As filed with the Securities and Exchange Commission
On February 13, 1996
Registration No. _____________
_________________________________________________________________
_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM S-4
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, P.L.L.P.
1900 Chemed Center Pillsbury Center South
255 East Fifth Street 220 South Sixth Street
Cincinnati, Ohio 45202 Minneapolis, Minnesota 55402
Approximate date of commencement of proposed sale of the securities to the
public:
As soon as practicable after this Registration Statement becomes effective.
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.
</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
_________, March __, 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.
March __, 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 March ___, 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 March __, 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.
March __, 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
_________________, 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 to be issued in connection
with the proposed Merger (as defined herein).
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, no par value ("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.
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.
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, 1994;
(b) Pages 27-47 of SDRC's 1994 Annual Report to Shareholders;
(c) SDRC's Proxy Statement dated March 20, 1995;
(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 (and
any amendment or report filed for the purpose of updating the description).
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 Effective Date 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
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 RIGHTS OF SHAREHOLDERS
Voting Rights
Dividends
Preemptive Rights
Rights Upon Liquidation
Indemnification and Personal Liability of Directors and Officers
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
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.
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 March _____, 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 March __, 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.
[THE BALANCE OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
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."
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."
[THE BALANCE OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
Terms of the Merger and Reasons for 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
premium 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 March __, 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.
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. 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."
[THE BALANCE OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
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 and 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.
[THE BALANCE OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]
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."
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) _________________,
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 .0636, 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 January 16, 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 $1.5105
____________, 1996
[THE BALANCE OF THIS PAGE HAS BEEN LEFT INTENTIONALLY BLANK]<PAGE>
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, 1993 and
1994 and for the three years then ended 1994 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, 1990, 1991 and 1992 and for the two
years ended December 31, 1991 for SDRC and CAMAX has been derived from the
consolidated financial statements of SDRC and CAMAX as of and for those
periods. The selected historical consolidated financial data for SDRC and
CAMAX for the nine-month periods ended September 30, 1995 and 1994 have been
derived from SDRC's and CAMAX's consolidated unaudited financial statements
and include, in the opinion of SDRC's and CAMAX's management, all
adjustments necessary to present fairly the data for such 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 $____ million. 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 .0636 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>
Nine Months
Year Ended December 31, Ended September 30,
1990 1991 1992 1993 1994 1994 1995
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of operations data:
Net Revenue $114,269 $129,932 $149,041 $147,605 $167,547 $122,004 $141,283
Income (loss) before income
taxes and cumulative effect
of accounting changes 16,378 14,525 13,907 (7,356) (5,168) (147) 14,134
Income (loss) before
cumulative effect of
accounting changes 8,913 9,279 8,775 (11,732) (9,001) (2,714) 9,118
Net income (loss) 8,913 9,279 9,475 (11,732) (12,897) (6,610) 9,118
Earnings (loss) per share:
Before cumulative effect
of accounting changes .32 .31 .29 (.39) (.31) (.09) .29
Net income (loss) .32 .31 .31 (.39) (.45) (.22) .29
Common and common
equivalent shares 27,618 29,817 30,093 29,876 28,844 29,474 31,513
Balance sheet data:
Working capital $41,483 $ 45,207 $ 48,440 $ 27,474 $ 27,590 $ 28,472 $ 41,704
Total assets 99,167 119,339 136,130 134,549 142,699 142,177 166,277
Long-term liabilities 2,604 -- -- 326 10,219 4,873 6,272
Total shareholders' equity 60,332 80,359 92,447 84,581 72,152 78,993 90,441
</TABLE>
<PAGE>
<TABLE>
CAMAX MANUFACTURING TECHNOLOGIES, INC.
SUMMARY OF SELECTED CONSOLIDATED FINANCIAL DATA
<CAPTION>
Nine Months
Year Ended December 31, Ended September 30,
1990 1991 1992 1993 1994 1994 1995
(in thousands, except per share data)
<S> <C> <C> <C> <C> <C> <C> <C>
Statement of operations data:
Net Sales $13,793 $15,515 $18,064 $18,288 $17,811 $13,209 $14,277
Income (loss) before income
taxes and cumulative effect
of accounting change 775 676 1,115 306 (2,528) (829) 596
Income (loss) before cumulative
effect of accounting change 641 603 973 368 (2,576) (838) 566
Net income (loss) 641 603 973 1,343 (2,576) (838) 566
Earnings (loss) per share:
Before cumulative effect
of accounting change .04 .03 .05 .02 (.15) (.05) .03
Net income (loss) .04 .03 .05 .07 (.15) (.05) .03
Common and common equivalent
shares 18,196 18,231 18,121 18,471 16,892 16,838 18,756
Balance sheet data:
Working capital $1,722 $2,229 $2,997 $ 3,419 $2,098 $ 2,653 $ 1,814
Total assets 6,739 7,818 9,610 11,146 9,674 10,942 10,525
Long-term liabilities 824 591 639 703 1,304 1,331 948
Total shareholders' equity 3,071 3,589 4,590 5,758 3,164 4,914 3,798
/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, 1992, 1993
and 1994 and as of September 30, 1995 and for the nine months then ended as
if the Merger had been effected January 1, 1992.
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, 1992, 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.
<TABLE>
<CAPTION>
Year Ended Nine Months
Ended
December 31, September
30,
1992 1993 1994 1995
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Statement of operations data:
Net revenue $167,105 $165,893 $185,358 $155,559
Income (loss) before income
taxes and cumulative effect
of accounting changes 15,022 (7,050) (7,696) 14,730
Income (loss) before cumulative
effect of accounting changes 9,724 (11,365) (11,577) 9,684
Net income (loss) 10,424 (11,365) (15,473) 9,684
Earnings (loss) per share:
Before cumulative effect of
accounting changes .31 (.37) (.39) .30
Net income (loss) .33 (.37) (.52) .30
Common and common equivalent
shares 31,340 31,034 30,002 32,768
</TABLE>
<TABLE>
<CAPTION>
Year Ended Nine Months
Ended
December 31, September
30,
1992 1993 1994 1995
(in thousands, except per share
data)
<S> <C> <C> <C> <C>
Balance sheet data:
Working capital $ 51,437 $ 30,623 $ 29,238 $ 43,067
Total assets 145,716 144,695 151,374 175,801
Long-term liabilities 985 1,029 11,523 7,219
Total shareholders' equity 97,013 89,339 74,316 93,239
</TABLE>
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, 1992 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 .0636 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, 1992 $ .29 $.05 $ .02 $ .31
For the Year Ended
December 31, 1993 (.39) .02 (.02) (.37)
For the Year Ended
December 31, 1994 (.31) (.15) (.02) (.39)
For the Nine Months Ended
September 30, 1995 .03
Book Value Per Share
December 31, 1994 -- $.18
September 30, 1995 $2.87 $.21 $ .18 $2.85
Market Value Per Share
on January 16, 1996(1) $23.75 $.70(2)
<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.
</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 March ____, 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
March __, 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.
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 beneficially
owned by directors and executive officers of CAMAX and their affiliates on
the Record Date, excluding shares subject to stock options, 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
Information Management ("PIM") 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 Tom 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 a certain 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 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 and Whitney P.L.L.P. and Deloitte and 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 and Whitney P.L.L.P.'s legal due diligence, and
(iv) the results of Deloitte and 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 PIM, 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
PIM. 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 (PIM) segments of SDRC's business. Since many companies want an
integrated solution, there would be an opportunity to gain CAD and PIM
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.
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.
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 process for redeeming retained shares will be substantially as described
in the Escrow Agreement appended as Annex D hereof (the "Escrow 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.
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. 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.
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 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 March ___, 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.
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. 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. CAMAX shareholders should
note that the opinion expressed by WA&H was provided solely for the use of
the CAMAX Board of Directors in its evaluation of the Merger and was not on
behalf of, and was not intended to confer rights or remedies upon SDRC, any
securityholder of SDRC or CAMAX, or any person other than CAMAX's Board of
Directors. 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.
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"). 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 recognized securities analysts. 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. 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 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.
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 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.
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 January 31, 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) 98,667 *
Richard M. Passek(10) 154,500 *
All Officers and Directors
as a group (13 persons)(11) 7,683,873 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 98,667 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 1,114,083 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 60 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 September 30,
1995 and the proforma combined statement of operations for the nine-month
period ended September 30, 1995 and the years ended December 31, 1994, 1993
and 1992, 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 .0636 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."
<TABLE>
Proforma Combined Balance Sheet
Unaudited Proforma Combined Balance Sheet
September 30, 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 $ 40,186 $ 1,965 $ -- $ 42,151
Short-term investments 10,747 767 -- 11,514
Accounts receivable, net 54,348 3,970 -- 58,318
Prepaid expenses and other 5,987 440 -- 6,427
current assets
Deferred income taxes -- 451 (451) --
Total current assets 111,268 7,593 (451) 118,410
Long-term investments 10,402 -- -- 10,402
Property and equipment, at cost:
Computer and other equipment 32,599 5,208 -- 37,807
Office furniture and equipment 9,434 1,730 -- 11,164
Leasehold improvements 3,985 64 -- 4,049
46,018 7,002 53,020
Less accumulated depreciation and 35,272 4,775 -- 40,047
amortization
Net property and equipment 10,746 2,227 -- 12,973
Computer software construction 29,900 12 -- 29,900
costs, net
Deferred income taxes -- 549 (549) --
Other assets 3,961 143 -- 4,116
Total assets $166,277 $10,524 $(1,000) $175,801
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 6,199 $ 708 $ -- $ 6,907
Current portion of long-term -- 769 -- 769
debt
Accrued expenses 26,421 1,234 -- 27,655
Accrued income taxes 5,817 -- -- 5,817
Deferred revenue 31,127 3,068 -- 34,195
Total current liabilities 69,564 5,779 -- 75,343
Long-term debt -- 947 -- 947
Long-term liabilities 6,272 -- -- 6,272
Commitments and contingencies
Shareholders' equity:
Common stock 210 -- 8 218
Capital in excess of stated value 54,612 14,540 (317) 68,835
Retained earnings (deficit) 35,846 (10,742) (691) 24,413
Unrealized holding loss on (227) -- -- (227)
investments
Total shareholders' equity 90,441 3,798 (1,000) 93,239
Total liabilities and $166,277 $10,524 $(1,000) $175,801
shareholders' equity
</TABLE>
See accompanying notes to unaudited proforma combined financial statements.
<TABLE>
Proforma Combined Statement of Operations
Unaudited Proforma Combined Statement of Operations
For the nine months ended September 30, 1995
<CAPTION>
Historical Proforma
(in thousands, except SDRC CAMAX Adjustments Combined
per share data)
<S> <C> <C> <C> <C>
Revenue:
Software licenses $ 81,784 $ 9,748 $ -- $ 91,532
Software maintenance and 59,499 4,493 -- 63,992
services
Other -- 35 -- 35
Net revenue 141,283 14,276 -- 155,559
Cost of revenue 45,315 1,399 -- 46,714
Gross profit 95,968 12,877 -- 108,845
Operating expenses:
Selling and marketing 60,860 7,756 -- 68,616
Research and development 12,822 2,891 -- 15,713
General and administrative 8,660 1,651 -- 10,311
Total operating expenses 82,342 12,298 -- 94,640
Operating income 13,626 579 -- 14,205
Equity in losses of affiliates (858) -- -- (858)
Other income, principally 1,366 17 -- 1,383
interest
Income before income taxes 14,134 596 -- 14,730
Income tax expense 5,016 30 -- 5,046
Net income $ 9,118 $ 566 $ -- $ 9,684
Earnings per share:
Net income per share $ .29 $ .03 $ .30
Common and common equivalent 31,513 18,756 1,255 32,768
shares
</TABLE>
See accompanying notes to unaudited proforma combined financial statements.<PAGE>
<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 64,230 5,532 -- 69,762
services
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), 2,121 (26) -- 2,095
principally interest
Loss before income taxes and (5,168) (2,528) -- (7,696)
cumulative effect of accounting
change
Income tax expense 3,833 48 -- 3,881
Loss before cumulative (9,001) (2,576) -- (11,577)
effect of accounting change
Cumulative effect of accounting (3,896) -- -- (3,896)
change
Net loss $(12,897) $(2,576) $ -- $(15,473)
Loss per share:
Before cumulative effect of $ (.31) $ (.15) $ (.39)
accounting change
Cumulative effect of (.14) -- (.13)
accounting change
Net loss per share $ (.45) $ (.15) $ (.52)
Common and common equivalent 28,844 16,892 1,158 30,002
shares
</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 60,851 4,574 -- 65,425
services
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), 477 (17) -- 460
principally interest
Income (loss) before income taxes (7,356) 306 -- (7,050)
and cumulative effect of
accounting change
Income tax expense (benefit) 4,376 (61) -- 4,315
Income (loss) before cumulative (11,732) 367 -- (11,365)
effect of accounting change
Cumulative effect of accounting -- 976 (976) --
change
Net income (loss) $(11,732)$ 1,343 $(976) $(11,365)
Income (loss) per share:
Before cumulative effect of $ (.39)$ .02 $ (.37)
accounting change
Cumulative effect of accounting -- .05
change
Net income (loss) per share $ (.39)$ .07 $ (.37)
Common and common equivalent 29,876 18,471 1,158 31,034
shares
</TABLE>
See accompanying notes to unaudited proforma combined financial statements.
<TABLE>
Unaudited Proforma Combined Statement of Operations
For the year ended December 31, 1992
<CAPTION>
Historical Proforma
(in thousands, except SDRC CAMAX Adjustments Combined
per share data)
<S> <C> <C> <C> <C>
Revenue:
Software licenses $ 87,399 $12,574 $ -- $ 99,973
Software maintenance and 61,642 3,431 -- 65,073
services
Other -- 2,059 -- 2,059
Net revenue 149,041 18,064 -- 167,105
Cost of revenue 39,812 2,618 -- 42,430
Gross profit 109,229 15,446 -- 124,675
Operating expenses:
Selling and marketing 69,634 9,496 -- 79,130
Research and development 19,245 3,156 -- 22,401
General and administrative 8,563 1,677 -- 10,240
Total operating expenses 97,442 14,329 -- 111,771
Operating income 11,787 1,117 -- 12,904
Equity in losses of affiliates (410) -- -- (410)
Other income (expense), 2,530 (2) -- 2,528
principally interest
Income before income taxes and 13,907 1,115 -- 15,022
cumulative effect of accounting
change
Income tax expense 5,132 142 24 5,298
Income (loss) before cumulative 8,775 973 (24) 9,724
effect of accounting change
Cumulative effect of accounting 700 -- -- 700
change
Net income (loss) $ 9,475 $ 973 $(24) $ 10,424
Income per share:
Before cumulative effect of $ .29 $ .05 $ .31
accounting change
Cumulative effect of accounting$ .02 -- $ .02
change
Net income per share $ .31 $ .05 $ .33
Common and common equivalent 30,093 18,121 1,247 31,340
shares
</TABLE>
See accompanying notes to proforma combined financial statements.
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 and for the nine months ended
September 30, 1995 and the years ended December 31, 1994, 1993 and 1992 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, 1992.
(2) Proforma Adjustments
The proforma adjustments to the unaudited proforma data are as follows:
a) To record the issuance of an estimated 1,158 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 $25.9055 as calculated by the
average closing price of the SDRC stock for the twenty days ending on the
fifth trading day prior to the public announcement of the Merger.
(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 since 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.
DESCRIPTION OF CAPITAL STOCK
SDRC is authorized to issue 100,000,000 shares of SDRC Common Stock, without
par value. As of December 29, 1995, SDRC had outstanding 30,535,975 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 18,211,692 shares were issued and outstanding as of December 31, 1995.
As of December 31, 1995, CAMAX had issued options to purchase a total of
3,290,238 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 603,250 shares of CAMAX Common Stock had been issued
pursuant to CAMAX's 1985 and 1987 Stock Option Plans at a weighted average
exercise price of $.49 per share; options to purchase 208,888 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 $.70 per share. No additional stock options will be permitted to
be granted under CAMAX's 1987 Stock Option Plan 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 $.71 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 RIGHTS OF SHAREHOLDERS
Set forth below is a description and comparison of SDRC Common Stock and
CAMAX Common Stock. This description and analysis are brief summaries of
relevant provisions of the Articles of Incorporation of SDRC and of CAMAX
and are qualified in their entirety by reference to such documents, to the
parties' respective Codes of Regulations and Bylaws, and to the laws of the
parties' respective states of incorporation.
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.
The Code of Regulations of SDRC provides for the division of its Board of
Directors into two classes of approximately equal size. Directors of the
SDRC Board of Directors are elected for two-year terms, and the terms of
office of one-half of the members of the classified Board of Directors
expire 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 Bylaws of CAMAX provide that each
member of the Board of Directors be elected for a one-year term at the
annual meeting of shareholders.
The holders of SDRC Common Stock have the right to vote cumulatively in the
election of directors. Under applicable Ohio law, cumulative voting in the
election of directors of a corporation will be permitted if (i) written
notice is given by any shareholder of such corporation to the President,
Vice President or the Secretary of such corporation, not less than 48 hours
before the time fixed for holding the meeting at which directors are to be
elected, indicating that such shareholder desires that voting for the
election of directors be cumulative and (ii) announcement of the giving of
such notice is made upon the convening of the meeting by the meeting
Chairman or Secretary or by or on behalf of the shareholder giving such
notice. In such event, each shareholder will be entitled to cumulate such
voting power as he or she possesses and to give one nominee as many votes
as the number of directors to be elected multiplied by the number of his or
her shares, or to distribute such votes on the same principle among two or
more candidates, as each shareholder sees fit. Under Minnesota law
cumulative voting is presumed unless denied in the Articles of
Incorporation. CAMAX's Articles of Incorporation deny cumulative voting
rights.
SDRC is only authorized to effect a merger, consolidation or sale of assets
not in the regular course of business, to dissolve, or amend its Articles
of Incorporation, pursuant to authority given by persons holding two-thirds
of its capital stock. Minnesota law provides that an amendment to a
corporation's articles of incorporation must be by resolution approved by
the affirmative vote of a majority of the directors present at a meeting or
proposed by a shareholder or shareholders holding 3% or more of the voting
shares entitled to vote thereon. In addition, any such amendment must be
approved by the affirmative vote of a majority of the shareholders present
at a meeting unless the articles of incorporation require a larger portion
or number. CAMAX's Articles of Incorporation require the affirmative vote
of the majority of shares of CAMAX capital stock entitled to vote thereon.
Minnesota law and CAMAX's Bylaws provide that the power to adopt, amend or
repeal the Bylaws shall be vested in the board of directors except that the
board shall not adopt, amend or repeal a bylaw fixing a quorum for meetings
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,
a shareholder or shareholders holding 3% or more of the voting shares
entitled to vote may propose a resolution to adopt, 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.
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.
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.
Preemptive Rights
Under Ohio law, shareholders of a corporation are presumed to have
preemptive rights unless denied in the corporation's articles of
incorporation. The SDRC Articles of Incorporation deny preemptive voting
rights. Minnesota law also presumes preemptive rights unless otherwise
denied in the articles of incorporation. CAMAX's Articles of Incorporation
deny preemptive voting rights.
Rights Upon Liquidation
Upon liquidation, dissolution or winding up, the holders of SDRC Common
Stock and CAMAX Common Stock, respectively, are entitled to share pro rata
in the distribution of all of the respective assets of such Company
available therefor.
Indemnification and Personal Liability of Directors and Officers
SDRC's Code of Regulations provides for the indemnification of each director
and officer of the corporation to the fullest extent permitted by Ohio law
against all expenses and liabilities reasonably incurred by or imposed by
him or her 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. Generally, Ohio permits such indemnification
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 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 Articles of Incorporation provide that directors of the
corporation shall not be liable to its shareholder for monetary damages for
breaches of fiduciary duty; provided however, that such liability of a
director shall not be eliminated or limited to the extent provided by
applicable law.
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 CAMAX'S FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
<TABLE>
The following table sets forth, as a percentage of total net sales,
consolidated statement of operations data for the periods indicated:
<CAPTION>
Nine Months
Year Ended Ended
December 31, September 30,
1992 1993 1994 1994 1995
------ -------- ------ --------- ---------
<S> <C> <C> <C> <C> <C>
Net sales:
Software 69.6% 66.6% 65.9% 65.6% 68.3%
Maintenance and services 19.0 25.0 31.1 30.9 31.5
Other 11.4 8.4 3.0 3.5 0.2
------ ------- ------- ------- -------
Total net sales 100.0 100.0 100.0 100.0 100.0
Cost of sales:
Software 5.3 4.5 12.3 7.9 7.5
Maintenance and services 0.7 0.9 1.8 1.5 2.1
Other 8.5 5.8 2.0 2.3 0.2
------ ----- ------- ------- -------
Total cost of sales 14.5 11.2 16.1 11.7 9.8
------- ------- ------- ------- -------
Gross margin 85.5 88.8 83.9 88.3 90.2
Operating expenses:
Sales and marketing 52.5 53.6 56.8 53.8 54.3
Research and development 17.5 21.2 23.6 22.3 20.2
General and
administrative 9.3 12.2 17.5 18.4 11.6
------- ------- ------- ------- -------
Total operating expenses 79.3 87.0 97.9 94.5 86.1
------- ------ ------ ------ -------
Income (loss) from
operations 6.2 1.8 (14.0) (6.2) 4.1
Other expense (income) 0.0 0.1 0.2 0.0 (0.1)
------- ------- ------- ------ -------
Income (loss) before
income taxes and
cumulative effect
of accounting change 6.2 1.7 (14.2) (6.2) 4.2
Provision (benefit)
for income taxes 0.8 (0.3) 0.3 0.1 0.2
------- ------- ------- -------- -------
Income (loss) before
cumulative effect of
accounting change 5.4 2.0 (14.5) (6.3) 4.0
Cumulative effect of
accounting change 5.3
------- ------- ------- --------- -------
Net income (loss) 5.4% 7.3% (14.5)% (6.3)% 4.0%
======= ======= ======= ========= =======
</TABLE>
Years Ended December 31, 1992, 1993 and 1994
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. 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 September 30, 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 remained relatively constant at $18.1 million, $18.3 million
and $17.8 million in 1992, 1993 and 1994, respectively, representing an
increase of 1% from 1992 to 1993 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 $12.6 million, $12.2
million and $11.7 million in 1992, 1993 and 1994, respectively, representing
decreases of 3% from 1992 to 1993 and 4% from 1993 to 1994. Substantially
all of the period-to-period decline in software sales 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 accounted for 56%, 50%
and 46% of total software sales for 1992, 1993 and 1994, respectively, and
ManufacturingExpert accounted for 4% of total software sales for 1994.
CAMAX purchased the ManufacturingExpert product line in August 1994.
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 and to convert these customers to Camand. Management expects
that there will be declining 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 $3.4
million, $4.6 million and $5.5 million in 1992, 1993 and 1994, respectively,
representing increases of 33% from 1992 to 1993 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, 1992, 1993 and 1994, maintenance and
services sales as a percentage of total net sales accounted for 19%, 25% and
31%, 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 $2.1 million, $1.5 million and $0.5 million
in 1992, 1993 and 1994, respectively, representing decreases of 25% from
1992 to 1993 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, 1992, 1993 and 1994, other sales as a
percentage of net sales accounted for 11%, 8% and 3%, 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 31%, 31%
and 33% of total net sales in 1992, 1993 and 1994, respectively. The
increase in international sales 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, on 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. Cost of software
sales was $0.9 million, $0.8 million and $2.2 million in 1992, 1993 and
1994, respectively, representing 8%, 7% and 19% of software sales for each
respective year. The increase in the cost of software sales from 1993 to
1994 is primarily attributable to the amortization of the cost of the
ManufacturingExpert, acquired in 1994 (See Note 2 of Notes to Consolidated
Financial Statements), product line and the cost of royalties for third
party technology.
In August 1994, CAMAX purchased the assets of the software product known as
ManufacturingExpert from Autodesk, Inc. ("Autodesk"). The purchase price
was $1.6 million which consisted 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 development process
significantly reduced 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 were expensed as incurred. Costs of $0.3 million and $0.5
million were capitalized in 1992 and 1993, respectively. CAMAX estimated
that such costs had an economic life of two years. Amortization expense of
$0.3 million, $0.4 million and $0.3 million has been included in cost of
software sales for 1992, 1993 and 1994, respectively. There will be
amortization of approximately $0.1 million charged to cost of software sales
in 1995 to complete the amortization of the remaining balance of deferred
software development costs.
Cost of Maintenance and Services Sales. Cost of maintenance and services
sales consists primarily of the same types of costs as those incurred for
software sales, as well as costs for third party technology maintenance.
Cost of maintenance and services sales was $0.1 million, $0.2 million and
$0.3 million in 1992, 1993 and 1994, respectively, representing 4%, 3% and
6% of maintenance and services sales for each respective year. The increase
in the dollar amount of the cost of maintenance and services 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 and hardware maintenance purchased by CAMAX and resold to its
customers. Cost of other sales was $1.5 million, $1.1 million and $0.4
million in 1992, 1993 and 1994, respectively, representing 75%, 69% and 66%
of other sales for each respective year. The decrease in the dollar amount
of the cost of other sales in each successive year was due primarily to the
decrease in the other sales. Management believes that the cost of other
sales will be insignificant in future periods.
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 $9.5 million, $9.8 million and $10.1 million, or 53%, 54% and
57% of total net sales, in 1992, 1993 and 1994, respectively. The year-to-year
increases in dollar amount and as a percentage of total net sales 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
international markets.
Research and Development. Research and development expenses were $3.2
million, $3.9 million and $4.2 million in 1992, 1993 and 1994, or 18%, 21%
and 24% of total net sales, in 1992, 1993 and 1994, respectively. The
increase in dollar amount in research and development expenses and as a
percentage of total net sales from 1992 to 1993 was primarily due to an
increase in the number of software engineers to develop product
enhancements. The increase in dollar amount and as a percentage of 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 $1.7
million, $2.2 million and $3.1 million, or 9%, 12% and 18% of total net
sales, in 1992, 1993 and 1994, respectively. The increase in dollar amount
in general and administrative expenses and as a percentage of total net
sales from 1992 to 1993 was primarily due to an increase in administrative
employees as well as the write-off of certain accounts receivable. 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 Co. in September 1994.
Other Income (Expense)
Other income (expense) consists of the net effect of interest income,
interest expense and miscellaneous income and expense items. Other expense
was $2,000, $18,000 and $26,000 in 1992, 1993 and 1994, respectively.
Income Taxes
The effective tax rates for 1992, 1993 and 1994 were 13%, (20%) and (2%),
respectively. These rates differ from the statutory rate primarily due to
the use of a net operating loss carryforward in 1992 (for CAMAX), the use
of both a net operating loss carryback (for Point Control) and a loss
carryforward (for CAMAX) in 1993 and a net operating loss (consolidated) in
1994.
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, 1994, CAMAX has net operating loss carryforwards of
approximately $9.8 million, research and development tax credit
carryforwards of approximately $0.5 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 realized. CAMAX expects that its effective tax rate for 1995 will also
be significantly below the statutory rate due to the use of net operating
loss carryforwards. See Note 7 of Notes to Consolidated Financial
Statements.
Nine Months Ended September 30, 1994 and 1995
Net Sales
Total net sales increased by 8% from $13.2 million for the nine months
September 30, 1994 to $14.3 million for the nine months ended September 30,
1995. Total net sales increased primarily due to sales of software licenses
for ManufacturingExpert (purchased from Autodesk in August 1994 as
previously described) and increased maintenance fees resulting from an
increasing number of CAMAX's customers purchasing software maintenance
agreements. Sales derived through indirect distribution channels accounted
for the majority of CAMAX's total net sales for the nine months ended
September 30, 1994 and 1995.
Software Sales. Sales from software licenses increased 12% from $8.7
million for the nine months ended September 30, 1994 to $9.7 million for the
nine months ended September 30, 1995. The increase was primarily due to
sales of software licenses for ManufacturingExpert. In the nine months
ended September 30, 1995, Camand accounted for 44%, SmartCAM accounted for
41% and ManufacturingExpert accounted for 15% of total software sales.
Maintenance and Services Sales. Maintenance and services sales increased
10% from $4.1 million for the nine months ended September 30, 1994 to $4.5
million for the nine months ended September 30, 1995. The growth was
primarily attributable to an increasing number of CAMAX's customers electing
to purchase software maintenance agreements. As a percentage of total net
sales, maintenance and services sales remained consistent at 31% for each
of the nine months ended September 30, 1994 and 1995.
Other Sales. Other sales decreased 92% from $0.5 million for the nine
months ended September 30, 1994 to less than $0.1 million for the nine
months ended September 30, 1995. The decrease was primarily attributable
to a de-emphasis by CAMAX on the resale of hardware products and related
maintenance. As a percentage of total net sales, other sales decreased from
3% for the nine months ended September 30, 1994 to less than 1% for the nine
months ended September 30, 1995.
International Sales. Sales outside of North America as a percentage of
total net sales increased from 32% for the nine months ended September 30,
1994 to 35% for the nine months ended September 30, 1995. The increase was
primarily due to the increase in the number of international resellers
marketing CAMAX's products.
Cost of Sales
Cost of Software Sales. Cost of software sales increased from $1.0 million
for the nine months ended September 30, 1994 to $1.1 million for the nine
months ended September 30, 1995, representing 11% and 12%, respectively, of
software sales for each period. The increase in dollar amount was primarily
due to the increase in sales of software licenses.
Cost of Maintenance and Services Sales. Cost of maintenance and services
sales increased from $0.2 million for the nine months ended September 30,
1994 to $0.3 million for the nine months ended September 30, 1995,
representing 5% and 7%, respectively, of maintenance and services sales.
The increase in dollar amount and as a percentage of maintenance and
services sales was primarily due to the increases in maintenance and
services sales and the cost of maintenance on third party technology.
Cost of Other Sales. Cost of other sales decreased from $0.3 million for
the nine months ended September 30, 1994 to less than $0.1 million for the
nine months ended September 30, 1995, representing 67% and 71%,
respectively, of other sales. The decrease in dollar amount was due
primarily to the decrease in related other sales.
Operating Expenses
Sales and Marketing. Sales and marketing expenses increased by 9% from $7.1
million for the nine months ended September 30, 1994 to $7.8 million for the
nine months ended September 30, 1995, representing 54% of total net sales
for each period. The increase in sales and marketing expenses in dollar
amount was primarily due to increased costs for reseller development and
advertising and promotional costs.
Research and Development. Research and development expenses decreased by
2% from $3.0 million for the nine months ended September 30, 1994 to $2.9
million for the nine months ended September 30, 1995, representing 22% and
20%, respectively, of total net sales. The decrease in research and
development expenses both in dollar amount and as a percentage of total net
sales was primarily due to a fewer number of software engineers devoting
time to development efforts in 1995 then in 1994.
General and Administrative. General and administrative expenses decreased
by 32% from $2.4 million for the nine months ended September 30, 1994 to
$1.7 million for the nine months ended September 30, 1995, representing 18%
and 12%, respectively, of total net sales. The decrease in general and
administrative expenses both in dollar amount and as a percentage of total
net sales was primarily due to severance payments made in connection with
the departure of CAMAX's former President and Chief Executive Officer in
June 1994, as well as legal, accounting and other costs associated with the
merger of CAMAX and Point Control Co. in September 1994.
Other Income (Expense)
Other expense was $9,000 for the nine months ended September 30, 1994 as
compared to other income of $17,000 for the nine months ended September 30,
1995, primarily due to increased interest income generated from higher cash
balances.
Income Taxes
Income tax expense for the nine months ended September 30, 1994 was $10,000
as compared to $30,000 for the nine months ended September 30, 1995,
primarily due to an increase in income before income taxes.
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 1992, 1993 and 1994 and the nine months ended
September 30, 1995, $1.8 million, $1.1 million, $1.9 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 in 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 1992, 1993, 1994 and the nine months ended September 30,
1995, CAMAX used $0.9 million, $0.7 million, $0.9 million and $1.6 million,
respectively, to purchase property and equipment, primarily computer
hardware and software. In addition, CAMAX capitalized software development
costs of $0.3 and $0.5 in 1992 and 1993, respectively, and allocated $0.8
million to purchased software from the purchase of the ManufacturingExpert
product line in 1994. 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 1992-1994 levels. 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 September 30, 1995, CAMAX had $2.7 million in cash, cash equivalents and
investments and $1.8 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 September 30, 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 plus 1.625%
(9.75% at September 30, 1995) and expires in November 1998. The principal
balance of this term loan was $486,000 on September 30, 1995. At September
30, 1995, CAMAX had outstanding $527,000 in remaining obligations for
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 of 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 (9.75% at September 30, 1995).
Borrowings under the $750,000 line of credit agreement bear interest at the
bank's reference rate plus 1% (9.75% at September 30, 1995) 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 September 30, 1995,
CAMAX had no borrowings outstanding under either agreement.
CAMAX's days sales outstanding were 64, 61, 56 and 66 at December 31, 1992,
1993 and 1994 and September 30, 1995, respectively. The decrease in days
sales outstanding at December 31, 1994 was primarily due to a decline in
sales in December 1994 from historical levels.
To date, CAMAX has not invested in derivative securities or any other
financial instruments that involve a high level of complexity or risk.
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, 1994 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, 1994 and for the year 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 each of the two years in the period 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>
CAMAX INDEX TO FINANCIAL STATEMENTS
Page
--------
Independent Auditors' Report of Deloitte & Touche LLP....... F-2
Independent Auditors' Report of Coopers & Lybrand L.L.P. ... F-3
Consolidated Balance Sheets --
- December 31, 1993 and 1994
- September 30, 1995 (Unaudited)......................... F-4
Consolidated Statements of Operations --
- Years ended December 31, 1992, 1993 and 1994
- Nine-months ended September 30, 1994 and 1995 (Unaudited). F-5
Consolidated Statements of Shareholders' Equity --
- Years ended December 31, 1992, 1993 and 1994
- Nine-months ended September 30, 1995 (Unaudited) ..... F-6
Consolidated Statements of Cash Flows --
- Years ended December 31, 1992, 1993 and 1994
- Nine-months ended September 30, 1994 and 1995 (Unaudited) F-7
Notes to Consolidated Financial Statements --
- Years ended December 31, 1992, 1993 and 1994
- Nine-months ended September 30, 1994 and 1995 (Unaudited). F-8
to
F-15<PAGE>
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, 1993
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, 1994. 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 interest as described in Note 2 to the
consolidated financial statements. We did not audit the balance sheet of
Point Control Co. as of December 31, 1993 or the related statements of
operations, shareholders' equity, and cash flows of Point Control Co. for
the years ended December 31, 1992 and 1993, which statements reflect total
assets of $3,915,833 as of December 31, 1993 and total net revenues of
$8,933,436 and $8,705,647 for the years ended December 31, 1992 and 1993.
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 1992 and 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, 1993 and 1994 and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1994 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."
Minneapolis, Minnesota
April 28, 1995
Report of Independent Accountants
To the Board of Directors
Point Control Co.:
We have audited the consolidated balance sheet of Point Control Co. and
subsidiaries as of December 31, 1993, and the related consolidated
statements of operations, shareholders' equity and cash flows for each of
the two years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audits.
We conducted our audits in accordance with 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 used in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above (not presented
separately herein) present fairly, in all material respects, the
consolidated financial position of Point Control Co. and subsidiaries as of
December 31, 1993, and the consolidated results of their operations and
their cash flows for each of the two years in the period ended December 31,
1993 in conformity with generally accepted accounting principles.
As discussed in Note 1 to the financial statements, the Company changed its
method of accounting for income taxes in 1992.
/s/ Coopers & Lybrand
Eugene, Oregon
February 10, 1994
<TABLE>
CAMAX MANUFACTURING TECHNOLOGIES, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, September 30,
1993 1994 1995
(Unaudited)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 2,250,740 $2,247,534 $ 1,965,256
Investments 98,261 1,064,240 766,536
Accounts receivable, net of
allowance for doubtful accounts
of $146,402, $193,000, and $235,220,
respectively 4,567,628 2,804,222 3,912,037
Other accounts receivable 69,567 70,446 57,828
Inventory 207,632 211,709 168,286
Prepaid expenses 484,348 455,884 272,299
Deferred income taxes 273,881 451,000 451,000
Income taxes receivable 151,878
---------- --------- ----------
Total current assets 8,103,935 7,305,035 7,593,242
PROPERTY:
Equipment 3,337,497 4,065,614 5,207,996
Office furniture and fixtures 1,503,654 1,534,993 1,729,720
Leasehold improvements 51,901 51,901 64,640
---------- --------- ----------
Total property and equipment 4,893,052 5,652,508 7,002,356
Less accumulated depreciation 3,322,632 4,217,224 4,775,459
---------- --------- ----------
Property and equipment, net 1,570,420 1,435,284 2,226,897
OTHER ASSETS:
Deferred software development costs 441,757 138,109 12,478
Deferred income taxes 730,000 549,000 549,000
Other assets, net 300,118 246,747 143,054
---------- --------- ----------
Total other assets 1,471,875 933,856 704,532
---------- --------- ----------
Total assets $11,146,230 $9,674,175 $10,524,671
---------- --------- ----------
---------- --------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Note payable $ 300,000
Accounts payable 879,759 $ 871,355 $ 707,698
Current portion of long-term debt 262,357 625,606 769,456
Accrued payroll and commissions 666,404 433,694 473,356
Deferred revenue 2,182,776 2,538,656 3,068,148
Accrued joint marketing funds 55,417 195,855 415,920
Other accrued liabilities 338,668 541,744 344,490
--------- --------- ---------
Total current liabilities 4,685,381 5,206,910 5,779,068
LONG-TERM DEBT 702,785 1,303,718 947,613
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock - no par value;
authorized 50,000,000 shares;
issued and outstanding 16,898,267,
17,137,528, and 17,451,029 shares,
respectively 14,393,897 14,472,170 14,540,519
Accumulated deficit (8,635,833)(11,308,623) (10,742,529)
---------- ------------ ------------
Total shareholders' equity 5,758,064 3,163,547 3,797,990
---------- ------------ ------------
Total liabilities and shareholders'
equity $11,146,230 $9,674,175 $10,524,671
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
See notes to consolidated financial statements.
<PAGE>
<TABLE>
CAMAX MANUFACTURING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
Year Ended Nine Months Ended
December 31, September 30,
1992 1993 1994 1994 1995
(Unaudited)
<S> <C> <C> <C> <C> <C>
NET SALES:
Software $12,574,304 $12,178,193 $11,733,692 $ 8,665,682 $ 9,748,339
Maintenance and services 3,430,712 4,574,142 5,532,263 4,085,018 4,493,046
Other 2,059,327 1,535,611 544,588 458,521 35,243
---------- ---------- ---------- ---------- ----------
Total net sales 18,064,343 18,287,946 17,810,543 13,209,221 14,276,628
COST OF SALES:
Software 946,402 830,258 2,193,135 1,038,776 1,069,903
Maintenance and services 129,591 155,066 317,164 197,404 304,554
Other 1,541,638 1,062,084 361,843 305,861 24,861
---------- ---------- ---------- ---------- ----------
Total cost of sales 2,617,631 2,047,408 2,872,142 1,542,041 1,399,318
---------- ---------- ---------- ---------- ----------
Gross margin 15,446,712 16,240,538 14,938,401 11,667,180 12,877,310
OPERATING EXPENSES:
Sales and marketing 9,496,322 9,806,707 10,115,728 7,103,745 7,756,407
Research and development 3,155,778 3,874,508 4,202,117 2,949,465 2,890,819
General and administrative 1,676,921 2,235,809 3,122,347 2,433,698 1,650,606
---------- ---------- ---------- ---------- ----------
Total operating expenses 14,329,021 15,917,024 17,440,192 12,486,908 12,297,832
---------- ---------- ---------- ---------- ----------
INCOME (LOSS) FROM OPERATIONS 1,117,691 323,514 (2,501,791) (819,728) 579,478
OTHER EXPENSE (INCOME):
Interest expense 94,469 93,113 141,972 98,971 136,009
Other income, net (92,177) (75,458) (115,764) (89,978) (152,625)
---------- ---------- ----------- ---------- ----------
Total other expense (income) 2,292 17,655 26,208 8,993 (16,616)
---------- ---------- ----------- ---------- ----------
INCOME (LOSS) BEFORE INCOME TAXES
AND CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 1,115,399 305,859 (2,527,999) (828,721) 596,094
PROVISION (BENEFIT) FOR INCOME
TAXES 142,113 (62,065) 48,473 9,761 30,000
--------- ---------- ----------- ---------- ----------
INCOME (LOSS) BEFORE CUMULATIVE
EFFECT OF ACCOUNTING CHANGE 973,286 367,924 (2,576,472) (838,482) 566,094
CUMULATIVE EFFECT OF
ACCOUNTING CHANGE 975,567
--------- ---------- ----------- ---------- ----------
NET INCOME (LOSS) $ 973,286 $ 1,343,491 $(2,576,472) $(838,482) $ 566,094
-------- ---------- ----------- ---------- ----------
-------- ---------- ----------- ---------- ----------
NET INCOME (LOSS) PER
COMMON AND COMMON EQUIVALENT
SHARE $ .05 $ .07 $ (.15) $ (.05) $ .03
--------- ---------- ----------- ---------- ----------
--------- ---------- ----------- ---------- ----------
WEIGHTED AVERAGE NUMBER OF
COMMON AND COMMON
EQUIVALENT SHARES
OUTSTANDING 18,121,357 18,470,601 16,892,254 16,838,229 18,755,626
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</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, 1991 16,522,602 $14,327,722 $(10,739,065) $ 3,588,657
Common stock issued upon exercise
of stock options 556,220 72,459 72,459
Common stock redeemed (110,618) (19,742) (24,236) (43,978)
Net income 973,286 973,286
---------- ---------- ----------- -----------
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 (unaudited) 313,501 68,349 68,349
Net income (unaudited) 566,094 566,094
----------- ---------- ----------- -----------
BALANCES AT
SEPTEMBER 30, 1995 (Unaudited) 17,451,029 $14,540,519 $(10,742,529) $3,797,990
----------- ---------- ----------- -----------
----------- ---------- ----------- -----------
</TABLE>
See notes to consolidated financial statements.<PAGE>
<TABLE>
CAMAX MANUFACTURING TECHNOLOGIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended Nine-Months Ended
December 31, September 30,
1992 1993 1994 1994 1995
(Unaudited)
<S> <C> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING
ACTIVITIES:
Net income (loss) $ 973,286 $ 1,343,491 $(2,576,472) $ (838,482) $ 566,094
Adjustments to reconcile net
income (loss) to net
cash provided by operating
activities:
Depreciation 689,213 746,351 980,000 613,651 724,313
Amortization 358,865 381,143 333,408 255,150 134,364
Amortization of
ManufacturingExpert 765,518 77,125
Noncash expense for transition
services 247,000 247,000
Loss on sale of equipment (4,357) (5,387) (6,085) (13,524) (22,791)
Deferred income taxes (7,866) 35,753 3,881
Cumulative effect of accounting
change (975,567)
Changes in assets and liabilities:
(Increase) decrease in accounts
receivable (830,643) (275,677) 1,762,527 1,414,749 (1,095,197)
Decrease (increase) in inventory 119,963 39,536 (4,077) 69,523 43,423
(Increase) decrease in prepaid
expenses (349,032) (89,268) 28,464 (441,065) 183,585
Decrease in income taxes
receivable 16,487 151,878
(Decrease) increase in accounts
payable (5,397) (124,050) (8,404) 180,464 (163,657)
Increase in accruals and other
liabilities 866,149 95,962 466,683 219,335 591,966
(Increase) decrease in other
assets (71,022) (13,178) 53,371 (22,378) 103,693
Decrease in other long-term
liabilities (8,150) (11,285) (5,642)
--------- --------- ---------- ---------- -----------
Total adjustments 774,210 (195,667) 4,768,522 2,600,030 499,699
--------- --------- ---------- ---------- -----------
Net cash provided by operating
activities 1,747,496 1,147,824 2,192,050 1,761,548 1,065,793
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments (98,261) (1,827,587) (1,147,517) (959,527)
Proceeds from maturities of
investments 861,608 568,868 1,257,231
Purchases of property (904,237) (740,431) (888,813) (650,933) (1,558,309)
Proceeds from sale of equipment 35,583 10,627 20,274 13,524 56,440
Software development costs
capitalized (308,139) (483,242)
----------- ----------- ----------- ---------- -----------
Net cash used in investing
activities (1,176,793) (1,311,307) (1,834,518) (1,216,058) (1,204,165)
CASH FLOWS FROM FINANCING
ACTIVITIES:
Proceeds from issuance of
short-term debt 450,000 150,000 150,000 147,111
Principal payments on short-term
debt obligations (150,000) (150,000) (450,000) (450,000)
Proceeds from issuance of
long-term debt 502,100 350,278 211,328 211,328 206,819
Principal payments on long-term
debt obligations (410,547) (388,460) (254,021) (233,533) (566,185)
Common stock issued for cash,
net of issuance costs 72,459 28,878 95,153 55,278 68,349
Redemptions of common stock (43,978) (204,729) (113,198) (104,625)
----------- ----------- ----------- ----------- ------------
Net cash (used in) provided
by financing activities (29,966) 85,967 (360,738) (371,552) (143,906)
----------- ----------- ----------- ----------- ------------
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 540,737 (77,516) (3,206) 173,938 (282,278)
CASH AND CASH EQUIVALENTS,
BEGINNING OF PERIOD 1,787,519 2,328,256 2,250,740 2,250,740 2,247,534
----------- ----------- ----------- ----------- ------------
CASH AND CASH EQUIVALENTS, END
OF PERIOD $ 2,328,256 $ 2,250,740 $ 2,247,534 $ 2,424,678 $ 1,965,256
----------- ----------- ----------- ----------- ------------
----------- ----------- ----------- ----------- ------------
SUPPLEMENTAL CASH FLOW INFORMATION:
Interest paid $ 94,469 $ 93,113 $ 104,802 $ 81,818 $ 160,407
----------- ----------- ----------- ----------- ------------
----------- ------------ ----------- ----------- -----------
Income taxes paid (refunded) $ 144,904 $ 49,500 $ (102,586) $ (130,508) $ 8,220
----------- ------------ ----------- ----------- -----------
----------- ------------ ----------- ----------- -----------
</TABLE>
Long-term debt of $1,012,518 was incurred when the Company purchased
ManufacturingExpert (See Note 2).
See notes to consolidated financial statements.
CAMAX MANUFACTURING TECHNOLOGIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1992, 1993, and 1994
AND NINE-MONTHS ENDED SEPTEMBER 30, 1994 AND 1995 (Unaudited)
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.
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.
Unaudited Consolidated Financial Statements - The consolidated balance sheet
as of September 30, 1995 and the statement of operations, shareholders'
equity, and cash flows for the nine-month periods ended September 30, 1995
and 1994 are unaudited. In the opinion of management, such unaudited
consolidated financial statements include all adjustments, consisting of
only normal, recurring accruals necessary for a fair presentation thereof.
The results of operations for any interim period are not necessarily
indicative of the results for the year.
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.
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
period 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.
Capitalized lease amounts included in property were $208,000 and $304,000
which were net of accumulated amortization of $352,000 and $517,000 at
December 31, 1993 and 1994, respectively.
Deferred Computer Software Development Costs - Under the criteria set forth
in the 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 development
process significantly reduced 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 were expensed as
incurred.
Costs of $308,000 and $483,000 were capitalized in 1992 and 1993,
respectively, and were included in Deferred Software Development Costs. The
Company estimated that such costs had an economic life of two years.
Amortization expense of $340,000, $353,000, and $304,000 has been included
in cost of sales for 1992, 1993, and 1994, respectively.
Impairment of Long-Lived Assets - Management of the Company periodically
reviews the carrying value of 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 writeoff of ManufacturingExpert 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 31%, 31% and 33% of
total net sales in 1992, 1993 and 1994, 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
prior financial statements. 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 period end based
on statutory tax rates applicable to periods 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 tax benefit primarily related to existing operating loss
carryforwards. The cumulative effect as of January 1, 1993 of adopting SFAS
No. 109 was a credit to income of $975,567.
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 1992 and 1993 amounts have been reclassified to
conform with presentations in the 1994 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.
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 ManufacturingExpert Assets:
On August 9, 1994, the Company purchased the assets for the software product
known as ManufacturingExpert 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 1994 and for the nine-months ended
September 30, 1995 include $506,000 and $109,000, respectively for these
transition team services. The purchased software was amortized completely
during 1994, which 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. LINE 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, 1994).
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, 1994, 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.
The $750,000 line of credit is collateralized with accounts receivable,
inventory, equipment, and general intangibles of PCC. The interest rate is
variable, based on the bank's reference rate (8.5% at December 31, 1994),
plus 1%, with a floor of 8.75%. As part of the borrowing arrangement, PCC
is required to maintain a $50,000 compensating balance. At December 31,
1994, PCC had no borrowings outstanding under this line of credit agreement.
In addition to a guarantee by the Company, the line of credit agreement
contains certain restrictive covenants which, among others, require PCC to
maintain net worth of not less than $800,000 and a ratio of liabilities to
net worth of less than 3 to 1. As of December 31, 1994, PCC was in
technical violation of these covenants; however, the bank provided a waiver
of the violations. In June 1995, the covenants for the line of credit were
renegotiated.
4. LONG-TERM DEBT
Long-term debt at December 31 consists of the following:
1993 1994
Note payable, imputed interest rate of 9%, due in annual
installments of $400,000 through August 1997
$1,012,518
Note payable, interest at reference rate plus 1.625%, due
in monthly installments of $14,114 through November 1998 $684,766 570,894
Installment loans, interest at 8.0%, due in monthly
installments of $2,230 through August 1996 63,989 41,593
Capitalized leases, interest at 8.5% to 13.7%, due in
varying monthly installments through January 1997 210,745 304,319
Other 5,642
--------- ---------
965,142 1,929,324
Less current maturities 262,357 625,606
------- ---------
$702,785 $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, 1994 are approximately $626,000 in 1995, $570,000 in 1996, $547,000 in
1997, $157,000 in 1998, and $30,000 in 1999.
5. LEASE COMMITMENTS
The Company leases its facilities and certain equipment under operating
leases with terms of up to 72 months. Rent expense applicable to operating
leases was $678,000 in 1992, $747,000 in 1993, and $769,000 in 1994. At
December 31, 1994, the future minimum rental payments required by
noncancelable operating leases are: 1995, $420,000; 1996, $420,000; 1997,
$407,000; 1998, $344,000; 1999, $348,000; and 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:
1992 1993
1994
Options outstanding at the beginning of the year 63,909 61,109
60,709
Options canceled (2,800) (400)
------- -------
- ------
Options outstanding at the end of year 61,109 60,709
60,709
------- -------
- ------
------- -------
- ------
Exercise price per share $2.00 - $2.10
-------------
-------------
At December 31, 1994, all outstanding options were exercisable and there
were 114,291 shares available for grant under the above 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>
<CAPTION>
1992 1993 1994
<S> <C> <C> <C>
Options outstanding at beginning of year 2,057,417 2,137,417 2,041,417
Options granted 155,000 215,000 185,000
Options exercised (75,000) (8,500) (75,000)
Options canceled (302,500) (600,000)
---------- ---------- ----------
Options outstanding at end of year 2,137,417 2,041,417 1,551,417
----------- ---------- ----------
----------- ---------- ----------
Exercise price per share $.20 - $.60
-----------
-----------
At December 31, 1994, 1,189,749 options were exercisable and there were
603,066 shares available for grant under the above 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 Outstanding
Stock Appreciation
Options Rights
Balance at December 31, 1991 1,243,647 345,110
Options granted 154,922 38,730
Options exercised (330,877)
Options canceled (48,635) (39,814)
SARs applied (9,603)
--------- ---------
Balance at December 31, 1992 1,019,057 334,423
Options granted 110,050 27,513
Options exercised (299,052)
Options canceled (68,887) (151,285)
SARs applied (20,359)
--------- ----------
Balance at December 31, 1993 761,168 190,292
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
---------- ---------
---------- ---------
Exercise price per share $.30 - $.56
-----------
-----------
At December 31, 1994, all outstanding options and SARs were exercisable and
there were 367,372 shares available for grant under the above 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 and have
exercise prices ranging from $.20 to $.56 per share. The following
summarizes the activity for the years ended December 31:
1992 1993 1994
Options outstanding at the
beginning of the year 400,343 409,750 356,323
Options granted 372,750 603,500 213,000
Options exercised (150,343) (17,928) (183,520)
Options canceled (213,000)(638,999) (133,479)
-------- ------- -------
Options outstanding at the end of year 409,750 356,323 252,324
-------- ------- -------
-------- ------- -------
At December 31, 1994, 187,251 options were exercisable.
On April 28, 1995, the Company's Board of Directors 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. In addition, the Board of Directors
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.
Both of the foregoing plans were approved by the Company's shareholders on
June 22, 1995.
7. INCOME TAXES
The income tax provisions (benefits) consist of the following components for
the years ended December 31:
1992 1993 1994
Federal $75,889 $(95,094) $32,352
Foreign sales corporation 16,745 (16,745)
Foreign tax 41,573 3,000 5,037
Research and development credits (27,104)
State 42,876 11,021 7,203
-------- -------- ------
149,979 (97,818) 44,592
Deferred taxes (7,866) 35,753 3,881
-------- -------- ------
Provision (benefit) $142,113 $(62,065)$48,473
-------- -------- ------
-------- -------- ------
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:
1993 1994
Current deferred assets:
Net operating loss carryforwards $ 190,000 $ 190,000
Allowance for doubtful accounts 54,000 73,000
Salary accrual 52,000 169,000
Amortization of purchased software (48,000)
Other 26,000 19,000
---------- ----------
274,000 451,000
Long-term deferred assets:
Net operating loss carryforwards 3,140,000 3,552,000
State taxes 57,000 73,000
Tax credits 676,000 698,000
Excess of book depreciation over
tax depreciation 73,000 138,000
Software development costs (168,000) (52,000)
Valuation allowance (3,048,000)(3,860,000)
---------- -----------
730,000 549,000
---------- -----------
Net deferred tax asset $ 1,004,000 $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:
1992 1993 1994
Tax at statutory rate $379,236 $107,051 $(884,800)
Utilization of net operating
loss and research and development
credit carryforwards (259,750) (140,578)
Valuation allowance adjustment 812,000
Permanent differences (6,800) (5,955) 16,038
State income taxes, net of
federal benefit 28,298 7,164 4,681
Foreign (benefit) tax (23,604) (13,745) 5,037
Effect of graduated tax rates 3,059 25,000
Writeoff of foreign tax
credit receivable 26,667
Other 24,733 (19,061) 43,850
-------- -------- --------
$142,113 $(62,065) $ 48,473
-------- -------- --------
-------- -------- --------
At December 31, 1994, the Company had a net operating loss carryforward of
approximately $9,848,000, an investment tax credit carryforward of
approximately $44,000, a research and development credit carryforward of
approximately $521,000, and a general business credit carryforward of
$133,000. The carryforwards expire in varying amounts from 1998 to 2010.
8. 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.
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 and 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
and 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 and 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<PAGE>
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 $2,6000,000. The aggregate value of the consideration paid
to CAMAX shareholders and CAMAX option holders is approximately
$32,6000,000.
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 only, 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-app-
ealable 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
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
Document Exhibit Sequential Numbering
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
(4)
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
____________________
(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, 1994.
(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 Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized in the City of Cincinnati, State of Ohio, on February 12, 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/Albert F. Peter President and February 12, 1996
Albert F. Peter Chief Executive
Officer
Principal Financial and Accounting Officer:
/s/ Jeffrey J. Vorholt Vice President, February 12, 1996
Jeffrey J. Vorholt Chief Financial
Officer, and
Treasurer
Directors of the Company: Date:
/s/ William P. Conlin February 12, 1996
William P. Conlin
/s/ Albert F. Peter February 12, 1996
Albert F. Peter
/s/Robert P. Henderson February 12, 1996
Robert P. Henderson
/s/ John E. McDowell February 12, 1996
John E. McDowell
/s/ Gilbert R. Whitaker, Jr. February 12, 1996
Gilbert R. Whitaker, Jr.
/s/ Bannus B. Hudson February 12, 1996
Bannus B. Hudson
/s/ James W.Nethercott February 12, 1996
James W. Nethercott
/s/ Arthur B. Sims February 12, 1996
Arthur B. Sims
<PAGE>
</TABLE>
Exhibit 5, 23.4
(513) 977-8315
Charles F. Hertlein, Jr.
February 12, 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: /s/ J. Michael Cooney
J. Michael Cooney
SUMMARY OF SELECTED FINANCIAL DATA
Structural Dynamics Research Corporation
<TABLE>
<CAPTION>
Year ended December 31,
(in thousands except
per share data) 1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Statement of
operations data:
Net revenue $167,547 $147,605 $149,041 $129,932 $114,269
Income (loss) before
income taxes and
cumulative effect of
accounting changes (5,168) (7,356) 13,907 14,525 16,378
Income (loss) before
cumulative effect
of accounting changes (9,001) (11,732) 8,775 9,279 8,913
Net income (loss) (12,897) (11,732) 9,475 9,279 8,913
Earnings (loss)
per share:
Before cumulative
effect of accounting
changes (.31) (.39) .29 .31 .32
Net income (loss) (.45) (.39) .31 .31 .32
Common and common
equivalent shares 28,844 29,876 30,093 29,817 27,618
Balance sheet data:
Working capital $27,590 $27,474 $48,440 $45,207 $41,483
Total assets 142,699 134,549 136,130 119,339 99,167
Long-term
liabilities 10,219 326 -- -- 2,604
Total shareholders'
equity 72,152 84,581 92,447 80,359 60,332
</TABLE>
Management's Discussion and Analysis of Financial Condition and
Results of Operations
Structural Dynamics Research Corporation
(in thousands)
The Company operates in two segments: software products and
services, and engineering services. Revenue in the software
products and services segment consists primarily of revenue from
software licenses, software maintenance contracts and customer
training. Revenue in the engineering services segment consists of
consulting activities which are undertaken on either a time and
materials or a fixed fee contract basis.
Software Products and Services
The software products and services segment accounted for
approximately 89%, 86% and 85% of SDRC's consolidated revenue for
the years ended December 31, 1994, 1993 and 1992, respectively, and
approximately (108)%, (103)% and 99% of consolidated operating
income (loss) for the same periods.
Software segment revenue in 1994 increased $20,977 or 16% over
1993. This growth comparison excludes $8,485 of revenue generated
by the SDRC Software and Services GmbH joint venture established in
the first quarter of 1994 and accounted for under the equity
method. Maintenance revenue derived from annual software
maintenance contracts increased 10% primarily due to license
increases in prior years. Revenue was negatively impacted by a 25%
decline from an OEM customer, whose software marketing agreement
was terminated in December 1994. Additionally, revenue was
impacted by difficult market conditions in Europe. Software segment
revenue outside of North America accounted for 62%, 63% and 69% of
software revenue in 1994, 1993 and 1992, respectively. The Company
expects the international market to continue to account for a
significant portion of total software segment revenue.
The software segment incurred operating losses of $2,247 in 1994
and $8,657 in 1993. This improvement was due primarily to
increased revenues partially offset by increased expenses.
Software segment revenue in 1993 was level with 1992. Management's
expectation was that 1993 revenue would increase more than the
performance ultimately achieved. The license revenue in 1993
suffered in part from technical problems associated with the I-DEAS
Master Series initial product release in June 1993. As a result of
the technical problems, a number of customers deferred large
purchase decisions until completion of their benchmark testing of
the I-DEAS Master Series software after the Company had addressed
the unforeseen problems. Additionally, revenue was impacted by
difficult economic conditions in Europe and Japan and by a 42%
decline from an OEM customer. Maintenance revenue derived from
annual software maintenance contracts increased 9% primarily due to
license increases in prior years.
The software segment incurred an operating loss of $8,657 in 1993
compared to operating income of $12,084 in 1992 resulting from
significant increases in cost of revenue and selling, general and
administrative expenses as described below.
Engineering Services
In 1994, 1993 and 1992, the engineering services segment
represented 11%, 14% and 15%, respectively, of the Company's
consolidated revenue and 8%, 3% and 1% of consolidated operating
income (loss) for the same periods.
In 1994, 1993 and 1992, the engineering services segment revenue
decreased 5%, 11% and 15%, respectively. The revenue reduction
was due to downsizing portions of the consulting business not
considered synergistic with the software segment. The Company has
continued to align the engineering services cost structure with the
anticipated revenue stream.
Cost and Expenses
Cost of Revenue. Cost of revenue consists principally of the
amortization of capitalized software construction costs, external
commissions associated with indirect marketing channels and the
cost of distributing software products and providing engineering
consulting services. Cost of revenue includes $7,137, $9,539 and
$3,667 for amortization of software construction costs in 1994,
1993 and 1992, respectively.
Cost of revenue for 1994 decreased 6% from 1993 primarily due to
the charge in 1993 of approximately $3,311 relating to software
construction costs determined to be non-recoverable upon the
release of the I-DEAS Master Series product. Engineering services
consulting costs also declined 5% which is consistent with the
decline in engineering services revenue. These reductions are
partially offset by a full year of amortization of software
construction costs for the I-DEAS Master Series product which was
initially released in June 1993 and an increase in the software
segment's variable costs directly associated with the product
licensing and distribution.
Cost of revenue in 1993 increased 13% over 1992 due to the
commencement of amortization of software construction costs for the
I-DEAS Master Series product upon its initial release in June 1993,
and approximately $3,311 relating to software construction costs
determined to be non-recoverable upon the release of the I-DEAS
Master Series product. In addition, variable costs directly
associated with software product licensing and distribution
increased.
Research and Development Expenses. Research and development
expenses consist primarily of expenses for development of software
products. These expenses 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
capitalized software development costs of $9,312, $11,282 and
$9,365 in 1994, 1993 and 1992, respectively.
Research and development expenses amounted to $33,560, $25,937 and
$25,369 in 1994, 1993 and 1992, respectively. During 1994, research
and development expenses increased significantly in line with the
Company's commitment to the technological advancement of its
product line. Specifically, the product development staff focused
on modifications to I-DEAS Master Series 1.0 and early product
development activities associated with I-DEAS Master Series 3.0.
Royalty fees paid to third parties under licensing agreements,
another component of research and development expenses, increased
significantly in each of the last three years. Third party royalty
expenses increased 53% in 1994 over 1993 primarily due to fees
associated with product data management (PDM) software developed by
a joint venture investee.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses consist principally of costs incurred in
the software products and services segment and corporate staff.
Selling, general and administrative expenses increased 9%, 18% and
26% in 1994, 1993 and 1992, respectively.
During 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, the Company initiated a plan to cut
costs and strengthen its competitive position by reducing its
workforce by 87 people. These employees were primarily product
development, marketing and administrative personnel. As a result,
the Company recognized a charge of $1,247 for severance costs and
outplacement assistance for employees. In 1994, the Company paid
$303 to these employees. At December 31, 1994, the Company had
accrued severance benefits of $944 related to this matter. In
February, 1995, the Company further reduced its workforce and will
record a related charge to income of approximately $1,000.
Additionally, in 1994, the Company incurred severance costs of
$1,919 due to the termination of its former Chief Financial Officer
and the other managers and the resignation of its former Chief
Executive Officer. The former Chief Executive Officer was employed
pursuant to an employment agreement with the Company which provided
for specified severance benefits.
In 1993, the Company recognized expense of $4,200 for the
settlement of a claim by a significant OEM customer. Certain
discretionary employee benefits were reduced in 1993 to offset the
lower than expected revenue growth as a result of technical issues
associated with the initial introduction of I-DEAS Master Series.
Equity in Losses of Affiliates
During 1992, the Company formed a joint venture with Control Data
Systems, Inc., Metaphase Technology, Inc. Metaphase is involved in
developing and marketing product data management software. During
1994, the Company formed a joint venture with Siemens Nixdorf
Informationssysteme AG, 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 losses, the majority of which
resulted from the SDRC GmbH joint venture.
Other Income
Other income consists principally of interest income. Increasing
interest rates in 1994 resulted in higher interest income. In 1994
the Company also received interest on an income tax refund.
Income Taxes
During 1994 and 1993, the Company recorded tax expense of $3,833
and $4,376 on pretax losses of $5,168 and $7,356, respectively.
Although the Company incurred losses in 1994 and 1993, 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. Due to U.S. tax net
operating losses (NOLs), the Company is not currently in a position
to utilize these foreign tax credits (FTCs). The FTCs and NOLs
are available to offset future U.S. income tax liabilities, subject
to various restrictions. No tax benefit was currently recognized
for these FTCs and NOLs as their realization is not assured.
Effective January 1, 1992, the Company adopted SFAS No. 109,
"Accounting for Income Taxes". The cumulative effect (for periods
prior to January 1, 1992) of applying this statement was to
increase net income by $700 or $.02 per share for the year ended
December 31, 1992.
In 1994, the Company received a tax refund of $1,754 for research
and experimentation credits not previously recorded.
Postemployment Benefits
Effective January 1, 1994, the Company adopted the provisions of
SFAS No. 112, "Employers' Accounting for Postemployment Benefits".
This statement requires that companies 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 112 reduced 1994 income by
$3,896. The annual incremental charge for future periods is not
anticipated to be material.
Liquidity and Capital Resources
As of December 31, 1994, the Company had $46,240 in cash, cash
equivalents and investments. The Company's working capital was
$27,590. As of March 1, 1995, the Company also has an unsecured
bank line of credit of $15,000.
During 1994, 1993 and 1992 the Company generated cash flows from
operations of $6,176, $19,467 and $21,855, respectively. In 1994,
the sources of net cash provided by operating activities were
significantly reduced by the $16,158 increase in accounts
receivable. The 1994 growth in accounts receivable over 1993 was
due to the higher level of revenue in the 1994 fourth quarter,
primarily in North American and Far East operations.
The Company had no borrowings in 1994.
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 1992 through 1994 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 9 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.
Report of Management
Responsibility for the integrity and objectivity of the financial
information presented in this Annual Report rests with Structural
Dynamics Research Corporation's management. The accompanying
financial statements have been prepared in conformity with
generally accepted accounting principles, applying certain
estimates and judgments as required. Financial information
contained elsewhere in this Annual Report is consistent with that
in the financial statements.
The management of the Company is responsible for establishing and
maintaining a system of internal accounting control that is
designed to provide reasonable assurance that assets are
safeguarded and transactions are properly recorded. This system is
supported by written policies and procedures, organizational
structures that provide an appropriate division of responsibility,
internal reviews, and the careful selection and training of
qualified personnel.
Our independent accountants, Price Waterhouse LLP, audit the
financial statements in accordance with generally accepted auditing
standards, which includes the consideration of the system of
internal control to the extent they deem necessary to express an
opinion on the financial statements.
The Board of Directors, through its Audit Committee, composed of
outside directors, meets regularly with the Company's independent
accountants and management to review the adequacy of internal
accounting controls, financial reporting and the extent and results
of the audit effort.
Albert F. Peter
President and Chief Executive Officer
Jeffrey J. Vorholt
Vice President,
Chief Financial Officer and Treasurer
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, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years
in the period ended December 31, 1994, 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 described in Note 5, in 1994 the Company changed its method of
accounting for postemployment benefits.
Price Waterhouse LLP
Cincinnati, Ohio
February 15, 1995
CONSOLIDATED STATEMENT OF OPERATIONS
Structural Dynamics Research Corporation
Year ended December 31
(in thousands, except per share data) 1994 1993 1992
Revenue:
Software products and services $111,349 $ 93,591 $ 95,494
Maintenance 37,101 33,882 31,023
Engineering services 19,097 20,132 22,524
Net revenue 167,547 147,605 149,041
Cost and expenses:
Cost of revenue 35,354 37,503 33,141
Research and development expenses 33,560 25,937 25,369
Selling, general and
administrative expenses 100,715 92,549 78,318
Total cost and expenses 169,629 155,989 136,828
Operating income (loss) (2,082) (8,384) 12,213
Equity in losses of affiliates (5,329) (614) (410)
Other income, principally interest 2,243 1,642 2,104
Income (loss) before income taxes and
cumulative effect of
accounting changes (5,168) (7,356) 13,907
Income tax expense 3,833 4,376 5,132
Income (loss) before cumulative
effect of accounting changes (9,001) (11,732) 8,775
Cumulative effect of accounting
changes (3,896) -- 700
Net income (loss) $(12,897) $(11,732) $ 9,475
Earnings (loss) per share:
Before cumulative effect of
accounting changes $ (.31) $ (.39) $ .29
Cumulative effect of
accounting changes (.14) -- .02
Net income (loss) per share $ (.45) $ (.39) $ .31
Common and common equivalent shares 28,844 29,876 30,093
See accompanying notes to consolidated financial statements.
<PAGE>
CONSOLIDATED BALANCE SHEET
Structural Dynamics Research Corporation
December 31,
(in thousands) 1994 1993
Assets
Current assets:
Cash and cash equivalents $ 21,885 $ 34,783
Short-term investments 17,296 10,720
Trade accounts receivable, net 35,867 20,567
Other accounts receivable 6,760 5,902
Prepaid expenses 6,110 5,144
Total current assets 87,918 77,116
Long-term investments 7,059 10,547
Property and equipment, at cost:
Computer and other equipment 36,259 36,055
Office furniture and equipment 9,258 9,079
Leasehold improvements 3,799 3,594
49,316 48,728
Less accumulated depreciation
and amortization 35,537 32,897
Net property and equipment 13,779 15,831
Computer software construction costs, net 30,854 28,457
Other assets 3,089 2,598
Total assets $142,699 $134,549
See accompanying notes to consolidated financial statements.
December 31,
(in thousands, except per share data) 1994 1993
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $ 6,857 $ 6,512
Accrued expenses 29,495 24,699
Accrued income taxes 4,262 5,371
Deferred revenue 19,714 13,060
Total current liabilities 60,328 49,642
Postemployment benefits and other 4,336 326
Cumulative share of losses in affiliate, net 5,883 --
Commitments and contingencies (Note 9)
Shareholders' equity:
Common stock, stated value $.0069 per share
Authorized 100,000 shares; outstanding
shares - 28,897 and 28,709 net of 1,652
and 1,612 shares in treasury 201 199
Capital in excess of stated value 46,482 45,376
Retained earnings 26,728 39,625
Foreign currency translation adjustment (590) (619)
Unrealized holding loss on investments (669) --
Total shareholders' equity 72,152 84,581
Total liabilities and
shareholders' equity $142,699 $134,549<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
Structural Dynamics Research Corporation
Foreign Unrealized Total
Common stock Capital in currency holding share-
outstanding excess of Retained translation loss on holders'
Shares Stated stated value earnings adjustment investments equity
value
(in thousands)
<S> <C> <C> <C> <C> <C> <C> <C>
December
31, 1991 27,081 $188 $38,440 $41,882 $(151) $ -- $80,359
Transactions
involving
employee stock
plans 1,178 8 4,621 4,629
Purchases of
treasury stock (123) (1) (1,587) (1,588)
Net income 9,475 9,475
Foreign currency
translation
adjustment (428) (428)
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
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
<CAPTION>
<PAGE>
CONSOLIDATED STATEMENT OF CASH FLOWS
Structural Dynamics Research Corporation
Year ended December 31
<S> <C> <C> <C>
(in thousands) 1994 1993 1992
Cash flows from
operating activities:
Net income (loss) $(12,897) $(11,732) $ 9,475
Adjustments to
reconcile net income (loss)
to net cash provided by
operating activities:
Depreciation and
amortization 7,027 6,990 7,009
Amortization of computer
software construc-
tion costs 7,137 9,539 3,667
Equity in losses of
affiliates 5,329 614 410
Postemployment benefits
accounting change 3,896 -- --
Changes in assets
and liabilities:
(Increase) decrease
in accounts
receivable, net (16,158) 8,468 (7,989)
Increase in prepaid
expenses (966) (717) (92)
Increase in accounts
payable and accrued
expenses 5,141 6,433 1,771
(Decrease) increase
in accrued income
taxes (1,109) 13 4,920
Increase (decrease)
in deferred revenue 6,654 (141) 2,761
Increase (decrease) in
other long-term
liabilities 2,122 -- (77)
Net cash provided
by operating
activities 6,176 19,467 21,855
Cash flows from investing
activities:
Purchases of investments (32,007) (39,811) (14,890)
Proceeds from sales of
investments 28,250 39,296 10,628
Additions to property and
equipment, net (4,975) (6,150) (8,764)
Additions to computer
software construction costs (9,534) (11,578) (9,625)
Investment in joint ventures (1,823) (1,500) (1,477)
Other, net (122) (468) 2
Net cash used in investing
activities (20,211) (20,211) (24,126)
Cash flows from financing
activities:
Stock issued under employee
benefit plans 1,465 4,071 4,629
Purchases of treasury stock (357) (165) (1,588)
Net cash provided by
financing activities 1,108 3,906 3,041
Effect of exchange rate
changes on cash 29 (40) (428)
(Decrease) increase in cash
and cash equivalents (12,898) 3,122 342
Cash and cash equivalents:
Beginning of period 34,783 31,661 31,319
End of period $21,885 $ 34,783 $ 31,661
Cash paid during the year for
income taxes $ 3,528 $ 4,450 $ 3,957
See accompanying notes to consolidated financial statements.
</TABLE>
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
hardware vendors and distributors. 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, $7,877 and $13,599 in
1994, 1993 and 1992, 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.
The Company recognizes revenue and expenses from engineering
consulting contracts based on the percentage of completion method
of accounting. When losses are estimated to occur on these
contracts, the entire estimated loss is recognized at that time.
(c) Earnings (Loss) Per Share
Earnings (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 maturities of less than 90 days to be cash
equivalents. Reverse repurchase agreements of $11,549 and $19,555
were held at December 31, 1994 and 1993, respectively. Due to the
short-term nature of the agreements, the Company and the trustee do
not take possession of the securities, which are segregated in the
accounts of the trustee; the Company and the trustee monitor the
underlying market values to assure that sufficient collateral
exists to cover the initial investment and accrued interest.
(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 marketable securities 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.
(g) Computer Software Construction Costs
The Company designs, develops and markets computer software
products. Costs related to the construction of software 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 $11,573 and $4,436 at December 31, 1994 and 1993,
respectively. As of December 31, 1994 and 1993, computer software
construction costs, net, include only those costs related to
current software products. Amortization 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 and $68 for
the years ended December 31, 1993 and 1992, respectively, related
to software construction costs determined to be non-recoverable.
(h) Foreign Currency Translation and Hedging Contracts
The functional currency of the engineering services foreign
operations is their local currency and their assets and liabilities
are translated at year-end exchange rates. Translation gains and
losses are not included in determining net income but are
accumulated in a separate component of shareholders' equity. For
foreign software products and services 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.
In 1993 the Company began hedging certain portions of its exposure
to foreign currency fluctuations, primarily the Company's net
assets in foreign subsidiaries, by utilizing forward foreign
exchange contracts. At December 31, 1994, the Company had
contracts to exchange foreign currencies totaling $16,500 which
matured in January 1995. 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
Effective January 1, 1992, the Company adopted SFAS No. 109,
"Accounting for Income Taxes". The cumulative effect of applying
this statement was to increase net income by $700 or $.02 per share
in 1992. Under SFAS No. 109, 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. 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 have been, or are
intended to be, permanently reinvested. Undistributed earnings
amounted to approximately $3,705 at December 31, 1994.
(j) Concentration of Credit Risk
The Company's revenue is generated from customers in diversified
industries, primarily in North America, Europe and the Far East.
In 1994 and 1993, the Company generated revenue from a significant
customer aggregating 11%. 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) 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.
(2) Supplemental Consolidated Balance Sheet Data
December 31
Trade accounts receivable,
net, consists of: 1994 1993
Trade accounts receivable $38,774 $22,918
Allowance for doubtful accounts
and reserve for returns and allowances (2,907) (2,351)
$35,867 $20,567
December 31, 1994
Fair Amortized
Investments consist of: Value Cost
Short-term:
Available-for-sale U.S.
government agency obligations $10,548 $10,741
Held-to-maturity certificates
of deposit 6,748 6,748
$17,296 $17,489
Long-term:
Available-for-sale U.S.
government agency obligations $ 7,059 $ 7,535
Investments available-for-sale have maturities of $10,548 in 1995,
$4,392 in 1996, $1,867 in 1997 and $800 in 2013.
<PAGE>
December 31
Accrued expenses consist of: 1994 1993
Accrued compensation $13,171 $ 9,470
Accrued royalties 3,020 102
Accrued marketing costs 2,715 3,936
Accrued taxes other than income taxes 1,776 2,036
Other 8,813 9,155
$29,495 $24,699
(3) Leases
Future minimum lease payments under noncancelable operating leases
for the five years ending December 31, 1999 approximate $8,958,
$6,770, $5,396, $4,118 and $3,262, respectively, and $36,568
thereafter. Total rental expenses under operating leases for the
years ended December 31, 1994, 1993 and 1992 were $13,042, $10,673
and $9,673, respectively.
(4) Income Taxes
<TABLE>
<CAPTION>
The provision for income taxes Year ended December 31
consists of the following: 1994 1993 1992
<S> <C> <C> <C>
Federal:
Current $(1,754) $ -- $ 387
Deferred -- -- (77)
(1,754) -- 310
State 411 500 979
Foreign:
Income taxes 1,113 444 1,010
Withholding taxes 4,063 3,432 2,833
$ 3,833 $4,376 $5,132
</TABLE>
Deferred state and foreign taxes are not material.
(4) Income Taxes - continued
The provision for income taxes
differs from the amounts computed
by using the statutory U.S.
Federal income tax rate. The Year ended December 31
reasons for the differences
are as follows: 1994 1993 1992
Computed expected income tax
expense (benefit) $(1,809) $(2,575) $4,728
Increase (reduction) resulting
from:
Foreign taxes, without current
benefit 5,176 3,876 --
U.S. losses without tax benefit 1,809 2,575 --
Receipt of research and
experimentation tax credit refund
not previously recorded (1,754) -- --
State taxes, net of federal benefit 411 500 646
Research and experimentation credit -- -- (354)
Other, net -- -- 112
$3,833 $4,376 $5,132
The tax effects of temporary differences
that give rise to the deferred tax assets
and deferred tax liabilities are as
follows: Year ended December 31,
1994 1993
Deferred tax assets:
Revenue recognition and
accounts receivable $ 730 $ 18,276
Property and equipment 1,028 959
Other liabilities and reserves 2,926 998
Tax credit and net operating
loss carryforwards 24,412 2,661
Other 792 802
Total deferred tax assets 29,888 23,696
Valuation allowance (19,537) (14,628)
Net deferred tax assets 10,351 9,068
Deferred tax liabilities:
Computer software construction
costs, net of amortization (10,351) (9,068)
Total net deferred taxes $ -- $ --
Of the $24,412 in tax credit and net operating loss carryforwards
available at December 31, 1994, $10,908 of foreign tax credits
expire in the years 1997 through 1999, $2,243 of research and
experimentation credits expire in the years 2007 through 2009,
$1,017 of alternative minimum taxes never expire and $10,244 of net
operating losses expire in the year 2009.
The net change in the valuation allowance for deferred tax assets
was an increase of $4,909 in 1994 and $8,533 in 1993. Of the
$19,537 in valuation allowance at December 31, 1994, $7,908 is
attributable to the tax benefit of stock option exercises. Such
benefits will be credited to capital in excess of stated value when
realized.
(5) Postemployment Benefits
In the first quarter of 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 112 reduced income by
$3,896, net of zero tax benefit, in the first quarter of 1994.
In the fourth quarter of 1994 the Company initiated a plan to cut
costs and strengthen its competitive position by reducing its
workforce by 87 people. These employees were primarily product
development, marketing and administrative personnel. As a result,
the Company recognized a charge of $1,247 for severance costs and
outplacement assistance for employees. In 1994, the Company paid
$303 to these employees. At December 31, 1994, the Company had
accrued severance benefits of $944 related to this matter. In
February, 1995, the Company further reduced its workforce and will
record a related charge to income of approximately $1,000.
(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. In March 1994 the Company and
Siemens Nixdorf Informationssysteme AG (SNI) formed a joint
venture, SDRC Software and Services GmbH (SDRC GmbH), to market
mechanical CAE/CAD/CAM software and services in Central Europe.
The Company has a 50% interest in the joint venture. Previously,
revenue from the Company's activities in this region was reported
on a consolidated basis. The SDRC GmbH joint venture agreement
requires each venture partner to make additional equity
contributions in the event of venture losses. SDRC's future
commitment is limited to $2,000 through 1996. The Company's
investments in the joint ventures are accounted for on the equity
basis.
Financial data for the year ended December 31, 1994 for Metaphase
and SDRC GmbH is presented below; data for 1993 and 1992 represents
only Metaphase:
Year ended and as of December 31
1994 1993 1992
Current assets $ 5,905 $ 764 $ 737
Non-current assets 4,426 2,185 836
Current liabilities 8,564 1,075 2,643
Non-current liabilities 6,760 4,670 --
Net revenue 14,379 6,412 737
Loss before income taxes (10,483) (1,756) (1,170)
Net loss $(10,502) $(1,756) $(1,170)
(7) 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.
(8) 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; 67% 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, 1994 there were
approximately 5,318 shares on which options were exercisable.
(8) Common Stock and Employee Benefit Plans - continued
Transactions with respect to
the Company's stock options for
the years ended December 31, 1992, Option Price
1993 and 1994 are as follows: Shares Per Share
Shares under option December 31, 1991 5,940 $ 1.25-24.44
Granted 1,684 $10.59-28.75
Exercised 1,103 $ 1.25-20.13
Cancelled 135 $ 9.88-23.75
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
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 employees principally
through contributory defined contribution retirement plans.
Expenses related to these plans totaled $2,091, $943 and $1,686 in
1994, 1993 and 1992, respectively.
(9) Commitments and Contingencies
In September 1994 the Company announced that in the course of an
internal examination, it had discovered that a number of purported
sales to or through third-party distribution channels apparently
did not reflect actual sales and that, as a result, it would be
necessary to restate the Company's financial results. The Company
issued its restated financial statements for the years ended
December 31, 1993, 1992 and 1991 on January 16, 1995. The Company
also announced that it had terminated its Vice President and
General Manager of Far East Operations.
On September 15, 1994 the first of a total of 12 class action
lawsuits and two derivative lawsuits was filed. All of these suits
were filed in the United States District Court, Southern District
of Ohio and alleged a variety of causes of action under the federal
securities laws and Ohio corporate law. Two of the class action
lawsuits were later voluntarily dismissed. The remaining cases
were then consolidated into one proceeding. The complaint demands
money damages in an unspecified amount.
The plaintiffs in this case presently consist of 22 individuals who
allegedly purchased shares of the Company's Common Stock between
February 3, 1992 and September 14, 1994. The consolidated
complaint contains allegations intended to support the
certification of a class of plaintiffs. The defendants include
the Company, certain directors and former officers.
The Securities and Exchange Commission has commenced a formal,
private investigation of the Company arising out of the same facts
which gave rise to the above-described litigation.
The Company intends to defend itself vigorously in this litigation
but is unable, at this time, to determine the amount of loss, if
any, that may result from these matters. Management does not
believe the ultimate outcome of these matters will have a material
adverse impact on the Company's financial position.
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.
The Company is involved in other legal proceedings arising from the
normal course of business, none of which, in management's opinion,
is expected to have a material adverse impact on the Company's
financial position.
<PAGE>
(10) Segment and Geographic Information
Depreciation
and
Financial data Operating Identifiable Amortization Capital
by segment: Revenue Income (Loss) Assets Expense Expendi-
tures
Year ended December 31, 1994
Software products
and services $148,450 $ (2,247) $ 82,436 $4,852 $4,259
Engineering
services 19,097 165 9,030 1,061 391
Corporate -- -- 51,233 1,114 325
Consolidated $167,547 $( 2,082) $142,699 $7,027 $4,975
Year ended December 31, 1993
Software products
and services $127,473 $ (8,657) $ 67,922 $4,521 $4,340
Engineering
services 20,132 273 8,455 1,316 1,323
Corporate -- -- 58,172 1,153 487
Consolidated $147,605 $(8,384) $134,549 $6,990 $6,150
Year ended December 31, 1992
Software products
and services $126,517 $12,084 $ 63,562 $4,271 $7,101
Engineering
services 22,524 129 9,721 1,453 750
Corporate -- -- 62,847 1,285 913
Consolidated $149,041 $12,213 $136,130 $7,009 $8,764
Financial data by geographic
area (Corporate general
expenses are not allocated
to operating income by Operating Identifiable
geographic area): Revenue Income(Loss) Assets
Year ended December 31, 1994
North America $ 71,805 $ 5,615 $ 59,168
Europe 46,027 (599) 26,102
Far East 49,715 1,079 6,196
Corporate -- (8,177) 51,233
Consolidated $167,547 $(2,082) $142,699
Year ended December 31, 1993
North America $ 57,760 $ 1,407 $ 41,821
Europe 47,497 (8,142) 30,352
Far East 42,348 4,209 4,204
Corporate -- (5,858) 58,172
Consolidated $147,605 $(8,384) $134,549
Year ended December 31, 1992
North America $ 54,188 $ 3,875 $ 40,550
Europe 49,266 783 24,200
Far East 45,587 14,447 8,533
Corporate -- (6,892) 62,847
Consolidated $149,041 $12,213 $136,130
<PAGE>
(11) Quarterly Results of Operations (Unaudited)
The following table sets forth selected unaudited quarterly
financial information for 1994 and 1993. The Company believes
that all necessary adjustments have been included to present
fairly the selected quarterly information.
Three months ended Year ended
March 31, June 30, September December December
1994 1994 30, 1994 31, 1994 31, 1994
Net revenue $36,795 $42,709 $42,500 $45,543 $167,547
Operating
results (3,327) 3,507 1,535 (3,797) (2,082)
Net income
(loss) (8,210) 1,592 8 (6,287) (12,897)
Earnings (loss)
per share (.27) .05 -- (.22) (.45)*
Three months ended Year ended
March 31, June 30, September December December
1993 1993 30, 1993 31, 1993 31, 1993
Net revenue $33,506 $40,428 $35,057 $38,614 $147,605
Operating
results (47) (2,456) (4,117) (1,764) (8,384)
Net loss (636) (3,657) (4,991) (2,448) (11,732)
Loss per share (.02) (.12) (.16) (.08) (.39)*
*Per share amounts are not additive.<PAGE>
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 February 15, 1995,
which appears in SDRC's 1994 Annual Report on Form 10-K for the year ended
December 31, 1994. 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
February 12, 1996
INDEPENDENT AUDITOR'S CONSENT
We consent to the use in this Registration Statement of Structural Dynamics
Research Corporation on Form S-4 of the report of Deloitte & Touche LLP
dated April 28, 1995 (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, 1993 and 1994 and for each of the three years in the period
ended December 31, 1994 appearing in the Joint Proxy Statement/Prospectus
which is part of this Registration Statement.
We also consent to the reference to Deloitte & Touche LLP under the headings
"Selected Financial Data" and "Experts" in such Joint Proxy
Statement/Prospectus.
/s/ Deloitte & Touche
Minneapolis Minnesota
February 12, 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 relating to the financial statements of Point Control Co. and
subsidiaries as of December 31, 1993, and for each of the two years in the
period 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 L.L.P.
Coopers & Lybrand L.L.P.
Eugene, Oregon
February 13, 1996
Exhibit 23.4
Consent of Wessels, Arnold & Henderson, L.L.C.
February 12, 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
[Proxy Card] EXHIBIT 99.2
CAMAX MANUFACTURING TECHNOLOGIES, INC.
Proxy for Special Meeting of Shareholders
Holders of Common Stock
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
For the purpose of voting on the approval or disapproval of the merger (the
"Merger") of CAMAX Manufacturing Technologies, Inc. ("CAMAX") with and into
SDRC Systems, Inc. ("SDRC Sub") pursuant to that certain Agreement of Merger
and Plan of Reorganization by and among CAMAX, SDRC Sub and Structural
Dynamics Research Corporation ("SDRC"), dated January 16, 1996 (the "Merger
Agreement"), the undersigned hereby appoints Robert J. Majteles and Gregory
S. Furness, and each of them acting alone, with the power to appoint a
substitute, to vote all shares the undersigned is entitled to vote at the
Special Meeting of Shareholders of CAMAX, to be held on April __, 1996, and
at all adjournments thereof, as specified below on the matters referred to:
1. The approval and adoption of the Merger and the Merger Agreement and the
transactions contemplated thereby. Pursuant to the Merger Agreement, among
other things, CAMAX will be merged with and into SDRC Sub, and each
outstanding share of CAMAX Common Stock will be exchanged for shares of SDRC
Common Stock (with cash paid in lieu of fractional shares), subject to
certain formulae set forth in the Merger Agreement.
__ FOR __ AGAINST __ ABSTAIN
This Proxy, when properly executed, will be voted in the manner directed
herein by the undersigned shareholder. If no direction is made, this Proxy
will be voted FOR Item 1. When shares are held by joint tenants, both
should sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such. When signing as a corporation,
please sign in full corporate name by President or other authorized officer.
When signing as a partnership, please sign in partnership name by authorized
person.
_____________________________
Signature
_____________________________
Name
_____________________________
Signature if held jointly
_____________________________
Name
Dated: ___________, 1996
__________________________________________________________
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY PROMPTLY.
Return envelope is enclosed for your convenience.
__________________________________________________________
