. WA&H calculated an
implied valuation of CAMAX by adding the present value of the cash
flows and the terminal value and then applying a 30% discount to
reflect the fact that CAMAX Common Stock is privately held and
therefore less liquid than stock of comparable publicly-held
companies. The implied value of CAMAX based on this analysis ranged
from $18,431,000 to $32,108,000. WA&H determined that, at the time
of the Wessels Opinion, the value of the consideration to be
received by the CAMAX shareholders in the Merger of $32,600,000 was
greater than the present value of CAMAX's cash flows under the range
of discounted cash flow valuations discussed above.
The preparation of a fairness opinion is a complex process and is
not necessarily susceptible to partial analysis or summary
description. WA&H believes that its analyses must be considered as
a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all factors and
analyses, could create an incomplete or misleading view of the
processes underlying its opinion. In arriving at its fairness
determination, WA&H considered the results of all such analyses. In
view of the wide variety of factors considered in connection with
its evaluation of the fairness of the consideration to be received
by the shareholders of CAMAX in the Merger, WA&H did not find it
practicable to assign relative weights to the factors considered in
reaching its opinion. No company or transaction used in the above
analysis as a comparison is identical to CAMAX or SDRC or the
proposed Merger. The analyses were prepared solely for purposes of
WA&H providing its opinion as to the fairness of the Merger
consideration pursuant to the Merger Agreement to CAMAX and do not
purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold. Analyses based upon
forecast of future results are not suggested by such analyses. As
described above, the Wessels Opinion and presentation to the CAMAX
Board of Directors was one of the many factors taken into
consideration by the CAMAX Board of Directors in making its
determination to approve the Merger and the Merger Agreement.
WA&H assumed and relied upon the accuracy and completeness of the
financial, legal, tax, operating and other information provided by
CAMAX and SDRC and did not independently verify such information.
Further, WA&H assumed that the Merger will be accounted for as a
pooling of interests. WA&H did not perform an independent
evaluation or appraisal of any of the respective assets or
liabilities of CAMAX. With respect to financial forecasts, WA&H
assumed that these forecasts were reasonably prepared on bases
reflecting the best currently available estimates and judgments of
the management of CAMAX and SDRC, as the case may be, as to the
respective future financial performance of CAMAX and SDRC. The
Wessels Opinion was based on the conditions as they existed and the
information available to WA&H on the date of the opinion. Events
occurring after the date of the Wessels Opinion may materially
affect the assumptions used in preparing the WA&H Opinion. Further,
the Wessels Opinion speaks only as of the date thereof and is based
on the conditions as they existed and information with which WA&H
was supplied as of the date thereof.
The full text of the opinion of Wessels, Arnold & Henderson, L.L.C.,
a copy of which is attached as Annex B to this Proxy
Statement/Prospectus, includes certain qualifications and
assumptions made, matters considered and limitations on the reviews
undertaken. The summary and description of the opinion of Wessels,
Arnold & Henderson, L.L.C. contained herein are qualified in their
entirety by reference to the full text of the opinion, and it is
recommended that holders of CAMAX Common Stock read such opinion in
its entirety.
Effects of Merger
Upon consummation of the Merger, CAMAX will merge with and into
Acquisition Corp. which will change its name to CAMAX Manufacturing
Technologies, Inc., and CAMAX will cease to exist as a separate
entity. The Merger will not result in any material adverse effect
to the results of operation or financial condition of SDRC.
The Board of Directors of SDRC and Surviving Corporation after the
Merger is consummated will consist of all of the members of the
Boards of Directors of SDRC and Acquisition Corp. for the term for
which such directors were elected, subject to each company's Codes
of Regulations and in accordance with law. The officers of SDRC and
Surviving Corporation after the Merger is consummated will be those
officers of SDRC and Acquisition Corp., respectively, who are in
office at the Effective Date, subject to each company's Codes of
Regulations and in accordance with law.
Among the most important effects of the Merger, SDRC anticipates
that the growth in resources will provide for the swift and
effective augmentation of SDRC's CAM business. The products
currently being developed and offered by CAMAX are complementary to
SDRC's and are expected to strengthen and enhance SDRC's position in
the CAM industry in the near future following the Merger. Moreover,
because CAMAX products and personnel are expected to be easily
integrated into SDRC, SDRC anticipates being able to capitalize on
the integration of complementary companies.
RESALE OF SDRC COMMON STOCK ISSUED IN THE MERGER
No restrictions on the sale, pledge, transfer or other disposition
of the shares of SDRC Common Stock issued pursuant to the Merger
will be imposed solely as a result of the Merger, other than
restrictions on the transfer of such shares issued to any CAMAX
shareholder who may be deemed to be an "affiliate" of SDRC or CAMAX
for purposes of Rule 145 promulgated under the Securities Act.
Directors, executive officers or holders of 10% or more of the
outstanding shares of CAMAX Common Stock may be deemed to be
affiliates of CAMAX for purposes of Rule 145. Affiliates may not
sell, pledge, transfer or otherwise dispose of the shares of SDRC
Common Stock issued to them in exchange for their shares of CAMAX
Common Stock, unless the requirements of Rule 145(d) are satisfied
or the sale, pledge, transfer or disposition is otherwise in
compliance with the Securities Act and the rules and regulations
promulgated thereunder. Generally, under Rule 145(d), an affiliate
of CAMAX will be permitted to sell, pledge, transfer or otherwise
dispose of his or her shares of SDRC Common Stock received pursuant
to the Merger if one of the following is satisfied:
(1) The shares are sold in "broker's transactions" or in
transactions directly with a "market maker." The affiliate does not
solicit or arrange for the solicitation of purchase orders or make
any payments in connection with the sale to anyone other than the
broker or market maker, and the number of shares sold, together with
all other sales of SDRC Common Stock by such affiliate within the
preceding three months, does not exceed one percent of the
outstanding shares of SDRC Common Stock; or
(2) The affiliate is not an affiliate of SDRC and has been the
beneficial owner of the SDRC Common Stock for at least two years,
and there is certain publicly available information regarding SDRC.
In addition, shares of SDRC Common Stock issued to affiliates in the
Merger may not be sold, pledged, transferred or otherwise disposed
of until such time as financial results covering at least 30 days of
combined operations of SDRC and CAMAX have been published within the
meaning of Section 201.01 of the Commission's Codification of
Financial Reporting Policies.
Share certificates for SDRC Common Stock issued to affiliates of
CAMAX will bear a legend as follows:
The shares of stock evidenced by this certificate are subject to
restrictions on transfer and may only be transferred after the
Issuer has received an opinion from its counsel that the transfer
will be in compliance with the requirements of Rule 145(d)
promulgated under the Securities Act of 1933. The Issuer will mail
a copy of Rule 145(d) to the shareholder without charge within five
(5) days after written request therefor.
The foregoing is only a general statement of the restrictions on the
disposition of the shares of SDRC Common Stock to be issued in the
Merger. Accordingly, those shareholders of CAMAX who may be
affiliates of CAMAX should confer with legal counsel with respect to
the resale restrictions.
STRUCTURAL DYNAMICS RESEARCH CORPORATION
Description of Business
SDRC is a leading international supplier of mechanical design
automation software and engineering services used by manufacturers
for the design, analysis, testing and manufacturing of mechanical
products. SDRC is also a leader in product data management ("PDM")
systems, which provide a comprehensive approach to the management
and control of engineering information. SDRC's products and
services significantly reduce product development time and cost,
resulting in superior product quality by enabling customers to
optimize product designs prior to production.
SDRC was incorporated under the laws of the State of Ohio in 1967.
During the past five years, it has restructured certain aspects of
its business. In 1994, SDRC and Siemens Nixdorf Informationssysteme
AG (SNI) formed a joint venture, SDRC Software and Services GmbH, to
supply mechanical CAE/CAD/CAM software and services in Central
Europe. In 1992, SDRC and Control Data Systems, Inc. established a
joint venture company, Metaphase Technology, Inc., to market product
data management software. In 1989, SDRC and Nissan Motor Co., Ltd.
established a Japanese joint venture company, ESTECH Corporation, to
provide engineering services in Japan and the Far East.
At December 31, 1995, SDRC and its subsidiaries had consolidated
assets of $193.5 million, consolidated liabilities of $116.1 million
and consolidated shareholders' equity of $77.4 million.
Software Products and Services
Software Products. SDRC's primary software products are a
comprehensive software system for mechanical design automation
("MDA") marketed under the I-DEAS Master Series (TM) name and PDM
software marketed under the Metaphase Series 2 name. These products
allow members of products development teams to design and optimize
a product concept and then track and manage data associated with
such a product throughout the development process.
I-DEAS (Integrated Design Engineering Analysis Software) Master
Series (TM) ("I-DEAS") is a family of tightly-integrated software
modules that automate the entire mechanical product development
process. I-DEAS is one of the most widely used mechanical design
automation software tools in the industry, with more than 127,000 I-DEAS
software licenses in use at more than 14,000 customer sites
worldwide.
I-DEAS allows manufacturers to design, simulate, test and optimize
manufacturing and prototype product concepts in a fraction of the
time required using standalone or partially integrated software
tools. With I-DEAS, users are able to create and view a "master
model," a solid representation of a product that precisely defines
its geometry and material characteristics. This master model is
easily understood by everyone concerned with the product, including
representatives from management, marketing and manufacturing. It
can be analyzed to evaluate the mechanical performance and
structural integrity of the design concept, as well as provide
information that can be used to optimize product performance.
Metaphase Series 2 tracks and manages data associated with a product
throughout its development process. Metaphase Series 2 is based on
the product line of Metaphase Technology, Inc. Metaphase Series 2
is a modular PDM system designed to provide the depth and breadth of
functionality users require to meet current and future data
management needs. The software assists users to improve the way
they create, share, access, define, manufacture and support their
products.
Services. SDRC also provides customers with technical applications
software support and maintenance, technical support, training and
consulting services. Technical applications software support and
maintenance service provides telephone "hotline" support, software
maintenance corrections for licensed I-DEAS products, products and
features as well as enhancement versions released during the term of
the contract, and documentation updates to support new vendor
hardware and other services that enhance and maintain the customer's
I-DEAS software investment.
SDRC provides basic training for each major I-DEAS software package.
Advanced training classes are offered for selected I-DEAS
applications to support continued growth of customer skills and to
increase the productivity of departments utilizing I-DEAS.
Building on its extensive knowledge of mechanical design automation
technology and engineering applications, SDRC also provides
engineering consulting services to improve the design of its
customers' products, as well as to improve its customers'
development process. In addition, advanced training and technology
transfer are provided to customers to enable them to integrate and
optimize their mechanical design automation investment. Advance
computer simulation methods and in-depth application expertise are
utilized for traditional or highly specialized computer technologies
including design audits, product design, troubleshooting and
engineering process design.
Legal Proceedings
Except for the following matters, SDRC is not a party to any
litigation other than ordinary routine litigation incidental to its
business. Beginning in September 1994 a total of 12 class action
lawsuits alleging various violations of the federal securities laws
and two derivative lawsuits alleging breaches of Ohio corporate law
were filed against SDRC following SDRC's public disclosure of
certain accounting irregularities. All of the complaints sought
unspecified damages. The class action cases were consolidated into
one case entitled In Re: Structural Dynamics Research Corporation
Securities Litigation, United States District Court, Southern
District of Ohio, Consolidated Master File No. C-1-94-630 (the
"Class Action Case"). Subsequently, the two derivative cases were
consolidated into one case entitled In Re: Structural Dynamics
Research Corporation Derivative Litigation, United States District
Court, Southern District of Ohio, Consolidated Master File No. C-1-94-650
(the "Derivative Case").
The Class Action Case represents a direct claim against SDRC by
certain named plaintiffs acting on behalf of a class of plaintiffs
consisting of certain purchasers of SDRC's common stock between
February 3, 1992 and September 14, 1994. In December 1995, SDRC and
plaintiffs' counsel in the Class Action Case entered into a
Memorandum of Understanding setting forth the terms of a proposed
settlement of this case. Pursuant to the proposed settlement, SDRC
will establish a settlement fund of $27.6 million consisting of
$17.6 million cash and $10 million in shares of SDRC Common Stock
(to be valued based on market prices at the time of distribution).
The settlement is subject to final approval of the United States
District Court which has not yet been obtained.
The Derivative Case remains pending. The legal theory of derivative
litigation is that the named plaintiffs, who are shareholders of the
corporation, are pursuing claims on behalf of the corporation
against third parties whose actions have injured the corporation but
against whom the corporation has refused to take independent action.
In such litigation the corporation is considered a "nominal"
defendant. In the Derivative Case, SDRC is therefore a "nominal"
defendant. The "real" defendants consist of various former officers
and employees of SDRC and certain of its directors. Since the
plaintiffs are theoretically acting on behalf of SDRC, any recovery
in this matter would be for the benefit of SDRC. However, SDRC
could nevertheless face exposure to liability through the legal
obligation, which could be applicable under certain circumstances,
to indemnify and hold harmless certain of the defendants against
whom a judgment might be rendered. Although there can be no
assurance as to the ultimate outcome of this matter, SDRC management
does not believe it will have a material adverse impact on the
financial condition of SDRC.
Based on the same facts which gave rise to the Class Action Case and
the Derivative Case, the Commission commenced a formal, private
investigation of SDRC in September 1994 which remains pending.
SDRC is fully cooperating with this investigation but cannot predict
its outcome.
During 1994 and 1995 SDRC carried $5 million of primary directors
and officers liability insurance coverage from the Federal Insurance
Company plus "excess liability coverage" from Agricultural Excess
and Surplus Insurance Company ("AESIC"), which provides $3 million
of such coverage, and from Old Republic Insurance Company ("Old
Republic"), which provides an additional $2 million of such
coverage. The directors and officers liability insurance, both
primary and excess, is potentially available with respect to the
Class Action Case and the Derivative Case because certain of SDRC's
directors and former officers are personal defendants in those
matters. Coverage under the excess policies is dependent upon first
exhausting the primary coverage. SDRC has come to an understanding
with the primary insurer with respect to its coverage, but the
excess carriers have to date denied coverage. On October 11, 1995,
SDRC and certain officers and directors named in the Class Action
Case and/or the Derivative Case filed a declaratory judgment action
against the excess carriers in a case entitled Structural Dynamics
Research Corporation, et al. v. Agricultural Excess and Surplus
Insurance Company, et al., Clermont County Court of Common Pleas,
Case No. 95-CV-9697. The action alleges that neither AESIC nor Old
Republic is entitled to rescind its policy or exclude any of the
named plaintiffs from coverage with respect to claims in the Class
Action Case or the Derivative Case. AESIC and Old Republic each
responded and have taken the position that they are entitled to
rescission and that all claims are excluded under the terms of the
policy. While SDRC intends to vigorously pursue this case, there
can be no assurance as to its ultimate outcome.
CAMAX MANUFACTURING TECHNOLOGIES, INC.
CAMAX originated as a division of National Computer Systems, Inc. in
1977 and was incorporated as a Minnesota corporation in 1981 under
the name CompuTool Corporation. Today, CAMAX is the largest company
in the world focused exclusively on the development and support of
CAM software for computerized numerical control ("CNC")
applications. CAMAX develops and markets software designed to
enhance the craftsmanship of its customers, increase the speed of
manufacturing and lower the cost of NC processes.
The CAD/CAM Industry
When CAMAX originated, the computer-aided-design-and-manufacturing
("CAD/CAM") industry was in its infancy, and all design through
manufacturing-related tasks performed with a computer, with the
exception of material resource planning applications, was considered
CAD/CAM. As the CAD/CAM market developed, increasingly more
software capabilities fell within the general category of CAD/CAM,
to the extent that a need for differentiation created the additional
category of CAE. Further development of the market, combined with
competitive forces in the manufacturing industry, drove the need to
catalog, store, and associate CAD/CAM/CAE data related to single
products or assemblies of parts, giving birth to yet another
computerized application for PDM. What was once CAD/CAM has grown
to become CAD/CAM/CAE and PDM. Today, the industry includes a broad
range of software products to facilitate design, analysis and
manufacturing for the mechanical, architectural, civil and
electrical engineering disciplines.
Engineers, designers, draftsmen, and programmers use CAD/CAM/CAE
software products to create models of products, structures,
assemblies, parts and processes. These models can then be viewed on
a graphics display screen and used to generate performance analysis,
documentation and processing instructions. All related data is
interrelated, linked and updated with PDM software. The economic
benefits which have led to the growth of the CAD/CAM/CAE and PDM
industry include:
(1) Generation of accurate digital model descriptions of the
designed objects which can subsequently be easily accessed for
reference, change, and transfer to other locations.
(2) Simulations and tests of performance characteristics can be
conducted so that optimized performance of the modeled objects and
manufacturing materials can be determined without the time and cost
of producing prototypes.
(3) Databases cataloging many products and instructions can be
utilized for subsequent projects to eliminate or reduce duplicative
effort.
(4) Revision of an element of a part or assembly can be made with an
immediate, corresponding revision to all affected parts or
assemblies.
(5) Transfer of the processing and machining data to production
machines can be accomplished to provide a closer association between
production and material resource requirements, to reduce time and
costs and to improve quality.
CAD, in its simplest form, can be described as the software that
allows users to draw, on-screen, the equivalent of paper blueprints.
In its more advanced form, CAD allows developing 3-dimensional
("3-D") models of the subject. By itself, the greatest benefit of
CAD is the time savings provided when a revision is required or when
a similar part or product is to be created. In conjunction with
other software, the benefits can be multiplied.
CAE is the broad category of analysis tools, typically used by
mechanical engineers to analyze material composition, stress, flow
and temperature dynamics. CAE software normally uses a
CAD-generated model and applies physical construction and ambient
conditions to the model for analysis. As a result of analysis, the
material selected for the product to be manufactured could be
changed. Often the shape of a part, the shape of a part feature or
the location of part features requires changing. Changes are made
on the model with the CAD software. The benefit that CAE software
provides is the ability to test materials, parts and assemblies
under various conditions to determine the best construction and
materials for given specifications, requirements or conditions,
without having to build or manufacture parts, assemblies or
constructions.
CAM is generally described as the broad category of software that is
used to drive manufacturing equipment or processes, and to
disseminate, collect and archive data to, on and from shop floor
equipment and personnel. Most often, CAM is used to describe
software that generates NC instructions for numerical control or CNC
machine tools, other terms being used for better defining specific
shop-floor related software applications.
NC/CNC machine tools were developed to accelerate manufacturing
through a level of automation that reduces human error and that
provides increased consistency among parts. Historically,
production of complex tools, parts, dies, and molds has required
individual machining by a skilled machinist. The scarcity of
skilled machinists contributes to the cost and delay involved in
complex machining operations. NC machines have enabled the partial
automation of these machining tasks. NC machines read preprogrammed
instructions and perform motions according to those instructions in
the proper order. CNC machines extend this concept one step further
by using internal memory and processors (controls) to store large
complicated programs and automated routines, and to rapidly generate
the signals for complex simultaneous machining motions. When
properly programmed, CNC machines can perform complex milling
operations more efficiently than skilled machinists utilizing manual
methods.
CAM software expedites the manufacturing processes, particularly the
complex milling and machining operations associated with mold, tool,
die and piece-part manufacturing because CAM systems are used to
generate these complex CNC programs efficiently and accurately. CAM
systems can generate CNC programs in a manner which provides
graphics aids to the operator for development of complex geometry
and cutting tool motion instructions. These CAM systems also allow
the operator to view a simulation of the program, of the cutting
tool and of the machine-tool motion as the program steps through its
execution sequence. The CNC programs are usually lengthy and a
magnetic medium or a directly wired or networked transmission is
typically used to send the programs from the programming source to
the CNC control.
CAM software, like CAE, receives part models from CAD systems.
Alternatively, the part can be "traced" with physical devices that
convert part shape to digital data (digitize), with optical
recognition systems that also digitize models, and with highly
precise laser digitizing devices. When a part model is received by
a CAM system, three possibilities exist. If the part is to be
machined, the CAM software can generate NC instructions to drive a
machine tool to manufacture the part. If the part is to be created
through a molding, stamping, casting or forging process, the CAD
model must be used to develop the mold or die surfaces to be
machined. This requires a CAM system with surface modeling
capabilities since creating machinable geometry for a mold or die is
also required; a mold or die is not simply the 3-D reverse of the
part. If the part is not manufacturable as designed, the model must
be modified for machining within the CAM system, or it must be
returned to the CAD system for modification and, perhaps analysis
after modification.
Iterations among CAD, CAM, and CAE software applications consume
product development time. In addition, tracking revisions and
modifications can become problematic. Associating individual
geometric or material changes of individual components to each other
and to the assemblies that comprise finished products can be
difficult, can create problems or confusion, and is always time
consuming. To alleviate this problem, software vendors began
development of PDM software, the demand for which is now gaining
momentum. PDM software works best where all the software
applications that are creating elements it catalogs, associates and
tracks are using the same underlying software base or architecture.
It is for this reason that large CAD/CAM/CAE companies are also
becoming the primary suppliers of PDM software.
Integrated systems provide the same underlying architecture for the
CAD, CAM and CAE functions, facilitating interchange of data and
data models among the various components. Stand-alone systems,
whether CAD, CAM, or CAE must rely on direct data translators or on
industry standard data formats to exchange data. Today, both types
of systems exist in all three software areas. CAMAX has stand-alone
CAM software, which relies on direct translators and the IGES, VDA
and DXF data exchange formats.
Recent Developments
Purchase of ManufacturingExpert. On August 9, 1994, CAMAX purchased
the assets for the ManufacturingExpert, a CAM software product, from
Autodesk, Inc. The purchase price for ManufacturingExpert was
$1,568,000. CAMAX paid $300,000 at the closing, assumed $68,000 in
liabilities and entered into a noninterest-bearing promissory note
for $1,200,000 in favor of Autodesk, Inc. payable in three equal
annual installments of $400,000. The purchase agreement between
CAMAX and Autodesk, Inc. contains a provision whereby payment of
certain amounts owing to Autodesk, Inc. will accelerate upon a
change in control of CAMAX and become immediately due and owing to
Autodesk, Inc.
In connection with CAMAX's acquisition of the ManufacturingExpert
assets from Autodesk, Inc., Autodesk, Inc. granted a license back to
CAMAX for the use of certain of the source code of the
ManufacturingExpert software. Under the terms of the license
agreement, Autodesk, Inc. may, at its option, terminate the license
agreement upon a change of control of CAMAX.
Merger of Point Control. In September 1994, CAMAX consummated a
merger with Point Control Co., an Oregon corporation ("Point
Control"), pursuant to which each issued and outstanding share of
Point Control common stock was converted into 17.75 shares of CAMAX
Common Stock and Point Control became a wholly-owned subsidiary of
CAMAX. Founded in 1984, Point Control developed and marketed
vertical application software, including its SmartCAM products, for
the general CAM segment of the CAD/CAM industry.
Obsolescence of ManufacturingExpert. While enhancing
ManufacturingExpert for the product's first maintenance release
under the CAMAX name, CAMAX determined that it could best deliver
and continue to deliver advanced NC functionality through its Camand
product, and that it would be more beneficial to its customers, and
more efficient and cost effective for CAMAX, to develop
ManufacturingExpert-like functionality for Camand and to deliver
future releases of Camand to ManufacturingExpert users than to
continue development of ManufacturingExpert. In the third quarter
of 1995, CAMAX announced a migration program for its
ManufacturingExpert users, with a goal of completing the migration
in 1996. By 1995 year end, CAMAX had delivered the Camand product
to over one half of its entire ManufacturingExpert customer base.
No further enhancements or releases are planned for the
ManufacturingExpert product.
CAMAX Products
CAMAX software now consists of two product families, Camand and
SmartCAM. Differentiation between the two families is best made
through complexity of part geometries, manufacturing processes, and
machine-tool motion required to produce the parts. CAMAX software
products address the needs of all manufacturers using NC and CNC
machine tools and rapid-prototyping equipment for producing
prototypes, parts, tooling, molds and dies. Key industries are
automotive; tool, die and mold makers; aerospace; general and
industrial machinery; consumer products; suppliers to all these
industries; and general job shops.
Camand, with surface modeling and machining capabilities geared for
geometrically complex parts and for machining with complex
machine-tool motion, is especially suited to mold and die work in
all industries, aerospace component manufacturing, and specialized
CNC machining applications requiring 4 and 5 axes in simultaneous
motion. Typical applications for Camand's ability to model and
machine geometrically complex parts are automotive stamping dies and
plastic injection molds in all industries. Applications requiring
complex machine tool motion are exemplified by the machining of
turbine blades and aircraft wing spars.
SmartCAM is geared for a wide variety of procedurally complex CNC
work. Automated and interactive features of the system were
developed with a focus on simplifying, modeling and optimizing the
NC machining process for various types of machine tools. SmartCAM
software allows users to generate NC programs with multiple NC
operations and efficient sequencing of operations for optimal
machine-tool motion. These capabilities make SmartCAM specially
suited for production machining applications where time savings are
multiplied over dozens, hundreds or thousands of parts. It is also
an ideal application where production CNC work and 3-axis surface
machining are both required from a single software product. Because
SmartCAM applications have a broad reach across multiple industries,
typical applications are best categorized by individual SmartCAM
application, but can be described, overall, as general piece-part
manufacturing, which comprises nearly 70% of the market using CNC
machine tools.
Camand. Camand comprises several modules which are combined to
deliver integrated packages for specific sectors of the
manufacturing markets. Camand software makes use of high-resolution
graphics with an interactive user interface supported by a mouse,
buttons and dials for dynamic pan, zoom, rotation and manipulation
of geometry. The recent version 10.0 release of Camand also
supports an increasingly popular, ergonomically engineered, user
interface device called the Spaceball, manufactured by the Spacetec
IMC Corporation, to offer an alternative to the combination of
mouse, buttons and dials.
General functionality delivered by the multiple modules of Camand
includes NC programming with interactive editing capabilities,
wireframe and surface modeling, dynamic visualization, NC
verification, machine-tool simulation, and translation from and to
nearly all CAD or CAD/CAM systems. In addition to selecting
standard packages for seat or network licensing, customers may also
select additional modules, assigning each for seat or network
licensing. Camand is supported on UNIX workstations and Intel-based
PCS running the Windows NT operating system.
Five separate packages, created by integrating different modules,
are marketed under the general name of Camand. The packages are
Camand Modeler, Camand NC, Camand Partmaker, Camand Machinist and
Camand Multax. All five packages, including the Camand Modeler, are
geared for users whose ultimate goal is a manufactured part. Each
software package includes a graphic user interface, data manager,
basic modeling functions, documentation, data translation and output
device drivers. Also included in each package is an easy-to-use
programming language which enables users to customize features for
added efficiency or corporate standards, to automate
parameter-driven, associative programming, and to automate
repetitive modeling or NC programming functions. Software modules
not included in packaged systems are available as purchasable
options.
Purchasable options are Camand Lathe, Camand Wire EDM, Camand NCV (a
visual machining verification application), bidirectional IGES and
VDA translators, and Viewmax, software used for high-resolution
shading of part models to check for surface continuity and
smoothness.
With the exception of the Camand Modeler, all Camand software
packages include the NC programming functionality and universal
postprocessor necessary to meet the needs of the intended market.
The various software packages support multiple NC/CNC machine tool
types and configurations from the simplest (Camand Partmaker) to the
most complex (CAMAX Multax), including machining centers, turning
centers, mills, lathes, lasers and wire EDM. Standard NC program
output is APT-CL which is used by the Camand postprocessor to
generate machine specific code to drive NC and CNC machine tools
with up to a 5-axis simultaneous motion.
The Camand applications, by nature, need to operate within various
CAD environments, and must therefore accept data from multiple
sources. CAMAX has invested much development effort to accommodate
data translation, and has differentiated the Camand product from
competitive offerings with continuous development and support of
industry standard data translators. Camand receives CAD data in the
IGES, VDA and DXF formats and exports model data in the IGES and VDA
formats. In addition, Camand exports data for rapid prototyping
systems in a format common to many of these, the STL file format.
SmartCAM. SmartCAM applications are based on technology that
incorporates attributes of the target machine tool into the computer
model as the user builds a toolpath. This allows users to predict
results and to optimize the toolpath for time and material savings
before the actual CNC machine code is generated. The technological
base of SmartCAM also allows users to customize and automate
SmartCAM applications to meet individual requirements.
The SmartCAM product family, originally developed for the PC
platform with subsequent migration to Unix workstations, comprises
seven separate and distinct applications, each targeting a specific
manufacturing process or machine-tool type, plus an additional six
optional modules. In addition, certain of the applications are
packaged together and offered at bundled pricing. The multiple
applications within the SmartCAM family provide CNC programming
capabilities across the broadest range of CNC machinery, and one of
the deepest ranges within individual machine-tool categories.
The SmartCAM Production Milling application accommodates production
environments using 3-axis CNC milling machines for producing piece
parts with 2 1/2-axis machine tool motion, typical of high-volume
machining operations in large manufacturing companies and small job
shops. Parts machined with SmartCAM Production Milling are the most
common, typically incorporating multiple drilling, tapping,
threading, pocketing and profiling operations. Support for a
rotary axis enables rotating parts on a fixture to machine the part
from different directions, or to employ tombstone machining, the
mounting of multiple stock pieces on fixtures for automatic,
sequential rotation into machining position.
SmartCAM Advanced 3-D Machining incorporates all the capabilities of
Production Milling and adds a third axis of simultaneous motion, and
a fourth axis of positioning motion, enabling users to machine the
simpler of 3-dimensional surfaces in addition to all typical 2
1/2-axis machining operations. The combination of 2 1/2-axis
milling and surface machining enables Advanced 3-D Machining to
provide all the capabilities necessary to cut most machined parts.
SmartCAM FreeForm Machining includes all the functionality of
Advanced 3-D Machining and adds the ability to machine multiple,
complex surfaces. It is considered to be one of the fastest
applications in the industry in generating CNC programs across
geometry incorporating multiple surfaces. Because this application
has high machining functionality and accepts ACIS-based solid models
and complex IGES surface models for machining, it is gaining
acceptance as a partnership application for several ACIS-based CAD
suppliers.
SmartCAM Production Turning provides the CNC programming required
for piece-part production with 2-axis CNC lathes and supporting
linear, contour and groove roughing operations. Parts created with
2-axis lathes typically involve a single profile revolving about the
part axis, often having threads machined on the lathe. The simplest
of these parts can be represented by cylindrical shapes.
SmartCAM Advanced Turning elevates the CNC programming capabilities
of Production Turning for application to complex 4-axis lathes and
6-axis millturn centers, which are specialized CNC machine tools
that combine turning and machining operations on a single machine.
SmartCAM Advanced Turning enables programming both types of
machines to create complex parts with reduced fixturing, reduced
scrap, and increased quality. In addition to supporting these
complex machines, Advanced Turning provides all the capabilities of
Production Turning.
SmartCAM Advanced Wire EDM supports the growing category of
traveling wire electric discharge machines, which employ an
electrically charged wire moving through metal to generate the
piece-part. SmartCAM Advanced Wire EDM provides automated functions
that enable untended machine operation, especially important for
this machine type since the EDM process is slow, relative to other
machining operations.
SmartCAM Advanced Fabrication primarily supports the sheet-metal
fabrication industry, although its functions support CNC equipment
used in other industries. Its CNC programming functions drive
sheet-metal punches, burners, punch/plasma combinations, and laser-
and waterjet-cutting equipment. Advanced Fabrication supports 2-D
and 3-D fabrication requirements, provides canned cycle (automatic
machine) support and part nesting capabilities. It does automatic
folding and unfolding of flat patterns and optimizes the CNC
programs. These functions, combined with its ability to create
transition pieces with minimal user input, allows Advanced
Fabrication to also work well in sheet metal fabrication within the
HVAC industry.
The SmartCAM applications are enhanced to operate within various CAD
environments with additional modules that facilitate data
translation. The AutoCAD SmartCAM Connection allows designers to
add machining processes to AutoCAD mechanical design models to
generate CNC programs in SmartCAM without going through a DXF file
transfer. The SmartCAM CAM Connection bundle includes IGES and DXF
translators. An additional module, Tape to Shape, allows converting
CNC toolpath data into SmartCAM geometry for modification or reverse
engineering. In addition, a SmartCAM Localization Kit is marketed
to resellers and system integrators to develop local language
interfaces for SmartCAM applications.
Product Enhancements. Regular releases of software contribute to
CAMAX's position in the industry. In 1994, CAMAX began a time-based
release schedule to update all of its products on a regular
twice-a-year release schedule. As a result, CAMAX is able to
provide meaningful enhancements to its customers in new releases of
each product every six months.
CAMAX Market and Customers
The discrete manufacturing industry has undergone and continues to
undergo dramatic changes in process and technology. Market forces
and international competition, notably from Japan and other Asian
regions, are causing companies to move away from large lot, long
production runs that carry economies of scale, to shorter, more
flexible production runs that can respond to changing market
developments. At the same time, machine tool and control
technologies are evolving to make one-off and rapid response
manufacturing more cost effective. Manufacturing engineers and NC
programmers are faced with the challenges of increasing quality,
controlling production costs and shortening time to market.
Significant shifts are also occurring in the geographic distribution
of the CAD/CAM market, as the growth in Europe and the Asia/Pacific
markets out-paces the North American market. In the near term, it
is anticipated that the European market will overtake the North
American market and become the largest single CAD/CAM market.
Longer term, China is believed to have the largest growth potential
for CNC machine tool consumption and, therefore, provide a large
market for NC programming software. With these geographic changes,
process changes are occurring as well. While product design,
manufacturing and engineering, and NC programming have in the past
been considered as discrete tasks, companies are now moving towards
concurrent engineering believing that significant benefits can be
realized by improving communications and data sharing among these
areas and treating them as concurrent processes. Thus the
traditional sequential nature of the design-to-manufacture process
is being replaced with concurrent, iterative processes and systems.
Historically, CAMAX's software and systems have been targeted
generally at the mechanical manufacturing segment of the CAD/CAM
market. This market segment is composed of two types of customers.
One customer group includes captive departments within vertically
integrated firms which manufacture a product from engineering
specifications and drawings. The other customer group consists of
independent contractors which perform all or part of these
manufacturing engineering services, such as mold design and
manufacture or piece-part production, for their customers. Both
groups require extensive CNC programming features such as those
offered by CAMAX software. Each group can be further subdivided
into the type of machining services they require. Some need one-off
type of manufacturing, such as prototype or model making.
Similarly, those requiring mold or die machining may require one-off
production or low quantity, high complexity machining. The largest
category, industry wide, are those who require production piece-part
machining. Original manufacturers or contractors in this category
can require several small lots of parts machined each year, or may
require frequent lots of thousands of identical parts.
Originally, CAMAX's target market fell in the one-off category, and
CAMAX marketed its Camand software to captive model and prototype
shops and to mold-making and die-making operations of all sizes.
Overall, the combination of these operations approximates 30% of the
entire CNC machining industry. Further, when these shops are not
captive internal operations, they typically fall into the third tier
supplier category. To install stand-alone CAM software in the
internal captive shops of large companies, longer sales cycles are
often required because vendors must overcome corporate policies
dictating specific CAD/CAM software for all purposes and prove that
mandated software is incapable of performing necessary functions
before other software is approved. On the other hand, smaller
shops, typically suppliers to several large companies, require NC
programming capabilities within a system that accepts data from
multiple sources. These, then, became the bulk of the CAMAX market.
The CAM assets of Autodesk, including the ManufacturingExpert
product, were acquired to address the same mold- and die-making
market, but with a product that operated on a PC platform. Even
with two platforms, CAMAX software was still targeted for
approximately 30% of the market.
Merging with Point Control Co. provided solutions on the same
platforms, but with software to address the needs of the general
machining market, which approximates 70%. Point Control had also
developed an application within the SmartCAM product line to provide
some of the capabilities of ManufacturingExpert, falling short in
some areas and exceeding it in others. With the combination of
products, CAMAX is now able to address nearly the entire CNC
manufacturing market, although sales to the large companies still
require longer sales cycles due to requirements for company-mandated
CAD/CAM systems or requirements for native-file integration of all
applications.
With broad CAM product offerings, CAMAX now has an installed base of
approximately 25,000 seats of software installed at 12,000 customer
sites. Representative customers are AT&T, Advanced Cardiovascular
Systems, American Mold, ASICS, Ben Hogan, B & B Tool and Mould,
Black & Decker, CAE Electronics, California Amplifier, Converse,
Crucam, Custom Mold, Dowty Aerospace, Edelbrock, FGL Precision
Works, Fokker, General Motors, H.S. Die, Hamilton Standard, Hendrick
Motosports, Hewlett-Packard, Hitachi, Honda Engineering, Industrial
Molds, Johnson Controls, JVC, Motorola, Nabisco, Nissan, Ogihara
Seiki, Phillips Plastics, Pioneer, Pratt & Whitney, Red Dog
Industries, Reynolds Mason, Ricoh, SAAB, Satellite Models, Service
Tool & Die, Shimano, Shutt Medical, Starline Manufacturing, Tell
Tool, Toyota and Westinghouse.
CAMAX has historically made sales to existing customers for
expansion and upgrades of the capabilities of their systems. Many
of CAMAX's customers have ordered additional software or systems
from CAMAX subsequent to initial installations. CAMAX's expectation
is that this pattern will continue.
Competition
The CAM market is highly competitive and is characterized by
continual change and improvement in technology. CAMAX's existing
and potential competitors can be divided into two major categories.
Large CAD/CAM/CAE suppliers, with substantially greater financial,
marketing and technical resources than CAMAX, present the greatest
competition. While most of their applications are not for CAM, and
their focus is not CAM, demand for integrated product sets allow
them an advantage in marketing to many companies. Companies in this
category are Computervision, Dassault Systemes, EDS Unigraphics,
Intergraph and Matra Datavision.
A second major category of competitors comprises CAM-focused
companies. Although CAMAX is the largest of these, as a group of
over one hundred companies, these competitors often have an
advantage in either direct local representation, low price or
sub-niche specialization. Representatives of this group are CNC
Software, DP Technology, Delcam and Gibbs Systems. Within this
category is a growing sub-category which is focusing on a sub-niche
of the CAM market with specialized machining applications that can
operate with data from nearly all CAD, CAD/CAM or CAM software
systems, offering fast NC code generation for the more popular
3-axis styles of machining surfaces. Companies in this group are
limited, but their growing success is gaining attention in the
industry. The WorkNC product from Sescoi, Hypermill from Open Mind
Software, and PowerMill from Delcam fall into this group.
CAMAX believes that the principal factors enabling its ability to
compete in a CAM market with many suppliers are the breadth and
depth of product offerings, the range of customer support and
services, the ability of products to interface with a variety of
widely used hardware, demonstrable productivity gains from using the
product, the size of CAMAX's user base and alliances with major
hardware and software vendors.
CAMAX expects that its business strategy and focus on developing
knowledge-based products with advanced CNC programming features will
continue to limit the number of CAD/CAM companies against which it
will directly compete with its software products. However, with the
growing number of companies that have developed an interest in
satisfying the machining market with CAM software, there is no
assurance that existing CAM or CAD/CAM or other companies have not
or will not begin marketing products focused on the market selected
by CAMAX or that further consolidation in the marketplace will not
produce a supplier capable of marketing products in CAMAX's market.
Should such developments occur, the degree of competition within
this CAD/CAM niche will intensify.
CAMAX's broad range of applications, with open architecture,
provides the advantages of flexibility and transportability.
Flexibility allows customers to purchase only that software
necessary to drive their specific type or configuration of machine
tool, thereby reducing their entry cost. This is a key advantage of
the SmartCAM application set. Transportability enables customers
to purchase hardware configurations which match the performance and
price point they require for running their applications. This is an
advantage of both Camand and SmartCAM. The complex modeling,
multi-axis CNC programming and machine-tool simulation tasks can be
performed on high performance systems and tasks such as 2-axis lathe
work and 3-axis milling can be performed on lower priced systems.
Within product families, CAMAX's software can operate in a networked
manner utilizing a common data base with users operating the systems
with common commands and procedures. Network licensing schemes for
Camand allow users to license specific packages, thereby gaining the
benefits of reduced overall costs.
SmartCAM also gives CAMAX an advantage because it provides products
ranging from $3,500 to $13,000 per license. Camand applications,
which are generally considered "high-end," range from $9,500 to
$32,000. Combined with CAMAX's attractive trade-up incentives,
CAMAX can offer entry-level packages to customers with limited
budgets or those only beginning to use CNC machines, and keep them
moving upward within and across applications.
Marketing and Sales
CAMAX products are marketed and supported in over 50 countries
through a value added reseller (VAR) channel, which is managed and
supported by a sales force with the assistance of CAMAX application
engineers. Application engineers demonstrate CAMAX applications to
both direct and reseller prospects, provide advanced training to
reseller application and sales engineers, and act as internal
consultants to employees who are dedicated to reseller and customer
training, consulting and support. Currently CAMAX has 12 sales
people and 13 application engineers. In addition to sales and
support people located across the United States, CAMAX also has
sales personnel in The Netherlands, France, and Germany.
CAMAX uses a standard VAR agreement with its resellers, who
represent CAMAX products in 53 different countries, including
Canada, Mexico, U.S.A., Puerto Rico, West Indies, Costa Rica,
Argentina, Brazil, Chile, Colombia, Peru, Venezuela, Austria,
Belarus, Belgium, Croatia, Czech Republic, Denmark, England,
Finland, France, Germany, Greece, Hungary, Ireland, Italy,
Luxembourg, Netherlands, Norway, Poland, Portugal, Russia, Scotland,
Spain, Sweden, Switzerland, Ukraine, Yugoslavia, China (PRC),Hong
Kong, Indonesia, Japan, South Korea, Malaysia, Phillipines,
Thailand, Taiwan (ROC), Singapore, Australia, New Zealand, India,
Turkey, and South Africa.
CAMAX sells on a direct basis only to "corporate accounts," which
are those customers who require support agreements directly from the
software manufacturer as a matter of corporate policy.
CAMAX promotes its products through direct advertising, referrals,
an electronic bulletin board service ("BBS"), a Web site, industry
trade shows, and events held and promoted by strategic partner CAD
vendors. Until late in 1995, direct advertising was restricted to
the United States. Late in 1995, plans for direct advertising were
developed to support resellers in strategic growth areas. To date,
advertising outside of the United States has been limited, but plans
include extending advertising to other areas.
CAMAX product promotion through industry trade shows has increased
in recent years. CAMAX participates in all major
manufacturing-focused trade shows in the United States, and supports
its resellers with participation in regional shows, both nationally
and internationally. Aside from its direct exhibits and joint
exhibits with resellers, CAMAX usually participates in several
CAD-vendor exhibits at these and other trade shows, as CAMAX
products are seen as complementary and often enabling technologies.
Through trade shows and joint-marketing events, promotion through
strategic CAD partnerships has also been increasing. CAMAX has
participated in several vendor-specific events with various
companies, and has participated in Autodesk, Hewlett-Packard and
Silicon Graphics events worldwide, and continues to do so.
Customer Support Services
In addition to sales of its software licenses, CAMAX offers a wide
range of services to ensure that its products deliver value for each
customer's investment. CAMAX offers tutorials to help users learn
the system independently. A training group holds formal training
classes for customers and resellers at CAMAX's Minneapolis facility.
The training group also certifies resellers and educational
institutions for authorized training programs, and assists them in
developing training curricula. Through their effort, product
training is also held at Authorized Training Centers, which include
VAR facilities and public education institutions around the world.
CAMAX maintains a Customer Support group in both the Minneapolis and
Eugene facilities. These employees are dedicated to providing
telephone hot-line, fax-back support and consulting services for
customers and resellers. Taking advantage of the time difference
between the two facilities, they provide support from 7:00 A.M. to
7:00 P.M. Central Time.
CAMAX and its representatives also offer on-site support and
consulting services for customers needing access to the higher
capabilities of the software and those needing assistance with their
most difficult or unusual jobs.
The Application Engineering group, whose primary responsibility is
assisting the direct sales force in support of the VAR channel,
consists of skilled system operators who also act as a test site and
laboratory for CAMAX technology. Through their direct use of the
software and information received from reseller engineers and
customers, they provide data on application requirements,
performance and productivity. These application engineers also
provide additional post-sale support and consulting services as a
supplement to the Customer Support group.
Finally, CAMAX offers complete software enhancement services through
Software Maintenance Agreements. Today, approximately 70% of Camand
and 35% of SmartCAM users subscribe to these services and receive
all software updates.
Sources of Supply
CAMAX develops nearly all of the fundamental application software
and system interface software used in its systems and employs 39
full-time development personnel. CAMAX licenses certain third-party
software utilities, which its development group integrates with
CAMAX applications. For example, CAMAX has contracted with
International Technegroup, Inc., a software developer specializing
in data translation and data integration, to develop and support
translators for Camand and SmartCAM. In addition, to increase its
hardware platform independence, CAMAX has contracted with Ithaca
Software, an Autodesk subsidiary, to supply system software for
graphics technology.
As CAMAX changed its sales strategy from one of turnkey provider,
supplying third-party computers and peripherals with its software,
to one of software-only provider, CAMAX has no direct reliance on
hardware manufacturers. CAMAX delivers its software to VARs, who
then provide the hardware and peripherals with CAMAX software, to
supply a turnkey system to customers. Direct customers receive
software from CAMAX and obtain their hardware directly from vendors,
from CAMAX resellers or from other parties.
The transportable nature of CAMAX's software reduces reliance upon
any particular brand of hardware. CAMAX currently supports
Intel-based PCS running the DOS, Windows, Windows NT and Windows 95
operating systems, and UNIX workstations from Silicon Graphics Inc.,
Hewlett-Packard and Sun Microsystems. CAMAX resellers obtain
computer hardware and peripherals either directly from the vendors
or through resellers of the hardware vendors.
Copyrights, Trade Secrets and Trademarks
CAMAX's SmartCAM software is protected by registered copyrights.
CAMAX also relies upon the law of trade secrets and the
confidentiality provisions of its contracts with customers to
protect its proprietary SmartCAM software.
CAMAX's Camand software is not protected by patents or registered
copyrights, and CAMAX instead relies upon the law of copyright and
trade secrets, and the confidentiality provisions of its contracts
with customers to protect its proprietary software. Management
believes that the protection of its software by patents or
copyrights is less important than the knowledge, experience and
creativity of CAMAX's product development and marketing staff in an
industry characterized by rapid technological change. There can be
no assurance that competitors could not successfully copy or
duplicate CAMAX's proprietary software.
Camand and SmartCAM are registered trademarks and
ManufacturingExpert is a trademark of CAMAX.
Employees
As of January 31, 1996, CAMAX had 156 employees, including 30 in
sales and marketing positions, 39 in engineering and product
development, 56 in technical training and support and 31 in
financial and administrative roles. None of CAMAX's employees is
represented by a labor union and CAMAX has not experienced a work
stoppage or labor relations problems and believes its relations with
its employees are good.
Property
CAMAX's principal offices are located at 7851 Metro Parkway,
Minneapolis, Minnesota 55425, in an 26,238 square foot office
facility under a lease expiring in 2000. CAMAX also leases office
facilities in Eugene, Oregon with an aggregate of 29,200 square
feet. In addition, CAMAX leases an engineering and product
development office in High Wycombe, United Kingdom.
Legal Proceedings
CAMAX is not a party to any litigation and is not aware of any
pending or threatened litigation.
Principal Shareholders of CAMAX
<TABLE>
The following table sets forth, as of March 15, 1996, certain
information with respect to the beneficial ownership of CAMAX Common
Stock by (i) each person known by CAMAX to be the beneficial owner
of 5% or more of the outstanding shares of CAMAX Common Stock, (ii)
each director of CAMAX, (iii) each of the named officers and (iv) by
all directors and officers as a group:
<CAPTION>
Percent of
Number of Shares Outstanding
Beneficial Owner Beneficially Owned(1) Shares(1)
<S> <C> <C>
Bruce Winegarden (2) 2,753,500 15.0%
1726 White Oak Drive
Eugene, OR 97405
Jerald W. Blakely 2,662,500 14.6%
523 Mary Lane
Eugene, OR 97405
North Star 2,256,143 12.4%
Ventures II, Inc.
First Bank Place - Suite 4950
601 Second Avenue South
Minneapolis, MN 55402
Sutter Creek Limited
Partnership 1,250,000 6.9%
1912 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
John F. Carlson(3) 8,333 *
Joel A. Elftmann 256,283 1.4%
Terrence W. Glarner 94,006 *
Gregory B. Hadley(4) 35,500 *
Raymond A. Lipkin 769,251 4.2%
Robert J. Majteles (5) 431,667 2.3%
Bradford C. Morley (6) 8,333 *
George L. Daum(7) 107,000 *
Gregory S. Furness(8) 304,333 1.6%
Thomas A. Greene(9) 123,667 *
Richard M. Passek(10) 154,500 *
All Officers and Directors
as a group (13 persons)(11) 7,708,873 39.8%
_____________
<FN>
* Less than one percent.
(1) Beneficial ownership is determined in accordance with the rules
of the Securities and Exchange Commission, and includes generally
sole voting and investment power with respect to securities. Shares
of CAMAX Common Stock subject to options or warrants currently
exercisable or exercisable within sixty (60) days of the date of
determination are deemed outstanding for purposes of computing the
percentage of shares beneficially owned by the person holding such
options or warrants, but are not deemed to be outstanding for
purposes of computing such percentage for any other person. Except
as indicated by footnote, each person or group identified has sole
voting and investment power with respect to all shares of CAMAX
Common Stock shown as beneficially owned.
(2) Includes 91,000 shares of CAMAX Common Stock issuable upon
exercise of outstanding options.
(3) Includes 8,333 share of CAMAX Common Stock issuable upon
exercise of outstanding options.
(4) Includes 35,500 shares of CAMAX Common Stock issuable upon
exercise of outstanding options.
(5) Includes 431,667 shares of CAMAX Common Stock issuable upon
exercise of outstanding options.
(6) Includes 8,333 shares of CAMAX Common Stock issuable upon
exercise of outstanding options.
(7) Includes 107,000 shares of CAMAX Common Stock issuable upon
exercise of outstanding options.
(8) Includes 244,333 shares of CAMAX Common Stock issuable upon
exercise of outstanding options.
(9) Includes 123,667 shares of CAMAX Common Stock issuable upon
exercise of outstanding options.
(10) Includes 89,250 shares of CAMAX Common Stock issuable upon
exercise of outstanding options.
(11) Includes 1,139,083 shares of CAMAX Common Stock issuable upon
exercise of outstanding options by all officers and directors as a
group
</FN>
</TABLE>
Management of CAMAX
<TABLE>
The executive officers and directors of CAMAX as of the date of this
Proxy Statement/Prospectus are as follows:
<CAPTION>
Name Age Position
<S> <C> <C>
Raymond A. Lipkin 52 Chairman of the Board
Robert J. Majteles 31 President, Chief Executive Officer
and Director
Gregory S. Furness 42 Executive Vice President, Chief
Financial Officer, Secretary
and Treasurer
Bruce C. Winegarden 42 Chief Technical Officer
Jerald W. Blakely 52 Director
John F. Carlson 56 Director
Joel A. Elftmann(1) 55 Director
Terrence W. Glarner(1) 51 Director
Gregory B. Hadley 62 Director
Bradford C. Morley(1) 48 Director
_____________
<FN>
(1) Member of the Compensation Committee of the Board of Directors
of CAMAX.
</FN>
</TABLE>
Mr. Lipkin has been Chairman of the Board of CAMAX since August 1994
and a director since April 1994. Mr. Lipkin is the owner of Lipkin
Capital Management, Inc. and the managing general partner of several
investment partnerships. Mr. Lipkin is also a director of Buffet's,
Inc.
Mr. Majteles has been President, Chief Executive Officer and a
director of CAMAX since June 1994. Prior to that, Mr. Majteles was
Senior Vice President Operations since January 1994. Mr. Majteles
has also served as Vice President Sales and Vice President
International Sales since joining CAMAX in January 1992. From
January 1990 until December 1991, he was an investment banker
serving as Vice President with IAI Capital Group. Prior thereto,
Mr. Majteles was an attorney with the law firm of Skadden, Arps,
Slate, Meagher & Flom.
Mr. Furness has been Executive Vice President and Chief Financial
Officer of CAMAX since December 1987. Mr. Furness is a certified
public accountant.
Mr. Winegarden has been Chief Technical Officer of CAMAX since
September 1994. Prior to that, Mr. Winegarden was Executive Vice
President, Chief Technical Officer and a director of Point Control
Co. for more than five years.
Mr. Blakely became a director of CAMAX in September 1994 as part of
the 1994 merger between CAMAX and Point Control Co., and he was
previously a director of Point Control Co. for more than five years.
Since September 1994, Mr. Blakely has also been a business
consultant to CAMAX and other companies. He also teaches business
courses on a part-time basis at the University of Oregon. Prior to
September 1994, Mr. Blakely was the President and Chief Executive
Officer of Point Control Co. for more than 10 years.
Mr. Carlson has been a director of CAMAX since May 1995. In May
1995, Mr. Carlson retired from Cray Research, Inc. ("Cray
Research"), a leading supplier of supercomputers used to solve
complex industrial and scientific problems. Mr. Carlson was
Chairman and Chief Executive Officer of Cray Research from January
1993 through December 31, 1994. From 1991 until 1993, Mr. Carlson
had been President and Chief Operating Officer of Cray Research, and
prior to that, he was Executive Vice President and Chief Financial
Officer of Cray Research. In December 1994, Mr. Carlson was
appointed by President Bill Clinton to the President's Export
Council, which advises the president on export and international
trade-related matters. Mr. Carlson is a member of the board of
directors of TSI Incorporated and also serves on the boards of
Junior Achievement of the Upper Midwest, Inc., the Minnesota Private
College Council and the Minnesota Center for Corporate
Responsibility.
Mr. Elftmann has been a director of CAMAX since May 1983. Mr.
Elftmann is co-founder of FSI International, Inc. ("FSI") and has
served as a director of FSI since 1973 and currently serves as its
President and Chief Executive Officer. Mr. Elftmann has served as
Chairman of the Board of Directors of FSI since August 1983. Mr.
Elftmann is also Chairman of the Board of Metron Semiconductors
Europa BV, a European distributor of FSI's products. Mr. Elftmann
currently serves on the boards of Semiconductor Equipment and
Materials International, an international trade organization, and
SEMI/Sematech. Mr. Elftmann also serves as a director of FSI, Ltd.,
a joint venture between FSI and Mitsui & Co., Japan, and Veeco
Instruments, Inc. He is a member of the Dunwoody Institute Board of
Trustees.
Mr. Glarner has been a director of CAMAX since January 1990. Since
February, 1993, Mr. Glarner has been President of West Concord
Ventures, Inc. and is a consultant to Norwest Venture Capital, an
entity affiliated with Norwest Growth Fund, Inc. ("NGF") and
Northwest Venture Partners, a Minnesota Limited Partnership
("Northwest"). NGF is an investor in CAMAX. From 1988 to February
1993, Mr. Glarner was President of North Star and North Star
Ventures II, Inc. ("North Star II"), an affiliate of North Star
which is also an investor in CAMAX. Mr. Glarner is also a director
of Atrium, Inc., CIMA Labs, Inc., FSI, Inc., and Datakey, Inc., all
of which are public companies, and Oncotech, Inc., which is
privately held.
Mr. Hadley became a director of CAMAX in September 1994 as part of
the 1994 merger between CAMAX and Point Control, and he had
previously been a director of Point Control Co. since December 1993.
Mr. Hadley has spent over 25 years as an independent businessman
specializing in issues of business valuation and consulting for
mid-market privately owned companies. He is also a consultant to
the State of Oregon's Economic Development Department. Prior to his
involvement with private businesses, Mr. Hadley was with IBM in
various sales, marketing and management positions. Mr. Hadley
currently serves on the boards of directors of four other companies,
all of which are privately held.
Mr. Morley has been a director of CAMAX since January 1995. Mr.
Morley is currently retired. From 1990 to 1993, he was employed by
Schlumberger, Ltd. as President of its CAD/CAM subsidiary, Applicon,
Inc. From 1987 to 1990, Mr. Morley was Senior Vice President and
General Manager of the Software Division of SDRC.
The Board of Directors has a standing Compensation Committee
composed of Messrs. Elftmann, Glarner and Morley. The Compensation
Committee makes recommendations concerning executive salaries and
incentive compensation for employees of CAMAX and administers the
CAMAX Systems, Inc. 1987 Stock Option Plan (the "1987 Stock Option
Plan"), the Point Control Co. 1987 Stock Option Plan (the "Point
Control Stock Option Plan"), CAMAX Systems, Inc. 1985 Stock Option
Plan (the "1985 Plan") and the CAMAX Manufacturing Technologies,
Inc. 1995 Long-Term Incentive and Stock Option Plan (the "1995 Stock
Option Plan"). The Board has no standing audit or nominations
committee.
CAMAX's employee directors receive no supplemental cash compensation
for their services as directors but are reimbursed for expenses
actually incurred in attending Board and committee meetings.
CAMAX's non-employee directors receive cash compensation of $1,000
for each Board meeting and $500 for each committee meeting attended,
plus any travel and lodging expenses. Existing non-employee
directors have also been granted options to purchase CAMAX Common
Stock under the CAMAX Manufacturing Technologies, Inc. Directors'
Stock Option Plan. See "-Stock Plans."
Employment Agreement
In connection with the 1994 merger of Point Control and CAMAX, on
September 2, 1994, CAMAX entered into an employment agreement (the
"Employment Agreement") with Mr. Bruce Winegarden. The term of the
Employment Agreement is for two years. According to the terms of
the Employment Agreement, Mr. Winegarden is to serve as CAMAX's
Chief Technical Officer and perform such reasonable employment
duties as the Board of Directors of CAMAX shall assign to him from
time to time. In consideration of his efforts on behalf of CAMAX,
Mr. Winegarden is to receive a base salary of $150,000 for each year
during the term of the Employment Agreement. Mr. Winegarden is also
entitled to participate in any incentive compensation plans which
may be established by the Board of Directors of CAMAX during the
term of the Employment Agreement. If CAMAX terminates the
Employment Agreement because Mr. Winegarden has become disabled (as
defined in the Employment Agreement) or has committed any criminal
act or act of fraud or dishonesty in any material respect related to
or connected with his employment by CAMAX, Mr. Winegarden is
entitled to receive a lump-sum severance payment of $150,000. If
Mr. Winegarden terminates his own employment with CAMAX prior to
September 2, 1996, he is entitled to receive a lump-sum severance
payment of $75,000 and an additional $75,000 in consideration of his
continuing agreement not to compete with CAMAX for a period of one
year after such termination. If Mr. Winegarden terminates his own
employment with CAMAX upon expiration of the Employment Agreement,
he is entitled to receive $75,000 in consideration of his continuing
agreement not to compete with CAMAX for a period of one year after
such termination. The Employment Agreement also requires that any
intellectual property conceived of or created by Mr. Winegarden
shall remain the property of CAMAX and that Mr. Winegarden shall not
divulge to anyone or use in any way any confidential or secret
knowledge or information of CAMAX which Mr. Winegarden acquired or
became acquainted with prior to the termination of the Employment
Agreement for whatever reason. The Employment Agreement will
survive the Merger and become the binding obligation of both the
Acquisition Corp. and Mr. Winegarden in accordance with its terms
following the consummation of the Merger.
Stock Plans
In the following context, all references to fair market value are as
determined by the Board of Directors of CAMAX.
1985 Stock Option Plan. Pursuant to the 1985 Stock Option Plan,
directors, executive officers, and other employees of CAMAX may
receive options to purchase CAMAX Common Stock. The 1985 Stock
Option Plan was approved by the Board of Directors in October 1985.
The 1985 Stock Option Plan provides for the grant of incentive stock
options intended to qualify for preferential tax treatment under
Section 422 of the Internal Revenue Code of 1954, as amended. The
exercise price of all options granted under the 1985 Stock Option
Plan must equal the fair market value of the CAMAX Common Stock at
the time of grant as reasonably determined by a committee of the
Board of Directors. In the event of a merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of CAMAX, appropriate
adjustments in the 1985 Stock Option Plan and outstanding options
are to be made by a committee of the Board of Directors. The 1985
Stock Option Plan is administered by the Compensation Committee of
the Board of Directors of CAMAX and terminated in October 1995.
Despite the termination of the 1985 Stock Option Plan, all options
issued pursuant to the 1985 Stock Option Plan shall continue for
their natural term and be exercisable in accordance with their
respective terms.
A total of 175,000 shares of CAMAX Common Stock has been reserved
for issuance under the 1985 Stock Option Plan. As of December 31,
1995, CAMAX had outstanding options to purchase an aggregate of
5,100 shares, at a weighted average exercise price of $2.10 per
share, pursuant to the 1985 Stock Option Plan.
1987 Stock Option Plan. Pursuant to the 1987 Stock Option Plan,
directors, executive officers, other employees, consultants and
independent contractors of CAMAX may receive options to purchase
CAMAX Common Stock. The 1987 Stock Option Plan was approved by the
Board of Directors in November 1987. The 1987 Stock Option Plan
provides for the grant of non-qualified stock options that do not
qualify for preferential tax treatment under Section 422 of the
Code. The exercise price of all options granted under the 1987
Stock Option Plan must equal or exceed 50% of the fair market value
of the CAMAX Common Stock at the time of grant as reasonably
determined by the Board of Directors or a committee thereof. In the
event of a merger, consolidation, reorganization, recapitalization,
stock dividend, stock split or other change in the corporate
structure of CAMAX, appropriate adjustments in the 1987 Stock Option
Plan and outstanding options are to be made by the Board of
Directors or a committee thereof. The 1987 Stock Option Plan is
administered by the Compensation Committee of the Board of Directors
of CAMAX and will expire in November 1997, unless terminated earlier
by the Board of Directors of CAMAX as provided in the 1987 Stock
Option Plan.
A total of 2,400,000 shares of CAMAX Common Stock has been reserved
for issuance under the 1987 Stock Option Plan. As of December 31,
1995, CAMAX had outstanding options to purchase an aggregate of
603,250 shares, at a weighted average exercise price of $.49 per
share, pursuant to the 1987 Stock Option Plan.
Point Control Stock Option Plan. Pursuant to the Point Control
Stock Option Plan, employees of Point Control received options to
purchase Point Control Common Stock prior to the consummation of the
1994 merger between Point Control and CAMAX. In connection with the
1994 merger of Point Control and CAMAX, the previously issued
options to purchase shares of Point Control Common Stock became the
right to purchase shares of CAMAX Common Stock on the same terms as
though all such options had been exercised immediately prior to the
consummation of the merger between Point Control and CAMAX. No
further options were granted to employees of Point Control following
the 1994 merger between Point Control and CAMAX. The Point Control
Stock Option Plan was approved by the Point Control Board of
Directors in April 1987 and approved by Point Control's shareholders
in April 1987. The Point Control Stock Option Plan provides for the
grant of both incentive stock options intended to qualify for
preferential tax treatment under Section 422 of the Code, and
non-qualified stock options that do not qualify for such treatment.
The exercise price of all options granted under the Point Control
Stock Option Plan must equal or exceed the fair market value of the
Point Control Common Stock at the time of grant as reasonably
determined by the Board of Directors or a committee thereof. The
Point Control Stock Option Plan also provides for grants of stock
appreciation rights. In the event of a merger, consolidation,
reorganization, recapitalization, stock dividend, stock split or
other change in the corporate structure of CAMAX, appropriate
adjustments in the 1987 Stock Option Plan and outstanding options
are to be made by the Board of Directors or a committee thereof.
The Point Control Stock Option Plan is administered by the
Compensation Committee of the Board of Directors of CAMAX and will
expire in April 1997, unless terminated earlier by the Board of
Directors of CAMAX as provided in the Point Control Stock Option
Plan.
A total of 100,000 shares of Point Control Common Stock was
originally reserved for issuance under the Point Control Stock
Option Plan. Following the 1994 merger between Point Control and
CAMAX and giving effect to the exchange ratio in such merger, a
total of 1,775,000 shares of CAMAX Common Stock has been reserved
for issuance under the Point Control Stock Option Plan. As of
December 31, 1995, CAMAX had outstanding options to purchase an
aggregate of 208,888 shares, at a weighted average exercise price of
$.47 per share, pursuant to the Point Control Stock Option Plan.
1995 Stock Option Plan. Pursuant to the 1995 Stock Option Plan,
directors, executive officers, other employees, consultants and
independent contractors of CAMAX may receive options to purchase
CAMAX Common Stock. The 1995 Stock Option Plan was approved by the
Board of Directors in April 1995 and approved by CAMAX's
shareholders in June 1995. The 1995 Stock Option Plan provides for
the grant of both incentive stock options intended to qualify for
preferential tax treatment under Section 422 of the Internal Revenue
Code of 1986, as amended, and non-qualified stock options that do
not qualify for such treatment. The exercise price of all options
granted under the 1995 Stock Option Plan must equal or exceed the
fair market value of the CAMAX Common Stock at the time of grant as
reasonably determined by the Compensation Committee. The 1995 Stock
Option Plan also provides for grants of stock appreciation rights,
restricted stock awards and performance awards. Only employees are
eligible for the grant of incentive stock options. In the event of
a merger in which CAMAX is not the surviving corporation, a transfer
of all of CAMAX's stock, a sale of substantially all of CAMAX's
assets or a dissolution or liquidation of CAMAX, all outstanding
options will become exercisable in full at least ten days prior to
such event on such conditions as the Board shall determine, unless
the successor corporation assumes the outstanding options or
substitutes substantially equivalent options. The 1995 Stock Option
Plan is administered by the Compensation Committee and will expire
in May 2005, unless the Board of Directors terminates the 1995 Stock
Option Plan earlier as provided in the 1995 Stock Option Plan.
All stock options previously granted under CAMAX's 1985 Stock Option
Plan, the 1987 Stock Option Plan and the Point Control Stock Option
Plan will remain outstanding in accordance with the terms thereof
following the effectiveness of the 1995 Stock Option Plan. However,
no additional stock options will be permitted to be granted under
CAMAX's 1985 Stock Option Plan, the 1987 Stock Option Plan or the
Point Control Stock Option Plan.
A total of 3,000,000 shares of CAMAX Common Stock has been reserved
for issuance under the 1995 Stock Option Plan. As of December 31,
1995, CAMAX had outstanding options to purchase an aggregate of
2,266,500 shares, at a weighted average exercise price of $.71 per
share, pursuant to the 1995 Stock Option Plan.
Directors' Plan. The 1995 Directors' Stock Option Plan (the
"Directors' Plan") provides for an automatic grant of nonqualified
stock options to purchase 25,000 shares of CAMAX Common Stock to
non-employee directors of CAMAX on the date such individuals become
directors of CAMAX, and an option to purchase 5,000 shares of CAMAX
Common Stock on each subsequent annual shareholder meeting date,
subject to certain limitations. Options granted on the date an
individual becomes a director of CAMAX shall vest and thereby become
exercisable as to one-third of such shares on the date of such grant
and one-third at each of the first and second twelve month
anniversary dates of such grant if the holder remains a director on
such dates. Options granted on the date of each annual meeting of
shareholders become exercisable one year subsequent to the date of
grant, provided, however, that such option shall only be granted to
eligible directors who have served since the date of the last annual
meeting of shareholders and will continue to serve after the date of
grant of such option. In the event of a merger in which CAMAX is
not the surviving corporation, a transfer of all of CAMAX's stock,
a sale of substantially all of CAMAX's assets or a dissolution or
liquidation of CAMAX, all outstanding options will become
exercisable in full at least ten days prior to such event on such
conditions as the Board shall determine, unless the successor
corporation assumes the outstanding options or substitutes
substantially equivalent options. CAMAX has reserved 400,000 shares
of CAMAX Common Stock for issuance under the Directors' Plan. The
option price for directors is equal to the fair market value of the
CAMAX Common Stock as of the date of grant.
Pursuant to the Directors' Plan, Mr. Blakely, Mr. Elftmann, Mr.
Glarner, Mr. Hadley and Mr. Lipkin each received options to purchase
10,000 shares of CAMAX Common Stock, which options are exercisable
at $.70 per share, and Mr. Morley and Mr. Carlson each received
options to purchase 25,000 shares of CAMAX Common Stock, one-third
of which vested at the date of grant and are exercisable at $.70 per
share, and the remainder of which options shall vest and become
exercisable one-third at each of the first and second twelve month
anniversary dates of such grant. No other options have been granted
under the Directors' Plan.
PROFORMA FINANCIAL STATEMENTS
Proforma Combined Financial Statements
The following unaudited proforma combined balance sheet as of
December 31, 1995 and the proforma combined statement of operations
for the years ended December 31, 1995, 1994 and 1993, give effect to
the Merger accounted for as a pooling-of-interests. This proforma
information is based on the historical consolidated financial
statements of SDRC and CAMAX and their subsidiaries under the
assumptions and adjustments set forth in the accompanying notes to
the proforma combined financial statements.
The proforma combined financial statements have been prepared
based upon SDRC's and CAMAX's respective consolidated financial
statements. Proforma per share amounts are based upon the exchange
ratio of .0531 shares of SDRC Common Stock for each share of CAMAX
Common Stock. The proforma combined financial condition and results
of SDRC and CAMAX may not be indicative of the results that actually
would have occurred if the Merger had been in effect during the
periods presented or which may be attained in the future. The
proforma combined financial statements should be read in conjunction
with the historical consolidated financial statements and notes
thereto of SDRC incorporated by reference herein, and of CAMAX
included herein. See "Summary of Selected Financial Data of SDRC"
and "Summary of Selected Consolidated Financial Data of CAMAX"; and
"CAMAX Consolidated Financial Statements."
<PAGE>
<TABLE>
Proforma Combined Balance Sheet
Unaudited Proforma Combined Balance Sheet
December 31, 1995
<CAPTION>
Historical Proforma
(in thousands, SDRC CAMAX Adjustments Combined
except per share data)
<S> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 59,397 $ 2,451 $ -- $ 61,848
Short-term investments 14,305 1,426 -- 15,731
Accounts receivable, net 64,061 4,102 -- 68,163
Prepaid expenses and other
current assets 5,882 401 800(2d) 7,083
Deferred income taxes -- 417 (417)(2b) --
Total current assets 143,645 8,797 383 152,825
Long-term investments 4,465 -- -- 4,465
Property and equipment, at cost:
Computer and other equipment 34,678 5,486 -- 40,164
Office furniture and equipment 10,064 1,698 -- 11,762
Leasehold improvements 4,058 67 -- 4,125
48,800 7,251 -- 56,051
Less accumulated depreciation and
amortization (36,604) (4,926) -- (41,530)
Net property and equipment 12,196 2,325 -- 14,521
Computer software construction
costs, net 30,568 -- -- 30,568
Deferred income taxes -- 583 (583)(2b) --
Other assets 2,648 157 -- 2,805
Total assets $193,522 $11,862 $ (200) $205,184
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 9,938 $ 664 $ -- $ 10,602
Current portion of long-term
debt -- 769 367(2e) 1,136
Accrued expenses 31,411 1,415 800(2d) 33,626
Accrued litigation 28,600 -- -- 28,600
Accrued income taxes 6,396 -- -- 6,396
Deferred revenue 31,605 3,172 -- 34,777
Total current liabilities 107,950 6,020 1,167 115,137
Long-term debt -- 879 (367)(2e) 512
Long-term liabilities 8,163 -- -- 8,163
Commitments and contingencies
Shareholders' equity:
Common Stock (Historical - SDRC
30,617 and CAMAX 18,212 and
Proforma 31,584) 213 -- 7(2a) 220
Capital in excess of stated value 59,116 14,712 (316)(2a)(2c) 73,512
Retained earnings (deficit) 18,261 (9,749) (691)(2b) 7,821
Unrealized holding loss on
investments (181) -- -- (181)
Total shareholders' equity 77,409 4,963 (1,000) 81,372
Total liabilities and
shareholders' equity $193,522 $11,862 $ (200) $205,184
</TABLE>
See accompanying notes to unaudited proforma combined financial statements.
<PAGE>
<TABLE>
Proforma Combined Statement of Operations
Unaudited Proforma Combined Statement of Operations
For the year ended December 31, 1995
<CAPTION>
Historical Proforma
(in thousands, except SDRC CAMAX Adjustments Combined
per share data)
<S> <C> <C> <C> <C>
Revenue:
Software licenses $117,573 $13,638 $ -- $131,211
Software maintenance and
services 86,511 6,380 -- 92,891
Other -- 36 -- 36
Net revenue 204,084 20,054 -- 224,138
Cost of revenue 63,073 1,928 -- 65,001
Gross profit 141,011 18,126 -- 159,137
Operating expenses:
Selling and marketing 87,049 10,223 -- 97,272
Research and development 20,496 3,976 -- 24,472
General and administrative 11,263 2,321 -- 13,584
Total operating expenses 118,808 16,520 -- 135,328
Operating income 22,203 1,606 -- 23,809
Equity in losses of affiliates (951) -- -- (951)
Litigation Settlement (24,300) -- -- (24,300)
Other income (loss), principally
interest 1,131 19 -- 1,150
Income (loss) before income taxes (1,917) 1,625 -- (292)
Income tax expense 6,550 66 (563)(2b) 7,179
Net income (loss) $(8,467) $ 1,559 $(563) $ (7,471)
Earnings (loss) per share $ (.28) $ .08 $ -- $ (.24)
Net income (loss) per share $ (.28) $ .08 $ -- $ (.24)
Common and common equivalent
shares 29,921 18,596 967(2a) 30,888
</TABLE>
See accompanying notes to unaudited proforma combined financial statements.
<TABLE>
Unaudited Proforma Combined Statement of Operations
For the year ended December 31, 1994
<CAPTION>
Historical Proforma
(in thousands, except SDRC CAMAX Adjustments Combined
per share data)
<S> <C> <C> <C> <C>
Revenue:
Software licenses $ 103,317 $11,734 $ -- $115,051
Software maintenance and
services 64,230 5,532 -- 69,762
Other -- 545 -- 545
Net revenue 167,547 17,811 -- 185,358
Cost of revenue 48,785 2,873 -- 51,658
Gross profit 118,762 14,938 -- 133,700
Operating expenses:
Selling and marketing 89,628 10,116 -- 99,744
Research and development 20,715 4,202 -- 24,917
General and administrative 10,379 3,122 -- 13,501
Total operating expenses 120,722 17,440 -- 138,162
Operating loss (1,960) (2,502) -- (4,462)
Equity in losses of affiliates (5,329) -- -- (5,329)
Other income (expense),
principally interest 2,121 (26) -- 2,095
Loss before income taxes and
cumulative effect of accounting
change (5,168) (2,528) -- (7,696)
Income tax expense 3,833 48 -- 3,881
Loss before cumulative
effect of accounting change $ (9,001) $(2,576) $ -- $(11,577)
Loss per share before cumulative
effect of accounting change $ (.31) $ (.15) $ (.39)
Common and common equivalent
shares 28,844 16,892 967(2a) 29,811
</TABLE>
See accompanying notes to unaudited proforma combined financial statements.
<TABLE>
Unaudited Proforma Combined Statement of Operations
For the year ended December 31, 1993
<CAPTION>
Historical Proforma
(in thousands, except SDRC CAMAX Adjustments Combined
per share data)
<S> <C> <C> <C> <C>
Revenue:
Software licenses $ 86,754 $12,178 $ -- $ 98,932
Software maintenance and
services 60,851 4,574 -- 65,425
Other -- 1,536 -- 1,536
Net revenue 147,605 18,288 -- 165,893
Cost of revenue 46,937 2,048 -- 48,985
Gross profit 100,668 16,240 -- 116,908
Operating expenses:
Selling and marketing 80,906 9,807 -- 90,713
Research and development 17,526 3,874 -- 21,400
General and administrative 9,455 2,236 -- 11,691
Total operating expenses 107,887 15,917 -- 123,804
Operating income (loss) (7,219) 323 -- (6,896)
Equity in losses of affiliates (614) -- -- (614)
Other income (expense),
principally interest 477 (17) -- 460
Income (loss) before income taxes
and cumulative effect of
accounting change (7,356) 306 -- (7,050)
Income tax expense (benefit) 4,376 (61) -- 4,315
Income (loss) before cumulative
effect of accounting change $(11,732)$ 367 $ -- $(11,365)
Income (loss) per share
before cumulative effect of
accounting change $ (.39)$ .02 $ (.37)
Common and common equivalent
shares 29,876 18,471 967(2a) 30,843
</TABLE>
See accompanying notes to unaudited proforma combined financial statements.
<PAGE>
<PAGE>
Notes To The Unaudited Proforma Combined Financial Statements
(in thousands, except per share data)
(1) Introduction
On January 16, 1996, SDRC entered into a definitive agreement to
acquire CAMAX and its Subsidiaries. CAMAX provides CAM software
for computerized numerical control machining operations, with
products and services designed to simplify, automate and optimize
the machining process, to streamline production and to accelerate
time to market.
SDRC will issue SDRC Common Stock having a market value of $30,000
in exchange for 100 percent ownership of CAMAX Common Stock. The
total number of SDRC shares of common stock to be issued will be
determined based on the market price for a twenty day period
preceding the fifth day prior to the close of the transaction.
The proforma combined data (unaudited) as of December 31, 1995
and for the year ended December 31, 1995, 1994 and 1993 are based on
the historical consolidated financial statements of SDRC and CAMAX
adjusted to give effect to the transaction as though it had
occurred as of January 1, 1993. Following the completion of the
acquisition of CAMAX and its subsidiaries by SDRC, SDRC plans to
merge CAMAX and its subsidiaries into the SDRC operation by
integrating the functional areas as appropriate. No proforma
adjustments have been included in the proforma financial statements
to reflect potential effects of (a) efficiencies which may be
obtained by combining the CAMAX and SDRC operations, or (b) costs of
restructuring, integration or consolidation of their operations.
The costs of integration are not expected to have a material impact
on the resultant combined financial statements.
(2) Proforma Adjustments
The proforma adjustments to the unaudited proforma data are as
follows:
(a) To record the issuance of an estimated 967 shares of SDRC
Common Stock with a stated value of $.0069 in exchange for all of
the outstanding CAMAX Common Stock, none of which has any par value.
The number of SDRC shares has been estimated based on a market value
of $31.03 as calculated by the average closing price of the SDRC
stock for the twenty days ending on the fifth trading day prior to
the latest practicable trading day before the filing of this Proxy
Statement/Prospectus with the Commission.
(b) To conform the accounting for income taxes to FAS 109 as of
January 1, 1992 and to establish a 100% valuation allowance against
the CAMAX deferred tax assets for the portion as management believes
it is more likely than not that the deferred tax assets will not be
realized.
(c) To reclassify the amount paid by Point Control Co. (which was
acquired by CAMAX in 1994) to its employees who redeemed their
Point Control Co. stock upon termination of employment.
(d) To record the estimated direct expenses related to the
Merger.
(e) To reclassify a portion of the long-term debt as a current
portion of long-term debt due to acceleration of the payment terms
with a change in control of CAMAX.
DESCRIPTION OF CAPITAL STOCK
SDRC is authorized to issue 100,000,000 shares of SDRC Common
Stock, without par value. As of March 12, 1996, SDRC had
outstanding 31,252,775 shares of SDRC Common Stock. Acquisition
Corp.'s authorized capital stock consists of 50 shares of common
stock, without par value, of which 10 shares are issued and
outstanding.
CAMAX is authorized to issue 50,000,000 shares of CAMAX Common
Stock, of which 18,219,271 shares were issued and outstanding as of
March 15, 1996. As of March 15, 1996, CAMAX had issued options to
purchase a total of 3,253,159 shares of CAMAX Common Stock. Of this
amount, options to purchase 5,100 shares of CAMAX Common Stock had
been issued pursuant to CAMAX's 1985 Stock Option Plan at a weighted
average exercise price of $2.10 per share; options to purchase
573,750 shares of CAMAX Common Stock had been issued pursuant to
CAMAX's 1987 Stock Option Plan at a weighted average exercise price
of $.50 per share; options to purchase 201,309 shares of CAMAX
Common Stock had been issued pursuant to the Point Control 1987
Stock Option Plan at a weighted average exercise price of $.47 per
share, and options to purchase 2,266,500 shares of CAMAX Common
Stock had been issued pursuant to CAMAX's 1995 Stock Option Plan at
a weighted average exercise price of $.71 per share. No additional
stock options will be permitted to be granted under CAMAX's 1985 and
1987 Stock Option Plans or the Point Control Stock Option Plan.
Options under the 1995 Stock Option Plan are granted by the
Compensation Committee. The Compensation Committee may issue
options with varying vesting schedules, but all options granted
pursuant to the 1995 Stock Option Plan must be exercised within ten
years from the date of grant. CAMAX has also issued options to
purchase 100,000 shares of CAMAX Common Stock pursuant to CAMAX's
Directors' Plan at an exercise price of $.70 per share. CAMAX has
also assumed non-qualified options issued by Point Control to
purchase 106,500 shares of CAMAX Common Stock at a weighted average
exercise price of $.42 per share. Options granted under the CAMAX
Option Plans provide for antidilution adjustments in the event of
certain mergers, consolidations, reorganizations, recapitalizations,
stock dividends, stock splits or other changes in the corporate
structure of CAMAX. Shares of SDRC Common stock issued to
shareholders of CAMAX pursuant to the Merger Agreement will be
validly issued, fully paid and non-assessable.
COMPARISON OF SHAREHOLDER RIGHTS
The rights of the shareholders of SDRC are governed by the Ohio
General Corporation Law (the "OGCL"), the Articles of Incorporation
of SDRC, as amended ("SDRC Articles"), and the Amended Code of
Regulations of SDRC ("SDRC Code"). The rights of the shareholders
of CAMAX are governed by the Minnesota Business Corporation Act (the
"MBCA"), as well as by the Restated Articles of Incorporation of
CAMAX, as amended ("CAMAX Articles"), and the Bylaws of CAMAX, as
amended ("CAMAX Bylaws"). The following is a summary of certain
material differences between the rights of shareholders of SDRC and
the rights of shareholders of CAMAX, as contained in provisions of
the OGCL and the MBCA, the SDRC Articles and SDRC Code, and the
CAMAX Articles and CAMAX Bylaws.
The following does not purport to be a complete statement of the
rights of SDRC's shareholders under applicable Ohio law and the SDRC
Articles and SDRC Code as compared with the rights of CAMAX
shareholders under Minnesota law and the CAMAX Articles and CAMAX
Bylaws. The identification of certain specific differences is not
meant to indicate that other equally or more significant differences
do not exist.
Voting Rights
Holders of both SDRC Common Stock and CAMAX Common Stock are
entitled to one vote per share on all matters submitted to a vote of
shareholders.
Cumulative Voting
Under Ohio law, unless the articles of incorporation are amended to
deny cumulative voting rights, each shareholder has the right to
cumulate his or her voting power. SDRC has so amended its articles,
and the holders of SDRC Common Stock do not have the right to vote
cumulatively in the election of directors. Under Minnesota law
cumulative voting is presumed unless denied in the Articles of
Incorporation. The CAMAX Articles deny cumulative voting
rights.
Preemptive Rights
Under both the OGCL and the MBCA, shareholders of a corporation are
presumed to have preemptive rights unless denied in the
corporation's articles of incorporation. The SDRC Articles and the
CAMAX Articles each deny preemptive voting rights.
Shareholders' Dissenters' Rights
Under both the OGCL and the MBCA, shareholders may exercise a right
of dissent from certain corporate actions and obtain payment of the
fair value of their shares. This remedy is an exclusive remedy,
except where the corporate action involves fraud or illegality.
The OGCL grants such dissenters' rights to a shareholder with
respect to (i) amendments to articles of incorporation that adjust
or eliminate dividend rights or are substantially prejudicial to the
holders of shares of a class that has preference in dividends or
distributions or on liquidation over other classes (provided the
articles do not expressly or by implication permit such amendments),
(ii) a disposition of all or substantially all of the corporation's
assets not in the usual course of business, (iii) mergers if the
merger is into a surviving or new entity, (iv) mergers if the
shareholder is entitled to vote on the merger or if the merger is
the merger of a subsidiary into a parent and (v) plans of exchange
involving the acquisition of the corporation's shares if the
shareholder is entitled to vote on the plan.
Under the MBCA, the categories of transactions subject to
dissenters' rights are similar to those in the OGCL. A shareholder
of a Minnesota corporation may exercise dissenter's rights in
connection with an amendment to the articles of incorporation
materially and adversely affecting the rights or preferences of
shares held by the dissenting shareholder, a disposition of all or
substantially all of the corporation's property and assets not in
the usual course of business, a plan of merger in which the
shareholder may vote, and a plan of exchange involving the
acquisition of the corporation's shares if the shareholder is
entitled to vote on the plan.
Board of Directors
The OGCL provides that the number of directors of an Ohio
corporation shall not be less than three (unless all shares are
owned of record by one or two shareholders). The SDRC Code requires
a board comprised of seven directors, which number may be increased
(to not more than 15) or decreased (to not less than seven) by the
affirmative vote of two-thirds of the board or of 80% of
shareholders entitled to vote. In addition, the SDRC Code provides
for the division of SDRC's Board of Directors into two classes of
approximately equal size. Directors in each class serve for two
years, and elections are staggered such that one class is elected
each year. This classification of SDRC's Board may make it more
difficult for a shareholder to acquire control of SDRC and remove
management by means of a hostile takeover.
The MBCA provides that the board of directors of a Minnesota
corporation shall consist of one or more directors as fixed by the
articles of incorporation or bylaws. The CAMAX articles provide
that CAMAX shall have the number of directors, not more than nine,
as provided in the bylaws. Under the CAMAX Bylaws, the Board of
Directors is to consist of not less than six, nor more than nine,
directors. Each member of the CAMAX Board of Directors is to be
elected for a one-year term at the annual meeting of shareholders.
Removal of Directors
The OGCL provides that if shareholders have a right to vote
cumulatively in the election of directors, unless otherwise provided
in the articles or code of regulations, directors may be removed by
a vote of the holders of a majority of the voting power entitled to
vote. Under the SDRC Code, removal of a director requires the vote
of at least 80% of the voting power of the corporation entitled to
vote, voting as a single class.
The MBCA provides that, unless modified by the articles or bylaws
of the corporation or by shareholder agreement, the directors may be
removed with or without cause by the affirmative vote of that
proportion or number of the voting power of the shares of the
classes or series the director represents which would be sufficient
to elect such director. Under the CAMAX Bylaws, removal of a
director requires the affirmative vote of shareholders holding a
majority of the shares entitled to vote for directors.
Amendments to Bylaws
Under the OGCL and the SDRC Code, the SDRC Code may be altered,
amended, or repealed, or new bylaws adopted, by approval of the
board of directors, except that the affirmative vote of at least 80%
of the outstanding shares of SDRC entitled to vote is required to
amend SDRC Code provisions relating to special meeting requirements
and the number, term, removal and indemnification of directors.
The MBCA and the CAMAX Bylaws provide that the power to adopt,
amend or repeal the bylaws shall be vested in the board (subject to
certain notice requirements set forth in the CAMAX Bylaws), except
that the board shall not adopt, amend, or repeal a bylaw fixing a
quorum for meeting of shareholders, prescribing procedures for
removing directors or filling vacancies in the board, or fixing the
number of directors or their classifications, qualifications, or
terms of office, but may adopt or amend a bylaw to increase the
number of directors. Notwithstanding the foregoing, under the MBCA
a shareholder or shareholders holding 3% or more of the voting
shares entitled to vote may propose a resolution to amend or repeal
bylaws adopted, amended or repealed by the board, in which event
such resolution must be approved pursuant to the procedures for
amending the articles of incorporation.
Amendments to Articles
Under the OGCL, directors may, without shareholder approval, adopt
an amendment to the articles of incorporation with respect to (i)
unissued or treasury shares (to the extent authorized by the
articles), (ii) authorization of additional shares to satisfy
previously authorized conversion or option rights and (iii)
reduction of the authorized number of shares of a class following
redemption or acquisition of shares by the corporation.
Shareholders may adopt amendments to the articles by the affirmative
vote of two-thirds of the voting power of those shares entitled to
vote, unless the articles provide a greater or lesser proportion
(but not less than a majority). If an amendment alters a preference
or any relative or other right of a class of outstanding shares,
then two-thirds of the shares of that class must approve the
amendment as well. The SDRC Articles provide that any amendment to
the SDRC Articles requires the affirmative vote of two-thirds of the
voting power of the corporation.
The MBCA provides that an amendment to a corporation's articles
must be by resolution approved by the affirmative vote of a majority
of the directors present or proposed by a shareholder or
shareholders holding 3% or more of the voting shares entitled to
vote thereon. Under the MBCA, any such amendment must be approved
by the affirmative vote of a majority of the shareholders entitled
to vote thereon, except that the articles may provide for a
specified proportion or number larger than a majority. The CAMAX
Articles do not so provide.
Dividends
Holders of SDRC Common Stock and CAMAX Common Stock are each
entitled to dividends as and when declared by the respective Board
of Directors of each corporation out of funds legally available for
the payment of dividends. The MBCA allows payment of dividends if
the Board of Directors determines that the corporation will be able
to pay its debts in the ordinary course of business after paying the
dividend. The MBCA prohibits the payment of dividends, however, if
such payment would reduce the remaining net assets of the
corporation below the aggregate preferential amount payable in the
event of liquidation to the holders of preferred stock. Under the
OGCL, dividends may be declared and paid in cash or property only
out of the unreserved and unrestricted earned surplus of the
corporation, except that no dividends may be paid when the
corporation is insolvent or when the payment thereof would render
the corporation insolvent or when the declaration or payment thereof
would be contrary to any restriction contained in the articles of
incorporation. Under the OGCL, dividends may be declared and paid
in the corporation's own treasury shares. The concept of treasury
shares does not exist under the MBCA.
In the past five years, SDRC has not paid a cash dividend on any
class of SDRC capital stock. CAMAX has never paid cash dividends on
CAMAX Common Stock.
Indemnification and Personal Liability of Directors and Officers
The SDRC Code provides for the indemnification of each director
and officer of the corporation to the fullest extent permitted by
Ohio law. Generally, Ohio permits indemnification against all
expenses and liabilities reasonably incurred by or imposed by a
person in connection with any proceeding or threatened proceeding in
which he or she may become involved by reason of his or her being or
having been a director or officer, provided that the person seeking
to be indemnified has acted in good faith and in a manner reasonably
believed to be in or not opposed to the best interests of the
corporation and provided that the board or the shareholders make a
determination that the person has met the applicable standard of
conduct, and with respect to any criminal action, had no reasonable
cause to believe his or her conduct was unlawful, so long as no
judgment or other final adjudication adverse to such person
establishes that his or her acts or omissions (i) were in breach of
his or her duty of loyalty to the corporation or its shareholders,
(ii) were not in good faith or involved a knowing violation of law,
or (iii) resulted in his or her receipt of an improper personal
benefit. The grant of indemnification in the context of a
derivative or other comparable lawsuit may have a circular effect,
inasmuch as any damages recovered in such action will be offset by
the cost of indemnification.
The CAMAX Bylaws provide for the indemnification of all directors
and officers of the corporation to the fullest extent permitted by
the MBCA. Indemnification obligations under the MBCA are mandatory
with respect to all actions regardless of who brought the action,
provided that certain standards of conduct are met. In addition,
the MBCA requires the corporation to report the indemnification
payments to its shareholders not later than the next meeting of
shareholders. There is no similar provision in the OGCL or in the
SDRC Code.
Shareholder Right to Inspect
The OGCL provides that any shareholder, upon written demand stating
the specific purpose thereof, has the right to examine (and make
copies) in person or by agent or attorney, at any reasonable time
and for any reasonable and proper purpose, the articles of the
corporation, its regulations, its books and records of account,
minutes, shareholder records and voting trust agreements, if any, on
file with the corporation.
Under the MBCA and the CAMAX Bylaws, every shareholder of CAMAX
and every holder of a voting trust certificate has the right, upon
written demand, to examine and copy in person or by authorized agent
or attorney records of shareholder proceedings for the prior three
years, records of board proceedings for the prior three years, CAMAX
Articles and Bylaws, financial statements required to be kept by
CAMAX, reports made to shareholders generally in the prior three
years, a statement of the names and usual business addresses of the
directors and principal officers, voting trust agreements,
shareholder control agreements and any agreements fixing the
relative rights and preferences of a class or series of capital
stock.
Shareholder Meetings
In accordance with the SDRC Code, special meetings of the
shareholders of SDRC may be called by the Board, the Chairman of the
Board, the President (in the Chairman's absence), or shareholders
holding 50% of all shares outstanding and entitled to vote thereat.
Notice of each annual or special meeting of shareholders must be
given in writing not less than seven days before the meeting,
although shareholders may waive the notice requirements at any time.
The OGCL also provides that if the meeting is called by a person
other than the Board and notice is not given by the corporation
within 15 days after the delivery of the request, those persons
entitled to call the meeting may give the notice.
Under the MBCA and the CAMAX Bylaws, the Chief Executive Officer,
the Chief Financial Officer, any two directors, or one or more
shareholders holding ten percent or more of shares entitled to vote
at such meeting may call a special meeting. However, if the meeting
involves a business combination, including an action to affect the
composition of the Board of Directors, then at least 25% of the
shares entitled to vote at such meeting are required to call the
meeting. The CAMAX Bylaws also provide that notice of each
shareholder meeting must be mailed not less than 10 nor more than 60
days prior to the meeting, except that notice of a meeting at which
there is to be considered (i) an agreement of merger or exchange of
shares, (ii) a proposal to dispose of all or substantially all of
the property and assets of the corporation, (iii) a proposal to
dissolve the corporation, or (iv) a proposal to amend the CAMAX
Articles must be mailed to all shareholders, whether entitled to
vote or not, at least 20 days prior to the date of such a meeting.
Under the MBCA, if the meeting is demanded by shareholders, the
meeting, on notice, must occur between 30 and 90 days after receipt
of the demand.
Fair Price Requirement for Takeover Offers
Section 302A.675 of the MBCA requires that any person who makes or
in any way participates in making a takeover offer for a publicly
held Minnesota corporation may not acquire shares of such Minnesota
corporation within two years following the last purchase of shares
pursuant to a takeover offer with respect to that class of security,
including but not limited to, acquisitions made by purchase,
exchange, merger, consolidation, partial or complete liquidation,
redemption, reverse stock split, recapitalization, reorganization,
or any other similar transaction, unless the shareholder is
afforded, at the time of the acquisition a reasonable opportunity to
dispose of the shares to the offeror upon substantially equivalent
terms as those provided in the earlier takeover offer. These
provisions do not apply if the acquisition of shares is approved by
a committee of the board of directors' disinterested directors
before the purchase of any shares by the offeror pursuant to a
takeover offer.
While the OGCL does regulate acquisitions of Ohio corporations,
there is no comparable fair price provision in the OGCL relating to
takeover offers.
Mergers and Consolidations
In order to effect a merger under the OGCL, a corporation's board of
directors must adopt a plan of merger and recommend it to the
shareholders. The SDRC Articles require that any merger,
consolidation or sale of all or substantially all of the
corporation's assets must be approved by the affirmative vote of the
holders of shares entitling them to two-thirds of the voting power
of SDRC. In addition, under the OGCL any class of shares of the
corporation must approve the plan by a majority vote of the class if
the plan contains any provision which, if contained in a proposed
amendment to the corporation's articles of incorporation, would
entitle such class to vote as a class.
The MBCA provides that a resolution containing a plan of merger
or exchange must be approved by the affirmative vote of a majority
of the directors and submitted to the shareholders and approved by
the affirmative vote of a majority of the shareholders of all shares
entitled to vote. Like the OGCL, the MBCA requires that any class
of shares of a Minnesota corporation must approve the plan if it
contains a provision which, if contained in a proposed amendment to
the corporation's articles of incorporation, would entitle such
class to vote as a class.
Business Combinations
The OGCL bars a corporation from engaging in certain business
combinations, including mergers, dispositions of significant assets,
stock sales, recapitalizations and similar corporate control
transactions, with a shareholder of the corporation who, together
with its affiliates and associates, acquired 10% or more of the
voting power of the outstanding voting shares of the corporation
after April 11, 1990 (an "interested shareholder"), for three years
after the interested shareholder acquired the shares. This
prohibition does not apply if the board of directors approves the
transaction prior to the acquisition of the shares by the interested
shareholder. Further, the business combination is permitted if a
majority of the outstanding voting power not owned by or affiliated
with the interested shareholder approves the transaction no earlier
than three years after the interested shareholder acquired the
shares. The OGCL also permits a business combination if certain
conditions are met, including, among other things, conditions with
respect to consideration to be paid in the business combination.
The MBCA contains similar restrictions on business combinations
with interested shareholders, although the restrictive period
following the acquisition date is four years as compared to the
three years under the OGCL. In addition, Section 302A.671 of the
MBCA applies, with certain exceptions, to any acquisition of voting
stock of a corporation from a person other than the corporation, and
other than in connection with certain mergers and exchanges to which
the corporation is a party, that results in the beneficial ownership
by the acquiring party of 20% or more of the corporation's voting
stock then outstanding. Any such acquisition must be approved by a
majority vote of the shareholders of the corporation. In general,
in the absence of such approval, shares exceeding the threshold are
denied voting rights and may be redeemed by the corporation at their
then fair market value within 30 days after the acquiring person
fails to give a timely information statement to the corporation or
after the date the shareholders vote not to grant voting rights to
the acquiring person's shares.
Other Anti-Takeover Provisions
In addition to the business combination statutes discussed above,
the OGCL and MBCA each contain a "control share acquisition statute"
which restricts the voting rights of a person (and those acting in
association with such person) who acquires a controlling interest in
the corporation to those voting rights which are conferred by the
shareholders of the corporation at an annual or special meeting.
The meeting may be a scheduled meeting or a meeting called upon the
demand of the acquiring person. In the event that the shareholders
grant voting rights to the acquiring person, the OGCL and MBCA both
provide dissenters' rights to any shareholder who did not vote in
favor of authorizing voting rights to the acquiring person.
The MBCA provides that during any tender offer, a publicly held
corporation may not enter into or amend an agreement (whether or not
subject to contingencies) that increases the current or future
compensation of any officer or director. Ohio law has no equivalent
provision.
It should also be noted that in addition to the anti-takeover
measures discussed above, the provisions in the SDRC Code (i)
providing for a staggered board of directors (discussed above in
"Board of Directors"), (ii)requiring a vote of two-thirds of the
shareholders to amend provisions of the SDRC Articles concerning the
election and removal of directors and concerning certain mergers,
consolidations and other business combinations and reorganizations
(discussed above under "Amendments to Articles" and "Mergers and
Consolidations"), and (iii)limiting the right of shareholders to
call a special meeting of shareholders involving a business
combination or the composition of the Board of Directors to require
the request of holders of at least 50% of the outstanding shares
(discussed above under "Shareholder Meetings") may make it more
difficult to effect a change in control of SDRC and may discourage
or deter a third party from attempting a takeover.
CERTAIN TRANSACTIONS
In connection with the 1994 merger of Point Control and CAMAX, on
September 2, 1994, CAMAX entered into a consulting agreement (the
"Consulting Agreement") with Mr. Blakely. Pursuant to the terms of
the Consulting Agreement, Mr. Blakely is required to devote no less
than 450 hours, 325 hours and 200 hours of his time to the business
of CAMAX during the first, second and third twelve month periods
following the date of the Consulting Agreement, respectively. In
consideration of his efforts on behalf of CAMAX, Mr. Blakely is to
receive a consulting fee of $150 per hour. According to the terms
of the Consulting Agreement, Mr. Blakely is required to create and
maintain distributor relationships, participate in trade shows,
produce and review marketing materials, develop background materials
for industry analysts and publications, maintain key customer
relationships and create future technologies. In addition to Mr.
Blakely's hourly consulting fee, Mr. Blakely received $50,000 on the
date of the Consulting Agreement, $40,000 on the first anniversary
of the Consulting Agreement and is to receive $30,000 on the second
anniversary of the Consulting Agreement for his agreement not to
compete with CAMAX during the term of the Consulting Agreement. The
Consulting Agreement also requires that any intellectual property
conceived of or created by Mr. Blakely shall remain the property of
CAMAX and that Mr. Blakely shall not divulge to anyone or use in any
way any confidential or secret knowledge or information of CAMAX
which Mr. Blakely acquired or became acquainted with prior to the
termination of the Consulting Agreement for whatever reason. The
Consulting Agreement will survive the Merger and become the binding
obligation of both Acquisition Corp. and Mr. Blakely in accordance
with its terms following the consummation of the Merger.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Results of Operations
The following table sets forth, as a percentage of net sales,
consolidated statements of operations data for the periods
indicated:
Year Ended December 31,
---------------------------------------
1995 1994 1993
---------- --------- ---------
Net sales:
Software 68.0% 65.9% 66.6%
Maintenance and services 31.8 31.1 25.0
Other 0.2 3.0 8.4
------- ------- -------
Total net sales 100.0 100.0 100.0
Cost of sales:
Software 7.4 12.3 4.5
Maintenance and services 2.1 1.8 0.9
Other 0.1 2.0 5.8
------- ------- -------
Total cost of sales 9.6 16.1 11.2
------- ------- -------
Gross margin 90.4 83.9 88.8
Operating expenses:
Sales and marketing 51.0 56.8 53.6
Research and development 19.8 23.6 21.2
General and administrative 11.6 17.5 12.2
------- ------- -------
Total operating expenses 82.4 97.9 87.0
------- ------- -------
Income (loss) from operations 8.0 (14.0) 1.8
Other expense (income) (0.1) 0.2 0.1
------- ------- -------
Income (loss) before
income taxes and cumulative
effect of accounting change 8.1 (14.2) 1.7
Provision (benefit) for
income taxes 0.3 0.3 (0.3)
------- ------- -------
Income (loss) before
cumulative effect of
accounting change 7.8 (14.5) 2.0
Cumulative effect of
accounting change 5.3
------- ------- -------
Net income (loss) 7.8% (14.5)% 7.3%
======= ======= =======
Years Ended December 31, 1995, 1994 and 1993
Net Sales
CAMAX's net sales are derived from license fees for its
software products, from software maintenance and services fees and
from other sources. Software sales are derived from software
licensing fees and software upgrades to more advanced modules.
Maintenance and services sales are derived from software maintenance
fees, updates to the current versions of software and training fees.
Other sales are derived primarily from the resale of hardware
products and services. The Company recognizes revenue from software
licensing fees in accordance with the provisions of American
Institute of Certified Public Accountants Statement of Position No.
91-1, Software Revenue Recognition. Software revenue from the sale
of software licenses is recognized upon shipment to the reseller, or
to the end-user if the order to CAMAX is from the end-user, if
collection is probable and remaining vendor obligations are
insignificant. Product returns and allowances (which have not been
significant through December 31, 1995) are estimated and provided
for at the time of sale. Maintenance sales from ongoing software
maintenance agreements are recognized ratably over the term of the
maintenance agreement, which is typically 12 months. Payments for
maintenance fees are generally received in advance. Sales for
training are recognized when the services are performed. Sales from
the resale of hardware products are recognized when the hardware
products are shipped to the end-user.
Total net sales were $20.1 million, $17.8 million and $18.3
million in 1995, 1994 and 1993, respectively, representing an
increase of 13% from 1994 to 1995 and a decrease of 3% from 1993 to
1994. CAMAX derives its sales from three separate product lines--Camand,
SmartCAM and ManufacturingExpert. CAMAX distributes the
majority of its products through a worldwide network of third party
resellers.
Software Sales. Sales from software licenses were $13.6
million, $11.7 million and $12.2 million in 1995, 1994 and 1993,
respectively, representing an increase of 16% from 1994 to 1995 and
a decrease of 4% from 1993 to 1994. The increase in software sales
from 1994 to 1995 was due primarily to the increase in the number of
units of software shipped for ManufacturingExpert. CAMAX purchased
the ManufacturingExpert product line in August 1994. Substantially
all of the decline in software sales from 1993 to 1994 was due to
a decrease in the number of units of software shipped for the
SmartCAM product line. Camand accounted for 44%, 50% and 50% and
SmartCAM 42%, 46% and 50% of total software sales for 1995, 1994 and
1993, respectively, and ManufacturingExpert 14% and 4% of total
software sales for 1995 and 1994, respectively.
CAMAX anticipates that sales from software licenses will continue
to represent a substantial majority of its sales for the foreseeable
future. CAMAX also believes that it will continue to experience
intense competition which could result in price reductions, reduced
margins or loss of market share, any of which could materially and
adversely affect the Company's business, operating results and
financial condition. In July 1995, CAMAX announced a program to
eliminate the sale and use of the ManufacturingExpert product line.
Management expects very few sales from the sale of software licenses
for ManufacturingExpert in 1996 and no sales in 1997 and future
periods.
Maintenance and Services Sales. Maintenance and services sales
were $6.4 million, $5.5 million and $4.6 million in 1995, 1994 and
1993, respectively, representing increases of 15% from 1994 to 1995
and 21% from 1993 to 1994. The growth in each period was primarily
attributable to an increase in the number of customers in CAMAX's
installed base purchasing software maintenance agreements. For the
years, 1995, 1994 and 1993, maintenance and services sales as a
percentage of total net sales accounted for 32%, 31% and 25%,
respectively. CAMAX believes that prior growth in the rates of
increase for maintenance and services sales should not be relied
upon as any indication of growth rates for any future period.
Other Sales. Other sales were $0.04 million, $0.5 million and
$1.5 million in 1995, 1994 and 1993, respectively, representing
decreases of 93% from 1994 to 1995 and 65% from 1993 to 1994. The
decline in each period was primarily attributable to a de-emphasis
on the resale of hardware products which began in 1993. For the
years, 1995, 1994 and 1993, other sales as a percentage of total net
sales accounted for 0.2%, 3%, and 8%, respectively. During 1995,
CAMAX ended its practice of selling hardware products and does not
expect to generate any significant hardware sales in future
periods.
International Sales. Sales outside of North America accounted
for 38%, 33% and 31% of total net sales in 1995, 1994 and 1993,
respectively. The increase in sales outside of North America in
1995 was primarily attributable to more effective penetration of the
market across all product lines by the Company's international
resellers. The increase in 1994 was primarily attributable to an
increase in the number of international resellers marketing CAMAX's
products. CAMAX intends to continue increasing the number of
international resellers and direct sales personnel within its
international markets. There can be no assurance that CAMAX's
investments in its international sales and marketing operations will
result in increased international sales.
Although exposure to currency fluctuations to date has been
insignificant, there can be no assurance that fluctuations in the
currency exchange rates in the future will not have an adverse
impact on CAMAX's operations. Additional risks inherent in CAMAX's
international business activities include unexpected changes in
regulatory requirements, tariffs and other trade barriers, costs of
localizing products for foreign countries, lack of acceptance of
localized products in foreign countries, longer accounts receivable
payment cycles, difficulties in collecting payment, difficulties in
managing international operations, potentially adverse tax
consequences including repatriation of earnings, reduced protection
for intellectual property and the burdens of complying with a wide
variety of foreign laws. There can be no assurance that such
factors will not have a material adverse effect on CAMAX's future
international sales and, consequently, CAMAX's business, operating
results and financial condition.
Cost of Sales
Cost of Software Sales. Cost of software sales consists
primarily of third party royalty fees, manuals, software
amortization, product media and duplication, packaging materials and
shipping expenses. Costs of software sales were $1.5 million, $2.2
million and $0.8 million in 1995, 1994 and 1993, respectively,
representing 11%, 19% and 7% of software sales for each respective
year. The decrease in the cost of software sales from 1994 to 1995
was primarily due to the amortization of the ManufacturingExpert
product line acquired in 1994 (See Note 2 of Notes to Consolidated
Financial Statements). The increase from 1993 to 1994 is primarily
attributable to the amortization of the ManufacturingExpert product
line and the cost of royalties for third party technology.
In August 1994, CAMAX purchased the assets for the software
product known as ManufacturingExpert from Autodesk, Inc.
("Autodesk"). The purchase price was $1.6 million, which was paid
with a down payment of $0.3 million in cash, assumption of
liabilities of $0.1 and a noninterest-bearing note of $1.2 million
issued by CAMAX to Autodesk which requires three annual payments of
$0.4 million through 1997. The purchase price was allocated as
follows: discount for imputed interest, $0.2 million; services of
Autodesk personnel during the transition period, $0.6 million; and
purchased software, $0.8 million.
CAMAX capitalizes software development costs in accordance
with SFAS No. 86, Accounting for the Costs of Computer Software to
be Sold, Leased, or Otherwise Marketed. Capitalization of software
development costs begins upon the establishment of technological
feasibility of the product. In 1994, CAMAX changed its software
development process from a feature-based release model to a time-based release
model. This change significantly reduced the amount
of time between technological feasibility and release thereby
reducing the extent of software production costs incurred after the
establishment of technological feasibility. Because of this change,
CAMAX management believes the amount of any software development
costs that could be capitalized is immaterial. Accordingly, all
software development costs during 1994 and 1995 were expensed as
incurred. Costs of $0.5 million were capitalized in 1993. CAMAX
estimated that such costs had an economic life of two years.
Amortization expense of $0.1 million, $0.3 million and $0.4 million
has been included in cost of software sales for 1995, 1994 and 1993,
respectively.
Cost of Maintenance and Services Sales. Cost of maintenance
and services sales consists primarily of the same types costs as
those incurred for software sales, as well as costs for third party
technology maintenance. Costs of maintenance and services sales
were $0.4 million, $0.3 million and $0.2 million in 1995, 1994 and
1993, respectively, representing 7%, 6% and 3% of maintenance and
services sales for each respective year. The increase in the cost
of maintenance and services sales in dollar amount and as a
percentage of maintenance and service sales in each successive year
was due primarily to the increase in maintenance and services sales
as well as to an increase in the cost of software maintenance on
third party technology.
Other Sales. Cost of other sales consists primarily of the
cost of third party hardware products purchased by CAMAX and resold
to its customers. Costs of other sales were $0.02 million, $0.4
million and $1.1 million in 1995, 1994 and 1993, respectively,
representing 70%, 66% and 69% of other sales for each respective
year. The decrease in the dollar amount of other sales in each
successive year was due primarily to the decrease in other
sales.
Operating Expenses
Sales and Marketing. Sales and marketing expenses consist
primarily of salaries, commissions and bonuses of sales and
marketing personnel, travel and entertainment expenses and
promotional expenses. Sales and marketing expenses were $10.2
million, $10.1 million and $9.8 million, or 51%, 57% and 54% of
total net sales, in 1995, 1994 and 1993, respectively. The year-to-year
increases in dollar amount was primarily due to increases in
marketing and promotional activities. Management believes that
sales and marketing expenses will increase in dollar amounts in
future periods as it expands its sales and marketing in markets
outside of North America.
Research and Development. Research and development expenses
were $4.0 million, $4.2 million and $3.9 million in 1995, 1994 and
1993, or 20%, 24% and 21% of total net sales, in 1995, 1994 and
1993, respectively. The decrease in research and development
expenses in dollar amount and as a percentage of total net sales
from 1994 to 1995 was primarily due to reductions in third party
services and equipment maintenance costs. The increase in dollar
amount and as a percentage of total net sales from 1993 to 1994 was
primarily due to the previously described change in the software
development process.
General and Administrative. General and administrative
expenses were $2.3 million, $3.1 million and $2.2 million, or 12%,
18% and 12% of total net sales, in 1995, 1994 and 1993,
respectively. The decrease in dollar amount in general and
administrative expenses and as a percentage of total net sales from
1994 to 1995 and the increase in dollar amount and as a percentage
of total net sales from 1993 to 1994 was primarily due to severance
payments made in connection with the departure of CAMAX's former
President and CEO in June 1994, as well as legal, accounting and
other costs associated with the merger of CAMAX and Point Control in
September 1994.
Other Expense (Income)
Other expense (income) consists of the net effect of interest
income, interest expense and miscellaneous income and expense items.
Other expense (income) was ($19,000), $26,000 and $18,000 in 1995,
1994 and 1993, respectively.
Income Taxes
The effective tax rates for 1995, 1994 and 1993 were 4%, (2%) and
(20%), respectively. These rates differ from the statutory rate
primarily due to changes in the deferred tax valuation allowance
resulting from the use of a net operating loss carryforward in 1995
(for CAMAX), a net operating loss (consolidated) which resulted in
an increase in the tax valuation allowance in 1994 and the carryback
of a net operating loss (for Point Control) in 1993 and a decrease
in the tax valuation allowance resulting from the use of a net
operating loss carryforward (for CAMAX) in 1993.
In 1993, CAMAX recognized a change in accounting for deferred
income taxes. Effective January 1, 1993, CAMAX adopted SFAS No.
109, Accounting for Income Taxes. CAMAX elected to adopt the
requirements of SFAS No. 109 as of January 1, 1993, rather than
retroactively restate prior financial statements. The cumulative
effect as of January 1, 1993 of adopting SFAS No. 109 was a credit
to income of $1.0 million. See Note 1 of Notes to Consolidated
Financial Statements.
As of December 31, 1995, CAMAX had net operating loss
carryforwards of approximately $8.0 million, research and
development tax credit carryforwards of approximately $0.6 million
and other tax credit carryforwards of approximately $0.2 million.
The carryforwards expire in varying amounts from 1998 to 2010.
There can be no assurance that the net operating loss carryforwards
and the various tax credit carryforwards will be available in the
future. See Note 7 of Notes to Consolidated Financial
Statements.
Liquidity and Capital Resources
From its inception through 1987, CAMAX financed its operations
primarily through private sales of common stock, totaling over $14
million, and bank loans. Since 1988, CAMAX has financed its
operations primarily through cash generated from operations. In
1995, 1994 and 1993, $2.5 million, $2.2 million and $1.1 million,
respectively, was generated by operations. Cash provided by
operations has been primarily the result of net income, adjusted for
depreciation and amortization, generated in each year, except 1994
where the collection of accounts receivable provided $1.8 million of
cash.
CAMAX's investing activities consist primarily of purchases
of property and equipment. In 1995, 1994 and 1993, CAMAX used $1.9
million, $0.9 million and $0.7 million, respectively, to purchase
property and equipment, primarily computer hardware and software.
In addition, CAMAX capitalized software development costs of $0.5 in
1993. Beginning in 1994, CAMAX changed its software development
process which resulted in CAMAX incurring immaterial costs after
achievement of technological feasibility. Management expects that
the rate of purchases of property and equipment will decrease in
1996 to the approximate levels of those for 1992-1994. CAMAX's
principal commitments consist primarily of leases on its facilities
in Minneapolis, Minnesota and Eugene, Oregon. See Note 5 of Notes
to Consolidated Financial Statements.
At December 31, 1995, CAMAX had $3.9 million of cash, cash
equivalents and short-term investments and $2.8 million of working
capital. CAMAX had an unsecured, noninterest-bearing note
outstanding to Autodesk in connection with CAMAX's purchase of the
ManufacturingExpert product line with a principal balance as of
December 31, 1995 of $704,000. The terms of the note include an
acceleration in the payment of the note in the event of a change in
control of CAMAX.
CAMAX also had a term loan from a bank that was secured by
certain assets of CAMAX. The loan bears interest at the bank's
reference rate (8.5% at December 31, 1995) plus 1.625% and expires
in November 1998. The principal balance of this term loan was
$457,000 at December 31, 1995. At December 31, 1995, CAMAX had
outstanding $488,000 in remaining obligations for installment loans
and capitalized equipment leases which expire in varying timeframes
through the first quarter of 2000. See Note 4 of Notes to
Consolidated Financial Statements.
CAMAX has short-term lines of credit with two banks for
borrowings up to $500,000 and $750,000, respectively. Borrowings
under the $500,000 line of credit agreement bear interest at 1.0%
over the reference rate as established by First Bank Minneapolis
(8.5% at December 31, 1995). Borrowings under the $750,000 line of
credit agreement bear interest at the bank's reference rate (8.5% at
December 31, 1995) plus 1% with a floor of 8.75%. As part of the
$750,000 borrowing arrangement, CAMAX must maintain a $50,000
compensating balance. Borrowings under the agreements are
collateralized by substantially all of CAMAX's assets. Both
agreements contain certain restrictive covenants which, among other
things, require CAMAX to maintain specified levels of net worth. As
of December 31, 1995, CAMAX had no borrowings outstanding under
either agreement.
CAMAX believes that at December 31, 1995 its existing cash, cash
equivalents and short-term investments and, if needed, the available
borrowings under the short-term lines of credit will be sufficient
to fund its future operating activities and to fund the debt service
requirements of its long-term debt and capitalized leases. At
December 31, 1995, CAMAX did not have any material commitments for
the acquisition of assets.
CAMAX's days sales outstanding were 58, 56, and 61 at December
31, 1995, 1994 and 1993, respectively.
To date, CAMAX has not invested in derivative securities or
any other financial instruments that involve a high level of
complexity or risk.
<PAGE>
LEGAL MATTERS
Dinsmore & Shohl, Cincinnati, Ohio, counsel for SDRC, has rendered
its opinion that the shares of SDRC Common Stock to be issued to the
shareholders of CAMAX in connection with the Merger have been duly
authorized and, if issued pursuant to the Merger Agreement, will be
validly issued, fully paid and non-assessable under the current laws
of the State of Ohio. Such firm will also render its opinion with
respect to certain federal income tax consequences of the Merger to
SDRC, CAMAX and the shareholders of CAMAX.
John E. McDowell, a partner in Dinsmore & Shohl, is a director of
SDRC. As of December 31, 1995, partners of Dinsmore & Shohl and
attorneys employed by such firm beneficially owned 105,906 shares of
SDRC Common Stock.
EXPERTS
The consolidated financial statements of SDRC incorporated in
this Proxy Statement/Prospectus by reference to the Annual Report
on Form 10-K for the year ended December 31, 1995 have been so
incorporated in reliance on the report of Price Waterhouse LLP,
independent accountants, given on the authority of said firm as
experts in auditing and accounting.
The consolidated financial statements of CAMAX Manufacturing
Technologies, Inc. as of December 31, 1995 and 1994 and for the
years then ended included in this Proxy Statement/Prospectus have
been audited by Deloitte & Touche LLP, independent auditors, as
stated in their report appearing herein. The consolidated financial
statements of CAMAX Manufacturing Technologies, Inc. as of December
31, 1993 and for the year ended December 31, 1993 restated to give
effect to the Point Control Co. merger on September 2, 1994 and
accounted for as a pooling of interests have been audited by
Deloitte & Touche LLP as stated in their report appearing herein
which is based in part on the report of Coopers & Lybrand LLP,
independent auditors. The separate financial statements of Point
Control Co. are not included herein, but are included in the
restated audited financial statements of CAMAX Manufacturing
Technologies, Inc. The report of Deloitte & Touche LLP expresses an
unqualified opinion and includes an explanatory paragraph relating
to a change in the method of accounting for income taxes by adopting
the provisions of the Financial Accounting Standards Board's
Statement of Financial Accounting Standard No. 109, Accounting for
Income Taxes, in 1993. Such consolidated financial statements of
CAMAX Manufacturing Technologies, Inc. have been so included in
reliance upon such firms given upon their authority as experts in
accounting and auditing.
OTHER MATTERS
The Board of Directors of CAMAX knows of no other matters which may
come before the Special Meeting. However, if any matters other than
those set forth in the notice should be properly presented for
action, including any adjournment of the Special Meeting, such
matters will be handled in accordance with applicable legal
requirements.
Representatives of Deloitte & Touche, LLP are expected to be present
at the Special Meeting to answer, at the appropriate time, any
questions of shareholders.
<PAGE>
<PAGE>
<PAGE>
CAMAX MANUFACTURING TECHNOLOGIES, INC.
TABLE OF CONTENTS
Page
INDEPENDENT AUDITORS' REPORTS:
Deloitte & Touche LLP F-2
Coopers & Lybrand LLP F-3
CONSOLIDATED BALANCE SHEETS -
December 31, 1995, and 1994 F-4
CONSOLIDATED STATEMENTS OF OPERATIONS -
Years Ended December 31, 1995, 1994, and 1993 F-5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY -
Years Ended December 31, 1995, 1994, and 1993 F-6
CONSOLIDATED STATEMENTS OF CASH FLOWS -
Years Ended December 31, 1995, 1994, and 1993 F-7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -
Years Ended December 31, 1995, 1994, and 1993 F -8
<PAGE>
[DELOITTE & TOUCHE,LLP LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors and Shareholders
CAMAX Manufacturing Technologies, Inc.
Minneapolis, Minnesota
We have audited the consolidated balance sheets of CAMAX
Manufacturing Technologies, Inc. and subsidiaries (the Company) as
of December 31, 1995 and 1994 and the related consolidated
statements of operations, shareholders' equity, and cash flows for
each of the three years in the period ended December 31, 1995.
These consolidated financial statements are the responsibility of
the Company's management. Our responsibility is to express an
opinion on the consolidated financial statements based on our
audits. The consolidated financial statements give retroactive
effect to the merger of CAMAX Systems, Inc. and Point Control Co.,
which has been accounted for as a pooling of interests as described
in Note 2 to the consolidated financial statements. We did not
audit the statements of operations, shareholders' equity, and cash
flows of Point Control Co. for the year ended December 31, 1993,
which statements reflect total net revenues of $8,705,647. Those
statements were audited by other auditors whose report has been
furnished to us, and our opinion, insofar as it relates to the
amounts included for Point Control Co. for 1993, is based solely on
the report of such other auditors.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We
believe that our audits and the report of the other auditors provide
a reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other
auditors, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of
CAMAX Manufacturing Technologies, Inc. and subsidiaries at
December 31, 1995 and 1994 and the results of their operations and
their cash flows for each of the three years in the period ended
December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 1 to the consolidated financial statements, in
1993 the Company adopted Statement of Financial Accounting Standards
No. 109, Accounting for Income Taxes.
/s/ Deloitte & Touche LLP
Minneapolis, Minnesota
March 12, 1996
<PAGE>
[COOPERS & LYBRAND LETTERHEAD]
INDEPENDENT AUDITORS' REPORT
Board of Directors
Point Control Co.
We have audited the statements of operations, shareholders' equity,
and cash flows for the year ended December 31, 1993 of Point Control
Co. and subsidiaries (PCC). These financial statements are the
responsibility of PCC's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such financial statements present fairly, in all
material respects, the consolidated results of operations and cash
flows of Point Control Co. and subsidiaries for the year ended
December 31, 1993, in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand LLP
Eugene, Oregon
February 10, 1994
<PAGE>
<TABLE>
CAMAX MANUFACTURING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1995 AND 1994
<CAPTION>
1995 1994
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,450,864 $2,247,534
Investments 1,425,490 1,064,240
Accounts receivable, net of
allowance for doubtful accounts of
$200,00 and $193,000, respectively 4,030,016 2,804,222
Other accounts receivable 72,143 70,446
Inventory 103,860 211,709
Prepaid expenses 297,461 455,884
Deferred income taxes 417,000 451,000
--------- ---------
Total current assets 8,796,834 7,305,035
PROPERTY:
Equipment 5,486,105 4,065,614
Office furniture and fixtures 1,698,623 1,534,993
Leasehold improvements 66,662 51,901
--------- ---------
Total property and equipment 7,251,390 5,652,508
Less accumulated depreciation 4,925,879 4,217,224
--------- ---------
Property and equipment, net 2,325,511 1,435,284
OTHER ASSETS:
Deferred software development costs 138,109
Deferred income taxes 583,000 549,000
Other assets, net 156,833 246,747
------- -------
Total other assets 739,833 933,856
----------- ---------
$11,862,178 $9,674,175
=========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 663,932 $ 871,355
Current portion of long-term debt 769,420 625,606
Accrued payroll and commissions 735,625 433,694
Deferred revenue 3,172,416 2,538,656
Other accrued liabilities 678,714 737,599
--------- ---------
Total current liabilities 6,020,107 5,206,910
LONG-TERM DEBT 879,083 1,303,718
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock - no par value;
authorized 50,000,000 shares;
issued and outstanding
18,211,692 and 17,137,528 shares,
respectively 14,712,062 14,472,170
Accumulated deficit (9,749,074) (11,308,623)
----------- ------------
Total shareholders' equity 4,962,988 3,163,547
----------- ------------
$11,862,178 $9,674,175
=========== ============
</TABLE>
See notes to consolidated financial statements.<PAGE>
<TABLE>
CAMAX MANUFACTURING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
NET SALES:
Software $13,637,996 $11,733,692 $12,178,193
Maintenance and
services 6,380,279 5,532,263 4,574,142
Other 35,479 544,588 1,535,611
---------- ---------- ----------
Total net sales 20,053,754 17,810,543 18,287,946
COST OF SALES:
Software 1,487,371 2,193,135 830,258
Maintenance and
services 415,730 317,164 155,066
Other 24,925 361,843 1,062,084
---------- --------- ---------
Total cost of sales 1,928,026 2,872,142 2,047,408
---------- --------- ---------
Gross margin 18,125,728 14,938,401 16,240,538
OPERATING EXPENSES:
Sales and marketing 10,222,630 10,115,728 9,806,707
Research and
development 3,975,482 4,202,117 3,874,508
General and
administrative 2,321,089 3,122,347 2,235,809
---------- ---------- ----------
Total operating
expenses 16,519,201 17,440,192 15,917,024
---------- ---------- ----------
INCOME (LOSS) FROM
OPERATIONS 1,606,527 (2,501,791) 323,514
OTHER EXPENSE (INCOME):
Interest expense 174,812 141,972 93,113
Other income, net (193,975) (115,764) (75,458)
--------- ---------- ----------
Total other (income)
expense (19,163) 26,208 17,655
--------- ---------- ----------
INCOME (LOSS) BEFORE INCOME
TAXES AND CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 1,625,690 (2,527,999) 305,859
PROVISION (BENEFIT) FOR
INCOME TAXES 66,141 48,473 (62,065)
--------- --------- ----------
INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 1,559,549 (2,576,472) 367,924
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 975,567
---------- ----------- ----------
NET INCOME (LOSS) $1,559,549 $(2,576,472) $1,343,491
========== =========== =========
PER COMMON AND COMMON EQUIVALENT SHARE:
INCOME (LOSS) BEFORE
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE $0.08 $(0.15) $0.02
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 0.05
------ ------- ------
NET INCOME (LOSS) $0.08 $(0.15) $0.07
====== ======= ======
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT
SHARES OUTSTANDING 18,596,439 16,892,254 18,470,601
========== ========== ==========
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
CAMAX MANUFACTURING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
<CAPTION>
Common Stock
----------------- Net
Number of Accumulated Shareholders'
Shares Amount Deficit Equity
<S> <C> <C> <C> <C>
BALANCES AT DECEMBER 31, 1992 16,968,204 $14,380,439 $(9,790,015) $4,590,424
Common stock issued upon exercise
of stock options 325,480 28,878 28,878
Common stock redeemed (395,417) (15,420) (189,309) (204,729)
Net income 1,343,491 1,343,491
---------- ---------- ---------- -----------
BALANCES AT DECEMBER 31, 1993 16,898,267 14,393,897 (8,635,833) 5,758,064
Common stock issued upon exercise
of stock options 478,656 95,153 95,153
Common stock redeemed (239,395) (16,880) (96,318) (113,198)
Net loss (2,576,472) (2,576,472)
---------- ---------- ---------- ----------
BALANCES AT DECEMBER 31, 1994 17,137,528 14,472,170 (11,308,623) 3,163,547
Common stock issued upon exercise
of stock options 1,074,164 239,892 239,892
Net income 1,559,549 1,559,549
--------- --------- --------- ----------
BALANCES AT DECEMBER 31, 1995 18,211,692 $14,712,062 $(9,749,074) $4,962,988
========== ========== ========= =========
</TABLE>
See notes to consolidated financial statements.
<TABLE>
CAMAX MANUFACTURING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
<CAPTION>
1995 1994 1993
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $1,559,549 $(2,576,472) $1,343,491
Adjustments to reconcile net
income (loss) to net cash
provided by operating activities:
Depreciation 994,679 980,000 746,351
Amortization 237,887 333,408 381,143
Amortization of Manufacturing Expert 765,518
Noncash expense for transition services 247,000
Gain on sale of equipment (22,923) (6,085) (5,387)
Deferred income taxes 3,881 35,753
Cumulative effect of accounting change (975,567)
Changes in assets and liabilities:
(Increase) decrease in accounts receivable (1,227,491) 1,762,527 (275,677)
Decrease (increase) in inventory 107,849 (4,077) 39,536
Decrease (increase) in prepaid expenses 158,423 28,464 (89,268)
Decrease in income taxes receivable 151,878
Decrease in accounts payable (207,423) (8,404) (124,050)
Increase in accruals and other liabilities 876,807 466,683 95,962
(Increase) decrease in other assets (9,863) 53,371 (13,178)
Decrease in other long-term liabilities (5,642) (11,285)
-------- --------- ---------
Total adjustments 907,945 4,768,522 (195,667)
-------- --------- ---------
Net cash provided by operating
activities 2,467,494 2,192,050 1,147,824
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (2,193,510) (1,827,587) (98,261)
Proceeds from maturities of investments 1,832,260 861,608
Purchases of property (1,936,859) (888,813) (740,431)
Proceeds from sale of property 57,101 20,274 10,627
Software development costs capitalized (483,242)
---------- ---------- -----------
Net cash used in investing activities (2,241,008) (1,834,518) (1,311,307)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of short-term debt 150,000 450,000
Principal payments on short-term debt
obligations (450,000) (150,000)
Proceeds from issuance of long-term debt 370,964 211,328 350,278
Principal payments on long-term debt
obligations (634,012) (254,021) (388,460)
Common stock issued for cash 239,892 95,153 28,878
Redemptions of common Stock (113,198) (204,729)
--------- -------- ---------
Net cash (used in) provided by
financing activities (23,156) (360,738) 85,967
--------- -------- ---------
NET INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS 203,330 (3,206) (77,516)
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 2,247,534 2,250,740 2,328,256
--------- --------- ---------
CASH AND CASH EQUIVALENTS, END OF YEAR $2,450,864 $2,247,534 $2,250,740
========= ========= =========
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $182,625 $ 104,802 $93,113
======== ======== ======
Income taxes paid (refunded) $ 39,541 $(102,586) $49,500
======== ======== ======
</TABLE>
Long-term debt of $1,012,518 was incurred in 1994 when the Company purchased
Manufacturing Expert (see Note 2).
See notes to consolidated financial statements.
<PAGE>
CAMAX MANUFACTURING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
1. SUMMARY OF OPERATIONS AND SIGNIFICANT ACCOUNTING POLICIES
Operations:
CAMAX Manufacturing Technologies, Inc. and its wholly owned
subsidiaries, Point Control Co., Point Control International Sales
Corporation, and Point Control International Limited, (collectively,
the Company) develop and market computer software and services for
use in manufacturing facilities and distribute the products
nationally and internationally primarily through a dealer
network.
The nature of the Company's operations exposes the Company to
certain business risks. The market for computer software and
services is highly competitive and subject to rapid technological
change and evolving industry standards that may affect both the
operations of the Company and its customers. In addition, there are
risks inherent in the Company's international business activities
such as currency fluctuations, reduced protection for intellectual
property and other such conditions which may also adversely affect
the Company's business, operating results and financial
condition.
Summary of Significant Accounting Policies:
Consolidation - The consolidated financial statements include the
accounts of CAMAX Manufacturing Technologies, Inc. (formerly CAMAX
Systems, Inc.) and its subsidiaries. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Cash and Cash Equivalents - Cash and cash equivalents include
temporary cash investments stated at cost, which approximates
market. The Company considers all investments with maturities of
three months or less when purchased to be cash equivalents. A
substantial portion of the cash and cash equivalents are interest
bearing.
Investments - The Company invests in debt securities issued by
the U.S. Treasury, certificates of deposit of financial
institutions, and commercial paper. All securities have been
classified as held to maturity under Statement of Financial
Accounting Standards (SFAS) No. 115 due to the Company's intent and
ability to hold these investments to maturity. These investments
are recorded at amortized cost. As fair market value approximates
amortized cost, the unrealized holding gain or loss at each year end
was not significant.
Concentrations of Credit Risk - Financial instruments which
potentially expose the Company to concentrations of credit risk, as
defined by SFAS No. 105, consist primarily of trade accounts
receivable. The Company's accounts receivable are primarily due
from its dealer network. The Company manages this credit risk by
evaluating creditworthiness regularly. The Company does not require
collateral for its trade accounts receivable.
Inventory - Inventories, which consist of software manuals and
supplies, are valued at the lower of average cost or market.
Property - Property is stated at cost. Depreciation, which
includes the amortization of assets recorded under capital leases,
is computed using the straight-line method over the asset's
estimated useful life or the term of the capital lease, whichever is
shorter. Estimated lives used in computing depreciation are as
follows:
Equipment 2 to 3 years
Office furniture and fixtures 5 years
Leasehold improvements 5 years
Capitalized lease amounts included in property were $266,000 and
$304,000, which were net of accumulated amortization of $217,000 and
$517,000, at December 31, 1995 and 1994, respectively.
Deferred Computer Software Development Costs - Under the criteria
set forth in SFAS No. 86, Accounting for the Costs of Computer
Software to Be Sold, Leased, or Otherwise Marketed, capitalization
of software development costs begins upon the establishment of
technological feasibility of the product. The establishment of
technological feasibility and the ongoing assessment of the
recoverability of these costs require considerable judgment by
management with respect to certain external factors, including, but
not limited to, anticipated future gross product revenues, estimated
economic product lives, and changes of software and hardware
technology.
In 1994, the Company changed its software development process
from a feature-based release model to a time-based release model.
This change significantly reduced the amount of time between
technological feasability and release thereby reducing the extent of
software production costs incurred after the establishment of
technological feasibility. Because of this change, the Company's
management believes the amount of any software development costs
that could be capitalized is immaterial. Accordingly, all software
development costs after December 31, 1993 have been expensed as
incurred.
Costs of $483,000 were capitalized in 1993 and were included in
deferred software development costs. The Company estimated that
such costs had an economic life of two years. Amortization expense
of $138,000, $304,000, and $353,000 has been included in cost of
sales for 1995, 1994, and 1993, respectively.
Impairment of Long-Lived Assets - Management of the Company
periodically reviews the carrying value of long-term assets,
including deferred software development costs and other intangible
assets for potential impairment by comparing the carrying value of
these assets with their related expected future net cash flows.
Should the sum of the related expected future net cash flows be less
than the carrying value, management will determine whether an
impairment loss should be recognized. An impairment loss would be
measured by the amount by which the carrying value of the asset
exceeds the fair value of the asset. To date, except for the write-off of
Manufacturing Expert as discussed in Note 2, management has
determined that no impairment of these assets exists.
Revenue Recognition - Revenue from the sale of software licenses
is recognized when the product is shipped to the customer.
Maintenance revenue is recognized on a monthly basis over the life
of the maintenance agreement. Revenue from consulting services is
recognized when the services are provided. Sales outside of North
America accounted for 38%, 33%, and 31% of total net sales in 1995,
1994, and 1993, respectively.
Income Taxes - Effective January 1, 1993, the Company adopted
SFAS No. 109, Accounting for Income Taxes. The Company elected to
adopt the requirements of SFAS No. 109 as of January 1, 1993 rather
than retroactively restate the financial statements of prior years.
Prior to the adoption of SFAS No. 109, the Company followed the
provisions of SFAS No. 96, Accounting for Income Taxes. Under SFAS
No. 109, deferred income taxes are recognized for tax consequences
in future years of differences between tax bases of assets and
liabilities and their financial reporting amounts at each year end
based on statutory tax rates applicable to years in which the
differences are expected to affect taxable income. As a result of
changes in requirements for the recognition of deferred tax assets
contained in SFAS No. 109, the Company recorded a cumulative effect
of a credit to income of $975,567 as of January 1, 1993.
Earnings (Loss) Per Common and Common Equivalent Share - Earnings
(loss) per common and common equivalent share were calculated by
dividing net income (loss) by the weighted average common and common
equivalent shares outstanding during each period. Common equivalent
shares, using the treasury stock method, include the dilutive effect
of all outstanding common stock options.
Use of Estimates in the Preparation of Financial Statements - The
preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
Reclassifications - Certain 1994 and 1993 amounts have been
reclassified to conform with presentations in the 1995 financial
statements.
2. BUSINESS MERGER AND PRODUCT LINE PURCHASE
Merger with Point Control Co.:
On August 22, 1994, CAMAX Systems, Inc. (CAMAX) and Point Control
Co. (PCC) signed a definitive agreement to merge PCC into CAMAX,
which resulted in PCC becoming a wholly owned subsidiary of CAMAX
effective September 2, 1994. Under the terms of the agreement, PCC
shareholders received 17.75 shares of CAMAX's common stock for each
PCC share and an equivalent conversion for each PCC stock option
outstanding. Accordingly, CAMAX issued 7,008,520 shares of its
common stock for all the outstanding shares of PCC common stock. On
December 9, 1994, the shareholders of CAMAX voted to amend its
Articles of Incorporation to change the name of the Company to CAMAX
Manufacturing Technologies, Inc.
The merger qualified as a tax-free reorganization and was
accounted for as a pooling of interests. Accordingly, the Company's
consolidated financial statements have been restated to give
retroactive effect to the merger of CAMAX and PCC for all periods
presented.
Combined and separate results of CAMAX and PCC during the periods
preceding the merger were as follows:
CAMAX Point
Systems, Inc. Control Co. Combined
Six months ended June 30,
1994 (unaudited):
Net revenues $4,775,343 $4,200,854 $8,976,197
Net income (loss) (40,274) 41,255 981
Year ended December 31, 1993:
Net revenues 9,582,299 8,705,647 18,287,946
Income before cumulative
effect of accounting
change 750,244 (382,320) 367,924
Cumulative effect of
accounting change 1,000,000 (24,433) 975,567
Net income (loss) 1,750,244 (406,753) 1,343,491
The combined results include reclassifications to conform the
financial statement presentation between the two companies. These
reclassifications had no effect on net income (loss) or
shareholders' equity as previously reported by CAMAX or PCC, other
than restating the $24,433 cumulative effect for the adoption of
SFAS No. 109 for PCC from fiscal 1992 as previously reported to
fiscal 1993.
Transaction costs relating to the merger of the two companies,
which were expensed in 1994, consist primarily of professional fees.
The costs to combine the two organizations include provisions for
severance costs relating to the streamlining of the administrative,
sales, and marketing functions.
Purchase of Manufacturing Expert Assets:
On August 9, 1994, the Company purchased the assets for the software
product known as Manufacturing Expert from Autodesk Inc. (Autodesk).
The purchase price was $1,568,000, which was paid with a down
payment of $300,000 in cash, assumption of $68,000 in liabilities,
and issuance of a noninterest-bearing note for $1,200,000 to
Autodesk which requires three annual payments of $400,000 through
1997 (see Note 4). The terms of the note include an acceleration of
the note's maturity in the event of a change in control of the
Company. The note has been discounted in the financial statements
at an imputed interest rate of 9%. The purchase price was allocated
as follows:
Discount for imputed interest $ 187,000
Services of Autodesk personnel during
transition period 615,000
Value of purchased software 766,000
---------
$1,568,000
=========
The discount is being amortized over the note term as interest
expense. The cost of the services of Autodesk personnel was
expensed ratably over a six-month period beginning August 9, 1994,
the period over which such services were rendered. Operating
expenses for 1995 and 1994 include $109,000 and $506,000,
respectively, for these transition services. The purchased software
was amortized completely during 1994 and is included in cost of
sales because of management's determination that the expected future
net cash flows would not support the carrying value of this
software.
3. LINES OF CREDIT
The Company has short-term lines of credit with two banks for
borrowings up to $500,000 and $750,000, respectively.
Borrowings under the $500,000 line of credit agreement bear
interest at 1.0% over the reference rate as established by First
Bank Minneapolis (8.5% at December 31, 1995). Borrowings under the
agreement are limited to the lesser of $500,000 or the Company's
borrowing base, which consists of a specified percentage of certain
accounts receivable. Borrowings under the agreement are secured by
substantially all of the Company's assets. At December 31, 1995,
the Company had no borrowings outstanding under this line of credit
agreement. The line of credit agreement contains certain
restrictive covenants which, among other things, require the Company
to maintain net worth in an amount at least equal to two times its
obligations and certain indebtedness to the bank and restricts the
declaration of payments of dividends.
The $750,000 line of credit is collateralized with accounts
receivable, inventory, equipment, and general intangibles of the
Company. The interest rate is variable, based on the bank's
reference rate (8.5% at December 31, 1995), plus 1%, with a floor of
8.75%. As part of the borrowing arrangement, the Company is
required to maintain a $50,000 compensating balance. At
December 31, 1995, the Company had no borrowings outstanding under
this line of credit agreement. In addition, the line of credit
agreement contains certain restrictive covenants which, among other
things, require the Company to maintain tangible net worth of not
less than $3,250,000 and a current ratio of not less than
1.25:1.
4. LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
1995 1994
Note payable, imputed interest rate
of 9%, due in annual installments of
$400,000 through August 1997 $ 703,645 $1,012,518
Note payable, interest at reference rate
plus 1.625%, due in monthly installments
of $14,114 through November 1998 456,761 570,894
Installment loan, interest at 10.0%, due
in monthly installments of $13,004 through
October 1996 123,497
Installment loans, interest at 8.0%, due in
monthly installments of $2,230 through
August 1996 17,311 41,593
Capitalized leases, interest at 6.7% to
14.34%, due in varying monthly installments
through February 2000 347,289 304,319
------- -------
1,648,503 1,929,324
Less current maturities 769,420 625,606
------- -------
$ 879,083 $1,303,718
Various loan agreements and capitalized leases are collateralized
by the pledge of certain equipment. Total long-term debt maturities
at December 31, 1995 are approximately $769,000 in 1996, $604,000 in
1997, $201,000 in 1998, $67,000 in 1999, and $7,000 in 2000.
5. LEASE COMMITMENTS
The Company leases its facilities and certain equipment under
operating leases with terms remaining of up to 54 months. Rent
expense applicable to operating leases was $846,000 in 1995,
$769,000 in 1994, and $747,000 in 1993. Future minimum lease
payments under noncancelable operating leases for the five years
ending December 31, 2000 approximate $1,593,000. These minimum
payments are 1996, $414,000; 1997, $414,000; 1998, $353,000; 1999,
$351,000; 2000, $61,000.
6. STOCK PLANS
Stock Option Plans - Under a 1985 Incentive Stock Option Plan,
options for 175,000 shares of common stock may be granted at 100% of
fair market value at date of grant as determined by the Board of
Directors. Options are exercisable at a rate determined by the
Board of Directors and expire ten years after date of grant or
earlier, in accordance with the terms of the plan. The following
summarizes the activity for the years ended December 31:
1995 1994 1993
Options outstanding at beginning
of year 60,709 60,709 61,109
Options expired (55,609)
Options canceled (400)
------- ------ ------
Options outstanding at end of year 5,100 60,709 60,709
======= ====== ======
Exercise price per share $2.10 $2.00-$2.10 $2.00-$2.10
======= ========== ==========
At December 31, 1995, all outstanding options were exercisable.
No additional options will be granted under this plan.
Under a 1987 Nonqualified Stock Option Plan for directors and
employees of the Company, options for 2,400,000 shares of common
stock may be granted at 100% of fair market value at date of grant,
as determined by the Board of Directors, and expire ten years after
date of grant or earlier, in accordance with the terms of the plan.
The following summarizes the activity for the years ended December
31:
<TABLE>
1995 1994 1993
<S> <C> <C> <C>
Options outstanding at beginning
of year 1,551,417 2,041,417 2,137,417
Options granted 185,000 215,000
Options exercised (898,167) (75,000) (8,500)
Options canceled (50,000) (600,000) (302,500)
--------- --------- ---------
Options outstanding at end
of year 603,250 1,551,417 2,041,417
========= ========= =========
Exercise price per share $.20 - $.60 $.20 - $.60 $.20 - $.60
=========== =========== ===========
</TABLE>
At December 31, 1995, 458,250 options were exercisable. No
additional options will be granted under this plan.
Under a 1987 Incentive Stock Option Plan, options and stock
appreciation rights (SARs) may be granted to employees at 100% of
market value at date of grant. SARs entitle the holder to receive
the appreciation in value of the SARs (i.e., the difference between
the market price and option price of a share at the time of exercise
of the SARs) in shares of common stock of the Company.
Outstanding
Stock Appreciation Price Per
Options Rights Share
Balance at
December 31, 1992 1,019,057 334,423
Options granted 110,050 27,513
Options exercised (296,177)
Options canceled (71,762) (151,285)
SARs applied (20,359)
---------- --------
Balance at
December 31, 1993 761,168 190,292 $.28 - $.56
Options exercised (220,136) ===========
Options canceled (129,894) (72,047)
Options expired (34,968) (6,718)
SARs applied (17,484)
----------- --------
Balance at
December 31, 1994 376,170 94,043 $.30 - $.56
Options exercised (100,997) ===========
Options canceled (23,945) (31,235)
Options expired (42,340) (10,586)
----------- --------
Balance at
December 31, 1995 208,888 52,222 $.37 - $.56
=========== ====== ===========
At December 31, 1995, all outstanding options and SARs were
exercisable. No additional shares will be granted under this
plan.
During 1995, the Company's Board of Directors and shareholders
approved an incentive and stock option plan which provides for the
granting of stock options and other awards to employees and other
eligible participants. The number of shares for which options or
other awards may be issued under the plan is 3,000,000 shares of
common stock. The plan also provides that no more stock options
will be granted from the Company's 1985 Stock Option Plan or the
Company's two 1987 Stock Option Plans. The following summarizes the
activity for the year ended December 31, 1995:
Options granted 2,439,500
Options canceled (173,000)
---------
Options outstanding at December 31, 1995 2,266,500
=========
Exercise price per share $.70- $.77
=========
At December 31, 1995, 673,333 options were exercisable and there
were 733,500 shares available for grant under this plan.
During 1995, the Board of Directors and shareholders also
approved a stock option plan which provides for the granting of
stock options to the Company's outside directors. The number of
shares on which options may be issued under the plan is 400,000
shares of common stock. The following summarizes the activity for
the year ended December 31, 1995:
Options granted and outstanding at December 31, 1995 100,000
=======
Exercise price per share $0.70
=======
At December 31, 1995, 16,666 options were exercisable and there were
300,000 shares available for grant under this plan.
In addition, the Company has issued nonqualified options to
employees and others to purchase stock at the discretion of the
Board of Directors. These options have varying terms as to the life
and vesting requirements. The following summarizes the activity for
the years ended December 31:
1995 1994 1993
Options outstanding at
beginning of year 252,324 356,323 409,750
Options granted 213,000 603,500
Options exercised (75,000) (183,520) (17,928)
Options expired (70,824)
Options canceled (133,479) (638,999)
-------- ------- -------
Options outstanding at
end of year 106,500 252,324 356,323
========= ======= =======
Exercise price per share $.27-$.56 $.20-$.56 $.20-$.56
========== ======= =========
At December 31, 1995, 82,834 options were exercisable.
7. INCOME TAXES
The income tax provisions (benefits) consist of the following
components for the years ended December 31:
1995 1994 1993
Federal $34,548 $32,352 $(95,094)
Foreign sales corporation 800 (16,745)
Foreign tax 5,000 5,037 3,000
State 25,793 7,203 11,021
------ ------ -------
66,141 44,592 (97,818)
Deferred taxes 3,881 35,753
------ ------ -------
Provision (benefit) $66,141 $48,473 $(62,065)
====== ====== =======
Deferred income taxes reflect the impact for financial statement
reporting purposes of "temporary differences" between the financial
statement carrying amounts and tax bases of assets and liabilities.
The "temporary differences" that give rise to a significant portion
of the deferred tax assets relate to the following at December 31:
1995 1994
Current deferred assets:
Net operating loss carryforwards $ 190,000 $190,000
Allowance for doubtful accounts 76,000 73,000
Salary accrual 108,000 169,000
Other 43,000 19,000
--------- ---------
417,000 451,000
Long-term deferred assets:
Net operating loss carryforwards 2,850,000 3,552,000
State taxes 77,000 73,000
Tax credits 809,000 698,000
Excess of book depreciation over tax
depreciation 176,000 138,000
Software development costs (52,000)
Other (32,000)
Valuation allowance (3,297,000) (3,860,000)
--------- ---------
583,000 549,000
--------- ---------
Net deferred tax asset $1,000,000 $1,000,000
========= =========
The Company has established a valuation allowance to reduce the
deferred tax asset to the amount estimated to be realizable in the
future.
The differences between the U.S. federal income taxes calculated
at the statutory rate and the consolidated tax provision are
summarized as follows for the years ended December 31:
<TABLE>
1995 1994 1993
<S> <C> <C> <C>
Tax at statutory rate $ 569,000 $(884,800) $ 107,051
Valuation allowance adjustment (563,000) 812,000 (141,000)
Permanent differences 65,062 16,038 (5,955)
State income taxes, net of
federal benefit 17,023 4,681 7,164
Foreign tax (benefit) 5,800 5,037 (13,745)
Effect of graduated tax rates (16,250) 25,000 3,059
Write-off of foreign tax credit
receivable 16,347 26,667
Other (27,841) 43,850 (18,639)
------- ------- --------
$ 66,141 $ 48,473 $ (62,065)
======== ========= ==========
</TABLE>
At December 31, 1995, the Company had a net operating loss
carryforward of approximately $8,001,000, an investment tax credit
carryforward of approximately $44,000, a research and development
credit carryforward of approximately $634,000, and a general
business credit carryforward of $131,000. The carryforwards expire
in varying amounts from 1998 to 2010.
8. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS
Cash, receivables, accounts payable, accrued expenses, and other
liabilities are carried at amounts which reasonably approximate
their fair value.
The fair value estimates presented herein are based on
information available to management as of December 31, 1995.
Although management is not aware of any factors that would
significantly affect the estimated fair value amounts, such amounts
have not been comprehensively revalued for the purposes of these
financial statements since that date, and current estimates of fair
value may differ significantly from the amounts presented
therein.
9. IMPACT OF ACCOUNTING PRONOUNCEMENTS ISSUED BUT NOT ADOPTED
In March 1995, the Financial Accounting Standards Board (FASB)
issued SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to Be Disposed of, which requires
impairment losses to be recorded on long-lived assets used in
operations when indicators of impairment are present and the
undiscounted cash flows estimated to be generated by those assets
are less than the assets' carrying amount. SFAS No. 121 also
addresses the accounting for long-lived assets that are expected to
be disposed of. The Company will adopt SFAS No. 121 in the first
quarter of 1996 and, based on a preliminary assessment, does not
believe the effect of adoption will be significant to future
financial results.
In October 1995, the FASB issued SFAS No. 123, Accounting for
Stock-Based Compensation, which will be effective for the Company
beginning January 1, 1996. SFAS No. 123 requires expanded
disclosures of stock-based compensation arrangements with employees
and encourages (but does not require) compensation cost to be
measured based on the fair value of the equity instrument awarded.
Companies are permitted, however, to continue to apply Accounting
Principles Board (APB) Opinion No. 25, which the Company presently
is following and which recognizes compensation cost based on the
intrinsic value of the equity instrument awarded. The Company will
continue to apply APB Opinion No. 25 to its stock-based compensation
awards to employees and directors and will disclose the required
pro-forma effect on net income and earnings per share.
10. SUBSEQUENT EVENT
On January 16, 1996, the Company entered into an agreement of merger
and plan of reorganization with Structural Dynamics Research
Corporation (SDRC) whereby all outstanding shares of the Company's
common stock will be exchanged for shares of SDRC common stock
having a value of $30,000,000. The merger agreement is subject to
the approval of the Company's shareholders and other regulatory
approvals.
<PAGE>
Annex A
AGREEMENT OF MERGER
AND PLAN OF REORGANIZATION
This Agreement of Merger and Plan of Reorganization (the
"Agreement") made this _____ day of January, 1996 by and among CAMAX
Manufacturing Technologies, Inc., a Minnesota corporation ("CAMAX";
all references herein to CAMAX shall also be references to the CAMAX
Subsidiaries as such term is defined below); Structural Dynamics
Research Corporation, an Ohio corporation ("SDRC") and SDRC Systems,
Inc., an Ohio corporation ("Surviving Corporation").
WITNESSETH:
WHEREAS, CAMAX, SDRC and Surviving Corporation wish to effect a
merger under the authority and provisions of the corporation law of
Ohio and the corporation law of Minnesota pursuant to which at the
effective date, as defined herein, CAMAX will be merged with and
into SDRC Systems, Inc. (the "Merger"); and
WHEREAS, for federal income tax purposes, CAMAX, SDRC and Surviving
Corporation intend the Merger to qualify as a reorganization within
the meaning of Sections 368(a)(1)(A) and 368(a)(2)(D) of the
Internal Revenue Code of 1986, as amended (the "Code").
NOW THEREFORE, in consideration of the mutual promises and covenants
contained herein, the parties hereto hereby agree as follows:
ARTICLE 1
THE MERGER
Section 1.1 Transfer of Property and Liabilities. Upon the
Effective Date (as defined in Article 9 hereof) of the Merger, the
separate existence of CAMAX shall cease; all of the outstanding
shares of common stock, without par value of CAMAX ("CAMAX Common
Stock") shall be exchanged for and converted into shares of the
common stock without par value of SDRC ("SDRC Common Stock"), as
hereinafter provided; and upon the filing of the appropriate
Certificate of Merger with the Secretary of State of Ohio and
Articles of Merger with the Secretary of State of Minnesota,
Surviving Corporation shall possess all of the rights, privileges,
immunities, powers and purposes, and all of the property, real and
personal, causes of action and every other asset of CAMAX, and shall
assume and be liable for all of the liabilities, obligations and
penalties of CAMAX, in accordance with the General Corporation Law
of the State of Ohio and the Minnesota Business Corporation Act.
Section 1.2 Surviving Corporation. Following the Merger, the
existence of Surviving Corporation shall continue unaffected and
unimpaired by the Merger, with all the rights, privileges,
immunities and powers, subject to all of the duties and liabilities
of a corporation organized under the laws of the State of Ohio. The
Articles of Incorporation and Code of Regulations of Surviving
Corporation, as of the Effective Date, shall continue in full force
and effect, and shall not be changed in any manner by the Merger;
except that Article First of the Articles of Incorporation of
Surviving Corporation shall be amended in its entirety to read as
follows:
FIRST: The name of the Corporation shall be CAMAX Manufacturing
Technologies, Inc.
The officers and directors of Surviving Corporation immediately
prior to the Effective Date shall continue as the officers and
directors of Surviving Corporation.
Section 1.3 Principal Office. Following the Effective Date, the
principal office of Surviving Corporation shall be located in
Milford, Clermont County, Ohio.
Section 1.4 State Law. Surviving Corporation shall be an Ohio
corporation, governed in all respects by the corporate laws of the
State of Ohio.
Section 1.5 Registered Office. The address, including street and
number of the registered office of Surviving Corporation in
Minnesota, shall be 7851 Metro Parkway, Minneapolis, Minnesota 55425
Section 1.6 Agreement with Secretary of State. The Surviving
Corporation shall file with the Secretary of State of Minnesota an
agreement to the following effect (and if acceptable to the
Secretary of State of Minnesota, this Agreement when filed as part
of the Articles of Merger shall constitute such agreement):
Section 1.6.1 Service of Process. The Surviving Corporation may be
served with process in Minnesota in any proceeding for the
enforcement of an obligation of the Surviving Corporation and in any
proceeding for the enforcement of the rights of a dissenting
shareholder of CAMAX against the Surviving Corporation.
Section 1.6.2 Appointment of Agent. The Surviving Corporation
irrevocably appoints the Secretary of State of Minnesota as its
agent to accept service of process in any proceeding and such
service of process may be forwarded to:
John A. Mongelluzzo
Vice President, General Counsel and Secretary
Legal Department
Structural Dynamics Research Corporation
2000 Eastman Drive
Milford, Ohio 45150-2789
Section 1.6.3 Dissenting Shareholders. The Surviving Corporation
will promptly pay to the dissenting shareholders of CAMAX the
amount, if any, to which they are entitled under Section 302A.473 of
the Minnesota Business Corporation Act with respect to the rights of
dissenting shareholders.
ARTICLE 2.
CONVERSION OF SHARES
Section 2.1 Conversion Ratio. All of the shares of CAMAX Common
Stock issued and outstanding as of the close of business on the
business date immediately prior to the Effective Date shall, in the
aggregate, without any action on the part of Surviving Corporation
or any holder of such shares, be converted by the Merger into shares
of SDRC Common Stock without par value ("SDRC Common Stock") having
a total value of $30,000,000 (the "Total Value"). The total number
of shares of SDRC Common Stock to be issued shall be determined by
dividing the Total Value by the "Applicable Value Per Share of SDRC
Common Stock." The "Applicable Value Per Share of SDRC Common
Stock" shall be the average of the last sale prices of the SDRC
Common Stock as reported on the Nasdaq National Market for the 20-trading day
period ending on the fifth trading day prior to the
Effective Date (the "Valuation Period"). Of the total number of
shares of SDRC Common Stock so determined, 10% thereof shall be set
aside for retention under Section 2.2 below. Each individual share
of CAMAX Common Stock issued and outstanding as of the close of
business on the business date immediately prior to the Effective
Date shall be converted into that number of shares of SDRC Common
Stock equal to the total number of shares of SDRC Common Stock to be
issued in the Merger as provided above (less the number of shares
retained pursuant to Section 2.2) divided by the total number of
shares of CAMAX Common Stock issued and outstanding as of the close
of business on the business date immediately prior to the Effective
Date; provided, however, that no fractional shares of SDRC Common
Stock shall be issued pursuant to the Merger and in lieu thereof
cash shall be paid for fractional shares that would otherwise be
issued, in accordance with Section 2.3 below.
Section 2.2 Retention of Shares. From and after the Effective Date,
SDRC shall retain that number of shares of SDRC Common Stock which
represents 10% of the total shares to be issued to the CAMAX
shareholders upon consummation of the Merger, in accordance with the
conversion ratio set forth in Section 2.1 of this Agreement, which
SDRC shall have the option of redeeming as payment for any amounts
due SDRC or the Surviving Corporation pursuant to Article 10 of this
Agreement (the "Retention Shares"). For the purposes of any such
redemption by SDRC, the redeemed shares shall be valued at the
Applicable Value Per Share of SDRC Common Stock.
Upon the earlier of (i) the date that SDRC files its Annual Report
on Form 10-K for the year ended December 31, 1996 or (ii) the first
anniversary of the Closing Date, as defined herein, (the "Retention
Period") SDRC shall distribute any Retention Shares not previously
redeemed to the CAMAX shareholders on a pro rata basis based upon
their percentage ownership of CAMAX Common Stock immediately prior
to the Effective Date in the same manner as provided in the last
sentence of Section 2.1 above.
Section 2.3 Exchange of Certificates. After the Effective Date,
each holder of a certificate or certificates for shares of CAMAX
Common Stock, upon surrender of the same duly transmitted to SDRC's
stock transfer agent (or in lieu of surrendering such certificates
in the case of lost, stolen, destroyed or mislaid certificates, upon
execution of such documentation as may be reasonably required by
SDRC's stock transfer agent), shall be entitled to receive in
exchange therefor a certificate or certificates representing the
number of whole shares of SDRC Common Stock into which such holder's
shares of CAMAX Common Stock shall have been converted by the
Merger, less that proportion of the Retention Shares attributable to
such shareholder, plus a cash payment for any fraction of a share to
which the holder is entitled, in lieu of such fraction of a share,
equal in amount to the product resulting from multiplying such
fraction by the Applicable Value Per Share of SDRC Common Stock.
Until so surrendered, each outstanding certificate that prior to the
time the Merger becomes effective represented shares of CAMAX Common
Stock shall be deemed for all corporate purposes to evidence
ownership of the number of full shares of SDRC Common Stock into
which the same shall have been converted; provided, however, that
dividends or distributions otherwise payable with respect to shares
of SDRC Common Stock into which CAMAX Common Stock shall have been
so converted shall be paid with respect to such shares only when the
certificate or certificates evidencing any such shares of CAMAX
Common Stock shall have been so surrendered (or in lieu of
surrendering such certificates in the case of lost, stolen,
destroyed or mislaid certificates, upon execution of such
documentation as may be reasonably required by SDRC), and,
thereupon, any such dividends and distributions shall be paid,
without interest, to the holder entitled thereto, subject however to
the operation of any applicable escheat or similar laws relating to
unclaimed funds.
Section 2.4 Dissenting Shares.
(a) Notwithstanding anything in this Agreement to the contrary, if
Section 302A.471 of the Minnesota Business Corporation Act shall be
applicable to the Merger, shares of CAMAX Common Stock that are
issued and outstanding immediately prior to the Effective Date and
which are held by shareholders who have not voted such shares in
favor of the Merger, who shall have delivered, prior to any vote on
the merger, a written demand for the fair value of such shares in
the manner provided in Section 302A.473 of the Minnesota Business
Corporation Act and who, as of the Effective Date, shall not have
effectively withdrawn or lost such right to dissenters' rights
("Dissenting Shares") shall not be converted into or represent a
right to receive shares of SDRC Common Stock pursuant to Section 2.1
hereof, but the holders thereof shall be entitled only to such
rights as are granted by Section 302A.473 of the Minnesota Business
Corporation Act. Each holder of Dissenting Shares who becomes
entitled to payment for such shares pursuant to Sections 302A.471
and 302A.473 of the Minnesota Business Corporation Act shall receive
payment therefor from the Surviving Corporation in accordance with
the Minnesota Business Corporation Act; provided, however, that if
such holder of Dissenting Shares shall have effectively withdrawn
such holder's demand for appraisal of such shares or lost such
holder's right to appraisal and payment of such shares under Section
302A.473 of the Minnesota Business Corporation Act, such holder or
holders (as the case may be) shall forfeit the right to appraisal of
such shares and each such share shall thereupon be deemed to have
been canceled, extinguished and converted, as of the Effective Date,
into and represent the right to receive payment from the Surviving
Corporation of the shares of SDRC Common Stock, as provided in
Section 2.1 hereof.
(b) CAMAX shall give SDRC (i) prompt notice of any written demand
for fair value, any withdrawal of a demand for fair value and any
other instrument served pursuant to Section 302A.473 of the
Minnesota Business Corporation Act received by CAMAX, and (ii) the
opportunity to direct all negotiations and proceedings with respect
to demands for fair value under such negotiations and proceedings
with respect to demands for fair value under such Section 302A.473
of the Minnesota Business Corporation Act. CAMAX shall not, except
with the prior written consent of SDRC, voluntarily make any payment
with respect to any demand for fair value or offer to settle or
settle any such demand.
Section 2.5 Plan Stock Options.
(a) At the Effective Date, each outstanding option to purchase
shares of CAMAX Common Stock (individually, a "Plan Option" and,
collectively, the "Plan Options") issued pursuant to the Point
Control Co. 1987 Incentive Stock Option Plan, CAMAX Systems, Inc.
1985 Incentive Stock Option Plan, CAMAX Systems, Inc. 1987 Non-Qualified Stock
Option Plan, CAMAX Manufacturing Technologies, Inc.
1995 Long-Term Incentive and Stock Option Plan and CAMAX
Manufacturing Technologies, Inc. 1995 Directors' Stock Option Plan
(individually, a "Plan" and, collectively, the "Plans"), whether
vested or unvested, shall be assumed by SDRC. Each Plan Option
shall be deemed to constitute an option to acquire, on the same
terms and conditions as were applicable under such Plan Option, the
same number of shares of SDRC Common Stock as the holder of such
Plan Option would have been entitled to receive pursuant to the
Merger had such holder exercised such option in full immediately
prior to the Effective Date (rounded down to the nearest whole
share), at a price per share equal to (x) the aggregate exercise
price for the shares of CAMAX Common Stock otherwise purchasable
pursuant to such Plan Option divided by (y) the number of full
shares of SDRC Common Stock deemed purchasable pursuant to such Plan
Option; provided, however, that in the case of any option to which
Section 421 of the Code applies by reason of its qualification under
Section 422 of the Code ("qualified stock options"), the option
price, the number of shares purchasable pursuant to such option and
the terms and conditions of exercise of such option shall be
determined in order to comply with Section 424(a) of the Code. The
stock appreciation rights attached to each Plan Option, if any (the
"Stock Appreciation Rights"), shall attach to the option to acquire
SDRC Common Stock into which such Plan Option is converted pursuant
to the preceding sentence, on the same terms and conditions as were
applicable under such Plan Option.
(b) As soon as practicable after the Effective Date, SDRC shall
deliver to the holders of Plan Options appropriate notices setting
forth such holders' rights pursuant to the Plan and the agreements
evidencing the grants of such Plan Options shall continue in effect
on the same terms and conditions (subject to the adjustments
required by this Section 2.5) after giving effect to the Merger and
the assumption by SDRC as set forth above. SDRC shall comply with
the terms of the Plan and ensure, to the extent required by, and
subject to the provisions of, such Plan, that Plan Options which
qualified as qualified stock options prior to the Effective Date
continue to qualify as qualified stock options of SDRC after the
Effective Date.
(c) SDRC shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of SDRC Common Stock for
delivery upon exercise of Plan Options assumed by it in accordance
with this Section 2.5 immediately after the Effective Date.
Section 2.6 Other Stock Options.
(a) At the Effective Date, each outstanding option to purchase
shares of CAMAX Common Stock (individually, a "Stock Option" and,
collectively, the "Stock Options") issued other than pursuant to the
Plan, whether vested or unvested, shall be assumed by SDRC. Each
Stock Option shall be deemed to constitute an option to acquire, on
the same terms and conditions as were applicable under such Stock
Option, the same number of shares of SDRC Common Stock as the holder
of such Stock Option would have been entitled to receive pursuant to
the Merger had such holder exercised such option in full immediately
prior to the Effective Date, at a price per share equal to (x) the
aggregate exercise price for the shares of CAMAX Common Stock
otherwise purchasable pursuant to such Stock Option divided by (y)
the number of full shares of SDRC Common Stock deemed purchasable
pursuant to such Stock Option.
(b) As soon as practicable after the Effective Date, SDRC shall
deliver to the holders of Stock Options appropriate notices setting
forth such holders' rights and the agreements evidencing the grants
of such Stock Options shall continue in effect on the same terms and
conditions (subject to the adjustments required by this Section 2.6
after giving effect to the Merger and the assumption by SDRC as set
forth above).
(c) SDRC shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of SDRC Common Stock for
delivery upon exercise of Stock Options assumed by it in accordance
with this Section 2.6 immediately after the Effective Date.
ARTICLE 3.
REPRESENTATIONS AND WARRANTIES OF CAMAX
CAMAX and its Subsidiaries, as herein defined, hereby represent and
warrant to SDRC and Surviving Corporation, their successors and
assigns as follows:
Section 3.1 Organization and Good Standing. CAMAX is a corporation
duly organized, validly existing and in good standing under the laws
of the State of Minnesota, and duly authorized to carry on the
business presently conducted by it. CAMAX and its Subsidiaries are
qualified to do business in the jurisdictions listed on Schedule 3.1
and are not required to be qualified to do business in any other
jurisdiction where the failure to be so qualified would have a
Material Adverse Effect on CAMAX or its Subsidiaries.
Section 3.2 Capitalization. As of the date of this Agreement,
CAMAX's authorized capital stock consists of 50 million shares of
common stock, without par value per share, of which 18,241,192
shares are issued and outstanding, fully paid and nonassessable.
CAMAX has no outstanding options, warrants or other rights entitling
another person to acquire any securities of CAMAX of any kind other
than options to purchase a total of 3,260,738 shares of CAMAX Common
Stock under the Plans and Stock Options.
Section 3.3 Subsidiaries. Schedule 3.3 is a list of all of CAMAX's
direct or indirect subsidiaries and all joint ventures (the
"Subsidiaries"), and each of the Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of
the jurisdiction in which each is incorporated.
Section 3.4 Financial Statements. CAMAX has previously furnished to
SDRC its audited financial statements as of December 31, 1994, 1993
and 1992 together with unaudited financial statements for the eleven
month period ended November 30, 1995 (collectively, the "Financial
Statements"). The Financial Statements fairly present the financial
condition of CAMAX as of said dates and the results of its
operations for the periods then ended, in conformity with generally
accepted accounting principles, consistently applied, except that
the November 30, 1995 Financial Statements do not include footnotes
in accordance with generally accepted accounting principles. There
are no material liabilities, obligations or indebtedness of CAMAX
required to be disclosed in the Financial Statements other than the
liabilities, obligations or indebtedness disclosed therein
(including footnotes).
Section 3.5 Title. Except as set forth on Schedule 3.5 and except
where the result would not have a Material Adverse Effect on CAMAX,
CAMAX and its Subsidiaries have good and marketable title to all of
the properties and assets reflected in the Financial Statements as
of the latest balance sheet contained in the Financial Statements,
and which are still owned by it, and CAMAX and its Subsidiaries have
good and marketable title to all properties and assets acquired by
it after such date and still owned by it, subject to (i) any liens
and encumbrances that do not materially adversely impair the use of
the property, (ii) statutory liens for taxes not yet due and payable
and (iii) minor defects and irregularities in title that do not
materially adversely impair the use of the property.
Section 3.6 Accounts Receivable. Schedule 3.6 includes an accurate
aging schedule of all of the accounts receivable reflected on
CAMAX's latest balance sheet included in the Financial Statements.
The net accounts receivable reflected on the latest balance sheet
included in the Financial Statements will be fully collectible after
such date in the ordinary course of business using reasonable
business methods in light of the nature of the business.
Section 3.7 Real Property. Except as set forth on Schedule 3.7, (i)
CAMAX and its Subsidiaries do not own or lease any real estate and
(ii) CAMAX's or its Subsidiaries' leases of real property are all
assignable and do not contain change of control provisions. With
respect to all real estate leased by CAMAX or its Subsidiaries: (i)
CAMAX or its Subsidiaries are the owner and holder of the entire
interest in the leasehold estates purported to be granted by such
leases; (ii) CAMAX or its Subsidiaries are not in material default
under any lease and each lease constitutes a valid and binding
obligation of the respective parties thereto; and (iii) there are no
material declared defaults currently existing, neither CAMAX nor its
Subsidiaries have received any notices of material default, and, to
the knowledge of CAMAX or its Subsidiaries, no events have occurred
that with notice, the lapse of time or both, or otherwise would
constitute a material default under any of the real estate leases to
which CAMAX or its Subsidiaries are a party.
Except as set forth on Schedule 3.7, all improvements owned by CAMAX
or its Subsidiaries (including buildings and other structures) on
the real estate leased by CAMAX conform in all respects to
applicable federal, state, local and foreign laws and regulations
(including, but not limited to, those relating to environmental
protection, conservation, occupational safety and health, zoning and
building) and the real estate leased by CAMAX or its Subsidiaries is
zoned for the purpose for which CAMAX or its Subsidiaries use or
propose to use the real estate. All improvements (including
buildings and other structures) owned by CAMAX or its Subsidiaries
on the leased real estate are in good condition and repair, and
there does not exist any condition that interferes with the economic
value or the use thereof as presently used or as presently proposed
to be used by CAMAX or its Subsidiaries.
Section 3.8 Environmental Matters. Except as disclosed on Schedule
3.8: (i) the property and assets of CAMAX and its Subsidiaries and
the operations conducted thereon by CAMAX and its Subsidiaries (aa)
do not materially violate any applicable federal, state or local
environmental law, regulation or ordinance (each hereinafter an
"Environmental Law"), including by way of illustration and not by
way of limitation, the Clean Air Act, the Federal Water Pollution
Control Act of 1972, the Resource Conservation and Recovery Act of
1976, the Comprehensive Environmental Response Compensation and
Liability Act of 1980, and the Toxic Substances Control Act
(including any amendments or extensions thereof, and rules,
regulations, standards or guidelines pursuant to any Environmental
Laws) and all other environmental standards or requirements, and
(bb) are not subject to any existing, pending or, to the knowledge
of CAMAX or its Subsidiaries, threatened investigation, inquiry or
proceeding by any governmental authority or to any remedial
obligations under any Environmental Law; (ii) all notices, permits,
licenses or similar authorizations, if any, required to be obtained
or filed under any Environmental Law in connection with the use of
the real properties and assets of CAMAX and its Subsidiaries,
including, without limitation, past or present treatment, storage,
disposal or release of any or all petroleum products, underground
storage tanks, and all Hazardous Substances (as such term is
hereinafter defined) into the environment, have been obtained or
filed; (iii) no Hazardous Substances have been disposed of or
otherwise released by CAMAX or its Subsidiaries or, to the knowledge
of CAMAX or its Subsidiaries, by others on or to the real
properties on which the operations of CAMAX or its Subsidiaries are
conducted except in strict compliance with Environmental Laws; and
(iv) neither CAMAX nor its Subsidiaries have contingent liability in
connection with the release of any Hazardous Substances into the
environment. "Hazardous Substances" shall mean any toxic or
hazardous or noxious substance, material or waste which is regulated
by any local government authority having jurisdiction over the real
properties of or used by CAMAX, the States of Minnesota or Oregon or
the United States government, including, but not limited to (i)
asbestos or any asbestos containing material of any kind or
character which is now or may become friable and polychlorinated
biphenyls ("PCB's") as regulated by the Toxic Substance Control Act,
15 U.S.C.A. Section 2601 et seq., or materials or substances
designated as "hazardous substances" pursuant to Section 311 of the
Clean Water Act, 33 U.S.C.A. Section 1251 et seq., defined as
"hazardous waste" pursuant to Section 1004 of the Resource
Conservation and Recovery Act, 42 U.S.C.A. Section 6901 et. seq., or
defined as "hazardous substances" pursuant to Section 101 of the
Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C.A. Section 9601 et. seq.
Except as disclosed on Schedule 3.8, no notice of any violation of
any Environmental Laws has been received by CAMAX or its
Subsidiaries concerning the real properties of or used by CAMAX or
its Subsidiaries, and, to the knowledge of CAMAX or its
Subsidiaries, there are no existing or pending requirements of any
governmental authority relating to environmental matters requiring
any remedial action or other work, repairs, construction or capital
expenditures with respect to the real properties. Neither CAMAX nor
its Subsidiaries have been named as a "potentially responsible
party" in connection with any litigation, investigation or similar
matter, and CAMAX does not know of any matter in which CAMAX or its
Subsidiaries may be so named.
Except as set forth in Schedule 3.8, to the best of CAMAX's
knowledge there is not located in, on or under the real properties
owned or used by CAMAX or its Subsidiaries (1) electrical
transformers or other equipment containing PCB's, (2) underground
storage tanks, (3) urea formaldehyde foam insulation, (4) asbestos
in any form, or (5) any other Hazardous Substances.
Section 3.9 Inventories. Schedule 3.9 includes an accurate and
complete inventory listing as of November 30, 1995. The items
comprising the inventory reflected in the inventory amounts on
CAMAX's latest balance sheet included in the Financial Statements
and on Schedule 3.9 were, as of the dates thereof, and will be at
the Effective Date, of a quality and quantity that can be sold, used
or consumed in the ordinary course of CAMAX's business as conducted
on the date hereof and will in no event include items which are
obsolete or not usable by CAMAX in the ordinary course of its
business, except where the result would not have a Material Adverse
Effect on CAMAX.
Section 3.10 Absence of Material Adverse Changes. Except as
disclosed on Schedule 3.10: (i) since December 31, 1994, there have
been no changes which would have a Material Adverse Effect on the
financial condition, operations or business of CAMAX; and (ii)
neither CAMAX's chief executive officer nor its chief financial
officer is aware of any events which have occurred since December
31, 1994 or which are reasonably certain to occur in the future and
which reasonably can be expected to result in any Material Adverse
Effect on the financial condition, operations or business of CAMAX.
Section 3.11 Relationship with Customers and Distribution Channels.
To the best knowledge of CAMAX, there exists no threat on the part
of any material customer (including any reseller) or supplier to
materially reduce the volume of its purchases from or sales to CAMAX
or to otherwise materially modify its business relationship with
CAMAX.
Section 3.12 Absence of Undisclosed Liabilities. Except to the
extent reflected or reserved against on CAMAX's latest balance sheet
included in the Financial Statements, CAMAX does not have any
undisclosed liabilities or obligations (secured, unsecured,
contingent or otherwise) of a nature customarily reflected on a
corporate balance sheet prepared in accordance with generally
accepted accounting principles.
Section 3.13 Litigation. Except as disclosed on Schedule 3.13
hereto, there are no actions, suits, proceedings, investigations or
assessments of any kind pending before any court, administrative
agency, arbitration association, or other regulatory body, or to the
best knowledge of CAMAX, threatened against CAMAX or its
Subsidiaries which if successful might result in any Material
Adverse Effect on CAMAX or its Subsidiaries or which questions the
validity or legality of this Agreement or of any action taken or to
be taken by CAMAX in connection with this Agreement.
Section 3.14 Taxes. Except to the extent reserved against on the
latest balance sheet included in the Financial Statements and/or as
set forth on Schedule 3.14, CAMAX and its Subsidiaries have (i)
timely filed all tax returns, schedules, declarations, and tax-related documents
(collectively, "Returns") required to be filed by
any and all jurisdictions to which it is or has been subject; (ii)
timely paid in full any taxes, interest and penalties with respect
thereto, subject to audit of the taxing authorities by such
jurisdictions and timely made any deposits of tax required by taxing
jurisdictions; (iii) fully accrued on its books an amount sufficient
to pay all taxes not yet due for any completed taxable period; (iv)
made timely payments of the taxes required to be deducted and
withheld from the wages paid to employees; and (v) otherwise
satisfied, in all material respects, all legal requirements
applicable to it with respect to all aforementioned obligations to
taxing jurisdictions. All Returns filed by CAMAX correctly reflect
in all material respects its income, expenses, deductions, credits
and loss carryovers and the taxes due and are otherwise accurate and
complete in all material respects. CAMAX has delivered to SDRC true
and complete copies of all federal income tax returns of CAMAX for
each of the taxable years ended 1993 and 1994, inclusive. The most
recent period for which an assessment can no longer be made by the
IRS with respect to federal income tax obligations of CAMAX is for
the fiscal year ended 1991. Except as set forth on Schedule 3.14,
CAMAX has not experienced an audit of any of the Returns, and CAMAX
has no knowledge that an audit of any of the Returns is in progress
and has no reason to believe that any such audit is contemplated.
There are no other pending questions by any taxing authority
relating to, or claims asserted for (or to the knowledge of CAMAX or
its Subsidiaries any basis therefor), taxes or assessments of CAMAX.
For purposes of this Section, "tax" and "taxes" (when not modified
by other words such as "income" or "franchise") shall include all
income, gross receipts, franchise, excise, real and personal
property, and other taxes imposed by any federal, state, municipal,
local, or other governmental agency, including assessments in the
nature of taxes.
Section 3.15 Contracts, Agreements and Commitments. Except as
disclosed on Schedule 3.15, as of the date hereof, CAMAX is not a
party to any material contract, agreement or commitment, oral or
written, which is to be performed in whole or in part at or after
the date of this Agreement. Except as set forth on Schedule 3.15,
there is no breach or violation of, or default under any material
contract, agreement or commitment, and no event has occurred which,
with notice or lapse of time or both, would constitute a breach,
violation or default, or give rise to a right of termination,
modification, cancellation, prepayment or acceleration under any
such contract, agreement or commitment.
Section 3.16 Intellectual Property.
(a)Schedule 3.16 contains a complete and accurate list of
all of CAMAX's and its Subsidiaries' Intellectual Property, as
defined herein. Schedule 3.16 also contains a complete and accurate
list of all third-party owned software incorporated into any CAMAX
product. Except as set forth in Schedule 3.16, CAMAX and its
Subsidiaries own all right, title and interest in and to, or hold
valid licenses, if any, in and to the rights of the Intellectual
Property. Schedule 3.16 sets forth a list of all software products
currently marketed by CAMAX and its Subsidiaries, or marketed within
the three year period prior to the date of this Agreement, and
identifies the source or method of intellectual property protection
utilized or relied upon by CAMAX with respect to each such product.
Except as described on Schedule 3.16, none of the software products
marketed by CAMAX or its Subsidiaries has entered the public domain
or otherwise lacks intellectual property protection.
(b) Except as set forth on Schedule 3.16, CAMAX and its
Subsidiaries have not, as of and since the date upon which they
acquired any of the Intellectual Property, (i) transferred,
conveyed, sold, assigned, pledged, mortgaged or granted a security
interest in any of the Intellectual Property to any third party,
(ii) entered into any license, franchise or other agreement with
respect to any of the Intellectual Property with any third person,
or (iii) otherwise encumbered any of the Intellectual Property.
CAMAX and its Subsidiaries have maintained and enforced the
Intellectual Property in accordance with their customary practices
in order to safeguard the secrecy of all the Intellectual Property
that are considered to be trade secrets.
(c) The conduct of the business of CAMAX and its Subsidiaries as
currently conducted does not, to CAMAX's knowledge, conflict,
misappropriate or infringe in any way with any intellectual property
right of any third party that, individually or in the aggregate, is
reasonably likely to have a Material Adverse Effect on CAMAX's
business, and there is no claim, suit, action or proceeding pending
or, to the knowledge of CAMAX, threatened against CAMAX or any of
its Subsidiaries (i) alleging that use of the Intellectual Property
or any intellectual property licenses conflicts or infringes in any
way with any third party's intellectual property rights, or (ii)
challenging CAMAX's or its Subsidiaries' ownership of or right to
use or the validity of any Intellectual Property. To CAMAX's
knowledge, there are no conflicts, misappropriations, infringements
or other violations by any third party of any of the Intellectual
Property owned by or licensed by or to CAMAX or any of its
Subsidiaries.
(d) Each copyright registration, patent and trademark registration
and each application therefor listed in Schedule 3.16 is valid,
subsisting and in proper form, and has been duly maintained,
including the submission of all necessary filings in accordance with
the legal and administrative requirements of the appropriate
jurisdictions. CAMAX and its Subsidiaries have taken all of the
proper precautions to maintain the secrecy of its Intellectual
Property that are considered to be trade secrets, and to protect
their trade secrets from disclosure to the full extent required
under Minnesota law. Except as set forth in Schedule 3.16, there
have been no failures in complying with such requirements and no
Copyright, Patent or Trademark, each as defined herein, has lapsed
and there has been no cancellation or abandonment thereof.
(e) Neither CAMAX nor any other person has, to the knowledge of
CAMAX, granted any release, covenant not to sue, or non-assertion
assurance or entered into any indemnification or settlement
agreement with any person with respect to any part of the
Intellectual Property or any intellectual property licenses
associated with the Intellectual Property.
For the purpose of this Agreement, "Intellectual Property" shall be
defined as (a) all know-how, show-how, confidential or proprietary
technical information, trade secrets, designs, processes, computer
software, databases originating with CAMAX or as "work for hire"
created by or on behalf of CAMAX, research in progress, inventions
or invention disclosures (whether patentable or unpatentable) and
drawings, schematics, blueprints, flow sheets, designs and models;
(b) all copyrights, copyright registrations, copyrights mask works
and copyright applications (the "Copyrights"); (c) all patents,
patent applications, patents pending, patent disclosures on
inventions and all patents issued upon said patent applications or
based upon such disclosures (the "Patents"); and (d) all registered
and unregistered trade names, trademarks, service marks, product
designations, corporate names, trade dress, logos, slogans, designs
and general intangibles of like nature, together with all
registrations and recordings and all applications for registration
therefor and all translations, adaptations, derivatives and
combinations thereof (the "Trademarks").
Section 3.17 Business Operation. Since December 31, 1994, and
except for the grant and exercise of Stock Options and Plan Options,
CAMAX has been operating in the ordinary course of business, has not
made any changes in its capital or corporate structures, nor any
material changes in its methods of business operation and has not
provided any increases in employee salaries or benefits or made a
commitment to change the compensation of any employee, other than in
the ordinary course. Except as set forth on Schedule 3.17, since
December 31, 1994, CAMAX has not declared or paid any dividends nor
made any distributions of any other kind to its shareholders.
Section 3.18 CAMAX's Employees and Employee Benefit Plans. Schedule
3.18 contains a complete and accurate list and a brief description
of each employee contract and each plan or arrangement, including
the total number of CAMAX shares authorized to be issued under each
such contract, plan or arrangement, which provides any of the
following benefits: bonus, profit sharing, employee stock
ownership, stock option, stock appreciation right, stock grant,
phantom stock, pension, retirement, insurance, medical,
hospitalization, dental, disability, vacation, workers'
compensation, unemployment, deferred or incentive compensation,
severance or any other benefit, including, without limitation, each
"employee pension benefit plan" within the meaning of Section 3(2)
of ERISA, and "employee welfare benefit plan" within the meaning of
Section 3(1) of ERISA (collectively, "Benefit Plans") with respect
to any one or more of the employees or former employees of CAMAX.
To the extent the Benefit Plans have been reduced to writing,
complete and accurate copies of all the Benefit Plans have been
delivered to SDRC. In the event a Benefit Plan is not in written
form, Schedule 3.18 includes a complete and accurate description of
such Benefit Plan. CAMAX is not and never has been obligated to
make contributions to any multi-employer plan within the meaning of
Section 3(37) of ERISA and there exist no unfunded liabilities under
any of the Benefit Plans. Schedule 3.18 also includes an accurate
and complete list of each employee of CAMAX with each employee's job
title and annual compensation set forth next to each employee's
name. Except as set forth on Schedule 3.18, there has been no
change in the compensation payable to such employees. Except as
otherwise set forth in Schedule 3.18, CAMAX has not promised to
provide and is not providing any medical or life insurance benefits
to former employees or any other persons other than current
employees. CAMAX has previously delivered to SDRC copies of all
executory employment agreements.
Section 3.19 Compliance of Plans with ERISA and Code.
3.19.1 Compliance. If any of the Benefit Plans were to be
terminated, neither CAMAX nor its Subsidiaries would have any
material liability with respect to any Benefit Plan other than for
amounts already paid or provided for. All Benefit Plans comply in
all respects with all applicable laws and regulations including the
requirements of the Code that the Benefit Plans be non-discriminatory with
regard to coverage, availability of benefits and
amount and level of benefits. Each Benefit Plan has received a
favorable determination letter from the Interval Revenue Service
("IRS"), each of which is current, that such Benefit Plan meets the
requirements of Section 401(a) of the Code. There is no "excess
reserve" with respect to any Benefit Plan under Section
419(A)(f)(7)(C) of the Code. Each participant and beneficiary under
each of the Benefit Plans, and each of their spouses and dependents,
has received (i) all notices and reports required by ERISA within
the required deadlines, and (ii) adequate and timely notice of all
elections and options permitted under the Benefit Plans. All
required contributions have been made to each of the Benefit Plans.
3.19.2 Violations. CAMAX and its Subsidiaries have not engaged in
any transaction which could result in a material liability under
Section 409 of ERISA or Section 4975 of the Code. The execution and
delivery of this Agreement will not cause the termination of any of
the Benefit Plans, involve any prohibited transaction within the
meaning of Section 406 of ERISA or Section 4975 of the Code, nor
constitute a breach of fiduciary responsibility with respect to the
Benefit Plans.
3.19.3 Documents. CAMAX has delivered to SDRC: (i) all
determination letters issued by the IRS within the past five years
with respect to the Benefit Plans, and the requests therefor; (ii)
any and all documents submitted by CAMAX and its Subsidiaries to the
IRS or the Department of Labor ("DOL") with respect to the Benefit
Plans during the past five years; (iii) any document relating to the
Benefit Plans or the participation of CAMAX or its Subsidiaries
therein, or the benefits provided thereunder that create liability
with respect thereto; and (iv) any documents received by CAMAX or
its Subsidiaries from the IRS or the DOL challenging or raising
questions regarding the compliance of any Benefit Plan with the
Code, ERISA or any other applicable law.
Section 3.20 Labor and Employment Matters. Except as set forth on
Schedule 3.20, there has not been filed with the National Labor
Relations Board any complaint alleging any unfair labor practices
against CAMAX or its Subsidiaries; there are no facts that would
lead to any such unfair labor practice charge; and there has been no
occurrence within the past two years of any material work stoppage
or strike or any significant labor troubles at the facilities of
CAMAX or its Subsidiaries. CAMAX and its Subsidiaries are not
parties to any collective bargaining agreements. No person or party
(including, but not limited to, governmental agencies of any kind)
has any valid or enforceable claim or any basis for any valid and
enforceable action or proceeding against CAMAX or its Subsidiaries
arising out of any federal and/or state equal employment opportunity
statutes, ordinances or regulations, including, but not limited to,
those pertaining to race, age, religion, gender, sexual harassment
and all other similar claims. Except as set forth on Schedule 3.20,
all of CAMAX's and its Subsidiaries' employees are United States
citizens or are otherwise fully and properly authorized to work on
a permanent basis in the United States.
Section 3.21 Overtime, Back Wages, Vacation and Minimum Wages.
Except as set forth on Schedule 3.21 or as reflected in the latest
balance sheet included in the Financial Statements, no present or
former employee of CAMAX or its Subsidiaries has any valid and
enforceable claim (whether under federal or state law) under any
employment agreement, or otherwise, on account of or for (i)
overtime pay, other than overtime pay for the current payroll
period, (ii) wages or salary for any period other than the current
payroll period, (iii) vacation or time off (or pay in lieu thereof),
other than that earned in respect of the previous twelve months, or
(iv) any violation of any statute, ordinance or regulation relating
to minimum wages or maximum hours of work.
Section 3.22 Discrimination, Occupational Safety and Other Statutes
and Regulations. Except as set forth on Schedule 3.22, no person or
party (including, but not limited to, governmental agencies of any
kind) has any valid and enforceable claim, or any basis for any
valid and enforceable action or proceeding against CAMAX or its
Subsidiaries arising out of any breach or violation by CAMAX or its
Subsidiaries of any statute, ordinance or regulation relating to
discrimination in employment or employment practices or occupational
safety and health standards (including without limitation, the
Occupational Safety and Health Act, the Fair Labor Standards Act,
Title VII of the Civil Rights Act of 1964, the Age Discrimination in
Employment Act of 1967 or the Americans with Disabilities Act).
Section 3.23 CAMAX's Insurance Policies. Schedule 3.23 contains an
accurate and complete list of each insurance policy currently
providing coverage for the assets of CAMAX and its Subsidiaries,
their directors, officers and all employees. CAMAX and its
Subsidiaries have at all times maintained liability coverage with
financially sound and reputable insurance carriers in amounts which
are reasonable in light of the business of CAMAX and its
Subsidiaries and its claims experience. CAMAX and its Subsidiaries
have no knowledge that any insurance carriers presently providing
insurance coverage to CAMAX or its Subsidiaries intend to cancel or
refuse to renew such policies or materially increase the premiums
payable for coverage comparable to present coverage, except for
premium increases to be generally applicable; nor does CAMAX or its
Subsidiaries have any knowledge that any such insurance carriers
intend to require CAMAX or its Subsidiaries to implement material
changes in its present operating facilities or methods or products
as a condition to maintaining insurance.
Section 3.24 Bank Matters. Set forth on Schedule 3.24 is a list of
each bank account, including the name and address of the bank and
the account number, maintained by CAMAX or its Subsidiaries. The
list identifies each person who has signature power with respect to
each such account. Schedule 3.24 also contains a list of all bank
loans held by CAMAX or its Subsidiaries, including the name and
address of the bank, the loan number, the original loan amount and
all balances due. CAMAX has previously provided SDRC with copies of
all documentation with respect to any bank loans.
Section 3.25 Securities Laws and Regulations. Except as set forth
on Schedule 3.25, all of the CAMAX Common Stock previously issued,
including without limitation stock issued in connection with any of
the Plans and Stock Options, were issued in full compliance with all
federal and state securities laws and all regulations promulgated
thereunder.
Section 3.26 Minute Books and Stock Record Books. The minute books
of CAMAX and its Subsidiaries contain complete and accurate records
of all meetings and other corporate actions of each of its
shareholders and its Boards of Directors, including, but not limited
to, any committees of each such corporation's Board of Directors.
The stock record books of CAMAX and its Subsidiaries contain
complete and accurate records of all transactions involving the
issuance or transfer of equity securities of CAMAX or its
Subsidiaries, respectively.
Section 3.27 Brokers' Fees. Except for the fee payable to
Wessell's, Arnold and Henderson, CAMAX (i) has not, directly or
indirectly, dealt with any broker or finder in connection with this
transaction and (ii) has not incurred or will not incur any
obligation for any broker's or finder's fee or commission in
connection with the transactions provided for in this Agreement.
Section 3.28 Fairness Opinion. As referenced in Paragraph 2(a) of
the offer letter to CAMAX from SDRC dated December 7, 1995 (the
"Offer Letter"), CAMAX has received from an independent investment
banking firm an opinion, in form and substance satisfactory to
CAMAX, a copy of which is attached hereto as Exhibit 3.28, that the
Merger will, if consummated, be fair to the shareholders of CAMAX
from a financial point of view and such fairness opinion shall not
have been withdrawn as of the Effective Date.
Section 3.29 Tax Opinion. As referenced in Paragraph 2(a) of the
Offer Letter, CAMAX has received from tax counsel an opinion, in
form and substance satisfactory to CAMAX, a copy of which is
attached hereto as Exhibit 3.29, that the Merger will, if
consummated, constitute a tax-free transaction under the Code and
such opinion shall not have been withdrawn as of the Effective Date.
Section 3.30 Additional Tax Matters. To the knowledge of CAMAX and
its Subsidiaries, neither CAMAX nor any of its Subsidiaries,
affiliates or shareholders has taken or agreed to take any action
that would prevent the Merger from constituting a transaction
qualifying as a reorganization under Sections 368(a)(1)(A) and
368(a)(2)(D) of the Code.
Section 3.31 Corporate Power and Authorization. The directors of
CAMAX, by resolution adopted by the vote of the directors at a
meeting duly called and held in accordance with applicable law, have
duly approved this Agreement, and have directed that this Agreement
be submitted to a vote of CAMAX's shareholders at a special meeting
of shareholders to be called for that purpose, all in accordance
with and as required by law and in accordance with the Articles of
Incorporation and Bylaws of CAMAX. CAMAX has the corporate power
and authority to enter into this Agreement and to carry out its
obligations hereunder subject to certain required regulatory and
shareholder approvals. This Agreement, when executed and delivered,
will have been duly authorized and will constitute valid and binding
obligations of CAMAX, enforceable in accordance with their
respective terms, except to the extent that (i) enforceability
thereof may be limited by insolvency, reorganization, liquidation,
bankruptcy, readjustment of debt or other laws of general
application relating to or affecting the enforcement of creditors'
rights, and (ii) the availability of certain remedies may be
precluded by general principles of equity, subject, however, to the
receipt of requisite regulatory approvals and the approval of
CAMAX's shareholders.
Section 3.32 No Violation. Except as set forth on Schedule 3.32,
neither the execution of this Agreement, nor the consummation of the
transactions contemplated hereby, (i) conflicts with, results in a
breach of, violates or constitutes a material default under, CAMAX's
Articles of Incorporation or Bylaws or any federal, state or local
law, statute, ordinance, rule, regulation or court or administrative
order, or any agreement, arrangement or commitment to which CAMAX,
its Subsidiaries or any of its property is subject or bound; (ii)
results in the creation of or gives any person the right to create
any lien, charge, encumbrance, security agreement or any other
rights of others or other adverse interest upon any material right,
property or asset belonging to CAMAX or its Subsidiaries other than
such rights as may be given dissenting shareholders of CAMAX
pursuant to Minnesota law; (iii) terminates or gives any person the
right to terminate, amend, abandon or refuse to perform any material
agreement, arrangement or commitment to which CAMAX or its
Subsidiaries is a party or by which CAMAX's or its Subsidiaries'
rights, properties or assets are subject or bound; or (iv)
accelerates or modifies, or gives any party thereto the right to
accelerate or modify, the time within which, or the terms according
to which, CAMAX or its Subsidiaries are to perform any duties or
obligations or receive any rights or benefits under any material
agreements, arrangements or commitments. For purposes of
subparagraphs (iii) and (iv) immediately preceding, material
agreements, arrangements or commitments exclude agreements,
arrangements or commitments having a term expiring less than six
months from the date of this Agreement or which do not require the
expenditure of more than $150,000 (but shall include all agreements,
arrangements or commitments pursuant to which credit has been
extended by CAMAX or its Subsidiaries).
Section 3.33 International Business Matters. Except (i) as set
forth on Schedule 3.33 or (ii) to the extent it would not have a
Material Adverse Effect on CAMAX:
(a) CAMAX and its Subsidiaries have complied in all respects with
all laws, regulations and ordinances of the foreign jurisdictions in
which CAMAX or its Subsidiaries do business or propose to do
business;
(b) All contracts and agreements between CAMAX or its Subsidiaries
and any foreign parties are duly registered with or approved by the
appropriate regulatory authority in each foreign jurisdiction in
which CAMAX or its Subsidiaries do business or propose to do
business;
(c) CAMAX and its Subsidiaries are properly incorporated and
authorized to do business in all foreign jurisdictions where CAMAX
or its Subsidiaries currently do or propose to do business and have
all foreign governmental licenses and permits necessary for
conducting the business each conduct and such licenses and permits
are in full force and effect; no violations have been recorded and
no proceedings are pending or threatened to revoke or limit any of
such licenses and permits;
(d) Neither CAMAX nor its Subsidiaries has knowingly violated any
foreign law, regulation or ordinance or any U.S. laws pertaining to
business with foreign jurisdictions, including without limitation
the United States Foreign Corrupt Practices Act, the violation of
which could have a Material Adverse Effect on the ability of CAMAX
to do business in foreign jurisdictions, and CAMAX and its
Subsidiaries are not aware of any claims or litigation in any
foreign jurisdictions pending or threatened against CAMAX or its
Subsidiaries;
(e) The sale of CAMAX's or its Subsidiaries' products in any
foreign jurisdiction is not restricted by any United States export
laws and/or any regulations promulgated thereunder, and CAMAX and
its Subsidiaries conduct their international sales in full
compliance with all applicable export laws and regulations. CAMAX
and its Subsidiaries have previously provided SDRC with evidence of
the classification of CAMAX's or its Subsidiaries' software under
applicable United States export laws and regulations;
(f) CAMAX is current on all payments due to foreign distributors;
and
(g) All revenues resulting from sales made in foreign
jurisdictions by CAMAX or its Subsidiaries are reported on CAMAX's
Financial Statements in accordance with United States generally
accepted accounting principles.
Schedule 3.33 includes an itemized description of any restrictions
imposed by foreign governments or governmental agencies on CAMAX's
or its Subsidiaries' ability to terminate any of their distribution
agreements or other agreements with foreign entities selling CAMAX
products.
Section 3.34 Maintenance and Enhancement Agreements. Schedule 3.34
includes a copy of CAMAX's standard software maintenance agreement
and, except as set forth on Schedule 3.34, there exist no deviations
to CAMAX's standard software maintenance agreement which require
increased maintenance obligations by CAMAX to any of its customers.
Except as set forth on Schedule 3.34, CAMAX and its Subsidiaries
have not orally or in writing committed to provide selective special
enhancements to any of their software products for particular CAMAX
customers.
Section 3.35 Full Disclosure. No representation or warranty made by
CAMAX and its Subsidiaries in this Agreement or any Schedule or
Exhibit hereto and no statement or certificate or memorandum
furnished or to be furnished by CAMAX pursuant hereto or in
connection with the transactions covered hereby contains or will
contain any untrue statement of a material fact, or omit any
material fact, the omission of which would be misleading.
ARTICLE 4.
REPRESENTATIONS AND WARRANTIES OF SDRC
SDRC and Surviving Corporation, jointly and severally, hereby
represent and warrant to CAMAX, its successors and assigns as
follows:
Section 4.1 Organization and Good Standing. Each of SDRC and
Surviving Corporation is a corporation duly organized, validly
existing and in good standing under the laws of the State of Ohio,
and is duly authorized to carry on the business presently conducted
by it.
Section 4.2 Capitalization. SDRC's authorized capital stock
consists of 100,000,000 shares of common stock, no par value, of
which 30,535,975 shares are issued and outstanding as of December
31, 1995, fully paid and nonassessable. Surviving Corporation's
authorized capital stock consists of 500 shares of common stock, no
par value, of which 10 shares are issued and outstanding as of
December 31, 1995, fully paid and nonassessable.
Section 4.3 Corporate Power and Authorization. The Boards of
Directors of SDRC and Surviving Corporation, respectively, and the
shareholder of the Surviving Corporation, by resolution adopted by
votes of the directors at meetings duly called and held in
accordance with applicable law, have each duly approved this
Agreement, all in accordance with and as required by law and in
accordance with the Articles of Incorporation and Code of
Regulations of SDRC and Surviving Corporation, respectively. SDRC
and Surviving Corporation each have the corporate power and
authority to enter into this Agreement and to carry out its
obligations hereunder subject to certain required regulatory
approvals. This Agreement, when executed and delivered, will have
been duly authorized and will constitute valid and binding
obligations of each of SDRC and Surviving Corporation, enforceable
in accordance with their respective terms, except to the extent that
(i) enforceability thereof may be limited by insolvency,
reorganization, liquidation, bankruptcy, readjustment of debt or
other laws of general application relating to or affecting the
enforcement of creditors' rights, and (ii) the availability of
certain remedies may be precluded by general principles of equity,
subject, however, to the receipt of requisite regulatory approvals.
Section 4.4 No Violation. Neither the execution of this Agreement,
nor the consummation of the transactions contemplated hereby, (i)
conflicts with, results in a breach of, violates or constitutes a
material default under either SDRC's or Surviving Corporation's
Articles of Incorporation or Code of Regulations or any federal,
state or local law, statute, ordinance, rule, regulation or court or
administrative order, or any agreement, arrangement, or commitment,
to which SDRC or Surviving Corporation or any of their property is
subject or bound; (ii) results in the creation of or gives any
person the right to create any lien, charge, encumbrance, security
agreement or any other rights of others or other adverse interest
upon any material right, property or asset belonging to SDRC or
Surviving Corporation; (iii) terminates or gives any person the
right to terminate, amend, abandon, or refuse to perform any
material agreement, arrangement or commitment to which CAMAX is a
party or by which SDRC's or Surviving Corporation's rights,
properties or assets are subject or bound; or (iv) accelerates or
modifies, or gives any party thereto the right to accelerate or
modify, the time within which, or the terms according to which, SDRC
or Surviving Corporation is to perform any duties or obligations or
receive any rights or benefits under any material agreements,
arrangements or commitments.
Section 4.5 Due Diligence. SDRC has completed, to its satisfaction,
a due diligence review of CAMAX's products, software and
intellectual property and of CAMAX's books, records, contracts,
agreements and other documents directly impacting CAMAX and its
Subsidiaries, as provided in Paragraph 2(f) of the Offer Letter.
Section 4.6 Shares to be Issued. The shares of SDRC Common Stock to
be issued and delivered pursuant to this Agreement will, when so
issued, be duly and validly issued, fully paid and nonassessable.
Section 4.7 SEC Filings. SDRC has delivered to CAMAX true and
complete copies of its (i) Annual Reports on Form 10-K for the years
ended December 31, 1994, 1993 and 1992, as filed with the Securities
and Exchange Commission ("SEC"), and its Annual Report to
Shareholders for such years; (ii) proxy statements relating to all
of SDRC's meetings of shareholders (whether annual or special) since
December 31, 1992; and (iii) all other reports, statements and
registration statements (including Quarterly Reports on Form 10-Q
and Current Reports on Form 8-K) filed by SDRC with the SEC since
December 31, 1994 (collectively, the "SEC Filings"). As of their
respective dates, the SEC Filings (including all exhibits and
schedules thereto and documents incorporated by reference therein)
complied as to form in all material respects with the applicable
laws and rules and regulations of the SEC and did not contain any
untrue statement of 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. The financial statements of SDRC and its
subsidiaries included or incorporated by reference in the SEC
Filings (including the related notes and schedules) have been
prepared in accordance with generally accepted accounting principles
applied on a consistent basis during the periods involved (except as
may be indicated in the notes thereto) and fairly present the
consolidated assets, liabilities and financial position of SDRC and
its consolidated subsidiaries as of the dates thereof and the
consolidated results of their operations and changes in financial
position for the periods then ended (subject, in the case of any
unaudited interim financial statements, to normal year-end
adjustments). Since January 1, 1992, SDRC has filed in a timely
manner all reports that it was required to file with the SEC
pursuant to the Securities Exchange Act of 1934, as amended (the
"1934 Act"), and the rules and regulations promulgated thereunder.
Section 4.8 No Material Adverse Change. Except as disclosed in the
SEC Filings filed with the SEC through the date of this Agreement,
since September 30, 1995, there has been no change in, and no event,
occurrence or development in the business of SDRC, the Surviving
Corporation or any of the SDRC subsidiaries that, taken together
with other events, occurrences and developments with respect to such
business, has had or would reasonably be expected to have a Material
Adverse Effect on SDRC or the ability of SDRC to consummate the
transactions contemplated hereby.
Section 4.9 Prospectus/Proxy Statement. At the time the Registration
Statement (as defined in Section 5.8) becomes effective and at the
time the Prospectus/Proxy Statement (as defined in Section 5.8) is
mailed to the shareholders of CAMAX for purposes of obtaining the
approvals referred to in Section 5.15 and at all times subsequent to
such mailing up to and including the times of such approvals, the
Registration Statement and the Prospectus/Proxy Statement (including
any amendments or supplements thereto), with respect to all
information set forth therein relating to SDRC, the SDRC Common
Stock, this Agreement, the Merger and all other transactions
contemplated hereby, will (a) comply in all material respects with
applicable provisions of the Securities Act of 1933 ( the "1933
Act") and the 1934 Act and (b) 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 contained
therein, in light of the circumstances under which they were made,
not misleading.
Section 4.10 Current Plans or Intentions. To the knowledge of SDRC
and the Surviving Corporation, neither SDRC nor any of its
subsidiaries, affiliates or shareholders has taken or agreed to take
any action that would prevent the Merger from constituting a
transaction qualifying as a reorganization under Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code and SDRC does not have any
current plan or intention to take any of the following actions
within the twelve month period immediately following the Effective
Date:
(a) liquidate the Surviving Corporation;
(b) merge the Surviving Corporation with or into another
corporation, except if the Surviving Corporation is the surviving
corporation;
(c) cause the Surviving Corporation or any Surviving Corporation
Subsidiary to sell or otherwise dispose of any of its assets to any
entity other than the Surviving Corporation or a Surviving
Corporation Subsidiary, with the following exceptions: (i) sales or
dispositions in the ordinary course of business, or (ii) sales or
dispositions which would not violate the "substantially all" test as
defined in Rev. Proc. 77-37, 1977-2 568 Section 3.01;
(d) dispose of any stock of the Surviving Corporation except for
transfers to corporations controlled by SDRC, as defined in Section
368(c) of the Code, or cause the Surviving Corporation to issue
shares of its stock to anyone other than SDRC that would result in
SDRC losing 80% control of the Surviving Corporation, as defined in
Section 368(c) of the Code.
For purposes of this Section 4.10, the term "Surviving Corporation
Subsidiary" shall mean any entity with respect to which the
Surviving Corporation or another Surviving Corporation Subsidiary
(so defined), at the time of the occurrence of the event described
in this Section 4.10, owns stock that possesses at least 80% of the
total voting power of such entity and has a value equal to at least
80% of the total value of the stock of such entity.
Section 4.11 Litigation. Except as disclosed in SDRC's SEC Filings,
there are no actions, suits, proceedings, investigations or
assessments of any kind pending before any court, administrative
agency, arbitration association, or other regulatory body, or to the
knowledge of SDRC, threatened against SDRC, the Surviving
Corporation or any of its subsidiaries which if successful might
have a Material Adverse Effect or which questions the validity or
legality of this Agreement or of any action taken or to be taken by
SDRC or the Surviving Corporation in connection with this Agreement.
Section 4.12 Brokers' Fees. Neither SDRC nor the Surviving
Corporation (i) has, directly or indirectly, dealt with any broker
or finder in connection with this transaction and (ii) has not
incurred or will not incur any obligation for any broker's or
finder's fee or commission in connection with the transactions
provided for in this Agreement.
Section 4.13 Governmental Authorities; Consents. Except for the
applicable requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (the "HSR Act"), and except for the filing of
the Certificate of Merger and the Articles of Merger with the
Secretaries of State of the States of Ohio and Minnesota, SDRC and
Surviving Corporation are not required to submit any notice, report
or other filing with any governmental authority in connection with
the execution or delivery by it of this Agreement, the Certificate
of Merger or the Articles of Merger or the consummation of the
transactions contemplated hereby or thereby. No approval or
authorization of any governmental or regulatory authority or any
other party or person (except the approval of the Agreement of
Merger and Plan of Reorganization by the shareholders of CAMAX and
Surviving Corporation) is required to be obtained by SDRC or
Surviving Corporation in connection with their execution, delivery
and performance of this Agreement, the Certificate of Merger or the
Articles of Merger or the transactions contemplated hereby or
thereby.
Section 4.14 Full Disclosure. No representation or warranty made by
SDRC or Surviving Corporation in this Agreement or exhibit hereto
and no statement or certificate or memorandum furnished or to be
furnished by SDRC or Surviving Corporation pursuant hereto or in
connection with the transactions covered hereby contains or will
contain any untrue statement of a material fact, or omit any
material fact, the omission of which would be misleading.
ARTICLE 5
COVENANTS
Section 5.1 Cooperation. Each of the parties hereto shall cooperate
with the other party in all reasonable respects, and shall take all
other steps necessary to carry out and consummate the transactions
contemplated by this Agreement at the earliest practicable time
including, without limitation, the filing of applications, notices
and other documents with, and obtaining approval from, appropriate
governmental regulatory agencies.
Section 5.2 Access to Information. CAMAX and its Subsidiaries have
permitted SDRC, its officers, employees, accountants, agents and
attorneys, and SDRC has permitted CAMAX, its officers, employees,
accountants, agents and attorneys, to have reasonable access during
business hours to their respective books, records and properties for
the purpose of making a detailed examination or updating and
amplifying prior examinations of the financial condition, assets,
liabilities, legal compliance, affairs and the conduct of the
business of CAMAX or SDRC, as the case may be, and permitting one
another to undertake a complete due diligence investigation to its
satisfaction provided, however, that any such due diligence
investigation by SDRC or CAMAX shall not relieve SDRC or CAMAX from
any responsibility or liability for any material misrepresentation
or material breach of warranty hereunder discovered in the course of
or subsequent to such investigation and prior to the Effective Date.
Section 5.3 Conduct of the Business Until the Effective Date.
Except for actions contemplated hereby or taken with the prior
written consent of SDRC, CAMAX and its Subsidiaries will, from the
date of this Agreement until the Effective Date, conduct their
business only in the ordinary course and consistent with past
practices, and CAMAX and its Subsidiaries will refrain from taking
any action which would result in a material breach of any
representation and warranty made by CAMAX and its Subsidiaries
herein. During the period from the date of this Agreement to the
Effective Date, CAMAX and its Subsidiaries shall not without prior
written consent from SDRC, (1) license, sell or otherwise dispose of
any asset, property or intellectual property rights, in any form, in
whole or in part, nor (2) make any individual disbursements,
commitments or purchases in excess of $150,000, except for any
disbursements planned or made in the ordinary course of business in
accordance with the current CAMAX Manufacturing Technologies, Inc.
Bonus Plan.
Section 5.4 CAMAX Subsidiaries. As of the Effective Date, either
CAMAX or Point Control Co., an Oregon corporation and a wholly-owned
subsidiary of CAMAX, shall be the sole owner of all of the issued
and outstanding stock of all of the CAMAX Subsidiaries.
Section 5.5 Capital Structure and Dividends. From the date of this
Agreement until the Effective Date, except for the issuance of CAMAX
Common Stock pursuant to the valid exercise of Plan Options or Stock
Options, neither CAMAX nor any of its Subsidiaries will issue any
long term debt or additional securities of any kind or warrants or
options to purchase any of such securities. As of the date of this
Agreement, except for the issuance of CAMAX Common Stock pursuant to
the valid exercise of Plan Options or Stock Options, CAMAX shall
take no actions which change or affect its capital structure; nor
shall CAMAX, without the prior written consent of SDRC, pay any
dividends or make any distributions on CAMAX's or any of its
Subsidiaries' stock.
Section 5.6 No Other Negotiations. From the date of this Agreement
until the Effective Date, CAMAX agrees that neither it, its
Subsidiaries, nor any officer, director, employee or agent on its
behalf will initiate or hold discussions, negotiate or bargain with
or entertain offers from any other party concerning the acquisition
or change in control of CAMAX, however structured. In the event
CAMAX receives an unsolicited offer relating to the type of
transaction contemplated hereby, CAMAX shall immediately notify SDRC
in writing of the existence and contents of the offer, the identity
of the offeror, and shall provide SDRC with a copy of the offer and
any related correspondence. CAMAX shall immediately inform the
offeror of the existence of this Agreement and CAMAX shall reject
such offer.
Section 5.7 Option Plans. From the date of the Offer Letter until
the Effective Date, CAMAX shall not grant or have granted any
options under the Plans or the Stock Options. SDRC shall make all
filings required under federal and state securities laws within 30
days of the Effective Date, including, without limitation, filing
registration statements on Form S-8 (or such other form as may be
appropriate) with the Securities and Exchange Commission, so as to
permit the exercise of such options and the sale of the shares
received by the optionees upon such exercise.
Section 5.8 Registration Statement
(a) For the purposes (i) of holding a meeting of the shareholders
of CAMAX to approve this Agreement and the Merger and (ii) of
registering the SDRC Common Stock to be issued to holders of CAMAX
Common Stock in connection with the Merger with the SEC and with
applicable state securities authorities, the parties hereto shall
cooperate in the preparation of an appropriate registration
statement (such registration statement, together with any and all
amendments and supplements thereto, being herein referred to as the
"Registration Statement"), which shall include a prospectus/proxy
statement satisfying all applicable requirements of the 1933 Act,
the 1934 Act, applicable state securities laws and the rules and
regulations thereunder (such prospectus/proxy statement, together
with any and all amendments or supplements thereto, being herein
referred to as the "Prospectus/Proxy Statement").
(b) SDRC shall furnish such information concerning SDRC as is
necessary in order to cause the Prospectus/Proxy Statement, insofar
as it relates to SDRC, to be prepared in accordance with Section
5.8(a). SDRC agrees promptly to advise CAMAX if at any time prior
to the CAMAX shareholders' meeting any information provided by SDRC
in the Prospectus/Proxy Statement becomes incorrect or incomplete in
any material respect, and to provide the information needed to
correct such inaccuracy or omission.
(c) CAMAX shall furnish SDRC with such information concerning
CAMAX and the Subsidiaries as is necessary in order to cause the
Prospectus/Proxy Statement, insofar as it relates to CAMAX and the
Subsidiaries, to be prepared in accordance with Section 5.8(a).
CAMAX agrees promptly to advise SDRC if at any time prior to the
CAMAX shareholders' meeting any information provided by CAMAX in the
Prospectus/Proxy Statement becomes incorrect or incomplete in any
material respect, and to provide SDRC with the information needed to
correct such inaccuracy or omission.
(d) SDRC will use reasonable efforts to file the Registration
Statement with the SEC and applicable state securities agencies
within 30 days of the date of this Agreement. SDRC shall use
reasonable efforts to cause the Registration Statement to become
effective under the 1933 Act and applicable state securities laws at
the earliest practicable date. CAMAX authorizes SDRC to utilize in
the Registration Statement the information concerning CAMAX and the
Subsidiaries provided to SDRC for the purpose of inclusion in the
Prospectus/Proxy Statement. CAMAX shall have the right to review
and comment on the form of proxy statement included in the
Registration Statement. SDRC shall advise CAMAX promptly when the
Registration Statement has become effective and of any supplements
or amendments thereto, and SDRC shall furnish CAMAX with copies of
all such documents. Prior to the Effective Date or the termination
of this Agreement, each party shall consult with the other with
respect to any material (other than the Prospectus/Proxy Statement)
that might constitute a "prospectus" relating to the Merger within
the meaning of the 1933 Act.
(e) SDRC shall use reasonable efforts to cause to be delivered to
CAMAX a letter relating to the Registration Statement from Price
Waterhouse LLP, SDRC's independent auditors, dated a date within two
business days before the date on which the Registration Statement
shall become effective and addressed to CAMAX, in form and substance
reasonably satisfactory to CAMAX and customary in scope and
substance for letters delivered by independent public accountants in
connection with registration statements similar to the Registration
Statement.
(f) CAMAX shall use reasonable efforts to cause to be delivered to
SDRC a letter relating to the Registration Statement from Deloitte
& Touche LLP, CAMAX's independent auditors, dated a date within two
business days before the date on which the Registration Statement
shall become effective and addressed to SDRC, in form and substance
reasonably satisfactory to SDRC and customary in scope and substance
for letters delivered by independent public accountants in
connection with registration statements similar to the Registration
Statement.
(g) SDRC shall bear the costs of all SEC filing fees with respect
to the Registration Statement and the costs of qualifying the shares
of SDRC Common Stock under Blue Sky Laws to the extent necessary.
CAMAX shall bear all printing and mailing costs in connection with
the preparation and mailing of the Prospectus/Proxy Statement to
CAMAX shareholders. SDRC and CAMAX shall each bear their own legal
and accounting expenses in connection with the Registration
Statement.
Section 5.9 Employee Matters
(a) Subject to the following agreements, after the Effective Date
SDRC shall have the right to continue, amend or terminate any or all
of the Benefit Plans (as defined in Section 3.18) in accordance with
the terms thereof and subject to any limitation arising under
applicable law. Until SDRC shall take such action, however, such
Benefit Plans shall continue in force for the benefit of present and
former employees of CAMAX or the Subsidiaries who have any present
or future entitlement to benefits under any of the Benefit Plans
("CAMAX Employees").
(b) SDRC will honor the obligations of CAMAX with respect to
vested rights under Benefit Plans and agreements of CAMAX relating
to CAMAX Employees in accordance with the terms of such vested
rights and subject to the provisions of Section 5.9(a).
(c) SDRC will credit all employees of CAMAX and its Subsidiaries
with all service with CAMAX and its Subsidiaries for purposes of
eligibility to participate, eligibility for benefits, calculation of
benefits and vesting under any of the Surviving Corporation's or
SDRC's existing or future employee benefit plans, programs or
arrangements under which the right to or the amount of benefits is
based on service of such employees.
(d) This Section 5.9 is an agreement solely between CAMAX and the
Subsidiaries and SDRC and the Surviving Corporation. Nothing in
this Section 5.9, whether express or implied, confers upon any
employee of CAMAX, any of the Subsidiaries or SDRC or any other
person, any rights or remedies, including, but not limited to: (i)
any right to employment or recall, (ii) any right to continued
employment for any specified period, or (iii) any right to claim any
particular compensation, benefit or aggregate of benefits, of any
kind or nature whatsoever, as a result of this Section 5.9.
Section 5.10 Tax and Accounting Treatment. CAMAX, its Subsidiaries,
SDRC and the Surviving Corporation shall use reasonable efforts to
cause the Merger to qualify, and shall not take any actions which
could prevent the Merger from qualifying, for pooling-of-interests
accounting treatment and as a "reorganization" pursuant to Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code that would be tax free to
the shareholders of CAMAX.
Section 5.11 SDRC SEC Reports. SDRC shall continue to file all
reports with the SEC necessary to permit the shareholders of CAMAX
who are "affiliates" of CAMAX (within the meaning of such term as
used in Rule 145 under the 1933 Act) to sell the SDRC Common Stock
received by them in connection with the Merger pursuant to Rules 144
and 145(d) under the 1933 Act if they would otherwise be so
permitted. After the Effective Date, SDRC will file with the SEC
reports and other materials required by the federal securities laws
on a timely basis.
Section 5.12 Indemnification. With respect to all acts or omissions
occurring or alleged to occur prior to the Effective Date, and only
with respect thereto, SDRC and the Surviving Corporation shall
indemnify each person who is now, or has been at any time prior to
the date hereof or who becomes prior to the Effective Date, an
officer, director or employee of CAMAX or any of the Subsidiaries
(the "Indemnified Party" or "Indemnified Parties"), for judgments,
penalties, fines, including, without limitation, excise taxes
against the Indemnified Party with respect to an employee benefit
plan settlement, and reasonable expenses, including, attorneys' fees
and disbursements, incurred by the Indemnified Party in connection
with a proceeding, to the extent such indemnification would be
required under Section 302A.521 of the Minnesota Business
Corporation Act as in effect on the Effective Date.
Section 5.13 SEC Reports. SDRC agrees to provide to CAMAX copies of
all reports and other documents filed with the SEC by it and between
the date hereof and the Effective Date within five days after the
date such reports or other documents are filed with the SEC.
Section 5.14 Nasdaq National Market Listing. SDRC shall use its
best efforts to list on the Nasdaq National Market, subject to
official notice of issuance, the shares of SDRC Common Stock to be
issued to the holders of CAMAX Common Stock in the Merger.
Section 5.15 Shareholder Approval. CAMAX shall call a meeting of
its shareholders for the purpose of voting upon this Agreement and
the Merger, and shall schedule such meeting based on consultation
with SDRC. The Board of Directors of CAMAX shall recommend approval
of this Agreement and the Merger, and use its best efforts
(including, without limitation, soliciting proxies for such
approvals) to obtain such shareholder approval.
Section 5.16 Sales of SDRC Common Stock. In order that SDRC may
account for the Merger as a pooling of interests, CAMAX shall use
its best efforts to cause the directors and officers of CAMAX and
other affiliates not to sell any shares of SDRC Common Stock until
after SDRC has filed with the SEC a Form 8-K or Form 10-Q including
financial results for at least 30 days of the combined operations of
SDRC and CAMAX.
Section 5.17 Tax Files. CAMAX shall maintain and make available to
SDRC all of its files, working papers and Returns associated with
the federal income tax obligations of CAMAX for the earliest fiscal
year for which unused net operating loss carry forwards exist
through 1994, inclusive.
ARTICLE 6
CONDITIONS PRECEDENT TO CLOSING
Section 6.1 Conditions to the Obligations of Each of the Parties.
The obligation of each of the parties hereto to consummate the
transaction provided for herein is subject to the fulfillment on or
prior to the Effective Date of each of the following conditions:
Section 6.1.1 Corporate Approvals. The shareholders of CAMAX and
Surviving Corporation each shall have duly approved and adopted this
Agreement and the Merger in accordance with and as required by law
and in accordance with each company's charter and bylaws or code of
regulations.
Section 6.1.2 Governmental Approvals. All necessary governmental
and regulatory orders, consents, clearance and approvals and
requirements shall have been secured and satisfied and all
applicable waiting periods expired for the consummation of the
transaction contemplated hereby, including, without limitation, a
pre-merger notification pursuant to the HSR Act, if required.
Section 6.1.3 Registered Stock. SDRC shall have registered the
shares of SDRC Common Stock to be issued to CAMAX's shareholders
hereunder with the SEC pursuant to the 1933 Act, and shall have
complied with all applicable state securities laws by registration
or exemption of the SDRC Common Stock. The registration statement
with respect thereto shall have been declared effective by the SEC
and all applicable state securities authorities and no stop order
shall have been issued.
Section 6.1.4 Tax Opinion. Dinsmore & Shohl, counsel for SDRC,
shall have delivered an opinion to both CAMAX and SDRC, satisfactory
to both parties, that the transaction contemplated hereby will be
treated for tax purposes as a tax-free exchange of stock pursuant to
the Code.
Section 6.1.5 Employment of CAMAX Employees. Prior to the
Effective Date, SDRC shall have identified those employees of CAMAX
which shall be retained by SDRC.
Section 6.1.6 Nasdaq National Market. The SDRC Common Stock to
be issued to holders of CAMAX Common Stock in the Merger shall have
been approved for listing on the Nasdaq National Market on an
official notice of issuance.
Section 6.1.7 No Orders. The consummation of the Merger or the
transactions contemplated hereby shall not have been restrained,
enjoined, or prohibited by any court or governmental authority of
competent jurisdiction, and there shall be no action or proceeding
pending which seeks such relief.
Section 6.1.8 Escrow Agreement. The Escrow Agreement referenced
in Section 10.2 shall have been entered into at or prior to the
Effective Date.
Section 6.2 Conditions to the Obligation of SDRC and Surviving
Corporation. The obligation of SDRC and Surviving Corporation to
consummate the transaction provided for herein is subject to
fulfillment at or prior to the Effective Date of each of the
following conditions unless waived by SDRC and Surviving Corporation
in a writing delivered to CAMAX which specifically refers to the
condition or conditions being waived:
Section 6.2.3 Representations and Warranties. All of the
representations and warranties of CAMAX set forth in Article 3 of
this Agreement shall be true and correct in all material respects at
and as of the respective dates set forth with respect to each, as of
the date of this Agreement and at and as of the Effective Date as if
each such representation and warranty was given on and as of the
Effective Date (except (i) that any such representation and warranty
made as of a specified date shall only need to have been true in all
material respects on and as of such date, and (ii) that any
liability or potential liability which accrues to CAMAX as a result
of its compliance with any other Covenants or Conditions to Closing
specified in this Agreement shall not constitute a breach of any
CAMAX's representations and warranties, hereunder).
Section 6.2.4 CAMAX's Covenants. CAMAX shall have performed all
covenants and obligations required by this Agreement to be performed
by it on or before the Effective Date.
Section 6.2.5 Financial Statements. CAMAX shall have delivered
to SDRC audited financial statements for the year ended December 31,
1995 at least 14 days prior to the Effective Date and SDRC shall
have caused its independent public accountants to have reviewed such
audited 1995 financial statements and CAMAX's unaudited financial
statements as of the end of the month immediately preceding the
Effective Date, performed such other auditing procedures as may be
requested by SDRC and reported that it is not aware of any material
modifications that should be made in order for such financial
statements to be in conformity with generally accepted accounting
principles and to accurately state CAMAX's financial condition and
results of operations as of the respective dates thereof. In
addition, such audited 1995 financial statements shall not be
materially and adversely different from the latest dated financial
statements included in the Financial Statements after giving effect
to CAMAX's results of operations in the ordinary course of business,
for the month ended December 31, 1995.
Section 6.2.4 Pooling of Interests. SDRC shall have received
assurances satisfactory to it that the transaction contemplated
hereby may be accounted for as a pooling-of-interests, the SEC shall
have raised no objection to such accounting treatment and SDRC shall
have received on or before the Effective Date a letter from Price
Waterhouse, LLP supporting the pooling-of-interests accounting
treatment for the Merger. In addition, Deloitte & Touche LLP shall
have issued, prior to the Effective Date, a letter indicating that
CAMAX is a poolable entity.
Section 6.2.5 Dissenter's Rights. The holders of not more than
10% of the outstanding shares of CAMAX Common Stock shall have
exercised dissenter's rights in connection with the shareholders'
vote taken on the Merger.
Section 6.2.6 CAMAX's Liabilities. The liabilities of CAMAX
reflected on the audited balance sheet dated December 31, 1995 shall
not exceed the liabilities disclosed on CAMAX's audited balance
sheet dated December 31, 1994 by greater than 20%.
Section 6.2.7 CAMAX's Shareholders' Equity. The aggregate amount
of CAMAX's shareholders' equity on the audited balance sheet dated
December 31, 1995, shall not be less than the total shareholders'
equity disclosed on its audited balance sheet dated December 31,
1994.
Section 6.2.8 Opinion of CAMAX's Corporate Counsel. Dorsey &
Whitney P.L.L.P., counsel for CAMAX, shall have delivered to SDRC a
customary opinion of counsel dated the Effective Date, in the form
attached hereto as Exhibit 6.2.8.
Section 6.2.9 Opinion of CAMAX's Intellectual Property Counsel.
Dorsey & Whitney, P.L.L.P. intellectual property counsel for CAMAX,
shall have delivered to SDRC an opinion of counsel dated the
Effective Date, in the form attached hereto as Exhibit 6.2.9.
Section 6.2.10 Consents. On or before the Effective Date, CAMAX
shall have delivered to SDRC evidence satisfactory to it of receipt
or anticipated receipt of all material consents, licenses and
authorizations from all customers, lessors, licensors, government
agencies and any other persons or organizations, the consent,
license or authorization of which are necessary to permit SDRC to
continue CAMAX's business after the Effective Date.
Section 6.2.11 Severance Arrangements. At or prior to the
Effective Date, CAMAX and its Subsidiaries shall have severed the
employment of each CAMAX employee identified by SDRC as an employee
not to be retained by SDRC after the Effective Date, in accordance
with any instructions of SDRC as to the method, timing and terms or
conditions of such severance.
Section 6.2.12 Closing Documents. Prior to the Effective Date,
CAMAX and the Subsidiaries shall have delivered to SDRC and
Surviving Corporation all of the following:
(a) certificates of the Chief Executive Officer and the Chief
Financial Officer of CAMAX, dated as of the date of the Effective
Date, stating that the conditions precedent set forth in Sections
6.2.1 and 6.2.2 above have been satisfied;
(b) copies of the third party and governmental consents and
approvals and of the authorizations referred to in Section 6.2.10
above;
(c) CAMAX's and each Subsidiary's minute books, stock transfer
records, corporate seal and other materials related to CAMAX's and
the Subsidiaries' corporate administration;
(d) a copy of the Articles of Incorporation of CAMAX and each
Subsidiary, as amended to date, certified by the Secretary of State
in each jurisdiction in which such corporation exists, and a
Certificate of Good Standing of CAMAX and each Subsidiary from the
Secretary of State in each jurisdiction in which such corporation
exists evidencing the good standing of CAMAX and each Subsidiary in
such jurisdiction;
(e) a copy of each of (i) the text of the resolutions adopted by
the board of directors of CAMAX authorizing the execution, delivery
and performance of this Agreement and the Articles of Merger, (ii)
the text of the resolutions adopted by the shareholders of CAMAX
authorizing the execution, delivery and performance of this
Agreement and the Articles of Merger and the consummation of all of
the transactions contemplated by this Agreement and the Articles of
Merger, and (iii) the bylaws of CAMAX; along with certificates
executed on behalf of CAMAX by its corporate secretary certifying to
SDRC and Surviving Corporation that such copies are true, correct
and complete copies of such resolutions and bylaws, respectively,
and that such resolutions and bylaws were duly adopted and have not
been amended or rescinded;
(f) incumbency certificates executed on behalf of CAMAX by its
corporate secretary certifying the signature and office of each
officer executing this Agreement and the Articles of Merger; and
(g) such other documents, instruments and certificates as SDRC
may reasonably request.
Section 6.3 Conditions to the Obligation of CAMAX. The obligation
of CAMAX to consummate the transaction provided for herein is
subject to the fulfillment at or prior to the Effective Date of each
of the following conditions unless waived by CAMAX in a writing
delivered to SDRC which specifically refers to the condition or
conditions being waived:
Section 6.3.1 Representations and Warranties. All of the
representations and warranties of SDRC and Surviving Corporation set
forth in Article 4 of this Agreement shall be true and correct in
all material respects at and as of the respective dates set forth
with respect to each, as of the date of this Agreement and at and as
of the Effective Date as if each such representation and warranty
was given on and as of the Effective Date (except that any such
representation and warranty given as of a specified date shall only
need to have been true in all material respects on and as of such
date).
Section 6.3.2 SDRC's and Surviving Corporation's Covenants. SDRC
and Surviving Corporation shall have performed all covenants and
obligations required by this Agreement to be performed each on or
before the Effective Date.
Section 6.3.3 Opinion of SDRC's Counsel. Dinsmore & Shohl,
counsel for SDRC, shall have delivered to CAMAX a customary opinion
of counsel dated the Effective Date, in the form attached hereto as
Exhibit 6.3.3.
Section 6.3.4 Closing Documents. Prior to the Effective Date,
SDRC and Surviving Corporation shall have delivered to CAMAX all of
the following:
(a) certificates of the Chief Executive Officer and the Chief
Financial Officer of SDRC and Surviving Corporation dated as of the
date of the Effective Date, stating that the conditions precedent
set forth in Sections 6.3.1 and 6.3.2 above have been satisfied;
(b) copies of the third party and governmental consents and
approvals and of the authorizations referred to in Section 6.2.10
above;
(c) a copy of the Articles of Incorporation of SDRC and Surviving
Corporation, as amended to date, certified by the Secretary of State
of the State of Ohio, and a Certificate of Good Standing of SDRC and
Surviving Corporation from the Secretary of the State of Ohio
evidencing the good standing of SDRC and Surviving Corporation;
(d) a copy of each of (i) the text of the resolutions adopted by
the boards of directors of SDRC and Surviving Corporation
authorizing the execution, delivery and performance of this
Agreement and the Articles of Merger and the consummation of all of
the transactions contemplated by this Agreement and the Articles of
Merger, (ii) the text of the resolutions adopted by the sole
shareholder of Surviving Corporation authorizing the execution,
delivery and performance of this Agreement and the Articles of
Merger and the consummation of all of the transactions contemplated
by this Agreement and the Articles of Merger, and (iii) the codes of
regulations of SDRC and Surviving Corporation; along with
certificates executed on behalf of SDRC and Surviving Corporation by
their respective corporate secretaries certifying to CAMAX that such
copies are true, correct and complete copies of such resolutions and
codes of regulations were duly adopted and have not been amended or
rescinded;
(e) incumbency certificates executed on behalf of SDRC and
Surviving Corporation by their respective corporate secretaries
certifying the signature and office of each officer executing this
Agreement and the Articles of Merger; and
(f) such other documents, instruments and certificates as CAMAX
may reasonably request.
ARTICLE 7
PUBLICITY
All notices to third parties and all other parties concerning the
transactions contemplated by this Agreement shall be jointly planned
and coordinated by and between the parties. None of the parties
shall cause or authorize any such notice or publicity without the
prior written approval of the other party (for purposes of authority
to consent to any public announcement on behalf of CAMAX or its
Subsidiaries, the President and Chief Executive Officer of CAMAX
shall be the only authorized person); provided, however, that in the
case of an announcement which SDRC may be required by law, by any
governmental agency or by the Nasdaq National Market to make, issue
or release, such action by SDRC without the prior approval by the
other parties shall not constitute a breach of this Section.
ARTICLE 8
TERMINATION
Section 8.1 Circumstances of Termination. This Agreement may be
terminated (notwithstanding approval of the shareholders of CAMAX):
(i) By the mutual consent in writing of SDRC, Surviving
Corporation and CAMAX;
(ii) By SDRC and Surviving Corporation, if any condition provided
in Section 6.1 or 6.2 hereof has not been satisfied or waived on or
before the Effective Date;
(iii) By CAMAX if any condition provided in Section 6.1 or 6.3 has
not been satisfied or waived on or before the Effective Date;
(iv) By either SDRC and Surviving Corporation or CAMAX if the
merger contemplated by this Agreement is not fully and legally
consummated by June 30, 1996.
Section 8.2 Effect of Termination. In the event of a termination of
this Agreement pursuant to Section 8.1 hereof, each party shall pay
the costs and expenses incurred by it in connection with this
Agreement and no party (or any of its officers, directors or
shareholders) shall be liable to any other party for any costs,
expenses, damage or loss of anticipated profits hereunder.
ARTICLE 9
EFFECTIVE DATE OF MERGER
After adoption and approval of this Agreement by the shareholders of
CAMAX in accordance with the requirements of applicable law, and
upon satisfaction of each of the conditions set forth in Article 6
(unless waived in accordance with this Agreement) and in the absence
of any facts that would give any party hereto a right to terminate
this Agreement (which right has not been waived), and at such time
as shall be agreed upon in writing by CAMAX, SDRC and Surviving
Corporation (if no such agreement has been reached, then on the day
of the meeting of shareholders of CAMAX at which this Agreement is
approved), a Certificate of Merger shall be submitted for filing
with the Secretary of State of Ohio and the Articles of Merger shall
be submitted for filing with the Secretary of State of Minnesota.
The date of the later of such filings, or at such other date as the
parties may agree upon in writing pursuant to applicable law, is
referred to in this Agreement as the "Effective Date."
ARTICLE 10
INDEMNIFICATION
Section 10.1 Indemnification Obligation of CAMAX. In the event SDRC
and/or the Surviving Corporation incurs any expenses, losses,
damages, deficiencies or costs, or has received any written claim,
demand, suit, or other notice from a third party which, if such
party were to prevail against SDRC and/or the Surviving Corporation
would result in any expense, loss, damage, deficiency or cost, in an
aggregate cumulative amount in excess of $175,000 during the
Retention Period, resulting from any misrepresentation or breach by
CAMAX of any representation, warranty or covenant made by CAMAX in
this Agreement (except that any liability or potential liability
which accrues to CAMAX as a result of its compliance with any of the
Covenants or Conditions to Closing specified in this Agreement shall
not constitute a breach of any of CAMAX's representations and
warranties hereunder), SDRC and/or the Surviving Corporation shall
be entitled to be indemnified and held harmless against such
expenses, losses, damages, deficiencies, and/or costs by redeeming
Retention Shares having a value equal thereto, as provided in
Section 2.2 above.
Section 10.2 Procedure for Indemnification. In connection with any
claim for indemnification by SDRC or the Surviving Corporation under
Section 10.1, the procedure set forth below shall be followed:
(a) SDRC or the Surviving Corporation shall give to the
Representatives and the Escrow Agent (as such terms are defined
below) written notice of any matter for which indemnity may be
sought under Section 10.1, promptly but in any event within 30
business days after SDRC or the Surviving Corporation receives
written notice thereof.
(b) The Representatives shall have the right to adjust or settle
any claim, suit or judgment coming within the scope of this
indemnity obligation and shall have the right to control any
litigation related thereto. Either party hereto desiring to
participate in the handling of any such claim, suit or judgment
being handled by the other party shall have the right, at its
expense and with its counsel, to join with the other party and
participate fully in the defense of any such claim or interest.
(c) SDRC, the Surviving Corporation and the Representatives shall
cooperate in the defense of any such claim or litigation and each
shall make available all books and records which are relevant in
connection with such claim or litigation.
(d) Any and all amounts finally determined from time to time to be
due by reason of the indemnity obligations under Sections 10.1 and
10.2, shall be paid to SDRC or the Surviving Corporation from the
redemption by SDRC of that number of Retention Shares covering the
indemnity obligation within ten days of the amounts being finally
determined as provided in the Escrow Agreement as such term is
defined below.
(e) SDRC and CAMAX shall appoint First Trust National Association,
Minneapolis, Minnesota (the "Escrow Agent") to hold the Retention
Shares pursuant to an Escrow Agreement in substantially the form
appended hereto as Exhibit 10.2. CAMAX shall appoint one or more
individuals to act as representatives (the "Representatives") of the
CAMAX shareholders, which Representatives shall also be parties to
the Escrow Agreement.
ARTICLE 11
MISCELLANEOUS
Section 11.1 Headings. The subject headings of the sections,
paragraphs and subparagraphs of this Agreement are included for
purposes of convenience only, and shall not affect the construction
or interpretation of any of its provisions.
Section 11.2 Entire Agreement, Modification and Waiver. This
Agreement constitutes the entire agreement between the parties
pertaining to its subject matter and supersedes all prior and
contemporaneous agreements, including without limitation the Offer
Letter, representations and understandings of the parties; provided,
however, the Confidentiality Agreement between CAMAX and SDRC dated
December 4, 1995 shall survive until the Effective Date. No
supplement, modification or amendment of this Agreement shall be
binding unless executed in writing by all the parties. No waiver of
any of the provisions of this Agreement shall be deemed or shall
constitute, a waiver of any other provision, whether or not similar,
nor shall any waiver constitute a continuing waiver. No waiver
shall be binding unless executed in writing by the party making the
waiver.
Section 11.3 Knowledge. For purposes of this Agreement, "knowledge"
or "best knowledge" means the actual knowledge of current members of
the board of directors and officers through and including the Vice
President level of CAMAX and its Subsidiaries, as such knowledge has
been obtained in the normal conduct of the business and following a
reasonable investigation by such individuals.
Section 11.4 Material Adverse Effects. As used in this Agreement,
the term "Material Adverse Effect" with respect to any party means
any single or a series of related conditions, events, changes or
occurrences that have or may reasonably be expected to have a
financially adverse effect on the business, operations, results of
operations and/or financial condition of such party and its
subsidiaries, if any, taken as a whole, in the amount of $125,000 or
more.
Section 11.5 Consents. Where any consent or waiver of SDRC or the
Surviving Corporation is required or requested hereunder, John A.
Mongelluzzo, Vice President, Secretary and General Counsel shall be
the authorized person to provide any such consent or waiver. Where
any consent or waiver of CAMAX and its Subsidiaries is required or
requested hereunder, Robert J. Majteles shall be the authorized
person to provide any such consent or waiver.
Section 11.6 Survivability. The representations, warranties,
covenants and agreements of CAMAX set forth in this Agreement shall
survive the Effective Date and the consummation of the transactions
contemplated hereby until the end of the Retention Period. If a
notice is given in accordance with the Escrow Agreement before the
expiration of such Retention Period, then (notwithstanding the
expiration of such Retention Period) the representation, warranty,
covenant or agreement applicable to such claim shall survive until,
but only for purposes of, the resolution of such claim.
Section 11.7 Counterparts. This Agreement may be executed
simultaneously in one or more counterparts, each of which shall be
deemed an original, but all of which together shall constitute one
and the same instrument.
Section 11.8 Further Assurances. At any time and from time to time
after the Effective Date, each party will execute such additional
instruments and take such actions as may be reasonably requested by
the other party to confirm or perfect title to any property
transferred hereunder or otherwise to carry out the intent and
purposes of this Agreement.
Section 11.9 Assignment. This Agreement shall be binding on, and
shall inure to the benefit of, the parties to it and their
respective heirs, legal representatives, successors and assigns;
provided, however, that any assignment by either party of its rights
under this Agreement without written consent of the other party
shall be void.
Section 11.10 Effect of Certain Actions. No action taken pursuant
to or related to this Agreement, including without limitation any
investigation by or on behalf of any party, shall be deemed to
constitute a waiver by the party taking such action of compliance
with any representation, warrant, condition or agreement contained
herein.
Section 11.11 Notices. All notices, requests, demands and other
communications under this Agreement shall be in writing and shall be
deemed to have been duly given on the date of service if served
personally on the party (including, without limitation, service by
overnight courier service) to whom notice is to be given, or on the
third day after mailing if mailed to the party to whom notice is to
be given, by first class mail, registered or certified, postage
prepaid, at the address set forth below, or on the date of service
if delivered by facsimile to the facsimile number set forth below,
which facsimile is confirmed within three days by deposit of a copy
of such notice in first class mail, registered or certified, postage
prepaid at the address set forth below. Any party may change its
address for purposes of this paragraph by giving the other parties
written notice of the new address in the manner set forth above.
If to SDRC:
Structural Dynamics Research Corporation
2000 Eastman Drive
Milford, Ohio 45150
Fax No. (513) 576-2049
Attn: John A. Mongelluzzo
with a copy to:
Dinsmore and Shohl
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
Fax No. (513) 977-8141
Attn: Charles F. Hertlein, Jr.
If to CAMAX:
CAMAX Manufacturing Technologies, Inc.
7851 Metro Parkway
Minneapolis, Minnesota 55425
Attn: Gregory S. Furness
with a copy to:
Dorsey & Whitney
Pillsbury Center South
220 S. 6th Street
Minneapolis, Minnesota 55402
Attn: David J. Lubben
Section 11.12 Governing Law. This Agreement shall be construed,
without regard to conflicts of laws, in accordance with, and
governed by the laws of, the State of Ohio.
IN WITNESS WHEREOF, the parties to this Agreement have duly executed
it as of the date set forth above.
CAMAX MANUFACTURING
TECHNOLOGIES, INC.
By:/s/ Robert J. Majteles
Its: President and Chief Executive Officer
STRUCTURAL DYNAMICS RESEARCH CORPORATION
By: /s/ John A. Mongelluzzo
Its: Vice President, Secretary and General Counsel
SDRC SYSTEMS, INC.
By: /s/ John A. Mongelluzzo
Its: Vice President, Secretary and General Counsel<PAGE>
EXHIBIT LIST
Exhibit Description
3.28 Fairness Opinion
3.29 Tax Opinion
6.2.8 Form of Opinion of CAMAX's Corporate
Counsel
6.29 Form of Opinion of CAMAX's Intellectual
Property Counsel
6.3.3 Form of Opinion of SDRC's Corporate
Counsel
10.2 Form of Escrow Agreement
SCHEDULES
Schedule Description
3.1 Jurisdictions in which Qualified to do Business
3.3 Subsidiaries
3.5 Liens and Encumbrances
3.6 Accounts Receivable
3.7 Real Property
3.8 Environmental Matters
3.9 Inventory
3.10 Absence of Material Adverse Changes
3.11 Customers
3.13 Litigation
3.14 Taxes
3.15 Contracts, Agreements and Commitments
3.16 Intellectual Property
3.17 Dividends Paid
3.18 Employees and Employee Plans
3.20 Labor and Employment
3.21 Employee Claims
3.22 Discrimination
3.23 Insurance Policies
3.24 Bank Accounts and Loans
3.32 Violations
3.33 International Matters
3.34 Software Maintenance Agreements
Annex B
January 16, 1996
The Board of Directors
CAMAX Manufacturing Technologies, Inc.
7851 Metro Parkway
Minneapolis, MN 55425-1528
Attention: Mr. Robert J. Majteles, President and Chief Executive
Officer, Mr. Gregory S. Furness, Executive Vice President and Chief
Financial Officer
Gentlemen:
You have requested our opinion as to the fairness, from a financial
point of view, to the shareholders of CAMAX Manufacturing
Technologies, Inc. ("CAMAX" or the "Company"), of the financial
terms of the proposed Merger (the "Merger") between CAMAX and SDRC
Systems, Inc., a wholly-owned subsidiary of Structural Dynamics
Research Corporation ("SDRC"). Capitalized terms used herein shall
have the meaning used in the Agreement and Plan of Merger
("Agreement") dated January 16, 1996 unless otherwise defined
herein.
Pursuant to the Agreement, the outstanding shares of CAMAX will be
converted into and represent the right to receive such number of
shares of SDRC Common Stock having a Total Value of $30,000,000.
The total number of shares of SDRC Common Stock to be issued shall
be determined by dividing the Total Value by the Applicable Value
Per Share of SDRC Common Stock. The Applicable Value Per Share of
SDRC Common Stock shall be the average of the last sale prices of
the SDRC Common Stock as reported on the Nasdaq National Market for
the 20 trading day period ending on the fifth trading day prior to
the Effective Date. In order to render the opinion herein, we have
assumed the Applicable Value Per Share of SDRC Common Stock to be
$26.00 which assumption is based on the provisions of the Agreement
as if the Effective Date (which is expected to occur on March 31,
1996) were the date hereof.
Additionally, the outstanding CAMAX Stock Options and Plan Options,
whether vested or unvested, shall be assumed by SDRC and shall be
deemed to constitute an option to acquire, on the same terms and
conditions as were applicable under such CAMAX Plan, the same number
of shares of SDRC Common Stock as the holder of such Stock Options
or Plan Options would have been entitled to receive pursuant to the
Merger had such holder exercised such option in full immediately
prior to the Effective Date, The value of the Stock Options and
Plan Options to be assumed by SDRC is estimated to be approximately
$2,600,000. The aggregate value of the consideration paid to CAMAX
shareholders and CAMAX option holders is approximately $32,600,000.
In arriving at our opinion, we have, among other things: (i)
reviewed and analyzed the financial terms of the Agreement and
various related documents, (ii) reviewed and analyzed certain
historical and projected financial statements of CAMAX provided by
CAMAX's management, (iii) analyzed and reviewed certain historical
and projected financial statements provided by SDRC's management,
(iv) reviewed and analyzed certain historical business and financial
information relating to both CAMAX and SDRC, (v) conducted
discussions with members of the senior management of CAMAX and SDRC
with respect to the business prospects of CAMAX and SDRC, and (vi)
reviewed and analyzed certain other information related to the
Merger. We have also considered recent merger and acquisition
transactions involving similar companies and have analyzed certain
publicly available information, including financial information
relating to public companies whose operations we deemed comparable
to those of CAMAX. In addition, we have conducted such other
analyses and examinations and considered such other analyses and
examinations and considered such other financial, economic and
market criteria as we have deemed necessary in arriving at our
opinion.
In rendering our opinion, we have assumed and relied upon the
accuracy and completeness of the financial, legal, tax, operating
and other information provided to us by the Company and SDRC which
we have not independently verified. Further, our opinion is based
on the assumption that the Merger will be accounted for as a pooling
of interests business combination. We have not performed an
independent evaluation or appraisal of any of the respective assets
or liabilities of the Company or SDRC and we have not been furnished
with any such appraisals. With respect to the financial forecasts,
we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of
the management of the Company and SDRC, as the case may be, as to
the respective future financial performance of the Company and SDRC.
It is understood that this letter is for the information of the
Board of Directors of the Company, and this letter shall not be
published or otherwise used and no public references to Wessels,
Arnold and Henderson shall be made without our prior consent which
consent shall not be unreasonably withheld. Further, our opinion
speaks only as of the date hereof and is based on conditions as they
exist and information which we have been supplied as of the date
hereof.
Based upon our experience as investment bankers and subject to the
foregoing, including the various assumptions and limitations set
forth herein, it is our opinion that as of the date hereof, the
Total Value offered in the Merger is fair to the shareholders of the
Company from a financial point of view.
Very truly yours,
WESSELS, ARNOLD and HENDERSON, L.L.C.
By: /s/ Michael P. Ogborne
Investment Banking
<PAGE>
Annex C
302A.471 RIGHTS OF DISSENTING SHAREHOLDERS. - Subdivision 1.
Actions creating rights. A shareholder of a corporation may dissent
from, and obtain payment for the fair value of the shareholder's
shares in the event of, any of the following corporate actions:
(a) An amendment of the articles that materially and adversely
affects the rights or preferences of the shares of the dissenting
shareholder in that it:
(1) alters or abolishes a preferential rights of the shares;
(2) creates, alters, or abolishes a right in respect of the
redemption of the shares, including a provision respecting a sinking
fund for the redemption or repurchase of the shares;
(3) alters or abolishes a preemptive right of the holder of the
shares to acquire shares, securities other than shares, or rights to
purchase shares or securities other than shares;
(4)excludes or limits the right of a shareholder to vote on a
matter, or to cumulate votes, except as the right may be excluded or
limited through the authorization or issuance of securities of an
existing or new class or series with similar or different voting
rights; except that an amendment to the articles of an issuing
public corporation that provides that section 302A.671 does not
apply to a control share acquisition does not give rise to the right
to obtain payment under this section;
(b) A sale, lease, transfer, or other disposition of all or
substantially all of the property and assets of the corporation, but
not including a transaction permitted without shareholder approval
in section 302A.661, subdivision 1, or a disposition in dissolution
described in section 302A.725, subdivision 2, or a disposition
pursuant to an order of a court, or a disposition for cash on terms
requiring that all or substantially all of the net proceeds of
disposition be distributed to the shareholders in accordance with
their respective interests within one year after the date of
disposition;
(c) A plan of merger, whether under this chapter or under chapter
322B, to which the corporation is a party, except as provided in
subdivision 3;
(d) A plan of exchange, whether under this chapter or under
chapter 322B, to which the corporation is a party as the corporation
whose shares will be acquired by the acquiring corporation, if the
shares of the shareholder are entitled to be voted on the plan; or
(e) Any other corporate action taken pursuant to a shareholder
vote with respect to which the articles, the bylaws, or a resolution
approved by the board directs that dissenting shareholders may
obtain payment for their shares.
Subd. 2. Beneficial owners. (a) A shareholder shall not assert
dissenters' rights as to less than all of the shares registered in
the name of the shareholder, unless the shareholder dissents with
respect to all the shares that are beneficially owned by another
person but registered in the name of the shareholder and discloses
the name and address of each beneficial owner on whose behalf the
shareholder dissents. In the event, the rights of the dissenter
shall be determined as if the shares as to which the shareholder has
dissented and the other shares were registered in the names of
different shareholders.
(b) A beneficial owner of shares who is not the shareholder may
assert dissenters' rights with respect to shares held on behalf of
the beneficial owner, and shall be treated as a dissenting
shareholder under the terms of this section and section 302A.473, if
the beneficial owner submits to the corporation at the time of or
before the assertion of the rights a written consent of the
shareholder.
Subd. 3. Rights not to apply. Unless the articles, the bylaws, or
a resolution approved by the board otherwise provide, the right to
obtain payment under this section does not apply to a shareholder of
the surviving corporation in a merger, if the shares of the
shareholder are not entitled to be voted on the merger.
Subd. 4. Other rights. The shareholders of a corporation who have
a right under this section to obtain payment for their shares do not
have a right at law or in equity to have a corporate action
described in subdivision 1 set aside or rescinded, except when the
corporate action in fraudulent with regard to the complaining
shareholder or the corporation. (Last amended by Ch. 417, L. '94,
eff. 8-1-94.)
302A.473 PROCEDURES FOR ASSERTING DISSENTERS' RIGHTS. - Subdivision
1. Definitions. (a) For purposes of this section, the terms
defined in this subdivision have the meanings given them.
(b)"Corporation" means the issuer of the shares held by a
dissenter before the corporate action referred to in section
302A.471, subdivision 1 or the successor by merger of that issuer.
(c) "Fair value of the shares" means the value of the shares of a
corporation immediately before the effective date of the corporate
action referred to in section 302A.471, subdivision 1.
(d) "Interest" means interest commencing five days after the
effective date of the corporate action referred to in section
302A.471, subdivision 1 up to and including the date of payment,
calculated at the rate provided in section 549.09 for interest on
verdicts and judgments.
Subd. 2. Notice of action. If a corporation calls a shareholder
meeting at which any action described in section 302A.471,
subdivision 1 is to be voted upon, the notice of the meeting shall
inform each shareholder of the right to dissent and shall include a
copy of section 302A.471 and this section and a brief description of
the procedure to be followed under these sections.
Subd. 3. Notice of dissent. If a proposed action must be approved
by the shareholders, a shareholder who wishes to exercise
dissenters' rights must file with the corporation before the vote on
the proposed action a written notice of intent to demand the fair
value of the shares owned by the shareholder and must not vote the
shares in favor of the proposed action.
Subd. 4. Notice of procedure; deposit of shares. (a) After the
proposed action has been approved by the board and, if necessary,
the shareholders, the corporation shall send to all shareholders who
have complied with subdivision 3 and to all shareholders entitled to
dissent if no shareholder vote was required, a notice that contains:
(1) The address to which a demand for payment and certificates or
certificated shares must be sent in order to obtain payment and the
date by which they must be received;
(2) Any restrictions on transfer of uncertificated shares that
will apply after the demand for payment is received;
(3) A form to be used to certify the date on which the
shareholder, or the beneficial owner on whose behalf the shareholder
dissents, acquired the shares or an interest in them and to demand
payment; and
(4) A copy of section 302A.471 and this section and a brief
description of the procedures to be followed under these sections.
(b) In order to receive the fair value of the shares, a
dissenting shareholder must demand payment and deposit certificated
shares or comply with any restrictions on transfer of uncertificated
shares within 30 days after the notice was given, but the dissenter
retains all other rights of a shareholder until the proposed action
takes effect.
Subd. 5. Payment; return of shares. (a) After the corporate
action takes effect, or after the corporation receives a valid
demand for payment, whichever is later, the corporation shall remit
to each dissenting shareholder who has complied with subdivisions 3
and 4 the amount the corporation estimates to be the fair value of
the shares, plus interest, accompanied by:
(1) the corporation's closing balance sheet and statement of income
for a fiscal year ending not more than 16 months before the
effective date of the corporate action, together with the latest
available interim financial statements;
(2) an estimate by the corporation of the fair value of the shares
and a brief description of the method used to reach the estimate;
and
(3) a copy of section 302A.471 and this section, and a brief
description of the procedure to be followed in demanding
supplemental payment.
(b) The corporation may withhold the remittance described in
paragraph (a) from a person who was not a shareholder on the date of
action dissented from was first announced to the public or who is
dissenting on behalf of the person who was not a beneficial owner on
that date. If the dissenter has complied with subdivisions 3 and 4,
the corporation shall forward to the dissenter the materials
described in paragraph (a), a statement of the reason for
withholding the remittance, and an offer to pay to the dissenter the
amount listed in the materials if the dissenter agrees to accept
that amount in full satisfaction.
The dissenter may decline the offer and demand payment under
subdivision 6. Failure to do so entitles the dissenter only to the
amount offered. If the dissenter makes demand, subdivisions 7 and
8 apply.
(c) If the corporation fails to remit payment within 60 days of
the deposit of certificates or the imposition of transfer
restrictions on uncertificated shares, it shall return all deposited
certificates and cancel all transfer restrictions. However, the
corporation may again give notice under subdivision 4 and require
deposit or restrict transfer at a later time.
Subd. 6. Supplemental payment; demand. If a dissenter believes
that the amount remitted under subdivision 5 is less than the fair
value of the shares plus interest, the dissenter may give written
notice to the corporation of the dissenter's own estimate of the
fair value of the shares, plus interest, within 30 days after the
corporation mails the remittance under subdivision 5, and demand
payment of the difference. Otherwise, a dissenter is entitled only
to the amount remitted by the corporation.
Subd. 7. Petition; determination. If the corporation receives a
demand under subdivision 6, it shall, within 60 days after receiving
the demand, either pay to the dissenter the amount demanded or
agreed to by the dissenter after discussion with the corporation or
file in court a petition requesting that the court determine the
fair value of the shares, plus interest. The petition shall be
filed in the county in which the registered office of the
corporation is located, except that a surviving foreign corporation
that receives a demand relating to the shares of a constituent
domestic corporation shall file the petition in the county in this
state in which the last registered office of the constituent
corporation was located. The petition shall name as parties all
dissenters who have demanded payment under subdivision 6 and who
have not reached agreement with the corporation. The corporation
shall, after filing the petition, serve all parties with a summons
and copy of the petition under the rules of civil procedure.
Nonresidents of this state may be served by registered or certified
mail or by publication as provided by law. Except as otherwise
provided, the rules of civil procedure apply to this proceeding.
The jurisdiction of the court is plenary and exclusive. The court
may appoint appraisers, with powers and authorities the court deems
proper, to receive evidence on and recommend the amount of the fair
value of the shares. The court shall determine whether the
shareholder or shareholders in question have fully complied with the
requirements of this section, and shall determine the fair value of
the shares, taking into account any and all factors the court finds
relevant, computed by any method or combination of methods that the
court, in its discretion, sees fit to use, whether or not used by
the corporation or by a dissenter. The fair value of the shares as
determined by the court is binding on all shareholders, wherever
located. A dissenter is entitled to judgment in cash for the amount
by which the fair value of the shares as determined by the court,
plus interest, exceeds the amount, if any, remitted under
subdivision 5, but shall not be liable to the corporation for the
amount, if any, by which the amount, if any, remitted to the
dissenter under subdivision 5 exceeds the fair value of the shares
as determined by the court, plus interest.
Subd. 8. Costs; fees; expenses. (a) The court shall determine
the costs and expenses of a proceeding under subdivision 7,
including the reasonable expenses and compensation of any appraisers
appointed by the court, and shall assess those costs and expenses
against the corporation, except that the court may assess part or
all of those costs and expenses against a dissenter whose action in
demanding payment under subdivision 6 is found to be arbitrary,
vexatious, or not in good faith.
(b) If the court finds that the corporation has failed to comply
substantially with this section, the court may assess all fees and
expenses of any experts or attorneys as the court deems equitable.
These fees and expenses may also be assessed against a person who
has acted arbitrarily, vexatiously, or not in good faith in bringing
the proceeding, and may be awarded to a party injured by those
actions.
(c) The court may award, in its discretion, fees and expenses to an
attorney for the dissenters out of the amount awarded to the
dissenters, if any. (Last amended by Ch. 17, L. '93, eff 8-1-93.)
<PAGE>
Annex D
ESCROW AGREEMENT
This Agreement, dated _______, 1996, is made by and among CAMAX
Manufacturing Technologies, Inc., a Minnesota corporation ("CAMAX"),
Structural Dynamics Research Corporation, an Ohio corporation
("SDRC"), Terrence W. Glarner and Raymond A. Lipkin, acting solely
in their capacities as Representatives (the "Representatives") and
First Trust National Association, a national banking association, as
escrow agent (the "Escrow Agent").
INTRODUCTION
A. SDRC, SDRC Systems, Inc., an Ohio corporation ("Surviving
Corporation"), and CAMAX are parties to an Agreement and Plan of
Merger dated January _____, 1996 (the "Agreement") under the terms
of which CAMAX will merge with Surviving Corporation (the "Merger")
and all outstanding shares of CAMAX Common Stock will be converted
into a certain number of shares of Common Stock, without par value,
of SDRC ("SDRC Common Stock"). The Agreement provides for the
execution and delivery at the Effective Date thereunder of an escrow
agreement and the delivery of the Retention Shares to the Escrow
Agent for the purpose of establishing an escrow fund (the "Escrow
Fund"). SDRC and CAMAX have agreed that the execution and delivery
of this Escrow Agreement and the establishment of the Escrow Fund
provided for herein shall satisfy the obligations of the parties to
execute and deliver such escrow agreement. As hereafter provided,
the Escrow Fund hereunder shall fund and be the sole source of
securing the indemnification rights contemplated by Section 10 of
the Agreement (the "Escrow Fund Indemnities"). All capitalized
terms used herein and not otherwise defined shall have the meanings
ascribed to them in the Agreement.
B. The Agreement also provides for the appointment of the
Representatives to act for and on behalf of CAMAX shareholders
following the Merger. The appointment of the Representatives has
been duly approved by the CAMAX shareholders, and the
Representatives have been duly authorized to respond to the
assertion of any and all claims for indemnification by SDRC pursuant
to the terms of this Escrow Agreement and the provisions of the
Agreement pertaining thereto and to act for and on behalf of the
CAMAX shareholders with respect to this Escrow Agreement.
C. Subsequent to the Effective Date, the Escrow Fund shall be
viewed as owned by the former shareholders of CAMAX and it shall be
maintained and operated in a manner consistent with such ownership.
The Escrow Agent will administer the Escrow Fund as owned by CAMAX
shareholders.
D. Pursuant to the Agreement, SDRC and CAMAX have agreed that SDRC
shall transfer to the Escrow Agent shares of SDRC Common Stock to be
deposited at the Effective Date in escrow with the Escrow Agent and
held in accordance with the terms of this Escrow Agreement (the
"Retention Shares"). Accordingly, in consideration of consummating
the transactions contemplated by the Agreement, the covenants and
agreements herein set forth, and for other valuable consideration
the receipt of which is hereby acknowledged the parties further
agree as follows:
1. Appointment and Agreement of Escrow Agent. SDRC, CAMAX and the
Representatives, on behalf of the CAMAX shareholders, hereby appoint
First Trust National Association, as, and First Trust National
Association agrees to perform the duties of, Escrow Agent under this
Agreement. This Escrow Agreement shall be administered at and the
Escrow Fund held in Minneapolis, Minnesota, by the Escrow Agent at
180 E. Fifth Street, St. Paul, Minnesota 55101.
2. Agreement Not Limited by this Escrow Agreement. This Escrow
Agreement and the deposit of the Retention Shares are without
prejudice to and are not in limitation of, any obligations of CAMAX
or the CAMAX shareholders to SDRC in respect of any of the
covenants, representations or warranties of CAMAX, contained in the
Agreement, except insofar as the indemnity obligations of Section 10
are to be satisfied solely from the Escrow Fund.
3. Establishment of Escrow.
3.1 Delivery of Property.
(a) Simultaneously with the execution of this Escrow
Agreement, SDRC, CAMAX and the Representatives, on behalf of the
CAMAX shareholders, have caused to be deposited with the Escrow
Agent certificates in negotiable form duly endorsed in blank
representing _____ shares of SDRC Common Stock pursuant to the
formula set forth in Section 2.1 of the Agreement.
(b) Together with the certificates representing the Retention
Shares transferred to the Escrow Agent, the Representatives have
delivered to the Escrow Agent duly executed stock powers (endorsed
in blank) with respect thereto with signatures guaranteed by a bank
or trust company or by a member firm of the New York Stock Exchange,
together with a list of CAMAX shareholders, including their tax I.D.
numbers and addresses.
(c) The Escrow Fund shall be held and used only for the
purposes of funding the indemnity obligations set forth in Article
10 of the Agreement.
3.2 Receipt. The Escrow Agent hereby acknowledges receipt of
the Retention Shares and agrees to hold and disburse the Retention
Shares in accordance with the terms and conditions of this Escrow
Agreement and the Agreement for the uses and purposes stated herein
and therein.
3.3 Voting Rights of Escrowed Shares. All voting rights with
respect to Retention Shares shall be exercised by CAMAX shareholders
in accordance with their proportionate interests therein, and the
Escrow Agent shall from time to time execute and deliver to CAMAX
shareholders such proxies, consents or other documents as may be
necessary to enable the respective CAMAX shareholders to exercise
such rights.
3.4 Cash Dividends. Pending the disbursement of the Retention
Shares pursuant to this Escrow Agreement, the Escrow Agent shall
hold the certificates representing the Retention Shares in the
Escrow Fund. All cash dividends received with respect to Retention
Shares shall be income for tax purposes to CAMAX shareholders and
shall be distributed currently by the Escrow Agent to CAMAX
shareholders in accordance with their proportionate interests in the
Retention Shares.
3.5 Stock Splits/Stock Dividends. In case SDRC shall at any
time hereafter subdivide or combine the outstanding shares of the
SDRC Common Stock or declare a dividend payable in SDRC Common
Stock, the number of Retention Shares immediately prior to the
subdivision, combination or record date for such dividend payable in
common stock shall forthwith be proportionately increased, in the
case of combination, or decreased, in the case of subdivision, or
dividend payable in SDRC Common Stock.
4. Liabilities etc. Covered. This Escrow Agreement has been
executed and the deposit of the Retention Shares hereunder has been
made pursuant to Section 2.2 and Article 10 of the Agreement. The
deposit of the Retention Shares in the Escrow Fund has been made
for the purpose of funding and securing, to the extent of the
Retention Shares, the Escrow Fund Indemnities until the expiration
of the Retention Period.
5. Procedures for Disbursement of the Escrow Fund to SDRC.
5.1 Disbursement of the Escrow Fund. Whenever there shall be
delivered to the Escrow Agent (a) a certificate signed by SDRC and
the Representatives certifying, or (b) a certified copy of a final,
non-appealable judgment of a court of competent jurisdiction
determining, that an amount is due to SDRC pursuant to Article 10 of
the Agreement and further specifying the number of shares of SDRC
Common Stock, valued as provided in Section 2.2 of the Agreement, to
be transferred hereunder, the Escrow Agent shall, to the extent
that the amount of Retention Shares then held by it in the Escrow
Fund shall be sufficient for such purpose, promptly (and in no event
later than five business days following receipt of either document
referred to in clauses (a) and (b) of this Section 5.1) cause
certificates representing such number of Retention Shares, and duly
executed stock powers with respect to such certificates, with
signatures guaranteed by a bank or trust company or by a member firm
of the New York Stock Exchange, to be delivered to SDRC.
5.2 No Fractional Shares. In the event of any disbursement of
Retention Shares pursuant to subparagraph 5.1, no fractional shares
shall be delivered, but rather the Escrow Agent shall adjust the
amount of Retention Shares to be delivered to SDRC by rounding to
the nearest whole share.
6. Expiration of Retention Period.
(a) On the business day next following the expiration of the
Retention Period, SDRC shall authorize the Escrow Agent to deliver
to the Representatives, on behalf of the CAMAX shareholders, the
Retention Shares then held hereunder in the Escrow Fund, provided
however, that there shall be deducted from the amount to be
delivered to the Representatives the Escrowed Fund Reserved Amount
(as defined in Section 7 hereof).
(b) This Escrow Agreement shall automatically terminate if and
when all the Retention Shares shall have been distributed by the
Escrow Agent in accordance with the terms of this Escrow Agreement.
7. Retention of Retention Shares Following the Expiration of the
Retention Period. In the event that at the expiration of the
Retention Period claims for indemnification shall have been made
pursuant to Article 10 of the Agreement, then SDRC may in good
faith, at any time, prior to the expiration of the Retention Period
notify the Escrow Agent to such effect in writing, which written
notice shall describe briefly the nature of each such claim, the
facts and circumstances which give rise to each such claim, and the
estimated amount, based on the good faith judgment of SDRC as
determined solely by SDRC, of the potential liability, with respect
to each such claim, and the provisions of the Agreement or this
Escrow Agreement on which each such claim is based. SDRC shall
promptly deliver to the Representatives a copy of such written
notice. The Escrow Agent shall have no obligation to verify that
delivery of such notice has been made by SDRC to the
Representatives, but agrees to forward to the Representatives,
promptly, by overnight mail, a copy of the notice, received by it.
Certificates evidencing Retention Shares having a value (based upon
the Applicable Value Per Share of SDRC Common Stock) equal to one
hundred fifty percent (150%) of the total of the amounts set forth
in such written notice with respect to the claim or claims described
therein shall be set aside and retained (to the extent available in
the then remaining Retention Shares) by the Escrow Agent as a
reserve to cover such claim or claims (such certificates so set
aside and reserved, as reduced from time to time pursuant to the
provisions of this Paragraph 7 or of Paragraph 5.1 hereof, being
herein called the "Escrow Fund Reserved Amount").
8. No Transfer of Retention Shares. While any Retention Shares
shall continue to be held by the Escrow Agent, neither the CAMAX
shareholders nor the Representatives will transfer, sell, pledge,
create a security interest in or otherwise dispose of their rights
to any of the Retention Shares, or distributions with respect
thereto.
9. The Escrow Agent.
9.1 Indemnification of the Escrow Agent. SDRC and the
Representatives, on behalf of the CAMAX shareholders, jointly and
severally agree to indemnify and hold the Escrow Agent and its
directors, officers and employees harmless from and against any and
all costs, charges, damages, and attorneys' fees which the Escrow
Agent in good faith may incur or suffer in connection with or
arising out of this Escrow Agreement.
9.2 Duties of The Escrow Agent. The Escrow Agent shall have no
duties other than those expressly imposed on it herein and shall not
be liable for any act or omission except for its own negligence or
willful misconduct.
9.3 Fees of the Escrow Agent. The fees and charges of the
Escrow Agent (including its attorneys fees and expenses) with
respect to this Escrow Agreement shall be paid equally by the CAMAX
shareholders and SDRC in accordance with the Escrow Agent's
customary fees as charged from time to time. The Representatives,
on behalf of the CAMAX shareholders, agree that the Escrow Agent may
deduct any unpaid fees due from the CAMAX shareholders from the
Retention Shares prior to the Escrow Agent's distributing any
assets in connection with the termination of the Escrow Fund.
9.4 Escrow Agent to Follow Instructions of SDRC and the
Representatives. Any provision herein to the contrary
notwithstanding, the Escrow Agent shall at any time and from time to
time take such action hereunder with respect to the Retention Shares
as shall be agreed to in writing by SDRC and the Representatives,
provided that the Escrow Agent shall first be indemnified to its
satisfaction jointly and severally, by SDRC and the CAMAX
shareholders upon the dissolution of CAMAX with respect to any of
its costs or expenses which might be involved.
9.5 Resignation of the Escrow Agent. The Escrow Agent may resign
at any time by providing SDRC and the Representatives with thirty
(30) days' written notice of its intention to do so, provided that
a successor Escrow Agent has been appointed. The Escrow Agent's
resignation shall be effective upon delivery of the Retention Shares
to the successor Escrow Agent and the successor assuming the
obligations, rights and duties of the Escrow Agent hereunder.
10. Other Provisions.
10.1 Security Interest.
(a) The Representatives, on behalf of the CAMAX
shareholders, hereby grant to SDRC a first priority perfected
security interest in the Retention Shares to secure SDRC's rights to
indemnification under the Agreement and SDRC's rights under this
Escrow Agreement. The Escrow Agreement shall constitute a security
agreement under applicable law.
(b) The parties agree that this security interest shall
attach as of the execution of this Escrow Agreement. The parties
agree that, for the purpose of perfecting SDRC's security interest
in the above designated Retention Shares held by the Escrow Agent
pursuant to this Escrow Agreement, SDRC designates the Escrow Agent
to acquire and maintain possession of the Retention Shares and act
as bailee for SDRC with notice of SDRC's security interest in said
property under the Uniform Commercial Code and that possession of
the Retention Shares by the Escrow Agent acknowledges that it holds
the Retention Shares for SDRC for purposes of perfecting the
security interest. The Representatives and the Escrow Agent shall
take all other actions requested by SDRC to maintain the perfection
and priority of the security interest in the Retention Shares.
(c) SDRC shall release the security interest herein granted
and the security interest shall be terminated to the extent of any
disbursement of Retention Shares hereunder by the Escrow Agent in
accordance with the terms of this Escrow Agreement. Upon final
disbursement of any Retention Shares to the Representatives, SDRC
shall do all acts and things reasonably necessary to release and
extinguish such security interest. The Representatives, on behalf
of CAMAX shareholders, and SDRC hereby specifically agrees and
acknowledges that the grant of this security interest pursuant to
this Section 10.1 shall not in any way modify either the procedures
the Representatives, CAMAX shareholders and/or SDRC must follow in
order to obtain possession of any of the Retention Shares from those
procedures and rights expressly provided for in this Escrow
Agreement or in the Agreement.
10.2 Notices. All notices and other communications hereunder
shall be in writing and shall be sufficiently given if made by hand
delivery, by telex, by telecopier, or by registered or certified
mail (postage prepaid and return receipt requested) to the parties
at the following addresses (or at such other address for a party as
shall be specified by it by like notice) provided that
communications given to the Escrow Agent shall be considered given
when received by the Escrow Agent and, provided further, that any
communications to the Escrow Agent directing it to make a
disbursement from the Escrow Fund will be made by the Escrow Agent
only upon receipt of originally executed copies of such
communication.
(a) If to SDRC:
Structural Dynamics Research Corporation
2000 Eastman Drive
Milford, Ohio 45150
Attn: John A. Mongelluzzo
With a copy to:
Dinsmore & Shohl
1900 Chemed Center
255 East Fifth Street
Cincinnati, Ohio 45202
Attn: Charles F. Hertlein, Jr.
(b) If to CAMAX:
CAMAX Manufacturing Technologies, Inc.
7851 Metro Parkway
Minneapolis, Minnesota 55425
Attn: Gregory S. Furness
With a copy to:
Dorsey & Whitney P.L.L.P.
220 South Sixth Street
Minneapolis, Minnesota 55402
Attn: David J. Lubben
(c) If to the Representatives:
(d) If to the Escrow Agent:
First Trust National Association
180 E. Fifth Street
St. Paul, Minnesota 55101
Attn:
10.3 Benefit and Assignment. The rights and obligations of each
party under this Escrow Agreement may not be assigned without the
prior written consent of all other parties. This Escrow Agreement
shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns. Nothing in this Escrow
Agreement, expressed or implied, is intended to or shall (i) confer
on any person other than the parties hereto, or their respective
successors or assigns, any rights, remedies, obligations or
liabilities under or by reason of this Escrow Agreement, or (ii)
constitute the parties hereto as partners or participants in a joint
venture. The Escrow Agent shall not be obligated to recognize any
such succession or assignment, until satisfactory written evidence
thereof shall have been received by it.
10.4 Entire Agreement; Amendment. This Escrow Agreement and the
Agreement contain all the terms agreed upon by the parties with
respect to the subject matter hereof. This Escrow Agreement may be
amended only by a written instrument signed by the party against
which enforcement of any waiver, change, modification, extension or
discharge is sought.
10.5 Headings. The headings of the sections and subsections of
this Escrow Agreement are for ease of reference only and shall not
be deemed to evidence or affect the meaning or construction of any
of the provisions hereof.
10.6 Governing Law. This Escrow Agreement shall be construed, as
to both validity and performance, enforced in accordance with and
interpreted and governed by the laws of the State of Minnesota.
10.7 Attorneys' Fees. Should any litigation be commenced
between SDRC and the CAMAX shareholders or the Representatives
concerning this Escrow Agreement or the rights and duties of any
party in relation thereto, the party prevailing in such litigation
shall be entitled, in addition to such other relief as may be
granted, to a reasonable sum as and for such party's attorneys' fees
in such litigation which, shall be determined by the court in such
litigation or in a separate action brought for that purpose.
10.8 Counterparts. This Escrow Agreement may be executed in
multiple counterparts, all of which taken together shall constitute
one instrument.
IN WITNESS WHEREOF, CAMAX, SDRC and the Escrow Agent have caused
this Escrow Agreement to be executed on the date first written above
by their respective officers, and Terrence W. Glarner and Raymond A.
Lipkin have executed this agreement solely in their capacity as
Representatives on the date first written above.
CAMAX MANUFACTURING TECHNOLOGIES, INC.
By:
Its:
STRUCTURAL DYNAMICS RESEARCH CORPORATION
By:
Its:
FIRST TRUST NATIONAL ASSOCIATION
By:
Its:
THE REPRESENTATIVES:
Terrence W. Glarner
Raymond A. Lipkin<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 20. Indemnification of Directors and Officers
Section 1701.13 of the Ohio Revised Code provides that a corporation
may indemnify or agree to indemnify any person who was or is a
party, or is threatened to be made a party, to any threatened,
pending, or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, other than an action by
or in the right of the corporation, by reason of the fact that he is
or was a director, officer, employee, or agent of the corporation,
or is or was serving at the request of the corporation as a
director, trustee, officer, employee, or agent of another
corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees, judgments, fines, and amounts
paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding if he acted in good
faith and in a manner he reasonably believed to be in or not opposed
to the best interests of the corporation, and with respect to any
criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful. The termination of any action, suit or
proceeding by judgment, order, settlement or conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself,
create a presumption that the person did not act in good faith and
in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and with respect to any criminal
action or proceeding that he had reasonable cause to believe that
his conduct was unlawful. Section 1701.13 further specifies that a
corporation may indemnify or agree to indemnify any person who was
or is a party, or is threatened to be made a party, to any
threatened, pending, or completed action or suit by or in the right
of the corporation to procure a judgment in its favor by reason of
the fact that he is or was a director, officer, employee, or agent
of the corporation, or is or was serving at the request of the
corporation as a director, trustee, officer, employee, or agent of
another corporation, domestic or foreign, nonprofit or for profit,
partnership, joint venture, trust or other enterprise, against
expenses, including attorneys' fees actually and reasonably incurred
by him in connection with the defense or settlement of such action
or suit if he acted in good faith and in a manner he reasonably
believed to be in or not opposed to the best interests of the
corporation, except that no indemnification shall be made in respect
of any claim, issue, or matter as to which such person shall have
been adjudged to be liable for negligence or misconduct in the
performance of his duty to the corporation unless, and only to the
extent that the court of common pleas, or the court in which such
action or suit was brought, determines upon application that,
despite the adjudication of liability, but in view of all the
circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses as the court of common pleas
or such other court shall deem proper. In addition, Section 1701.13
requires a corporation to pay any expenses, including attorneys'
fees, of a director in defending an action, suit or proceeding
referred to above as they are incurred, in advance of the final
disposition of the action, suit or proceeding, upon receipt of an
undertaking by or on behalf of the director in which he agrees to
both (i) repay such amount if it is proved by clear and convincing
evidence that his action or failure to act involved an action or
omission undertaken with deliberate intent to cause injury to the
corporation or undertaken with reckless disregard for the best
interests of the corporation and (ii) reasonably cooperate with the
corporation concerning the action, suit or proceeding. The
indemnification provided by Section 1701.13 shall not be deemed
exclusive of any other rights to which those seeking indemnification
may be entitled under the Articles of Incorporation or Code of
Regulations of SDRC.
The Code of Regulations of SDRC provides that SDRC shall indemnify
each director and each officer of SDRC, and each person employed by
SDRC who serves at the written request of the President of SDRC as
a director, trustee, officer, employee or agent of another
corporation, domestic or foreign, nonprofit or for profit, to the
full extent permitted by Ohio law. SDRC may indemnify assistant
officers, employees and others by action of the Board of Directors
to the extent permitted by Ohio law.
SDRC carries directors' and officers' liability insurance coverage
which insures its directors and officers and the directors and
officers of its subsidiaries in certain circumstances.
<PAGE>
Item 21. Exhibits and Financial Statement Schedules
Page Number in
Sequential
Numbering
Document Exhibit System
Agreement of Merger and Plan of 2
Reorganization dated as of January
16, 1996, by and among CAMAX
Manufacturing Technologies, Inc.,
Structural Dynamics Research
Corporation and Acquisition Corp.
(set forth in Annex A to the
Proxy Statement/Prospectus
included in this Registration Statement)
Amended Articles of Incorporation of SDRC 3.1 Incorporated by
Reference (1)
Amended Code of Regulations of SDRC 3.2 Incorporated by
Reference (2)
Form of opinion as to the legality
of the securities being issued and
consent of Dinsmore & Shohl 5,23.4
Form of opinion of Dinsmore & Shohl
as to tax matters 8 *
Structural Dynamics Research
Corporation 1991 Employee Stock
Option Plan 10.1 Incorporated by
Reference (3)
Structural Dynamics Research
Corporation Directors' Non-Discretionary
Stock Option Plan 10.2 Incorporated by
Reference (3)
Structural Dynamics Research
Corporation Tax Deferred Capital
Accumulation Plan dated January 1, 1989 10.3 Incorporated by
Reference (4)
Joint Venture Agreement between
Structural Dynamics Research
Corporation and Nissan Motor Co., Ltd. 10.4 Incorporated by
Reference (5)
Joint Venture Agreement between
Structural Dynamics Research Corporation
and Vickers, Inc., a Trinova Company 10.5 Incorporated by
Reference (6)
Lease Agreement (including amendments
#1 and #2) between Park 50 Development
Company Limited Partnership and
Structural Dynamics Research
Corporation 10.6 Incorporated by
Reference (4)
Joint Venture Formation Agreement
between Structural Dynamics Research
Corporation and Control Data Systems,
Inc. 10.7 Incorporated by
Reference (7)
Statement regarding computation of per
share earnings 11 Incorporated by
Reference (8)
Quarterly Report on Form 10-Q for
quarter ended September 30, 1995 13.1 Incorporated by
Reference
Portions of the Annual Report to
Shareholders incorporated herein
by reference 13.2
Subsidiaries of SDRC 21 Incorporated by
Reference (8)
Consent of Price Waterhouse LLP
(with respect to SDRC) 23.1
Consent of Deloitte & Touche LLP
(with respect to CAMAX) 23.2
Consent of Coopers & Lybrand, LLP 23.3
Consent of Wessels, Arnold &
Henderson, L.L.C. 23.4
Power of attorney 24 Incorporated by
Reference (9)
Fairness Opinion of Wessels, Arnold
& Henderson, L.L.C., dated
January 16, 1996 (Set forth as
Annex B to the Proxy Statement/
Prospectus included in this
Registration Statement 99.1
Form of Proxy Card 99.2 *
____________________
*Previously provided.
(1) Incorporated by reference to SDRC's Annual Report on Form 10-K
for the year ended December 31, 1993 as originally filed on March
11, 1994.
(2) Incorporated by reference to SDRC's Registration Statement No.
33-16541, which was filed on August 17, 1987 and became effective on
September 29, 1987.
(3) Incorporated by reference to SDRC's definitive Proxy Statement
dated March 11, 1991.
(4) Incorporated by reference to an exhibit filed in SDRC's Annual
Report on Form 10-K for the year ended December 31, 1990.
(5) Incorporated by reference to SDRC's quarterly report on Form
10-Q dated May 12, 1989.
(6) Incorporated by reference to an exhibit filed in SDRC's Annual
Report on Form 10-K for the year ended December 31, 1989.
(7) Incorporated by reference to an exhibit filed in SDRC's Annual
Report on Form 10-K for the year ended December 31, 1992.
(8) Incorporated by reference to an exhibit filed in SDRC's
Annual Report on Form 10-K for the year ended December 31, 1995.
(9) Contained on the first page of the signature pages following
Part II of this Registration Statement.
Item 22. Undertakings
(1) The undersigned registrant hereby undertakes to file during
any period in which offers or sales are being made, a post-effective
amendment to this registration statement: (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of
1933; (ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which, individually or in
the aggregate, represent a fundamental change in the information set
forth in the registration statement, and (iii) to include any
material information with respect to the plan of distribution not
previously disclosed in the registration statement or any material
change to such information in the registration statement. The
registrant also undertakes: (i) that for the purpose of determining
any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof, and (ii) to remove from
registration by means of a post-effective amendment any of the
securities being registered which remain unsold at the termination
of the offering.
(2) The undersigned registrant hereby undertakes that, for
purposes of determining any liability under the Securities Act of
1933, each filing of the registrant's annual report pursuant to
section 13(a) or section 15(d) of the Securities Exchange Act of
1934 (and, where applicable, each filing of an employee benefit
plan's annual report pursuant to section 15(d) of the Securities
Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) The undersigned registrant hereby undertakes as follows: that
prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is part of this
registration statement by any person or party who is deemed to be an
underwriter within the meaning of Rule 145(c), the issuer undertakes
that such reoffering prospectus will contain the information called
for by the applicable registration form with respect to reofferings
by persons who may be deemed underwriters, in addition to the
information called for by the other Items of the applicable form.
(4) The registrant undertakes that every prospectus (i) that is
filed pursuant to paragraph (2) immediately preceding, or (ii) that
purports to meet the requirements of section 10(a)(3) of the
Securities Act of 1933 and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an
amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining
any liability under the Securities Act of 1933, each such
post-effective amendment shall be deemed to be a new registration
statement relating to the securities offering therein, and the
offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(5) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the
Securities Act of 1933 and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities
(other than the payment by the registrant of expenses incurred or
paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant
will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Securities Act of 1933 and
will be governed by the final adjudication of such issue.
(6) The undersigned registrant hereby undertakes to supply by
means of a post-effective amendment all information concerning a
transaction, and the company being acquired involved therein, that
was not the subject of and included in the registration statement
when it became effective.
(7) The undersigned registrant hereby undertakes to deliver or
cause to be delivered with the prospectus, to each person to whom
the prospectus is sent or given, the latest annual report to
security holders that is incorporated by reference in the prospectus
and furnished pursuant to and meeting the requirements of Rule 14a-3
or Rule 14c-3 under the Securities Exchange Act of 1934; and, where
interim financial information required to be presented by Article 3
of Regulation S-X are not set forth in the prospectus, to deliver or
cause to be delivered to each person to whom the prospectus is sent
or given, the latest quarterly report that is specifically
incorporated by reference in the prospectus to provide such interim
financial information.
(8) The undersigned registrant hereby undertakes to respond to
requests for information that is incorporated by reference into the
prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form within
one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt
means. This includes information contained in documents filed
subsequent to the effective date of the registration statement
through the date of responding to the request.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant certifies that it has reasonable grounds to believe that
it meets all the requirements for filing on Form S-4, and has duly
caused this Amendment No. 1 to the Registration Statement to be
signed on its behalf by the undersigned, thereunto duly authorized
in the City of Cincinnati, State of Ohio, on March 27, 1996.
STRUCTURAL DYNAMICS
RESEARCH CORPORATION
By:/s/ Albert F. Peter
Albert F. Peter
President and Chief Executive Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature
appears below constitutes and appoints John A. Mongelluzzo, his true
and lawful attorney-in-fact and agent, with full power of
substitution and resubstitution, for him and in his name, place and
stead, in any and all capacities, to sign and execute on behalf of
the undersigned any and all amendments to this Registration
Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorney-in-fact and agent
full power and authority to do and perform each and every act and
thing requisite and necessary to be done in connection with any such
amendments, as fully to all intents and purposes as he might or
could do in person, and does hereby ratify and confirm all that said
attorney-in-fact and agent, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in
the capacities and on the dates indicated.
Principal Executive Officer: Date:
/s/John A. Mongelluzzo* President and March 26, 1996
Albert F. Peter Chief Executive
Officer
Principal Financial and Accounting Officer:
/s/ Jeffrey J. Vorholt Vice President, March 27, 1996
Jeffrey J. Vorholt Chief Financial
Officer, and
Treasurer
Directors of the Company: Date:
/s/ John A. Mongelluzzo* March 26, 1996
William P. Conlin
/s/ John A. Mongelluzzo* March 26, 1996
Albert F. Peter
/s/ John A. Mongeluzzo* March 26, 1996
Robert P. Henderson
/s/ John A. Mongelluzzo* March 26, 1996
John E. McDowell
/s/ John A. Mongelluzzo* March 26, 1996
Gilbert R. Whitaker, Jr.
/s/ John A. Mongeluzzo* March 26, 1996
Bannus B. Hudson
/s/ John A. Mongeluzzo* March 26, 1996
James W. Nethercott
/s/ John A. Mongelluzzo* March 26, 1996
Arthur B. Sims
*John A. Mongelluzzo, by signing his name hereto, signs this
document on behalf of each person indicated above pursuant to a
power of attorney duly executed and filed with the Securities and
Exchange Commission.
/s/ John A. Mongelluzzo
John A. Mongelluzzo
<PAGE>
Exhibit 5, 23.4
(513) 977-8315
Charles F. Hertlein, Jr.
March 29, 1996
Structural Dynamics Research Corporation
2000 Eastman Drive
Milford, Ohio 45150
Ladies and Gentlemen:
This opinion is rendered for use in connection with the Registration
Statement on Form S-4, prescribed pursuant to the Securities Act of
1933, to be filed by Structural Dynamics Research Corporation (the
"Company") with the Securities and Exchange Commission on February
12, 1996, under which up to 2,000,000 shares of the Company's Common
Stock without par value ("Common Stock") are to be registered.
We hereby consent to the filing of this opinion as Exhibit 5 and
23.4 to the Registration Statement and to the reference to our name
in the Registration Statement.
As counsel to the Company, we have examined and are familiar with
originals or copies, certified or otherwise identified to our
satisfaction, of such statutes, documents, corporate records,
certificates of public officials, and other instruments as we have
deemed necessary for the purpose of this opinion, including the
Company's Amended Articles of Incorporated and Amended Code of
Regulations and the record of proceedings of the shareholders and
directors of the Company.
Based upon the foregoing, we are of the opinion that:
1. The Company has been duly incorporated and is validly existing
and in good standing as the corporation under the laws of the State
of Ohio.
2. When the Registration Statement shall have been declared
effective by order of the Securities and Exchange Commission and up
to 2,000,000 shares of the Common Stock to be issued for sale to the
public shall have been issued and sold upon the terms set forth in
the Registration Statement, such shares will be legally and validly
issued and outstanding, fully-paid and nonassessable.
Very truly yours,
DINSMORE & SHOHL
/s/ Charles F. Hertlein, Jr.
Charles F. Hertlein, Jr.
________________, 1996
THE FOLLOWING OPINION IS INTENDED TO BE RENDERED UPON THE CLOSING OF
THE TRANSACTION DESCRIBED THEREIN IN SUBSTANTIALLY THE FORM
PRESENTED, ASSUMING NO CHANGES IN THE FACTS OR THE LAW UPON WHICH
SUCH OPINION IS BASED, AND SUBJECT TO RECEIPT, REVIEW AND APPROVAL
OF FINAL DOCUMENTS
Structural Dynamics Research Corporation
2000 Eastman Drive
Milford, Ohio 45150
CAMAX Manufacturing Technologies, Inc.
7851 Metro Parkway
Minneapolis, Minnesota 55425
Dear Sirs:
As counsel for Structural Dynamics Research Corporation, ("SDRC"),
we have been requested to render our opinion with respect to certain
Federal income tax consequences of the Agreement of Merger and Plan
of Reorganization dated January 16, 1996, among SDRC, CAMAX
Manufacturing Technologies, Inc. ("CAMAX") and SDRC Systems, Inc.
providing for the merger of CAMAX into SDRC Systems, Inc.
We have reviewed the terms of the proposed transaction as set forth
in the Agreement of Merger and Plan of Reorganization and have
received representations from certain executive officers of SDRC and
CAMAX and certain CAMAX shareholders, relating to various factual
matters relevant to the opinions expressed herein. Our opinion is
based on the Agreement of Merger and Plan of Reorganization, the
facts set forth in such representations and on our analysis of the
applicable provisions of the Internal Revenue Code of 1986, as
amended (the "Code"), Treasury Regulations, Internal Revenue Service
Rulings, and judicial decisions interpreting the Code as in effect
on the date hereof, all of which are subject to change,
prospectively or retroactively. We have not independently verified
the factual matters set forth in the representations.
Based upon and subject to the foregoing, our opinion is as follows:
1. The merger of CAMAX with and into SDRC Systems, Inc. will
constitute a reorganization within the meaning of Sections
368(a)(1)(A) and 368(a)(2)(D) of the Code and, for purposes thereof,
SDRC, SDRC Systems, Inc. and CAMAX each will qualify as a "party to
a reorganization" within the meaning of Section 368(b) of the Code;
2. No gain or loss will be recognized by CAMAX as a consequence of
the merger;
3. No gain or loss will be recognized by SDRC Systems, Inc. on the
receipt by SDRC Systems, Inc. of substantially all the assets of
CAMAX and the assumption by SDRC Systems, Inc. of CAMAX's
liabilities;
4. No gain or loss will be recognized by the shareholders of CAMAX
who receive solely SDRC common stock in exchange for shares of CAMAX
common stock pursuant to the Agreement of Merger (disregarding for
this purpose any cash received for fractional share interests to
which they may be entitled);
5. The federal income tax basis of the SDRC common stock to be
received by CAMAX shareholders who exchange their shares of CAMAX
common stock solely for shares of SDRC common stock (disregarding
for this purpose any cash received for fractional share interests to
which they may be entitled) will be, in each instance, the same as
the federal income tax basis of the CAMAX common stock surrendered
in exchange therefor;
6. The holding period of the SDRC common stock received by a CAMAX
shareholder will include, in each case, the period during which the
CAMAX common stock surrendered in exchange therefor was held,
provided that the CAMAX common stock was held as a capital asset by
such shareholder on the date of the exchange; and
7. Holders of CAMAX common stock who receive cash in lieu of
fractional shares of SDRC common stock will be treated as having
received such fractional share of SDRC common stock and then as
having received such cash in redemption of such fractional share
subject to the provisions of Section 302 of the Code.
Our opinion is limited to the matters expressly addressed above. No
opinion is given or should be inferred as to any other issue.
We consent to the filing of this form of opinion as an exhibit to
the Registration Statement filed in connection with the merger.
Very truly yours,
DINSMORE & SHOHL
By:
J. Michael Cooney
<TABLE>
<CAPTION>
CAMAX Manufacturing Technologies, Inc.
Computation of Earnings per Share
Year Ended December 31
1995 1994 1993
<S> <C> <C> <C>
PRIMARY:
Income (Loss) Before Cumulative Effect of
Accounting Change, as Reported $ 1,559,549 $(2,576,472) $ 367,924
Cumulative Effect of Accounting Change 0 0 975,567
---------- ------------ -----------
Net Income (Loss) $ 1,559,549 $(2,576,472) $ 1,343,491
========== ============ ===========
Weighted Average Number of Common Shares
Outstanding, Unadjusted 17,368,015 16,892,264 16,841,843
Additional Dilutive Effect of Outstanding
Stock Options 1,228,424 0 1,628,758
---------- ------------ ----------
Weighted Average Number of Common and
Common Equivalent Shares Outstanding,
as Adjusted 18,596,439 16,892,264 18,470,601
========== ============ ===========
Primary Per Share Amount:
Income (Loss) Before Cumulative Effect of
Accounting Change, as Reported $0.08 ($0.15) $0.02
Cumulative Effect of Accounting Change 0.00 0.00 0.05
---------- ---------- -----------
Net Income (Loss) $0.08 ($0.15) $0.07
========== ========== ===========
FULLY DILUTED:
Income (Loss) Before Cumulative Effect of
Accounting Change, as Reported $ 1,559,549 $(2,576,472) $ 367,924
Cumulative Effect of Accounting Change 0 0 975,567
---------- ------------ -----------
Net Income (Loss) $ 1,559,549 $(2,576,472) $ 1,343,491
========== ============ ===========
Weighted Average Number of Common Shares
Outstanding, Unadjusted 17,368,015 16,892,264 16,841,843
Additional Dilutive Effect of Outstanding
Stock Options 1,228,424 0 1,628,758
---------- ------------ ----------
Weighted Average Number of Common and
Common Equivalent Shares Outstanding,
as Adjusted 18,596,439 16,892,264 18,470,601
========== ============ ===========
Fully-Diluted Per Share Amount:
Income (Loss) Before Cumulative Effect of
Accounting Change, as Reported $0.08 ($0.15) $0.02
Cumulative Effect of Accounting Change 0.00 0.00 0.05
---------- ---------- -----------
Net Income (Loss) $0.08 ($0.15) $0.07
========== ========== ===========
</TABLE>
<PAGE>
PORTIONS OF THE ANNUAL REPORT TO SHAREHOLDERS EXHIBIT 13
<TABLE>
SUMMARY OF SELECTED FINANCIAL DATA
Structural Dynamics Research Corporation
<CAPTION>
Year ended December 31
(in thousands,
except per share data) 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C>
Statement of operations data:
Net revenue $204,084 $167,547 $147,605 $149,041 $129,932
Income (loss) before income
taxes and cumulative effect
of accounting changes (1,917) (5,168) (7,356) 13,907 14,525
Income (loss) before cumulative
effect of accounting changes (8,467) (9,001) (11,732) 8,775 9,279
Net income (loss) (8,467) (12,897) (11,732) 9,475 9,279
Earnings (loss) per share:
Before cumulative effect of
accounting changes (.28) (.31) (.39) .29 .31
Net income (loss) (.28) (.45) (.39) .31 .31
Common and common equivalent
shares 29,921 28,844 29,876 30,093 29,817
Balance sheet data:
Working capital $ 35,695 $ 27,590 $ 27,474 $ 48,440 $ 45,207
Total assets 193,522 142,699 134,549 136,130 119,339
Long-term liabilities 8,163 10,219 326 -- --
Total shareholders' equity 77,409 72,152 84,581 92,447 80,359
</TABLE>
<PAGE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Structural Dynamics Research Corporation
(in thousands)
The Company operates in a single industry segment providing
mechanical design automation (MDA) software, product data
management (PDM) software and related services. The Company's
MDA product, I-DEAS Master Series, is a world-class, integrated
CAD/CAM/CAE product which allows manufacturers to optimize
product performance and reduct cost, while streamlining the
product development process from concept through manufacturing.
This total approach to product and process engineering enables
significant improvements in quality, while reducing overall
development time and cost. Metaphase Series 2 software, SDRC's
PDM product, provides a comprehensive approach to the management
and control of product information and configuration, release
management and work flow.
Revenue
Consolidated revenue, including licenses and services, for 1995
rose to $204,084 compared with 1994 revenue of $167,547 and 1993
revenue of $147,605. This represents increases of 22% in 1995
and 14% in 1994. The growth is due to an increase in the
Company's installed software base and the associated increase in
maintenance, software services and training revenue. In 1995,
the Company merged its software products marketing and
engineering services subsidiaries.
Software License Revenue. Software license revenue for 1995
increased to $117,573 compared to 1994 revenue of $103,317 and
1993 revenue of $86,754. These amounts represent an increase of
14% in 1995 and 19% in 1994 which is attributed to the
enthusiastic market acceptance of the I-DEAS Master Series
product enhancements and increased demand for the PDM product.
In 1995, PDM license revenue increased 54% over 1994. Also in
1995, the Company purchased the minority interest in SDRC GmbH.
As of the acquisition date, license revenue generated by SDRC
GmbH was included in the consolidated financial statements.
Software Maintenance and Services Revenue. Software maintenance
and services revenue is derived from software maintenance
contracts, software services and training. Combined software
maintenance and services revenue increased to $86,511 in 1995 or
35% over 1994 and to $64,230 in 1994 or 6% over 1993. This
revenue represents 42%, 38% and 41% of consolidated net revenue
in 1995, 1994 and 1993, respectively. Software maintenance
growth is due to revenue generated from maintenance contracts for
both new and existing customers. Software services growth in
1995 over 1994 is primarily attributable to the increased level
of I-DEAS and Metaphase Series 2 implementation and integration
projects. In addition, the Company's software services revenue
was impacted in 1995 by a large contract from one of its major
automotive customers and a renewal of a services contract from
one of its major aerospace customers. In 1994, engineering
consulting revenue did not increase over 1993 due to downsizing
portions of the consulting business not considered synergistic
with the software segment. The Company expects that the software
maintenance and services revenue will continue to increase.
Geographic. Total revenue from international operations
accounted for 56%, 57% and 61% of consolidated net revenue in
1995, 1994 and 1993, respectively. The Company expects the
international market to continue to account for a significant
portion of total revenue.
Cost and Expenses
Cost of Revenue. Cost of revenue consists principally of the
staff and related costs associated with the generation and
support of software service revenue, amortization of capitalized
software construction costs, royalty fees paid to third parties
under licensing agreements and the cost of distributing software
products.
These expenses increased to $63,073 in 1995 from $48,785 in 1994
and $46,937 in 1993. As a percentage of revenue, these costs
were 31%, 29% and 32% of net consolidated revenue for 1995, 1994
and 1993, respectively. In 1994, cost of revenue as a percent of
total revenue decreased primarily because staff and related costs
increased at a slower rate than revenue. The Company expects
that cost of revenue will continue to increase due to variable
costs associated with license and related services revenue
growth.
Research and Development Expenses. The Company continues to
invest significant amounts in the technological advancement of
its product line. Research and development expenses amounted to
$20,496, $20,715 and $17,526 in 1995, 1994 and 1993,
respectively. These amounts represent 10%, 12% and 12% of net
revenue for 1995, 1994 and 1993, respectively. In 1995,
research and development expenses as a percent of total revenue
decreased because of a reduction in staff and related staff costs
which occurred in the fourth quarter of 1994 and first quarter of
1995. The Company expects that the research and development
costs will increase due to the acceleration of the development of
its I-DEAS Master Series software and other product initiatives.
Research and development expenses consist of expenses for
development of software products which cannot be capitalized in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 86, "Accounting for the Costs of Computer Software to
be Sold, Leased, or Otherwise Marketed." Research and development
expenses exclude internally developed capitalized software costs
of $6,928, $9,312 and $11,282 in 1995, 1994 and 1993,
respectively. These capitalized amounts represent 34%, 45% and
64% of research and development expenses in 1995, 1994 and 1993,
respectively. The percentage of capitalized costs to total
research and development expenses has declined over the three-
year period because the product development staff is using a more
effective development process. With this process, more time is
spent in the phases before coding begins to refine the
requirements and approach, reducing the amount of software
development costs that are capitalizable. Capitalized computer
software costs are amortized over the useful lives of the related
products, which are estimated to be no more than five years.
Selling and Marketing Expenses. Selling and marketing expenses
consist of the costs associated with the world wide sales and
marketing staff, advertising and product localization. These
expenses amounted to $87,049, $89,628 and $80,906 in 1995, 1994
and 1993, respectively. These amounts represent 43%, 53% and 55%
of net consolidated revenue for 1995, 1994 and 1993,
respectively. The selling and marketing expense decrease in
1995 from 1994 is due to a reduction in staff and related staff
costs partially offset by an increase in sales incentives for
both the direct and indirect channels. The Company expects to
continue to expand its sales organization to meet the growing
customer demand for its products and services.
Throughout 1994 and 1993, the Company incurred significant
expenses from increased headcount in the sales and technical
support organizations to promote direct sales and support new and
existing customers. The primary focus was to assist the
Company's customers in their transitioning efforts to the I-DEAS
Master Series product introduced in June 1993. The Company
anticipated higher revenue growth to offset the incremental
headcount costs from sales and support activities. In the fourth
quarter of 1994 and the first quarter of 1995, the Company
initiated a plan to cut costs and strengthen its competitive
position by reducing its workforce.
General and Administrative Expenses. General and administrative
expenses consist of costs associated with the corporate, finance,
human resource and administrative staffs. General and
administrative expenses amounted to $11,263, $10,379 and $9,455
in 1995, 1994 and 1993, respectively. These amounts represent 6%
of net consolidated revenue for each of these years.
Equity in Losses of Affiliates
During 1992, the Company and Control Data Systems, Inc. formed a
joint venture known as Metaphase Technology, Inc. (Metaphase).
Metaphase is involved in developing and marketing product data
management software. The Company pays royalty fees to Metaphase
based upon the amount of PDM sales.
During 1994, the Company formed a joint venture with Siemens
Nixdorf Informationssysteme AG (SNI), SDRC Software and Services,
GmbH (SDRC GmbH) to market the Company's software products in
Central Europe. The Company's equity in the losses of affiliates
represents its share of Metaphase and SDRC GmbH joint venture
losses, the majority of which resulted from the SDRC GmbH joint
venture.
In 1995, the Company purchased the minority interest in SDRC GmbH
at its net book value. As of the acquisition date, 100% of the
operating results of SDRC GmbH were included in the consolidated
financial statements. The balance sheet impact increased assets
by approximately $8,928, decreased long-term liabilities by
$4,737, and increased current liabilities approximately $13,665.
The increase in assets represented primarily cash and accounts
receivable. The reduction in long-term liabilities represented
the reversal of the cumulative losses offset by the recording of
long-term liability of $1,927 due to SNI under a limited set of
circumstances as described in the agreement between SNI and SDRC.
The increase in current liabilities represented primarily
accounts payable, accrued liabilities and deferred revenue.
Acquisition of CAMAX Manufacturing Technologies, Inc.
On January 16, 1996, the Company entered into a definitive
agreement to acquire CAMAX Manufacturing Technologies, Inc.
(CAMAX) and its wholly owned subsidiaries. CAMAX provides
computer-aided manufacturing (CAM) software for computerized-
numerical-control machining operations, with products and
services designed to simplify, automate and optimize the
machining process to streamline production and accelerate time-to-
market.
SDRC will issue common stock having a market value of $30,000 in
exchange for 100 percent ownership of CAMAX common stock. The
acquisition is expected to be accounted for under the pooling of
interests method. Completion of the transaction is subject to
receipt of customary governmental approvals and CAMAX
shareholders' approval.
Litigation Settlement
In December 1995, the Company and plaintiffs' counsel in a class
action lawsuit entered into a Memorandum of Understanding setting
forth the terms of a proposed settlement. Pursuant to the
proposed settlement, the Company will establish a settlement fund
of $27,600 consisting of $17,600 cash and $10,000 in the form of
shares of the Company's common stock. The anticipated cost of
the settlement net of estimated insurance proceeds was recorded
as a 1995 expense. In January 1996, $17,600 was transferred to a
settlement fund in accordance with the Memorandum of
Understanding.
Other Income, Net
Other income, net, consists principally of interest income and
foreign currency losses. For the three-year period ending
December 31, 1995, interest income increased due to interest for
income tax refunds received in 1994 and 1995, higher investment
balances in 1995 and increasing interest rates throughout the
period. In 1995, other income, net, is offset by a net loss of
$1,878 resulting from the sale of the United Kingdom test and
analysis division.
Income Taxes
During 1995 and 1994, the Company recorded tax expense of $6,550
and $3,833 on pretax losses of $1,917 and $5,168, respectively.
Although the Company incurred losses in 1995 and 1994, there were
provisions for income taxes in both years consisting primarily of
income taxes currently payable to foreign jurisdictions and
foreign withholding taxes incurred on the Company's software
licensing revenue. These withholding taxes can be credited
against the Company's U.S. income tax liability. The Company is
not currently in a position to utilize all of these foreign tax
credits (FTCs). The FTCs and other tax carryforwards are
available to offset future U.S. income tax liabilities, subject
to various restrictions. No tax benefit was currently recognized
for the excess FTCs and other tax carryforwards since it is more
likely than not that they will not be realized.
In 1994, the Company received a tax refund of $1,754 for research
and experimentation credits not previously recorded.
Liquidity and Capital Resources
As of December 31, 1995, the Company had $78,167 in cash, cash
equivalents and liquid investments. The Company's working
capital was $35,695 and the Company had no borrowings. The
Company also has an unsecured bank line of credit of $15,000.
During 1995, 1994 and 1993 the Company generated cash flows from
operations of $31,343, $6,018 and $18,955, respectively. The
increase in net cash provided by operations was primarily due to
the increase in operating income and the increase in deferred
revenue, net of the accounts receivable increase.
The Company used $6,477, $20,053 and $19,699 during 1995, 1994
and 1993 for investing activities. The reduction in investing
activities from 1994 to 1995 was primarily due to reduction in
investments as defined in SFAS No. 115 "Accounting for Certain
Investments in Debt and Equity Securities." The investment
balances were converted into cash and cash equivalents. The
acquisition of the remaining minority interest in SDRC GmbH also
resulted in a net increase in cash and cash equivalents of
$1,152. Net cash used in investing activities in each of the
years also includes the additions to computer software
construction costs and property and equipment.
Net cash provided by financing activities was $12,646, $1,108 and
$3,906 during 1995, 1994 and 1993, respectively, representing
proceeds from the Company's stock option programs.
The Company's sources of liquidity and funds anticipated to be
generated from operations are expected to be adequate for the
Company's cash requirements in the foreseeable future. The
Company paid no dividends during the period 1993 through 1995 and
intends to continue its policy of retaining earnings to finance
future growth. The Company has no current commitments for
material capital expenditures. See Note 10 to the consolidated
financial statements for additional commitments and
contingencies. The Company does not expect inflation to have a
material impact on its future operations.
The Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of," which is required to be adopted
by 1996. The implementation of this Statement will not have a
material impact on the Company's financial statements.
The provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation" will be effective for the Company in 1996. This
recent standard requires that stock-based compensation either
continue to be determined under Accounting Principles Board
Opinion (APB) No. 25 "Accounting for Stock Issued to Employees"
or in accordance with the provisions of SFAS No. 123 whereby
compensation expense is recognized based on the fair value of
stock-based awards on the grant date. The Company currently
expects to continue to account for such awards under the
provisions of APB No. 25. Although SFAS No. 123 will require
additional disclosures beginning in 1996, management believes the
impact of SFAS No. 123 will not be material to the Company's
financial statements.
[PRICE WATERHOUSE LLP]
Report of Independent Accountants
To the Board of Directors
and Shareholders of
Structural Dynamics Research Corporation
In our opinion, the accompanying consolidated balance sheet and
the related consolidated statements of operations, of cash flows
and of shareholders' equity present fairly, in all material
respects, the financial position of Structural Dynamics Research
Corporation and its subsidiaries at December 31, 1995 and 1994,
and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 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,
in 1994 the Company changed its method of accounting for
postemployment benefits.
Price Waterhouse LLP
Cincinnati, Ohio
January 30, 1996
<TABLE>
CONSOLIDATED STATEMENT OF OPERATIONS
Structural Dynamics Research Corporation
<CAPTION>
Year ended December 31
(in thousands,
except per share data) 1995 1994 1993
<S> <C> <C> <C>
Revenue:
Software licenses $117,573 $103,317 $ 86,754
Software maintenance
and services 86,511 64,230 60,851
Net revenue 204,084 167,547 147,605
Cost of revenue 63,073 48,785 46,937
Gross profit 141,011 118,762 100,668
Operating expenses:
Selling and marketing 87,049 89,628 80,906
Research and development 20,496 20,715 17,526
General and administrative 11,263 10,379 9,455
Total operating expenses 118,808 120,722 107,887
Operating income (loss) 22,203 (1,960) (7,219)
Equity in losses of
affiliates (951) (5,329) (614)
Litigation settlement (24,300) -- --
Other income, net 1,131 2,121 477
Loss before income taxes and
cumulative effect of
accounting change (1,917) (5,168) (7,356)
Income tax expense 6,550 3,833 4,376
Loss before cumulative
effect of accounting change (8,467) (9,001) (11,732)
Cumulative effect of
accounting change -- (3,896) --
Net loss $ (8,467) $(12,897) $(11,732)
Loss per share:
Before cumulative effect
of accounting change $ (.28) $ (.31) $ (.39)
Cumulative effect of
accounting change -- (.14) --
Net loss per share $ (.28) $ (.45) $ (.39)
Weighted average common
shares outstanding 29,921 28,844 29,876
</TABLE>
See accompanying notes to consolidated financial statements.
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEET
Structural Dynamics Research Corporation
<CAPTION>
December 31
(in thousands) 1995 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 59,397 $ 21,885
Short-term investments 14,305 17,296
Trade accounts receivable, net 53,897 35,867
Other accounts receivable 10,164 6,760
Prepaid expenses and other current
assets 5,882 6,110
Total current assets 143,645 87,918
Long-term investments 4,465 7,059
Property and equipment, at cost:
Computer and other equipment 34,678 36,259
Office furniture and equipment 10,064 9,258
Leasehold improvements 4,058 3,799
48,800 49,316
Less accumulated depreciation and
amortization 36,604 35,537
Net property and equipment 12,196 13,779
Computer software construction
costs, net 30,568 30,854
Other assets 2,648 3,089
Total assets $193,522 $142,699
See accompanying notes to consolidated financial statements.
December 31
(in thousands, except per share data) 1995 1994
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 9,938 $ 6,857
Accrued expenses 31,411 29,495
Accrued litigation settlement and
related costs 28,600 --
Accrued income taxes 6,396 4,262
Deferred revenue 31,605 19,714
Total current liabilities 107,950 60,328
Long-term liabilities 8,163 4,336
Cumulative share of losses in
affiliate, net -- 5,883
Commitments and contingencies
(Note 10)
Shareholders' equity:
Common stock, stated value $.0069
per share Authorized 100,000 shares;
outstanding shares - 30,617 and
28,897 net of 1,510 and 1,652 shares
in treasury 213 201
Capital in excess of stated value 59,116 46,482
Retained earnings 18,261 26,728
Foreign currency translation
adjustment -- (590)
Unrealized holding loss on
investments (181) (669)
Total shareholders' equity 77,409 72,152
Total liabilities and
shareholders' equity $ 193,522 $ 142,699
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Structural Dynamics Research Corporation
<CAPTION>
Foreign Unrealized Total
Common stock Capital in currency holding share-
outstanding excess of Retained translation loss on holders'
(in thousands) Shares Stated value stated value earnings adjustment investments equity
<S> <C> <C> <C> <C> <C> <C> <C>
December 31,1992 28,136 $195 $41,474 $51,357 $(579) $ -- $92,447
Transactions
involving
employee
stock plans 582 4 4,067 4,071
Purchases of
treasury stock (9) (165) (165)
Net loss (11,732) (11,732)
Foreign currency
translation
adjustment (40) (40)
December 31,1993 28,709 199 45,376 39,625 (619) -- (84,581)
Transactions
involving
employee stock
plans 228 2 1,463 1,465
Purchases of
treasury stock (40) (357) (357)
Net loss (12,897) (12,897)
Foreign currency
translation
adjustment 29 29
Unrealized
holding
loss on
investments (669) (669)
December 31,1994 28,897 201 46,482 26,728 (590) (669) 72,152
Transactions
involving
employee stock
plans 1,832 13 14,521 14,534
Purchases of
treasury stock (112) (1) (1,887) (1,888)
Net loss (8,467) (8,467)
Foreign currency
translation 590 590
adjustment
Unrealized
holding
gain on
investments 488 488
December 31, 1995 30,617 $ 213 $59,116 $18,261 $ -- $ (181) $77,409
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Structural Dynamics Research Corporation
<CAPTION>
Year ended December 31
(in thousands) 1995 1994 1993
<S> <C> <C> <C>
Cash flows from operating activities:
Net loss $(8,467) $(12,897) $(11,732)
Adjustments to reconcile net loss to
net cash provided by operating
activities:
Depreciation and amortization 6,464 7,166 7,014
Amortization of computer software
construction costs 8,475 7,137 9,539
Equity in losses of affiliates 951 5,329 614
Postemployment benefits accounting
change -- 3,896 --
Litigation settlement 24,300 -- --
Loss on sale of UK test and analysis
division 1,878 -- --
Other (259) (36) (42)
Changes in assets and liabilities,
net of SDRC GmbH acquisition:
(Increase) decrease in accounts
receivable, net (9,472) (16,158) 8,468
(Increase) decrease in prepaid
expenses 429 (966) (717)
(Increase) decrease in other
assets 11 (261) (474)
Increase (decrease) in accounts
payable and accrued expenses (3,830) 5,141 6,433
Increase (decrease) in accrued
income taxes 2,134 (1,109) 13
Increase (decrease) in deferred
revenue 9,990 6,654 (141)
Increase (decrease) in long-term
liabilities (1,261) 2,122 (20)
Net cash provided by operating
activities 31,343 6,018 18,955
Cash flows from investing activities:
Purchases of investments (30,587) (32,007) (39,811)
Proceeds from sales of investments 36,660 28,250 39,296
Additions to property and equipment, net (3,844) (4,939) (6,106)
Proceeds from sale of UK test and
analysis division 524 -- --
Additions to computer software
construction costs (8,189) (9,534) (11,578)
Acquisition of minority interest in
SDRC GmbH, net of cash received 1,152 -- --
Investment in and advances to joint
ventures (2,193) (1,823) (1,500)
Net cash used in investing activities (6,477) (20,053) (19,699)
Cash flows from financing activities:
Stock issued under employee benefit plans 14,534 1,465 4,071
Purchases of treasury stock (1,888) (357) (165)
Net cash provided by financing
activities 12,646 1,108 3,906
Effect of exchange rate changes on cash -- 29 (40)
Increase (decrease) in cash and cash
equivalents 37,512 (12,898) 3,122
Cash and cash equivalents:
Beginning of period 21,885 34,783 31,661
End of period $59,397 $21,885 $34,783
Cash paid during the year for income taxes $ 5,901 $ 3,528 $ 4,450
See accompanying notes to consolidated financial statements.
/TABLE
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Structural Dynamics Research Corporation
(in thousands, except per share data)
(1) Summary of Significant Accounting Policies
(a) Basis of Consolidation
The consolidated financial statements include the accounts of the
Company and its wholly owned subsidiaries. Investments in which
the Company has significant influence, but not control, are
accounted for under the equity method. All significant
intercompany balances and transactions have been eliminated.
(b) Revenue Recognition
The use of software programs is licensed through the Company's
direct sales force and by specific arrangements with certain
distributors, value-added resellers and other marketing
representatives. Revenue generated from licenses is recognized
when the following criteria have been met: (a) a written order
for the unconditional license of software has been received, (b)
the Company has delivered the products and performed
substantially all services for which it was committed, (c) the
customer is obligated to pay and (d) collectibility is probable.
Under the terms of a former licensing agreement with an OEM
customer, the Company was unable to determine the amount of
revenue earned until cash was received from the customer.
Amounts recorded as revenue on the cash basis were $5,877 and
$7,877 in 1994 and 1993, respectively. This licensing agreement
was terminated by the Company in 1994.
Maintenance revenue is recognized ratably over the term of the
agreement and represents the substantial component of deferred
revenue. Training revenue is recognized as the services are
performed.
(c) Per Share Data
Income (loss) per common and common equivalent share is computed
using the weighted average number of common and dilutive common
equivalent shares outstanding during the period. Dilutive common
equivalent shares consist of stock option grants using the
treasury stock method.
(d) Cash and Cash Equivalents
The Company considers investments in interest bearing accounts,
certificates of deposit, commercial paper and reverse repurchase
agreements with original maturities of less than 90 days to be
cash equivalents.
The Company also has an unsecured bank line of credit of $15,000.
(e) Investments
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" which requires
the Company to distinguish between those securities held for sale
and those for which the ability and intent to hold to maturity
exists. Unrealized gains and losses on assets held for sale are
included in a separate component of equity. The effect of
adopting SFAS No. 115 was not material.
The Company invests in government agency obligations which are
available-for-sale and are recorded at market value. The Company
also invests in certificates of deposit which are held-to-
maturity and are recorded at amortized cost which approximates
market value. Realized and unrealized gains and losses are
determined based on the specific identification method.
(f) Property and Equipment
Depreciation is primarily computed on the straight-line method.
Leasehold improvements are amortized on the straight-line method
over the lesser of the life of the lease or the estimated useful
life of the improvement. The general ranges of years used in
calculating depreciation and amortization are: computer and other
equipment, 2-5 years; office furniture and equipment, 7
years; leasehold improvements, 1-10 years.
The Financial Accounting Standards Board issued SFAS No. 121,
"Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to be Disposed of," which is required to be adopted
by 1996. The implementation of this Statement will not have a
material impact on the Company's financial statements.
(g) Computer Software Construction Costs
The Company designs, develops and markets computer software
products. Costs related to the construction of software that are
incurred after the technological feasibility of the product has
been demonstrated are capitalized and are amortized over the
useful lives of such software, which are estimated to be no more
than five years. Computer software construction costs are shown
net of accumulated amortization of $20,048 and $11,573 at
December 31, 1995 and 1994, respectively. As of December 31,
1995 and 1994, computer software construction costs, net, include
only those costs related to current software products.
Amortization is calculated on a product by product basis and is
the greater of the amount computed using (a) the ratio that
current gross revenue bears to the total of current and
anticipated future years' revenue, or (b) the straight-line
method over the remaining estimated economic lives of the
software products. The Company included in amortization expense
approximately $3,311 for the year ended December 31, 1993 related
to software construction costs determined to be non-recoverable.
(h) Foreign Currency Translation and Hedging Contracts
For foreign software operations, the U.S. dollar is the
functional currency and foreign currency gains and losses, which
are not material, are included in determining net income. Prior
to the sale of the UK test and analysis division in 1995, the
functional currency was the division's local currency and its
assets and liabilities were translated at period-end exchange
rates. Revenue, expenses, gains and losses were translated at a
weighted average rate of exchange. Translation gains and losses
were not included in determining net income but were
accumulated in a separate component of shareholders' equity.
With the sale of the UK test and analysis division, the
accumulated foreign currency translation loss of $590 was
realized and included in the determination of income for 1995.
In 1993 the Company began hedging certain portions of its
exposure to foreign currency fluctuations, primarily the
financial instruments of the Company's European subsidiaries, by
utilizing forward foreign exchange contracts. At December 31,
1995, the Company had contracts to exchange foreign currencies
totaling $6,250 which matured in January 1996. Gains and losses
associated with these financial instruments are recorded
currently in income to offset the foreign exchange gains and
losses on the assets and liabilities being hedged. The interest
element of the foreign currency instruments is recognized over
the life of the contract. Should the counterparty to these
contracts fail to meet its obligations, the Company would be
exposed to foreign currency fluctuations, along with the cost, if
any, to extinguish the contracts.
(i) Income Taxes
In accordance with SFAS No. 109, "Accounting for Income Taxes",
deferred tax assets and liabilities are recognized for the future
tax consequences attributable to differences between the
financial statement carrying amounts of assets and liabilities
and their respective tax bases. Based on the Company's
historical tax position and estimates of taxable income for the
next four years, a valuation allowance is provided against
deferred tax assets when the Company believes it is more likely
than not that the deferred tax assets will not be realized.
The Company does not accrue Federal income taxes on undistributed
earnings of its foreign subsidiaries that (1) have been, or are
intended to be, permanently reinvested or (2) if remitted, would
not have material income tax consequences. Undistributed earnings
amounted to approximately $4,331 at December 31, 1995.
(j) Concentration of Credit Risk
The Company's revenue is generated from customers in diversified
industries, primarily in North America, Europe and Asia-Pacific.
The Company generated revenue from a significant customer
aggregating 14%, 11% and 11% in 1995, 1994 and 1993,
respectively. The Company performs ongoing credit evaluations of
its customers and generally does not require collateral. The
Company maintains allowances for potential credit losses which
management believes to be adequate in the circumstances.
The Company invests its excess cash with major financial
institutions with strong credit ratings and, by policy, limits
the amount of credit exposure in any one such institution.
(k) Use of Estimates
The financial statements, which are prepared in conformity with
generally accepted accounting principles, require management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the period.
Actual results could differ from those estimates. In particular,
management has utilized estimates based on the facts and
circumstances existing at the date of the financial statements
which are sensitive to change in the near term. The significant
estimates include the estimated useful lives of computer software
construction costs, the likelihood of realization of the deferred
tax assets and litigation exposures.
(l) Fair Value of Financial Instruments
The carrying amounts of cash and cash equivalents, investments,
accounts receivable, accounts payable, accrued expenses and
forward foreign exchange contracts approximate fair value.
(m) Postemployment Benefits
As of January 1, 1994, the Company adopted the provisions of SFAS
No. 112, "Employers' Accounting for Postemployment Benefits."
This statement requires that entities providing postemployment
benefits to their employees accrue the cost of benefits, if
attributable to employees' service already rendered. The Company
provides severance benefits for involuntarily terminated
employees. The cumulative effect of adopting SFAS No. 112
reduced income by $3,896, net of zero tax benefit, in the first
quarter of 1994.
(n) Stock-Based Compensation
The provisions of SFAS No. 123 "Accounting for Stock-Based
Compensation" will be effective for the Company in 1996. This
recent standard requires that stock-based compensation either
continue to be determined under Accounting Principles Board
Opinion (APB) No. 25 "Accounting for Stock Issued to Employees"
or in accordance with the provisions of SFAS No. 123 whereby
compensation expense is recognized based on the fair value of
stock-based awards on the grant date. The Company currently
expects to continue to account for such awards under the
provisions of APB No. 25. Although SFAS No. 123 will require
additional disclosures beginning in 1996, management believes the
impact of SFAS No. 123 will not be material to the Company's
financial statements.
(o) Reclassifications
Certain amounts have been reclassified in the 1993 and 1994
financial statements to conform with the current year
presentation. During 1995, the Company re-evaluated
classifications of certain expense categories and, based on its
current organizational structure, determined that certain
operating expenses were more appropriately classified as cost of
revenue. The Company has reflected the reclassifications in all
periods presented.
(2) Acquisition of CAMAX Manufacturing Technologies, Inc.
On January 16, 1996, the Company entered into a definitive
agreement to acquire CAMAX Manufacturing Technologies, Inc. (CAMAX)
and its wholly owned subsidiaries. CAMAX provides computer-aided
manufacturing (CAM) software for computerized-numerical-control
machining operations, with products and services designed to
simplify, automate and optimize the machining process to streamline
production and accelerate time-to-market.
SDRC will issue common stock having a market value of $30,000 in
exchange for 100 percent ownership of CAMAX common stock. The
total number of SDRC shares of common stock to be issued will be
determined based on the market price for a twenty-day period
preceding the close of the transaction.
The acquisition is expected to be accounted for under the pooling
of interests method. Completion of the transaction is subject to
receipt of customary governmental approvals and CAMAX shareholders'
approval.
Condensed combined proforma data (unaudited) is based on the
respective consolidated historical financial statements of SDRC and
CAMAX adjusted to give effect to the transaction as though it had
occurred as of January 1, 1993.
<TABLE>
<CAPTION>
Year ended
December 31
Condensed combined proforma data
(unaudited) is as follows: 1994 1993
<S> <C> <C>
Net revenue $185,358 $165,893
Loss before income taxes and
cumulative effect
of accounting changes (7,696) (7,050)
Loss before cumulative effect of
accounting changes (11,577) (11,365)
Net loss (15,473) (11,365)
Loss per share:
Before cumulative effect of
accounting changes (.39) (.37)
Net loss $ (.52) $ (.37)
</TABLE>
SDRC's assets, long-term liabilities and shareholders' equity were
$166,277, $6,272 and $90,441, respectively, at September 30, 1995.
Condensed combined proforma data as of September 30, 1995 includes
assets of $175,801, long-term liabilities of $7,219 and
shareholders' equity of $93,239. CAMAX data as of December 31,
1995 was not yet available.
(3) Supplemental Consolidated Balance Sheet Data
December 31
Trade accounts receivable, net, consists of: 1995 1994
Trade accounts receivable $56,217 $38,774
Allowance for doubtful accounts and
reserve for returns and allowances (2,320) (2,907)
$53,897 $35,867
December 31, December 31,
1995 1994
Fair Amortized Fair Amortized
Investments consists of: Value Cost Value Cost
Short term:
Available-for-sale U.S.
government agency
obligations $11,230 $11,239 $10,548 $10,741
Held-to-maturity
certificates of deposit 3,075 3,075 6,748 6,748
$14,305 $14,314 $17,296 $17,489
Long-term:
Available-for-sale U.S.
government agency
obligations $ 4,465 $ 4,637 $ 7,059 $ 7,535
Available-for-sale investments have maturities of $11,230 in
1996, $3,547 in 1997 and $918 in 2013.
December 31
Accrued expenses consists of: 1995 1994
Accrued compensation $18,399 $13,171
Accrued royalties 5,009 3,020
Accrued taxes other than income
taxes 2,310 1,776
Accrued marketing costs 88 2,715
Other 5,605 8,813
$31,411 $29,495
(4) Leases
Future minimum lease payments under noncancelable operating leases
for
the five years ending December 31, 2000 approximate $10,193,
$7,488,
$4,951, $3,346 and $2,673, respectively, and $33,802
thereafter.
Total rental expenses under operating leases for the years
ended
December 31, 1995, 1994 and 1993 were $13,730, $13,042 and
$10,673,
respectively.
(5) Income Taxes
Pre-tax accounting income(loss) is as follows:
Year ended December 31,
1995 1994 1993
Domestic $ (7,774) $ (4,900) $ (5,620)
Foreign 5,857 ( 268) (1,736)
----------------------------------
$ (1,917) $ (5,168) $ (7,356)
Year ended December 31
The provision for income taxes
consists of the following: 1995 1994 1993
Federal:
Current $ -- $(1,754) $ --
Deferred -- -- --
-- (1,754) --
State 257 411 500
Foreign:
Income taxes 2,209 1,113 444
Withholding taxes 4,084 4,063 3,432
$6,550 $ 3,833 $4,376
Deferred state and foreign taxes are not material.
The provision for income taxes differs
from the amounts computed by using the
statutory U.S. Federal income tax rate.
The reasons for the differences are Year ended December 31
as follows: 1995 1994 1993
Computed expected income tax benefit $ (671) $(1,809) $(2,575)
Increase (reduction) resulting
from:
Foreign taxes, without current
benefit 6,293 5,176 3,876
U.S. losses without tax benefit 671 1,809 2,575
Receipt of research and
experimentation tax credit
refund not previously recorded -- (1,754) --
State taxes, net of federal
benefit 257 411 500
$6,550 $ 3,833 $ 4,376
(5) Income Taxes - continued
The tax effects of temporary differences
that give rise to the deferred tax assets December 31
and deferred tax liabilities are as follows: 1995 1994
Deferred tax assets:
Revenue recognition and accounts
receivable $ 971 $ 730
Property and equipment 802 1,028
Accrued lawsuit settlement 8,260 --
Other liabilities and reserves 5,882 2,926
Tax credit and net operating loss
carryforwards 16,023 24,412
Other 1,375 792
Total deferred tax assets 33,313 29,888
Valuation allowance (31,995) (19,537)
Net deferred tax assets 1,318 10,351
Deferred tax liabilities:
Computer software construction costs
and capitalized research expenses,
net of amortization (1,318) (10,351)
Total net deferred taxes $ -- $ --
Of the $16,023 in tax credit carryforwards available at December
31, 1995, $11,980 of foreign tax credits expire in the years 1996
through 1999, $2,792 of research and experimentation credits
expire in the years 2006 through 2010, and $1,251 of alternative
minimum taxes never expire.
The net change in the valuation allowance for deferred tax assets
was an increase of $12,458 in 1995 and $4,909 in 1994. Of the
$31,995 in valuation allowance at December 31, 1995, $11,070 is
attributable to the tax benefit of stock option exercises. Such
benefits will be credited to capital in excess of stated value
when realized.
(6) Joint Venture Investments
In 1992 the Company and Control Data Systems, Inc. established a
joint venture company, Metaphase Technology, Inc. (Metaphase), to
develop and market product data management software worldwide.
The Company initially owned a 30% interest in Metaphase and
increased such interest to 50% during 1993. The Company's
investment in the joint venture is accounted for on the equity
basis.
In March 1994, the Company formed a joint venture with Siemens
Nixdorf Informationssysteme AG (SNI). The Company and SNI
contributed certain assets to the venture, SDRC Software and
Services GmbH (SDRC GmbH), along with the rights to certain
software products owned by SNI and made loans to the venture.
Although the Company received a 50.1% interest in the venture, it
did not exercise sufficient control to account for SDRC GmbH as a
consolidated subsidiary.
(6) Joint Venture Investments - continued
In 1995, the Company purchased the remaining 49.9% interest of
SDRC GmbH. The acquisition was accounted for using the purchase
method. Accordingly, the purchase price of $175 was allocated to
assets acquired and liabilities assumed based on their fair
value. As of the acquisition date, 100% of the operating results
of SDRC GmbH are included in the consolidated financial
statements. Proforma results of the purchase are not presented
as the amounts are not material when considered in conjunction
with the consolidated financial statements.
Financial data for the years ended December 31, 1995 and 1993 for
Metaphase and for the year ended December 31, 1994 for Metaphase
and SDRC GmbH is presented below:
Year ended and as of December 31
1995 1994 1993
Current assets $ 3,304 $ 5,905 $ 764
Non-current assets 4,766 4,426 2,185
Current liabilities 8,901 8,564 1,075
Non-current liabilities 3,470 6,760 4,670
Net revenue 11,295 14,379 3,412
Loss before income taxes (405) (10,483) (1,756)
Net loss $ (417) $(10,502) $(1,756)
In 1989, the Company and Nissan Motor Co., Ltd.establised a Japanese
joint venture company, ESTECH Corporation ("ESTECH") to provide
engineering services in Japan and the Far East. The impact of the
ESTECH
results were not material to the Company's results of operations.
(7) Other Income, Net
Year ended December 31
Other income, net consists of: 1995 1994 1993
Interest income $ 3,480 $2,243 $ 1,642
Loss on sale of UK test and
analysis division (1,878) -- --
Other, primarily foreign
currency losses (471) (122) (1,165)
$ 1,131 $2,121 $ 477
In July 1995, SDRC sold its test and analysis division located in
the United Kingdom to MascoTech Engineering Europe Limited
(MascoTech UK) for net proceeds of $524 and realized a loss on
the sale of $1,878. The loss includes foreign currency losses
and estimated costs pertaining to a lease commitment.
(8) Shareholders' Rights Plan
In 1988 the Board of Directors adopted a Shareholders' Rights
Plan to protect shareholders' interests in the event of an
unsolicited attempt to gain control of the Company. The Rights
become exercisable if a person acquires 20% or more of the
Company's outstanding common stock (Common Stock) or announces a
tender offer which would result in a person or group acquiring
20% or more of the Common Stock (Distribution Date). If, at any
time following the Distribution Date, and the Company has not
redeemed the Rights, the Company becomes the surviving
corporation in a merger or a person becomes the beneficial owner
of 20% or more of the Common Stock (Triggering Date), each holder
of a Right will have the right to purchase shares of Common Stock
having a value equal to two times the Right's exercise price of
$110. If, at any time following the Triggering Date, the Company
is acquired in a merger or other business combination transaction
in which the Company is not the surviving corporation, each
holder of a Right shall have the right to purchase shares of
Common Stock of the acquiring company having a value equal to two
times the exercise price of the Right. The Rights expire on
August 10, 1998, and may be redeemed by the Company for $.0025
per Right.
(9) Common Stock and Employee Benefit Plans
In 1991 the shareholders adopted the 1991 Employee Stock Option
Plan. Under the 1991 plan, the Company has reserved 5,300 shares
of previously unissued common stock. Options to purchase such
shares may be granted to key employees and executive officers at
the fair market value at the date of grant.
In 1991 the shareholders also adopted the Director's
Non-Discretionary Stock Option Plan which converted the Amended
and Restated 1986 Stock Option Plan into a non-discretionary plan
allowing future grants to outside directors at the fair market
value at the date of grant. Under the original 1986 plan, the
Company had reserved 7,000 shares of previously unissued common
stock. The status of all outstanding options previously granted
to employees remained unchanged.
In 1994 the shareholders adopted the 1994 Long-Term Stock
Incentive Plan, allowing stock incentives including stock
options, stock appreciation rights, stock awards, and
combinations thereof, to be granted to employees. The number of
shares with respect to which stock incentives may be granted in
one calendar year shall not exceed 4% of the Company's issued and
outstanding common stock. No stock incentives other than non-
qualified stock options have been granted under the 1994 plan.
Under the plans, employee options expire ten years from the date
of grant and are exercisable as follows: 33% on the first
anniversary of the grant date; an additional 34% on the second
anniversary; and all or any remaining options on the third
anniversary until expiration. Director options expire five years
from the date of grant and are exercisable 50% upon expiration of
six months from the grant date and all or any remaining options
on the first anniversary of the grant date until expiration. As
of December 31, 1995 there were approximately 3,200 shares on
which options were exercisable.
Transactions with respect to the Company's stock options
for the years ended December 31, 1993, 1994 and 1995
are as follows:
Option Price
Shares Per Share
Shares under option December 31, 1992 6,386 $ 1.25-28.75
Granted 1,627 $13.06-20.18
Exercised 439 $ 1.25-16.25
Cancelled 164 $ 9.88-28.75
Shares under option December 31, 1993 7,410 $ 1.38-28.75
Granted 1,357 $ 4.31-15.94
Exercised 154 $ 1.38-15.94
Cancelled 1,368 $ 1.81-28.75
Shares under option December 31, 1994 7,245 $ 1.38-28.75
Granted 1,022 $ 5.63-23.38
Exercised 1,510 $ 1.38-24.44
Cancelled 1,917 $ 4.50-28.75
Shares under option December 31, 1995 4,840 $ 1.38-28.75
(9) Common Stock and Employee Benefit Plans - continued
In 1990 the Company's Board of Directors established a Stock
Purchase Plan. Under the plan all domestic full-time employees
who are non-executive officers are entitled to purchase the
Company's common stock at 90% of fair market value. Employees
electing to participate must contribute at least one percent with
a maximum of ten percent of the participants' base salary and
commissions each month. All incidental expenses related to the
issuance of these shares including the 10% discount have been
charged to income. The plan has no fixed expiration date, may be
terminated by the Company at any time and has no limitation on
the number of shares that may be issued.
The Company provides retirement benefits to substantially all
employees principally through defined contribution retirement
plans. The Company's contributions to these plans are primarily
based on employee compensation and years of service. Expenses related to
these plans totaled $2,982, $2,091 and $943 in 1995, 1994
and 1993, respectively.
(10) Commitments and Contingencies
Except for the following matters, SDRC is not a party to any
litigation other than ordinary routine litigation incidental to
its business. Beginning in September 1994 a total of 12 class
action lawsuits alleging various violations of the federal
securities laws and two derivative lawsuits alleging breaches of
Ohio corporate law were filed against SDRC following SDRC's
public disclosure of certain accounting irregularities. All of
the complaints sought unspecified damages. The class action
cases were consolidated into one case (the "Class Action Case")
filed in the United States District Court, Southern District of
Ohio. Subsequently, the two derivative cases were consolidated
into one case (the "Derivative Case") filed in the United States
District Court, Southern District of Ohio.
The Class Action Case represents a direct claim against SDRC by
certain named plaintiffs acting on behalf of a class of
plaintiffs consisting of certain purchasers of SDRC's common
stock between February 3, 1992 and September 14, 1994. In
December 1995, SDRC and plaintiffs' counsel in the Class Action
Case entered into a Memorandum of Understanding setting forth the
terms of a proposed settlement of this case. Pursuant to the
proposed settlement, SDRC will establish a settlement fund of
$27,600 consisting of $17,600 cash and $10,000 in the form of
shares of SDRC's common stock (to be valued based on market
prices at the time of distribution). The anticipated cost of
the settlement, net of estimated insurance proceeds, was recorded
as a 1995 expense. The settlement is subject to final approval
of the District Court which has not yet been obtained.
The Derivative Case remains pending. The legal theory of
derivative litigation is that the named plaintiffs, who are
shareholders of the corporation, are pursuing claims on behalf of
the corporation against third parties whose actions have injured
the corporation but against whom the corporation has refused to
take independent action. In such litigation the corporation is
considered a "nominal" defendant. In the Derivative Case, SDRC is
therefore a "nominal" defendant. The "real" defendants consist
of various former officers and employees of SDRC and certain of
its directors. Since the plaintiffs are theoretically acting on
behalf of SDRC, any recovery in this matter would be for the
benefit of SDRC. However, SDRC could nevertheless face exposure
to liability through the legal obligation, which could be
applicable under certain circumstances, to indemnify and hold
harmless certain of the defendants against whom a judgment might
be rendered. Although there can be no assurance as to the
ultimate outcome of this matter, management does not believe it
will have a material impact on the Company's financial position.
Based on the same facts which gave rise to the Class Action Case
and the Derivative Case, the Securities and Exchange Commission
commenced a formal, private investigation of SDRC in September
1994 which remains pending. SDRC is fully cooperating with this
investigation but cannot predict its outcome.
(10) Commitments and Contingencies - continued
Pursuant to certain contractual obligations, the Company has
agreed to indemnify its directors and officers under certain
circumstances against claims arising from lawsuits. The Company
may be obligated to indemnify certain of its directors and
officers for the costs they may incur as a result of the
lawsuits.
(11) Segment and Geographic Information
In 1995, the Company reevaluated its industry segment reporting
because of an internal reorganization and the sale of the
Company's UK test and analysis division (see Note 7). The
Company determined that it operates in a single industry segment
providing mechanical design automation software and related
services to manufacturers for the design, analysis, testing and
manufacturing of mechanical products. SDRC also supplies product
data management systems providing a comprehensive approach to the
management and control of engineering information.
Financial data by geographic area
is as follows: Operating Identifiable
Revenue Income (Loss) Assets
Year ended December 31, 1995
North America $89,866 $10,112 $66,278
Europe 57,430 7,554 38,027
Asia-Pacific 56,788 13,654 13,843
Corporate -- (9,117) 75,374
Consolidated $204,084 $22,203 $193,522
Year ended December 31, 1994
North America $ 71,805 $ 5,615 $ 59,168
Europe 46,027 (477) 26,102
Asia-Pacific 49,715 1,079 6,196
Corporate -- (8,177) 51,233
Consolidated $167,547 $(1,960) $142,699
Year ended December 31, 1993
North America $ 57,760 $ 1,407 $ 41,821
Europe 47,497 (6,977) 30,352
Asia-Pacific 42,348 4,209 4,204
Corporate -- (5,858) 58,172
Consolidated $147,605 $(7,219) $134,549
(12) Quarterly Results of Operations (Unaudited)
The following table sets forth selected unaudited quarterly financial
information for 1995 and 1994. The Company believes that all
necessary adjustments have been included to present fairly the
selected quarterly information.
<TABLE>
<CAPTION>
Three months ended Year ended
March 31, June 30, September 30, December 31, December 31,
1995 1995 1995 1995 1995
<S> <C> <C> <C> <C> <C>
Revenue $43,812 46,777 50,694 62,801 $204,084
Gross profit $30,790 31,853 33,325 45,043 $141,011
Income(loss) before
cumulative effect
of accounting
change $ 267 3,055 5,796 (17,585) $(8,467)
Net Income(loss) $ 267 3,055 5,796 (17,585) $(8,467)
Earnings(loss) per
share $ .01 .10 .18 (.58) $ (.31)*
Three months ended Year ended
March 31, June 30, September 30, December 31, December 31,
1994 1994 1994 1994 1994
Revenue $36,795 42,709 42,500 45,543 $167,547
Gross profit $26,399 30,671 28,487 33,205 $118,762
Income(loss) before
cumulative effect
of accounting
change $(4,314) 1,592 8 (6,287) $ (9,001)
Net income(loss) $(8,210) 1,592 8 (6,287) $(12,897)
Earnings(loss) per
share $ (.27) .05 -- (.22) $ (.45)*
* Per share amounts are not additive.
</TABLE>
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
Prospectus constituting part of this Registration Statement on Form
S-4 of Structural Dynamics Research Corporation (SDRC) of our report
dated January 30, 1996, which appears in SDRC's 1995 Annual Report
on Form 10-K for the year ended December 31, 1995. We also consent
to the incorporation by reference of our report on the Financial
Statement Schedule, which appears in such Annual Report on Form 10-K. We also
consent to the references to us under the headings
"Experts", "Summary of Selected Consolidated Financial Data" and
"Selected Historical and Proforma Consolidated Financial Data" in
such Prospectus. However, it should be noted that Price Waterhouse
LLP has not prepared or certified such "Summary of Selected
Consolidated Financial Data" and "Selected Historical and Proforma
Consolidated Financial Data."
/s/ Price Waterhouse LLP
Price Waterhouse LLP
Cincinnati, Ohio
March 29, 1996
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Amendment No. 1 to Registration
Statement No. 333-009097 of Structural Dynamics Research Corporation
on Form S-4 of the report dated March 12, 1996 (which report
expresses an unqualified opinion and includes an explanatory
paragraph referring to a change in the method of accounting for
income taxes by adopting the provisions of the Financial Accounting
Standards Board's Statement of Financial Accounting Standard No.
109, Accounting for Income Taxes, in 1993), relating to the
consolidated financial statements of CAMAX Manufacturing
Technologies, Inc. as of December 31, 1994 and 1995 and for each of
the three years in the period ended December 31, 1995 appearing in
the Joint Proxy Statement/Prospectus which is part of this
Registration Statement.
We also consent to the reference to us under the headings "Selected
Financial Data" and "Experts" in such Joint Proxy
Statement/Prospectus.
/s/ Deloitte & Touche
Minneapolis Minnesota
March 29, 1996
Ex. 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this Registration Statement of
Structural Dynamics Research Corporation on Form S-4 of our report
dated February 10, 1994 on our audits of the financial statements of
Point Control Co. and subsidiaries for the year ended December 31,
1993 (not presented separately herein), which report appears in the
Joint Proxy Statement/Prospectus, which is part of the Registration
Statement. We also consent to the reference to our firm under the
caption "Experts."
/s/ Coopers & Lybrand
Coopers & Lybrand L.L.P.
Eugene, Oregon
March 28, 1996
<PAGE>
Exhibit 23.4
Consent of Wessels, Arnold & Henderson, L.L.C.
March 29, 1996
CAMAX Manufacturing Technologies, Inc.
7851 Metro Parkway
Minneapolis, MN 55425
Ladies and Gentlemen:
We hereby consent to the use in this Registration Statement on Form
S-4 of Structural Dynamics Research Corporation of our letter to the
Board of Directors of CAMAX Manufacturing Technologies, Inc.
included as Annex B to the Proxy Statement/Prospectus that is a part
of this Registration Statement, and to the references to such letter
and to our firm in such Proxy Statement/Prospectus. In giving such
consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities
Act of 1933, or the rules and regulations of the Securities and
Exchange Commission thereunder (as amended, the "Securities Act")
nor do we admit that we are experts with respect to any part of such
Registration Statement within the meaning of the term "experts" as
used in the Securities Act.
Very truly yours,
WESSELS, ARNOLD & HENDERSON, L.L.C.
By: /s/ Michael P. Ogborne
Michael P. Ogborne
