As filed with the Securities and Exchange Commission on July 28, 1997
Registration No. 333-26203
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
---------------
AMENDMENT NO. 2
TO
FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------
MARCAM CORPORATION
(Exact name of registrant as specified in its charter)
Massachusetts 04-2711580
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification Number)
95 Wells Avenue, Newton, Massachusetts 02159
(617) 965-0220
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
George A. Chamberlain, 3d
Chief Financial Officer
Marcam Corporation
95 Wells Avenue
Newton, Massachusetts 02159
(617) 965-0220
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
---------------
Copies to:
Mark H. Burnett Mark G. Borden
TESTA, HURWITZ & THIBEAULT, LLP Thomas L. Barrette, Jr.
125 High Street; High Street Tower HALE AND DORR LLP
Boston, Massachusetts 02110 60 State Street
(617) 248-7000 Boston, Massachusetts 02109
(617) 526-6000
---------------
Approximate date of commencement of proposed sale to the public: As soon
as practicable after this Registration Statement becomes effective.
If the only securities being registered on this form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this form are to be offered
on a delayed or continuous basis pursuant to Rule 415 under the Securities Act
of 1933, other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an Offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same Offering: [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same Offering: [ ]
If delivery of the Prospectus is expected to be made pursuant to Rule 434,
please check the following box: [X]
---------------
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 Commission, acting pursuant to said
Section 8(a), may determine.
================================================================================
<PAGE>
SUBJECT TO COMPLETION, DATED JULY 28, 1997
PROSPECTUS
, 1997
[MAPICS LOGO] 6,000,000 Shares
MAPICS, Inc.
(Currently Marcam Corporation)
Common Stock
[RED HERRING]
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such State.
[/RED HERRING]
All of the shares of Common Stock offered hereby are being sold by MAPICS,
Inc. ("MAPICS" or the "Company," currently known as Marcam Corporation). Prior
to the completion of the Offering, the Company will distribute to its
stockholders of record on the record date (the "Distribution") all of the
outstanding capital stock of Marcam Solutions, Inc., a new wholly owned
subsidiary of the Company ("Marcam Solutions"). The Offering is conditioned
upon the completion of the Distribution and will not occur until after the
Distribution. Purchasers of Common Stock in the Offering will not participate
in the Distribution. See "The Distribution." Accordingly, historical trading
prices of the Common Stock of Marcam Corporation will not be indicative of
future trading prices of the Company's Common Stock. The initial price to the
public of the Common Stock offered hereby will be determined by negotiations
between the Company and the Underwriters. It is currently estimated that the
initial price to the public will be between $9.00 and $12.00 per share. See
"Underwriting" for information relating to the factors to be considered in
determining the initial price to the public. The Common Stock of Marcam
Corporation is traded on the Nasdaq National Market under the symbol "MCAM."
Application has been made to change the Company's trading symbol to "MAPX"
effective concurrently with the Company's name change to "MAPICS, Inc." at the
time of the Offering.
See "Risk Factors" on page 7 for information that should be considered by
prospective investors.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
Price Underwriting Proceeds
to Discounts and to the
the Public Commissions(1) Company(2)
-------------- ---------------- -----------
<S> <C> <C> <C>
Per Share ...... $ $ $
Total (3) ...... $ $ $
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting" for indemnification arrangements with the
Underwriters.
(2) Before deducting expenses payable by the Company estimated at $1,750,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up
to an aggregate of 900,000 additional shares at the Price to the Public,
less Underwriting Discounts and Commissions, solely to cover
over-allotments, if any. If the option is exercised in full, the total
Price to the Public, Underwriting Discounts and Commissions and Proceeds to
the Company will be $ , $ , and $ , respectively. See "Underwriting."
The shares of Common Stock are offered by the several Underwriters when, as
and if delivered to and accepted by the Underwriters and subject to various
prior conditions, including their right to reject orders in whole or in part.
It is expected that delivery of the share certificates will be made in New
York, New York on or about , 1997.
Donaldson, Lufkin & Jenrette
Securities Corporation
Lazard Freres & Co. LLC
Dain Bosworth
Incorporated
<PAGE>
[PICTURES]
Description of Inside Front Cover Page Graphics:
Multicolor computer generated graphic depicting a silhouette of two
people shaking hands, encircled by computer icons which depict and name seven
areas of the Company's software applications, as follows: Financial Management;
Engineering; Production Planning; Plant Operations; Maintenance Management;
Marketing; and Cross-Applications, all superimposed upon a globe-like sphere
against a multi-colored background.
[/PICTURE]
[CAPTION]
MAPICS offers products -- over 40 integrated applications -- to meet a variety
of needs for the discrete and batch-process manufacturing industries. MAPICS
provides its customers with a strategic resource to gain a competitive edge in
their constantly changing marketplace.
[/CAPTION]
CERTAIN PERSONS PARTICIPATING IN THIS OFFERING MAY ENGAGE IN TRANSACTIONS
THAT STABILIZE, MAINTAIN, OR OTHERWISE AFFECT THE PRICE OF THE COMMON STOCK.
SPECIFICALLY, THE UNDERWRITERS MAY OVER-ALLOT IN CONNECTION WITH THE OFFERING
AND MAY BID FOR AND PURCHASE SHARES OF THE COMMON STOCK IN THE OPEN MARKET. FOR
A DESCRIPTION OF THESE ACTIVITIES, SEE "UNDERWRITING."
----------------
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS (IF ANY) OR THEIR RESPECTIVE AFFILIATES MAY ENGAGE IN PASSIVE MARKET
MAKING TRANSACTIONS IN THE COMMON STOCK ON THE NASDAQ STOCK MARKET IN
ACCORDANCE WITH RULE 103 OF REGULATION M. SEE "UNDERWRITING."
MAPICS[RegTM] is a registered trademark of the Company. Marcam[RegTM] is a
registered trademark of Marcam Solutions. This Prospectus also includes product
and company names, trademarks and trade names of companies other than the
Company.
2
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and combined financial statements, including the notes thereto,
appearing elsewhere in this Prospectus. Except as otherwise noted, all
information in this Prospectus (i) assumes no exercise of the Underwriters'
over-allotment option; and (ii) gives effect to the Distribution. Although
Marcam Solutions Common Stock will be distributed to Marcam Corporation's
stockholders, the Distribution will be recorded as a disposal of the business
conducted by MAPICS, Inc., due to the relative significance of the business
conducted by Marcam Solutions. Except as otherwise noted, the combined
financial statements and notes thereto and all other financial data herein
reflect only the business related to the MAPICS products, as derived from the
historical assets, liabilities and operating results of Marcam Corporation. See
"The Distribution," "Relationship Between MAPICS and Marcam Solutions,"
"Description of Capital Stock," "Underwriting" and Notes 1 and 15 of Notes to
Combined Financial Statements.
THE COMPANY
MAPICS is a leading provider of enterprise resource planning ("ERP")
software applications for mid-size discrete and batch-process manufacturing
enterprises worldwide. The Company's products provide an integrated and
function-rich ERP solution with the breadth and depth of applications to manage
an entire manufacturing enterprise. The MAPICS XA product line currently
consists of 44 integrated application modules in the areas of Engineering and
Cost Management, Market and Demand Management, Plant Operations and Logistics
Management, Production Resource Planning, Financial Management and Measurements
and Cross Applications Solutions. The Company continually enhances its product
offerings to meet the specific needs of mid-size manufacturers and offers such
manufacturers the opportunity to gradually migrate to new technologies, one
user at a time if desired, while protecting their existing investments in both
hardware and software. In addition to its internal development programs, the
Company utilizes independent software developers, known as Solution Partners,
to assist in the development of new applications. Solution Partners permit the
Company to introduce new applications quickly and on a variable cost basis.
Approximately 5,700 customer sites presently use MAPICS applications,
which the Company believes represents one of the largest installed user bases
in the ERP industry. In Advanced Manufacturing Research's ("AMR") survey of ERP
customer satisfaction, MAPICS products received the highest overall total score
(nearly one-third higher than the next competitor) based on 15 different
factors, including functionality, value, implementation results, quality of
support, service and maintenance, and knowledge of sales force. The Company's
customer base consists primarily of mid-size ($20 million to $500 million in
annual revenues) manufacturers and divisions, sites and subsidiaries of large
companies, including Bristol-Myers Squibb Company, Colgate-Palmolive Company,
Eaton Corporation, General Electric Company, Honda Motor Co., Ltd.,
International Game Technology, Peg Perego Pines SPA, Shiseido Cosmetics
(America) Ltd. and Sub-Zero Freezer Co., Inc. The primary channel for selling
and supporting MAPICS products is a network of more than 80 affiliates which
sells, implements, services and supports MAPICS products throughout the world.
In addition to providing customers high quality local implementation,
consulting and support services in a cost-effective manner, the affiliate
distribution channel provides the Company an attractive variable cost structure
for sales and marketing.
According to industry sources, the total worldwide market for ERP systems
on all hardware systems was approximately $5.5 billion in 1996 and will grow at
least 20% this year. The MAPICS XA product line runs on International Business
Machines Corporation's ("IBM") AS/400 system, which the Company believes is the
leading platform in the mid-size manufacturing market.
The Company's primary objective is to continue to be a leading provider of
integrated ERP solutions to mid-size manufacturers worldwide. The key elements
to implement this strategy are:
Leverage Large Installed Customer Base. The Company believes the
approximately 5,700 customer sites using MAPICS applications represent one of
the largest installed user bases in the ERP industry. Opportunities for
recurring revenue from existing customers include continued licensing of
existing modules, licensing of additional modules, implementation of MAPICS
products at additional sites, upgrades to larger processors and migrations to
new technologies.
3
<PAGE>
Utilize Well-Established Affiliate Distribution Channel. MAPICS products
are distributed in over 50 countries through a network of more than 80
affiliates. The use of local affiliates provides the Company with strong market
access and penetration, while providing for local support. With their extensive
experience installing MAPICS products, these affiliates typically offer
customers high quality and cost-effective local implementation, consulting and
support services and, in some cases, offer complementary products. Affiliates
typically have extensive knowledge of the mid-size manufacturing industry in
their geographic region and are able to establish and maintain cooperative
relationships with MAPICS customers. The affiliate distribution channel
provides the Company with an attractive variable cost structure for sales and
marketing.
Accelerate Growth in International Markets. The Company intends to
continue to expand its market presence throughout the world, with a focus on
Europe where there is a large installed base of IBM AS/400 systems. During
1996, the Company introduced its International Financial Management suite of
modules, which are designed to meet the requirements of international
enterprises with customers and production facilities in multiple countries. To
address specific needs in local markets, MAPICS modules are translated and
localized, supporting the local language, currency, taxation and accounting
requirements. Currently, the most commonly installed MAPICS XA application
modules are available in English, Chinese, French, German, Japanese, Portuguese
and Spanish.
Broaden Customer Base with New Functionality. The Company intends to
continue to broaden its customer base by offering new functionality required by
both new and existing customers. The Company uses the feedback it receives from
its customers, affiliates and Solution Partners to develop the functionality
needed by certain segments of the mid-size manufacturing industries. For
example, the Company recently introduced Intersite Logistics for customers with
multiple, interrelated production sites; Contract Accounting for manufacturers
with projects which extend over long time periods and for government
contractors; and Knowledge-Based Configurator for manufacturers in
make-to-order production industries.
Migrate Customers to New Technologies Gradually. The Company is committed
to enhancing the functionality of its products and delivering solutions which
utilize new technologies sought by users, while preserving users' previous
investments in both hardware and software. This evolutionary product
development strategy is designed to offer customers the opportunity to migrate
to new technologies at their own pace, as gradually as one user at a time if
desired. The Company believes this approach is attractive to those mid-size
manufacturers who seek functional applications which operate on established
hardware platforms.
The Company was incorporated in Massachusetts in 1980. The Company's
principal executive offices are located at 5775-D Glenridge Drive, Atlanta,
Georgia 30328, and its telephone number is (404) 705-3000.
RECENT DEVELOPMENTS
For the quarter ended June 30, 1997, MAPICS had revenues of $22.0 million
and net income of $3.0 million. MAPICS continued to show positive growth in the
1997 third quarter with an increase in license revenue of 24% and an increase
in total revenue of 21% compared to the 1996 third quarter.
On July 25, 1997, Marcam Corporation borrowed $64 million (the "Debt
Financing"). The net proceeds from the Debt Financing were used to make the $39
million cash transfer by Marcam Corporation to Marcam Solutions in connection
with the Distribution and to repay Marcam Corporation's $25 million of 9.82%
Subordinated Notes due 2001 (the "Subordinated Notes"). The indebtedness
incurred in the Debt Financing currently bears interest at the rate of 9% and
is payable on August 4, 1997. This indebtedness will be repaid in whole or in
part with the net proceeds from the Offering. See "The Distribution," "Use of
Proceeds" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations--Liquidity and Capital Resources."
The Company has also arranged for a $30 million senior secured revolving
credit and term loan facility. Under this facility, the Company may borrow up
to $15 million as a term loan and up to $15 million under the revolving credit
facility. The Company currently intends to use borrowings under this credit
facility to repay any amounts borrowed in the Debt Financing which are not
repaid with the net proceeds from the Offering and for general corporate
purposes, including working capital. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources."
4
<PAGE>
THE DISTRIBUTION
Marcam Corporation has announced its intention to spin off in a tax-free
distribution the portion of its business relating to its PRISM, Protean and
Avantis product lines. The separation into two independent, publicly traded
companies is designed to enable each to better focus on its core markets, to
better serve existing customers and to finance its business.
In connection with the spin-off, Marcam Corporation has transferred to a
newly formed corporation, Marcam Solutions, substantially all of the business,
assets and liabilities relating to its PRISM, Protean and Avantis product lines
and an aggregate of $39.0 million in cash (the "Asset Transfers"). The $39.0
million cash transfer by Marcam Corporation to Marcam Solutions was financed
with a portion of the net proceeds from the Debt Financing. See
"Summary--Recent Developments" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Liquidity and Capital
Resources."
All of the outstanding shares of common stock of Marcam Solutions will be
distributed (the "Distribution") by means of a distribution on July 29, 1997 to
stockholders of Marcam Corporation of record on July 23, 1997. Purchasers of
Common Stock in the Offering will not participate in the Distribution. See "The
Distribution."
THE OFFERING
<TABLE>
<S> <C>
Common Stock offered by the Company ...... 6,000,000 shares
Common Stock to be outstanding after
the Offering ........................... 17,535,010 shares(1)
Use of Proceeds ........................... Repayment of debt and general corporate purposes,
including working capital
Proposed Nasdaq National Market
symbol ................................. "MAPX"(2)
</TABLE>
- ------------
(1) Does not include as of May 31, 1997 (i) 3,250,000 shares of Common Stock
issuable upon the conversion of the Series D and E Convertible Preferred
Stock outstanding, (ii) 1,383,333 shares of Common Stock (subject to
adjustment) issuable upon the exercise of warrants outstanding with a
weighted average exercise price of $13.58 per share and (iii) 2,626,132
shares of Common Stock issuable upon the exercise of stock options
outstanding as of May 31, 1997 with a weighted average exercise price of
$14.675 per share. In connection with the Distribution, the exercise
prices of the warrants and the options will be reduced, and the number of
shares of Common Stock issuable upon exercise of certain of the warrants
will be increased, on a basis intended to preserve the spread value of the
warrants and options. See "Capitalization," "The Distribution" and
"Description of Capital Stock."
(2) To be effective concurrently with the Company's name change from "Marcam
Corporation" to "MAPICS, Inc." which is expected to occur at the time of
the Offering. See "The Distribution."
5
<PAGE>
SUMMARY COMBINED FINANCIAL DATA(A)
<TABLE>
<CAPTION>
Six Months Ended
March
Fiscal Years Ended September 30, 31,
--------------------------------- --------------------
1994 1995 1996 1996 1997
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
License ........................ $33,410 $42,745 $45,341 $20,501 $25,328
Services ........................ 19,373 26,553 32,261 15,343 18,837
-------- -------- -------- -------- --------
Total revenues .................. 52,783 69,298 77,602 35,844 44,165
-------- -------- -------- -------- --------
Operating expenses:
Cost of license revenues ......... 3,280 5,689 6,913 3,026 4,129
Cost of services revenues ...... 5,428 7,567 9,499 4,573 5,301
Selling and marketing ............ 17,765 24,780 27,851 13,028 14,834
Product development ............ 6,692 7,432 6,398 3,122 4,969
General and administrative ...... 4,810 5,384 5,965 2,212 4,360
-------- -------- -------- -------- --------
Total operating expenses ...... 37,975 50,852 56,626 25,961 33,593
-------- -------- -------- -------- --------
Operating income .................. 14,808 18,446 20,976 9,883 10,572
Income tax expense ............... 4,641 7,112 8,076 3,805 4,071
-------- -------- -------- -------- --------
Net income ........................ $10,167 $11,334 $12,900 $ 6,078 $ 6,501
======== ======== ======== ======== ========
Pro forma net income per
common share (B) ............... $ 0.72 $ 0.35
======== ========
Pro forma weighted average
number of common shares
outstanding (B) .................. 17,899 18,705
======== ========
</TABLE>
<TABLE>
<CAPTION>
As of March 31, 1997
-----------------------------------------------------
Pro Forma
Actual Pro Forma(C) As Adjusted (C)(D)
(In thousands)
<S> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents ............ $ 852 $ 852 $ 852
Working capital (deficit) (E) ......... (13,999) (77,999) (13,999)
Total assets ........................ 46,646 46,646 46,646
Total debt ........................... -- 64,000 7,160
Divisional equity .................. 9,228 -- --
Stockholders' equity (deficit) ...... -- (54,772) 2,068
</TABLE>
- ------------
(A) See Combined Financial Statements and related Notes thereto appearing
elsewhere in this Prospectus.
(B) See Note 2 of Notes to Combined Financial Statements for information
concerning the computation of per share earnings.
(C) Adjusted to give effect to the Distribution and the Debt Financing, the
proceeds of which were used to repay Marcam Corporation's $25.0 million
9.82% Subordinated Notes due 2001 (assumed by the Company for accounting
purposes) and to make the $39.0 million cash transfer to Marcam Solutions.
(D) Adjusted to give effect to the sale of shares of Common Stock offered by
the Company hereby and the application of the estimated net proceeds
therefrom based on an assumed initial price to the public of $10.50 per
share. See "Use of Proceeds," "Capitalization" and "Description of Capital
Stock."
(E) Includes $21.2 million of deferred revenue.
6
<PAGE>
RISK FACTORS
This Prospectus contains forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Actual results could differ
materially from those projected in the forward-looking statements as a result
of the risk factors set forth below and elsewhere in this Prospectus. In
addition to the other information contained in this Prospectus, the following
factors should be carefully considered by prospective investors when evaluating
an investment in the Common Stock offered hereby. The following factors relate
to the entire MAPICS product line.
Variability in Quarterly Operating Results; Seasonality. The Company has
experienced fluctuations in its quarterly operating results and anticipates
that such fluctuations will continue and may intensify. The Company's quarterly
operating results are affected by a number of factors that could materially and
adversely affect revenues and profitability, including the size and timing of
license transactions; the demand for the Company's products; the proportion of
revenues attributable to license fees versus services fees; the proportion of
Solution Partner-developed products versus internally-developed products
licensed; changes in the level of operating expenses; the potential for delay
or deferral of customer purchases of the Company's software; the timing of the
introduction or market acceptance of new or enhanced products offered by the
Company or its competitors; the ability of the Company's affiliate distribution
channel to service additional sales; the competitive conditions in the
industry; and the general economic and political conditions and other factors
affecting capital expenditures by customers. The purchase of the Company's
products and services may involve a significant commitment of capital and other
resources by its customers with the attendant delays frequently associated with
large capital expenditures and authorization procedures within an organization.
Accordingly, the sales cycles for the Company's products and services are
subject to a number of significant risks over which the Company has little or
no control, including customers' budgetary constraints and internal
authorization procedures. License revenues in any quarter are substantially
dependent on orders booked and shipped in that quarter.
The Company's quarterly operating results are subject to certain seasonal
fluctuations. The Company believes that its first quarter (ending December 31)
revenues generally are positively affected by year-end capital expenditures by
certain customers and by year-end incentives provided by International Business
Machines Corporation ("IBM") to resellers of its hardware, which include many
of the Company's distribution affiliates. In the Company's fourth quarter
(ending September 30), revenues are positively affected by the incentives
provided pursuant to the Company's sales compensation plans. These factors have
historically resulted in increased license revenues during such quarters. In
addition, the Company's revenues occur predominantly in the third month of each
quarter and tend to be concentrated in the latter half of that third month.
Accordingly, the Company's quarterly operating results are difficult to
predict, and delays in product delivery or in closings of sales near the end of
a quarter could cause quarterly revenues and, to a greater degree, net income
to fall substantially short of anticipated levels. Net income is affected
because the Company establishes its spending levels on the basis of its
expected future operating margins. These seasonal factors are likely to
continue to affect quarter-to-quarter comparisons.
Due to the foregoing factors, it is possible that the Company's operating
results could fail to meet the expectations of securities analysts or
investors. In such event, or in the event that adverse conditions in the
manufacturing or ERP marketplace prevail or are perceived to prevail, the price
of the Company's Common Stock would likely be materially adversely affected.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Quarterly Financial Results."
Reliance on Third Party Distribution Channel. The Company markets, sells,
and supports its products primarily through a network of more than 80
distribution affiliates and as a result maintains a limited direct sales force.
The Company relies on its affiliates for sales, product implementation,
customization and customer support services. There can be no assurance that the
affiliates will continue to provide the level and quality of service required
to meet the needs of the Company's customers or that the Company will be able
to maintain effective long-term relationships with its affiliates. If the
Company is unable to maintain effective, long-term relationships with the
affiliates, or if the affiliates fail to meet the needs of the Company's
customers, the Company's business would be adversely affected. From time to
time certain of the Company's competitors have established, and may continue to
seek to establish a comparable distribution channel, in part by attempting to
attract the Company's own affiliates. The Company's agreements with its
affiliates are generally terminable by either party and do not impose specific
obligations on the part of the affiliates. Further, there can be no assurance
that the affiliates will not otherwise reduce or discontinue their
relationships with or support of the Company and its products. See
"Business--Marketing and Sales."
7
<PAGE>
Competition. The market for business software within the mid-size
manufacturing industry is highly competitive, changes rapidly and is to a
significant degree affected by new product introductions and other market
activities of industry participants. The Company's products and related
services are primarily targeted at the market for business applications
software for use with the IBM AS/400. The Company's current and prospective
competitors offer a variety of products which address this and similar markets.
The Company's primary competition comes from a large number of independent
software vendors and other sources, including Baan N.V., Computer Associates,
Inc., Intentia AB, JBA Holdings Plc, J.D. Edwards & Company, Inc., Oracle
Corporation, SAP AG, and System Software Associates, Inc. Of the Company's
primary competitors, the products of Intentia are currently designed solely for
use with the IBM AS/400, and the products of JBA Holdings Plc, J.D. Edwards and
System Software Associates are currently designed for use primarily with the
IBM AS/400. The Company also experiences some competition from vendors of
specialized applications.
Certain of the Company's competitors have significantly greater financial,
marketing, service, support and technical resources, and greater name
recognition than the Company. In order to be successful in the future, the
Company must continue to respond promptly and effectively to the challenges of
technological change and its competitors' innovations. The Company's
competitors may be able to respond more quickly to new or emerging technologies
or changes in customer requirements or devote greater resources to the
development, promotion and sale of their products than the Company. The Company
also expects to face additional competition as other established and emerging
companies enter the market for business software for use with the AS/400 and as
new products and technologies are introduced. In addition, current and
potential competitors may make acquisitions or establish alliances among
themselves or with third parties, thereby increasing the ability of their
products to address the needs of the Company's prospective customers.
Accordingly, it is possible that new competitors or alliances among current and
new competitors may emerge and rapidly gain significant market share, resulting
in price or fee rate reductions, fewer customer orders and reduced gross
margin, any one of which could have a material adverse effect on the Company's
business, financial condition and results of operations. There can be no
assurance that the Company will be able to compete successfully with existing
or new competitors or that competition will not have a material adverse effect
on the Company's business, financial condition and results of operations. In
addition, because the Company relies on a network of distribution affiliates
for implementation and other support of its products, there can be no assurance
that these affiliates will maintain sufficiently high quality standards so that
the Company's reputation and competitive position will not be adversely
affected. See "Business-Marketing and Sales" and "--Competition."
Dependence on Key Personnel; Ability to Attract and Retain Skilled
Personnel. The Company's future performance depends to a significant extent
upon the continued service of a number of senior management and key technical
personnel. The Company does not maintain key-person life insurance on any of
its key employees. None of the Company's employees is bound by an employment
agreement. The loss of the services of one or more key employees could have a
material adverse effect on the Company. The Company's future financial results
also will depend in large part upon its ability to attract on a timely basis
and retain highly skilled technical, managerial and marketing personnel and the
ability of its officers and key employees to manage growth successfully and to
continue successful development of new products and enhancements to existing
products. Competition for such personnel is intense and is likely to intensify
further as companies compete to hire personnel. The Company competes in the
market for such personnel against numerous companies, including larger, more
established companies with significantly greater financial resources than the
Company. There can be no assurance that the Company will be successful in
attracting and retaining the personnel it requires to develop successfully new
and enhanced products. See "Business--Employees" and "Management."
Absence of History as a Stand-Alone Public Company; Limited Relevance of
Certain Historical Financial Information. The Company has never operated as a
stand-alone company. Except for Richard C. Cook, the Company's senior executive
officers have had limited or no prior management experience as senior
executives in a public company. After the Distribution, the Company will
operate as a stand-alone entity and, while the Company will continue to receive
certain services from Marcam Solutions, there can be no assurance that the
Company's operating results will not be adversely affected as a result of the
reduction of general service assistance from Marcam Solutions. In anticipation
of being established as a stand-alone entity, the Company has reviewed its
business and operations and is implementing certain organizational changes.
However, there can be no assurance that these changes or that the separation
from Marcam Solutions will not have an adverse impact on the Company's
business, financial condition and results of operations.
8
<PAGE>
The financial information included herein may not necessarily reflect the
results of operations, financial position and cash flows of the Company in the
future or what the results of operations, financial position and cash flows
would have been had the Company been a separate, stand-alone entity during the
periods presented, because certain allocations were made in preparing such
financial data. This is particularly true with regard to allocations of
corporate overhead. The financial information included herein does not reflect
the changes that may occur in the operations of the Company as a result of the
Distribution and the Offering, such as the increased administrative costs,
including data services, employee benefits, legal, insurance, accounting and
corporate overhead, that MAPICS will incur as a result of being an independent,
publicly traded company. In addition, the combined financial statements of the
Company include certain assets, liabilities, revenues and expenses which were
not historically recorded at the entity level of, but are associated with, the
Company. See "The Distribution" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations--Overview."
New Products and Technological Change. The market for the Company's ERP
software products is characterized by rapid technological advances, evolving
industry standards in computer hardware and software technology, changes in
customer requirements, and frequent new product introductions and enhancements.
The Company's future success will depend upon its ability to continue to
enhance its MAPICS products and to develop and introduce new products that keep
pace with technological developments, satisfy increasingly sophisticated
customer requirements and achieve market acceptance. In particular, the Company
must continue to anticipate and respond adequately to advances in standard
business applications software and client/server solutions, as well as
object-oriented technology. There can be no assurance that the Company will be
successful in developing and marketing, on a timely and cost-effective basis,
functioning product enhancements or new products that respond to technological
advances by its competitors or that its new products will achieve market
acceptance. See "Business--Product Development."
As a result of the complexities inherent in the functionality and
performance demanded by ERP software customers, major new products and product
enhancements can require long development and testing periods. In addition, ERP
software programs as complex as those offered by the Company may contain errors
which are discovered only after the products and new releases have been
installed and used by customers despite testing by the Company. There can be no
assurance that undetected errors will not impair the market acceptance of these
products or adversely affect the Company's operating results. Problems
encountered by customers installing and implementing the Company's new product
releases or with product performance, including product functionality, product
response time and program errors, could also materially adversely affect the
Company's operating results.
Dependence on External Development Resources. To date, approximately 19 of
the Company's application modules were developed in collaboration with third
parties (Solution Partners) and the Company expects to continue to rely on
Solution Partners for the development of additional application modules.
Generally, Solution Partners continue to own the rights to, and maintain, the
technology underlying the modules and license, on an exclusive basis, the
technology to the Company. Under the terms of such agreements, the Company is
obligated to pay a royalty to a Solution Partner for sales of the Solution
Partner-developed application modules. In the event the Company fails to pay
the required royalty when due, such agreement may be terminated. The
termination of such an agreement with a Solution Partner could adversely affect
the Company's business, financial condition and results of operations. There
can be no assurance that Solution Partners will be available to develop
application modules for the Company in the future or will complete application
modules for the Company on a timely basis, within acceptable guidelines, or at
all. The Company's success depends in part on its continued ability to license
application modules from Solution Partners and there can be no assurance that
the Company will be able to obtain such licenses on terms acceptable to the
Company or at all. Although the Company is entitled to obtain a non-exclusive
license to the source code for an application module in the event the Solution
Partner fails to maintain or update the application module, goes out of
business or otherwise breaches the terms of the license agreement, the Company
may not be able to maintain or upgrade the application module adequately or on
a timely basis. The failure of the Company to adequately or on a timely basis,
maintain or upgrade the application module could adversely affect the Company's
business, financial condition and results of operations. See "Business--Product
Development."
Dependence on IBM's AS/400. Substantially all of the Company's revenues
have been derived from products designed to operate primarily on IBM's AS/400
series of computers. Therefore, the Company's future revenues from initial
license fees and periodic license fees will be primarily derived from and
dependent upon the continued widespread use of the AS/400 and the continued
support of the AS/400 by IBM. While the Company believes that
9
<PAGE>
customers will continue to use, and IBM will continue to support, the AS/400,
there can be no assurance of such continued use or support and the loss of
either would have a material adverse effect on the Company's operating results.
The Company will be required and intends to continue to devote significant
resources to supporting its installed base of AS/400 customers. Although the
Company believes it has an advantage in assisting its installed AS/400 base in
converting to independent platforms, there is no assurance that these customers
will continue to use MAPICS products if they implement such independent
platforms. If there should be a rapid shift away from the current widespread
use of the AS/400 operating system, the Company would be required to expend
substantial capital resources to develop new software and would be likely to
experience delays or losses in customer orders and, as a result, its business
would be materially adversely affected. In addition, in order to retain its
AS/400 customers, the Company may be required to adapt its MAPICS products to
any changes made in the AS/400 operating system in the future. The Company's
inability to adapt to future changes in the AS/400 operating system, or delays
in doing so, could have a material adverse effect on the Company's business,
financial condition and results of operations. See "Business--Industry
Background."
Management of Potential Growth. The Company's business has grown rapidly
in the last three years, with total revenues increasing from $52,783,000 in
fiscal 1994 to $77,602,000 in fiscal 1996. This recent growth has placed, and
may continue to place, strain on the Company's management and systems.
Accordingly, the Company's future operating results will depend, in part, on
the ability of its officers and other key employees to continue to implement
and improve its operational and financial control systems and to effectively
expand, train and manage its employee base. The Company's growth is also
dependent upon its distribution affiliates' ability to implement the Company's
products in response to the projected demands of the Company's customer base.
There can be no assurance that the Company or its affiliates will be able to
manage any future expansion successfully, and any inability to do so would have
a material adverse effect on the Company's business, financial condition and
results of operations. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations."
Relationship with Marcam Solutions. The Company has entered into certain
agreements with Marcam Solutions which will govern certain aspects of the
parties' relationship on an ongoing basis that may be material to the conduct
of the Company's business, including the provision of certain administrative
services and indemnification obligations related to the Distribution. These
agreements would have a material adverse effect on the Company's business,
financial condition and results of operations if such agreements result in
significant liabilities to the Company. In addition, because the business to be
conducted by Marcam Solutions will be conducted through Marcam Corporation
until the Distribution, MAPICS may be liable for the liabilities of Marcam
Solutions relating to the period prior to the Distribution. If Marcam Solutions
for any reason is unable to satisfy its liabilities, MAPICS may be liable for
them. In addition, the Chief Financial Officer of Marcam Corporation is also
the Chief Financial Officer of Marcam Solutions. Following the Distribution,
this person will not be the Chief Financial Officer of the Company but will
become a director of the Company, while continuing to serve as Marcam
Solutions' Chief Financial Officer. See "Management." This person may have
conflicts of interest with respect to matters potentially or actually involving
or affecting the Company and Marcam Solutions. Such matters may require
consultation by such person with his legal advisors or a vote of the
disinterested directors of the Company only, concerning specific matters
presented to the Board of Directors of the Company. Notwithstanding such
precautions, there can be no assurance that any such potential conflict will be
resolved in a manner that will not adversely affect the interests of the
Company. See "The Distribution" and "Relationship Between MAPICS and Marcam
Solutions."
Dependence on Worldwide Manufacturing Industry. The Company's business
depends substantially upon the capital expenditures of mid-size manufacturers,
which expenditures depend in part upon the demand for such manufacturers'
products. A recession or other adverse events affecting the worldwide
manufacturing industry served by the Company could affect such demand, forcing
manufacturers in the Company's target market to curtail or postpone capital
expenditures on business information systems. Any such change in the amount or
timing of capital expenditures in its target market could have a material
adverse effect on the Company's business, financial condition and results of
operations.
Federal Income Tax Consequences and Liabilities. Marcam Corporation has
requested a private letter ruling (the "Private Letter Ruling") from the
Internal Revenue Service (the "Service") substantially to the effect that,
except as provided below, the Distribution will qualify as a tax-free
distribution to the Company and its stockholders under Section 355 of the Code.
At the option of the Board of Directors of Marcam Corporation, Marcam
Corporation may proceed with the Distribution based upon the opinions of its
special tax counsel, Skadden, Arps, Slate, Meagher
10
<PAGE>
& Flom LLP, and its independent accountants, Coopers & Lybrand L.L.P., that,
except as provided below, the Distribution should qualify as a tax-free
distribution under Section 355 of the Code (the "Tax Opinions"). The Tax
Opinions will be based upon certain facts, assumptions and representations of
officers of Marcam Corporation and Marcam Solutions as of the date of the
Distribution. The Company will not complete the Distribution unless it receives
the Private Letter Ruling or the Tax Opinions. Accordingly, neither the Company
nor its stockholders should recognize taxable gain on the Distribution, except
as provided below. The Company, however, will recognize gain on the
Distribution to the extent that Marcam Solutions shares are received by
stockholders who are not United States persons ("non-U.S. persons"). The number
of Marcam Solutions shares expected to be distributed to non-U.S. persons is
estimated to represent not more than 19% of the total Marcam Solutions shares
to be distributed in the Distribution. Moreover, the Company may recognize
additional gain with respect to certain aspects of the Distribution, including
certain restructuring transactions expected to be consummated in connection
with the Distribution. The aggregate amount of gain recognized by the Company
in connection with the Distribution is not expected to result in any
significant tax liability, but rather is expected to be offset by existing net
operating losses. Accordingly, the amount of such net operating losses
available to the Company after the Distribution will likely be reduced. In
connection with the Asset Transfers, taxable gain may also be recognized in
certain foreign jurisdictions. Such gain would not generally be offset by
existing domestic net operating losses. The incurrence of significant tax
liabilities by the Company, in the event that the Distribution is not treated
as a tax-free transaction, may have a material adverse effect on the Company's
business, financial condition and results of operations.
In connection with the Distribution, Marcam Corporation and Marcam
Solutions have entered into a tax sharing agreement (the "Tax Sharing
Agreement") that defines the parties' rights and obligations with respect to
certain tax liabilities and refunds of taxes relating to Marcam Corporation's
business for periods ending on or prior to the date of the Distribution. In
general, pursuant to the Tax Sharing Agreement, Marcam Solutions shall be
responsible for certain state, local and foreign taxes for periods ending on or
before the date of the Distribution (and shall be entitled to refunds with
respect to such taxes), and the Company shall be responsible for all other
taxes for such periods (and shall be entitled to refunds with respect to such
taxes). In addition, under the Tax Sharing Agreement, the Company shall be
liable for any taxes arising out of the Distribution. The Tax Sharing Agreement
further provides for cooperation with respect to certain tax matters, the
exchange of information and the retention of records.
Uncertain Protection of Proprietary Technology. The Company's success is
heavily dependent upon protection of its proprietary software. The Company
relies on a combination of copyright, trademark and trade secret laws and
license and non-disclosure agreements, to establish and protect its proprietary
rights in its products. The Company enters into confidentiality and/or license
agreements with its employees, distributors, customers and potential customers,
and limits access to and distribution of its software, documentation, and other
proprietary information. There can be no assurance, however, that despite these
precautions, an unauthorized third party will not copy or reverse-engineer
certain portions of the Company's products or obtain and use information that
the Company regards as proprietary. In addition, the laws of some foreign
countries do not protect the Company's proprietary rights to the same extent as
do the laws of the U.S. There can be no assurance that the mechanisms used by
the Company to protect its software will be adequate or that the Company's
competitors will not independently develop software products that are
substantially equivalent or superior to the Company's software products.
In the future the Company may receive notices claiming that it is
infringing the proprietary rights of third parties and there can be no
assurance that the Company will not become the subject of infringement claims
or legal proceedings by third parties with respect to current or future
products. In addition, the Company may initiate claims or litigation against
third parties for infringement of the Company's proprietary rights or to
establish the validity of the Company's proprietary rights. Any such claim
could be time consuming, result in costly litigation, cause product shipment
delays or force the Company to enter into royalty or license agreements rather
than dispute the merits of such claims. Moreover, an adverse outcome in
litigation or similar adversarial proceedings could subject the Company to
significant liabilities to third parties, require the expenditure of
significant resources to develop non-infringing technology, require disputed
rights to be licensed from others or require the Company to cease the marketing
or use of certain products, any of which could have a material adverse effect
on the Company's business, financial condition and results of operations. To
the extent the Company desires or is required to obtain licenses to proprietary
rights of others, there can be no assurance that any such licenses will be made
available on terms acceptable to the Company, if at all. Claims against the
Company, with or without merit, as well as claims initiated
11
<PAGE>
by the Company against third parties, can be time consuming and expensive to
defend, prosecute or resolve. See "Business--Proprietary Rights and
Technology."
Risks of Product Liability. The Company's products are generally used to
manage data critical to large organizations. As a result, the sale and support
of products by the Company may entail the risk of product liability claims.
While the Company's license agreements with its customers typically contain
provisions designed to limit the Company's exposure to potential product
liability claims, it is possible that such limitations of liability provisions
may not be effective under the laws of all jurisdictions. In addition, the
Company is insured for product liability protection against claims for personal
injury or damage to property, as well as for the customers losses for which the
Company is liable, although such insurance may not be sufficient to cover all
claims in the event the limitation of liability provisions contained in the
Company's license agreements are not effective. Although the Company has not
experienced any significant product liability claims to date, there can be no
assurance that the Company will not be subject to such claims in the future. A
successful product liability claim brought against the Company could have a
material adverse effect on the Company's business, financial condition and
results of operations. Moreover, defending such a suit, regardless of its
merits, could entail substantial expense and require the time and attention of
key management personnel, either of which could have a material adverse effect
on the Company's business, financial condition and results of operations.
Absence of Comparable Trading History for Common Stock; Possible
Volatility of Stock Price. The Common Stock of Marcam Corporation is currently
traded on the Nasdaq National Market. However, because of the Distribution,
historical trading prices of the Common Stock of Marcam Corporation are
unlikely to be indicative of future trading prices of the Company's Common
Stock. Following the Distribution, the Company's revenues will be substantially
lower than Marcam Corporation's consolidated revenues prior to the
Distribution, and management currently believes that the Company will have net
income compared to Marcam Corporation's net losses. Accordingly, as a result of
the Distribution, the trading prices of the Company's Common Stock immediately
after the Distribution may be less than, equal to or greater than the trading
prices of Marcam Corporation's Common Stock immediately prior to the
Distribution. The initial price to the public of the Common Stock to be sold in
the Offering will be determined by negotiations between the Company and the
Underwriters. See "Underwriting" for a discussion of the factors to be
considered in this connection.
The market price of the Company's Common Stock could be subject to
significant volatility due to a number of factors, including the continuing
depth and liquidity of the market for the Common Stock, investor perception of
the Company and the market for ERP software applications generally, the
announcement of new products or product enhancements by the Company or its
competitors, quarterly variations in the Company's operating results or
operating results of its competitors or companies in related industries,
changes in earnings or revenue estimates or recommendations by securities
analysts, developments in the Company's industry, general market conditions and
other factors, including factors unrelated to the operating performance of the
Company or its competitors. Such factors and fluctuations, as well as general
economic, political and market conditions, such as recessions, could materially
and adversely affect the market price of the Company's Common Stock. Such
prices may also be affected by certain provisions of the Company's articles of
organization and by-laws, the Company's Rights Plan and other matters described
in this Prospectus which may have an anti-takeover effect.
Risks Associated with International Operations and Currency
Fluctuations. A material portion of the Company's business comes from outside
the U.S. The Company derived approximately 22%, 27%, and 27% of its total
revenues from customers located outside of the U.S. in 1994, 1995, and 1996,
respectively. The Company believes that its continued growth and profitability
will require expansion of its sales in international markets. To successfully
expand international sales, the Company has utilized, and will continue to
utilize, substantial resources to enlarge existing foreign operations,
establish additional foreign operations and hire additional personnel.
International expansion of the Company's operations has required, and will
continue to require, the Company to translate and localize its application
modules. To the extent the Company is unable to expand its international
operations or translate and localize its application modules in a timely
manner, it is likely to adversely impact the Company's operating results. In
addition, even if international operations are successfully expanded, there can
be no assurance that the Company will be able to maintain or increase
international market presence or demand for its products.
Risks inherent in the Company's international business activities include
imposition of government controls, restrictions on the export of critical
technology, political and economic instability (including fluctuations in
foreign
12
<PAGE>
currency exchange rates), trade restrictions, difficulties in staffing
international offices, longer accounts receivable payment collection cycles in
certain countries, burdens of complying with a wide variety of foreign laws and
regulations, management of an organization spread over various countries,
unexpected changes in regulatory requirements and overlap of different tax
structures. In addition, effective copyright, trademark and trade secret
protection may not be available in every foreign country in which the Company
sells its products. As a result of the continued expansion of the Company's
international operations, the fluctuations in the value of foreign currencies
in which the Company conducts its business may cause currency transaction gains
and losses. To date, currency transaction gains and losses have not been
material. However, due to the number of foreign currencies involved, the
constantly changing currency exposures and volatility of currency exchange
rates, the Company cannot predict the effect of exchange rate fluctuations upon
future operating results. The Company's business, financial condition and
results of operations could be materially adversely affected by any of these
factors.
Anti-Takeover Provisions; Rights Plan; Issuance of Preferred Stock. The
Company's Restated Articles of Organization and Amended and Restated By-laws
contain provisions that may make it more difficult for a third party to
acquire, or discourage acquisition bids for, or discourage changes in
management of, the Company. These provisions could limit the price that certain
investors might be willing to pay in the future for shares of the Company's
Common Stock. Also, the Company has adopted a Stockholder Rights Plan, pursuant
to which the Company has distributed to its stockholders rights to purchase
shares of junior participating preferred stock (the "Rights Plan"). Upon
certain triggering events, such rights become exercisable to purchase the
Company's Common Stock at a price substantially discounted from the then
applicable market price of the Company's Common Stock. The Rights Plan could
generally discourage a merger or tender offer involving the securities of the
Company that is not approved by the Company's Board of Directors by increasing
the cost of effecting any such transaction and, accordingly, could have an
adverse impact on stockholders who might want to vote in favor of such merger
or participate in such tender offer. In addition, shares of the Company's
Preferred Stock have been issued in the past and may be issued in the future
without further stockholder approval and upon such terms and conditions, and
having such rights, privileges and preferences, as the Board of Directors may
determine. The rights of the holders of Common Stock are subject to, and may be
adversely affected by, the rights of the holders of Preferred Stock currently
outstanding and will be subject to, and may be adversely affected by, the
rights of any holders of Preferred Stock that may be issued in the future. The
issuance of Preferred Stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, a majority of the outstanding voting
stock of the Company. The Company has no present plans to issue any additional
shares of Preferred Stock. The Company's Board of Directors is divided into
three classes, each of which serves for a staggered three-year term. Such
staggered Board may make it more difficult for a third party to gain control of
the Company's Board of Directors. The Amended and Restated By-laws impose
various procedural and other requirements that could make it more difficult for
stockholders to effect certain corporate actions. See "Description of Capital
Stock."
Shares Eligible for Future Sale; Registration Rights. Sales of substantial
numbers of shares of Common Stock, or the prospect of such sales, could
adversely affect the market price of the Common Stock and the Company's ability
to raise needed capital in the capital markets at a time and price favorable to
the Company. Upon completion of this Offering, the Company will have a total of
17,535,010 shares of Common Stock outstanding, of which the 6,000,000 shares
offered hereby will be freely tradeable without restriction under the
Securities Act of 1933, as amended (the "Securities Act"), by persons other
than "affiliates" of the Company, as defined under the Securities Act. The
remaining 11,535,010 outstanding shares of Common Stock will be eligible for
sale in the public market following the Offering, except for shares of Common
Stock subject to lock-up agreements described below and shares of Common Stock
held or subsequently purchased by affiliates of the Company. Of these shares,
an aggregate of 242,587 shares are subject to lock-up agreements with the
representatives of the Underwriters expiring 180 days following the date of
this Prospectus (the "Lock-Up Agreements"). Such agreements provide that the
representatives may, in their sole discretion and at any time without notice,
release all or a portion of the shares subject to these Lock-Up Agreements. The
remaining shares are not subject to Lock-Up Agreements and substantially all of
these shares are eligible for immediate sale into the public market.
As of May 31, 1997, the Company had options to purchase an aggregate of
2,626,132 shares outstanding under its existing stock option plans and had an
additional 1,886,713 shares of Common Stock reserved for issuance pursuant to
these plans. In addition, the Company maintains an employee stock purchase plan
pursuant to which it has 152,281 shares of Common Stock reserved for issuance.
Any shares of Common Stock issued upon the
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<PAGE>
exercise of such outstanding options or any options granted in the future will
be, upon issuance, freely tradeable in the public market, except for shares
subject to Lock-Up Agreements and shares held by affiliates of the Company. Of
the outstanding options, 1,595,958 shares issuable upon exercise of such
options are exercisable within 180 days of the date of this Prospectus and of
these shares of Common Stock, 668,248 shares are subject to Lock-Up Agreements.
In connection with the Distribution, the exercise prices of the options will be
decreased on a basis intended to preserve the spread value of the existing
options. See "The Distribution." The Company also has in effect a registration
statement under the Securities Act covering the sale of 383,333 shares of
Common Stock issuable upon the exercise of warrants exercisable at a price of
$8.93 per share. These shares of Common Stock are not subject to Lock-Up
Agreements. In connection with the Distribution, the exercise price will be
decreased and the number of underlying shares will be increased on a basis
intended to preserve the spread value of the warrants. See "The Distribution."
The holders of the Company's convertible preferred stock currently
convertible into 3,250,000 shares of Common Stock and the holders of warrants
currently exercisable for 1,000,000 shares of Common Stock at an exercise price
of $15.36 are entitled to certain demand registration rights with respect to
such shares of Common Stock commencing on or after July 23, 1998 and are also
entitled to piggy-back registration rights. If the Company were required to
include in a Company-initiated registration shares held by such holders
pursuant to the exercise of their piggyback registration rights, such sale
might have an adverse effect on the Company's ability to raise needed capital
in the capital markets at a time and price favorable to the Company. In
connection with the Distribution, the exercise price of the warrants will be
decreased on a basis intended to preserve the spread value of the warrants. See
"The Distribution." In addition, 2,250,000 shares of Common Stock underlying
the convertible preferred stock currently are eligible for sale in the public
market subject to the conditions of Rule 144 and the remaining shares of Common
Stock underlying the convertible preferred stock and warrants will become
eligible for sale subject to the conditions of Rule 144 on July 23, 1997. Of
the 4,250,000 shares underlying the convertible preferred stock and warrants,
4,000,000 are subject to Lock-Up Agreements.
14
<PAGE>
USE OF PROCEEDS
The net proceeds to the Company from the sale of the shares of Common
Stock offered by the Company hereby are estimated to be approximately
$56,840,000 ($65,628,500 if the Underwriters' over-allotment option is
exercised in full), after deducting estimated underwriting discounts and
commissions and offering expenses, based on an assumed initial price to the
public of $10.50 per share.
The Company currently intends to use the net proceeds from the Offering to
repay the indebtedness incurred in the Debt Financing. The net proceeds from
the Debt Financing were used to make the $39 million cash transfer by Marcam
Corporation to Marcam Solutions in connection with the Distribution and to
repay Marcam Corporation's $25 million of 9.82% Subordinated Notes due 2001
(the "Subordinated Notes"). The indebtedness incurred in the Debt Financing
currently bears interest at the rate of 9% and is payable on August 4, 1997. If
the net proceeds from the Offering are not sufficient to repay the indebtedness
incurred in the Debt Financing in full, the Company currently intends to use
borrowings under the $30 million senior secured revolving credit and term loan
facility to repay any amounts borrowed in the Debt Financing which are not
repaid with the net proceeds from the Offering. See "Management's Discussion
and Analysis of Financial Condition and Results of Operations--Liquidity and
Capital Resources."
The Company intends to use any remaining net proceeds for general
corporate purposes, including working capital. Pending such uses, the net
proceeds of this Offering will be invested in interest-bearing or
dividend-bearing, investment grade securities.
DIVIDEND POLICY
Marcam Corporation has never paid any cash dividends on its Common Stock.
Upon completion of the Distribution, the Company currently intends to retain
future earnings to fund future development and growth and the operation of its
business, and therefore does not anticipate paying any cash dividends in the
foreseeable future. Covenants in the revolving credit facility prohibit the
payment of cash dividends. Any future determination to pay cash dividends will
be at the discretion of the Board of Directors and will be dependent upon the
Company's results of operations, financial condition, capital requirements and
such other factors as the Board of Directors deems relevant.
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of
March 31, 1997 (i) on an actual basis, (ii) on a pro forma basis reflecting the
Distribution and certain other matters, and (iii) on a pro forma as adjusted
basis reflecting the Distribution, certain other matters, the sale of shares of
Common Stock offered hereby and the application of the estimated net proceeds
therefrom based on an assumed initial price to the public of $10.50 per share.
This table should be read in conjunction with the Combined Financial Statements
and related Notes thereto appearing elsewhere in this Prospectus. See also "Use
of Proceeds," "Selected Combined Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Description of
Capital Stock."
<TABLE>
<CAPTION>
As of March 31, 1997
-------------------------------------------
Pro Forma As
Actual Pro Forma(A) Adjusted(A)(B)
(In thousands, except per share data)
<S> <C> <C> <C>
Cash and cash equivalents ........................ $ 852 $ 852 $ 852
======= ========== ==========
Total debt ....................................... $ -- $ 64,000 $ 7,160
------- ---------- ----------
Divisional equity ................................. 9,228 -- --
Stockholders' equity:
Preferred stock, $1.00 par value; 1,000 shares
authorized
Series D Convertible Preferred Stock,
225 shares issued and outstanding pro forma
and pro forma as adjusted ..................... -- 225 225
Series E Convertible Preferred Stock,
100 shares issued and outstanding pro forma
and pro forma as adjusted ..................... -- 100 100
Common stock, $.01 par value; 50,000 shares
authorized; 11,534 shares issued and
outstanding pro forma; 17,534 shares issued
and outstanding pro forma as adjusted (C) ...... -- 115 175
Additional paid in-capital ..................... -- -- 56,780
Retained earnings (accumulated deficit) ......... -- (55,212) (55,212)
------- ---------- ----------
Total stockholders' equity (deficit) ............ -- (54,772) 2,068
------- ---------- ----------
Total capitalization .............................. $9,228 $ 9,228 $ 9,228
======= ========== ==========
</TABLE>
- ------------
(A) Adjusted to give effect to the Distribution and the Debt Financing, the
proceeds of which were used to repay Marcam Corporation's $25.0 million
9.82% Subordinated Notes due 2001 (assumed by the Company for accounting
purposes) and to make the $39.0 million cash transfer to Marcam Solutions.
(B) Adjusted to give effect to the sale of shares of Common Stock offered by
the Company hereby and the application of the estimated net proceeds
therefrom based on an assumed initial price to the public of $10.50 per
share. See "Use of Proceeds" and "Description of Capital Stock."
(C) Does not include (i) 1,383,333 shares of Common Stock (subject to
adjustment) issuable upon the exercise of warrants outstanding as of March
31, 1997 with a weighted average exercise price of $13.58 per share and
(ii) 2,663,452 shares of Common Stock issuable upon the exercise of stock
options outstanding as of March 31, 1997 with a weighted average exercise
price of $14.64 per share. In connection with the Distribution, the
exercise prices of the warrants and the options will be reduced, and the
number of shares of Common Stock issuable upon exercise of certain of the
warrants will be increased, on a basis intended to preserve the spread
value of the warrants and options. See "The Distribution" and "Description
of Capital Stock."
16
<PAGE>
SELECTED COMBINED FINANCIAL DATA(A)
The following table sets forth selected combined financial data of the
Company as of and for the years ended September 30, 1994, 1995 and 1996, for
the six months ended March 31, 1996 and 1997, and as of March 31, 1997. The
selected combined financial data as of September 30, 1995 and 1996, for each of
the three years in the period ended September 30, 1996, and as of and for the
six months ended March 31, 1997 have been derived from the Company's combined
financial statements which have been audited by Coopers & Lybrand L.L.P.,
independent public accountants, as indicated in their report. The selected
combined financial data as of September 30, 1994 and for the six months ended
March 31, 1996 have been derived from the Company's unaudited combined
financial statements which, in the opinion of management of MAPICS, have been
prepared on the same basis as the audited combined financial statements and
include all adjustments, consisting only of normal recurring accruals,
necessary for a fair presentation of the financial position and the results of
operations for these periods. Operating results for the six months ended March
31, 1997 are not necessarily indicative of the results to be expected for the
entire year. These data should be read in conjunction with "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
the Combined Financial Statements and Notes thereto included elsewhere in this
Prospectus.
<TABLE>
<CAPTION>
Six Months Ended
March
Fiscal Years Ended September 30, 31,
--------------------------------- --------------------
1994 1995 1996 1996 1997
(In thousands, except per share data)
<S> <C> <C> <C> <C> <C>
Statement of Operations Data:
Revenues:
License ........................ $33,410 $42,745 $45,341 $20,501 $25,328
Services ........................ 19,373 26,553 32,261 15,343 18,837
-------- -------- -------- -------- --------
Total revenues .................. 52,783 69,298 77,602 35,844 44,165
Operating expenses:
Cost of license revenues ......... 3,280 5,689 6,913 3,026 4,129
Cost of services revenues ...... 5,428 7,567 9,499 4,573 5,301
Selling and marketing ............ 17,765 24,780 27,851 13,028 14,834
Product development ............ 6,692 7,432 6,398 3,122 4,969
General and administrative ...... 4,810 5,384 5,965 2,212 4,360
-------- -------- -------- -------- --------
Total operating expenses ...... 37,975 50,852 56,626 25,961 33,593
Operating income .................. 14,808 18,446 20,976 9,883 10,572
Income tax expense ............... 4,641 7,112 8,076 3,805 4,071
-------- -------- -------- -------- --------
Net income ........................ $10,167 $11,334 $12,900 $ 6,078 $ 6,501
======== ======== ======== ======== ========
Pro forma net income per common
share (B) ........................ $ 0.72 $ 0.35
======== ========
Pro forma weighted average
number of common shares
outstanding (B) .................. 17,899 18,705
======== ========
</TABLE>
<TABLE>
<CAPTION>
As of September 30, As of March 31,
------------------------------------------- ----------------
1994 1995 1996 1997
(In thousands)
<S> <C> <C> <C> <C>
Balance Sheet Data:
Cash and cash equivalents ......... $ 107 $ 226 $ 378 $ 852
Working capital (deficit) (C) ...... (2,040) (8,527) (13,945) (13,999)
Total assets ........................ 36,392 41,226 45,405 46,646
Long-term liabilities ............... 493 196 884 394
Divisional equity .................. 17,091 11,492 9,193 9,228
</TABLE>
- ------------
(A) See Notes to Combined Financial Statements appearing elsewhere in this
Prospectus.
(B) See Note 2 of Notes to Combined Financial Statements for information
concerning the computation of per share earnings.
(C) Includes $9.7 million, $15.2 million, $18.6 million and $21.2 million of
deferred revenue at September 30, 1994, 1995, 1996 and
March 31, 1997, respectively.
17
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis should be read in conjunction with
"Selected Combined Financial Data" and the combined financial statements and
notes thereto included elsewhere in this Prospectus. The discussion in this
Prospectus contains forward-looking statements that involve risks and
uncertainties, such as statements of the Company's plans, objectives,
expectations and intentions. The cautionary statements made in this Prospectus
should be read as being applicable to all related forward-looking statements
wherever they appear in this Prospectus. The Company's actual results could
differ materially from those discussed herein. Factors that could cause or
contribute to such differences include those discussed in "Risk Factors" as
well as those discussed elsewhere herein.
Overview
The MAPICS product line was initially introduced by International Business
Machines Corporation ("IBM") in 1978 to provide integrated application software
for accounting, manufacturing and logistics for mid-size manufacturers. In
February 1993, Marcam Corporation acquired the exclusive marketing and
licensing rights to the MAPICS products from IBM and began managing the
development and support of the MAPICS products. In September 1995, Marcam
Corporation acquired all of the outstanding capital stock of the company that
owned the MAPICS products. The combined financial statements and other
financial information included in this Prospectus have been prepared using
Marcam Corporation's historical basis in the assets, liabilities and historical
results of operations of the business related to the MAPICS products. See Notes
to Combined Financial Statements.
The Company generates revenues primarily from licensing its software. When
it first licenses its software, the Company receives both an initial license
fee and a periodic license fee. The periodic license fee, which is typically
paid annually in advance thereafter, entitles the customer to continue using
the software and to receive certain support services. If a customer does not
renew its periodic license, it is no longer entitled to use the Company's
software. The Company believes this licensing arrangement provides it with
recurring revenues from its installed base of customers and enables customers
to take advantage of new releases and enhancements of its software. Initial
license fees are recorded as license revenues, and periodic license fees are
recorded as services revenues and recognized ratably over the period.
The Company's cost structure is designed so that a significant portion of
its costs vary in direct relation to license revenues, particularly its selling
and marketing expenses and cost of license revenues. The MAPICS products are
sold primarily through the Company's network of independent local affiliates,
with support from the Company's sales management. The Company's single largest
expense is commissions paid to these affiliates, which are based on the
revenues they generate from selling licenses to the MAPICS products. The
Company currently expects that as its affiliates generate increasing license
revenues, selling and marketing expenses will decrease as a percentage of
revenues because of the relatively fixed cost of the Company's direct selling
and marketing activities. The affiliates, not the Company, provide the
Company's customers with consulting and implementation services relating to the
MAPICS products. As a result, the Company neither receives revenues from
providing consulting and implementation services, nor bears the fixed costs
inherent in maintaining a services business.
In Japan and certain Eastern European countries, the Company utilizes
resellers rather than affiliates to distribute the MAPICS products and the
Company records as license revenues the net royalties received from the
resellers without any corresponding commission expenses. From 1994 to 1996, net
royalties received from such resellers decreased from 17.0% to 1.3% of total
license revenues. The Company's strategy has been to replace these resellers
with affiliates in order to provide the Company with a more direct relationship
with its customers. This shift generally has resulted in an increase in selling
and marketing expense as a percentage of revenues and a decrease in the
operating margin percentage. The Company believes that the proportion of
reseller sales to total license revenues will remain relatively constant for
the foreseeable future.
Cost of license revenues consists primarily of royalties paid to Solution
Partners with respect to products licensed by the Company and amortization of
software development costs. The Company expects that cost of license revenues
will vary based on the mix of products licensed during the applicable period
between Company-developed products and Solution Partner-developed products. The
Company licenses from its Solution Partners complementary software products
which have been integrated into the MAPICS product line. When the Company
18
<PAGE>
licenses a Solution Partner product to a customer, the Company pays a royalty
to the Solution Partner. As a result, a significant portion of its cost of
license revenues varies in direct relation to license revenues based on
Solution Partners' products. Through its Solution Partner arrangements, the
Company has been able to both enhance the functionality of its existing
products and introduce new products utilizing this variable cost approach to
expand its product offerings. During the past three fiscal years, the mix of
products licensed by the Company has included increasing percentages of
Solution Partner products, which has resulted in both increasing revenues and
royalty costs.
The Company's capitalized software development costs result primarily from
internal software development activities and the translation of software into
various foreign languages. The Company has typically amortized its capitalized
software development and translation costs over five years. As of March 31,
1997, the Company's balance sheet reflected approximately four years of
accumulated capitalized software development costs, because the Company did not
begin capitalizing software until the acquisition of the exclusive marketing
and licensing rights to the MAPICS products in February 1993. Consequently, the
Company currently expects amortization of these costs to continue to increase
through fiscal 1998, when five years of software development costs will have
been capitalized. In addition, in fiscal 1997 the Company made a decision to
amortize its 1997 and future translation expenditures over a revised useful
life of two years rather than five years. This decision resulted, beginning in
the first quarter of fiscal 1997, and will continue to result, in an increase
in amortization expense compared with fiscal 1996.
In the U.S. and Canada, the Company is the provider of support services
(primarily via telephone) to its customers. Elsewhere, the Company engages
local affiliates to provide varying degrees of support services for a fee. For
certain Solution Partner-developed products, the Solution Partners provide
varying levels of support for a fee. The costs of the Company's direct support
services and the fees paid to affiliates and Solution Partners for providing
support services are recorded as costs of services revenues.
In 1996, the Company reduced its level of spending on product development
activities other than translation of products ("core product development")
because, at the time, Marcam Corporation anticipated that the MAPICS products
would use certain technologies being developed in connection with its Protean
and Avantis product lines. Subsequently, the Company determined that such a
development strategy was not consistent with the demands of its target market
and commenced a revised development strategy which will allow future platform
independence. The Company anticipates continuing its efforts to develop
additional versions of certain of its applications to run on Microsoft's NT
server platforms. The Company does not believe that such additional versions
will materially affect results of operations or liquidity. The Company
currently anticipates that core product development expenditures will increase
as a percentage of revenues to levels more consistent with those of 1994 and
1995. Costs of establishing technological feasibility of computer software
products are charged to product development expense as they are incurred.
Consequently, the Company's operating results may be affected adversely by
significant changes in the level of product development investments.
Certain expenses presented in the combined financial statements and other
financial information included in this Prospectus have been allocated based on
management's estimates of the cost of services provided to the Company by
Marcam Corporation. The Company's management believes that these allocations
are reasonable. The combined financial statements and other financial
information included in this Prospectus, however, may not necessarily reflect
the combined financial position, results of operations and cash flows of the
Company had it operated as a separate entity during the periods presented, or
what they may be in the future. See "Risk Factors-- Absence of History as a
Stand-Alone Public Company" and Notes to Combined Financial Statements.
19
<PAGE>
Results of Operations
The following table sets forth, for the periods indicated, the percentage
of total revenues represented by certain line items in the Company's combined
statements of operations.
<TABLE>
<CAPTION>
Six Months Ended
Fiscal Years Ended September 30, March 31,
------------------------------------ -----------------------
1994 1995 1996 1996 1997
<S> <C> <C> <C> <C> <C>
Revenues:
License ........................ 63.3% 61.7% 58.4% 57.2% 57.3%
Services ........................ 36.7 38.3 41.6 42.8 42.7
------ ------ ------ ------ ------
Total revenues .................. 100.0 100.0 100.0 100.0 100.0
Operating expenses:
Cost of license revenues ......... 6.2 8.2 8.9 8.4 9.3
Cost of services revenues ...... 10.3 10.9 12.2 12.8 12.0
Selling and marketing ............ 33.7 35.8 35.9 36.3 33.6
Product development ............ 12.7 10.7 8.3 8.7 11.3
General and administrative ...... 9.1 7.8 7.7 6.2 9.9
------ ------ ------ ------ ------
Total operating expenses ...... 72.0 73.4 73.0 72.4 76.1
------ ------ ------ ------ ------
Operating income .................. 28.0 26.6 27.0 27.6 23.9
Income tax expense ............... 8.8 10.3 10.4 10.6 9.2
------ ------ ------ ------ ------
Net income ........................ 19.2% 16.3% 16.6% 17.0% 14.7%
====== ====== ====== ====== ======
</TABLE>
Six Months ended March 31, 1997 Compared to Six Months ended March 31, 1996
Revenues. The Company generates revenues from licensing its software.
Total revenues increased 23.2% to $44.2 million for the six months ended March
31, 1997 from $35.8 million for the six months ended March 31, 1996. License
revenues increased 23.5% to $25.3 million for the six months ended March 31,
1997 from $20.5 million for the six months ended March 31, 1996. This increase
resulted primarily from an increase of license sales to new customers, and to a
lesser extent, an increase of license sales to existing customers for new
sites, upgraded systems and additional modules, particularly in the U.S.,
Canada and the Europe, Middle East and Africa region ("EMEA"). Services
revenues increased 22.8% to $18.8 million for the six months ended March 31,
1997 from $15.3 million for the six months ended March 31, 1996, principally
due to the increase in the Company's installed customer base and additional
optional support offerings that were made available in the second quarter of
fiscal 1996 in EMEA to customers who had licensed MAPICS products from IBM
without support services.
Cost of License Revenues. Cost of license revenues consists primarily of
royalties paid to Solution Partners with respect to products licensed by the
Company and amortization of capitalized software development costs. Cost of
license revenues increased 36.5% to $4.1 million for the six months ended March
31, 1997 from $3.0 million for the six months ended March 31, 1996. These costs
increased as a percentage of license revenues to 16.3% from 14.8% for the six
months ended March 31, 1997 and 1996, respectively. These increases were
primarily due to increased royalty costs as the volume of Solution Partner
products licensed by the Company increased from the 1996 period to the 1997
period and increased amortization of capitalized software development and
translation costs which resulted from the increased capitalized software asset.
Cost of Services Revenues. Cost of services revenues consists primarily of
personnel costs related to the ongoing maintenance and support of the MAPICS
products, fees paid to affiliates outside the U.S. and Canada to provide
certain support services in those regions, and the fees paid to Solution
Partners to provide similar services with respect to their products. Cost of
services revenues increased 15.9% to $5.3 million for the six months ended
March 31, 1997 from $4.6 million for the six months ended March 31, 1996,
primarily as a result of the increased fees paid to affiliates and Solution
Partners for providing support services. As a percentage of services revenues,
these costs decreased to 28.1% from 29.8% for the six months ended March 31,
1997 and 1996, respectively. This decrease resulted primarily from the
relatively fixed personnel costs in the Company's support services organization
which were offset in part by the increased fees paid to Solution Partners and
affiliates for support services in the 1997 period.
20
<PAGE>
Selling and Marketing. Selling and marketing expenses consist primarily of
commissions paid to the Company's independent affiliates, compensation for the
Company's sales and marketing personnel and direct costs associated with the
Company's marketing campaigns. Selling and marketing expenses increased 13.9%
to $14.8 million for the six months ended March 31, 1997 from $13.0 million for
the six months ended March 31, 1996. This increase in the 1997 period was due
primarily to increased commissions earned by affiliates on increased license
revenues. As a percentage of revenues, selling and marketing expenses decreased
to 33.6% from 36.3% for the six months ended March 31, 1997 and 1996,
respectively. This decrease resulted primarily from the Company's direct
selling and marketing costs being relatively fixed in nature.
Product Development. Product development expenses consist primarily of
compensation for software engineering personnel and independent contractors
retained to assist in the Company's product development efforts. Costs of
establishing technological feasibility of computer software products are
charged to product development expense as they are incurred. Thereafter,
certain software development costs and the cost of translating software
products into different foreign languages are capitalized in accordance with
Statement of Financial Accounting Standards No. 86. Capitalized software
development costs are amortized over the useful lives of such products, which
are generally five years (except for translation expenditures capitalized in
1997 which are being amortized over two years). Amortization expense is charged
to cost of license revenues.
Overall, product development expenses increased 59.2% to $5.0 million for
the six months ended March 31, 1997 from $3.1 million for the six months ended
March 31, 1996 and increased as a percentage of revenues to 11.3% from 8.7% for
the six months ended March 31, 1997 and 1996, respectively. These increases
resulted primarily from lower costs qualifying for capitalization in 1997 than
in 1996 due to the Company's core development efforts. See "Overview" and
"Business--Product Development."
Gross core development expenditures increased 16.3% to $6.0 million for
the six months ended March 31, 1997 from $5.2 million for the six months ended
March 31, 1996. This increase was primarily due to increased development
expenditures as a result of the Company's change in product development
strategy. See "Overview" and "Business--Product Development." The amounts of
core development expenditures capitalized for the six months ended March 31,
1997 and 1996 were $1.2 million and $2.2 million, respectively, representing
19.1% and 42.1% of gross core development expenditures during those periods.
The amounts of development expenditures capitalized during the period decreased
because a higher proportion of development expenditures were related to the
establishment of technological feasibility of the Company's revised development
strategy. Gross translation expenditures decreased 30.8% to $1.3 million for
the six months ended March 31, 1997 from $1.9 million for the six months ended
March 31, 1996. Translation expenditures are typically project related and the
timing of these expenditures is subject to change from period to period. The
amounts of translation costs capitalized for the six months ended March 31,
1997 and 1996 were $1.2 million and $1.8 million, respectively, representing
93.8% of gross translation expenditures during both periods.
General and Administrative. General and administrative expenses consist
primarily of salaries of executive, financial, legal and administrative
personnel, outside professional and service fees and provisions for bad debts.
General and administrative expenses increased 97.1% to $4.4 million for the six
months ended March 31, 1997 from $2.2 million for the six months ended March
31, 1996 due primarily to an increase in the provision for bad debts, as well
as increases in facilities and personnel costs. General and administrative
expenses represented 9.9% of revenues for the six months ended March 31, 1997
as compared to 6.2% for the six months ended March 31, 1996. The level of
general and administrative expenses for the 1996 period was relatively low
primarily because the Company recorded less bad debt expense due to available
reserves.
Provision for Income Taxes. Income tax expense represented 38.5% of income
before tax expense for the six months ended March 31, 1997 and 1996. The
effective tax rates for both periods exceeded the statutory federal rate
largely due to the impact of state income taxes, partially offset by research
and experimentation credits.
Fiscal 1996 Compared to Fiscal 1995
Revenues. Total revenues increased 12.0% to $77.6 million in 1996 from
$69.3 million in 1995. License revenues increased 6.1% to $45.3 million in 1996
from $42.7 million in 1995. This increase resulted primarily from an increase
of license sales to new and existing customers for new sites, upgraded systems
and additional modules, particularly outside the U.S. and Canada. This increase
was primarily attributable to the availability of French,
21
<PAGE>
German, Spanish and Portuguese translations of Release 2 of MAPICS XA. Services
revenues increased 21.5% to $32.3 million in 1996 from $26.6 million in 1995,
principally due to the increase in the Company's installed customer base and
revenues from optional support services offered in EMEA to customers who had
licensed MAPICS products from IBM without support services.
Cost of License Revenues. Cost of license revenues increased 21.5% to $6.9
million from $5.7 million in 1995 and represented 15.2% and 13.3% of license
revenues in 1996 and 1995, respectively. This increase was primarily due to
increased royalty costs as the volume of Solution Partner products licensed by
the Company increased from 1995 to 1996 and increased amortization of
capitalized software development and translation costs which resulted from the
increased capitalized software asset.
Cost of Services Revenues. Cost of services revenues increased 25.5% to
$9.5 million from $7.6 million in 1995 and represented 29.4% and 28.5% of
services revenues in 1996 and 1995, respectively. This increase was primarily
due to increases in staff and other costs in 1996 to support the growing base
of customers in EMEA.
Selling and Marketing. Selling and marketing expenses increased 12.4% to
$27.9 million in 1996 from $24.8 million in 1995 and represented 35.9% and
35.8% of total revenues in 1996 and 1995, respectively. The increase in these
expenses resulted primarily from increased commissions earned by affiliates on
increased revenues. As a percentage of total revenues, these expenses remained
relatively constant as a result of changes in the mix of revenues from
affiliates and resellers. See "Overview."
Product Development. Overall, product development expenses decreased 13.9%
to $6.4 million from $7.4 million in 1995 and represented 8.3% and 10.7% of
total revenues in 1996 and 1995, respectively. These decreases resulted
primarily from lower core development expenditures in 1996. See "Overview" and
"Business--Product Development."
Gross core development expenditures decreased 9.9% to $9.1 million for
1996 from $10.0 million for 1995. This decrease was due primarily to the change
in the Company's development strategy. See "Overview." The amounts of core
development expenditures capitalized for 1996 and 1995 were $2.9 million and
$2.8 million, respectively, representing 31.9% and 28.2% of gross core
development expenditures during those periods. Gross translation expenditures
increased 27.6% to $3.7 million for 1996 from $2.9 million for 1995. The
amounts of translation costs capitalized for 1996 and 1995 were $3.5 million
and $2.7 million, respectively, representing 93.6% and 92.4% of gross
translation expenditures during those periods.
General and Administrative. General and administrative expenses increased
10.8% to $6.0 million from $5.4 million in 1995 and represented 7.7% and 7.8%
of total revenues in 1996 and 1995, respectively. The overall increase was
primarily due to expansion of staff and facilities in EMEA.
Provision for Income Taxes. Income tax expense represented 38.5% and 38.6%
of income before income tax for fiscal years 1996 and 1995, respectively. The
effective tax rates for both periods exceeded the statutory federal rate
largely due to the impact of state income taxes, partially offset by research
and experimentation credits.
Fiscal 1995 Compared to Fiscal 1994
Revenues. Total revenues increased 31.3% to $69.3 million in 1995 from
$52.8 million in 1994. License revenues grew 27.9% to $42.7 million in 1995
from $33.4 million in 1994. This increase resulted primarily from increased
licensing volume both to new customers and to existing customers for new sites,
upgraded systems and additional modules, particularly in the U.S. and Canada.
The Company believes that this increase was attributable to the availability of
the significant enhancements in Release 2 of MAPICS XA and improvements in
affiliate productivity outside North America.
Services revenues increased 37.1% to $26.6 million in 1995 from $19.4
million in 1994. This increase was primarily attributable to the inclusion in
1995 of periodic license fee revenues for a full year. In connection with the
transactions relating to the MAPICS products which occurred in February 1993,
none of the periodic license fees billed by IBM prior to the closing were
transferred to the Company. The Company began recognizing periodic license fee
revenues only after the period for which the customer paid IBM expired.
Periodic license fees were typically billed on the anniversary of the original
license of the software, although revenues from those fees were recognized
ratably during the period. Consequently, the Company did not recognize a full
year of periodic license
22
<PAGE>
fee revenues during 1994. In addition, the Company recognized revenues from
optional support services offered in Europe to customers who had licensed
MAPICS products from IBM without support services.
Cost of License Revenues. Cost of license revenues increased 73.4% to $5.7
million from $3.3 million in 1994 and represented 13.3% and 9.8% of license
revenues in 1995 and 1994, respectively. This increase was primarily due to
increased royalty costs as the volume of Solution Partner products licensed by
the Company increased from 1994 to 1995 and increased amortization of
capitalized software development and translation costs which resulted from the
increased capitalized software asset.
Cost of Services Revenues. Cost of services revenues increased 39.4% to
$7.6 million from $5.4 million in 1994 and represented 28.5% and 28.0% of
services revenues in 1995 and 1994, respectively. This increase resulted
primarily from increased personnel costs associated with expansion of the
Company's North American and European support capabilities.
Selling and Marketing. Selling and marketing expenses increased 39.5% to
$24.8 million in 1995 from $17.8 million in 1994. This increase was due
primarily to increased commissions earned by affiliates on increased license
revenues. Selling and marketing expenses increased as a percentage of total
revenues from 33.7% to 35.8% from 1994 to 1995. This increase was primarily
attributable to a decrease in the proportion of revenues received in 1995 from
affiliates who act as resellers whereby the Company only records as license
revenues the net proceeds from the affiliate and no corresponding commission
expense is recognized, as well as expansion of the Company's direct marketing
programs.
Product Development. Overall, product development expenses increased 11.1%
to $7.4 million in 1995 from $6.7 million in 1994 and represented 10.7% and
12.7% of revenues in 1995 and 1994, respectively. These increases were due to
lower amounts of core development costs qualifying for capitalization in 1995.
Gross core development expenditures decreased 5.5% to $10.0 million for
1995 from $10.6 million for 1994. The amounts of core development expenditures
capitalized for 1995 and 1994 were $2.8 million and $4.1 million, respectively,
representing 28.2% and 39.0% of gross core development expenditures during
those periods. Gross translation expenditures increased 237.4% to $2.9 million
for 1995 from $0.9 million for 1994. The amounts of translation costs
capitalized for 1995 and 1994 were $2.7 million and $0.7 million, respectively,
representing 92.4% and 75.9% of gross translation expenditures during those
periods.
General and Administrative. General and administrative expenses increased
11.9% to $5.4 million from $4.8 million in 1994 and represented 7.8% and 9.1%
of total revenues in 1995 and 1994, respectively. This increase was due
primarily to an increase in the provision for bad debts.
Provision for Income Taxes. Income tax expense represented 38.6% and 31.3%
of income before income tax for fiscal years 1995 and 1994, respectively. The
effective tax rate in 1995 exceeded the federal statutory rate largely due to
the impact of state income taxes, partially offset by research and
experimentation credits. The effective tax rate in 1994 was lower than the
federal statutory rate due to research and experimentation credits and the
benefit of net operating losses exceeding the impact of state income taxes.
Quarterly Financial Results
The following table sets forth unaudited statement of operations data for
each of the four quarters in fiscal 1995 and 1996 and the first two quarters in
fiscal 1997 and the percentage of the Company's total revenues represented by
each item for the respective quarter. This unaudited quarterly information has
been prepared on the same basis as the annual information presented elsewhere
herein and, in the Company's opinion, includes all adjustments necessary for a
fair presentation of the information for the quarters presented. The operating
results for any quarter are not necessarily indicative of results for any
future period.
23
<PAGE>
Operating Results:
<TABLE>
<CAPTION>
Quarters Ended
--------------------------------------------
Dec. 31, Mar. 31, June 30, Sept. 30,
1994 1995 1995 1995
(in thousands)
<S> <C> <C> <C> <C>
Revenues:
License ..................... $11,241 $ 8,456 $ 8,739 $14,309
Services ..................... 5,972 6,902 6,564 7,115
-------- --------- --------- --------
Total revenues ............... 17,213 15,358 15,303 21,424
Operating Expenses:
Cost of license revenues ... 1,060 1,043 1,462 2,124
Cost of services revenues ... 1,643 1,770 1,821 2,333
Selling and marketing ...... 5,720 5,456 5,297 8,307
Product development ......... 1,739 1,844 2,078 1,771
General and administrative ... 1,307 1,205 1,143 1,729
-------- --------- --------- --------
Total operating expenses ... 11,469 11,318 11,801 16,264
-------- --------- --------- --------
Operating income ............ 5,744 4,040 3,502 5,160
Income tax expense ............ 2,215 1,558 1,350 1,989
-------- --------- --------- --------
Net income .................. $ 3,529 $ 2,482 $ 2,152 $ 3,171
======== ========= ========= ========
<CAPTION>
Quarters Ended
----------------------------------------------------------------
Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31,
1995 1996 1996 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Revenues:
License ..................... $11,449 $ 9,052 $ 9,809 $15,031 $14,277 $11,051
Services ..................... 7,174 8,169 8,319 8,599 9,102 9,735
-------- --------- --------- -------- -------- --------
Total revenues ............... 18,623 17,221 18,128 23,630 23,379 20,786
Operating Expenses:
Cost of license revenues ... 1,681 1,345 1,429 2,458 2,558 1,571
Cost of services revenues ... 2,234 2,339 2,300 2,626 2,583 2,718
Selling and marketing ...... 6,814 6,214 6,321 8,502 8,035 6,799
Product development ......... 1,371 1,751 1,482 1,794 2,488 2,481
General and administrative ... 1,486 726 2,002 1,751 1,922 2,438
-------- --------- --------- -------- -------- --------
Total operating expenses ... 13,586 12,375 13,534 17,131 17,586 16,007
-------- --------- --------- -------- -------- --------
Operating income ............ 5,037 4,846 4,594 6,499 5,793 4,779
Income tax expense ............ 1,939 1,866 1,768 2,503 2,230 1,841
-------- --------- --------- -------- -------- --------
Net income .................. $ 3,098 $ 2,980 $ 2,826 $ 3,996 $ 3,563 $ 2,938
======== ========= ========= ======== ======== ========
</TABLE>
Percentage of Total Revenues:
<TABLE>
<CAPTION>
Quarters Ended
--------------------------------------------
Dec. 31, Mar. 31, June 30, Sept. 30,
1994 1995 1995 1995
<S> <C> <C> <C> <C>
Revenues:
License ..................... 65.3% 55.1% 57.1% 66.8%
Services ..................... 34.7 44.9 42.9 33.2
------ ------ ------ ------
Total revenues ............... 100.0 100.0 100.0 100.0
Operating Expenses:
Cost of license revenues ... 6.2 6.8 9.5 9.9
Cost of services revenues ... 9.5 11.5 11.9 10.9
Selling and marketing ...... 33.2 35.5 34.6 38.8
Product development ......... 10.1 12.0 13.6 8.2
General and administrative ... 7.6 7.9 7.5 8.1
------ ------ ------ ------
Total operating expenses ... 66.6 73.7 77.1 75.9
------ ------ ------ ------
Operating income ............ 33.4 26.3 22.9 24.1
Income tax expense ............ 12.9 10.1 8.8 9.3
------ ------ ------ ------
Net income .................. 20.5% 16.2% 14.1% 14.8%
====== ====== ====== ======
<CAPTION>
Quarters Ended
----------------------------------------------------------------
Dec. 31, Mar. 31, June 30, Sept. 30, Dec. 31, Mar. 31,
1995 1996 1996 1996 1996 1997
<S> <C> <C> <C> <C> <C> <C>
Revenues:
License ..................... 61.5% 52.6% 54.1% 63.6% 61.1% 53.2%
Services ..................... 38.5 47.4 45.9 36.4 38.9 46.8
------ ------ ------ ------ ------ ------
Total revenues ............... 100.0 100.0 100.0 100.0 100.0 100.0
Operating Expenses:
Cost of license revenues ... 9.0 7.8 7.9 10.4 10.9 7.6
Cost of services revenues ... 12.0 13.6 12.7 11.1 11.1 13.1
Selling and marketing ...... 36.6 36.1 34.9 36.0 34.4 32.7
Product development ......... 7.4 10.2 8.2 7.6 10.6 11.9
General and administrative ... 8.0 4.2 11.0 7.4 8.2 11.7
------ ------ ------ ------ ------ ------
Total operating expenses ... 73.0 71.9 74.7 72.5 75.2 77.0
------ ------ ------ ------ ------ ------
Operating income ............ 27.0 28.1 25.3 27.5 24.8 23.0
Income tax expense ............ 10.4 10.8 9.7 10.6 9.5 8.8
------ ------ ------ ------ ------ ------
Net income .................. 16.6% 17.3% 15.6% 16.9% 15.3% 14.2%
====== ====== ====== ====== ====== ======
</TABLE>
The Company's quarterly operating results are affected by a number of
factors including the size and timing of license transactions; the demand for
the Company's products; the proportion of revenues attributable to license fees
versus services fees; the proportion of Solution Partner-developed products
versus internally-developed products licensed; changes in the level of
operating expenses; the potential for delay or deferral of customer purchases
of the Company's software; the timing of the introduction or market acceptance
of new or enhanced products offered by the Company or its competitors; the
ability of the Company's affiliate distribution channel to service additional
sales; the competitive conditions in the industry; and the general economic and
political conditions and other factors affecting capital expenditures by
customers. The purchase of the Company's products and services may involve a
significant commitment of capital and other resources by its customers with the
attendant delays frequently associated with large capital expenditures and
authorization procedures within an organization. Accordingly, the sales cycles
for the Company's products and services are subject to a number of significant
risks over which the Company has little or no control, including customers'
budgetary constraints and internal authorization procedures. License revenues
in any quarter are substantially dependent on orders booked and shipped in that
quarter.
24
<PAGE>
The Company's quarterly operating results are subject to certain seasonal
fluctuations. The Company believes that its first quarter (ending December 31)
revenues generally are positively affected by year-end capital expenditures by
certain customers and by year-end incentives provided by IBM to resellers of
its hardware, which include many of the Company's affiliates. In the Company's
fourth quarter (ending September 30), revenues are positively affected by the
incentives provided pursuant to the Company's sales compensation plans. These
factors historically have resulted in each case in increased license revenues
during such quarters. In addition, the Company's revenues occur predominantly
in the third month of each quarter and tend to be concentrated in the latter
half of that third month. Accordingly, delays in product delivery or in
closings of sales near the end of a quarter could cause quarterly revenues and,
to a greater degree, net income to fall substantially short of anticipated
levels. Net income is affected because the Company establishes its spending
levels on the basis of its expected future gross margins. These seasonal
factors are likely to continue to affect quarter-to-quarter comparisons.
Due to the foregoing factors, it is possible that the Company's operating
results could fail to meet the expectations of securities analysts or
investors. In such event, or in the event that adverse conditions in the
manufacturing or ERP marketplace prevail or are perceived to prevail, the price
of the Company's Common Stock would likely be materially adversely affected.
See "Risk Factors--Variability in Quarterly Operating Results; Seasonality."
Liquidity and Capital Resources
The Company has funded its operations and capital expenditures primarily
through cash generated from operations. Historically, the Company has remitted
its excess cash from operations to Marcam Corporation. During the six months
ended March 31, 1997, the Company transferred net cash of $6.5 million to
Marcam Corporation. During fiscal 1996, 1995 and 1994, the Company transferred
net cash to Marcam Corporation of $15.2 million, $16.5 million and $14.3
million, respectively. As of March 31, 1997, the Company had $0.9 million in
cash and a working capital deficit of $14.0 million.
Cash provided by operations was $9.8 million for the six months ended
March 31, 1997 and $23.3 million, $22.7 million and $20.4 million for fiscal
1996, 1995 and 1994, respectively. During the six months ended March 31, 1997,
working capital changes included an increase in deferred revenue as a result of
growth in services revenues, offset partially by an increase in accounts
receivable. During fiscal 1996, working capital was principally affected by an
increase in deferred revenue as a result of growth in services revenues.
Cash used for investing activities was $2.9 million for the six months
ended March 31, 1997 and $8.0 million, $6.1 million and $5.8 million for fiscal
1996, 1995 and 1994, respectively. During fiscal 1996 and the six months ended
March 31, 1997, the Company used cash for investing activities primarily
related to software development and translation and purchases of property and
equipment.
On July 25, 1997, Marcam Corporation borrowed $64 million in the Debt
Financing. The net proceeds from the Debt Financing were used to make the $39
million cash transfer by Marcam Corporation to Marcam Solutions in connection
with the Distribution and to repay Marcam Corporation's $25 million of 9.82%
Subordinated Notes due 2001 (the "Subordinated Notes"). The prepayment penalty
and accrued interest of approximately $2.4 million on the Subordinated Notes
was paid by Marcam Solutions. The indebtedness incurred in the Debt Financing
currently bears interest at the rate of 9% and is payable on August 4, 1997.
This indebtedness will be repaid in whole or in part with the net proceeds from
the Offering. See "The Distribution" and "Use of Proceeds."
The Company has also arranged for a $30 million senior secured revolving
credit and term loan facility. Under this facility, the Company may borrow up
to $15 million as a term loan and up to $15 million under the revolving credit
facility. The Company intends to use borrowings under this credit facility to
repay any amounts borrowed in the Debt Financing which are not repaid with the
net proceeds from the Offering and for general corporate purposes, including
working capital. The Company's obligations under the credit facility will be
secured by liens on substantially all of the Company's assets. The principal of
the term loan under the credit facility will be payable in installments
beginning on September 30, 1998 and ending on June 30, 2001, and any revolving
credit loans under the credit facility will mature on June 30, 2000. The
facility will provide for prime and LIBOR based interest rate options. The
borrowing availability for revolving credit loans and the rate of interest will
vary depending upon specified financial ratios. The credit facility will
contain covenants which, among other things, will require that the Company
maintain certain financial ratios and will impose certain limitations or
prohibitions on the Company with respect to the occurrence of indebtedness,
liens and capital leases; the payment of dividends on, and the
25
<PAGE>
redemption or repurchase of, capital stock of the Company; investments and
acquisitions; the merger or consolidation of the Company with any person or
entity; and the disposition of any of the Company's properties or assets. The
Company has also arranged for the borrowing availability under the senior
secured revolving credit and term loan facility to be increased to $75 million,
which would permit the Company to repay the indebtedness incurred in the Debt
Financing, in the event the Offering is not completed by August 4, 1997.
In connection with the Debt Financing, Marcam Corporation's $20.0 million
revolving credit facility was terminated on July 25, 1997.
As of March 31, 1997, the Company did not have any material commitments
for capital expenditures. The Company anticipates that its capital requirements
for the last six months of fiscal 1997 will be approximately $1.0 million. The
Company's aggregate minimum lease payments for the remainder of fiscal 1997 are
expected to be $538,000.
The Company believes that the net proceeds from the Offering, together
with cash flows from operations and available borrowings, will be sufficient to
meet the Company's working capital and capital expenditure needs at least until
the end of fiscal year 1998.
Inflation
To date, the Company believes inflation has not had a material impact on
the Company's operations.
Recently Issued Pronouncements
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), was issued which will
require the Company to elect either expense recognition under SFAS 123 or its
disclosure-only alternative for stock-based employee compensation. The expense
recognition provision encouraged by SFAS 123 would require fair-value based
financial accounting to recognize compensation expense for employee stock
compensation plans. The Company has determined that it will elect the
disclosure-only alternative. The Company will be required to disclose the pro
forma net income and pro forma net income per share in the notes to the
combined financial statements using the fair-value based method beginning in
fiscal 1997 after the Distribution, with comparable disclosures for fiscal
1996. The Company has not determined the impact that these pro forma
adjustments will have on its net income or income per share.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"), was issued which will require the Company to
present basic and diluted earnings per share ("EPS"). Basic EPS, which replaces
primary EPS, excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS under existing rules. SFAS 128 requires restatement of all prior
period earnings per share data presented. The Company will adopt SFAS 128 as of
October 1, 1998 and has not yet determined the impact of the adoption.
26
<PAGE>
BUSINESS
MAPICS is a leading provider of enterprise resource planning ("ERP")
software applications for mid-size discrete and batch-process manufacturing
enterprises worldwide. The Company's products provide an integrated and
function-rich ERP solution with the breadth and depth of applications to manage
an entire manufacturing enterprise. The MAPICS XA product line currently
consists of 44 integrated application modules in the areas of Engineering and
Cost Management, Market and Demand Management, Plant Operations and Logistics
Management, Production Resource Planning, Financial Management and Measurements
and Cross Applications Solutions. The Company continually enhances its product
offerings to meet the specific needs of mid-size manufacturers and offers such
manufacturers the opportunity to gradually migrate to new technologies, one
user at a time if desired, while protecting their existing investments in both
hardware and software. In addition to its internal development programs, the
Company utilizes third parties (Solution Partners) to assist in the development
of new applications. Solution Partners permit the Company to introduce new
applications quickly and on a variable cost basis.
Approximately 5,700 customer sites presently use MAPICS applications,
which the Company believes represents one of the largest installed user bases
in the ERP industry. In Advanced Manufacturing Research's survey of ERP
customer satisfaction (the "AMR Survey"), MAPICS products received the highest
overall total score (nearly one-third higher than the next competitor) based on
15 different factors, including functionality, value, implementation results,
quality of support, service and maintenance, and knowledge of sales force. The
Company's customer base consists primarily of mid-size ($20 million to $500
million in annual revenues) manufacturers and divisions, sites and subsidiaries
of large companies, including Bristol-Myers Squibb Company, Colgate-Palmolive
Company, Eaton Corporation, General Electric Company, Honda Motor Co., Ltd.,
International Game Technology, Peg Perego Pines SPA, Shiseido Cosmetics
(America) Ltd. and Sub-Zero Freezer Co., Inc. The primary channel for selling
and supporting MAPICS products is a network of more than 80 affiliates which
sells, implements, services and supports MAPICS products throughout the world.
In addition to providing customers high quality local implementation,
consulting and support services in a cost-effective manner, the affiliate
distribution channel provides the Company an attractive variable cost structure
for sales and marketing.
The MAPICS XA product line runs on International Business Machine
Corporation's ("IBM") A/S 400 system, which the Company believes is the leading
platform in the mid-size manufacturing market. The Company intends to pursue
growth opportunities in the ERP market by leveraging its large installed
customer base, continuing to utilize its well-established affiliate
distribution channel, accelerating its growth in international markets,
broadening its customer base with new functionality and continuing its
evolutionary product development approach, designed to migrate customers to new
technologies gradually.
Industry Background
Manufacturers face increasingly intense global competitive pressures, more
demanding vendor-customer relationships and rapidly changing market
requirements. Intensifying global competition requires immediate and effective
communication with customers and suppliers of both discrete and batch-process
manufacturers. Discrete manufacturers produce products by assembling or
machining component parts or sub-assemblies into finished products.
Batch-process manufacturers typically produce a specific quantity of products
on an order or "batch" basis in which a batch moves through a series of
operations in discontinuous mode with work-in-process often building up at
process points (e.g., pharmaceutical and computer chip manufacturers). In
contrast, continuous process manufacturers typically produce products at a
specified rate (e.g., 12 tons per day for 30 days) in which material moves
through various process steps in a continuous flow with no work-in-process
building up at any process point (e.g., chemical, food processing and paper
manufacturers). Customers of discrete and batch-process manufacturers
increasingly demand products which meet custom ("make-to-order") requirements.
These manufacturers are also utilizing new manufacturing methods such as
rate-based manufacturing and just-in-time inventory replenishment. In addition,
manufacturers are increasingly required to manage broadening product
portfolios, multinational distribution, reduced product development and
delivery cycles, lower inventory levels, and more complex manufacturing
strategies. These requirements often involve global sourcing and assembly from
a network of internal and outsourced manufacturers and suppliers. These
challenges require more streamlined organizations, more efficient business
processes, more effective information flow and communication, and a seamless
integration of the entire extended enterprise.
27
<PAGE>
Effective information technology systems, capable of generating and
disseminating critical information throughout an organization and its extended
enterprise, can be a strategic resource for pursuing competitive advantage,
allowing an organization to respond more rapidly to changing market and
customer needs. Organizations rely on ERP systems to manage and integrate
resources across the enterprise including component procurement, inventory
management, manufacturing control, sales management, distribution,
transportation, finance and other functions. The emergence of new computer and
communications technologies, the requirements for addressing Year 2000 system
issues and new developments in electronic commerce are creating demand for a
new generation of ERP applications that offer solutions with expanded
functionality which can be implemented faster, with less risk and lower cost
and which are designed to accommodate future changes to the manufacturing
processes.
Mid-size manufacturers, consisting of independent companies and divisions,
sites and subsidiaries of larger companies with annual revenues of between $20
million and $500 million, are focused on balancing their needs for
functionality from their ERP systems against budgetary constraints. The IBM
AS/400 system, which the Company believes is the leading platform used by
mid-size manufacturers, is increasingly being used as a server for
client/server networks and offers an attractive platform alternative for many
companies implementing ERP solutions because of its low cost of ownership,
flexibility, scalability and maintainability. According to industry sources,
the total worldwide market for ERP systems on all hardware systems was
approximately $5.5 billion in 1996 and will grow at least 20% this year. IBM
has reported that more than 425,000 AS/400 systems have been shipped since
1988. In addition, according to industry sources, more than 60,000 IBM AS/400
systems were shipped during 1996.
In order to compete effectively in their market today and in the future,
mid-size manufacturers require the benefits of client/server ERP solutions that
are affordable and can be implemented quickly, with minimal disruption to
business, and that can be maintained with a limited information technology
staff. ERP systems must provide sufficient depth of functionality and
flexibility to enable manufacturers to respond to varying customer needs and
must offer scalability for growth in operations. Mid-size manufacturers prefer
fully integrated ERP solutions covering all aspects of managing the business
enterprise as opposed to specialized solutions which are costly to integrate
and maintain and are difficult to synchronize when changes are made in software
solutions developed by multiple vendors.
The MAPICS Solution
The Company is a leading provider of ERP software applications for
mid-size discrete and batch-process manufacturing enterprises worldwide. The
Company's approach to addressing this market includes the following:
Integrated Product Line With Broad And Deep Functionality. The MAPICS XA
product line currently consists of 44 integrated application modules which
offer the breadth and depth of functions required to manage a complex
manufacturing enterprise. The MAPICS products, initial versions of which were
introduced over 19 years ago, reflect the Company's comprehensive understanding
of manufacturing processes across a wide range of industries worldwide. The
Company offers a suite of fully integrated application modules which has
expanded from the original 19 modules (many of which have been substantially
enhanced and rewritten) to 44 over the past three years. These new modules and
product enhancements were developed in response to emerging customer needs and
include, among others, Intersite Logistics, Material Requirements Planning,
Customer Order Management, International Financial Management and Electronic
Commerce. Additionally, all of the current versions of MAPICS products are Year
2000 compliant.
Customers Able to Migrate to New Technologies Gradually. The Company
continually enhances its product offerings to meet the specific needs of
customers and offers customers the opportunity to gradually migrate to new
technologies, one user at a time if desired, while protecting their existing
investments in both hardware and software. As new features and functions are
added, all existing functionality is preserved. MAPICS XA utilizes the
technology often sought by manufacturers, such as client/server computing,
object-oriented technology and data warehousing.
Local Implementation and Support Services. MAPICS users throughout the
world benefit from the implementation and other support services provided by
the Company's more than 80 local distribution affiliates. These affiliates
offer customers experienced local contact to implement and customize MAPICS
products rapidly and cost-effectively and also offer customers the necessary
level of support to permit them to maintain limited information technology
staffs. These affiliates are also able to customize applications for customers.
The Company has consolidated its distribution channel, reducing significantly
the number of affiliates in place at the time the
28
<PAGE>
business was acquired in 1993, retaining its current affiliates because of
their ability to sell and market MAPICS products, product knowledge, quality of
customer support, implementation capacity and financial stability.
High Quality Product Support. The Company is dedicated to providing high
quality support for its products both directly through its approximately 90
employee support staff and through its affiliates. The Company's development
laboratory and the primary customer support center were among the first in the
ERP packaged software industry to be ISO 9001 registered, and they remain among
the few which have achieved this status. In the AMR Survey, MAPICS products
received the highest overall total score (nearly one-third higher than the next
competitor) based on 15 different factors, including functionality, value,
implementation results, quality of support, service and maintenance, and
knowledge of sales force.
Strategy
The Company's primary objective is to continue to be a leading provider of
integrated ERP solutions to mid-size manufacturers worldwide. The key elements
to implement this strategy are:
Leverage Large Installed Customer Base. The Company believes the
approximately 5,700 customer sites using MAPICS applications represent one of
the largest installed user bases in the ERP industry. Opportunities for
recurring revenue from existing customers include continued licensing of
existing modules, licensing of additional modules, implementation of MAPICS
products at additional sites, upgrades to larger processors and migrations to
new technologies.
Utilize Well-Established Affiliate Distribution Channel. MAPICS products
are distributed in over 50 countries through a network of more than 80
affiliates. The use of local affiliates provides the Company with strong market
access and penetration, while providing for local support. With their extensive
experience installing MAPICS products, these affiliates typically offer
customers high quality and cost-effective local implementation, consulting and
support services and, in some cases, offer complementary products. Affiliates
typically have extensive knowledge of the mid-size manufacturing industry in
their geographic region and are able to establish and maintain cooperative
relationships with MAPICS customers. While these activities generate
significant revenues for the affiliates, the affiliate distribution channel
provides the Company with an attractive variable cost structure for sales and
marketing. The Company continues to enhance its affiliate distribution channel
by providing new training programs, assisting in affiliate recruiting efforts
and improving communications with its affiliates.
Accelerate Growth in International Markets. The Company intends to
continue to expand its market presence throughout the world, with a focus on
Europe where there is a large installed base of AS/400 systems. During 1996,
the Company introduced its International Financial Management suite of modules,
which are designed to meet the requirements of international enterprises with
customers and production facilities in multiple countries. To address specific
needs in local markets, MAPICS modules are translated and localized, supporting
the local language, currency, taxation and accounting requirements. Currently,
the most commonly installed MAPICS XA application modules are available in
English, Chinese, French, German, Japanese, Portuguese and Spanish.
Broaden Customer Base with New Functionality. The Company intends to
continue to broaden its customer base by offering new functionality required by
both new and existing customers. The Company uses the feedback it receives from
its customers, affiliates and Solution Partners to develop the functionality
needed by certain segments of the mid-size manufacturing industries. For
example, the Company recently introduced Intersite Logistics for customers with
multiple, interrelated production sites; Contract Accounting for manufacturers
with projects which extend over long time periods and for government
contractors; and Knowledge-Based Configurator for manufacturers in
make-to-order production industries.
Migrate Customers to New Technologies Gradually. The Company is committed
to enhancing the functionality of its products and delivering solutions which
utilize new technologies sought by users, while preserving users' previous
investments in both hardware and software. This evolutionary product
development strategy is designed to offer customers the opportunity to migrate
to new technologies at their own pace, as gradually as one user at a time if
desired. The Company believes this approach is attractive to those mid-size
manufacturers who seek functional applications which operate on established
hardware platforms. Product development priorities are determined by insight
and input from the Company's customers, Solution Partners and affiliates. Also,
the Company will continue to work with Solution Partners, which enables the
Company to offer functionality to meet specific customer needs.
29
<PAGE>
Products
The MAPICS I application system, the first comprehensive manufacturing
resource planning system, was introduced in 1978 by IBM. In 1984, IBM
introduced the enhanced MAPICS II application, which was designed to run on
IBM's System 36 and 38 computers. In 1989, IBM introduced MAPICS/DB to run on
IBM's AS/400 system. In 1993, the Company acquired the exclusive marketing
rights to the MAPICS product line and retained approximately 150 former IBM
employees to continue the development and support of the MAPICS products.
Following the acquisition, the Company undertook to improve the overall
functionality of the MAPICS products and in 1994 MAPICS eXtended Advantage (XA)
was introduced by the Company. Overall, since the acquisition of the marketing
rights in 1993, the Company has expanded the number of software modules from 19
to 44, and has substantially enhanced and rewritten many of the original
modules.
The Company's principal software product line, MAPICS XA, which runs on
the IBM AS/400 system, provides a comprehensive and integrated ERP solution for
mid-size manufacturing enterprises. The MAPICS XA product line has been
designed to support, within a single site or multiple sites, varied production
and operational processes. The MAPICS products provide the flexibility to
expand to additional sites and processes as a manufacturer's business evolves.
The MAPICS XA product line consists of application modules, which can be
combined and integrated to meet the evolving and specific needs of the
Company's customers.
The Company's MAPICS XA software application modules integrate
feature-rich applications in the following key application areas:
Engineering and Cost Management Applications assist in the development of
data which describe the materials, processes and facilities required to
estimate costs and produce manufactured items. The Company's four software
modules in this area include:
Product Data Management Engineering Data Management
PDMPlus Estimating and Quote Management
Market and Demand Management Applications provide for the configuration
and entry of customer orders and the control of these orders through pricing,
picking, shipping and invoicing. Also included is the analysis of the demand
sources (e.g., customers, sales territories and geographies) of all orders. The
Company's four software modules in this area include:
Customer Order Management Market Monitoring and Analysis
Sales Analysis Knowledge-Based Configurator
Plant Operations and Logistics Management Applications support the
procurement and tracking of material, the launch and control of manufacturing
activity, and the management of plant maintenance. The Company's 14 software
modules in this area include:
Inventory Management Approvals
Repetitive Production Management Entity Management
Intersite Logistics-Single Site Preventive Maintenance
Intersite Logistics-Multiple Site Work Order Management
Purchasing MRO Inventory
Production Control and Costing Maintenance Imaging
Production Monitoring and Control Maintenance EIS
Production Resource Planning Applications project the demand for
materials, personnel and equipment based on forecasts and assist in preparing
the master schedule to produce items ordered by customers. The Company's five
software modules in this area include:
Forecasting Master Production Schedule Planning
Material Requirements Planning Capacity Requirements Planning
Finite Capacity Planning and Scheduling
30
<PAGE>
Financial Management and Measurements Applications provide financial and
managerial accounting functions and tracks historical performance of key
management measurements and contracts. The Company's 12 software modules in
this area include:
International Financial Management Accounting Management
Accounts Payabale Accounts Payable
Accounts Receivable Accounts Receivable
General Ledger Financial Analysis
Contract Accounting General Ledger
Executive Information System Fixed Assets
Manufacturing Performance Analysis Payroll USA
Cross Applications Solution Applications provide common services (e.g.,
security control, data retrieval, report development, data transmission) for
all application modules. The Company's five software modules in this area
include:
Cross Application Support Electronic Commerce
PowerVision Visual WorkPlace
Information WorkPlace
The MAPICS XA product line is compatible with the needs of mid-size
manufacturers throughout the world. The Company's most commonly purchased
products have been translated into at least six languages, support local
currency transactions and can be implemented and utilized in multisite,
multinational divisions of large, diverse enterprises.
When it first licenses its software, the Company receives both an initial
license fee and a periodic license fee. The periodic license fee, which is
typically paid annually in advance thereafter, entitles the customer to
continue using the software and to receive certain support services. If a
customer does not renew its periodic license, it is no longer entitled to use
the Company's software. The typical initial license fee for a new MAPICS system
ranges between $100,000 and $600,000, depending upon the number and type of
modules licensed, the size of the processor and in some instances the number of
users. The typical periodic license fee is based on a percentage of the then
current amount of the applicable initial license fee.
The MAPICS XA product line offers a Graphical User Interface (GUI), which
allows the user to choose between the lower cost character-based screens or a
Microsoft Windows-based look and feel. The MAPICS products have been converted
to be Year 2000 compliant and are offered to MAPICS customers who are paying
periodic license fees.
Product Development
Since the Company acquired the exclusive marketing rights to the MAPICS
products from IBM in 1993, it has released a number of new products and product
enhancements to the MAPICS/DB and MAPICS XA product lines. Ongoing product
development efforts are focused on addressing the needs of its customer base,
in part as a result of feedback from its local affiliates, and on further
broadening and deepening the functionality of MAPICS products. In particular,
research is currently being conducted by the Company to make MAPICS products
available in a JAVA development environment which can be ported to run on
multiple platforms, including the IBM AS/400 and those running Microsoft's NT
Server. To date, the Company has developed a prototype product that runs its
PDMPlus application on Microsoft's NT server platforms. The Company intends to
employ the technology underlying the prototype product to duplicate the MAPICS
applications on Microsoft's NT server platforms. These research efforts have
been undertaken so that the Company may, in the future, offer its customers a
choice of platforms on which to run MAPICS products. Development direction is
established by senior management with guidance from the marketing staff and
affiliates. The development team is responsible for design and design
verification, coding, quality assurance, documentation, and language conversion
of new enhancements, products and releases. The Company's development lab,
located in Atlanta, Georgia, is certified for compliance with ISO 9001. See
"Risk Factors--New Products and Technological Change."
In addition to internal development efforts, the Company has, to date,
developed 19 of the Company's software modules in collaboration with third
parties, termed "Solution Partners." Solution Partners are generally expected
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to maintain development quality and procedures commensurate with those utilized
in the Company's internal development lab. As a result of working closely with
its Solution Partners, the Company believes that most of its software modules
attain consistent quality, implementation and support standards, and that most
modules developed by Solution Partners are virtually indistinguishable from
those developed by the Company's internal development team. The Solution
Partners are generally paid royalties by the Company when the Company receives
its license fees for Solution Partner-developed modules.
Research and development expenditures have increased significantly in
recent periods as the Company has continued to focus on development of new and
enhanced products. During fiscal years 1994, 1995, and 1996, gross research and
product development expenditures were $11.5 million, $12.9 million, and $12.8
million, respectively. See "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and "Risk Factors--Dependence on External
Development Resources."
Customers
The Company believes that MAPICS products have been licensed to more
customer sites worldwide than any other ERP software solution in the industry
with an installed user base of approximately 5,700 customer sites. The
Company's primary customers are mid-size discrete and batch-process
manufacturers, consisting of independent companies and divisions, sites and
subsidiaries of larger companies with annual revenues of between $20 million
and $500 million. Discrete mid-size manufacturers generally seek software
solutions that will address and help manage product specifications, customer
demand, inventory availability, labor and equipment resources and advanced
manufacturing techniques which require just-in-time inventory replenishment.
The Company believes that it meets the practical business requirements of
mid-size manufacturers by offering modular technology choices which can be
implemented gradually and which are fully supported by local service providers.
The Company's products assist customers in meeting their internal goals of
maintaining operational flexibility, responding to market changes, increasing
revenue and market share, and minimizing cost, waste and disruption.
None of the Company's customers accounted for more than 10% of total
revenues in fiscal 1996. The Company does not believe that its backlog at any
particular point in time is indicative of future sales.
The Company's installed base includes divisions, sites and subsidiaries of
the following enterprises:
<TABLE>
<S> <C>
ABB Asea Brown Boveri (Holding) Ltd. Kerry Ingredients UK Ltd.
Bayer Corporation Matsushita Electronic Industrial Co., Ltd.
Bostick, Inc. Michelin Corporation
Bristol-Myers Squibb Company Michigan Bulb Company Inc.
Colgate-Palmolive Company MTD Products, Inc.
Coltec Industries Inc. Pall Corporation
Cooper Industries Peg Perego Pines SPA
Eaton Corporation Philips Electronics N.V.
Emerson Electric Co. Shiseido Cosmetics (America) Ltd.
Figgie International, Inc. Sub-Zero Freezer Co., Inc.
Gencor Ltd. Syntex Corp.
General Electric Company, P.L.C. Thomas Lighting Inc.
Giddings and Lewis, Inc. Volvo Corporation
Goodyear Tire & Rubber Company Westinghouse Electric Corporation
Honda Motor Co., Ltd. York International
International Game Technology
</TABLE>
Marketing and Sales
The Company markets its products through a network of more than 80
affiliates in over 50 countries throughout North America, Europe, Africa, the
Middle East, the Asia Pacific region, and Latin America, which implements,
services and supports the Company's products throughout the world. The use of
local affiliates provides the Company with strong market access and
penetration. Affiliates provide sales, consulting, implementation and
maintenance services directly to the Company's customer base on a local basis.
Typically, the affiliates have extensive experience in installing MAPICS
products and provide high quality, knowledgeable consulting and
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support services to MAPICS customers. Affiliates tend to have extensive
knowledge of the mid-size manufacturing industry in their geographic region and
are able to establish and maintain cooperative relationships with MAPICS
customers. The Company does not own any interest in any of its distribution
affiliates. Each affiliate has the right to market and sell MAPICS products
within a specific geographic territory and in return, affiliates are generally
not permitted to represent other, competitive, ERP systems. The affiliates are
managed by a sales management team which has emphasized consolidation of
smaller affiliates into larger organizations, eliminated overlapping
territories, and developed a higher level of sales skills.
The affiliate distribution channel provides significant leverage to the
Company. Most importantly, the affiliates provide a variable cost channel since
they generally receive a sales commission when the Company receives its license
fees. Moreover, the affiliate channel provides the Company continual input and
feedback regarding customer concerns and requirements, industry trends and
competitive products, thus enabling the Company to respond to and anticipate
the future product needs of its customer base and to incorporate such knowledge
into its product development efforts.
The Company historically has had excellent relations with its affiliates.
These strong relations are, the Company believes, attributable to a number of
factors, including the significant revenues which the affiliates receive both
directly from MAPICS as well as from consulting and customization services
rendered to users of MAPICS products and from IBM for sales of the AS/400. In
addition, the affiliates have generally made significant investments in
developing MAPICS knowledge within their organizations.
Customer Support and Service
The Company believes that providing a high level of customer service and
technical support is necessary to achieve rapid product implementation which,
in turn, is essential to long-term customer satisfaction and continued revenue
growth. Accordingly, MAPICS is committed to maintaining a high-quality,
knowledgeable affiliate channel supported by the Company's internal service and
support staff. MAPICS' customer service and support activities can be grouped
into two key areas, as follows:
Implementation consulting, education and applications integration
services. These services are provided on a project consulting basis by the
Company's affiliates. Implementation consulting services are provided on-site
to assist customers in the installation and use of the Company's products
whether entire systems are implemented or individual modules are installed to
augment existing applications. The Company also provides its customers with
supplemental materials which guide the customer through the installation
process thus increasing the efficiency of installation and reducing the cost.
The Company has developed and provides educational materials and instructions
which are used by affiliates in customer classroom environments.
Installed product maintenance. The Company maintains a central telephone
response and assistance program. In North America, this program is available to
customers that pay periodic license fees, 24 hours a day, seven days a week.
Customers receive assistance in operational issues and resolving possible code
errors. A standardized telephone support management system is used by all
support centers to log telephone calls, trace problems or inquiries, identify
qualified support personnel to assist customers, follow the inquiry through to
a successful resolution and measure support performance. In the AMR Survey,
telephone support for the MAPICS products was rated the highest in the
industry.
The Company presently maintains three support centers: Atlanta, Georgia,
which serves North and South America; Eindhoven, Netherlands, which services
Europe, the Middle East and Africa; and Kuala Lumpur, Malaysia which services
the Asia Pacific region.
Proprietary Rights and Technology
The Company's success and ability to compete is heavily dependent upon its
proprietary technology, including its software source code. To protect its
proprietary technology, the Company relies on a combination of copyright,
trademark and trade secret laws and license and non-disclosure agreements,
which may afford only limited protection. In addition, effective copyright
protection may be unavailable or limited in certain foreign countries. Although
the Company relies on the limited protection afforded by such intellectual
property laws, it also believes that factors such as the technological and
creative skills of its personnel, new product developments, frequent product
enhancements, name recognition and reliable customer support are also essential
to establishing and maintaining a technology leadership position. The Company
presently has no patents or patent applications pending.
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The source code for the Company's proprietary software is protected both as a
copyrighted work and certain of the applications are protected as trade
secrets. The Company generally enters into confidentiality or license
agreements with its employees, consultants, distributors and customers, and
generally controls access to and distribution of its software, documentation
and other proprietary information. The Company is reliant, however, upon
certain of its Solution Partners to continue to allow the Company to use
technologies developed by such Solution Partners on terms that are favorable to
the Company.
Despite the measures taken by the Company to protect its proprietary
rights, unauthorized parties may attempt to reverse engineer or copy aspects of
the Company's products or to obtain and use information that the Company
regards as proprietary. Policing unauthorized use of the Company's products is
difficult. Litigation may be necessary in the future to enforce the Company's
intellectual property rights, to protect the Company's trade secrets, to
determine the validity and scope of the proprietary rights of others, or to
defend against claims of infringement or invalidity. Such litigation could
result in substantial costs and diversion of resources and could have a
material adverse effect on the Company's business, operating results and
financial condition. In addition, to the extent the Company desires or is
required to obtain licenses to proprietary rights of others, there can be no
assurance that any such licenses will be made available on terms acceptable to
the Company, if at all. Any litigation or dispute regarding proprietary
technology which results in a ruling or settlement that is adverse to the
Company, could have a material adverse effect on the Company's business
operating results and financial condition. Claims against the Company, with or
without merit, as well as claims initiated by the Company against third
parties, can be time consuming and expensive to defend, prosecute or resolve.
See "Risk Factors--Uncertain Protection of Proprietary Technology."
Competition
The market for ERP software within the mid-size manufacturing industry is
highly competitive, changes rapidly and is to a significant degree affected by
new product introductions and other market activities of industry participants.
The Company's products and related services are primarily targeted at the
market for business applications software for use with the IBM AS/400. The
Company's current and prospective competitors offer a variety of products which
address this and similar markets. The Company's primary competition comes from
a large number of independent software vendors and other sources, including
Baan N.V., Computer Associates, Inc., Intentia AB, JBA Holdings Plc, J.D.
Edwards and Company, Inc., Oracle Corporation, SAP AG and System Software
Associates, Inc. Of the Company's primary competitors, the products of Intentia
are currently designed solely for use with the IBM AS/400, and the products of
JBA Holdings Plc, J.D. Edwards and System Software Associates are currently
designed for use primarily with the IBM AS/400. The Company also experiences
some competition from vendors of specialized applications. See "Risk Factors--
Competition."
The principal competitive factors in the market for ERP software and
services include product functionality, quality, performance, reliability,
ease-of-use, cost-effectiveness, size of installed base, technology, service,
and vendor reputation and financial stability. The Company believes that its
products currently compete favorably on the foregoing bases, although in
certain instances it may be at a competitive disadvantage against companies
with greater financial, marketing, service, support, and technological
resources, and greater name recognition. The Company believes its competitive
strengths include its extensive mid-size manufacturing industry expertise, its
dedicated affiliate channel, broad and deep functionality of its products and
proven customer satisfaction.
In order to be successful in the future, the Company must continue to
respond promptly and effectively to the challenges of technological change and
its competitors' innovations by continually enhancing its own product
offerings. There can be no assurance, however, that the Company's products will
continue to compete favorably or that the Company will be successful in the
face of increasing competition from new products and enhancements introduced by
existing competitors or by new companies entering this market. In addition,
because the Company often relies on third party affiliates for implementation
and other support of its products, there can be no assurance that these
affiliates will maintain high quality standards sufficient to maintain the
reputation and competitive position of the Company. The Company must continue
to respond effectively to customer needs and properly select and incorporate
those technologies and application functionalities that will meet the
challenges posed by competitors' innovations. To accomplish these critical
objectives, the Company must continue to invest in enhancing its current
products and introduce new products to remain competitive. See "Risk
Factors--New Products and Technological Change."
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Employees
As of April 30, 1997, the Company employed a total of 234 employees. None
of the Company's employees is represented by a labor union. The Company has
experienced no work stoppages and believes that its employee relations are
good.
The Company's future operating results depend in significant part upon the
continued service of its key technical and senior management personnel. The
Company's future success also depends on its continuing ability to attract and
retain highly qualified technical and managerial personnel. Competition for
such personnel is intense, and may further intensify due to the hiring needs of
numerous competitors to particularly address Year 2000 issues. There can be no
assurance that the Company will retain its key managerial or technical
personnel or attract such personnel in the future. The Company has at times
experienced and continues to experience difficulty recruiting qualified
personnel and there can be no assurance that the Company will not continue to
experience such difficulties in the future. The Company, either directly or
through personnel search firms, actively recruits qualified product
development, consulting and sales and marketing personnel. If the Company is
unable to hire and retain qualified personnel in the future, such inability
could have a material adverse effect on the Company's business, financial
condition and results of operations.
Facilities
The Company's principal administrative, marketing, product development and
support facilities are located in Atlanta, Georgia, where the Company leases a
total of approximately 60,000 square feet under two agreements that expire in
March 1998 and in 1999. The Company has other leases in place for its North
American, Latin American, European and Asian Pacific sales and service offices.
The Company believes that its facilities are adequate for its current needs.
Marcam Corporation's principal administrative, marketing and product
development and support facilities are located in Newton, Massachusetts. In
connection with the Distribution, Marcam Corporation has assigned its lease for
the premises in Newton, Massachusetts (approximately 94,000 square feet) to
Marcam Solutions. This lease expires in 1999. Marcam Corporation has also
assigned the leases for certain of the Atlanta facilities as well as the Saddle
Brook, New Jersey, Oakbrook Terrace, Illinois, and Irvine, California locations
to Marcam Solutions. The remaining facilities will not be affected by the
Distribution.
Legal Proceedings
The Company is subject to legal proceedings and claims which arise in the
normal course of business. While the outcome of these matters cannot be
predicted with certainty, management does not believe the outcome of any of
these legal matters will have a material adverse effect on the Company's
business, financial condition or results of operations.
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<PAGE>
MANAGEMENT
Executive Officers and Directors
Prior to the completion of the Offering and in connection with the
Distribution, it is expected that all current directors of the Company other
than William E. Ford and Edward J. Kfoury will resign and that Messrs. Ford and
Kfoury will fill the vacancies so created with the other individuals identified
as directors below. In addition, it is expected that all current executive
officers of the Company other than Richard C. Cook will be replaced with the
individuals identified as executive officers below.
<TABLE>
<CAPTION>
Name Age Position
- ------------------------------------- ----- ------------------------------------------------------
<S> <C> <C>
Richard C. Cook ..................... 50 President, Chief Executive Officer and Director
William J. Gilmour .................. 41 Chief Financial Officer and Vice President of Finance
Thomas F. Aery ..................... 51 Vice President of Worldwide Customer Support
George A. Chamberlain, 3d (2) ...... 61 Director
Edward J. Kfoury (1)(2) ............ 58 Director
William E. Ford (1)(2) ............ 35 Director
</TABLE>
- ------------
(1) Member of Compensation Committee.
(2) Member of Audit Committee.
Mr. Cook will serve as the Company's President and Chief Executive Officer
immediately following the Offering. Since July 1996, Mr. Cook served as Marcam
Corporation's Senior Vice President and General Manager, MAPICS Business Group.
From October 1994 to July 1996, he served as Marcam Corporation's Vice
President and General Manager, MAPICS Business Group. Mr. Cook served as the
President, Chief Executive Officer and Chairman of the Board of Mapics, Inc.
from October 1992 to September 1994. Mr. Cook was employed by International
Business Machines Corporation ("IBM") as Director of its Atlanta Software
Development Lab from March 1990 to September 1992 and as Director of its
Corporate CIM (Computer Integrated Manufacturing) Project Office from March
1988 to April 1990.
Mr. Gilmour will serve as the Company's Chief Financial Officer and Vice
President of Finance immediately following the Offering. Since October 1994,
Mr. Gilmour served as Controller of Marcam Corporation's MAPICS Buisiness
Group. From January 1993 to September 1994, Mr. Gilmour served as Controller of
Mapics, Inc. From November 1991 to January 1993, Mr. Gilmour served as
Controller of Marcam Canada Corporation, an indirect subsidiary of Marcam
Corporation. Prior to joining Marcam Corporation, Mr. Gilmour served as
Corporate Controller of Madison Chemical Industries, a specialty chemical
manufacturer. Mr. Gilmour obtained his Chartered Accountant designation from
the Canadian Institute of Chartered Accountants in 1980.
Mr. Aery will serve as the Company's Vice President of Worldwide Customer
Support immediately following the Offering. Since October 1994, he has served
as Marcam Corporation's Vice President of Worldwide Customer Support, MAPICS
Business Group. From May 1993 to September 1994, Mr. Aery served as Director of
Worldwide Customer Support of Mapics, Inc. Prior to joining Marcam Corporation,
Mr. Aery was employed by IBM as Worldwide Product Manager, MAPICS.
Mr. Chamberlain will become a director of the Company immediately
following the Offering. Mr. Chamberlain will serve as Marcam Solutions' Chief
Financial Officer and Vice President of Finance after the Distribution. Mr.
Chamberlain has served as Marcam Corporation's Chief Financial Officer since
September 1994. Prior to joining Marcam Corporation, Mr. Chamberlain was an
Executive Vice President with Capital Technologies, Inc., a consulting and
venture capital company, during 1993 and 1994. Mr. Chamberlain retired from
Digital Equipment Corporation in 1992, where he had most recently been Vice
President of Finance.
Mr. Kfoury has been a director of Marcam Corporation since May 10, 1993
and will continue to be a director of the Company. He was initially appointed
to the Board of Directors of Marcam Corporation as a designee of IBM, a
stockholder of Marcam Corporation, pursuant to agreements between IBM and
Marcam Corporation and among IBM, Marcam Corporation, Paul A. Margolis and John
Campbell. Mr. Kfoury is no longer a designee of IBM. Mr. Kfoury served as a
division President and as a Vice President of IBM until June 1, 1993, the
effective date of his retirement.
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<PAGE>
Mr. Ford has been a director of Marcam Corporation since October 1995 and
will continue to be a director of the Company. He was appointed to the Board of
Directors as a designee of General Atlantic Partners 21, L.P., ("GAP 21"), a
stockholder of Marcam Corporation, pursuant to the Convertible Preferred Stock
Purchase Agreement dated as of September 20, 1995 by and among Marcam
Corporation, GAP 21, GAP Coinvestment Partners, L.P. and The Northwestern
Mutual Life Insurance Company. Mr. Ford has been a managing member of General
Atlantic Partners, LLC since 1991. Prior to 1991, Mr. Ford was a Senior
Associate with Morgan Stanley. Mr. Ford is also a director of GT Interactive
Software Corp., Envoy Corporation, SS&C Technologies, Inc. and E*Trade Group,
Inc.
Pursuant to the Company's Restated Articles of Organization, the Company's
Board of Directors is divided into three classes. Each director is elected for
a three-year term of office, with one class of directors being elected at each
annual meeting of stockholders. Each director holds office until his successor
is elected and qualified or until his earlier death, resignation or removal.
Mr. Kfoury will serve in class I whose term expires in 1998; Messrs.
Chamberlain and Cook will serve in class II whose term expires in 1999; and Mr.
Ford will serve in class III whose term expires in 2000.
Executive Compensation
Prior to the Distribution, the executive officers of the Company will have
been paid compensation and provided benefits by Marcam Corporation.
Compensation paid or benefits provided by Marcam Corporation and its
subsidiaries during Marcam Corporation's last fiscal year to the chief
executive officer of the Company and the two other most highly compensated
executive officers of the Company whose annual compensation and bonus was
$100,000 or more is as follows: Mr. Cook received a base salary of $162,437, a
bonus of $189,801 and a contribution to Marcam Corporation's group life
insurance policy and 401(k) Plan of $3,018. Mr. Cook did not receive any stock
option grants during fiscal 1996. Mr. Aery received a base salary of $99,875, a
bonus of $41,055 and a contribution to Marcam Corporation's group life
insurance policy and 401(k) Plan of $1,906. Mr. Aery received options to
purchase 5,000 shares of Common Stock during fiscal 1996. Mr. Gilmour received
a base salary of $78,678, a bonus of $23,954 and a contribution to Marcam
Corporation's group life insurance policy and 401(k) Plan of $1,665. Mr.
Gilmour received options to purchase 1,000 shares of Common Stock during fiscal
1996. Marcam Corporation did not grant any stock appreciation rights during
fiscal 1996. No other executive officer of the Company who held office during
fiscal 1996 met the definition of "highly compensated" within the meaning of
the Securities and Exchange Commission's executive compensation disclosure
rules.
After the Distribution, the Company intends to increase the base salaries
for its executive officers to levels commensurate with salary levels of
software companies with similar historical revenues. In addition, the Company
expects to implement new executive incentive compensation and stock option
arrangements similar to those currently maintained by software companies with
similar historical revenues. Accordingly, the historical compensation
information for Messrs. Cook, Aery and Gilmour is of limited relevance.
THE DISTRIBUTION
Marcam Corporation has announced its intention to spin off in a tax-free
distribution the portion of its business relating to its PRISM, Protean and
Avantis product lines. The separation into two independent, publicly traded
companies is designed to enable each to better focus on its core markets, to
better serve existing customers and to finance its business. In connection with
the Distribution, the Company will change its name from "Marcam Corporation" to
"MAPICS, Inc."
In connection with the Distribution, Marcam Corporation has transferred to
Marcam Solutions, substantially all of the business, assets and liabilities
relating to its PRISM, Protean and Avantis product lines and an aggregate of
$39.0 million in cash in exchange for (i) a number of shares of common stock of
Marcam Solutions sufficient for Marcam Corporation to make the Distribution and
(ii) warrants to purchase an aggregate of 500,000 shares of common stock of
Marcam Solutions (the "Marcam Solutions Warrants"). The $39 million cash
transfer by Marcam Corporation to Marcam Solutions was financed with a portion
of the net proceeds from the Debt Financing. See "Summary--Recent Developments"
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
Marcam Corporation intends to distribute all of its ownership interest in
Marcam Solutions (the "Distribution") by means of a distribution on July 29,
1997 to its stockholders of record on July 23, 1997. Marcam Corporation
37
<PAGE>
has requested a private letter ruling (the "Private Letter Ruling") from the
Internal Revenue Service (the "Service") substantially to the effect that,
except as provided below, the Distribution will qualify as a tax-free
distribution to the Company and its stockholders under Section 355 of the Code.
At the option of the Board of Directors of Marcam Corporation, Marcam
Corporation may proceed with the Distribution based upon the opinions of its
special tax counsel, Skadden, Arps, Slate, Meagher & Flom LLP, and its
independent accountants, Coopers & Lybrand L.L.P., that, except as provided
below, the Distribution should qualify as a tax-free distribution under Section
355 of the Code (the "Tax Opinions"). See "Risk Factors--Federal Income Tax
Consequences and Liabilities." The Tax Opinions will be based upon certain
facts, assumptions, and representations of officers of Marcam Corporation and
Marcam Solutions as of the date of the Distribution. The Company will not
complete the Distribution unless it receives the Private Letter Ruling or the
Tax Opinions. Accordingly, neither the Company nor its stockholders should
recognize taxable gain on the Distribution, except as provided below. The
Company, however, will recognize gain on the Distribution to the extent that
Marcam Solutions shares are received by stockholders who are not United States
persons ("non-U.S. persons"). The number of Marcam Solutions shares expected to
be distributed to non-U.S. persons is estimated to represent not more than 19%
of the total Marcam Solutions shares to be distributed in the Distribution.
Moreover, the Company may recognize additional gain with respect to certain
aspects of the Distribution, including certain restructuring transactions
expected to be consummated in connection with the Distribution. The aggregate
amount of gain recognized by the Company in connection with the Distribution is
not expected to result in any significant tax liability, but rather is expected
to be offset by existing net operating losses. Accordingly, the amount of such
net operating losses available to the Company after the Distribution will
likely be reduced. In connection with the Asset Transfers, taxable gain may
also be recognized in certain foreign jurisdictions. Such gain would not
generally be offset by existing domestic net operating losses. The incurrence
of significant tax liabilities by the Company, in the event that the
Distribution is not treated as a tax-free transaction, may have a material
adverse effect on the Company's business, financial condition and results of
operations. See "Risk Factors--Federal Income Tax Consequences and
Liabilities."
The Distribution is also subject to certain other conditions, including
(i) approval by Marcam Corporation's stockholders of the Distribution and the
Asset Transfers; (ii) the completion of the Asset Transfers and other internal
reorganization transactions contemplated by the Distribution Agreement in all
material respects; (iii) the Registration Statement on Form 10 (the "Form 10")
under the Securities Exchange Act of 1934 (the "Exchange Act"), filed by Marcam
Solutions with the Securities and Exchange Commission (the "Commission") having
become effective and no stop order with respect thereto being in effect; and
(iv) there not being in effect any statute, rule, regulation or order of any
court, governmental or regulatory body which prohibits or makes illegal the
transactions contemplated by the Distribution Agreement and the related
agreements. These conditions are not waivable by the Board of Directors of
Marcam Corporation.
Unless waived by the Board of Directors of Marcam Corporation, the
Distribution is also conditioned upon, among other things: (i) the receipt of
all necessary regulatory approvals; (ii) the receipt of all necessary consents
of third parties; (iii) the approval of the shares of common stock of Marcam
Solutions and associated rights for listing on the Nasdaq National Market; and
(iv) the holders of less than one percent (1%) of the shares of capital stock
of Marcam Corporation outstanding exercising and perfecting statutory appraisal
rights available under Massachusetts law. Even if all the above conditions are
satisfied, the Board of Directors of Marcam Corporation has reserved the right
to abandon, defer or modify the Distribution and any related transactions at
any time prior to the date of the Distribution. No assurance can be given that
such conditions will be satisfied. The Offering is conditioned upon the
completion of the Distribution and will not occur until after the Distribution.
Purchasers of Common Stock in the Offering will not participate in the
Distribution.
Marcam Corporation and Marcam Solutions have entered into a Distribution
Agreement together with certain ancillary agreements providing for the
separation of the product lines and governing various ongoing relationships
between the two companies. See "Relationship Between MAPICS and Marcam
Solutions."
The Distribution Agreement provides that promptly following the closing of
the Offering, all directors of Marcam Corporation (other than those directors
who will continue to be directors of the Company) shall resign from the Board
of Directors of Marcam Corporation. The continuing directors will then elect
the new directors to fill the vacancies created by the resignations and the
newly constituted Board of Directors of the Company will appoint the executive
officers of the Company.
After the Distribution, the Company expects to continue to offer a benefit
package to its employees substantially comparable to that currently available
under the plans and programs offered by Marcam Corporation
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<PAGE>
and also expects that there will be no significant interruption in or loss of
benefits to its employees. These benefits include participation in a 401(k)
plan, medical, dental, disability and life insurance, a Section 125 cafeteria
plan, an employee stock purchase plan and other welfare benefits.
Employees assigned to Marcam Solutions will continue to participate in all
Marcam Corporation's benefit plans and provisions, although Marcam Solutions
will bear its allocable share of the costs of those plans and programs until
the earlier of the date Marcam Solutions establishes its own separate,
comparable benefit plan or program or the date the Distribution is completed.
Effective no later than the date of the Distribution, Marcam Solutions will
establish its own welfare benefit plans and programs which generally will be
comparable to those currently offered by Marcam Corporation. However, Marcam
Solutions may change its plans and programs in the future. In addition, it is
expected that the Company will transfer the assets and liabilities of the
401(k) plan relating to Marcam Solutions employees and former employees to a
corresponding Marcam Solutions 401(k) plan. See "Relationship Between MAPICS
and Marcam Solutions."
Marcam Corporation currently maintains the following stock plans, each of
which has previously been approved by Marcam Corporation stockholders: The
Marcam Corporation 1987 Stock Plan (the "1987 Plan"), the Marcam Corporation
1991 Non-Employee Director Stock Option Plan (the "Directors Plan") and the
Marcam Corporation 1994 Stock Plan (the "1994 Plan") (collectively, the "Marcam
Plans"). Under the Marcam Plans, as of May 31, 1997, options to purchase an
aggregate of approximately 2,626,132 shares of common stock of Marcam
Corporation (collectively the "Marcam Options") were held by current and former
employees and directors of Marcam Corporation (the "Optionees"). The
Distribution Agreement provides that, in connection with the Distribution, each
holder of a Marcam Option will (i) retain such Marcam Option, which after the
Distribution will be an option to purchase the same number of shares of the
Company's Common Stock (the "Adjusted MAPICS Option"), and (ii) be granted an
option to purchase shares of common stock of Marcam Solutions equal to one-half
of the number of shares of common stock of Marcam Corporation subject to such
Marcam Option (each, a "Marcam Solutions Option"; collectively, the "Adjusted
Options"). Thus, following the Distribution, each Optionee will hold separate
options to purchase shares of the Company's Common Stock and common stock of
Marcam Solutions. The per share exercise price of each Adjusted Option will be
adjusted to give effect to the Distribution by allocating the exercise price of
the corresponding Marcam Option between the Adjusted MAPICS Option and the
Adjusted Marcam Solutions Option, based on the relative fair market values of
the underlying Company Common Stock and Marcam Solutions common stock after the
Distribution so as to preserve the "spread" value of the existing Marcam
Option. For this purpose, the fair market value of a share of each such Common
Stock will be the average of the closing sales prices per share of each Common
Stock on the Nasdaq National Market for each of the five consecutive trading
days beginning on the first day following the Distribution Date.
Each Adjusted Option will continue to be subject to the same terms and
conditions that applied to the corresponding Marcam Option prior to the
Distribution, except that vesting will be based on service with Marcam
Solutions, the Company or both.
In connection with the Distribution, the warrants to purchase an aggregate
of 383,333 shares of Common Stock of Marcam Corporation issued in connection
with the sale of the Subordinated Notes (the "Sub Debt Warrants") will be
adjusted such that the exercise price will be decreased and the number of
underlying shares will be increased on a basis intended to preserve the spread
value of the Sub Debt Warrants. In addition, the holders of the warrants to
purchase an aggregate of 1,000,000 shares of Common Stock of Marcam Corporation
issued in connection with the sale of Series E Convertible Preferred Stock (the
"GA Warrants") will (i) retain such GA Warrants, which after the Distribution
will be warrants to purchase the same number of shares in the aggregate of the
Company's Common Stock (the "MAPICS GA Warrants") and (ii) receive the Marcam
Solutions Warrants. The current exercise price of the GA Warrants will be
allocated between the MAPICS GA Warrants and the Marcam Solutions Warrants on a
basis intended to preserve the spread value of the existing GA Warrants.
39
<PAGE>
RELATIONSHIP BETWEEN MAPICS AND MARCAM SOLUTIONS
Marcam Corporation and Marcam Solutions have entered into the Distribution
Agreement. Pursuant to the Distribution Agreement, subject to limited
exceptions, the two companies are required to indemnify each other and each
other's directors, officers, employees, agents and representatives for
liabilities under federal or state securities laws that are a result of the
Offering and the Distribution, including liabilities arising out of or based
upon alleged misrepresentations in or omissions from the Registration Statement
on Form S-4, the Registration Statement on Form 10, the Special Meeting Proxy
Statement and other disclosure documents prepared in connection with the
Distribution by such party. The Distribution Agreement also provides that each
party thereto will indemnify the other party thereto and its directors,
officers, employees, agents and representatives for liabilities that may be
incurred by the indemnified party relating to, resulting from or arising out of
(i) the business, operations or assets conducted or owned or formerly conducted
or owned by the indemnifying party and its subsidiaries, or (ii) the failure by
the indemnifying party to comply with any other agreements executed in
connection with the Distribution or the Offering. In addition, the Distribution
Agreement will provide that each party will indemnify the other party and its
directors, officers, employees, agents and representatives for any liabilities
resulting from or arising out of certain acts, failures to act or the provision
of incorrect factual information by the indemnifying party in connection with
the IRS private letter ruling request or the Tax Opinions, as the case may be,
that causes the Distribution to be taxable to the indemnified party or its
stockholders. In addition, because the business to be conducted by Marcam
Solutions will be conducted through Marcam Corporation until the Distribution,
the Company may be liable for the liabilities of Marcam Solutions for the
period prior to the Distribution. If Marcam Solutions for any reason is unable
to satisfy its liabilities, the Company may be liable for them.
The ancillary agreements executed and delivered together with the
Distribution Agreement include a General Services Agreement and a Tax Sharing
Agreement. The General Services Agreement provides that Marcam Solutions and
the Company will provide to each other from time to time, upon request, certain
routine and ordinary corporate services, including financial, accounting,
administrative, tax and legal services. For these services, the party providing
such services will be reimbursed for its costs, including the pro rata costs of
its employees performing such services and allocable overhead, on a per diem
basis.
In connection with the Distribution, Marcam Corporation and Marcam
Solutions have entered into a Tax Sharing Agreement that defines the parties
rights and obligations with respect to certain tax liabilities and refunds of
taxes relating to Marcam Corporation's business for periods ending on or prior
to the date of the Distribution. In general, pursuant to the Tax Sharing
Agreement, Marcam Solutions shall be responsible for certain state, local and
foreign taxes for periods ending on or before the date of the Distribution (and
shall be entitled to refunds with respect to such taxes), and the Company shall
be responsible for all other taxes for such periods (and shall be entitled to
refunds with respect to such taxes). In addition, under the Tax Sharing
Agreement, the Company shall be liable for any taxes arising out of the
Distribution. The Tax Sharing Agreement further provides for cooperation with
respect to certain tax matters, the exchange of information and the retention
of records.
40
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information regarding beneficial
ownership of the Company's voting securities (i) by each person who, to the
knowledge of the Company, beneficially owns more than 5% of any class of the
Company's voting securities; (ii) by each person who is expected to become a
director of the Company immediately following the Offering; (iii) by each
person who is expected to become an executive officer of the Company
immediately following the Offering; and (iv) by all persons who are expected to
become directors and executive officers of the Company immediately following
the Offering as a group.
<TABLE>
<CAPTION>
Percent of Total
Shares
----------------------
Shares Beneficially Before After
Name and Address Owned (1) Offering Offering
- ----------------------------------------------- --------------------- ---------- ---------
<S> <C> <C> <C>
General Atlantic Partners, LLC (2) ......... 4,000,000 25.8% 18.6%
Clover Capital Management, Inc. (3) ......... 2,628,625 22.8% 15.0%
Pioneer Management Corporation (4) ......... 1,140,000 9.9% 6.5%
Richard C. Cook (5) ........................ 48,500 * *
William J. Gilmour (6) ..................... 2,698 * *
Thomas F. Aery (7) ........................... 8,275 * *
George A. Chamberlain, 3d (8) ............... 48,000 * *
William E. Ford (9) ........................ 4,000,000 25.8% 18.6%
Edward J. Kfoury (10) ........................ 11,600 * *
All executive officers and directors as a group
(6 persons) (11) ........................... 4,119,073 26.3% 19.0%
</TABLE>
- ------------
* less than 1%
(1) The persons and entities named in the table have sole voting and investment
power with respect to all shares shown as beneficially owned by them,
except as noted below. Information is as of May 31, 1997, unless otherwise
indicated. As of May 31, 1997, there were outstanding 11,535,010 shares of
Common Stock. Pursuant to the rules of the Securities and Exchange
Commission, the number of shares of Common Stock deemed outstanding for a
specified person or group includes shares issuable pursuant to convertible
securities, warrants and options held by such person or group which may be
converted or exercised within 60 days of this Prospectus.
(2) Consists of 176,058 shares of Series D Preferred Stock held by General
Atlantic Partners 21, L.P. ("GAP 21"), 23,942 shares of Series D Preferred
Stock and 13,681 shares of Series E Preferred Stock held by GAP
Coinvestment Partners, L.P. ("GAP Coinvestment") and 86,319 shares of
Series E Preferred Stock held by General Atlantic Partners 32, L.P. ("GAP
32"). Each share of Series D Preferred Stock and Series E Preferred Stock
currently is convertible at any time into 10 shares of Common Stock. Also
includes warrants to purchase 863,190 and 136,810 shares of Common Stock
held by GAP 32 and GAP Coinvestment, respectively. GAP Coinvestment, GAP
21, GAP 32 and General Atlantic Partners, LLC ("GAP LLC"), the sole general
partner of GAP 21 and GAP 32 (the "GA Entities"), own beneficially
4,000,000 shares of Common Stock of the Company. The GA Entities own
beneficially 88.9% of the outstanding Series D Preferred Stock and 100% of
the outstanding Series E Preferred Stock. Mr. Ford, William O. Grabe,
Steven A. Denning, David C. Hodgson, Stephen P. Reynolds and J. Michael
Cline (the "GA Members") are the managing members of GAP LLC, which is the
sole general partner of GAP 21 and GAP 32, and are the same persons who
have voting and investment control over securities held by GAP
Coinvestment. The GA Members disclaim beneficial ownership of such shares,
except to the extent of each member's proportionate pecuniary interest
therein.
(3) According to Amendment No. 3 to Schedule 13G dated February 11, 1997.
Clover Capital Management, Inc., a registered investment adviser for
various accounts, has shared voting and investment power with respect to
2,628,625 shares.
(4) According to Amendment No. 1 to Schedule 13G dated January 21, 1997. Of the
1,140,000 shares beneficially owned by Pioneer Management Corporation
("Pioneer"), it has sole voting power with respect to 1,140,000 shares,
shared investment power with respect to 1,132,000 shares and sole
investment power with respect to 8,000 shares.
(5) Consists of 100 shares held by Mr. Cook's wife and 48,400 shares issuable
upon the exercise of outstanding stock options exercisable currently or
within 60 days.
(6) Includes 2,525 shares issuable upon the exercise of outstanding stock
options exercisable currently or within 60 days.
(7) Consists of 8,275 shares issuable upon the exercise of outstanding stock
options exercisable currently or within 60 days.
(8) Consists of 48,000 shares issuable upon the exercise of outstanding stock
options exercisable currently or within 60 days.
(9) Consists of 4,000,000 shares of Common Stock beneficially owned by the GA
Entities. See note 2, above.
(10) Includes 6,600 shares issuable upon the exercise of outstanding stock
options exercisable currently or within 60 days.
(11) Includes 113,800 shares which the directors and executive officers as a
group have the right to acquire upon the exercise of outstanding stock
options exercisable currently or within 60 days granted under the Company's
stock plans.
41
<PAGE>
DESCRIPTION OF CAPITAL STOCK
The Company's authorized capital stock consists of 30,000,000 shares of
Common Stock, par value $.01 per share, which will be increased to 50,000,000
shares prior to the closing of the Offering, and 1,000,000 shares of preferred
stock, par value $1.00 per share (the "Preferred Stock").
As of May 31, 1997, there were outstanding 11,535,010 shares of Common
Stock held of record by 597 stockholders and 325,000 shares of Series D and E
Preferred Stock convertible into 3,250,000 shares of Common Stock. Based upon
the number of shares of Common Stock outstanding as of that date and giving
effect to the issuance of 6,000,000 shares of Common Stock offered hereby,
there will be 17,535,010 shares of Common Stock outstanding upon the closing of
the Offering (20,785,010 shares on an as converted basis).
Initially, holders of the Company capital stock will have the same rights,
preferences and privileges with respect to such capital stock as holders of
Marcam Corporation's capital stock have currently.
Common Stock
Except as otherwise provided by law, the Company's Restated Articles of
Organization or the description of the Preferred Stock below, holders of
Preferred Stock and Common Stock vote together as a class on all matters to be
voted on by the stockholders of the Company and holders of Common Stock are
entitled to one vote for each share held on all matters submitted to a vote of
stockholders and do not have cumulative voting rights. Holders of Common Stock
will not have any conversion, redemption, subscription or preemptive rights.
Holders of Common Stock are entitled to receive ratably such dividends, if any,
as may be declared by the Board of Directors out of funds legally available
therefor, subject to any preferential dividend rights of any then outstanding
Preferred Stock. Upon the dissolution, liquidation or winding up of the
Company, whether voluntary or involuntary, holders of Common Stock will be
entitled to receive ratably all of the net assets of the Company available for
distribution to its stockholders after the payment of all debts and
liabilities, subject to any preferential and participation rights of any then
outstanding Preferred Stock. The rights, preferences and privileges of holders
of Common Stock are subject to, and may be adversely affected by, the rights of
holders of shares of Series D Convertible Preferred Stock and Series E
Convertible Preferred Stock and the rights of any series of Preferred Stock
which the Company may designate and issue in the future.
Preferred Stock
Of the 1,000,000 authorized shares of Preferred Stock, one share has been
designated as Series A Preferred Stock, one share has been designated as Series
B Preferred Stock, one share has been designated as Series C Preferred Stock,
225,000 shares have been designated as Series D Convertible Preferred Stock,
100,000 shares have been designated as Series E Convertible Preferred Stock and
30,000 shares have been designated as Series F Junior Participating Preferred
Stock. As of March 31, 1997, there were outstanding 225,000 shares of Series D
Convertible Preferred Stock and 100,000 shares of Series E Convertible
Preferred Stock. For certain information regarding the Series F Junior
Participating Preferred Stock, see "Rights Plan."
Dividends. Holders of Series D Convertible Preferred Stock and Series E
Convertible Preferred Stock (the "Convertible Preferred Stock") are entitled to
receive (on an as converted basis), out of funds legally available therefor,
dividends at the same rate as dividends (other than dividends paid in
additional shares of Common Stock) are paid with respect to the Common Stock.
Conversion. A holder of Convertible Preferred Stock has the right, at its
option at any time, to convert any such shares of Convertible Preferred Stock
into ten shares of Common Stock, subject to adjustment. At the time of each
conversion, the Company will pay in cash an amount equal to all dividends
(other than dividends paid in additional shares of Common Stock) declared but
unpaid on the shares of Convertible Preferred Stock surrendered for conversion.
The Company does not have the right to redeem the Convertible Preferred Stock.
Voting Rights. Except as otherwise provided by law and the Company's
Restated Articles of Organization, the holders of Preferred Stock and Common
Stock vote together as a single class on all matters to be voted on by the
stockholders of the Company on the following basis: (i) each holder of
Convertible Preferred Stock is entitled to such number of votes per share on
each action as shall equal the number of shares of Common Stock (including
fractions of a share) into which each share of Convertible Preferred Stock is
then convertible and (ii) each holder of Common Stock is entitled to one vote
per share. As long as the GA Entities (together with their affiliates) own in
the aggregate shares of Common Stock, Convertible Preferred Stock or other
securities of the Company convertible into or exchangeable for shares of voting
capital stock of the Company that represent at least 10% of
42
<PAGE>
the total number of shares of Common Stock outstanding on an as converted
basis, the GA Entities will be entitled to elect, or designate one person for
election as, a director of the Company.
Liquidation. Upon any liquidation, dissolution or winding up of the
Company, whether voluntary or involuntary (each a "Liquidation Event"), the
Convertible Preferred Stock will be entitled, before any distribution or
payment is made upon any stock ranking junior, to be paid an amount equal to
the greater of (i) $100 per share plus, in the case of each share, an amount
equal to any dividends declared but unpaid thereon, through the date payment
thereof is made available, or (ii) such amount per share as would have been
payable had each such share been converted to Common Stock immediately prior to
such Liquidation Event and the holders of Convertible Preferred Stock are not
entitled to any further payment. Upon any such Liquidation Event after the
holders of Preferred Stock have been paid in full the amount to which such
holders are entitled, the remaining net assets of the Company may be
distributed to the holders of stock ranking junior.
Future Issuances. The Board of Directors is authorized, subject to any
limitations prescribed by law, without further stockholder approval, to issue
from time to time the remaining shares of Preferred Stock in one or more
series. Each such series of Preferred Stock shall have such number of shares,
designations, preferences, voting powers, qualifications and special or
relative rights or privileges as shall be determined by the Board of Directors.
The issuance of Preferred Stock, while providing desirable flexibility in
connection with possible acquisitions and other corporate purposes, could have
the effect of making it more difficult for a third party to acquire, or of
discouraging a third party from acquiring, a majority of the outstanding voting
stock of the Company. The Company has no present plans to issue any additional
shares of Preferred Stock.
Warrants
On May 12, 1994, in connection with the issuance and sale of $25,000,000
in aggregate principal amount of its 9.82% Subordinated Notes due on April 30,
2001, the Company issued warrants to purchase an aggregate of 383,333 shares of
Common Stock of the Company, as adjusted from time to time. The warrants are
exercisable at any time during the period commencing June 30, 1994 and ending
April 30, 2001, at an exercise price of $8.93 per share, as adjusted from time
to time.
On July 19, 1996, in connection with the issuance and sale of the Series E
Convertible Preferred Stock, the Company issued and sold warrants to purchase
an aggregate of 1,000,000 shares of Common Stock of the Company, as adjusted
from time to time, for an aggregate purchase price of $500,000. The warrants
are exercisable at any time during the period commencing July 23, 1996 and
ending July 23, 2003, at an exercise price of $15.36 per share, as adjusted
from time to time.
For the effects of the Distribution on these warrants, see "The
Distribution."
Massachusetts Law and Certain Charter Provisions
The Company is subject to the provisions of Chapter 110F of the
Massachusetts General Laws and anti-takeover law. In general, this statute
prohibits a publicly held Massachusetts corporation such as the Company from
engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
becomes an interested stockholder, unless (i) the interested stockholder
obtains the approval of the Board of Directors prior to becoming an interested
stockholder, (ii) the interested stockholder acquires 90% of the outstanding
voting stock of the corporation (excluding shares held by certain affiliates of
the corporation) at the time it becomes an interested stockholder or (iii) the
business combination is approved by both the Board of Directors and the holders
of two-thirds of the outstanding voting stock of the corporation (excluding
shares held by the interested stockholder). An "interested stockholder" is a
person who, together with affiliates and associates, owns (or at any time
within the prior three years did own) 5% or more the outstanding voting stock
of the corporation. A "business combination" includes a merger, a stock or
asset sale, and other transactions resulting in a financial benefit to the
stockholder.
The Company's Amended and Restated By-laws include a provision which
excludes the Company from the applicability of Massachusetts General Laws
Chapter 110D, entitled "Regulation of Control Share Acquisitions." In general,
this statute provides that any stockholder of a corporation subject to this
statute who acquires 20% or more of the outstanding voting stock of a
corporation may not vote such stock unless the stockholders of the corporation
so authorize. The Board of Directors may amend the Company's Amended and
Restated By-laws at any time to subject the Company to this statute
prospectively.
43
<PAGE>
Massachusetts General Laws Chapter 156B, Section 50A require that a
publicly held Massachusetts corporation have a classified board of directors
consisting of three classes as nearly equal in size as possible, unless the
corporation elects not to be covered by Section 50A. The Company is subject to
the provisions of Section 50A.
The Company's Restated Articles of Organization also include provisions to
(i) eliminate the personal liability of the Company's directors for monetary
damages resulting from breaches of their fiduciary duty to the extent permitted
by the Massachusetts Business Corporation Law and (ii) indemnify the Company's
directors and officers to the fullest extent permitted by Massachusetts law,
including under circumstances in which indemnification is otherwise
discretionary. Also, the Company has entered into indemnity agreements with
each of its directors and certain executive officers. Those agreements require
the Company to indemnify such individuals to the fullest extent permitted by
Massachusetts law.
Rights Plan
Pursuant to the Company's Stockholder Rights Plan, each share of the
Common Stock has an associated preferred stock purchase right (a "Right") and
each share of Convertible Preferred Stock has ten associated Rights. Each Right
entitles the holder to purchase from the Company a unit consisting of one
one-thousandth of a share of Series F Junior Participating Preferred Stock, par
value $1.00 per share (the "Junior Preferred Shares"), of the Company at a
price of $60.00 per unit, subject to adjustment (the "Purchase Price"). The
Rights will be exercisable only if (i) a person or group other than an Exempt
Person (as defined below) acquires beneficial ownership of 20% or more of the
outstanding Common Stock (an "Acquiring Person"), (ii) a person or group
announces a tender offer or exchange offer the consummation of which would
result in the beneficial ownership by such person or group of 20% or more of
the outstanding Common Stock or (iii) a person owning 10% or more of the Common
Stock of the Company whose ownership is determined by the Board of Directors to
be reasonably likely to cause a material adverse impact on the business or
prospects of the Company or to pressure the Company to take action to benefit
such person as opposed to the Company is declared by the Board of Directors to
be an adverse person (an "Adverse Person"). Until a Right is exercised, the
holder thereof will have no rights as a stockholder of the Company. General
Atlantic Partners and its affiliates would each be deemed "Exempt Persons",
subject to compliance with their standstill agreements with the Company.
In the event that (i) any person or group acquires 20% or more of the
outstanding Common Stock, except pursuant to a tender or exchange offer for all
shares at a price that a majority of the continuing directors determines to be
fair, (ii) a person owning 10% or more of the Common Stock is determined by the
Board of Directors to be an Adverse Person, (iii) a person owning 20% or more
of the outstanding Common Stock engages in a merger with the Company in which
the Company survives and its Common Stock remains outstanding and unchanged, or
(iv) while there is an Acquiring Person, such person engages in certain
self-dealing transactions or an event occurs which results in such person's
stock holdings increasing by more than 1%, each holder of a Right, other than
Rights beneficially owned by the Acquiring Person or the Adverse Person, will
thereafter have the right to receive upon exercise that number of shares of
Common Stock having a market value of two (2) times the Purchase Price, and in
the event that, while there is an Acquiring Person, the Company is acquired in
a business combination transaction in which it does not survive or 50% or more
of its assets are sold, each holder of a Right will thereafter have the right
to receive upon exercise that number of shares of common stock of the acquiring
company which at the time of the transaction will have a market value of two
(2) times the Purchase Price. The events set forth in this paragraph are
referred to as "Section 11(a)(ii) Events."
At any time after the occurrence of a Section 11(a)(ii) Event, the Board
of Directors of the Company may cause the Rights (other than Rights owned by
such person or group) to be exchanged, in whole or in part, for Common Stock at
an exchange rate of one (1) share of Common Stock per Right.
The Board of Directors of the Company will generally be entitled to redeem
the Rights in whole at a price of $.01 per Right, until the tenth day following
a public announcement that a 20% stock position has been acquired and in
certain other circumstances.
The Rights have a certain anti-takeover effects, in that they will cause
substantial dilution to a person or group that attempts to acquire a
significant interest in the Company on terms not approved by the Board of
Directors.
Transfer Agent
The transfer agent and registrar for the Company's Common Stock is Boston
EquiServe LP.
44
<PAGE>
UNDERWRITING
Subject to certain conditions contained in the Underwriting Agreement, a
syndicate of underwriters named below (the "Underwriters"), for whom Donaldson,
Lufkin & Jenrette Securities Corporation, Lazard Freres & Co. LLC and Dain
Bosworth Incorporated are acting as representatives (the "Representatives"),
have severally agreed to purchase from the Company an aggregate of 6,000,000
shares of Common Stock. The number of shares of Common Stock that each
Underwriter has agreed to purchase is set forth opposite its name below:
<TABLE>
<CAPTION>
Underwriters Number of
- ------------------------------------------------------------ Shares
<S> <C>
Donaldson, Lufkin & Jenrette Securities Corporation ......
Lazard Freres & Co. LLC .................................
Dain Bosworth Incorporated ..............................
Total ................................................... 6,000,000
=========
</TABLE>
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase the shares of Common Stock offered hereby are subject
to approval of certain legal matters by their counsel and to certain other
conditions. If any of the shares of Common Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, the Underwriters are
obligated to purchase all such shares (other than those covered by the
over-allotment option described below).
The Company has been advised by the Underwriters that they propose to
offer the shares of Common Stock to the public initially at the price to the
public set forth on the cover page of this Prospectus and to certain dealers
(including the Underwriters) at such price, less a concession not in excess of
$ per share. The Underwriters may allow, and such dealers may re-allow, a
concession not in excess of $ per share to certain other dealers.
The Company has granted to the Underwriters an option, exercisable for 30
days from the date of this Prospectus, to purchase up to 900,000 additional
shares of Common Stock at the initial price to the public less underwriting
discounts and commissions, solely to cover over-allotments. To the extent that
the Underwriters exercise such option, each of the Underwriters will be
committed, subject to certain conditions, to purchase a number of option shares
pro rata in accordance with such Underwriter's initial commitment as indicated
in the preceding table.
In the Underwriting Agreement, the Company and the Underwriters have
agreed to indemnify each other against certain liabilities, including
liabilities under the Securities Act.
The Company, certain of its officers and directors and certain other
stockholders will agree not to (i) pledge, offer, sell, contract to sell, sell
any options or contracts to purchase, purchase any options or contracts to
sell, grant any option, right or warrant to purchase or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock or
(ii) enter into any swap or other arrangement that transfers all or a portion
of the economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise) for a period of 180 days after the date of this Prospectus
without the prior written consent of Donaldson, Lufkin & Jenrette Securities
Corporation provided that the Company may grant options and issue Common Stock
upon the exercise of options under its option plans. In addition, during such
period, the Company will also agree not to file any registration statement with
respect to, and each of its executive officers, directors and certain
stockholders of the Company will agree not to make any demand for, or exercise
any right with respect to, the registration of any shares of Common Stock or
any securities convertible into or exercisable or exchangeable for Common Stock
without Donaldson, Lufkin & Jenrette Securities Corporation's prior written
consent.
In general, the rules of the Securities and Exchange Commission prohibit
the Underwriters (and selling group members) from making a market in the Common
Stock during the "cooling off" period immediately preceding the commencement of
sales in the Offering. The Commission has, however, adopted exemptions from
these rules that permit passive market making under certain conditions. In
connection with the Offering, the Underwriters and dealers may engage in
passive market making transactions in the Common Stock in accordance with Rule
103 of Regulation M promulgated by the Securities and Exchange Commission. In
general, a passive market maker may
45
<PAGE>
not bid for or purchase the Common Stock at a price that exceeds the highest
independent bid. In addition, the net daily purchases made by any passive
market maker generally may not exceed 30% of its average daily trading volume
in the Common Stock during a specified two month prior period, or 200 shares,
whichever is greater. A passive market maker must identify passive market
making bids on the Nasdaq electronic inter-dealer reporting system. Passive
market making may stabilize or maintain the market price of the Common Stock
above independent market levels. The Underwriters are not required to engage in
passive market making and may end passive market making activities at any time.
In connection with the Offering, the Underwriters may engage in
transactions that stabilize, maintain or otherwise affect, the price of the
Common Stock. Specifically, the Underwriters may overallot the Offering,
creating a syndicate short position. Underwriters may bid for and purchase
shares of Common Stock in the open market to cover syndicate short positions.
In addition, the Underwriters may bid for and purchase shares of Common Stock
in the open market to stabilize the price of the Common Stock. These activities
may stabilize or maintain the market price of the Common Stock above
independent market levels. The Underwriters are not required to engage in these
activities and may end these activities at any time.
The Representatives have informed the Company that the Underwriters do not
intend to confirm sales to any account over which they exercise discretionary
authority.
The Common Stock of Marcam Corporation is traded on the Nasdaq National
Market. However, because of the Distribution, historical trading prices of the
Common Stock of Marcam Corporation are unlikely to be indicative of future
trading prices. The price to the public for the shares of Common Stock will be
determined through negotiations between the Company and the Representatives and
will be based on, among other things, the Company's financial and operating
history and condition, the prospects of the Company and its industry in
general, the management of the Company and the market prices of securities of
companies engaged in businesses similar to those of the Company. There can,
however, be no assurance that the prices at which the shares of Common Stock
will sell in the public market after this Offering will not be lower than the
price at which they are sold by the Underwriters.
LEGAL MATTERS
The validity of the shares of Common Stock offered hereby will be passed
upon for the Company by Testa, Hurwitz & Thibeault, LLP, Boston, Massachusetts.
Certain legal matters in connection with this Offering will be passed upon for
the Underwriters by Hale and Dorr LLP, Boston, Massachusetts.
EXPERTS
The combined balance sheets of MAPICS, Inc. as of September 30, 1995 and
1996 and March 31, 1997 and the related combined statements of operations,
divisional equity, and cash flows for each of the three years in the period
ended September 30, 1996 and for the six months ended March 31, 1997, included
in this Prospectus and Registration Statement, have been included in reliance
on the report of Coopers & Lybrand L.L.P., independent accountants, given on
the authority of that firm as experts in accounting and auditing.
The consolidated financial statements of Marcam Corporation as of
September 30, 1996 and 1995 and for each of the two years in the period ended
September 30, 1996, included in the Annual Report on Form 10-K of the Company
for the year ended September 30, 1996 and referred to below, have been audited
by Coopers & Lybrand L.L.P., independent accountants, as set forth in their
report dated October 24, 1996, accompanying such financial statements, and are
incorporated herein by reference in reliance upon the report of such firm,
which report is given upon their authority as experts in accounting and
auditing.
The consolidated financial statements of Marcam Corporation and
subsidiaries for the year ended September 30, 1994, have been incorporated by
reference herein in reliance upon the report of KPMG Peat Marwick LLP,
independent certified public accountants, incorporated by reference herein, and
upon the authority of said firm as experts in accounting and auditing.
46
<PAGE>
INFORMATION INCORPORATED BY REFERENCE
The following documents filed by the Registrant with the Securities and
Exchange Commission (the "Commission") pursuant to the Exchange Act are
incorporated in this Prospectus by reference as of their respective dates (File
No. 0-18674): (1) Annual Report on Form 10-K for the fiscal year ended
September 30, 1996, including portions of Marcam Corporation's Proxy Statement
dated January 8, 1997 for its Annual Meeting of Stockholders held on February
12, 1997 set forth under the captions "Election of Directors," "The Board of
Directors and its Committees," "Executive Compensation," "Securities Ownership
of Certain Beneficial Owners and Management" and "Certain Relationships and
Related Transactions"; (2) Quarterly Reports on Form 10-Q for the fiscal
periods ended December 31, 1996 and March 31, 1997; (3) Current Reports on Form
8-K dated December 3, 1996, May 9, 1997, as amended on July 3, 1997, July 15,
1997 and July 23, 1997; (4) the section entitled "Description of Securities to
be Registered" contained in the Registrant's Registration Statement on Form 8-A
filed with the Commission on December 5, 1996; and (5) the section entitled
"Description of Securities to be Registered" contained in the Registrant's
Registration Statement on Form 8-A filed on June 29, 1990, as amended on Form 8
as filed with the Commission on August 13, 1990.
All documents subsequently filed by the Company pursuant to Section 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date of this Prospectus and
prior to the termination of the Offering shall be deemed to be incorporated by
reference in this Prospectus from the date of filing of such documents. 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 Prospectus to the extent that a statement contained herein or in any other
subsequently filed document which is also deemed to be incorporated by
reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
The Company will provide without charge to each person, including any
beneficial owner, to whom a Prospectus is delivered, upon written or oral
request of such person, a copy of any or all of the documents described above
(other than exhibits to such documents). Requests for such copies should be
directed to George A. Chamberlain, 3d, Chief Financial Officer, Marcam
Corporation, 95 Wells Avenue, Newton, Massachusetts 02159 (telephone:
617-965-0220).
AVAILABLE INFORMATION
The Company is subject to the informational 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. All such reports, proxy statements and other information can be
inspected and copied at the public reference facilities maintained by the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
following regional offices of the Commission: 73 Tremont Street, Suite 600,
Boston, Massachusetts 02108-3912; 7 World Trade Center, Suite 1300, New York,
New York 10048; and Citicorp Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661-2511. Copies of such material may also be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549 at prescribed rates. The Commission maintains a
World-Wide Web site that contains reports, proxy and information statements and
other information regarding registrants that file electronically with the
Commission. The address of the Commission's Web site is http://www.sec.gov. The
Common Stock of the Company is quoted on The Nasdaq National Market and such
material may also be inspected at the offices of the National Association of
Securities Dealers, Inc., 1735 K Street, N.W., Washington, D.C. 20006.
The Company has filed with the Commission a Registration Statement on Form
S-3 (including all amendments thereto, the "Registration Statement") under the
Securities Act, with respect to the Common Stock offered hereby. This
Prospectus, which constitutes part of the Registration Statement, does not
contain all information set forth in the Registration Statement, certain parts
of which are omitted in accordance with the rules and regulations of the
Commission. For further information regarding the Company and the Common Stock
offered hereby, reference is hereby made to the Registration Statement and to
the exhibits and schedules filed therewith. Statements contained in this
Prospectus regarding the contents of any agreement or other document filed as
an exhibit to the Registration Statement are not necessarily complete, and in
each instance reference is made to the copy of such agreement filed as an
exhibit to the Registration Statement, each such statement being qualified in
all respects by such reference. The Registration Statement, including the
exhibits and schedules thereto, may be inspected at the Public Reference
Section of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 and
copies of all or any part thereof may be obtained from such office upon payment
of the prescribed fees.
47
<PAGE>
[THIS PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
MAPICS, INC.
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
-----
<S> <C>
Report of Independent Accountants ...................................................... F-2
Combined Balance Sheets as of September 30, 1995 and 1996 and March 31, 1997 ............ F-3
Combined Statements of Operations for the years ended September 30, 1994, 1995 and 1996
and for the six months ended March 31, 1996 (unaudited) and 1997 ........................ F-4
Combined Statements of Divisional Equity for the years ended September 30, 1994, 1995 and
1996 and for the six months ended March 31, 1997 ...................................... F-5
Combined Statements of Cash Flows for the years ended September 30, 1994, 1995 and 1996
and for the six months ended March 31, 1996 (unaudited) and 1997 ........................ F-6
Notes to Combined Financial Statements ................................................ F-7
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of Marcam Corporation:
We have audited the accompanying combined balance sheets of MAPICS, Inc. as of
September 30, 1995 and 1996 and March 31, 1997 and the related combined
statements of operations, divisional equity, and cash flows for each of the
three years in the period ended September 30, 1996 and for the six months ended
March 31, 1997. These financial statements are the responsibility of MAPICS,
Inc.'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 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 present fairly, in
all material respects, the combined financial position of MAPICS, Inc. as of
September 30, 1995 and 1996 and March 31, 1997, and the combined results of its
operations and its cash flows for each of the three years in the period ended
September 30, 1996 and for the six months ended March 31, 1997, in conformity
with generally accepted accounting principles.
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
June 3, 1997
F-2
<PAGE>
MAPICS, INC.
Combined Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
As of September 30, As of March 31,
--------------------- ----------------
1995 1996 1997
<S> <C> <C> <C>
ASSETS
Current assets:
Cash ......................................................... $ 226 $ 378 $ 852
Accounts receivable, net of allowances of $1,626 in 1995,
$1,240 in 1996 and $1,466 in 1997 (Note 3) .................. 20,416 20,518 21,141
Prepaid expenses and other current assets ..................... 369 487 1,032
-------- -------- --------
Total current assets ....................................... 21,011 21,383 23,025
Property and equipment, net (Note 4) ........................... 1,755 2,992 2,813
Computer software costs, net (Note 5) ........................ 12,495 15,705 15,741
Other intangible assets, net (Notes 7 and 13) .................. 5,965 5,325 5,067
-------- -------- --------
Total assets ............................................. $41,226 $45,405 $46,646
======== ======== ========
LIABILITIES AND DIVISIONAL EQUITY
Current liabilities:
Accounts payable ............................................. $ 3,659 $ 5,308 $ 4,412
Accrued expenses and other current liabilities (Note 6) ...... 10,673 11,457 11,415
Deferred revenue ............................................. 15,206 18,563 21,197
-------- -------- --------
Total current liabilities ................................. 29,538 35,328 37,024
Deferred income taxes (Note 8) ................................. 196 884 394
-------- -------- --------
Total liabilities .......................................... 29,734 36,212 37,418
Commitments and contingencies (Notes 9 and 15) ...............
Divisional equity ............................................. 11,492 9,193 9,228
-------- -------- --------
Total liabilities and divisional equity .................. $41,226 $45,405 $46,646
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-3
<PAGE>
MAPICS, INC.
Combined Statements of Operations
(In thousands, except per share data)
<TABLE>
<CAPTION>
Six months ended
Years ended September 30, March 31,
--------------------------------- ------------------------
1994 1995 1996 1996 1997
(unaudited)
<S> <C> <C> <C> <C> <C>
Revenues:
License .............................. $33,410 $42,745 $45,341 $20,501 $25,328
Services .............................. 19,373 26,553 32,261 15,343 18,837
-------- -------- -------- -------- --------
Total revenues ..................... 52,783 69,298 77,602 35,844 44,165
-------- -------- -------- -------- --------
Operating expenses:
Cost of license revenues ............ 3,280 5,689 6,913 3,026 4,129
Cost of services revenues ............ 5,428 7,567 9,499 4,573 5,301
Selling and marketing ............... 17,765 24,780 27,851 13,028 14,834
Product development .................. 6,692 7,432 6,398 3,122 4,969
General and administrative ............ 4,810 5,384 5,965 2,212 4,360
-------- -------- -------- -------- --------
Total operating expenses ............ 37,975 50,852 56,626 25,961 33,593
-------- -------- -------- -------- --------
Income before income tax expense ...... 14,808 18,446 20,976 9,883 10,572
Income tax expense ..................... 4,641 7,112 8,076 3,805 4,071
-------- -------- -------- -------- --------
Net income ........................... $10,167 $11,334 $12,900 $ 6,078 $ 6,501
======== ======== ======== ======== ========
Pro forma net income per common
share (Note 2) (unaudited) ............ $ 0.72 $ 0.35
======== ========
Pro forma weighted average number of
common and common equivalent
shares outstanding (Note 2)
(unaudited) ........................... 17,899 18,705
======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-4
<PAGE>
MAPICS, INC.
Combined Statements of Divisional Equity
(In thousands)
<TABLE>
<CAPTION>
Six months
ended
Years ended September 30, March 31,
--------------------------------------------- ------------
1994 1995 1996 1997
<S> <C> <C> <C> <C>
Balance, beginning of period ............... $ 21,271 $ 17,091 $ 11,492 $ 9,193
Net income .............................. 10,167 11,334 12,900 6,501
Net transfers to Marcam Corporation ...... (14,347) (16,933) (15,199) (6,466)
---------- ---------- ---------- ---------
Balance, end of period ..................... $ 17,091 $ 11,492 $ 9,193 $ 9,228
========== ========== ========== =========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-5
<PAGE>
MAPICS, INC.
Combined Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six months
ended
Years ended September 30, March 31,
-------------------------------------- -------------------------
1994 1995 1996 1996 1997
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income .......................................... $ 10,167 $ 11,334 $ 12,900 $ 6,078 $ 6,501
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation .................................... 545 709 954 375 660
Amortization .................................... 2,353 3,248 3,788 1,936 2,328
Provision for bad debts ........................... 6 939 399 73 611
Deferred income taxes ........................... 1,110 737 688 323 (490)
Changes in operating assets and liabilities, net
of effects of acquisition:
Accounts receivable .............................. (788) (5,302) (501) 4,447 (1,234)
Prepaid expenses and other assets ............... (418) 239 (118) (69) (266)
Accounts payable ................................. 576 383 1,071 (513) (896)
Accrued expenses and other current liabilities . 2,725 4,988 784 (2,999) (42)
Deferred revenue ................................. 4,143 5,466 3,357 2,982 2,634
--------- --------- --------- -------- --------
Net cash provided by operating activities ......... 20,419 22,741 23,322 12,633 9,806
--------- --------- --------- -------- --------
Cash flows from investing activities:
Purchases of property and equipment ............... (979) (623) (1,613) (466) (481)
Additions to computer software costs ............... (4,795) (5,516) (6,358) (3,973) (2,385)
--------- --------- --------- -------- --------
Net cash used for investing activities ............ (5,774) (6,139) (7,971) (4,439) (2,866)
--------- --------- --------- -------- --------
Cash flows from financing activities:
Net transfers to Marcam Corporation ............... (14,347) (16,483) (15,199) (7,947) (6,466)
--------- --------- --------- -------- --------
Net cash used for financing activities ......... (14,347) (16,483) (15,199) (7,947) (6,466)
--------- --------- --------- -------- --------
Net increase in cash ................................. 298 119 152 247 474
Cash at beginning of period ........................ (191) 107 226 226 378
--------- --------- --------- -------- --------
Cash at end of period .............................. $ 107 $ 226 $ 378 $ 473 $ 852
========= ========= ========= ======== ========
</TABLE>
The accompanying notes are an integral part of the combined financial
statements.
F-6
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements
(1) BASIS OF PRESENTATION
(a) The Distribution (unaudited)
On April 28, 1997, the Board of Directors of Marcam Corporation authorized
management to proceed with the separation of Marcam Corporation into two
publicly traded corporations. Marcam Corporation intends to spin off in a
tax-free distribution the portion of its business relating to its PRISM,
Protean and Avantis product lines. The separation into two independent,
publicly traded companies is designed to enable each to better focus on its
core markets, to better serve existing customers and to finance its business.
Marcam Corporation will change its name to MAPICS, Inc. ("MAPICS") and will
continue the operations relating to the MAPICS product lines.
In connection with the separation, Marcam Corporation will transfer to a
newly formed corporation, Marcam Solutions, Inc. ("Marcam Solutions"), the
business, assets and liabilities relating to its PRISM, Protean and Avantis
product lines and $39 million in cash. The cash transfer of $39 million is
expected to be paid with proceeds of a debt financing by Marcam Corporation,
and borrowings under that debt financing are expected to be repaid in whole or
in part with the proceeds from a proposed offering of common stock of MAPICS.
All of the shares of common stock of Marcam Solutions will be distributed (the
"Distribution") by means of a distribution to stockholders of Marcam
Corporation. Subsequent to the Distribution, MAPICS will be the legal entity
that will continue to conduct the operations relating to Marcam Corporation's
MAPICS product lines. However, for accounting purposes, due to the relative
significance of the PRISM, Protean and Avantis product lines, the Distribution
will be recorded as a disposal of the MAPICS product lines in the historical
consolidated financial statements of Marcam Corporation and in the future
financial statements of Marcam Solutions.
The Distribution will be subject to final approval by the Board of
Directors of Marcam Corporation, approval by the stockholders of Marcam
Corporation, and the receipt of a favorable ruling from the Internal Revenue
Service that, except as provided therein, the Distribution will qualify as a
tax-free distribution under Section 355 of the Internal Revenue Code of 1986,
as amended (the "Code"), or, at the option of the Board of Directors of Marcam
Corporation, an opinion of special tax counsel and Marcam Corporation's
independent accountants to the effect that, except as provided therein, such
distribution should qualify as a tax-free distribution under Section 355 of the
Code.
These combined financial statements have been prepared using Marcam
Corporation's historical basis in the assets and liabilities and historical
results of operations related to the MAPICS product lines. These combined
financial statements generally reflect the financial position, results of
operations, and cash flows of MAPICS as if it were a separate entity for all
periods presented. Certain costs and expenses presented in these financial
statements have been allocated based on management's estimates of the cost of
services provided to MAPICS by Marcam Corporation. Management believes that
these allocations are reasonable. However, the financial information included
herein may not necessarily reflect the combined financial position, results of
operations, and cash flows of MAPICS in the future, or what they would have
been had MAPICS been a separate entity during the periods presented.
Prior to the Distribution, Marcam Corporation (to be renamed MAPICS)
intends to enter into various agreements with Marcam Solutions providing for
the separation of the product lines and governing various ongoing relationships
between the two companies, in accordance with the terms described in Note 15.
(b) Nature of the Business
MAPICS is a leading provider of enterprise resource planning (ERP)
software applications for mid-size manufacturing enterprises worldwide. MAPICS'
products provide an integrated and function-rich ERP solution with the breadth
and depth of applications to manage an entire manufacturing enterprise. The
MAPICS XA product line currently consists of 44 integrated application modules
in the areas of Engineering and Cost Management, Market and Demand Management,
Plant Operations and Logistics Management, Production Resource Planning,
Financial Management and Measurements and Cross Applications Solutions. MAPICS
also provides services to customers in the form of product support. The primary
geographic markets of MAPICS include North America, Europe, the Middle East,
Africa, Latin America and Asia Pacific.
F-7
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
(2) SIGNIFICANT ACCOUNTING POLICIES
(a) Use of Estimates by Management
The preparation of combined financial statements in conformity with
generally accepted accounting principles requires management to make certain
estimates and assumptions. These estimates and assumptions 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 periods. The most significant
estimates included in these financial statements are the valuation of
capitalized software, intangible assets and accounts receivable and the
allocation of corporate expenses from Marcam Corporation. Actual results may
differ from estimates.
(b) Revenue Recognition
MAPICS recognizes revenues from the licensing of its software upon the
signing of license agreements, delivery of the software and determination that
collection of the related receivable is probable. Under the terms of the MAPICS
license agreements, the customer is responsible for installation and training.
At the time MAPICS recognizes revenues from the licensing of software, no
significant vendor obligations remain, and the costs of insignificant
obligations, if any, are accrued.
MAPICS recognizes services revenues from its periodic license fees ratably
over the terms of the license agreements. The periodic license fee, which is
typically payable annually in advance, entitles the customer to continue using
the software and to receive certain support services.
Generally, revenues from the licensing of products through third-party
representatives are included in revenues, and related commissions are included
in selling and marketing expenses. In certain situations, however, revenues
from affiliates are recorded as royalties in license revenues (See Note 14).
(c) Concentrations of Credit Risk
Financial instruments which potentially expose MAPICS to concentrations of
credit risk consist primarily of trade accounts receivable. MAPICS provides
credit, in the normal course of business, to various types and sizes of
manufacturers located throughout the world. As a result, concentration of
credit risk with respect to trade receivables is not significant.
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation is calculated
using the straight-line method based upon the following estimated useful lives:
<TABLE>
<S> <C>
Furniture and fixtures ...... 4 years
Computer equipment ......... 4 years
Leasehold improvements ...... Shorter of lease term or useful life of asset
</TABLE>
(e) Computer Software Costs
MAPICS charges all costs of establishing technological feasibility of
computer software products to product development expense as they are incurred.
Thereafter, computer software costs are capitalized and reported at the lower
of unamortized cost or net realizable value. Computer software costs include
in-house software development costs and the costs incurred to translate
software into various foreign languages. Amortization of computer software
costs commences upon general release of the product to customers and is
computed on a product-by-product basis using the greater of the amount
determined using (a) the ratio that current period gross revenues bear to the
total of current and anticipated future gross revenues or (b) the straight-line
method over the estimated economic life of the product (generally five years).
Amortization of capitalized software costs is charged to cost of license
revenues. Capitalized software is subject to rapid technological obsolescence
and, as a result, amortization periods could ultimately shorten to reflect
changes in technology in the future. In fiscal 1997, MAPICS changed the
estimated useful life of its 1997 and future translation expenditures from five
years to two years. This change in estimate decreased net income by
approximately $230,000 for the six months ended March 31, 1997.
F-8
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
(f) Other Intangible Assets
Other intangible assets represent intangible assets that are being
amortized to cost of license revenues using the straight-line method over the
estimated lives of the intangibles. The installed customer base and affiliate
network is amortized over fifteen years; trade names, trademarks and goodwill
are amortized over ten years.
MAPICS evaluates the net realizable value of capitalized software costs
and other intangibles on a quarterly basis using undiscounted cash flows. Its
review of intangible assets includes an analysis of past operating results,
business plans and budgets related to recoverability of the specific assets.
(g) Foreign Currency Translation
The majority of foreign revenues of MAPICS are denominated in local
currencies. The functional currency for each of the MAPICS foreign operations
is generally its local currency. Assets and liabilities of foreign operations
are translated into U.S. dollars at period-end rates of exchange. Revenues and
expenses are translated into U.S. dollars at the average rates for the periods.
The resultant translation gains and losses are immaterial for all periods
presented. Foreign currency transaction gains and losses and the effects of
exchange rate changes on cash are immaterial for all periods presented.
(h) Income Taxes
Historically, the operations represented by MAPICS have been included in
the consolidated U.S. Federal and certain state and foreign income tax returns
filed by Marcam Corporation. Income tax expense has been calculated on a
separate-return basis. Income taxes paid on behalf of MAPICS are included in
divisional equity. After the Distribution, MAPICS will file separate income tax
returns.
Pursuant to the anticipated Tax Sharing Agreement between Marcam
Corporation and Marcam Solutions and after the Distribution, MAPICS will be
entitled to utilize certain tax attributes (principally federal, state and
foreign net operating loss carryforwards) of Marcam Corporation.
(i) Divisional Equity
Divisional equity includes accumulated retained earnings, net transfers to
Marcam Corporation and current period income.
(j) Unaudited pro forma net income per share
Unaudited pro forma net income per share gives effect to the Distribution.
The calculation of pro forma weighted average number of shares outstanding
includes (i) the weighted average number of common shares outstanding of Marcam
Corporation (11,384,000 shares and 11,459,000 shares, respectively, for the
year ended September 30, 1996 and for the six months ended March 31, 1997),
(ii) the weighted average number of common equivalent shares from the assumed
exercise of dilutive stock options, warrants and convertible preferred stock of
Marcam Corporation (2,801,000 shares and 3,532,000 shares, respectively, for
the year ended September 30, 1996 and for the six months ended March 31, 1997),
and (iii) the number of shares of common stock from the proposed offering of
MAPICS common stock whose proceeds are deemed to be used to pay the capital
contribution of $39,000,000 to Marcam Solutions, based on an assumed offering
price of $10.50 per share (3,714,000 shares for the year ended September 30,
1996 and for the six months ended March 31, 1997) (See Note 9). Pro forma fully
diluted net income per share does not differ materially from reported pro forma
primary net income per share.
(k) Allocated Costs
Expenses have been allocated based on a variety of methods depending on
the nature of the expense. Such allocation methods include proportional MAPICS
product revenue to total Marcam Corporation revenue, headcount equivalents and
management estimates. These amounts approximate management's estimates of
Marcam Corporation's corporate costs to support the MAPICS-related operations.
An allocation of corporate marketing expenses, corporate product development
expenses, and corporate administrative functions (including data services,
employee benefits, legal, insurance, accounting and other corporate overhead)
has been included in the selling and marketing, product development, and
general and administrative operating expenses in the combined statements of
operations.
F-9
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
(l) Interim Period Financial Statements
The interim combined financial statements and related footnote information
for the six months ended March 31, 1996 are unaudited. In the opinion of
management, the interim combined financial statements contain all adjustments
of a normal recurring nature which are necessary to present fairly the interim
financial position of MAPICS and its interim results of operations and cash
flows. Results of operations and cash flows for the six months ended March 31,
1997 are not necessarily indicative of results for the entire year.
(m) New Accounting Pronouncements
In October 1995, Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"), was issued which will
require MAPICS to elect either expense recognition under SFAS 123 or its
disclosure-only alternative for stock-based employee compensation. The expense
recognition provision encouraged by SFAS 123 would require fair-value based
financial accounting to recognize compensation expense for employee stock
compensation plans. MAPICS has determined that it will elect the
disclosure-only alternative. MAPICS will be required to disclose the pro forma
net income and pro forma net income per share in the notes to the financial
statements using the fair-value based method beginning in fiscal 1997 after the
Distribution, with comparable disclosures for fiscal 1996. MAPICS has not
determined the impact that these pro forma adjustments will have on its net
income or income per share.
In February 1997, Statement of Financial Accounting Standards No. 128,
"Earnings Per Share" ("SFAS 128"), was issued which will require MAPICS to
present basic and diluted earnings per share (EPS). Basic EPS, which replaces
primary EPS, excludes dilution and is computed by dividing income available to
common stockholders by the weighted-average number of common shares outstanding
for the period. Diluted EPS reflects the potential dilution that could occur if
securities or other contracts to issue common stock were exercised or converted
into common stock or resulted in the issuance of common stock that then shared
in the earnings of the entity. Diluted EPS is computed similarly to fully
diluted EPS under existing rules. SFAS 128 requires restatement of all prior
period earnings per share data presented. MAPICS will adopt SFAS 128 as of
October 1, 1998 and has not yet determined the impact of the adoption of this
standard.
(3) ALLOWANCE FOR DOUBTFUL ACCOUNTS
MAPICS provides reserves for customer receivable balances which are
considered potentially uncollectible. The allowance for doubtful accounts
amounted to $733,000, $1,626,000, $1,240,000 and $1,466,000 at September 30,
1994, 1995 and 1996 and March 31, 1997, respectively. The provision charged to
bad debt expense, which is included in general and administrative expenses, was
$6,000, $939,000 and $399,000 for fiscal 1994, 1995 and 1996, respectively, and
was $611,000 for the six months ended March 31, 1997. Write-offs against the
allowance were $458,000, $46,000 and $785,000 for fiscal 1994, 1995 and 1996,
respectively, and were $385,000 for the six months ended March 31, 1997.
F-10
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
(4) PROPERTY AND EQUIPMENT
Property and equipment consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, March 31,
--------------------------- -----------
1995 1996 1997
<S> <C> <C> <C>
Furniture and fixtures ........................ $ 99 $ 106 $ 138
Computer equipment .............................. 3,101 5,285 5,710
Leasehold improvements ........................ 25 25 49
--------- --------- ---------
3,225 5,416 5,897
Accumulated depreciation and amortization ...... (1,470) (2,424) (3,084)
--------- --------- ---------
$ 1,755 $ 2,992 $ 2,813
========= ========= =========
</TABLE>
(5) COMPUTER SOFTWARE COSTS
Computer software costs capitalized during fiscal years 1994, 1995 and
1996 amounted to $4,795,000, $5,516,000 and $6,358,000, respectively, and
during the six months ended March 31, 1997, amounted to $2,385,000.
Amortization of computer software costs during those periods was approximately
$1,553,000, $2,448,000, $3,148,000, and $2,070,000, respectively. These
combined financial statements reflect a reduction of $1,050,000 in net
capitalized software costs at September 30, 1995 as a result of purchase
accounting adjustments described in Note 13 and reflect the reclassification of
$279,000 of capitalized software costs to other assets in the six months ended
March 31, 1997. Accumulated amortization at September 30, 1995, September 30,
1996 and March 31, 1997 totaled $2,754,000, $5,902,000 and $7,972,000,
respectively.
(6) ACCRUED EXPENSES AND OTHER CURRENT LIABILITIES
Accrued expenses and other current liabilities consist of the following
(in thousands):
<TABLE>
<CAPTION>
September 30, March 31,
--------------------- ----------
1995 1996 1997
<S> <C> <C> <C>
Accrued commissions and royalties ......... $ 5,949 $ 5,556 $ 7,077
Accrued payroll and related expenses ...... 274 1,642 1,632
Accrued sales and other taxes ............ 407 530 722
Other .................................... 4,043 3,729 1,984
-------- -------- --------
$10,673 $11,457 $11,415
======== ======== ========
</TABLE>
F-11
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
(7) OTHER INTANGIBLE ASSETS
Other intangible assets consist of the following (in thousands):
<TABLE>
<CAPTION>
September 30, March 31,
--------------------------- -----------
1995 1996 1997
<S> <C> <C> <C>
Installed customer base and affiliate network ...... $ 6,034 $ 6,034 $ 6,034
Trade names and trademarks ........................ 1,712 1,712 1,712
Goodwill .......................................... 286 286 286
--------- --------- ---------
8,032 8,032 8,032
Accumulated amortization ........................... (2,067) (2,707) (2,965)
--------- --------- ---------
$ 5,965 $ 5,325 $ 5,067
========= ========= =========
</TABLE>
(8) INCOME TAXES
The components of the provision for income taxes are as follows (in
thousands):
<TABLE>
<CAPTION>
Six months ended
Years ended September 30, March 31,
------------------------------ -----------------
1994 1995 1996 1997
<S> <C> <C> <C> <C>
Federal:
Current ...... $2,742 $4,743 $5,547 $ 3,527
Deferred ...... 978 653 610 (434)
------- ------- ------- -------
Total ......... 3,720 5,396 6,157 3,093
------- ------- ------- -------
State:
Current ...... 736 1,398 1,415 745
Deferred ...... 131 84 78 (56)
------- ------- ------- -------
Total ......... 867 1,482 1,493 689
------- ------- ------- -------
Foreign:
Current ...... 54 234 426 289
Deferred ...... -- -- -- --
------- ------- ------- -------
Total ......... 54 234 426 289
------- ------- ------- -------
Total ......... $4,641 $7,112 $8,076 $ 4,071
======= ======= ======= =======
</TABLE>
F-12
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
The components of income from domestic and foreign operations before
provision for income taxes are as follows (in thousands):
<TABLE>
<CAPTION>
Six months
ended
Years ended September 30, March 31,
--------------------------------- ------------
1994 1995 1996 1997
<S> <C> <C> <C> <C>
Domestic ...... $14,760 $18,137 $20,766 $10,274
Foreign ...... 48 309 210 298
-------- -------- -------- --------
Total ......... $14,808 $18,446 $20,976 $10,572
======== ======== ======== ========
</TABLE>
The effective income tax rates of 31.3%, 38.6% and 38.5% for the years
ended September 30, 1994, 1995 and 1996, respectively, and 38.5% for the six
months ended March 31, 1997, differ from the expected income taxes for those
periods calculated by applying the federal statutory rate of 35.0% to income
before income taxes for the years ended September 30, 1994, 1995 and 1996 and
the six months ended March 31, 1997 as follows (in thousands):
<TABLE>
<CAPTION>
Six months
ended
Years ended September 30, March 31,
--------------------------------------- ------------
1994 1995 1996 1997
<S> <C> <C> <C> <C>
Expected tax .............................. $ 5,183 $ 6,456 $ 7,342 $ 3,701
Benefit of net operating losses ............ (169) -- -- --
State taxes, net ........................... 610 992 998 429
Research and experimentation credits ...... (737) (423) (413) (159)
Other .................................... (246) 87 149 100
------- ------- ------- -------
$ 4,641 $ 7,112 $ 8,076 $ 4,071
======= ======= ======= =======
</TABLE>
Temporary differences between the financial statement carrying amounts and
tax bases of assets and liabilities that give rise to significant portions of
the net deferred income tax liability at September 30, 1995 and 1996 and March
31, 1997 relate to the following (in thousands):
<TABLE>
<CAPTION>
September 30, March 31,
--------------------------- -------------
1995 1996 1997
<S> <C> <C> <C>
Deferred tax assets:
Deferred revenue ..................... $ 334 $ 411 $ 451
Allowance for doubtful accounts ...... 469 229 450
Intangible assets ..................... 71 -- --
Other ................................. 41 267 718
--------- --------- ---------
Total deferred tax assets ............ 915 907 1,619
--------- --------- ---------
Deferred tax liabilities:
Capitalized software .................. (1,044) (1,034) (867)
Intangible assets ..................... -- (737) (1,143)
Other ................................. (67) (20) (3)
--------- --------- ---------
Total deferred tax liabilities ...... (1,111) (1,791) (2,013)
--------- --------- ---------
Net deferred tax liabilities ......... $ (196) $ (884) $ (394)
========= ========= =========
</TABLE>
F-13
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
In assessing the realizability of deferred tax assets, management
considers whether it is more likely than not that some or all of the deferred
tax assets will not be realized. As a result of its evaluation, management has
recorded no valuation allowance.
Pursuant to the anticipated Tax Sharing Agreement between Marcam
Corporation and Marcam Solutions and upon the effectiveness of the
Distribution, MAPICS will become entitled to utilize certain tax attributes of
Marcam Corporation. As of September 30, 1996, those attributes include net
operating loss carryforwards of approximately $42 million, foreign tax credit
carryforwards of approximately $4 million and research and experimentation
credit carryforwards of approximately $3 million. Such carryforwards expire
between 1997 and 2012. The utilization of net operating loss carryforwards will
be limited on an annual basis due to changes in ownership of Marcam
Corporation. Management does not believe that this limitation will have a
significant impact on the amount of taxes to be paid in the future.
(9) COMMITMENTS AND CONTINGENCIES
Lease Commitments
MAPICS leases certain equipment and office space under noncancelable
agreements and leases which expire at various dates through 2001. Future
minimum lease payments under noncancelable operating leases at September 30,
1996 were as follows (in thousands):
<TABLE>
<CAPTION>
Year ending September 30:
<S> <C>
1997 ........................... $1,161
1998 ........................... 584
1999 ........................... 166
2000 ........................... 11
2001 ........................... 5
-------
Total minimum lease payments ...... $1,927
=======
</TABLE>
Total rental expense charged to operations was $926,000, $1,033,000 and
$1,133,000 for fiscal years 1994, 1995 and 1996, respectively, and $533,000 for
the six months ended March 31, 1997.
Litigation
MAPICS is subject to legal proceedings and claims which arise in the
normal course of business. While the outcome of these matters cannot be
predicted with certainty, management does not believe the outcome of any of
these legal matters will have a material adverse effect on the financial
position or results of operations of MAPICS.
MAPICS will be indemnified for future claims arising from Marcam
Corporation's PRISM, Protean and Avantis product lines and related activities
in accordance with the agreements to be entered into with Marcam Solutions as
described in Note 15.
F-14
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
(10) EMPLOYEE STOCK OPTION PLANS
Under Marcam Corporation's stock plans, certain employees and officers
have been granted incentive stock options and non-qualified stock options. At
September 30, 1996, options for the purchase of 2,109,000 shares of Marcam
Corporation common stock were outstanding, of which options for 623,000 shares
were exercisable, with option prices ranging from $1.00 to $29.25 per share. Of
those options, MAPICS employees held 213,000, of which 96,000 shares were
exercisable, with option prices ranging from $1.50 to $22.50 per share. At
March 31, 1997, options for the purchase of approximately 2,664,000 shares of
Marcam Corporation common stock were outstanding, of which options for 874,000
shares were exercisable, with option prices ranging from $1.00 to $29.25 per
share. Of those options, MAPICS employees held approximately 357,000, of which
124,000 shares were exercisable, with option prices ranging from $1.50 to
$22.50 per share.
Promptly following the Distribution, outstanding awards under the Marcam
Corporation stock plans held by Marcam Corporation employees will be adjusted
so as to represent two separately exercisable options--one to purchase common
stock of MAPICS and one to purchase common stock of Marcam Solutions. Each of
the two options will have the same ratio of the exercise price per option to
the market value per share, the same vesting provisions, option periods and
other terms and conditions and, in aggregate, the same difference between
market value and exercise price as reflected in the original Marcam Corporation
option.
(11) EMPLOYEE BENEFIT PLAN
Certain employees of MAPICS in the United States are eligible to
participate in Marcam Corporation's sponsored profit sharing retirement plan
established under the provisions of Internal Revenue Code Section 401(k). The
expenses of MAPICS related to this plan which are included in the statements of
operations amounted to $0, $77,000 and $110,000 for the fiscal years ended
September 30, 1994, 1995, and 1996, respectively, and $85,000 for the six-month
period ended March 31, 1997.
(12) MAJOR CUSTOMERS AND GEOGRAPHIC INFORMATION
MAPICS had no customers which accounted for 10% or more of total revenues
in fiscal years 1995 and 1996 or in the six months ended March 31, 1996 and
1997. In fiscal 1994, International Business Machines Corporation accounted for
12% of total revenues (See Note 14.)
MAPICS markets its products worldwide. Revenues are grouped into three
main geographic segments: U.S., Europe and All Other. Financial data by
geographic area is as follows (in thousands):
F-15
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
<TABLE>
<CAPTION>
U.S. Europe All Other Elimination Total
--------- --------- ----------- ------------- --------
<S> <C> <C> <C> <C> <C>
Fiscal year 1994
- ----------------------------------------------
Net sales to unaffiliated customers ...... $41,210 $ 5,273 $6,300 $ -- $52,783
Transfers between geographic areas ...... 965 -- -- (965) --
-------- -------- ------- -------- --------
Total revenues ........................... 42,175 5,273 6,300 (965) 52,783
-------- -------- ------- -------- --------
Net income .............................. 5,356 1,375 1,608 1,828 10,167
Identifiable assets ..................... 32,041 3,489 862 -- 36,392
Fiscal year 1995
- ----------------------------------------------
Net sales to unaffiliated customers ...... $50,934 $10,419 $7,945 $ -- $69,298
Transfers between geographic areas ...... 1,538 -- -- (1,538) --
-------- -------- ------- -------- --------
Total revenues ........................... 52,472 10,419 7,945 (1,538) 69,298
-------- -------- ------- -------- --------
Net income (loss) ........................ 9,669 458 2,623 (1,416) 11,334
Identifiable assets ..................... 34,765 4,841 1,620 -- 41,226
Fiscal year 1996
- ----------------------------------------------
Net sales to unaffiliated customers ...... $56,546 $14,311 $6,745 $ -- $77,602
Transfers between geographic areas ......... 1,816 -- -- (1,816) --
-------- -------- ------- -------- --------
Total revenues ........................... 58,362 14,311 6,745 (1,816) 77,602
-------- -------- ------- -------- --------
Net income (loss) ........................ 10,058 2,197 938 (293) 12,900
Identifiable assets ........................ 37,876 4,789 2,740 -- 45,405
Six months ended March 31,1997
- ----------------------------------------------
Net sales to unaffiliated customers ...... $32,450 $ 9,447 $2,268 $ -- $44,165
Transfers between geographic areas ...... 1,114 -- -- (1,114) --
-------- -------- ------- -------- --------
Total revenues ........................... 33,564 9,447 2,268 (1,114) 44,165
-------- -------- ------- -------- --------
Net income (loss) ........................ 5,641 702 255 (97) 6,501
Identifiable assets ..................... 37,459 5,156 4,031 -- 46,646
</TABLE>
(13) RELATIONSHIP WITH MARCAM CORPORATION
An allocation of corporate marketing expenses, corporate product
development expenses, and corporate administrative functions (including data
services, employee benefits, legal, insurance, accounting and other corporate
overhead) has been included in the selling and marketing, product development,
and general and administrative operating expenses in the combined statements of
operations and is presented in the following table. Certain general and
administrative and selling and marketing expenses, which were specifically
identified by product line in fiscal 1995 and 1996, were not directly
identified by product line or function in fiscal 1994. Management has estimated
those fiscal 1994 expenses attributable to the MAPICS-related business, and has
presented those expenses as corporate allocations in the following table.
The amounts allocated to MAPICS in each of the periods presented are as
follows (in thousands):
<TABLE>
<CAPTION>
Six months ended
Years ended September 30, March 31,
------------------------------ ----------------------
1994 1995 1996 1996 1997
(unaudited)
<S> <C> <C> <C> <C> <C>
Selling and marketing ............ $5,219 $ 223 $ 213 $ 102 134
Product development ............ 207 221 239 117 --
General and administrative ...... 2,794 2,030 2,412 1,204 1,415
</TABLE>
F-16
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
Net transfers to Marcam Corporation, included in divisional equity,
includes net cash transfers to Marcam Corporation, amounts due to Marcam
Corporation for services and other charges, and income taxes paid on behalf of
MAPICS by Marcam Corporation. No interest has been charged to MAPICS related to
these transactions or to any debt held by Marcam Corporation. The weighted
average balance due to (from) Marcam Corporation was $16,901,000, $1,261,000,
$(14,806,000) and $(25,638,000) for the years ended September 30, 1994, 1995
and 1996 and for the six months ended March 31, 1997, respectively. The
activity in the net transfers to Marcam Corporation account, included in
divisional equity, is summarized below.
<TABLE>
<CAPTION>
Six months
ended
Years ended September 30, March 31,
------------------------------------------- ------------
1994 1995 1996 1997
<S> <C> <C> <C> <C>
Marcam Corporation services and other charges ...... $ 8,220 $ 2,474 $ 2,864 $ 1,549
Domestic and foreign income taxes .................. 4,641 7,112 8,076 4,071
Non-cash purchase accounting adjustments ............ -- (450) -- --
Cash transfers, net ................................. (27,208) (26,069) (26,139) (12,086)
--------- --------- --------- ----------
Net transfers to Marcam Corporation ............... $ (14,347) $(16,933) $ (15,199) $ (6,466)
========= ========= ========= ==========
</TABLE>
On February 26, 1993, Marcam Corporation acquired the exclusive worldwide
marketing rights to the MAPICS product line for 25 years. Marcam Corporation
also acquired the option to purchase the MAPICS product line and certain
related intellectual property rights. As part of the acquisition of the
marketing rights, Marcam Corporation expensed $5,568,000 of in-process research
and development costs and recorded $10,699,000 of intangible assets acquired.
These amounts have been reflected in the combined financial statements of
MAPICS.
On September 29, 1995, Marcam Corporation acquired all of the outstanding
stock of the company which owned the MAPICS product line. As part of the
acquisition, certain non-cash balance sheet adjustments were recorded by Marcam
Corporation which have been reflected in the combined financial statements of
MAPICS. The adjustments consist of the following (in thousands):
<TABLE>
<S> <C>
Reduction of net computer software costs $ 1,050
Reduction of payables ..................... (1,500)
---------
Net adjustment ........................... $ (450)
=========
</TABLE>
(14) RELATED PARTY TRANSACTIONS
MAPICS has a number of marketing and product development relationships
with International Business Machines Corporation ("IBM"). IBM has purchased
licenses for MAPICS products for internal use, as well as for marketing
purposes. MAPICS has purchased certain services, equipment and software
licenses from IBM.
Under various agreements with MAPICS and its representatives, IBM markets
MAPICS products in cooperation with MAPICS and its subsidiaries or
representatives in several countries. In each case, MAPICS or its
representative pays IBM a fee for marketing MAPICS products when a sale is made
with IBM's assistance. The fee is calculated as a percentage of the license
fees received by MAPICS and varies based on the agreement's specific
territories. MAPICS paid IBM aggregate fees of $1,453,000, $198,000 and $0 in
fiscal years 1994, 1995 and 1996, respectively, and $0 in the six-month period
ended March 31, 1997.
MAPICS recorded royalties from IBM of approximately $5,675,000, $2,614,000
and $604,000 in fiscal years 1994, 1995 and 1996, respectively, and $265,000,
in the six-month period ended March 31, 1997 relating to sales of MAPICS
products.
MAPICS also licenses products and provides services to IBM in the ordinary
course of business. During fiscal years 1994, 1995 and 1996, MAPICS recognized
an aggregate of approximately $700,000, $185,000 and $409,000,
F-17
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
respectively, and during the six-month period ended March 31, 1997 recognized
$236,000 from licensing products and providing services to IBM. IBM also sells
products and provides services, including distribution and translation
services, to MAPICS in the ordinary course of business.
Total revenues that were derived from transactions with IBM were
$6,375,000, $2,799,000 and $1,013,000 for fiscal 1994, 1995 and 1996,
respectively, and $501,000 for the six-month period ended March 31, 1997.
(15) SUBSEQUENT EVENTS (Unaudited)
Agreements with Marcam Solutions
Distribution Agreement. Prior to the completion of the Distribution,
Marcam Corporation (to be renamed MAPICS) and Marcam Solutions will enter into
a Distribution Agreement. Pursuant to the Distribution Agreement, subject to
limited exceptions, the two companies are required to indemnify each other and
each other's directors, officers, employees, agents and representatives for
liabilities under federal or state securities laws that are a result of the
offering and the Distribution. The Distribution Agreement also provides that
each party thereto will indemnify the other party thereto and its directors,
officers, employees, agents and representatives for liabilities that may be
incurred by the indemnified party relating to, resulting from or arising out of
(i) the business, operations or assets conducted or owned or formerly conducted
or owned by the indemnifying party and its subsidiaries, or (ii) the failure by
the indemnifying party to comply with any other agreements executed in
connection with the Distribution or the offering. In addition, the Distribution
Agreement provides that each will indemnify the other party and its directors,
officers, employees, agents and representatives for any liabilities resulting
from or arising out of certain acts, failures to act or the provision of
incorrect factual information by the indemnifying party in connection with the
IRS private letter ruling request that cause the Distribution to be taxable to
the indemnified party or its stockholders. The ancillary agreements to be
executed in connection with the Distribution include a General Services
Agreement and a Tax Sharing Agreement. With respect to matters governed by the
General Services Agreement, the relationship between MAPICS and Marcam
Solutions is intended to continue in a manner generally consistent with past
practices. Management believes that the expected charges in accordance with
these agreements are fair and reasonable.
General Services Agreement. The General Services Agreement will provide
that Marcam Solutions and MAPICS will provide to each other from time to time,
upon request, certain routine and ordinary corporate services, including
financial, accounting, administrative, tax, and legal services. For these
services, the party providing such services will be reimbursed for its costs,
including the pro rata costs of its employees performing such services and
allocable overhead, on a per diem basis.
Tax Sharing Agreement. Prior to completion of the Distribution, Marcam
Corporation (to be renamed MAPICS) and Marcam Solutions intend to enter into a
Tax Sharing Agreement that defines the parties rights and obligations with
respect to certain tax liabilities and refunds of taxes relating to Marcam
Corporation's business for periods ending on or prior to the date of the
Distribution. In general, pursuant to the Tax Sharing Agreement, Marcam
Solutions shall be responsible for certain state, local and foreign taxes for
periods ending on or before the date of the Distribution (and shall be entitled
to refunds with respect to such taxes), and MAPICS shall be responsible for all
other taxes for such periods (and shall be entitled to refunds with respect to
such taxes). In addition, under the Tax Sharing Agreement, MAPICS shall be
liable for any taxes arising out of the Distribution. The Tax Sharing Agreement
further provides for cooperation with respect to certain tax matters, the
exchange of information and the retention of records.
Debt Financing
On July 25, 1997, Marcam Corporation borrowed $64 million (the "Debt
Financing"). The net proceeds of this financing were used to make the $39
million cash transfer by Marcam Corporation to Marcam Solutions in connection
with the Distribution and to repay Marcam Corporation's $25 million 9.82%
Subordinated Notes due 2001. The indebtedness incurred in the Debt Financing
was assumed, for accounting purposes, by MAPICS and
F-18
<PAGE>
MAPICS, INC.
Notes to Combined Financial Statements -- (Continued)
currently bears interest at the rate of 9% and is payable on August 4, 1997.
This indebtedness is expected to be repaid in whole or in part with proceeds
from the proposed offering of MAPICS common stock (the "Offering").
Revolving Credit and Term Loan Facility
In July 1997, MAPICS also arranged for a $30 million senior secured
revolving credit and term loan facility. Under this facility, MAPICS may borrow
up to $15 million as a term loan and up to $15 million under the revolving
credit facility. MAPICS intends to use borrowings under this credit facility to
repay any amounts borrowed in the Debt Financing which are not repaid with the
net proceeds from the Offering and for general corporate purposes, including
working capital. MAPICS' obligations under the credit facility will be secured
by liens on substantially all of its assets. The principal of the term loan
under the credit facility will be payable in installments beginning on
September 30, 1998 and ending on June 30, 2001, and any revolving credit loans
under the credit facility will mature on June 30, 2000. The facility will
provide for prime and LIBOR based interest rate options. The borrowing
availability for revolving credit loans and the rate of interest will vary
depending upon specified financial ratios. The credit facility will contain
covenants which, among other things, will require that MAPICS maintain certain
financial ratios and will impose certain limitations or prohibitions on MAPICS
with respect to the occurrence of indebtedness, liens, capital leases; the
payment of dividends on, and the redemption or repurchase of, capital stock of
the company; investments and acquisitions; the merger or consolidation of the
company with any person or entity; and the disposition of any of the company's
properties or assets. MAPICS has also arranged for the borrowing availability
under the senior secured revolving credit and term loan facility to be
increased to $75 million, which would permit the company to repay the
indebtedness incurred in the Debt Financing, in the event the Offering is not
completed by August 4, 1997.
(16) SELECTED QUARTERLY FINANCIAL DATA (Unaudited)
The following quarterly information is unaudited and, in the opinion of
management, includes all adjustments (consisting only of normal recurring
adjustments) necessary to present fairly the operating results for each
quarter.
<TABLE>
<CAPTION>
First Second Third Fourth
Quarter Quarter Quarter Quarter Year
--------- --------- --------- --------- --------
(In thousands)
<S> <C> <C> <C> <C> <C>
1995:
Revenues .............................. $17,213 $15,358 $15,303 $21,424 $69,298
Income before income tax expense ...... 5,744 4,040 3,502 5,160 18,446
Net income ........................... 3,529 2,482 2,152 3,171 11,334
1996:
Revenues .............................. $18,623 $17,221 $18,128 $23,630 $77,602
Income before income tax expense ...... 5,037 4,846 4,594 6,499 20,976
Net income ........................... 3,098 2,980 2,826 3,996 12,900
1997:
Revenues .............................. $23,379 $20,786
Income before income tax expense ...... 5,793 4,779
Net income ........................... 3,563 2,938
</TABLE>
F-19
<PAGE>
MAPICS continually enhances its product offerings to meet the specific needs of
customers and offers customers the opportunity to gradually migrate to new
technologies, one user at a time if desired while protecting their existing
investments in both hardware and software.
Description of inside back-cover page:
[Multicolor computer generated graphic depicting a sample of one of the
Company's proprietary "PDM Plus" graphical user interface computer screens,
showing multiple task, function, editing and customizing selections, simulated
data and representative icons.] A caption at the bottom of the pages reads as
follows: "MAPICS continually enhances its product offerings to meet the
specific needs of customers and offers customers the opportunity to gradually
migrate to new technologies, one user at a time if desired, while protecting
their existing investments in both hardware and software."
[MAPICS LOGO]
<PAGE>
================================================================================
No dealer, salesperson or other person has been authorized to give any
information or to make any representations other than those contained in this
Prospectus and, if given or made, such information or representations must not
be relied upon as having been authorized by the Company or any of the
Underwriters. This Prospectus does not constitute an offer to sell or a
to buy the shares by anyone in any jurisdiction in which such offer or
solicitation is not authorized, or in which the person making the offer or
solicitation is not qualified to do so, or to any person to whom it is unlawful
to make such offer or solicitation. Neither the delivery of this Prospectus nor
any sale made hereunder shall create any implication that the information
contained herein is correct as of any time subsequent to its date.
---------------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
Prospectus Summary ........................ 3
Risk Factors .............................. 7
Use of Proceeds ........................... 15
Dividend Policy ........................... 15
Capitalization .............................. 16
Selected Combined Financial Data ............ 17
Management's Discussion and Analysis
of Financial Condition and Results of
Operations .............................. 18
Business .................................... 27
Management ................................. 36
The Distribution ........................... 37
Relationship Between MAPICS and
Marcam Solutions ........................ 40
Principal Stockholders ..................... 41
Description of Capital Stock ............... 42
Underwriting .............................. 45
Legal Matters .............................. 46
Experts .................................... 46
Information Incorporated by Reference ...... 47
Available Information ..................... 47
Index to Combined Financial
Statements .............................. F-1
</TABLE>
6,000,000 Shares
[MAPICS LOGO]
Common Stock
----------------------------------------
P R O S P E C T U S
----------------------------------------
Donaldson, Lufkin & Jenrette
Securities Corporation
Lazard Freres & Co. LLC
Dain Bosworth
Incorporated
, 1997
================================================================================
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth an estimate (except for the SEC
registration fee, the NASD filing fee and the Nasdaq National Market listing
fee) of the fees and expenses (other than underwriting discounts and
commissions) expected to be incurred in connection with the issuance and
distribution of the Common Stock being registered under the Registration
Statement.
<TABLE>
<S> <C>
SEC registration fee .................................... $ 26,136
NASD filing fee ....................................... 9,125
Nasdaq National Market listing fee ..................... 17,500
Printing and engraving expenses ........................ 100,000
Legal fees and expenses ................................. 700,000
Accounting fees and expenses ........................... 700,000
Blue Sky fees and expenses (including legal fees) ...... 10,000
Transfer agent and registrar fees and expenses ......... 10,000
Miscellaneous .......................................... 177,239
-----------
TOTAL ................................................ $1,750,000
===========
</TABLE>
The Company will bear all expenses shown above.
Item 15. Indemnification of Directors and Officers.
Section 67 of the Massachusetts Business Corporation Law ("Section 67")
provides that a corporation may indemnify its directors and officers to the
extent specified in or authorized by (i) the articles of organization, (ii) a
by-law adopted by the stockholders, or (iii) a vote adopted by the holders of a
majority of the shares of stock entitled to vote on the election of directors.
In all instances, the extent to which a corporation provides indemnification to
its directors and officers under Section 67 is optional. The Company's Restated
Articles of Organization provide indemnification to the Company's directors and
officers to the fullest extent permitted by Massachusetts law, including
circumstances in which indemnification is otherwise discretionary. The
Company's By-laws provide that each director and officer shall be indemnified
by the Company against liabilities and expenses in connection with any legal
proceeding to which such officer or director may become a party by reason of
being or having been an officer or director, provided that such officer or
director acted in good faith and in a manner he or she reasonably believed to
be in the best interests of the Company, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe his or her conduct was
unlawful. The Company has also entered into indemnity agreements with each of
its directors and certain executive officers, which agreements require the
Company to indemnify such individuals to the fullest extent permitted by
Massachusetts law.
The Company's Restated Articles of Organization eliminate the personal
liability of the Company's directors for monetary damages for breach of their
fiduciary duty as directors to the Company and its stockholders,
notwithstanding any provision of law imposing such liability. The Company's
Articles of Organization, however, do not eliminate liability of the Company's
directors for breach of the director's duty of loyalty to the Company or its
stockholders, acts or omissions not in good faith or involving intentional
misconduct or a knowing violation of law and actions leading to improper
personal benefit to the director, or under Section 61 or 62 of the
Massachusetts Business Corporation Law.
II-1
<PAGE>
Item 16. Exhibits and Financial Statement Schedules.
(a) Exhibits:
<TABLE>
<CAPTION>
Exhibit No. Description SEC Document Reference
- ------------- ------------------------------------------------------------- ------------------------------
<S> <C> <C>
1 Revised Form of Underwriting Agreement dated July 25, 1997
2+ Stock Purchase Agreement dated as of September 29, 0-18674
1995 by and among Marcam Corporation, International Exhibit 2.1 to Current
Business Machines Corporation, Edison Venture Fund, Report on Form 8-K Dated
L.P., Richard C. Cook, Paul A. Margolis, John Campbell September 29, 1995
and MAPICS, Inc.
4.1+ Restated Articles of Organization of the Registrant 33-35666
Exhibits 3.2, 4.2
4.2+ By-laws, as amended and restated, of the Registrant 33-35666
Exhibits 3.3, 4.3
4.3+ Certificate of Vote of Directors Establishing a Series or a 0-18674
Class of Stock of the Registrant Exhibits 3.1, 4.2 to Current
Report on Form 8-K Dated
June 18, 1993
4.4+ Certificate of Vote of Directors Establishing a Series or a 0-18674
Class of Stock of the Registrant Exhibits 3.4, 4.4 to Annual
Report on Form 10-K for the
fiscal year ended September
30, 1993
4.5+ Specimen certificate representing the Common Stock 33-35666
Exhibit 4.4
4.6+ Certificate of Vote of Directors Establishing a Series of a 0-18674
Class of Stock for the Series D Convertible Preferred Exhibit 4 to Current Report
Stock of Marcam Corporation on Form 8-K Dated
September 29, 1995
4.7+ Certificate of Vote of Directors Establishing a Series of a 0-18674
Class of Stock for the Series E Convertible Preferred Exhibit 4 to Current Report
Stock of Marcam Corporation on Form 8-K Dated July 23,
1996
4.8+ Rights Agreement, dated as of December 3, 1996, 0-18674
between Marcam Corporation and The First National Exhibit 4 to Current Report
Bank of Boston, which includes as Exhibit A the form of on Form 8-K Dated
Certificate of Vote of Directors Establishing a Series of a December 3, 1996
Class of Stock, as Exhibit B the Form of Rights
Certificate, and as Exhibit C the Summary of Rights to
Purchase Preferred Stock
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description SEC Document Reference
- ------------- ---------------------------------------------------------- -----------------------------
<S> <C> <C>
5 Opinion of Testa, Hurwitz & Thibeault, LLP
10.1 Promissory Note dated July 25, 1997, between Marcam
Corporation and BankBoston, N.A.
10.2 Security Agreement dated July 25, 1997, between
Marcam Corporation and BankBoston, N.A.
21* Subsidiaries of the Registrant 333-26203
Exhibit 21
23.1 Consent of Testa, Hurwitz & Thibeault, LLP (contained in
its opinion as Exhibit 5)
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Coopers & Lybrand L.L.P.
23.4 Consent of KPMG Peat Marwick LLP
24* Power of Attorney (contained in the Signature Pages)
99.1+ Revised Form of Distribution Agreement between 0-22841
Marcam Solutions, Inc. and Marcam Corporation Exhibit 2 to Amendment No.
1 to Registration Statement
on Form 10 of Marcam
Solutions, Inc. Dated July
22, 1997
99.2+ Revised Form of Tax Sharing Agreement between 0-22841
Marcam Solutions, Inc. and Marcam Corporation Exhibit 10.2 to Amendment
No. 1 to Registration
Statement on Form 10 of
Marcam Solutions, Inc.
Dated July 22, 1997
99.3+ Revised Form of General Services Agreement between 0-22841
Marcam Solutions, Inc. and Marcam Corporation Exhibit 10.1 to Amendment
No. 1 to Registration
Statement on Form 10 of
Marcam Solutions, Inc.
Dated July 22, 1997
</TABLE>
- ------------
+ Incorporated herein by reference.
* Previously filed.
(b) Financial Statements Schedules:
All schedules to the combined financial statements are omitted as the
required information is either inapplicable or presented in the combined
financial statements or related notes thereto.
II-3
<PAGE>
Item 17. Undertakings.
(a) 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 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.
(b) 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 Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the Act and
will be governed by the final adjudication of such issue.
(c) The undersigned registrant hereby undertakes that:
(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of
this registration statement in reliance upon Rule 430A and contained in a
form of prospectus filed by the registrant pursuant to Rule 424(b)(1) or
(4) or 497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus
shall be deemed to be a new registration statement relating to the
securities offered therein, and the Offering of such securities at that
time shall be deemed to be the initial bona fide Offering thereof.
II-4
<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 of the
requirements for filing on Form S-3 and has duly caused this amendment to the
registration statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Newton, Commonwealth of Massachusetts on this
28th day of July, 1997.
MARCAM CORPORATION
By: /s/ George A. Chamberlain, 3d
-------------------------------------
George A. Chamberlain, 3d
Chief Financial Officer
POWER OF ATTORNEY AND SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, this amendment
to the registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title(s) Date
- ------------------------------ ------------------------------------- --------------
<S> <C> <C>
/s/ Michael J. Quinlan President, Chief Executive Officer, July 28, 1997
- ------------------------- and Director (Principal Executive
Michael J. Quinlan Officer)
* Chairman of the Board of Directors July 28, 1997
- ------------------------- and Director
Paul A. Margolis
* Director July 28, 1997
- -------------------------
John Campbell
* Chief Financial Officer (Principal July 28, 1997
- ------------------------- Financial and Accounting Officer)
George A. Chamberlain, 3d
* Director July 28, 1997
- -------------------------
Richard S. Hickok
* Director July 28, 1997
- -------------------------
Edward J. Kfoury
* Director July 28, 1997
- -------------------------
William E. Ford
* Director July 28, 1997
- -------------------------
William O. Grabe
* By: /s/ Michael J. Quinlan
--------------------
Michael J. Quinlan
Attorney-in-fact
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit No. Description SEC Document Reference
- ------------- ------------------------------------------------------------- ------------------------------
<S> <C> <C>
1 Revised Form of Underwriting Agreement dated July 25, 1997
2+ Stock Purchase Agreement dated as of September 29, 0-18674
1995 by and among Marcam Corporation, International Exhibit 2.1 to Current
Business Machines Corporation, Edison Venture Fund, Report on Form 8-K Dated
L.P., Richard C. Cook, Paul A. Margolis, John Campbell September 29, 1995
and MAPICS, Inc.
4.1+ Restated Articles of Organization of the Registrant 33-35666
Exhibits 3.2, 4.2
4.2+ By-laws, as amended and restated, of the Registrant 33-35666
Exhibits 3.3, 4.3
4.3+ Certificate of Vote of Directors Establishing a Series or a 0-18674
Class of Stock of the Registrant Exhibits 3.1, 4.2 to Current
Report on Form 8-K Dated
June 18, 1993
4.4+ Certificate of Vote of Directors Establishing a Series or a 0-18674
Class of Stock of the Registrant Exhibits 3.4, 4.4 to Annual
Report on Form 10-K for the
fiscal year ended September
30, 1993
4.5+ Specimen certificate representing the Common Stock 33-35666
Exhibit 4.4
4.6+ Certificate of Vote of Directors Establishing a Series of a 0-18674
Class of Stock for the Series D Convertible Preferred Exhibit 4 to Current Report
Stock of Marcam Corporation on Form 8-K Dated
September 29, 1995
4.7+ Certificate of Vote of Directors Establishing a Series of a 0-18674
Class of Stock for the Series E Convertible Preferred Exhibit 4 to Current Report
Stock of Marcam Corporation on Form 8-K Dated July 23,
1996
4.8+ Rights Agreement, dated as of December 3, 1996, 0-18674
between Marcam Corporation and The First National Exhibit 4 to Current Report
Bank of Boston, which includes as Exhibit A the form of on Form 8-K Dated
Certificate of Vote of Directors Establishing a Series of a December 3, 1996
Class of Stock, as Exhibit B the Form of Rights
Certificate, and as Exhibit C the Summary of Rights to
Purchase Preferred Stock
5 Opinion of Testa, Hurwitz & Thibeault, LLP
</TABLE>
II-6
<PAGE>
<TABLE>
<CAPTION>
Exhibit No. Description SEC Document Reference
- ------------- ---------------------------------------------------------- -----------------------------
<S> <C> <C>
10.1 Promissory Note dated July 25, 1997, between Marcam
Corporation and BankBoston, N.A.
10.2 Security Agreement dated July 25, 1997, between
Marcam Corporation and BankBoston, N.A.
21* Subsidiaries of the Registrant 333-26203
Exhibit 21
23.1 Consent of Testa, Hurwitz & Thibeault, LLP (contained in
its opinion as Exhibit 5)
23.2 Consent of Coopers & Lybrand L.L.P.
23.3 Consent of Coopers & Lybrand L.L.P.
23.4 Consent of KPMG Peat Marwick LLP
24* Power of Attorney (contained in the Signatures)
99.1+ Revised Form of Distribution Agreement between 0-22841
Marcam Solutions, Inc. and Marcam Corporation Exhibit 2 to Amendment No.
1 to Registration Statement
on Form 10 of Marcam
Solutions, Inc. Dated July
22, 1997
99.2+ Revised Form of Tax Sharing Agreement between 0-22841
Marcam Solutions, Inc. and Marcam Corporation Exhibit 10.2 to Amendment
No. 1 to Registration
Statement on Form 10 of
Marcam Solutions, Inc.
Dated July 22, 1997
99.3+ Revised Form of General Services Agreement between 0-22841
Marcam Solutions, Inc. and Marcam Corporation Exhibit 10.1 to Amendment
No. 1 to Registration
Statement on Form 10 of
Marcam Solutions, Inc.
Dated July 22, 1997
</TABLE>
- ------------
+ Incorporated herein by reference.
* Previously filed.
II-7
___________ Shares
MAPICS, Inc.
Common Stock
UNDERWRITING AGREEMENT
, 1997
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD FRERES & CO. LLC
DAIN BOSWORTH INCORPORATED
As representatives of the
several underwriters
named in Schedule I hereto
277 Park Avenue
New York, New York 10172
Dear Sirs:
MAPICS, Inc., a Massachusetts corporation (the "Company"), proposes to
issue and sell _____________ shares of its Common Stock, par value $.01 per
share (the "Firm Shares") to the several underwriters named in Schedule I hereto
(the "Underwriters"). The Company also proposes to issue and sell to the several
Underwriters not more than _______ additional shares of its Common Stock, par
value $.01 per share (the "Additional Shares"), if requested by the Underwriters
as provided in Section 2 hereof. The Firm Shares and the Additional Shares are
hereinafter referred to collectively as the "Shares". The shares of common stock
of the Company to be outstanding after giving effect to the sales contemplated
hereby are hereinafter referred to as the "Common Stock".
<PAGE>
SECTION 1. Registration Statement and Prospectus. The Company has prepared
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively, the
"Act"), a registration statement on Form S-3 (No. 333-26203), including a
prospectus, relating to the Shares. The registration statement, as amended at
the time it became effective, including the information (if any) deemed to be
part of the registration statement at the time of effectiveness pursuant to Rule
430A under the Act, is hereinafter referred to as the "Registration Statement",
and the prospectus in the form first used to confirm sales of Shares is
hereinafter referred to as the "Prospectus" (including, in the case of all
references to the Registration Statement or the Prospectus, documents
incorporated therein by reference). If the Company has filed or is required
pursuant to the terms hereof to file a registration statement pursuant to Rule
462(b) under the Act registering additional shares of Common Stock (a "Rule
462(b) Registration Statement"), then, unless otherwise specified, any reference
herein to the term "Registration Statement" shall be deemed to include such Rule
462(b) Registration Statement. The terms "supplement" and "amendment" or "amend"
as used in this Agreement shall include all documents subsequently filed by the
Company with the Commission in accordance with the Securities Exchange Act of
1934, as amended, and the rules and regulations of the Commission thereunder
(collectively, the "Exchange Act") that are deemed to be incorporated by
reference in the Registration Statement and the Prospectus.
SECTION 2. Agreements to Sell and Purchase and Lock-Up Agreements. On the
basis of the representations and warranties contained in this Agreement, and
subject to its terms and conditions, the Company agrees to issue and sell, and
each Underwriter agrees, severally and not jointly, to purchase from the Company
at a price per Share of $_______ (the "Purchase Price") the number of Firm
Shares set forth opposite the name of such Underwriter in Schedule I hereto.
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, the Company agrees to issue
and sell the Additional Shares and the Underwriters shall have the right to
purchase, severally and not jointly, up to ________ Additional Shares from the
Company at the Purchase Price. Additional Shares may be purchased solely for the
purpose of covering over-allotments made in connection with the offering of the
Firm Shares. The Underwriters may exercise their right to purchase Additional
Shares in whole or in part from time to time by giving written notice thereof to
the Company within 30 days after the date of this Agreement. You shall give any
such notice on behalf of the Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant to such exercise
and the date for payment and delivery thereof, which date shall be a business
day (i) no earlier than two business days after such notice has been given (and,
in any event, no earlier than the Closing Date (as hereinafter defined)) and
(ii) no later than ten business days after such notice has been given. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase from the Company the number of Additional Shares
(subject to such adjustments to eliminate fractional shares as you may
determine) which bears the same proportion to the total number of Additional
Shares to be purchased from the Company as the number of Firm Shares set forth
opposite the name of such Underwriter in Schedule I bears to the total number of
Firm Shares.
-2-
<PAGE>
The Company hereby agrees not to (i) offer, pledge, sell, contract to sell,
sell any option or contract to purchase, purchase any option or contract to
sell, grant any option, right or warrant to purchase, or otherwise transfer or
dispose of, directly or indirectly, any shares of Common Stock or any securities
convertible into or exercisable or exchangeable for Common Stock or (ii) enter
into any swap or other arrangement that transfers all or a portion of the
economic consequences associated with the ownership of any Common Stock
(regardless of whether any of the transactions described in clause (i) or (ii)
is to be settled by the delivery of Common Stock, or such other securities, in
cash or otherwise), except to the Underwriters pursuant to this Agreement, for a
period of 180 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation. Notwithstanding
the foregoing, during such period (i) the Company may grant stock options
pursuant to the Company's existing stock option and purchase plans and (ii) the
Company may issue shares of Common Stock upon the exercise of an option or
warrant or the conversion of a security outstanding on the date hereof or any
option granted pursuant to the Company's existing stock option and purchase
plans. The Company also agrees not to file any registration statement with
respect to any shares of Common Stock or any securities convertible into or
exercisable or exchangeable for Common Stock without the prior written consent
of DLJ, except that the Company may file a registration statement with respect
to the resale of the additional shares of Common Stock issuable upon exercise of
certain warrants outstanding on the date hereof as a result of the distribution
by the Company of shares of Common Stock of Marcam Solutions Inc. The Company
shall, prior to or concurrently with the execution of this Agreement, deliver an
agreement executed by (i) each of the directors and executive officers of the
Company and (ii) each stockholder listed on Annex I hereto to the effect that
such person will not, during the period commencing on the date such person signs
and delivers to you such agreement and ending 180 days after the date of the
Prospectus, without the prior written consent of Donaldson, Lufkin & Jenrette
Corporation, (x) engage in any of the transactions described in the first
sentence of this paragraph or (y) make any demand for, or exercise any right
with respect to, the registration of any shares of Common Stock or any
securities convertible into or exercisable or exchangeable for Common Stock.
SECTION 3. Terms of Public Offering. The Company is advised by you that the
Underwriters propose (i) to make a public offering of their respective portions
of the Shares as soon after the execution and delivery of this Agreement as in
your judgment is advisable and (ii) initially to offer the Shares upon the terms
set forth in the Prospectus.
SECTION 4. Delivery and Payment. Delivery to the Underwriters of and
payment for the Firm Shares shall be made at 9:00 A.M., New York City time, on
August __, 1997 (the "Closing Date") at such place as you shall designate. The
-3-
<PAGE>
Closing Date and the location of delivery of and payment for the Firm Shares may
be varied by agreement between you and the Company.
Delivery to the Underwriters of and payment for any Additional Shares to be
purchased by the Underwriters shall be made at such place as you shall designate
at 9:00 A.M., New York City time, on the date specified in the applicable
exercise notice given by you pursuant to Section 2 (an "Option Closing Date").
Any such Option Closing Date and the location of delivery of and payment for
such Additional Shares may be varied by agreement between you and the Company.
Certificates for the Shares shall be registered in such names and issued in
such denominations as you shall request in writing not later than two full
business days prior to the Closing Date or an Option Closing Date, as the case
may be. Such certificates shall be made available to you for inspection not
later than 9:30 A.M., New York City time, on the business day prior to the
Closing Date or the applicable Option Closing Date, as the case may be.
Certificates in definitive form evidencing the Shares shall be delivered to you
on the Closing Date or the applicable Option Closing Date, as the case may be,
with any transfer taxes thereon duly paid by the Company, for the respective
accounts of the several Underwriters, against payment to the Company of the
Purchase Price therefor by wire transfer of Federal or other funds immediately
available in Boston.
SECTION 5. Agreements of the Company. The Company agrees with you:
(a) To advise you promptly and, if requested by you, to confirm such advice
in writing, (i) of any request by the Commission for amendments to the
Registration Statement or amendments or supplements to the Prospectus or for
additional information, (ii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the suspension
of qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, (iii) when any amendment to the
Registration Statement becomes effective, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, when the Rule 462(b) Registration Statement has become effective and
(v) of the happening of any event during the period referred to in paragraph (d)
below which makes any statement of a material fact made in the Registration
Statement or the Prospectus untrue or which requires any additions to or changes
in the Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, the Company will use
its best efforts to obtain the withdrawal or lifting of such order at the
earliest possible time.
(b) To furnish to you, without charge, four signed copies of the
Registration Statement as first filed with the Commission and of each amendment
to it, including all exhibits and documents incorporated by reference, and to
furnish to you
-4-
<PAGE>
and each Underwriter designated by you such number of conformed copies of the
Registration Statement as so filed and of each amendment to it, without exhibits
but including documents incorporated therein by reference, as you may reasonably
request.
(c) To prepare the Prospectus in a form approved by you and to file the
Prospectus in such form with the Commission within the applicable period
specified in Rule 424(b) under the Act; not to file any further amendment to the
Registration Statement and not to make any amendment or supplement to the
Prospectus of which you shall not previously have been advised or to which you
shall reasonably object after being so advised; and to prepare and file with the
Commission, promptly upon your reasonable request, any amendment to the
Registration Statement or amendment or supplement to the Prospectus which may be
necessary or advisable in connection with the distribution of the Shares by you,
and to use its best efforts to cause any such amendment to the Registration
Statement to become promptly effective.
(d) Prior to 10:00 A.M. New York City time on the first business day after
the date of this Agreement and from time to time thereafter for such period as
in the opinion of counsel for the Underwriters a prospectus is required by law
to be delivered in connection with sales by an Underwriter or a dealer, to
furnish in New York City to each Underwriter and dealer as many copies of the
Prospectus (and of any amendment or supplement to the Prospectus) and any
documents incorporated therein by reference as such Underwriter or dealer may
reasonably request.
(e) If during the period specified in paragraph (d), any event shall occur
as a result of which, in the opinion of counsel for the Underwriters, it becomes
necessary to amend or supplement the Prospectus in order to make the statements
therein, in the light of the circumstances when the Prospectus is delivered to a
purchaser, not misleading, or if it is necessary to amend or supplement the
Prospectus to comply with applicable law, forthwith to prepare and file with the
Commission an appropriate amendment or supplement to the Prospectus so that the
statements in the Prospectus, as so amended or supplemented, will not in the
light of the circumstances when it is so delivered, be misleading, or so that
the Prospectus will comply with law, and to furnish to each Underwriter and to
such dealers as you shall specify, such number of copies thereof as such
Underwriter or dealer may reasonably request.
(f) Prior to any public offering of the Shares, to cooperate with you and
counsel for the Underwriters in connection with the registration or
qualification of the Shares for offer and sale by the several Underwriters and
by dealers under the state securities or Blue Sky laws of such jurisdictions as
you may request, to continue such qualification in effect so long as required
for distribution of the Shares and to file such consents to service of process
or other documents as may be necessary in
-5-
<PAGE>
order to effect such registration or qualification; provided, however, that the
Company shall not be obligated to file any general consent to service of process
or to qualify as a foreign corporation in any jurisdiction in which it is not so
qualified.
(g) To mail and make generally available to its stockholders as soon as
practicable an earnings statement covering the twelve-month period ending
September 30, 1998 that shall satisfy the provisions of Section 11(a) of the
Act, and to advise you in writing when such statement has been so made
available.
(h) During the period of three years after the date of this Agreement, to
furnish to you as soon as available copies of all reports or other
communications furnished to the record holders of Common Stock or furnished to
or filed with the Commission or any national securities exchange on which any
class of securities of the Company is listed and such other publicly available
information concerning the Company and its subsidiaries as you may reasonably
request.
(i) Whether or not the transactions contemplated in this Agreement are
consummated or this Agreement is terminated, to pay or cause to be paid all
expenses incident to the performance of the Company's obligations under this
Agreement, including: (i) the fees, disbursements and expenses of the Company's
counsel and the Company's accountants in connection with the registration and
delivery of the Shares under the Act and all other fees or expenses in
connection with the preparation, printing, filing and distribution of the
Registration Statement (including financial statements and exhibits), any
preliminary prospectus, the Prospectus and all amendments and supplements to any
of the foregoing prior to or during the period specified in paragraph (d),
including the mailing and delivering of copies thereof to the Underwriters and
dealers in the quantities specified herein, (ii) all costs and expenses related
to the transfer and delivery of the Shares to the Underwriters, including any
transfer or other taxes payable thereon, (iii) all costs of printing or
producing this Agreement and any other agreements or documents in connection
with the offering, purchase, sale or delivery of the Shares, (iv) all expenses
in connection with the registration or qualification of the Shares for offer and
sale under the securities or Blue Sky laws of the several states and all costs
of printing or producing any Preliminary and Supplemental Blue Sky Memoranda in
connection therewith (including the filing fees and the reasonable fees and
disbursements of counsel for the Underwriters in connection with such
registration or qualification and memoranda relating thereto), (v) the filing
fees and disbursements of counsel for the Underwriters in connection with the
review and clearance of the offering of the Shares by the National Association
of Securities Dealers, Inc., (vi) all costs and expenses incident to the listing
of the Shares on the Nasdaq National Market, (vii) the cost of printing
certificates representing the Shares, (viii) the costs and charges of any
transfer agent, registrar and/or depositary, and (ix) and all other costs and
expenses incident to the performance of the obligations of the Company hereunder
for which provision is not otherwise made in this Section.
-6-
<PAGE>
(j) To use its best efforts to list for quotation the Shares on the Nasdaq
National Market and to maintain the listing of the Shares on the Nasdaq National
Market for a period of three years after the date of this Agreement.
(k) To use its best efforts to do and perform all things required or
necessary to be done and performed under this Agreement by the Company prior to
the Closing Date or any Option Closing Date, as the case may be, and to satisfy
all conditions precedent to the delivery of the Shares.
(l) If the Registration Statement at the time of the effectiveness of this
Agreement does not cover all of the Shares, to file a Rule 462(b) Registration
Statement with the Commission registering the Shares not so covered in
compliance with Rule 462(b) by 10:00 P.M., New York City time, on the date of
this Agreement and to pay to the Commission the filing fee for such Rule 462(b)
Registration Statement at the time of the filing thereof or to give irrevocable
instructions for the payment of such fee pursuant to Rule 111(b) under the Act.
SECTION 6. Representations and Warranties of the Company. The Company
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective (other than any Rule
462(b) Registration Statement to be filed by the Company after the effectiveness
of this Agreement); any Rule 462(b) Registration Statement filed after the
effectiveness of this Agreement will become effective no later than 10:00 P.M.,
New York City time, on the date of this Agreement; and no stop order suspending
the effectiveness of the Registration Statement is in effect, and to the
Company's knowledge, no proceedings for such purpose are pending before or
threatened by the Commission.
(b) (i) Each document, if any, filed or to be filed pursuant to the
Exchange Act and incorporated by reference in the Prospectus complied or will
comply when so filed in all material respects with the Exchange Act and the
applicable rules and regulations of the Commission thereunder, (ii) the
Registration Statement (other than any Rule 462(b) Registration Statement to be
filed by the Company after the effectiveness of this Agreement), when it became
effective, did not contain and, as amended, if applicable, will not contain any
untrue
-7-
<PAGE>
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not misleading,
(iii) the Registration Statement (other than any Rule 462(b) Registration
Statement to be filed by the Company after the effectiveness of this Agreement)
and the Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Act, (iv) if the Company is required to
file a Rule 462(b) Registration Statement after the effectiveness of this
Agreement, such Rule 462(b) Registration Statement and any amendments thereto,
when they become effective (1) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein not misleading and (2) will comply in
all material respects with the Act and (v) the Prospectus does not contain and,
as amended or supplemented, if applicable, will not contain any untrue statement
of a material fact or omit to state a material fact necessary to make the
statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this paragraph (b) do not apply to statements or omissions in the
Registration Statement or the Prospectus based upon information relating to any
Underwriter furnished to the Company in writing by such Underwriter through you
expressly for use therein.
(c) Each preliminary prospectus filed as part of the Registration Statement
as originally filed or as part of any amendment thereto, or filed pursuant to
Rule 424 under the Act, complied when so filed in all material respects with the
Act, and when so filed did not contain an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in the light of the circumstances under which they were
made, not misleading, except that the representations and warranties set forth
in this paragraph (c) do not apply to statements or omissions in any preliminary
prospectus based upon information relating to any Underwriter furnished to the
Company in writing by such Underwriter through you expressly for use therein.
(d) Each of the Company and its subsidiaries has been duly incorporated, is
validly existing as a corporation in good standing under the laws of its
jurisdiction of incorporation and has the corporate power and authority to carry
on its business as described in the Prospectus and to own, lease and operate its
properties, and each is duly qualified and is in good standing as a foreign
corporation authorized to do business in each jurisdiction in which the nature
of its business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not have a
material adverse effect on the business, prospects, financial condition or
results of operations of the Company and its subsidiaries, taken as a whole.
(e) There are no outstanding subscriptions, rights, warrants, options,
calls, convertible securities, commitments of sale or liens granted or issued by
the Company or any of its subsidiaries relating to or entitling any person to
purchase or otherwise to acquire any shares of the capital stock of the Company
or any of its subsidiaries, except as otherwise disclosed in the Registration
Statement and except for additional stock options that may be granted after the
date hereof pursuant to the Company's existing stock option and purchase plans.
(f) All the outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights; and the Shares have been duly
authorized and,
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when issued and delivered to the Underwriters against payment therefor as
provided by this Agreement, will be validly issued, fully paid and
non-assessable, and the issuance of such Shares will not be subject to any
preemptive or similar rights.
(g) All of the outstanding shares of capital stock of each of the Company's
subsidiaries have been duly authorized and validly issued and are fully paid and
non-assessable, and are owned by the Company, free and clear of any security
interest, claim, lien, encumbrance or adverse interest of any nature, except as
otherwise disclosed in the Registration Statement.
(h) The authorized capital stock of the Company conforms in all material
respects as to legal matters to the description thereof contained in the
Prospectus.
(i) Neither the Company nor any of its subsidiaries is in violation of its
respective charter or by-laws or in default in the performance of any
obligation, agreement, covenant or condition contained in any indenture, loan
agreement, mortgage, lease or other agreement or instrument that is material to
the Company and its subsidiaries, taken as a whole, to which the Company or any
of its subsidiaries is a party or by which the Company or any of its
subsidiaries or their respective property is bound.
(j) The execution, delivery and performance of this Agreement by the
Company, compliance by the Company with all the provisions hereof and the
consummation by the Company of the transactions contemplated hereby will not
require any consent, approval, authorization or other order of, or qualification
with, any court or governmental body or agency (except such as may be required
under the securities or Blue Sky laws of the various states) and will not
conflict with or constitute a breach of any of the terms or provisions of, or a
default under the Act and the charter or by-laws of the Company or any of its
subsidiaries or any indenture, loan agreement, mortgage, lease or other
agreement or instrument that is material to the Company and its subsidiaries,
taken as a whole, to which the Company or any of its subsidiaries is a party or
by which the Company or any of its subsidiaries or their respective property is
bound, or violate or conflict with any applicable law or any rule, regulation,
judgment, order or decree of any court or any governmental body or agency having
jurisdiction over the Company, any of its subsidiaries or their respective
property.
(k) There are no legal or governmental proceedings pending or, to the
Company's knowledge, threatened to which the Company or any of its subsidiaries
is or, to the Company's knowledge, could be a party or to which any of their
respective property is or, to the Company's knowledge, could be subject that are
required to be described in the Registration Statement or the Prospectus and are
not so described; nor are there any statutes, regulations, contracts or other
documents that are required
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to be described in the Registration Statement or the Prospectus or to be filed
as exhibits to the Registration Statement that are not so described or filed as
required.
(l) Neither the Company nor any of its subsidiaries has violated any
foreign, federal, state or local law or regulation relating to the protection of
human health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws") or any provisions of
the Employee Retirement Income Security Act of 1974, as amended, or the rules
and regulations promulgated thereunder, except for such violations which, singly
or in the aggregate, would not have a material adverse effect on the business,
prospects, financial condition or results of operation of the Company and its
subsidiaries, taken as a whole.
(m) Each of the Company and its subsidiaries has such permits, licenses,
franchises and authorizations of governmental or regulatory authorities
("permits"), including, without limitation, under any applicable Environmental
Laws, as are necessary to own, lease and operate its respective properties and
to conduct its business and is in compliance with all terms and conditions
thereof; and no event has occurred which allows or, after notice or lapse of
time or both, would allow, revocation or termination of such permits or results
or, after notice or lapse of time or both, would result in any other impairment
of the rights of the holder of any such permit; and such permits contain no
restrictions that are burdensome to the Company or any of its subsidiaries;
except where (i) such failure to have, or comply with the terms or conditions
of, such permits, (ii) the occurrence of any such event or (iii) the presence of
any such restriction would not, singly or in the aggregate, have a material
adverse effect on the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole.
(n) There are no assessed costs or liabilities associated with
Environmental Laws (including, without limitation, any capital or operating
expenditures required for clean-up, closure of properties or compliance with
Environmental Laws or any permit, license or approval, any related constraints
on operating activities and any potential liabilities to third parties) which
would, singly or in the aggregate, have a material adverse effect on the
business, prospects, financial condition or results of operations of the Company
and its subsidiaries, taken as a whole.
(o) This Agreement has been duly authorized, executed and delivered by the
Company.
(p) Coopers & Lybrand L.L.P. is the independent public accountant with
respect to the Company and its subsidiaries as required by the Act.
(q) The financial statements, together with related schedules and notes
forming part of the Registration Statement and the Prospectus (and any amendment
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or supplement thereto), present fairly the consolidated financial position,
results of operations and changes in financial position of the Company and its
subsidiaries on the basis stated in the Registration Statement at the respective
dates or for the respective periods to which they apply; such statements and
related schedules and notes have been prepared in accordance with generally
accepted accounting principles consistently applied throughout the periods
involved, except as disclosed therein; and the other financial and statistical
information and data set forth in the Registration Statement and the Prospectus
(and any amendment or supplement thereto) is, in all material respects,
accurately presented and prepared on a basis consistent with such financial
statements and the books and records of the Company.
(r) The Company is not and, after giving effect to the offering and sale of
the Shares and the application of the proceeds thereof as described in the
Prospectus, will not be, an "investment company" as such term is defined in the
Investment Company Act of 1940, as amended.
(s) Except as are described in the Prospectus, and as have been waived with
respect to the issuance and sale of Firm Shares and the Additional Shares, there
are no contracts, agreements or understandings between the Company and any
person granting such person the right to require the Company to file a
registration statement under the Act with respect to any securities of the
Company or to require the Company to include such securities with the Shares
registered pursuant to the Registration Statement.
(t) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there has not occurred any material adverse change or any development involving
a prospective material adverse change in the condition, financial or otherwise,
or the earnings, business, management or operations of the Company and its
subsidiaries, taken as a whole, (ii) there has not been any material adverse
change or any development involving a prospective material adverse change in the
capital stock or in the long-term debt of the Company or any of its subsidiaries
and (iii) neither the Company nor any of its subsidiaries has incurred any
material liability or obligation, direct or contingent.
(u) The Company has complied in all material respects with all provisions
of Section 517.075, Florida Statutes (Chapter 92-198, Laws of Florida).
(v) The Company and its subsidiaries have good and marketable title to all
personal property owned by them which is material to the business of the Company
and its subsidiaries, in each case free and clear of all liens, encumbrances and
defects except such as are described in the Prospectus or such as do not
materially affect the value of such property and do not interfere with the use
made and proposed to be
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made of such property by the Company and its subsidiaries; and any real property
and buildings held under lease by the Company and its subsidiaries are held by
them under valid, subsisting and enforceable leases with such exceptions as are
not material and do not interfere with the use made and proposed to be made of
such property and buildings by the Company and its subsidiaries, in each case
except as described in the Prospectus.
(w) The Company and its subsidiaries own, possess, or have rights to use
all patents, patent rights, licenses, inventions, copyrights, know-how
(including trade secrets and other unpatented and/or unpatentable proprietary or
confidential information, systems or procedures), trademarks, service marks and
trade names ("intellectual property") necessary for the conduct of the business
as now operated by them except where the failure to own, possess or have rights
to use such intellectual property would not, singly or in the aggregate, have a
material adverse effect on the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a whole; and
neither the Company nor any of its subsidiaries has received any notice of
infringement of or conflict with asserted rights of others with respect to any
of such intellectual property which, singly or in the aggregate, if the subject
of an unfavorable decision, ruling or finding, would have a material adverse
effect on the business, prospects, financial condition or results of operations
of the Company and its subsidiaries, taken as a whole.
(x) The Company and each of it subsidiaries are insured by insurers of
recognized financial responsibility against such losses and risks and in such
amounts as are prudent and customary in the business in which they are engaged;
and neither the Company nor any of its subsidiaries has any reason to believe
that it will not be able to renew its existing insurance coverage as and when
such coverage expires or to obtain similar coverage from similar insurers at a
cost that would not have a material adverse effect on the business, prospects,
financial conditions or results of operations of the Company and its
subsidiaries, taken as a whole.
(y) No relationship, direct or indirect, exists between or among the
Company or any of its subsidiaries on the one hand, and the directors, officers,
stockholders, customers or suppliers of the Company or any of its subsidiaries
on the other hand, which is required by the Act to be described in the
Registration Statement or the Prospectus which is not so described.
(z) The Company and each of its subsidiaries maintains a system of internal
accounting controls sufficient to provide reasonable assurance that (i)
transactions are executed in accordance with management's general or specific
authorization; (ii) transactions are recorded as necessary to permit preparation
of financial statements in conformity with generally accepted accounting
principles and to maintain asset accountability; (iii) access to assets is
permitted only in accordance with management's general or specific authorization
and (iv) the recorded accountability
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for assets is compared with the existing assets at reasonable intervals and
appropriate action is taken with respect to any differences.
(aa) All material tax returns required to be filed by the Company and each
of its subsidiaries in any jurisdiction have been filed, other than those
filings being contested in good faith, and all material taxes, including
withholding taxes, penalties and interest, assessments, fees and other charges
due pursuant to such returns or pursuant to any assessment received by the
Company or any of its subsidiaries have been paid, other than those being
contested in good faith and for which adequate reserves have been provided.
(bb) The dividend by the Company of shares of common stock of Marcam
Solutions, Inc. ("Marcam Solutions") contemplated by the Distribution Agreement
dated as of July 17, 1997 by and between the Company and Marcam Solutions (the
"Distribution Agreement") has been declared by the Company. Each of the
Distribution Agreement, the General Services Agreement between the Company and
Marcam Solutions (the "Services Agreement"), and the Tax Sharing Agreement
between Marcam Solutions and the Company (all of the foregoing agreements being
referred to herein as the "Inter-corporate Agreements") has been duly and
validly authorized, executed and delivered by the Company and Marcam Solutions
and is the valid and binding agreement of the Company and Marcam Solutions
enforceable in accordance with its terms, except as provided by bankruptcy,
insolvency, reorganization or other similar laws affecting creditors' rights
generally and subject to general principles of equity (regardless of whether
enforcement is considered in a proceeding in equity or at law) (collectively,
"applicable bankruptcy laws").
SECTION 7. Indemnification.
(a) The Company agrees to indemnify and hold harmless each Underwriter, its
directors, its officers and each person, if any, who controls any Underwriter
within the meaning of Section 15 of the Act or Section 20 of the Exchange Act,
from and against any and all losses, claims, damages, liabilities and judgments
(including, without limitation, any reasonable legal or other expenses
reasonably incurred in connection with defending or investigating any matter,
including any action, that could give rise to any such losses, claims, damages,
liabilities or judgments) caused by any untrue statement or alleged untrue
statement of a material fact contained in the Registration Statement (or any
amendment thereto), the Prospectus (or any amendment or supplement thereto) or
any preliminary prospectus, or caused by any omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to any Underwriter furnished in writing to the Company by such Underwriter
through you expressly for use therein ; provided, however, that the
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foregoing indemnity agreement with respect to any preliminary prospectus shall
not insure to the benefit of any Underwriter from whom the person asserting any
such losses, claims, damages and liabilities and judgments purchased Shares, or
any person controlling such Underwriter, if a copy of the Prospectus (as then
amended or supplemented if the Company shall have furnished any amendments or
supplements thereto) was not sent or given by or on behalf of such Underwriter
to such person at or prior to the written confirmation of the sale of the Shares
to such person, and if the Prospectus (as so amended and supplemented) would
have cured the defect giving rise to such loss, claim, damage, liability or
judgment.
(b) Each Underwriter agrees, severally and not jointly, to indemnify and
hold harmless the Company, its directors, its officers who sign the Registration
Statement and any person controlling the Company within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, to the same extent as the
foregoing indemnity from the Company to such Underwriter but only with reference
to information relating to such Underwriter furnished in writing to the Company
by such Underwriter through you expressly for use in the Registration Statement
(or any amendment thereto), the Prospectus (or any amendment or supplement
thereto) or any preliminary prospectus.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to paragraph (a) or (b) of this
Section 7 (the "indemnified party"), the indemnified party shall promptly notify
the person against whom such indemnity may be sought (the "indemnifying party")
in writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both paragraphs (a) and (b) of this Section 7, the
Underwriter shall not be required to assume the defense of such action pursuant
to this paragraph (c), but may employ separate counsel and participate in the
defense thereof, but the fees and expenses of such counsel, except as provided
below, shall be at the expense of such Underwriter). Any indemnified party shall
have the right to employ separate counsel in any such action and participate in
the defense thereof, but the fees and expenses of such counsel shall be at the
expense of the indemnified party unless (i) the employment of such counsel shall
have been specifically authorized in writing by the indemnifying party, (ii) the
indemnifying party shall have failed to assume the defense of such action or
(iii) the named parties to any such action (including any impleaded parties)
include both the indemnified party and the indemnifying party, and the
indemnified party shall have been advised by such counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the indemnifying party (in which case the indemnifying party
shall not have the right to assume the defense of such action on behalf of the
indemnified party). In any such case, the indemnifying party shall not, in
connection with any one action or separate
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but substantially similar or related actions in the same jurisdiction arising
out of the same general allegations or circumstances, be liable for the fees and
expenses of more than one separate firm of attorneys (in addition to any local
counsel) for all indemnified parties and all such fees and expenses shall be
reimbursed as they are incurred. Such firm shall be designated in writing by
Donaldson, Lufkin & Jenrette Securities Corporation, in the case of parties
indemnified pursuant to paragraph (a) of this Section 7, and by the Company, in
the case of parties indemnified pursuant to paragraph (b) of this Section 7. The
indemnifying party shall indemnify and hold harmless the indemnified party from
and against any and all losses, claims, damages, liabilities and judgments by
reason of any settlement of any action effected with its prior written consent.
No indemnifying party shall, without the prior written consent of the
indemnified party, effect any settlement or compromise of, or consent to the
entry of judgment with respect to, any pending or threatened action in respect
of which the indemnified party is or could have been a party and indemnity or
contribution may be or could have been sought hereunder by the indemnified
party, unless such settlement, compromise or judgment (i) includes an
unconditional release of the indemnified party from all liability on claims that
are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent the indemnification provided for in this Section 7 is
unavailable to an indemnified party or insufficient in respect of any losses,
claims, damages, liabilities or judgments referred to therein, then each
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses, claims, damages, liabilities and judgments (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the Underwriters on the other hand from the offering
of the Shares or (ii) if the allocation provided by clause (i) above is not
permitted by applicable law, in such proportion as is appropriate to reflect not
only the relative benefits referred to in clause (i) above but also the relative
fault of the Company and the Underwriters in connection with the statements or
omissions which resulted in such losses, claims, damages, liabilities or
judgments, as well as any other relevant equitable considerations. The relative
benefits received by the Company and the Underwriters shall be deemed to be in
the same proportion as the total net proceeds from the offering (before
deducting expenses) received by the Company, and the total underwriting
discounts and commissions received by the Underwriters, bear to the total price
to the public of the Shares, in each case as set forth in the table on the cover
page of the Prospectus. The relative fault of the Company and the Underwriters
shall be determined by reference to, among other things, whether the untrue or
alleged untrue statement of a material fact or the omission or alleged omission
to state a material fact relates to information supplied by the Company or the
Underwriters and the parties' relative intent, knowledge,
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access to information and opportunity to correct or prevent such statement or
omission.
The Company and the Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7(d) were determined by pro
rata allocation (even if the Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses incurred by such indemnified party in
connection with investigating or defending any matter that could have given rise
to such losses, claims, damages, liabilities or judgments. Notwithstanding the
provisions of this Section 7, no Underwriter shall be required to contribute any
amount in excess of the amount by which the total price at which the Shares
underwritten by it and distributed to the public were offered to the public
exceeds the amount of any damages which such Underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or omission
or alleged omission. No person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation. The
Underwriters' obligations to contribute pursuant to this Section 7(d) are
several in proportion to the respective number of Shares purchased by each of
the Underwriters hereunder and not joint.
(e) The remedies provided for in this Section 7 are not exclusive and shall
not limit any rights or remedies which may otherwise be available to any
indemnified party at law or in equity.
SECTION 8. Conditions of Underwriters' Obligations. The several obligations
of the Underwriters to purchase the Firm Shares under this Agreement are subject
to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in this
Agreement shall be true and correct on the Closing Date with the same force and
effect as if made on and as of the Closing Date.
(b) If the Company is required to file a Rule 462(b) Registration Statement
after the effectiveness of this Agreement, such Rule 462(b) Registration
Statement shall have become effective by 10:00 P.M., New York City time, on the
date of this Agreement; and no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been commenced or shall be pending before or contemplated by
the Commission.
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(c) You shall have received on the Closing Date a certificate dated the
Closing Date, signed by Michael J. Quinlan and George A. Chamberlain, 3d, in
their capacities as the President and Chief Financial Officer, respectively, of
the Company, confirming the matters set forth in paragraphs (a) and (b) of this
Section 8.
(d) Since the respective dates as of which information is given in the
Prospectus other than as set forth in the Prospectus (exclusive of any
amendments or supplements thereto subsequent to the date of this Agreement), (i)
there shall not have occurred any change or any development involving a
prospective change in the condition, financial or otherwise, or the earnings,
business, management or operations of the Company and its subsidiaries, taken as
a whole, (ii) there shall not have been any change or any development involving
a prospective change in the capital stock or in the long-term debt of the
Company or any of its subsidiaries and (iii) neither the Company nor any of its
subsidiaries shall have incurred any liability or obligation, direct or
contingent, the effect of which, in any such case described in clause (i), (ii)
or (iii) is material and adverse and makes it impracticable to market the Shares
on the terms and in the manner contemplated in the Prospectus.
(e) You shall have received on the Closing Date an opinion (satisfactory to
you), dated the Closing Date, of Testa Hurwitz & Thibeault, L.L.P., counsel for
the Company, to the effect that:
(i) the Company has been duly incorporated, is validly existing as a
corporation in good standing under the laws of its jurisdiction of
incorporation and has the corporate power and authority to carry on
its business as described in the Prospectus and to own, lease and
operate its properties;
(ii) the Company is duly qualified and is in good standing as a foreign
corporation authorized to do business in [specify states in which the
Company is qualified;]
(iii) all the outstanding shares of capital stock of the Company have been
duly authorized and validly issued and are fully paid, non-assessable
and not subject to any preemptive or similar rights;
(iv) the Shares have been duly authorized and, when issued and delivered to
the Underwriters against payment therefor as provided by this
Agreement, will be validly issued, fully paid and non-assessable, and
the issuance of such Shares will not be subject to any preemptive or
similar rights;
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(v) this Agreement has been duly authorized, executed and delivered by the
Company;
(vi) the authorized capital stock of the Company consists of: (A)
50,000,000 shares of common stock, par value $.01 per share, of which
_______________ shares were issued and outstanding as of a recent
date, and (B) 1,000,000 shares of preferred stock, par value $1.00 per
share, of which (1) one share has been designated as Series A
Preferred Stock, of which no shares are issued and outstanding, (2)
one share has been designated as Series B Preferred Stock, of which no
shares are issued and outstanding, (3) one share has been designated
as Series C Preferred Stock, of which no shares are issued or
outstanding, (4) 225,000 shares have been designated as Series D
Convertible Preferred Stock, of which 225,000 are issued and
outstanding, (5) 100,000 shares have been designated as Series E
Convertible Preferred Stock, of which 100,000 are issued and
outstanding, and (6) 30,000 shares have been designated as Series F
Junior Participating Preferred Stock, of which no shares are issued
and outstanding.
(vii) the Registration Statement has become effective under the Act, to
such counsel's knowledge, no stop order suspending its effectiveness
has been issued and, to such counsel's knowledge, no proceedings for
that purpose are pending before or contemplated by the Commission;
(viii) the statements under the captions "Risk Factors--Shares Eligible for
Future Sale; Registration Rights", "Risk Factors--Anti-Takeover
Provisions; Rights Plan; Issuance of Preferred Stock", "Description of
Capital Stock" and "Underwriting" in the Prospectus, insofar as such
statements purport to summarize legal matters or provisions of
documents referred to therein, present fair summaries of such legal
matters or provisions in all material respects;
(ix) the execution, delivery and performance of this Agreement by the
Company, compliance by the Company with all the provisions hereof and
the consummation by the Company of the transactions contemplated
hereby (a) will not require any consent, approval, authorization or
other order of, or qualification with, any court or governmental body
or agency, except such as may be required under the Act and such as
may be required under the securities or Blue Sky laws of the various
states (as to which such counsel need express no opinion), and (b)
will not conflict with or
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constitute a breach of any of the terms or provisions of, or a default
under, the charter or by-laws of the Company or any material agreement
filed as an exhibit to the Registration Statement to which the Company
or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries or their respective property is bound, and (c)
will not violate or conflict with any applicable law or any rule,
regulation, or any judgment, order or decree known to such counsel of
any court or any governmental body or agency having jurisdiction over
the Company, any of its subsidiaries or their respective property;
(x) such counsel does not know of any legal or governmental proceedings
pending or threatened against the Company that are required to be
described in the Registration Statement or the Prospectus and are not
so described, or of any statutes, regulations, contracts or other
documents that are required to be described in the Registration
Statement or the Prospectus or to be filed as exhibits to the
Registration Statement that are not so described or filed as required;
(xi) the Company is not and, after giving effect to the offering and sale
of the Shares and the application of the proceeds thereof as described
in the Prospectus, will not be, an "investment company" as such term
is defined in the Investment Company Act of 1940, as amended;
(xii) Each of the Inter-corporate Agreements has been duly authorized,
executed and delivered by the Company and Marcam Solutions.
(xiii) (A) each document, if any, filed pursuant to the Exchange Act and
incorporated by reference in the Registration Statement and the
Prospectus (except for financial statements, financial statement
schedules and other
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financial and statistical data included therein as to which no opinion
need be expressed) when so filed complied as to form in all material
respects with the requirements of the Exchange Act, (B) the
Registration Statement and the Prospectus and any supplement or
amendment thereto (except for the financial statements, financial
statement schedules and other financial and statistical data included
or incorporated by reference therein as to which no opinion need be
expressed) comply as to form in all material respects with the
requirements of the Act, (C) (C) nothing has come to such counsel's
attention that would lead such counsel to believe that the
Registration Statement (except for financial statements, financial
statement schedules and other financial and statistical data included
or incorporated by reference therein, as to which such counsel need
make no statement), at the time it became effective, contained an
untrue statement of a material fact or omitted to state a material
fact required to be stated therein or necessary in order to make the
statements therein not misleading, and (D) nothing has come to such
counsel's attention that would lead such counsel to believe that the
prospectus (except for financial statements, financial statement
schedules and other financial and statistical data included or
incorporated by reference therein, as to which such counsel need make
no statement), as of the date of such Prospectus or at the Closing
Date, included or includes an untrue statement of a material fact or
omitted or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances under which
they were made, not misleading.
In giving such opinions with respect to the matters covered by clause
(xiii) of paragraph (f) above, Testa, Hurwitz & Thibeault, L.L.P. may state that
their opinion and belief are based upon their participation in the preparation
of the Registration Statement and Prospectus and any amendments or supplements
thereto and documents incorporated therein by reference and review and
discussion of the contents thereof, but is without independent check or
verification except as specified.
The opinion of Testa, Hurwitz & Thibeault, L.L.P. described in paragraph
(f) above shall be rendered to you at the request of the Company and shall so
state therein.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Hale and Dorr LLP, counsel for the Underwriters, as to the
matters referred to in clauses (iv), (vi), (ix) (but only with respect to the
statements under the caption "Description of Capital Stock" and "Underwriting")
and subclauses (B), (C) and (D) of (xiii) of the foregoing paragraph (f).
In giving such opinions with respect to the matters covered by subclause
(B), (C) and (D) of clause (xiii) of paragraph (f) above, Hale and Dorr LLP may
state that their opinion and belief are based upon their participation in the
preparation of the Registration Statement and Prospectus and any amendments or
supplements thereto (other that the documents incorporated therein by reference)
and review and discussion of the contents thereof (including the documents
incorporated therein by reference), but are without independent check or
verification except as specified.
(g) You shall have received, on each of the date hereof and the Closing
Date, a letter dated the date hereof or the Closing Date, respectively, in form
and substance satisfactory to you, from Coopers & Lybrand L.L.P., independent
public
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<PAGE>
accountants, containing the information and statements of the type ordinarily
included in accountants' "comfort letters" to Underwriters with respect to the
financial statements and certain financial information contained in or
incorporated by reference into the Registration Statement and the Prospectus.
(h) The Company shall have delivered to you the agreements specified in
Section 2 hereof which agreements shall be in full force and effect on the
Closing Date.
(i) The Shares shall have been listed for quotation on the Nasdaq National
Market.
(j) The Company shall not have failed at or prior to the Closing Date to
perform or comply with any of the agreements herein contained and required to be
performed or complied with by the Company at or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Additional
Shares hereunder are subject to the delivery to you on the applicable Option
Closing Date of such documents as you may reasonably request with respect to the
good standing of the Company, the due authorization and issuance of such
Additional Shares and other matters related to the issuance of such Additional
Shares.
SECTION 9. Effectiveness of Agreement and Termination. This Agreement shall
become effective upon the execution and delivery of this Agreement by the
parties hereto.
This Agreement may be terminated at any time prior to the Closing Date by
you by written notice to the Company if any of the following has occurred: (i)
any outbreak or escalation of hostilities or other national or international
calamity or crisis or change in economic conditions or in the financial markets
of the United States or elsewhere that, in your judgment, is material and
adverse and would, in your judgment, make it impracticable to market the Shares
on the terms and in the manner contemplated in the Prospectus, (ii) the
suspension or material limitation of trading in securities on the New York Stock
Exchange, the American Stock Exchange, the Chicago Board of Options Exchange,
the Chicago Mercantile Exchange, the Chicago Board of Trade or the Nasdaq
National Market or limitation on prices for securities on any such exchange or
the Nasdaq National Market, (iii) the suspension of trading of any securities of
the Company on any exchange or in the over-the-counter market, (iv) the
enactment, publication, decree or other promulgation of any federal or state
statute, regulation, rule or order of any court or other governmental authority
which in your opinion materially and adversely affects, or will materially and
adversely affect, the business, prospects, financial condition or results of
operations of the Company and its subsidiaries, taken as a whole, (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any
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<PAGE>
action by any federal, state or local government or agency in respect of its
monetary or fiscal affairs which in your opinion has a material adverse effect
on the financial markets in the United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it or they have agreed to
purchase hereunder on such date and the aggregate number of Firm Shares or
Additional Shares, as the case may be, which such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase is
not more than one-tenth of the total number of Shares to be purchased on such
date by all Underwriters, each non-defaulting Underwriter shall be obligated
severally, in the proportion which the number of Firm Shares set forth opposite
its name in Schedule I bears to the total number of Firm Shares which all the
non-defaulting Underwriters, as the case may be, have agreed to purchase, or in
such other proportion as you may specify, to purchase the Firm Shares or
Additional Shares, as the case may be, which such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase on
such date; provided that in no event shall the number of Firm Shares or
Additional Shares, as the case may be, which any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 9 by
an amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares to be purchased by all Underwriters and arrangements satisfactory to you
and the Company for purchase of such Firm Shares are not made within 48 hours
after such default, this Agreement will terminate without liability on the part
of any non-defaulting Underwriter and the Company. In any such case which does
not result in termination of this Agreement, either you or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. If, on an Option Closing Date, any Underwriter or Underwriters shall
fail or refuse to purchase Additional Shares and the aggregate number of
Additional Shares with respect to which such default occurs is more than
one-tenth of the aggregate number of Additional Shares to be purchased on such
date, the non-defaulting Underwriters shall have the option to (i) terminate
their obligation hereunder to purchase such Additional Shares or (ii) purchase
not less than the number of Additional Shares that such non-defaulting
Underwriters would have been obligated to purchase on such date in the absence
of such default. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of any such
Underwriter under this Agreement.
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<PAGE>
SECTION 10. Miscellaneous. Notices given pursuant to any provision of this
Agreement shall be addressed as follows: (a) if to the Company, to MAPICS, Inc.,
5775-D Glenridge Drive, Atlanta, Georgia 30328 and (b) if to any Underwriter or
to you, to you c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277 Park
Avenue, New York, New York 10172, Attention: Syndicate Department, or in any
case to such other address as the person to be notified may have requested in
writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Company and the several Underwriters set
forth in or made pursuant to this Agreement shall remain operative and in full
force and effect, and will survive delivery of and payment for the Shares,
regardless of (i) any investigation, or statement as to the results thereof,
made by or on behalf of any Underwriter, the officers or directors of any
Underwriter, any person controlling any Underwriter, the Company, the officers
or directors of the Company or any person controlling the Company, (ii)
acceptance of the Shares and payment for them hereunder and (iii) termination of
this Agreement.
If for any reason the Shares are not delivered by or on behalf of the
Company as provided herein (other than as a result of any termination of this
Agreement pursuant to Section 9), the Company agrees to reimburse the several
Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Company, the Underwriters, the
Underwriters' directors and officers, any controlling persons referred to
herein, the Company's directors and the Company's officers who sign the
Registration Statement and their respective successors and assigns, all as and
to the extent provided in this Agreement, and no other person shall acquire or
have any right under or by virtue of this Agreement. The term "successors and
assigns" shall not include a purchaser of any of the Shares from any of the
several Underwriters merely because of such purchase.
This Agreement shall be governed and construed in accordance with the laws
of the State of TH&T not qualified to give a NY law opinion. Will assume NY Law
identical to MA Law in our opinion.
This Agreement may be signed in various counterparts which together shall
constitute one and the same instrument.
-23-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement
between the Company and the several Underwriters.
Very truly yours,
MAPICS, INC.
By: ___________________________
Title:
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
LAZARD FRERES & Co. LLC
DAIN BOSWORTH INCORPORATED
Acting severally on behalf of themselves
and the several Underwriters named
in Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By ____________________________________
-24-
<PAGE>
SCHEDULE I
----------
Number of Firm Shares
Underwriters to be Purchased
Donaldson, Lufkin & Jenrette Securities
Corporation
Lazard Freres & Co. LLC
Dain Bosworth Incorporated
----------------
Total
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<PAGE>
Annex I
General Atlantic Partners, LLC
General Atlantic Partners 21, L.P.
GAP Coinvestment Partners, L.P.
General Atlantic Partners 32, L.P.
Richard C. Cook
William J. Gilmour
Thomas F. Aery
George A. Chamberlain
William E. Ford
July 28,1997
Marcam Corporation
95 Wells Avenue
Newton, MA 02159
Re: S-3 Registration Statement
--------------------------
Ladies and Gentlemen:
We are acting as counsel to Marcam Corporation, a Massachusetts corporation
(the "Company"), in connection with the registration on a Registration Statement
on Form S-3 (the "Registration Statement") under the Securities Act of 1933 for
the offer and sale by the Company to the public of up to 6,900,000 shares of the
Common Stock, par value $.01 per share (the "Common Stock"), of the Company (the
"Shares").
The Shares consist of 6,000,000 shares of Common Stock being sold by the
Company and an additional 900,000 shares of Common Stock subject to an
over-allotment option granted by the Company to the underwriters named in the
prospectus included in the Registration Statement (the "Prospectus").
We have examined such documents, records and matters of law as we have
deemed necessary for this opinion.
We are members only of the Bar of the Commonwealth of Massachusetts and are
not experts in, and express no opinion regarding, the laws of any jurisdiction
other than the Commonwealth of Massachusetts and the United States of America.
Based upon and subject to the foregoing, we are of the opinion that the
Shares to be issued have been duly authorized and, when issued and paid for in
accordance with the terms described in the Prospectus, will be validly issued,
fully paid and nonassessable.
We hereby consent to the filing of this opinion as Exhibit 5 to the
Registration Statement and to the reference to our firm in the Prospectus
contained in the Registration Statement under the caption "Legal Matters."
Very truly yours,
/s/ TESTA, HURWITZ & THIBEAULT, LLP
-----------------------------------
TESTA, HURWITZ & THIBEAULT, LLP
PROMISSORY NOTE
---------------
$64,000,000 Dated as of July 25, 1997
FOR VALUE RECEIVED, the undersigned, MARCAM CORPORATION, a Massachusetts
corporation (the "Borrower"), having its principal place of business at 95 Wells
Avenue, Newton, Massachusetts, by this promissory note (hereinafter called "this
Note"), absolutely and unconditionally promises to pay to the order of
BANKBOSTON, N.A., a national banking association organized and existing under
the laws of The United States of America (hereinafter, together with its
successors in title and assigns, called the "Lender"), at the Lender's Head
Office (as hereinafter defined), on or before August 4, 1997 (the "Maturity
Date"), the principal sum of SIXTY FOUR MILLION DOLLARS ($64,000,000), or so
much thereof as shall have been advanced by the Lender to the Borrower by way of
loans under this Note and shall remain outstanding, and to pay interest on the
principal sum outstanding hereunder from time to time from the date hereof until
the said principal sum or the unpaid portion thereof shall have become due and
payable as hereinafter provided. This Note evidences, among other things, the
obligation of the Borrower to repay loans made hereunder by the Lender to the
Borrower.
From time to time prior to the Maturity Date, the Lender may, at its sole
discretion, make loans to the Borrower subsequent to the date hereof, provided
that the aggregate principal amount of all loans outstanding hereunder shall in
no event exceed sixty four million dollars ($64,000,000). All loans made by the
Lender to the Borrower pursuant to this Note and all repayments of principal
made hereunder shall be recorded by the Lender on the schedule annexed hereto.
The entire unpaid principal (not at the time overdue) of this Note
outstanding shall bear interest at an annual rate which shall at all times be
equal to one-half of one percent (1/2%) above the Base Rate (as hereinafter
defined) in effect from time to time during the period beginning on the date
hereof and ending on the date on which the entire unpaid principal amount of
this Note shall be paid in full.
On the Maturity Date, there shall become absolutely due and payable
hereunder, and the Borrower hereby promises to pay to the holder hereof, all of
the unpaid interest accrued to the date of payment on the unpaid principal
hereof not at the time overdue.
On the Maturity Date, there shall become absolutely due and payable by the
Borrower hereunder, and the Borrower hereby promises to pay to the holder
hereof, the balance (if any) of the principal hereof then remaining unpaid, all
of the unpaid interest accrued hereon and all (if any) other amounts payable on
or in respect of this Note or the indebtedness evidenced hereby.
Each overdue amount (whether of principal, interest or otherwise) payable
on or in respect of this Note or the indebtedness evidenced hereby shall (to the
extent permitted by
<PAGE>
-2-
applicable law) bear interest, from the date on which such amount shall have
first become due and payable in accordance with the terms hereof to the date on
which such amount shall be paid to the holder of this Note (whether before or
after judgment), at the annual rate of interest which shall (to the extent
permitted by applicable law) at all times be two percent (2%) above the Base
Rate (as hereinafter defined) in effect from time to time. The unpaid interest
accrued on each overdue amount in accordance with the foregoing terms of this
paragraph shall become absolutely due and payable by the Borrower to the holder
hereof on demand by the holder of this Note at any time. Interest on each
overdue amount will continue to accrue, as provided by the foregoing terms of
this paragraph, and will (to the extent permitted by applicable law) be
compounded monthly until the obligations of the Borrowers in respect of the
payment of such overdue amount shall be discharged (whether before or after
judgment).
The Borrower absolutely and unconditionally agrees to reimburse the Lender,
on demand, whether or not all or any of the transactions contemplated by the
Note are ultimately consummated, for all its reasonable out-of-pocket expenses,
including but not limited to (a) the attorney's fees and disbursements of the
Lender's Special Counsel (as hereinafter defined) and disbursements, reasonably
incurred or expended in connection with the preparation, negotiation and
interpretation of this Note or any ancillary documentation contemplated thereby,
or any amendment thereof, (b) all fees and disbursements incurred and expended
in connection with the making of loans, (c) all attorneys' fees reasonably
incurred relating to the enforcement of any obligations under this Note or the
satisfaction of any indebtedness of the Borrower hereunder, or in connection
with any litigation proceeding or dispute hereunder in any way related to the
credit hereunder, (d) any and all fees, costs and expenses reasonably incurred
in connection with any commercial finance examination of any of the Borrower
conducted by the Lender's examiners and (e) any and all fees, costs and expenses
reasonably incurred arising in connection with the perfection of a first
priority security interest in the Borrower's assets, whether now owned or
hereafter acquired.
Each payment of principal, interest or other sums payable on or in respect
of this Note or the indebtedness evidenced hereby shall be made by the Borrower
directly to the Lender in U.S. Dollars, for the account of the holder of this
Note, at the Lender's Head Office, not later than 11:00 a.m., Boston time, on
the due date of such payment, and in immediately available and freely
transferable funds.
All payments on or in respect of this Note or the indebtedness evidenced
hereby shall be made to the holder of this Note without set-off or counterclaim
and free and clear of and without any deduction of any kind for any taxes,
levies, fees, deductions, withholdings, restrictions or conditions of any
nature.
This Note evidences the obligations of the Borrower (a) to repay the
principal amount of all loans made by the Lender to the Borrower hereunder, (b)
to pay interest, as herein provided, on the principal amount hereof remaining
unpaid from time to time, and (c) to pay any fees, including, without
limitation, a closing fee of $164,000 payable to the Lender by not later than
July 25, 1997, or other amounts which may
<PAGE>
-3-
become due and payable hereunder as herein provided (the "Obligations"). The
payment of the principal of and the interest on this Note and the payment of all
(if any) other amounts which may become due and payable on or in respect of this
Note or the indebtedness evidenced hereby are secured by all assets of the
Borrower, whether now owned or hereafter acquired other than the capital stock
of Marcam Solutions, Inc. and assets of the Borrower to be distributed to Marcam
Solutions, Inc. pursuant to the Distribution Agreement dated July 17, 1997.
Reference is hereby made to a certain (a) Security Agreement dated as of the
date hereof between the Borrower and the Lender (as amended and in effect from
time to time, the "Security Agreement"), (b) the Trademark Collateral Security
and Pledge Agreement dated as of the date hereof by and between the Borrower and
the Lender (as amended and in effect from time to time, the "Trademark
Agreement") and (c) the Memorandum of Grant of Security Interest in Copyrights
dated as of the date hereof between the Borrower and the Lender (as amended and
in effect from time to time, the "Copyright Assignment"), for a description of
the collateral. All of the Obligations are secured by a perfected first priority
security interest in all presently owned and hereafter acquired personal
property and fixtures of the Borrower other than the capital stock of Marcam
Solutions, Inc. and assets of the Borrower to be distributed to Marcam
Solutions, Inc. pursuant to the Distribution Agreement dated July 17, 1997 (the
"Collateral").
No reference herein to any collateral for this Note shall impair the
obligations of the Borrower, which are absolute, unconditional and irrevocable,
to pay the principal of and the interest on this Note and to pay all (if any)
other amounts which may become due and payable on or in respect of this Note or
the indebtedness evidenced hereby, strictly in accordance with the terms and the
tenor of this Note.
The Bank hereby acknowledges and consents to the distribution of the
captial stock of Marcam Solutions, Inc. by the Borrower, and the transfer of
assets of the Borrower to Marcam Solutions, Inc., pursuant to the Distribution
Agreement.
For all purposes of this Note, the following terms shall have the
respective meanings set forth below:
(a) "Bankruptcy Event" means that the Borrower or any of its Subsidiaries
shall make an assignment for the benefit of creditors, or admit in writing its
inability to pay or generally fail to pay its debts as they mature or become
due, or shall petition or apply for the appointment of a trustee or other
custodian, liquidator or receiver of the Borrower or any of its Subsidiaries or
of any substantial part of the assets of the Borrower or any of its Subsidiaries
or shall commence any case or other proceeding relating to the Borrower or any
of its Subsidiaries under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction, now or hereafter in effect, or shall take any action to
authorize or in furtherance of any of the foregoing, or if any such petition or
application shall be filed or any such case or other proceeding shall be
commenced against the Borrower or any of its Subsidiaries and the Borrower or
any of its subsidiaries shall indicate its approval thereof, consent thereto or
acquiescence therein or such petition or application shall not have been
dismissed within forty-five days following the filing thereof; or a decree or
order is entered appointing any such trustee, custodian, liquidator or receiver
or adjudicating the Borrower or any of its Subsidiaries bankrupt or insolvent,
or approving a petition in any such case or other proceeding, or a decree or
order for relief is entered in respect of the Borrower or any
<PAGE>
-4-
Subsidiary of the Borrower in an involuntary case under federal bankruptcy laws
as now or hereafter constituted.
(b) "Base Rate" means the greater of (i) annual rate of interest from time
to time announced by BankBoston, N.A. at the Lender's Head Office as its base
rate or (ii) the rate equal to the weighted average of the published rates on
overnight Federal Funds transactions with members of the Federal Reserve System
plus 1/2%.
(c) "Business Day" means a day other than Saturday or Sunday on which banks
are open for business in Boston, Massachusetts.
(d) "Event of Default" means the occurrence of any of the following events:
(a) any failure by the Borrower to pay any installment of principal, interest or
any other amounts payable on or in respect of this Note or the indebtedness
evidenced hereby on or before the due date thereof; (b) if the Borrower shall
fail to perform any term, covenant or agreement herein contained or contained in
any of the Security Documents; (c) if the Company makes or made any
representation or warranty, statement or information in any documents or
financial statements delivered to the Lender for the purpose of inducing the
Lender to make or maintain the loan under this Note, and such representation,
warranty, statement or information is not true and correct in all material
respects when made; (d) if there occurs any event of default under any
instrument constituting, or under agreement relating to, Collateral, including
but not limited to the Security Documents; (e) if there occurs any material
adverse change in the condition (financial or otherwise) of the Company other
than the consummation of the distribution pursuant to the Distribution Agreement
which in the opinion of the Lender will materially impair its security or
materially increase its risk; and (f) the occurrence of any Bankruptcy Event.
(e) "holder" means the Lender in possession of this Note or any other
person who is at the time the lawful holder in possession of this Note.
(f) "Lender's Head Office" means the head office of the Lender located at
100 Federal Street, Boston, Massachusetts 02110.
(g) "Lender's Special Counsel" means Bingham, Dana & Gould LLP.
(h) "Security Documents" mean the Security Agreement, the Stock Pledge
Agreement, the Trademark Agreement and the Copyright Memorandum.
(i) "Subsidiary" means any corporation, association, trust or other
business entity of which the Borrower shall at any time own directly or
indirectly through a Subsidiary or Subsidiaries at least a majority (by number
of votes) of the outstanding Voting Stock.
(j) "Voting Stock" means stock or similar interests, of any class or
classes (however designated), the holders of which are at the time entitled, as
such holders, to vote for the election of a majority of the directors (or
persons performing similar functions) of the corporation, association, trust or
other business entity involved, whether or not the right so to vote exists by
reason of the happening of a contingency.
<PAGE>
-5-
The Borrower will have the right to prepay at any time the unpaid principal
of this Note in full or in part, without premium or penalty. There shall become
and be absolutely due and payable by the Borrower on the date of each prepayment
of principal of this Note, and the Borrower hereby promises to pay on the date
of each such prepayment of this Note, all of the unpaid interest accrued to such
date on the amount of principal of this Note being prepaid on such date.
Any partial payment of the indebtedness evidenced by this Note shall be
applied by the holder hereof (a) first, to the payment of all of the interest
due and payable on the unpaid principal of this Note at the time of such partial
payment, (b) then, to the payment of all (if any) other amounts (except
principal) due and payable at the time of such partial payment on or in respect
of this Note or the indebtedness evidenced by this Note, and (c) finally, to the
repayment or (as the case may be) the prepayment of the unpaid principal of this
Note due and payable at the time of such partial payment.
On the Maturity Date, the entire unpaid principal of this Note, all of the
interest accrued on the unpaid principal of this Note and all (if any) other
amounts payable on or in respect of this Note or the indebtedness evidenced
hereby (without regard to the length of any interest period in effect), the
entire unpaid principal of this Note, all of the interest accrued on the unpaid
principal of this Note and all (if any) other amounts payable on or in respect
of this Note or the indebtedness evidenced hereby (without regard to the length
of any interest period in effect), shall forthwith become and be due and payable
to the holder of this Note without presentment, further demand, protest, notice
of protest or any other formalities of any kind, all of which are hereby
expressly and irrevocably waived by the Borrower. In addition, upon the
occurrence of any Event of Default, the holder of this Note may, by notice to
the Borrower, declare this Note and all interest thereon to be forthwith due and
payable, whereupon this Note and all such interest and all such amounts shall
become and be forthwith due and payable, without presentment, demand, protest,
or further notice of any kind, all of which are hereby expressly waived by the
Borrower. No remedy herein conferred upon the Lender or the holder of this Note
is intended to be exclusive of any other remedy and each and every remedy shall
be cumulative and shall be in addition to every other remedy given hereunder or
now or hereafter existing at law or in equity or by statute or any other
provision of law.
All computations of interest payable as provided in this Note shall be made
by the holder hereof on the basis of the actual number of days elapsed divided
by 360. Any change in the Base Rate shall, for all purposes of this Note, become
effective on, and from the beginning of, the day on which such change shall
first be made public by the Lender in accordance with the Lender's usual
practice.
If any sum would, but for the provisions of this paragraph, become due and
payable on or in respect of this Note or the indebtedness evidenced hereby on a
day which is not a Business Day, then such sum shall become due and payable on
the Business Day next succeeding the day on which such sum would otherwise have
become due and payable hereunder, and interest payable hereunder to the holder
hereof shall be adjusted by the holder hereof accordingly.
<PAGE>
-6-
The failure of the holder of this Note to exercise all or any of its
rights, remedies, powers or privileges hereunder in any instance shall not
constitute a waiver thereof in that or in any other instance.
The Borrower hereby irrevocably waives notice of acceptance, presentment,
notice of nonpayment, protest, notice of protest, suit and all other conditions
precedent in connection with the delivery, acceptance, collection and/or
enforcement of this Note or any collateral or security therefor. The Borrower
hereby absolutely and irrevocably consents and submits to the jurisdiction of
the Courts of the Commonwealth of Massachusetts and of any Federal Court located
in the said Commonwealth in connection with any actions or proceedings brought
against the Borrower by the holder hereof arising out of or relating to this
Note.
The Borrower represents and warrants to the Lender that: (a) the Borrower
is a corporation duly organized, validly existing and in good standing under the
laws of Commonwealth of Massachusetts; (b) the Borrower has adequate corporate
power and authority and full legal right to carry on the business in which it is
presently engaged and will be engaged upon consummation of the transactions
contemplated hereby; and (c) all necessary corporate action has been taken to
execute and deliver this Note and the Security Documents and to make the
borrowings hereunder.
The Borrower hereby agrees, at the Borrower's own expense, to execute and
deliver, from time to time, any and all further, or other, instruments, and to
perform such acts, as the Lender may reasonably request to effect the
transactions contemplated by this Note and to provide to the Lender the benefits
of all rights, authorities and remedies conferred upon the Lender by the terms
of this Note.
The Borrower shall use the proceeds of the loans made by the Lender to the
Borrower pursuant to this Note (a) to capitalize the Borrower's subsidiary,
Marcam Solutions, Inc., in an amount of approximately $39,000,000 and (b) to
repay existing indebtedness of the Borrower or its subsidiaries, in an aggregate
principal amount of approximately $25,000,000.
This Note may be assigned by the Lender upon the prior written consent of
the Borrower, which consent shall not be unreasonably withheld.
This Note is intended to take effect as a sealed instrument. This Note and
the Obligations of the Borrower hereunder shall be governed by and interpreted
and determined in accordance with the laws of the Commonwealth of Massachusetts.
<PAGE>
-7-
IN WITNESS WHEREOF, this PROMISSORY NOTE has been duly executed by the
undersigned, MARCAM CORPORATION, as of the day and in the year first above
written.
The Borrower:
MARCAM CORPORATION
Witness: _____________________ By:_____________________________
July __, 1997 Title:____________________________
<PAGE>
-8-
ADVANCES AND REPAYMENTS OF PRINCIPAL
------------------------------------
Advances and payments of principal of this Note were made on the dates and
in the amounts specified below:
Amount Amount of Balance of
and Type Principal Principal Notation
Date of Loan Repaid Unpaid Made by:
- ---- ------- ------ ------ --------
SECURITY AGREEMENT
------------------
SECURITY AGREEMENT, dated as of July 25, 1997, between MARCAM CORPORATION,
a Massachusetts corporation (the "Company"), and BANKBOSTON, N.A., a national
banking association (hereinafter, the "Bank").
WHEREAS, the Company has entered into a Promissory Note dated as of July
25, 1997 (as amended and in effect from time to time, the "Note"), with the
Bank, pursuant to which the Bank, subject to the terms and conditions contained
therein, is to make loans to the Company; and
WHEREAS, it is a condition precedent to the Bank's making any loans to the
Company under the Note that the Company execute and deliver to the Bank a
security agreement in substantially the form hereof; and
WHEREAS, the Company wishes to grant security interests in favor of the
Bank as herein provided;
NOW, THEREFORE, in consideration of the promises contained herein and for
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, the parties hereto agree as follows:
1. Definitions. All capitalized terms used herein without definitions shall
have the respective meanings provided therefor in the Note. All terms defined in
the Massachusetts Uniform Commercial Code and used herein shall have the same
definitions herein as specified therein.
2. Grant of Security Interest.
2.1. Collateral Granted. The Company hereby grants to the Bank, to
secure the payment and performance in full of all of the Obligations, a
security interest in and so pledges and collaterally assigns to the Bank
the following properties, assets and rights of the Company, wherever
located, whether now owned or hereafter acquired or arising, and all
proceeds and products thereof (all of the same being hereinafter called the
"Collateral"):
All personal and fixture property of every kind and nature
including without limitation all furniture, fixtures, equipment, raw
materials, inventory, or other goods, accounts, contract rights,
rights to the payment of money, insurance refund claims and all other
insurance claims and proceeds, tort claims, chattel paper, documents,
instruments, securities and other investment property (other than the
capital stock of Marcam Solutions, Inc.), deposit accounts and all
general intangibles including, without limitation, all tax refund
claims, license fees, patents, patent applications, trademarks,
trademark applications, trade names, copyrights, copyright
applications, rights to sue and recover for past infringement of
patents, trademarks and copyrights, computer programs, computer
<PAGE>
-2-
software, engineering drawings, service marks, customer lists,
goodwill, and all licenses, permits, agreements of any kind or nature
pursuant to which the Company possesses, uses or has authority to
possess or use property (whether tangible or intangible) of others or
others possess, use or have authority to possess or use property
(whether tangible or intangible) of the Company, and all recorded data
of any kind or nature, regardless of the medium of recording
including, without limitation, all software, writings, plans,
specifications and schematics; provided, however, that Collateral
shall not include any assets transferred to Marcam Solutions, Inc.
pursuant to the Distribution Agreement dated as of July 17, 1997
between the Company and Marcam Solutions, Inc. (the "Distribution
Agreement").
2.2. Delivery of Instruments, etc.
(a) Pursuant to the terms hereof, the Company has endorsed,
collaterally assigned and delivered to the Bank all negotiable or
non-negotiable instruments (including certificated securities)
and chattel paper pledged by it hereunder, together with
instruments of transfer or assignment duly executed in blank as
the Bank may have specified. In the event that the Company shall,
after the date of this Agreement, acquire any other negotiable or
non-negotiable instruments (including certificated securities) or
chattel paper to be pledged by it hereunder, the Company shall
forthwith endorse, collaterally assign and deliver the same to
the Bank, accompanied by such instrument's of transfer or
assignment duly executed in blank as the Bank may from time to
time specify.
(b) To the extent that any securities now or hereafter
acquired by the Company are uncertificated and are issued to the
Company or its nominee directly by the issuer thereof, the
Company shall cause the issuer to note on its books the security
interest of the Bank in such securities and shall cause the
issuer, pursuant to an agreement in form and substance
satisfactory to the Bank, to agree to comply with instructions
from the Bank as to such securities, without further consent of
the Company or such nominee. To the extent that any securities,
whether certificated or uncertificated, or other financial assets
now or hereafter acquired by the Company are held by the Company
or its nominee through a securities intermediary, the Company
shall (i) cause such securities intermediary to note on its books
the security interest of the Bank in such securities or other
financial assets and to confirm such notation promptly to the
Bank and (ii), at the request of the Bank, cause such securities
intermediary, pursuant to an agreement in form and substance
satisfactory to the Bank, to agree to comply with entitlement
orders or other instructions from the Bank as to such securities
or other financial assets, without further consent of the Company
or such nominee.
<PAGE>
-3-
2.3. Excluded Collateral. Notwithstanding the foregoing
provisions of this ss.2, such grant of security interest shall not
extend to, and the term "Collateral" shall not include, any chattel
paper and general intangibles which are now or hereafter held by the
Company as licensee, lessee or otherwise, to the extent that (i) such
chattel paper and general intangibles are not assignable or capable of
being encumbered as a matter of law or under the terms of the license,
lease or other agreement applicable thereto (but solely to the extent
that any such restriction shall be enforceable under applicable law),
without the consent of the licensor or lessor thereof or other
applicable party thereto and (ii) such consent has not been obtained;
provided, however, that the foregoing grant of security interest shall
extend to, and the term "Collateral" shall include, (A) any and all
proceeds of such chattel paper and general intangibles to the extent
that the assignment or encumbering of such proceeds is not so
restricted and (B) upon any such licensor, lessor or other applicable
party's consent with respect to any such otherwise excluded chattel
paper or general intangibles being obtained, thereafter such chattel
paper or general intangibles as well as any and all proceeds thereof
that might have theretofore have been excluded from such grant of a
security interest and the term "Collateral".
2.4. Consent. The Bank hereby acknowledges and consents to the
distribution of the capital stock of Marcam Solutions, Inc. by the
Borrower, and the transfer of certain assets of the Borrower to Marcam
Solutions, Inc., pursuant to the Distribution Agreement.
2.5. Trademark Assignments. Concurrently herewith the Company is
also executing and delivering to the Bank the Trademark Agreement
pursuant to which the Company is assigning to the Bank certain
Collateral consisting of trademarks, service marks and trademark and
service mark rights, together with the goodwill appurtenant thereto.
The provisions of the Trademark Agreement are supplemental to the
provisions of this Agreement, and nothing contained in the Trademark
Agreement shall derogate from any of the rights or remedies of the
Bank hereunder. Nor shall anything contained in the Trademark
Agreement be deemed to prevent or extend the time of attachment or
perfection of any security interest in such Collateral created hereby.
2.6. Copyright Memorandum. Concurrently herewith the Company is,
in addition, executing and delivering to the Bank for recording in the
United States Copyright Office (the "Copyright Office") the Copyright
Memorandum. The Company represents and warrants to the Bank that such
Copyright Memorandum identifies all now existing material copyrights
and other rights in and to all material copyrightable works of the
Company, identified, where applicable, by title, author and/or
Copyright Office registration number and date. The Company represents
and warrants to the Bank that it has registered all material
copyrights with the Copyright Office, as identified in such Copyright
Memorandum. The Company covenants, promptly after the Bank's request
therefor following the Company's
<PAGE>
-4-
acquisition thereof, to provide to the Bank like identifications of
all material copyrights and other rights in and to all material
copyrightable works hereafter acquired by the Company and to execute
and deliver to the Bank a supplemental Memorandum of Grant of Security
Interest in Copyrights modified to reflect such subsequent
acquisitions.
3. Title to Collateral, etc. The Company is the owner of the Collateral
free from any adverse lien, security interest or other encumbrance, except for
the security interest created by this Agreement None of the Collateral
constitutes, or is the proceeds of, "farm products" as defined in ss.9-109(3) of
the Massachusetts Uniform Commercial Code.
4. Continuous Perfection. The Company's place of business or, if more than
one, chief executive office is indicated on the Perfection Certificate delivered
to the Bank herewith (the "Perfection Certificate"). The Company will change its
name to "Mapics, Inc." and will move its chief executive office to Atlanta,
Georgia on or before July 31, 1997 and thereafter will not change the same, or
the name, identity or corporate structure of the Company in any manner, without
providing at least 30 days prior written notice to the Bank. The Collateral, to
the extent not delivered to the Bank pursuant to ss.2.2, will be kept at those
locations listed on the Perfection Certificate and the Company will not remove
the Collateral from such locations except to move same to its new chief
executive office in Atlanta, Georgia, without providing at least 30 days prior
written notice to the Bank.
5. No Liens. Except for the security interest herein granted, the Company
shall be the owner of the Collateral free from any lien, security interest or
other encumbrance, and the Company shall defend the same against all claims and
demands of all persons at any time claiming the same or any interests therein
adverse to the Bank. The Company shall not pledge, mortgage or create, or suffer
to exist a security interest in the Collateral in favor of any person other than
the Bank.
6. No Transfers. The Company will not sell or offer to sell or otherwise
transfer the Collateral or any interest therein except for (a) sales of
inventory and licenses of general intangibles in the ordinary course of business
and (b) sales or other dispositions of obsolescent items of equipment in the
ordinary course of business consistent with past practices.
7. Insurance.
7.1. Maintenance of Insurance. The Company will maintain with
financially sound and reputable insurers insurance with respect to its
properties and business against such casualties and contingencies as shall
be in accordance with general practices of businesses engaged in similar
activities in similar geographic areas. Such insurance shall be in such
minimum amounts that the Company will not be deemed a co-insurer under
applicable insurance laws, regulations and policies and otherwise shall be
in such amounts, contain such terms, be in such forms and be for such
periods as may be reasonably satisfactory to the Bank. In addition, all
such
<PAGE>
-5-
insurance shall be payable to the Bank as loss payee under a "standard" or
"New York" loss payee clause. Without limiting the foregoing, the Company
will (i) keep all of its physical property insured with casualty or
physical hazard insurance on an "all risks" basis, with broad form flood
and earthquake coverages and electronic data processing coverage, with a
full replacement cost endorsement and an "agreed amount" clause in an
amount equal to 100% of the full replacement cost of such property, (ii)
maintain all such workers' compensation or similar insurance as may be
required by law and (iii) maintain, in amounts and with deductibles equal
to those generally maintained by businesses engaged in similar activities
in similar geographic areas, general public liability insurance against
claims of bodily injury, death or property damage occurring, on, in or
about the properties of the Company; business interruption insurance; and
product liability insurance.
7.2. Insurance Proceeds. The proceeds of any casualty insurance in
respect of any casualty loss of any of the Collateral shall, subject to the
rights, if any, of other parties with a prior interest in the property
covered thereby, (i) so long as no Default or Event of Default has occurred
and is continuing and to the extent that the amount of such proceeds is
less than $250,000, be disbursed to the Company for direct application by
the Company solely to the repair or replacement of the Company's property
so damaged or destroyed and (ii) in all other circumstances, be held by the
Bank as cash collateral for the Obligations. The Bank may, at its sole
option, disburse from time to time all or any part of such proceeds so held
as cash collateral, upon such terms and conditions as the Bank may
reasonably prescribe, for direct application by the Company solely to the
repair or replacement of the Company's property so damaged or destroyed, or
the Bank may apply all or any part of such proceeds to the Obligations.
7.3. Notice of Cancellation, etc. All policies of insurance shall
provide for at least thirty (30) days prior written cancellation notice to
the Bank. In the event of failure by the Company to provide and maintain
insurance as herein provided, the Bank may, at its option, provide such
insurance and charge the amount thereof to the Company. The Company shall
furnish the Bank with certificates of insurance and, upon the Bank's
reasonable request therefor, policies evidencing compliance with the
foregoing insurance provision.
8. Maintenance of Collateral; Compliance with Law. The Company will keep
the Collateral in good order and repair and will not use the same in violation
of law or any policy of insurance thereon. The Bank, or its designee, may
inspect the Collateral at any reasonable time, wherever located, and so long as
no Event of Default has occurred and is continuing, during regular business
hours, upon reasonable prior notice. The Company will pay promptly when due all
taxes, assessments, governmental charges and levies upon the Collateral or
incurred in connection with the use or operation of such Collateral or incurred
in connection with this Agreement; provided that any such tax, assessment,
charge, levy or claim need not be paid if the validity or amount thereof shall
currently be contested in
<PAGE>
-6-
good faith by appropriate proceedings and if the Company shall have set aside on
its books adequate reserves with respect thereto; and provided further that the
Company will pay all such taxes, assessments, charges, levies or claims
forthwith upon the commencement of proceedings to foreclose any lien that may
have attached as security therefor. Except as previously disclosed to the Bank,
the Company has at all times operated, and the Company will continue to operate,
its business in compliance with all applicable provisions of the federal Fair
Labor Standards Act, as amended, and with all applicable provisions of federal,
state and local statutes and ordinances dealing with the control, shipment,
storage or disposal of hazardous materials or substances.
9. Collateral Protection Expenses; Preservation of Collateral.
9.1. Expenses Incurred by Bank. In its discretion, the Bank may
discharge taxes and other encumbrances at any time levied or placed on any
of the Collateral, make repairs thereto and pay any necessary filing fees.
The Company agrees to reimburse the Bank on demand for any and all
expenditures so made. The Bank shall have no obligation to the Company to
make any such expenditures, nor shall the making thereof relieve the
Company of any default.
9.2. Bank's Obligations and Duties. Anything herein to the contrary
notwithstanding, the Company shall remain liable under each contract or
agreement comprised in the Collateral to be observed or performed by the
Company thereunder. The Bank shall not have any obligation or liability
under any such contract or agreement by reason of or arising out of this
Agreement or the receipt by the Bank of any payment relating to any of the
Collateral, nor shall the Bank be obligated in any manner to perform any of
the obligations of the Company under or pursuant to any such contract or
agreement, to make inquiry as to the nature or sufficiency of any payment
received by the Bank in respect of the Collateral or as to the sufficiency
of any performance by any party under any such contract or agreement, to
present or file any claim, to take any action to enforce any performance or
to collect the payment of any amounts which may have been assigned to the
Bank or to which the Bank may be entitled at any time or times. The Bank's
sole duty with respect to the custody, safe keeping and physical
preservation of the Collateral in its possession, under ss.9-207 of the
Massachusetts Uniform Commercial Code or otherwise, shall be to deal with
such Collateral in the same manner as the Bank deals with similar property
for its own account.
10. Securities and Deposits. The Bank may at any time, at its option,
transfer to itself or any nominee any securities constituting Collateral,
receive any income thereon and hold such income as additional Collateral or
apply it to the Obligations. If an Event of Default shall have occurred and be
continuing, the Bank may demand, sue for, collect, or make any settlement or
compromise which it deems desirable with respect to the Collateral. Regardless
of the adequacy of Collateral or any other security for the Obligations, any
deposits or other sums at
<PAGE>
-7-
any time credited by or due from the Bank to the Company may at any time be
applied to or set off against any of the Obligations then due and payable.
11. Notification to Account Debtors and Other Obligors. If an Event of
Default shall have occurred and be continuing, the Company shall, at the request
of the Bank, notify account debtors on accounts, chattel paper and general
intangibles of the Company and obligors on instruments for which the Company is
an obligee of the security interest of the Bank in any account, chattel paper,
general intangible or instrument and that payment thereof is to be made directly
to the Bank or to any financial institution designated by the Bank as the Bank's
agent therefor, and the Bank may itself, if an Event of Default shall have
occurred and be continuing, without notice to or demand upon the Company, so
notify account debtors and obligors. After the making of such a request or the
giving of any such notification, the Company shall hold any proceeds of
collection of accounts, chattel paper, general intangibles and instruments
received by the Company as trustee for the Bank without commingling the same
with other funds of the Company and shall turn the same over to the Bank in the
identical form received, together with any necessary endorsements or
assignments. The Bank shall apply the proceeds of collection of accounts,
chattel paper, general intangibles and instruments received by the Bank to the
Obligations, such proceeds to be immediately entered after final payment in cash
or solvent credits of the items giving rise to them.
12. Further Assurances. The Company, at its own expense, shall do, make,
execute and deliver all such additional and further acts, things, deeds,
assurances and instruments as the Bank may reasonably require more completely to
vest in and assure to the Bank its rights hereunder or in any of the Collateral,
including, without limitation, (i) executing, delivering and, where appropriate,
filing financing statements and continuation statements under the Uniform
Commercial Code, (ii) obtaining governmental and other third party consents and
approvals, including without limitation any consent of any licensor, lessor or
other applicable party referred to in ss.2.3, (iii) obtaining waivers from
mortgagees and landlords and (iv) taking all actions required by Sections 8-313
and 8-321 of the Uniform Commercial Code (1990) or Sections 8-106 and 9-115 of
the Uniform Commercial Code (1994), as applicable in each relevant jurisdiction,
with respect to certificated and uncertificated securities.
13. Power of Attorney.
13.1. Appointment and Powers of Bank. The Company hereby irrevocably
constitutes and appoints the Bank and any officer or agent thereof, with
full power of substitution, as its true and lawful attorneys-in-fact with
full irrevocable power and authority in the place and stead of the Company
or in the Bank's own name, for the purpose of carrying out the terms of
this Agreement, to take any and all appropriate action and to execute any
and all documents and instruments that may be necessary or desirable to
accomplish the purposes of this Agreement and, without limiting the
generality of the foregoing, hereby gives said attorneys the
<PAGE>
-8-
power and right, on behalf of the Company, without notice to or assent by
the Company, to do the following:
(a) upon the occurrence and during the continuance of an Event of
Default, generally to sell, transfer, pledge, make any agreement with
respect to or otherwise deal with any of the Collateral in such manner
as is consistent with the Massachusetts Uniform Commercial Code and as
fully and completely as though the Bank were the absolute owner
thereof for all purposes, and to do at the Company's expense, at any
time, or from time to time, all acts and things which the Bank deems
necessary to protect, preserve or realize upon the Collateral and the
Bank's security interest therein, in order to effect the intent of
this Agreement, all as fully and effectively as the Company might do,
including, without limitation, (i) the filing and prosecuting of
registration and transfer applications with the appropriate federal or
local agencies or authorities with respect to trademarks, copyrights
and patentable inventions and processes, (ii) upon written notice to
the Company, the exercise of voting rights with respect to voting
securities, which rights may be exercised, if the Bank so elects, with
a view to causing the liquidation in a commercially reasonable manner
of assets of the issuer of any such securities and (iii) the
execution, delivery and recording, in connection with any sale or
other disposition of any Collateral, of the endorsements, assignments
or other instruments of conveyance or transfer with respect to such
Collateral; and
(b) to the extent permitted by applicable law, to file such
financing statements with respect hereto, with or without the
Company's signature, or a photocopy of this Agreement in
substitution for a financing statement, as the Bank may deem
appropriate and to execute in the Company's name such financing
statements and amendments thereto and continuation statements
which may require the Company's signature.
13.2. Ratification by Company. To the extent permitted by law, the
Company hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with
an interest and shall be irrevocable.
13.3. No Duty on Bank. The powers conferred on the Bank hereunder are
solely to protect its interests in the Collateral and shall not impose any
duty upon it to exercise any such powers. The Bank shall be accountable
only for the amounts that it actually receives as a result of the exercise
of such powers and neither it nor any of its officers, directors, employees
or agents shall be responsible to the Company for any act or failure to
act, except for the Bank's own gross negligence or willful misconduct.
<PAGE>
-9-
14. Remedies. If an Event of Default shall have occurred and be continuing,
the Bank may, without notice to or demand upon the Company, declare this
Agreement to be in default, and the Bank shall thereafter have in any
jurisdiction in which enforcement hereof is sought, in addition to all other
rights and remedies, the rights and remedies of a secured party under the
Uniform Commercial Code, including, without limitation, the right to take
possession of the Collateral, and for that purpose the Bank may, so far as the
Company can give authority therefor, enter upon any premises on which the
Collateral may be situated and remove the same therefrom. The Bank may in its
discretion require the Company to assemble all or any part of the Collateral at
such location or locations within the state(s) of the Company's principal
office(s) or at such other locations as the Bank may designate which is
reasonably convenient to the Bank and the Company. Unless the Collateral is
perishable or threatens to decline speedily in value or is of a type customarily
sold on a recognized market, the Bank shall give to the Company at least ten
(10) Business Days prior written notice of the time and place of any public sale
of Collateral or of the time after which any private sale or any other intended
disposition is to be made. The Company hereby acknowledges that ten (10)
Business Days prior written notice of such sale or sales shall be reasonable
notice. In addition, the Company waives any and all rights that it may have to a
judicial hearing in advance of the enforcement of any of the Bank's rights
hereunder, including, without limitation, its right following an Event of
Default to take immediate possession of the Collateral and to exercise its
rights with respect thereto. To the extent that any of the Obligations are to be
paid or performed by a person other than the Company, the Company waives and
agrees not to assert any rights or privileges which it may have under ss.9-112
of the Massachusetts Uniform Commercial Code.
15. No Waiver, etc. The Company waives demand, notice, protest, notice of
acceptance of this Agreement, notice of loans made, credit extended, Collateral
received or delivered or other action taken in reliance hereon and all other
demands and notices of any description. With respect to both the Obligations and
the Collateral, the Company assents to any extension or postponement of the time
of payment or any other indulgence, to any substitution, exchange or release of
or failure to perfect any security interest in any Collateral, to the addition
or release of any party or person primarily or secondarily liable, to the
acceptance of partial payment thereon and the settlement, compromising or
adjusting of any thereof, all in such manner and at such time or times as the
Bank may deem advisable. The Bank shall have no duty as to the collection or
protection of the Collateral or any income thereon, nor as to the preservation
of rights against prior parties, nor as to the preservation of any rights
pertaining thereto beyond the safe custody thereof as set forth in ss.9.2. The
Bank shall not be deemed to have waived any of its rights upon or under the
Obligations or the Collateral unless such waiver shall be in writing and signed
by the Bank. No delay or omission on the part of the Bank in exercising any
right shall operate as a waiver of such right or any other right. A waiver on
any one occasion shall not be construed as a bar to or waiver of any right on
any future occasion. All rights and remedies of the Bank with respect to the
Obligations or the Collateral, whether evidenced hereby or by any other
instrument
<PAGE>
-10-
or papers, shall be cumulative and may be exercised singularly, alternatively,
successively or concurrently at such time or at such times as the Bank deems
expedient.
16. Marshalling. The Bank shall not be required to marshal any present or
future collateral security (including but not limited to this Agreement and the
Collateral) for, or other assurances of payment of, the Obligations or any of
them or to resort to such collateral security or other assurances of payment in
any particular order, and all of its rights hereunder and in respect of such
collateral security and other assurances of payment shall be cumulative and in
addition to all other rights, however existing or arising. To the extent that it
lawfully may, the Company hereby agrees that it will not invoke any law relating
to the marshalling of collateral which might cause delay in or impede the
enforcement of the Bank's rights under this Agreement or under any other
instrument creating or evidencing any of the Obligations or under which any of
the Obligations is outstanding or by which any of the Obligations is secured or
payment thereof is otherwise assured, and, to the extent that it lawfully may,
the Company hereby irrevocably waives the benefits of all such laws.
17. Proceeds of Dispositions; Expenses. The Company shall pay to the Bank
on demand any and all expenses, including attorneys' fees and disbursements,
reasonably incurred or paid by the Bank in protecting, preserving or enforcing
the Bank's rights under or in respect of any of the Obligations or any of the
Collateral. After deducting all of said expenses, the residue of any proceeds of
collection or sale of the Obligations or Collateral shall, to the extent
actually received in cash, be applied to the payment of the Obligations in such
order or preference as the Bank may determine, proper allowance and provision
being made for any Obligations not then due. Upon the final payment and
satisfaction in full of all of the Obligations and after making any payments
required by Section 9-504(l)(c) of the Massachusetts Uniform Commercial Code,
any excess shall be returned to the Company, and the Company shall remain liable
for any deficiency in the payment of the Obligations.
18. Overdue Amounts. Until paid, all amounts due and payable by the Company
hereunder shall be a debt secured by the Collateral and shall bear, whether
before or after judgment, interest at the rate of interest for overdue principal
set forth in the Note.
19. Governing Law; Consent to Jurisdiction. THIS AGREEMENT IS INTENDED TO
TAKE EFFECT AS A SEALED INSTRUMENT AND SHALL BE GOVERNED BY, AND CONSTRUED IN
ACCORDANCE WITH, THE LAWS OF THE COMMONWEALTH OF MASSACHUSETTS. The Company
agrees that any suit for the enforcement of this Agreement may be brought in the
courts of the Commonwealth of Massachusetts or any federal court sitting therein
and consents to the non-exclusive jurisdiction of such court and to service of
process in any such suit being made upon the Company by mail at the address
specified in the preamble to the Note. The Company hereby waives any objection
that it may now or hereafter have to the venue of any such suit or any such
court or that such suit is brought in an inconvenient court.
<PAGE>
-11-
20. Waiver of Jury Trial. THE COMPANY WAIVES ITS RIGHT TO A JURY TRIAL WITH
RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE IN CONNECTION WITH
THIS AGREEMENT, ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THE PERFORMANCE OF ANY
SUCH RIGHTS OR OBLIGATIONS. Except as prohibited by law, the Company waives any
right which it may have to claim or recover in any litigation referred to in the
preceding sentence any special, exemplary, punitive or consequential damages or
any damages other than, or in addition to, actual damages. The Company (i)
certifies that neither the Bank nor any representative, agent or attorney of the
Bank has represented, expressly or otherwise, that the Bank would not, in the
event of litigation, seek to enforce the foregoing waivers and (ii) acknowledges
that, in entering into the Note and the Security Documents to which the Bank is
a party, the Bank is relying upon, among other things, the waivers and
certifications contained in this ss.20.
21. Miscellaneous. The headings of each section of this Agreement are for
convenience only and shall not define or limit the provisions thereof. This
Agreement and all rights and obligations hereunder shall be binding upon the
Company and its respective successors and assigns, and shall inure to the
benefit of the Bank and its successors and assigns. If any term of this
Agreement shall be held to be invalid, illegal or unenforceable, the validity of
all other terms hereof shall in no way be affected thereby, and this Agreement
shall be construed and be enforceable as if such invalid, illegal or
unenforceable term had not been included herein. The Company acknowledges
receipt of a copy of this Agreement.
<PAGE>
-12-
IN WITNESS WHEREOF, intending to be legally bound, the Company has caused
this Agreement to be duly executed as of the date first above written.
MARCAM CORPORATION
By:__________________________________
Title:
Accepted:
BANKBOSTON, N.A.
By: _________________________
Title:
CERTIFICATE OF ACKNOWLEDGMENT
COMMONWEALTH OF MASSACHUSETTS__________________________________________)
__________________ ) ss.
COUNTY OF SUFFOLK______________________________________________________)
Before me, the undersigned, a Notary Public in and for the county
aforesaid, on this ____ day of July, 1997, personally appeared ______________ to
me known personally, and who, being by me duly sworn, deposes and says that he
is the _________ of Marcam Corporation, and that said instrument was signed and
sealed on behalf of said corporation by authority of its Board of Directors, and
said _______ acknowledged said instrument to be the free act and deed of said
corporation.
------------------------------
Notary Public
My commission expires:
Exhibit 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in Amendment No. 2 to this
registration statement of Marcam Corporation on Form S-3 of our report, dated
October 24, 1996, on our audits of the consolidated financial statements of
Marcam Corporation as of September 30, 1996 and 1995, and for the years ended
September 30, 1996 and 1995, which report is included in the Annual Report on
Form 10-K of Marcam Corporation for the year ended September 30, 1996. We also
consent to the reference to our firm under the caption "Experts".
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 25, 1997
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in Amendment No. 2 to this registration
statement on Form S-3 of our report dated June 3, 1997, on our audits of the
combined financial statements of MAPICS, Inc. We also consent to the references
to our firm under the captions "Experts" and "Selected Combined Financial
Data."
COOPERS & LYBRAND L.L.P.
Boston, Massachusetts
July 25, 1997
Exhibit 23.4
CONSENT OF INDEPENDENT AUDITORS
We consent to incorporation by reference in this Registration Statement on
Form S-3 of Marcam Corporation of our report dated October 20, 1994, relating
to the consolidated statements of operations, stockholders' equity, and cash
flows of Marcam Corporation and subsidiaries for the year ended September 30,
1994, which report appears in the September 30, 1996 annual report on Form 10-K
of Marcam Corporation and to the reference of our firm under the heading
"Experts" in the prospectus.
KPMG PEAT MARWICK LLP
Boston, Massachusetts
July 23, 1997
