<PAGE>
RULE 424(b)(3) PROSPECTUS
REGISTRATION NUMBER 333-76567
<TABLE>
<S> <C>
DISTRIBUTION ARCHITECTS SYMIX SYSTEMS, INC.
INTERNATIONAL, INC. PROSPECTUS
PROXY STATEMENT FOR ISSUANCE OF UP TO
FOR 625,000 COMMON SHARES
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 9, 1999
</TABLE>
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The boards of directors of Symix Systems, Inc. and Distribution Architects
International, Inc. have approved a merger combining DAI and Symix Acquisition
Corp., a subsidiary of Symix. After the merger, DAI will be a wholly-owned
subsidiary of Symix. If the merger is completed, DAI shareholders will receive
0.1313 of a Symix share for each share of DAI they own. This is a fixed exchange
ratio that will not be adjusted for changes in the price of stock of either
company before the merger is completed. Symix shares are listed on the Nasdaq
National Market under the Symbol "Symx".
We cannot complete the merger unless shareholders of DAI vote to approve it.
Shareholders of DAI will be asked to approve the merger agreement at a special
meeting to be held on June 9, 1999 at 9:00 a.m., local time, at the offices of
Squire, Sanders & Dempsey L.L.P. located at Two Renaissance Square, 40 North
Central Avenue, Suite 2700, Phoenix, Arizona 85004. The affirmative vote of the
holders of two-thirds of the outstanding shares of DAI is required to approve
the merger agreement.
This document is a proxy statement for DAI to use in soliciting proxies for
the special meeting. This document also is a prospectus of Symix relating to the
issuance of up to 625,000 Symix shares in connection with the merger. This
document gives you detailed information about the merger and includes the merger
agreement. In addition, you may obtain other information about Symix from
documents filed with the Securities and Exchange Commission. We encourage you to
read this entire document carefully.
FOR RISKS IN CONNECTION WITH THE MERGER, SEE "RISK FACTORS" BEGINNING ON PAGE
12.
On behalf of the board of directors of DAI, we urge you to vote "For" approval
of the merger agreement.
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THE SECURITIES TO BE ISSUED IN THE
MERGER OR DETERMINED IF THIS PROXY STATEMENT/ PROSPECTUS IS ACCURATE OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
THIS PROXY STATEMENT/PROSPECTUS IS DATED MAY 6, 1999 AND WAS FIRST MAILED TO DAI
SHAREHOLDERS ON OR ABOUT MAY 7, 1999.
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC.
------------------------
NOTICE OF A SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 9, 1999
---------------------
To the shareholders of Distribution Architects International, Inc.:
A special meeting of shareholders of Distribution Architects International,
Inc., a Texas corporation, will be held on June 9, 1999 at 9:00 a.m., local
time, at the offices of Squire, Sanders & Dempsey L.L.P. located at Two
Renaissance Square, 40 North Central Avenue, Suite 2700, Phoenix, Arizona 85004,
for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement of Merger
dated February 24, 1999, as amended, among DAI, Symix Systems, Inc. and
Symix Acquisition Corp., a wholly-owned subsidiary of Symix, as a result
of which DAI will be merged with and into Symix Acquisition Corp. and DAI
will become a wholly-owned subsidiary of Symix.
2. To transact any other business as may properly come before the special
meeting or any adjournment or postponement of the special meeting.
Shareholders of record at the close of business on April 30, 1999 are
entitled to notice of and to vote at the special meeting and any adjournment or
postponement of the special meeting. A form of proxy and a proxy
statement/prospectus containing more detailed information regarding the matters
to be considered at the special meeting accompany this notice.
THE BOARD OF DIRECTORS OF DAI UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR
OF APPROVAL OF THE MERGER AGREEMENT.
You are cordially invited to attend the special meeting in person. If you
attend the special meeting and desire to revoke your proxy and vote in person
you may do so. In any event, a proxy may be revoked at any time before it is
voted.
IN ORDER TO ASSURE YOUR REPRESENTATION AT THE SPECIAL MEETING, PLEASE
COMPLETE, SIGN, DATE AND MAIL PROMPTLY THE ENCLOSED PROXY, WHICH IS BEING
SOLICITED BY THE BOARD OF DIRECTORS OF DAI, WHETHER OR NOT YOU PLAN TO ATTEND
THE SPECIAL MEETING. AN ADDRESSED RETURN ENVELOPE WHICH REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES IS ENCLOSED FOR THAT PURPOSE.
By Order of the Board of Directors,
Thomas E. Cain
President and Secretary
Tempe, Arizona
May 6, 1999
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE NO.
-------------
<S> <C>
Questions and Answers About the Merger.................................................................. 1
Summary................................................................................................. 3
The Companies......................................................................................... 3
Recommendation to DAI Shareholders.................................................................... 3
Interests of DAI Executive Officers and Directors..................................................... 3
Market Price for Symix Common Shares.................................................................. 3
Comparison of Rights of DAI Shareholders and Symix Shareholders....................................... 4
Appraisal Rights for Dissenting Shareholders.......................................................... 4
Federal Income Tax Consequences....................................................................... 4
Regulatory Approvals.................................................................................. 4
Symix Selected Consolidated Financial Data.............................................................. 5
Selected Financial Data of DAI.......................................................................... 6
Unaudited Selected Pro Forma Consolidated Financial Data................................................ 7
Comparative Stock Prices and Dividends.................................................................. 8
Risk Factors............................................................................................ 9
Risks relating to the merger.......................................................................... 9
Risks relating to Symix............................................................................... 9
Cautionary Statement Regarding Forward-Looking Information.............................................. 12
The Special Meeting..................................................................................... 13
Date, time and place.................................................................................. 13
Matters to be considered.............................................................................. 13
Vote required......................................................................................... 13
Voting of proxies..................................................................................... 14
How to revoke a proxy................................................................................. 14
Solicitation of proxies............................................................................... 14
The Merger.............................................................................................. 14
Background of the merger.............................................................................. 14
Symix's reasons for the merger........................................................................ 15
DAI's reasons for the merger.......................................................................... 16
Interests of DAI executive officers and directors in the merger....................................... 17
Accounting treatment.................................................................................. 18
Federal income tax consequences....................................................................... 18
Restrictions on resales of Symix shares by affiliates of DAI.......................................... 20
The Merger Agreement.................................................................................... 21
The merger............................................................................................ 21
Effective time of the merger.......................................................................... 21
Procedures for exchange of certificates............................................................... 21
Representations and warranties........................................................................ 22
Covenants............................................................................................. 23
Conditions to the merger.............................................................................. 24
Termination of the merger agreement................................................................... 25
Amendment and waiver.................................................................................. 26
Board of directors and management of Symix following the merger....................................... 26
Rights of Dissenting Shareholders....................................................................... 27
Unaudited Pro Forma Condensed Consolidated Financial Statements......................................... 29
Unaudited Pro Forma Condensed Consolidated Balance Sheet.............................................. 30
Unaudited Pro Forma Condensed Consolidated Statement of Operations.................................... 31
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE NO.
-------------
<S> <C>
Notes to Pro Forma Condensed Consolidated Financial Statements (Unaudited)............................ 33
DAI's Management Discussion and Analysis of Financial Condition and Results of Operations............... 35
Information Concerning Symix............................................................................ 39
Information Concerning DAI.............................................................................. 40
Security Ownership of Certain Beneficial Owners and Management.......................................... 41
Description of Capital Stock of Symix................................................................... 41
Comparison of Shareholders' Rights...................................................................... 42
Appraisal and dissenters'rights....................................................................... 43
Control share acquisitions............................................................................ 43
Constituency provisions............................................................................... 44
Amendment of charter documents........................................................................ 44
Business combinations with certain persons............................................................ 45
Director and officer liability and indemnification.................................................... 45
Removal of directors and filling vacancies............................................................ 46
Special meetings of shareholders...................................................................... 46
Mergers and business combinations..................................................................... 47
Authorized capital.................................................................................... 48
Committees of the board of directors.................................................................. 48
Dividends............................................................................................. 48
Amendment to articles and regulations................................................................. 48
Limitation on directors'liability..................................................................... 49
Size and classification of board of directors......................................................... 50
Loans to directors.................................................................................... 50
Inspection of books and records....................................................................... 50
Where You Can Find More Information..................................................................... 51
Legal Matters........................................................................................... 52
Experts................................................................................................. 52
Shareholder Proposals................................................................................... 52
Index to financial statements........................................................................... F-1
Distribution Architects International, Inc. and Subsidiaries Financial Statements....................... F-2
Appendix A-- Agreement of Merger dated February 24, 1999 and Amendment No. 1 to Agreement of Merger
dated April 8, 1999
Appendix B-- Sections 5.11, 5.12 and 5.13 of the Texas Business Corporation Act
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q1: WHY ARE SYMIX AND DAI PROPOSING THE MERGER?
A1: Symix and DAI believe that the complimentary nature of our respective
product lines creates a combination which is more valuable to customers and
shareholders than the sum of our individual parts. We believe that the
merger will allow us to accelerate long-term growth and provide added
shareholder value. By combining operations, we expect to obtain lower costs
than we separately would have if the merger did not occur in the areas of
product development, marketing and distribution.
Q2: WHAT WILL DAI SHAREHOLDERS RECEIVE FOR THEIR DAI STOCK IN THE MERGER?
A2: If we complete the merger, DAI shareholders will receive 0.1313 of a share
of Symix for each share of DAI outstanding immediately prior to the merger.
Example: If you own 100 shares of DAI immediately prior to the merger, then
after the merger you will be entitled to receive 13 Symix shares and cash
for the market value of the 0.13 fractional Symix share. Based on the high
and low sales prices for Symix shares on March 31, 1999, this equals an
equivalent DAI per share price of approximately $2.09, thus giving DAI
shareholders a 94% premium over the book value per share of DAI at March 31,
1999.
This exchange ratio is fixed and will not change. Because the exchange ratio
is fixed and the market price of Symix shares that DAI shareholders will
receive in the merger will vary, DAI shareholders cannot be sure of the
market value of the Symix shares they will receive in the merger. The value
of the consideration you receive will depend on the market value of Symix
shares at the time the merger is completed.
Q3: WHAT WILL HOLDERS OF DAI STOCK OPTIONS RECEIVE IN THE MERGER?
A3: Each DAI stock option outstanding immediately prior to the merger will be
automatically converted into the right to receive the number of Symix shares
equal to $2.17, which is the per share value of DAI stock as agreed to by
DAI and Symix, less $1.242, which is the stock option exercise price,
multiplied by the number of shares of DAI covered by the stock option, and
divided by $18.50.
Example: If you hold a DAI stock option which is exercisable for 100 shares
of DAI immediately prior to the merger, then after the merger you will be
entitled to receive 5 Symix shares and cash for the market value of the 0.02
fractional Symix share, calculated as follows:
$2.17 - $1.242 = $0.928 x 100 = $92.80 / $18.50 = 5.02 Symix shares
Q4: WHAT DO I NEED TO DO NOW?
A4: After you have carefully read this document, just indicate on your proxy
card how you want to vote. Sign and mail the proxy card in the enclosed
prepaid return envelope marked "Proxy" as soon as possible so that your
shares of DAI may be represented and voted at the special meeting. In order
for us to complete the merger, holders of two-thirds of the outstanding
shares of DAI must approve the merger agreement. If you do not vote your
shares of DAI, the effect will be a vote against the merger agreement.
THE BOARD OF DIRECTORS OF DAI UNANIMOUSLY RECOMMENDS VOTING "FOR" THE MERGER
AGREEMENT.
<PAGE>
Q5: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?
A5: Yes. You can change your vote at any time before your proxy is voted. Just
send in a later dated, signed proxy card to DAI's secretary before the
special meeting or attend the special meeting in person and vote. DAI's
address and facsimile number are as follows:
905 East Westchester Avenue
Tempe, Arizona 85283-2938
Facsimile Number: (602) 831-7659
Attention: Secretary
Q6: SHOULD I SEND IN MY STOCK CERTIFICATES AT THIS TIME?
A6: No. After we complete the merger, Symix will send DAI shareholders written
instructions for exchanging their DAI stock.
Q7: WHEN DO YOU EXPECT TO COMPLETE THE MERGER?
A7: We are working toward completing the merger as quickly as possible. We must
first obtain the approval of DAI shareholders at the special meeting. We
hope to complete the merger in the Spring of 1999. However, we cannot assure
you as to when or if the merger will occur.
Q8: WHO CAN ANSWER MY QUESTIONS?
A8: If you have questions, you should contact:
Distribution Architects International, Inc.
905 East Westchester Avenue
Tempe, Arizona 85283-2938
Attention: President
Telephone Number: (602) 777-7000
2
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS PROXY
STATEMENT/PROSPECTUS. IT DOES NOT CONTAIN ALL OF THE INFORMATION THAT MAY BE
IMPORTANT TO YOU. WE URGE YOU TO READ CAREFULLY THIS ENTIRE PROXY
STATEMENT/PROSPECTUS AND THE OTHER DOCUMENTS REFERRED TO IN THIS PROXY
STATEMENT/PROSPECTUS, INCLUDING THE MERGER AGREEMENT, TO FULLY UNDERSTAND THE
MERGER. THE MERGER AGREEMENT IS THE LEGAL DOCUMENT THAT GOVERNS THE MERGER AND
IS ATTACHED TO THIS PROXY STATEMENT/PROSPECTUS AS APPENDIX A. FOR A GUIDE AS TO
WHERE YOU CAN OBTAIN MORE INFORMATION ABOUT SYMIX GENERALLY, SEE "WHERE YOU CAN
FIND MORE INFORMATION" ON PAGE 50.
THE COMPANIES
SYMIX SYSTEMS, INC. (SEE PAGE 39)
2800 Corporate Exchange Drive
Suite 400
Columbus, Ohio 43231
(614) 523-7000
Symix designs, develops, markets and supports fully integrated
manufacturing, planning and financial software products that address the
manufacturing and financial planning requirements of manufacturing firms. These
products are designed to improve manufacturers' performance with respect to
customer service, planning and materials management, production management and
enterprise management. Symix products operate across a wide range of hardware
platforms using the Windows NT and UNIX operation systems. Symix also sells and
provides implementation and post sales support services for its products.
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. (SEE PAGE 40)
905 East Westchester Avenue
Tempe, Arizona 85283-2938
(602) 777-7000
DAI designs, develops, markets and supports software products that address
the distribution requirements of its customers. These products consist of supply
chain management software and are designed to operate across a wide range of
hardware platforms, including Windows NT and UNIX operating systems. DAI also
sells and provides implementation and post sales support services for its
products.
RECOMMENDATION TO DAI SHAREHOLDERS (SEE PAGE 13)
All of the members of the DAI board of directors recommend that you vote
"FOR" the proposal to approve the merger agreement.
INTERESTS OF DAI EXECUTIVE OFFICERS AND DIRECTORS (SEE PAGE 17)
You should be aware that several directors and executive officers of DAI may
have interests in the merger that are different from, or in addition to, those
of DAI shareholders. As a condition to the merger, the surviving corporation in
the merger will enter into an employment agreement with the current president of
DAI, Thomas Cain. Several of DAI's executive officers also will receive Symix
shares for DAI stock options that will be canceled in the merger.
MARKET PRICE FOR SYMIX SHARES (SEE PAGE 8)
Symix shares are traded in the over-the-counter market and are quoted on the
Nasdaq National Market under the symbol "SYMX". The last reported closing price
of Symix shares on March 5, 1999, the last full trading day before the
announcement of the merger, was $19.25 per share. On April 8, 1999, the last
full trading day before the public announcement that the merger agreement had
been
3
<PAGE>
amended, the last reported closing price of Symix shares was $8.75 per share.
The last reported closing price of Symix shares on April 23, 1999 was $8.3125
per share.
COMPARISON OF RIGHTS OF DAI SHAREHOLDERS AND SYMIX SHAREHOLDERS (SEE PAGE 42)
After the merger, DAI shareholders will become shareholders of Symix. Since
Symix is an Ohio corporation, their rights will be governed by Ohio law instead
of Texas law. The rights of shareholders under Ohio law compared to the rights
of shareholders under Texas law are described on pages 52 through 63 of this
proxy statement/prospectus.
APPRAISAL RIGHTS FOR DISSENTING SHAREHOLDERS (SEE PAGE 27)
If the merger agreement is approved by the required vote of DAI shareholders
and is not abandoned or terminated, holders of DAI stock, by complying with the
Texas Business Corporation Act, Articles 5.11 through 5.13, will be entitled to
dissenters' rights as described in the Texas statute. However, it is a condition
to Symix's obligation to complete the merger that the holders of not more than
five percent (5%) of the outstanding shares of DAI be eligible to exercise
dissenters' rights.
FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 18)
You generally will not recognize taxable gain or loss for United States
federal income tax purposes in exchanging DAI stock for Symix shares in the
merger. You will, however, have to pay taxes on any cash received for a
fractional share. YOU SHOULD CONSULT YOUR OWN TAX ADVISOR FOR A FULL
UNDERSTANDING OF THE TAX CONSEQUENCES.
REGULATORY APPROVALS (SEE PAGE 21)
To complete the merger, articles of merger must be filed with the Secretary
of State of Texas and a certificate of merger must be filed with the Secretary
of State of Ohio. There are no other federal or state regulatory requirements to
be complied with or approvals to be obtained.
4
<PAGE>
SYMIX SELECTED CONSOLIDATED FINANCIAL DATA
In the table below, we provide you with selected historical financial data
of Symix Systems, Inc. We have prepared this information using the consolidated
financial statements of Symix Systems, Inc. for the five years ended June 30,
1998 and the six-month periods ended December 31,1998 and 1997. The financial
statements for the five fiscal years ended June 30, 1998 have been audited by
Ernst & Young LLP, independent auditors. The financial statements for the
six-month periods ended December 31, 1998 and 1997 have not been audited.
When you read this selected historical financial data, it is important that
you read along with it the historical financial statements and related notes in
Symix's annual and quarterly reports filed with the SEC, as well as the section
of Symix's annual and quarterly reports titled "Management's Discussion and
Analysis of Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
SIX MONTHS ENDED
DECEMBER 31, YEAR ENDED JUNE 30,
-------------------- -------------------------------
1998 1997 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Net revenue........................... $ 59,992 $ 41,582 $ 97,597 $ 65,772 $ 45,759 $ 42,828 $ 35,486
Cost of revenue....................... 22,916 15,428 35,701 23,690 16,496 15,672 12,917
--------- --------- --------- --------- --------- --------- ---------
Gross Margin.......................... 37,076 26,154 61,896 42,082 29,263 27,156 22,569
Operating Expenses
Selling, general, and
administrative.................... 27,423 18,874 45,474 31,351 21,593 24,774 19,188
Research and product development.... 4,446 3,744 7,901 5,659 3,673 3,744 2,589
Restructuring and other unusual
charges........................... -- -- -- -- 506 -- --
Acquired research and development
write-off......................... -- 6,503 6,503 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses............ 31,869 29,121 59,878 37,010 25,772 28,518 21,777
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)............... 5,207 (2,967) 2,018 5,072 3,491 (1,362) 792
Other income (expense), net........... 92 (65) (178) 107 221 314 122
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes..... 5,299 (3,032) 1,840 5,179 3,712 (1,048) 914
Provision (benefit) for income
taxes............................... 2,112 1,321 3,196 1,916 1,404 (410) 330
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)................... $ 3,187 ($ 4,353) ($ 1,356) $ 3,263 $ 2,308 ($ 638) $ 584
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Diluted earnings (loss) per share..... $ 0.44 ($ 0.72) ($ 0.21) $ 0.54 $ 0.41 ($ 0.12) $ 0.10
Weighted average common and common
share equivalents outstanding
assuming dilution................... 7,270 6,084 6,317 6,079 5,582 5,424 5,585
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31 AT JUNE 30
-------------------- -----------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................ $ 16,936 $ 11,685 $ 13,575 $ 7,897 $ 7,538 $ 6,363 $ 9,466
Total assets................................... 73,923 54,866 66,382 44,252 30,463 26,069 24,473
Total long-term debt, net of current........... 4,151 4,295 2,305 530 -- 138 335
Total shareholders' equity..................... 35,366 27,364 31,301 23,361 17,102 14,508 15,641
</TABLE>
5
<PAGE>
SELECTED FINANCIAL DATA OF DAI
In the table below, we provide you with selected historical financial data
of Distribution Architects International, Inc. We have prepared this information
using the consolidated financial statements of Distribution Architects
International, Inc. for each of the five years in the period ended September 30,
1998 and the three-month periods ended December 31, 1998 and 1997. The financial
statements for each of the five fiscal years in the period ended September 30,
1998 have been audited by Arthur Andersen LLP, independent public accountants.
The financial statements for the three-month periods ended December 31, 1998 and
1997 have not been audited.
When you read this selected historical financial data, it is important that
you read along with it DAI's historical financial statements and related notes,
as well as the "Management's Discussion and Analysis of Financial Condition and
Results of Operations," included herein.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
DECEMBER 31, YEARS ENDED SEPTEMBER 30,
-------------------- -----------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING STATEMENT DATA:
Net revenues...................................... $ 2,953 $ 3,041 $ 13,275 $ 14,282 $ 15,335 $ 12,727 $ 12,526
Cost of revenue................................... 1,203 1,228 5,621 6,437 6,722 6,006 6,984
--------- --------- --------- --------- --------- --------- ---------
Gross margin...................................... 1,750 1,813 7,654 7,845 8,613 6,721 5,542
--------- --------- --------- --------- --------- --------- ---------
Operating expenses
Selling, general and administrative............. 1,356 1,384 6,214 5,484 5,281 4,174 3,287
Research and product development................ 700 500 2,000 2,100 1,600 1,025 850
--------- --------- --------- --------- --------- --------- ---------
Total operating expenses........................ 2,056 1,884 8,214 7,584 6,881 5,199 4,137
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)........................... (306) (71) (560) 261 1,732 1,522 1,405
Other income (expense), net....................... 51 7 25 101 274 83 (5)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) before income taxes................. (255) (64) (535) 362 2,006 1,605 1,400
Provision for (benefit of) income taxes........... (120) (14) (307) 55 803 635 628
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)................................. $ (135) $ (50) $ (228) $ 307 $ 1,203 $ 970 $ 772
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Diluted earnings (loss) per share................. $ (0.03) $ (0.01) $ (0.05) $ 0.06 $ 0.21 $ 0.17 $ 0.14
Weighted average common and common share
equivalents outstanding assuming dilution....... 4,278 4,261 4,280 5,444 5,619 5,617 5,632
</TABLE>
<TABLE>
<CAPTION>
AT DECEMBER 31 AT SEPTEMBER 30,
-------------------- -----------------------------------------------------
1998 1997 1998 1997 1996 1995 1994
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital................................... $ 2,314 $ 3,580 $ 2,375 $ 3,734 $ 2,610 $ 2,358 $ 1,658
Total assets...................................... 9,114 9,747 10,671 10,172 12,524 11,378 9,447
Total long-term debt, net of current.............. 616 1,930 1,047 2,026 1,013 1,097 369
Total shareholders' equity........................ 4,948 5,233 5,083 5,263 4,930 3,756 2,777
</TABLE>
6
<PAGE>
UNAUDITED SELECTED PRO FORMA CONSOLIDATED FINANCIAL DATA
The following unaudited selected pro forma consolidated financial data has
been derived from and should be read in conjunction with the unaudited pro forma
condensed consolidated financial statements and notes thereto included elsewhere
in this proxy statement/prospectus on pages 39 through 42. The following
unaudited selected pro forma consolidated financial data is based on adjustments
to the historical consolidated balance sheets and related consolidated
statements of operations of Symix and DAI to give effect to the merger using the
purchase method of accounting for business combinations. The unaudited pro forma
condensed consolidated statements of operations data for the six months ended
December 31, 1998 and for the year ended June 30, 1998 assume the merger was
effected as of the beginning of each period presented. The unaudited pro forma
condensed consolidated balance sheet as of December 31, 1998 assumes the merger
was effected as of December 31, 1998. This unaudited selected pro forma
consolidated financial data also gives effect to the November 24, 1997
acquisition of the Pritsker Corporation assuming the acquisition occurred on
July 1, 1997. The following unaudited selected pro forma consolidated financial
data may not necessarily reflect the financial condition or results of
operations of Symix that would have actually resulted had the merger occurred as
of the date and for the periods indicated or reflect the future earnings of
Symix.
<TABLE>
<CAPTION>
SIX MONTHS
ENDED YEAR ENDED
DECEMBER 31, JUNE 30,
1998 1998
--------------- -----------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C>
Net revenue..................................................... $ 66,934 $ 112,217
Cost of revenue................................................. 25,885 42,009
------- -----------
Gross Margin.................................................... 41,049 70,208
------- -----------
Operating Expenses
Selling, general, and administrative.......................... 30,522 53,294
Research and product development.............................. 5,646 9,926
------- -----------
Total operating expenses...................................... 36,168 63,220
------- -----------
Operating income................................................ 4,881 6,988
Other income (expense), net..................................... 179 (226)
------- -----------
Income before income taxes...................................... 5,060 6,762
Provision for income taxes...................................... 2,102 2,803
------- -----------
------- -----------
Net income.................................................... $ 2,958 $ 3,959
------- -----------
------- -----------
Diluted earnings per share...................................... $ 0.37 $ 0.51
Weighted average common and common share equivalents outstanding
assuming dilution............................................. 7,895 7,749
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, 1998
-----------------
<S> <C> <C>
Balance Sheet Data:
Working capital................................................................. $ 18,675
Total assets.................................................................... 84,471
Total long-term debt, net of current............................................ 4,767
Total shareholders' equity...................................................... 39,938
</TABLE>
7
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
Symix shares are traded on the Nasdaq National Market under the symbol
"SYMX". As of April 23, 1999, there were approximately 130 holders of record of
Symix shares. Symix believes that there are more than 2,000 beneficial
shareholders of Symix. The table below presents the high and low sales prices
for Symix shares, as reported by the Nasdaq National Market, for fiscal years
1997 and 1998 and for the interim period since June 30, 1998:
<TABLE>
<CAPTION>
1997 (JULY 1, 1996-JUNE 30, 1997) HIGH LOW
------- -------
<S> <C> <C>
First Quarter.................................................................... $ 8 1/2 $ 7 1/4
Second Quarter................................................................... 8 5/8 7 3/8
Third Quarter.................................................................... 10 7/8 7 7/8
Fourth Quarter................................................................... 12 3/8 8
<CAPTION>
1998 (JULY 1, 1997-JUNE 30, 1998) HIGH LOW
------- -------
<S> <C> <C>
First Quarter.................................................................... $21 $10 3/4
Second Quarter................................................................... 19 14
Third Quarter.................................................................... 19 3/8 14
Fourth Quarter................................................................... 22 7/8 18 1/8
<CAPTION>
1999 (JULY 1, 1998-MARCH 31, 1999) HIGH LOW
------- -------
<S> <C> <C>
First Quarter.................................................................... $26 3/8 15 5/8
Second Quarter................................................................... 22 5/8 15 1/4
Third Quarter.................................................................... 24 7/8 15 1/8
</TABLE>
The closing price of Symix shares on March 5, 1999, the last full trading
day prior to the first public announcement of the merger, was $19.25 per share.
The last reported closing price of Symix shares on April 8, 1999, the last full
trading day before public announcement that the merger agreement had been
amended, was $8.75 per share. On April 23, 1999, the last reported closing price
of Symix shares, as reported by the Nasdaq National Market, was $8.3125 per
share.
Symix has never paid cash dividends on its shares. Symix also does not
intend to pay cash dividends on its shares in the foreseeable future.
There is no established public or other trading market for DAI stock. Since
1997, DAI has issued shares of its stock upon the exercise of employee stock
options at a price of $1.242 per share. The stock options were granted with
exercise prices equal to the fair market value of the DAI stock on the date of
grant of the option. Therefore, these prices may not reflect the prices that
would have been paid for the DAI stock on a public market. No dividends have
been paid on DAI stock.
The average of the high and low per share prices of Symix shares on April 8,
1999 (the last full trading day before the public announcement that the merger
agreement had been amended) through April 12, 1999 was $9.00. Based upon this
average, the corresponding per share value of DAI stock is approximately $1.18
per share. This value is determined by multiplying the specified average per
share price of Symix shares by the fraction of a Symix share to be issued for
each share of DAI in the merger.
Shareholders of DAI are advised to obtain current market quotations for
Symix shares.
8
<PAGE>
RISK FACTORS
YOU SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN EVALUATING WHETHER TO
ADOPT THE MERGER AGREEMENT. THESE FACTORS SHOULD BE CONSIDERED IN CONJUNCTION
WITH THE OTHER INFORMATION INCLUDED OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS.
RISKS RELATING TO THE MERGER
WE CANNOT ASSURE YOU THAT THE BUSINESSES OF DAI AND SYMIX WILL BE SUCCESSFULLY
COMBINED.
Unless we can successfully combine our businesses in a timely and efficient
manner, our businesses may be materially adversely affected. The merger will
involve combining companies that have previously operated separately. This
involves a number of risks, including:
- the diversion of management's attention to the integration and combination
of operations;
- difficulties in integrating personnel with different business and
corporate cultural backgrounds;
- challenges in keeping customers;
- difficulties in combining operations and systems;
- the inability to retain key employees; and
- potential short-term adverse effects on operating results, including the
expenditure of significant amounts of financial and other resources in
integrating our businesses.
SINCE THE MARKET PRICE OF SYMIX SHARES WILL VARY, DAI SHAREHOLDERS CANNOT BE
SURE OF THE MARKET VALUE OF THE SYMIX SHARES THEY WILL RECEIVE IN THE MERGER.
At the time that the merger is completed, each share of DAI outstanding will
be converted into the right to receive 0.1313 of a share of Symix. This exchange
ratio is fixed and will not be adjusted in the event of any increase or decrease
in the market price of Symix shares or the fair market value of DAI stock. As a
result, the value of the Symix shares received by DAI shareholders in the merger
will vary with fluctuations in the market price of Symix shares.
VOTING RIGHTS OF DAI MANAGEMENT ARE SUFFICIENT TO APPROVE OR TO DISAPPROVE THE
MERGER AGREEMENT.
When considering the recommendations of the DAI's board of directors, you
should be aware that Thomas Cain, chairman of the board and president of DAI,
holds shares of DAI sufficient to approve or disapprove the merger agreement. In
addition, some executive officers and directors of DAI may have interests in the
merger that are different from yours. These interests include rights they have
under employment agreements or in DAI stock options, and the fact that some
executive officers or directors of DAI may be appointed to serve as executive
officers or directors of the surviving corporation in the merger. In addition,
the current president of DAI, Thomas Cain, will enter into an employment
agreement with the surviving corporation. These interests may create potential
conflicts of interests. DAI's board of directors was aware of these potential
conflicts of interest of DAI executive officers and directors when it approved
the merger agreement and the merger.
RISKS RELATING TO SYMIX
CHANGES IN DEMAND FOR PRODUCTS AND SERVICES COULD CAUSE FLUCTUATIONS IN
QUARTERLY OPERATING RESULTS.
Symix's operating results may vary significantly from quarter to quarter.
Its quarterly operating results are affected by a number of factors that could
materially and adversely affect revenues and profitability. These factors also
make estimation of operating results prior to the end of a quarter extremely
uncertain. These factors include:
9
<PAGE>
- demand for Symix's products and services;
- competitive conditions in the software industry;
- the timing of the introduction or market acceptance of new or enhanced
products offered by Symix or its competitors;
- the potential for delay or deferral of customer purchases of Symix
products in anticipation of product enhancements or new product offerings
by Symix or its competitors:
- the timing of any acquisitions and related write-offs;
- the mix of product and services net revenues;
- the mix of North American and international net revenues; and
- general economic conditions and other factors affecting capital
expenditures by customers.
The purchase of Symix products and services may involve a significant
commitment of capital and other resources by its customers. As a result, the
sales cycles for Symix products and services, from initial evaluation to
delivery or performance, vary from customer to customer. The timing of
individual sales is difficult to predict, and sales can occur in quarters
subsequent to those anticipated by Symix.
Revenues in any quarter are substantially dependent on orders signed and
shipped in that quarter. Typically, Symix realizes higher revenues in its second
and fourth fiscal quarters. Symix generally records a majority of its quarterly
revenues in the third month of each quarter, primarily in the latter half of the
third month. Symix believes that the fluctuations in its operating results is
caused primarily by the budgeting cycles of its customers and the structure of
its sales commission and bonus programs. As a result, Symix's quarterly
operating results are difficult to predict. In addition, delays in product
delivery or in closings of sales near the end of a quarter could cause quarterly
operating results to fall substantially short of anticipated levels.
TERMINATION OF AGREEMENT WITH PROGRESS WOULD REQUIRE SYMIX TO MIGRATE ITS
PRODUCTS TO A DIFFERENT PROGRAMMING LANGUAGE AND COULD RESULT IN A LOSS OF
BUSINESS.
Symix's core product, SyteLine, is written in PROGRESS, a proprietary
programming language licensed by Symix from Progress Software Corporation. Symix
depends upon the license of PROGRESS to its customers and the acceptance of
PROGRESS by its customers. Symix markets and distributes PROGRESS in connection
with the sale of its products under a non-exclusive agreement with Progress. The
agreement may be terminated by either party upon 90 days written notice to the
other party. In addition, the agreement may be terminated immediately by either
party if a material breach of the agreement by the other party continues after
30 days' written notice. Symix's relationship with Progress involves other risks
which could have a material adverse effect on Symix's business, operating
results or financial condition, including the following:
- the failure of Progress to continue its relationship with Symix;
- the failure of Progress to develop, support or enhance PROGRESS in an
manner which is competitive with enhancements of other programming
languages;
- the loss of market acceptance of PROGRESS and its relational database
management system; and
- the inability of Symix to migrate its software products to other
programming languages on a timely basis if PROGRESS is no longer
available.
10
<PAGE>
SYMIX DERIVES A SIGNIFICANT PORTION OF ITS BUSINESS FROM OPERATIONS WHICH ARE
SUBJECT TO FOREIGN ECONOMIC CONDITIONS AND CURRENCY FLUCTUATIONS.
Symix derives a significant portion of its business from international
sales. It expects to continue to expand its international operations, which will
require significant management attention and financial resources. Symix's
international operations are subject to various risks, including the following:
- the impact of a recession in foreign countries, particularly in Europe and
the Asia/Pacific regions;
- cultural and language difficulties associated with serving customers,
localizing and translating products;
- staffing and management problems related to foreign operations;
- exchange controls and reduced protection for intellectual property;
- political instability; and
- fluctuations in foreign exchange rates.
ADVERSE ECONOMIC CONDITIONS IN THE MANUFACTURING INDUSTRY COULD RESULT IN
REDUCED PURCHASES OF SYMIX'S PRODUCTS.
Customers of Symix are primarily manufacturers. Symix's business depends
substantially upon the capital expenditures of its customers. Capital
expenditures by its customers depend upon the demand for manufactured products.
A recession or other adverse economic event affecting manufacturers could cause
them to curtail or delay capital expenditures for computer software products.
Any significant changes in the timing or amount of capital expenditures by
manufacturers could have a material adverse effect on Symix's business,
operating results or financial condition.
PRODUCT DEFECTS COULD RESULT IN A LOSS OF MARKET SHARE OR MATERIAL DELAYS IN THE
RELEASE OF NEW OR ENHANCED PRODUCTS.
Software programs are complex. Upon release, Symix's products may contain
undetected errors which are usually resolved through the regular maintenance and
updating process. However, Symix's products also may contain more serious errors
which may not be detected until the product has been delivered to customers. As
a result of serious errors:
- Symix customers could suffer major business interruptions or other
problems which could lead to claims for damages against Symix;
- Symix customers may delay their purchase of products until they are
satisfied that the problems have been resolved;
- Symix may experience delays in the scheduled release of new or enhanced
products;
- customers may decide not to purchase the defective products or other Symix
products;
- Symix may have to devote significant financial and product development
resources to fix defective products; and
- market acceptance of Symix products may be reduced.
If Symix's products contain serious errors, its business, results of
operations or financial condition may be materially adversely affected.
11
<PAGE>
YEAR 2000 COULD SHIFT CUSTOMERS' SOFTWARE PRODUCT PURCHASES AWAY FROM SYMIX'S
PRODUCTS.
Many currently installed computer software products use only two digits,
rather than four digits, to represent a particular year. Starting in the year
2000, these products will need to accept four digit entries to recognize
twenty-first century dates. The failure of these products to process dates
beyond the year 1999 may result in miscalculations or system failures. Embedded
systems, such as environmental systems controls, elevators and other products
that use microprocessors or computer chips, also may have year 2000 compliance
problems. As a result, these products and systems may need to be upgraded or
replaced to comply with year 2000 requirements.
Symix believes that the current version of its products are year 2000
compliant. Symix does not intend to make all prior versions of its products year
2000 compliant. It has notified its customers as to which versions of its
products will and will not be year 2000 compliant. Symix also has advised its
customers of available upgrades or new releases of older products which are year
2000 compliant.
Symix is in the process of assessing the year 2000 readiness of selected key
suppliers, subcontractors, business partners and customers of Symix. It has
confirmed that products and proprietary technology of others used in its
products are year 2000 compliant.
Symix is in the process of reviewing its internal computer information
system and non-computer systems with embedded computer technology, such as
telecommunications equipment and building elevators, for year 2000 compliance.
Symix believes that such systems are year 2000 compliant.
Symix is subject to various risks related to year 2000 compliance issues,
including:
- customers have allocated significant portions of their information
technology budgets to year 2000 compliance which could diminish demand for
Symix's products;
- some of Symix's products may contain undetected year 2000 problems; and
- the failure of others who provide external services to Symix, such as
public utilities, to be year 2000 ready could adversely impact its
operations.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION
This document contains statements about the merger and about our financial
condition, results of operations, plans, objectives, future performance and
business which we believe are forward looking statements within the meaning of
the safe harbor provisions of the Private Securities Litigation Reform Act of
1995. All statements included or incorporated by reference in this proxy
statement/prospectus or made by management of DAI or Symix other than statements
of historical fact regarding DAI, Symix or the combined company are intended to
be forward-looking statements. This includes information relating to cost
savings, benefits, market positions, product successes, business strategies,
revenues and earnings estimated to result from the merger. In some cases, you
can identify forward-looking statements as those using words like "may," "will,"
"should," "could," "would," "expects," "plans," "anticipates," "believes,"
"estimates," "predicts," "potential," or similar terms. These forward-looking
statements involve risks and uncertainties. Actual results may differ materially
from those predicted in these forward-looking statements because of factors or
possible events, including the following:
- expected savings from the merger are not achieved or are delayed;
- sales following the merger are lower than expected;
- costs or difficulties relating to the combination of our businesses;
- adverse changes in general economic, competitive and market conditions;
- loss of key personnel or the failure to successfully integrate our
personnel;
12
<PAGE>
- increased competition in our industry or markets;
- unsuccessful timing of product development and general release;
- the combined company's inability to resolve any year 2000 issues; and
- decreased demand and market acceptance of the combined company's products.
YOU SHOULD NOT PLACE A LOT OF EMPHASIS ON THESE FORWARD-LOOKING STATEMENTS.
THESE STATEMENTS SPEAK ONLY AS OF THE DATE OF THIS PROXY STATEMENT/PROSPECTUS
AND, IN THE CASE OF ANY DOCUMENT INCORPORATED IN THIS PROXY STATEMENT/PROSPECTUS
BY REFERENCE, THE DATE OF THAT DOCUMENT. WE WILL HAVE NO OBLIGATION TO REVISE
THESE FORWARD-LOOKING STATEMENTS.
THE SPECIAL MEETING
DATE, TIME AND PLACE
The special meeting of shareholders of DAI will be held on June 9, 1999 at
the offices of Squire, Sanders & Dempsey L.L.P. located at Two Renaissance
Square, 40 North Central Avenue, Suite 2700, Phoenix, Arizona, 85004, commencing
at 9:00 a.m., local time.
MATTERS TO BE CONSIDERED
If we meet the terms and conditions of the merger agreement, DAI will merge
with and into Symix Acquisition Corp. After the merger, DAI will be a
wholly-owned subsidiary of Symix. In the merger, each share of DAI issued and
outstanding immediately before the merger will convert into the right to receive
0.1313 of a share of Symix. In the merger, each option to buy DAI stock will be
canceled in exchange for Symix shares based upon the difference between $2.17,
the agreed value of DAI stock, and $1.242, the exercise price of the option,
multiplied by the number of shares of DAI covered by the option, and divided by
$18.50. YOU ARE URGED TO READ THE COPY OF THE MERGER AGREEMENT ATTACHED TO THIS
DOCUMENT AS APPENDIX A.
At the special meeting, shareholders of DAI will vote on a proposal to
approve the merger agreement.
THE DAI BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
THE MERGER AND UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF DAI VOTE "FOR"
APPROVAL OF THE MERGER AGREEMENT.
VOTE REQUIRED
The affirmative vote of holders of two-thirds of the outstanding shares of
DAI is required to approve the merger agreement. Each share of DAI is entitled
to one vote.
Only holders of record of DAI stock at the close of business on April 30,
1999 will be entitled to receive notice of and to vote at the special meeting.
As of April 23, 1999, there were 4,275,452 shares of DAI outstanding. Holders of
a majority of the outstanding shares of DAI entitled to vote, present in person
or represented by proxy, will constitute a quorum for the transaction of
business at the special meeting.
On April 23, 1999, DAI directors and executive officers and their affiliates
may be deemed to beneficially own 4,700,672 shares of DAI, including shares
subject to presently exercisable options. In addition, the current president of
DAI, Thomas Cain, beneficially owns approximately 94% of the outstanding shares
of DAI. Each of the directors and executive officers of DAI has indicated that
he or she intends to vote these shares for approval of the merger agreement.
We will have a list of DAI shareholders entitled to vote at the special
meeting available at the special meeting.
13
<PAGE>
VOTING OF PROXIES
Shares represented by a proxy will be voted at the special meeting as
specified in the proxy. Properly executed proxies that do not contain voting
instructions will be voted "FOR" approval of the merger agreement.
We will count properly executed proxies marked "Abstain" for purposes of
determining whether there is a quorum, but the shares that any of these proxies
represent will not be voted at the special meeting. If you execute and return a
proxy that does not specify otherwise, the shares represented by the proxy will
be voted "FOR" approval of the merger agreement in accordance with the
recommendation of the DAI board of directors.
HOW TO REVOKE A PROXY
Your grant of a proxy on the enclosed proxy card does not prevent you from
voting in person or otherwise revoking your proxy.
You may revoke a proxy at any time before its exercise by delivering a duly
executed revocation or a proxy bearing a later date to Thomas Cain, secretary of
DAI, 905 East Westchester Avenue, Tempe, Arizona 85283-2938, or by giving notice
of revocation at the special meeting. In addition, you may revoke your proxy by
voting your shares in person at the special meeting. The facsimile number for
DAI is (602) 831-7659.
SOLICITATION OF PROXIES
In addition to solicitation by mail, the directors, officers and employees
of DAI may solicit proxies from DAI shareholders by telephone, telecopy,
telegram or in person. DAI will bear the costs of the solicitation of proxies
from its shareholders, except Symix will bear the cost of printing this proxy
statement/prospectus. DAI SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH
THEIR PROXY CARDS.
THE MERGER
The discussion in this proxy statement/prospectus of the merger and the
description of the principal terms and conditions of the merger agreement and
the merger is a summary only. You should refer to the merger agreement for the
details of the merger and the terms and conditions of the merger agreement. We
have attached a copy of the merger agreement to this proxy statement/ prospectus
as Appendix A.
BACKGROUND OF THE MERGER
DAI entered 1998 as a profitable software and services organization with a
strong reputation in the distribution software industry. Although DAI has
extensive product functionality and strong expertise in distribution software,
DAI had not grown its business during the previous four years.
As a private company, DAI has focused primarily on profitability and has
limited the number of new customers it pursues each year. While this has been a
safe strategy in light of the highly fragmented nature and significant size of
the distribution software industry, it is becoming risky as trends in
consolidation become apparent.
With companies more open to "packaged" software applications and the
pressure of the Internet to shrink the distribution supply chain, market
opportunities for DAI products have been growing dramatically. In 1998, DAI
management began reevaluating its approach to the market and noted the following
three key constraints:
- DAI's focus was on profitability and risk aversion instead of growth
opportunities;
14
<PAGE>
- DAI's limited infrastructure prevented it from fully delivering large
scale business applications in the license based business model; and
- DAI believed its market would shift from stand-alone distribution
opportunities to those integrated with manufacturing, and DAI lacked
manufacturing software products and expertise.
After considering funding from venture capital resources and the possible
initial public offering of its stock, DAI concluded that the most effective way
to solve the challenges facing it would be to merge with another software
company that needed distribution expertise and products but which had already
solved the challenges facing DAI.
After researching and analyzing companies specializing in manufacturing
software solutions, on or about September 30, 1998, DAI contacted Symix and
inquired if Symix would be interested in pursuing a partnership or other
strategic relationship with DAI. Since Symix was in the process of reviewing a
number of options to expand its supply chain management product offerings, Symix
proceeded to evaluate DAI as a potential business partner.
On November 12, 1998, a representative of Symix visited with DAI's president
to explore mutual business opportunities. During that visit, the subject of a
possible merger of the two companies was discussed. On November 24, 1998,
Symix's representative visited DAI's offices in Tempe, Arizona to learn more
about DAI's operations and to determine whether DAI might, from Symix's
perspective, be an acquisition candidate. On December, 2, 1998, representatives
of both Symix and DAI met at Symix's offices in Columbus, Ohio to discuss a
possible merger of the two companies. Following that meeting, Symix and DAI
agreed to begin due diligence efforts to determine whether from a product and
technical perspective, the two companies should merge.
During December 1998 and January 1999, several meetings occurred between
representatives of the two companies involving product marketing and development
personnel. On January 27, 1999, Symix's president, Steve Sasser, and chief
financial officer, Larry DeLeon, presented an overview of a possible merger
between DAI and Symix to the Symix board of directors. The Symix board agreed
that Symix should continue discussions with DAI regarding a proposed merger. On
January 29, 1999, representatives of the two companies met in Dallas to review
implications of a possible merger.
On February 11, 1999 Symix verbally made an offer to acquire all of DAI's
outstanding stock in exchange for 550,000 shares of Symix. On February 18 and
19, representatives of the two companies met to negotiate the significant terms
of the merger. At the same time, the companies completed their review and
investigation of the other's business and operations. On February 22 and 23,
1999 representatives of both companies again met in Dallas to finalize the
merger agreement. The merger agreement was executed by the parties on February
24, 1999.
On April 8, 1999, the parties executed an amendment to the merger agreement
which, among other things, modifies the exchange ratio and the conversion
formula for DAI options to be converted in the merger. The closing price of
Symix shares on March 5, 1999, the last full trading day before the first public
announcement of the merger, was $19.25. On April 8, 1999, the last full trading
day before public announcement of the amendment, the closing price of Symix
shares was $8.75 per share. In the amendment, the parties agreed to increase the
maximum number of Symix shares to be issued in the merger from 610,000 to
625,000 as a result of the decrease in the market price of Symix shares between
March 5, 1999 and April 8, 1999. The amendment also provides for revisions to
the employment agreement to be entered into by Thomas Cain, the current
president and chief executive officer of DAI, and the surviving corporation in
the merger.
SYMIX'S REASONS FOR THE MERGER
Symix decided to acquire DAI primarily because the acquisition will add
supply chain planning and execution software to Symix's product line. Symix's
board of directors believes that DAI's products and
15
<PAGE>
expertise will complement Symix's product offering and give the combined company
a competitive advantage. Symix's board of directors also considered DAI's
significant technical expertise regarding distribution software solutions for
manufacturing firms.
DAI'S REASONS FOR THE MERGER
The DAI board of directors believes that the terms of the merger are fair
to, and in the best interests of, DAI and its shareholders. Accordingly, the DAI
board of directors has approved the merger agreement and the merger and
recommends that holders of DAI stock vote for approval of the merger agreement.
Prior to recommending action on the merger, the DAI board of directors
reviewed various materials and engaged in discussions with DAI's management
regarding the business, operations and financial condition of Symix. The DAI
board also reviewed the terms and conditions of the merger with DAI's senior
management. Set forth below are all the material factors in favor of the merger
that the DAI directors considered in reaching its decision to approve the merger
and to recommend that DAI's shareholders vote to approve the merger agreement:
- the merger provides DAI shareholders with Symix shares in a tax-free
exchange at a premium over the [book value] per share price of DAI stock;
- DAI board's assessment that the merger offers DAI shareholders an
opportunity to participate in the long-term growth and appreciation of
DAI's business through their ownership interest in Symix;
- DAI board's assessment that the strategic fit between Symix and DAI
complements the nature of their respective businesses;
- DAI board's belief that the prospects of each of DAI and Symix indicate
that the combined company will have a stronger presence in the enterprise
application software market than either company alone;
- anticipated operating synergies and cost savings, including the
consolidation of certain corporate, administrative and support functions;
however, the DAI board did not consider any quantified amount of cost
savings in reaching its decision to approve the merger; and
- the principal terms and conditions of the merger agreement, in particular:
- that the issuance of Symix shares in the merger is not subject to the
approval of Symix shareholders; and
- current and historical market prices of Symix shares and the premise
that the exchange ratio in the merger agreement represented a premium
over the book value of DAI stock.
Set forth below are all the material factors against the merger that the DAI
board considered in reaching its decision to approve the merger and to recommend
that DAI's shareholders vote to approve the merger agreement:
- Possible management disruption relating to the merger and the risk that,
despite the efforts of the combined company, key personnel of DAI might
decide not to continue their employment with the combined company;
- Possible failure of DAI to be integrated successfully into Symix;
- The fixed exchange ratio, which caps the number of Symix shares that DAI
shareholders would receive upon consummation of the merger if the Symix
share price declines;
16
<PAGE>
- The conditional nature of Symix's obligation to complete the merger, as
set forth in the merger agreement; and
- The restrictions on certain transactions by DAI during the period prior to
completion of the merger.
On balance, however, the DAI board determined that the benefits of the
merger outweighed the potential risks and unanimously approved the merger. The
DAI board did not retain the services of an investment banking firm in
connection with the proposed transaction. The foregoing discussion of
information and factors considered by the DAI board is not intended to be
exhaustive but is intended to include the material factors considered. In view
of the wide variety of factors considered, the DAI board did not find it
practical to, and did not, quantify or otherwise assign relative weight to the
specific factors considered and individual directors may have given different
weight to different factors.
INTERESTS OF DAI EXECUTIVE OFFICERS AND DIRECTORS IN THE MERGER
In considering the merger, holders of DAI stock should be aware that the
directors and executive officers of DAI have interests in the merger in addition
to their interests as shareholders of DAI generally, as described below:
CAIN EMPLOYMENT AGREEMENT. As a condition to the merger, Symix Acquisition
Corp. has agreed to enter into a four-year employment agreement with Thomas
Cain, the president and chief executive officer of DAI. The employment agreement
will become effective upon the closing of the merger. Under the terms of the
employment agreement, Mr. Cain will:
- serve in the capacity of chairman of the board of Symix Acquisition Corp.;
- receive an annual base salary of $260,000, a one-time retention bonus of
$125,000 payable upon consummation of the merger and an annual bonus of
$125,000;
- be eligible to participate in health and welfare plans generally afforded
to Symix employees; and
- agree not to compete with Symix during his term of employment and a period
of one year following termination of his employment for any reason.
If Symix Acquisition Corp. terminates Mr. Cain at any time during the term
of the employment agreement other than for "cause," as defined in the employment
agreement, or if he voluntarily terminates his employment for "Good Reason," as
defined in the employment agreement, he will be entitled to receive;
- a lump sum severance payment equal to the balance of any compensation due
to him under the employment agreement for the remainder of its original
term or any then current extended term; and
- health and welfare benefits for an additional six months following
termination.
The health and welfare benefits will be reduced to the extent comparable
benefits are actually received by Mr. Cain during the six-month period.
The term "cause" is defined under the employment agreement to mean
termination following Mr. Cain's conviction of a crime constituting a felony or
upon his willful and continued failure to substantially perform his duties under
the employment agreement, provided Symix Acquisition Corp. follows certain
procedural requirements set forth in the employment agreement. The term "Good
Reason" is defined to include the occurrence of any of the following events
without Mr. Cain's express written consent:
17
<PAGE>
- the failure of the board of directors of Symix Acquisition Corp. to elect
him as chairman of the board or the assignment to him of duties
inconsistent with those described in the employment agreement;
- a reduction of his base salary or the failure to provide any portion of
his then current compensation or any fringe benefits provided for under
the employment agreement; or
- the relocation of Symix Acquisition Corp.'s offices to a location more
than 50 miles from the present location of DAI or the requirement that Mr.
Cain travel out of town more than two weeks each calendar month.
DAI OPTIONS. At February 28, 1999, executive officers of DAI held options
to acquire an aggregate of 1,183,773 shares of DAI stock. Under the terms of the
option plan under which these options were granted, the options will expire upon
consummation of the merger. However, under the terms of the merger agreement,
the option holders will receive Symix shares based on a formula set forth in the
merger agreement. See "The Merger Agreement--The merger."
ACCOUNTING TREATMENT
The merger will be accounted for by Symix using the purchase method of
accounting as contemplated by Accounting Principles Board Opinion No. 16. Under
this method of accounting, the purchase price will be allocated to the fair
value of the net assets acquired. Symix currently estimates that it will incur a
nonrecurring charge of approximately $1,053,000 relating to the write-off of
acquired in-process technology of DAI, which will occur in the quarter in which
the merger is completed.
FEDERAL INCOME TAX CONSEQUENCES
The following discussion summarizes the material federal income tax
considerations of the merger that are generally applicable to holders of DAI
stock who hold DAI stock as a capital asset. This discussion is based on
currently existing provisions of the Internal Revenue Code, the Treasury
Regulations adopted under the Code and current administrative rulings and court
decisions. All of these laws, regulations, rulings and decisions are subject to
change. Any such change, which may be retroactive, could alter the tax
consequences described in this proxy statement/prospectus.
DAI shareholders should be aware that this discussion does not deal with all
federal income tax considerations that may be relevant to particular DAI
shareholders in light of their particular circumstances, including shareholders:
- who are dealers in securities;
- who are subject to the alternative minimum tax provisions of the Code;
- who are foreign persons; or
- who acquired their shares in connection with stock option or stock
purchase plans or in other compensatory transactions.
In addition, the following discussion does not address the tax consequences
of the merger under foreign, state or local tax laws or the tax consequences of
the exercise of DAI stock options or any other transactions occurring prior to
or after the merger. ACCORDINGLY, DAI OPTION HOLDERS AND SHAREHOLDERS ARE URGED
TO CONSULT THEIR OWN TAX ADVISORS AS TO THE SPECIFIC CONSEQUENCES OF THE MERGER,
INCLUDING THE APPLICABLE FEDERAL, STATE, LOCAL AND FOREIGN TAX CONSEQUENCES TO
THEM OF THE MERGER IN THEIR PARTICULAR CIRCUMSTANCES.
Neither DAI nor Symix has requested a ruling from the Internal Revenue
Service with regard to any of the federal income tax consequences of the merger.
In connection with the consummation of the merger, Squire, Sanders & Dempsey
L.L.P., counsel to DAI, will render an opinion addressed to DAI
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that the merger will constitute a reorgainzation under Section 368(a) of the
Code. The tax opinion will be based on various assumptions as well as
representations received from DAI, Symix, and the principal shareholder of DAI
including representations concerning the "continuity of interest" requirement
discussed below, and is subject to the limitations discussed below. The tax
opinion will not be binding on the IRS nor preclude the IRS from adopting a
contrary position.
Subject to the limitations and qualifications referred to in this proxy
statement/prospectus, it is the opinion of Squire, Sanders & Dempsey L.L.P.
that:
- the merger qualifies as a reorganization within the meaning of Section
368(a) of the Internal Revenue Code; and
- no gain or loss will be recognized by the shareholders of DAI on the
exchange of their DAI stock solely for Symix shares.
In addition, the merger will have the following federal income tax
consequences:
- the federal income tax basis of Symix shares received by the shareholders
of DAI for their DAI stock, including fractional share interests to which
the shareholder might otherwise be entitled, will be the same as the
federal income tax basis of the DAI stock surrendered in exchange for the
Symix shares;
- the holding period of the Symix shares received by a shareholder of DAI in
exchange for his DAI stock will include the period for which the DAI stock
was held, provided that the exchanged DAI stock was held as a capital
asset by the shareholder at the effective time of the merger;
- a shareholder of DAI who receives cash in lieu of fractional shares under
the terms of the merger agreement will recognize capital gain or loss
measured by the difference between the amount of cash received and the
shareholder's basis in the fractional shares, unless the distribution is
essentially equivalent to a dividend within the meaning of Section
302(b)(1) of the Code (a "Dividend Equivalent Transaction"), in which case
the cash received would be treated as ordinary dividend income;
- a shareholder of DAI who exercises dissenters' rights and receives payment
for his DAI stock in cash will recognize capital gain or loss, measured by
the difference between the amount of cash received and the shareholder's
basis in the stock, provided that the payment is not a Dividend Equivalent
Transaction;
- a shareholder of DAI who receives only cash incident to an exercise of
dissenters' rights generally will not be treated as having engaged in a
Dividend Equivalent Transaction if the DAI shareholder owns no Symix
shares within the meaning of Section 318 of the Code, at the effective
date; and
- none of DAI, Symix or Symix Acquisition Corp. will recognize gain solely
as a result of the merger.
The tax opinion is subject to various assumptions and qualifications and is
based on the truth and accuracy of various representations of DAI and Symix,
including representations in certificates delivered to counsel to DAI by the
respective managements of DAI and Symix and by the principal shareholder of DAI.
Of particular importance are the assumptions and representations relating to the
"continuity of interest" requirement.
The continuity of interest requirement is satisfied if a substantial part of
the proprietary interest in DAI is preserved in the merger. A substantial part
of the proprietary interest in DAI will generally be preserved in the merger if
the aggregate amount of Symix shares received by DAI shareholders in the merger
represents a substantial portion of the entire consideration received by the DAI
shareholders as
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a result of the merger. In determining whether a substantial proprietary
interest in DAI is preserved, dispositions of Symix shares received in exchange
for DAI stock negatively affect continuity of interest if such Symix shares are
acquired either by Symix or by one of its related entities. The definition of
related entity for this purpose is primarily based on the definition prescribed
in Section 1.368-1(e)(3) of the Treasury Regulations. Although representations
have been received from DAI, Symix and the principal shareholder of DAI
evidencing that the continuity of interest requirement will likely be satisfied,
no assurance can be made that the requirement will in fact be satisfied. If the
continuity of interest requirement were not satisfied, the merger would not be
treated as a reorganization.
A successful IRS challenge to the reorganization status of the merger, as a
result of a failure of the "continuity of interest" requirement or otherwise,
would result in significant tax consequences. A DAI shareholder would recognize
gain or loss with respect to each share of DAI surrendered equal to the
difference between the shareholder's basis in the share and the fair market
value, as of the effective time, of the Symix shares received in exchange for
the DAI stock. In that event, a shareholder's aggregate basis in the Symix
shares so received would equal their fair market value, and the shareholder's
holding period for the shares would begin upon receipt of the DAI stock.
The foregoing discussion is based on the existing provisions of the Code and
existing judicial and administrative interpretations of the Code, any of which
may be altered retroactively.
The federal income tax discussion set forth above is included for general
information only. DAI shareholders and option holders are urged to consult their
own tax advisors for more specific and definitive advice as to the federal
income tax consequences to them from the conversion of their shares of DAI in
the merger, as well as advice as to the application and effect of state, local
and foreign income and other tax laws.
RESTRICTIONS ON RESALES OF SYMIX SHARES BY AFFILIATES OF DAI
Symix shares received by DAI shareholders in the merger will be freely
transferable, except those received by "affiliates" of DAI or Symix, as that
term is defined in Rule 145 under the Securities Act. Persons who may be
considered affiliates of an entity generally include individuals or entities
that it controls, or that control it, or that are under common control with it.
These persons may include its officers, directors and principal shareholders.
Symix shares received in the merger by persons who are affiliates of DAI and do
not become affiliates of Symix may be resold by them only in transactions
permitted by the resale provisions of Rule 145 under the Securities Act or as
otherwise permitted under the Securities Act.
The merger agreement requires DAI to use its reasonable best efforts to
cause each DAI affiliate to sign and deliver a letter to Symix agreeing to
comply with these requirements.
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THE MERGER AGREEMENT
This is a summary of the material provisions of the merger agreement, a copy
of which is attached as Appendix A to and incorporated into this proxy
statement/prospectus. You should refer to the full text of the merger agreement
for details of the merger and all the terms and conditions of the merger
agreement.
THE MERGER
If the merger occurs, DAI will be merged with and into Symix Acquisition
Corp., the surviving corporation in the merger. The name of the surviving
corporation will be changed to "DISTRIBUTION ARCHITECTS INTERNATIONAL, INC." As
a result, DAI will become a wholly-owned subsidiary of Symix and DAI
shareholders will become shareholders of Symix.
Each share of DAI outstanding immediately before the merger automatically
will be converted into the right to receive 0.1313 of a share of Symix. This
fraction is referred to in this proxy statement/ prospectus as the exchange
ratio. All outstanding shares of DAI will be canceled and retired. Each holder
of a certificate representing any shares of DAI will no longer have any rights
with respect to shares of DAI, except for the right to receive Symix shares.
Each share of DAI held in DAI's treasury or held by Symix or their subsidiaries
at the time of the merger will be canceled without any payment.
In the merger, each DAI option outstanding immediately prior to the
effective time will be canceled and terminated. The holder of the option will be
entitled to receive that number of Symix shares equal to $2.17 (the per share
value of DAI stock as agreed to by DAI and Symix) less $1.242 (the stock option
exercise price), multiplied by the number of shares of DAI covered by the
option, and divided by $18.50.
EFFECTIVE TIME OF THE MERGER
The merger will become effective after articles of merger have been filed
with the Secretary of State of Texas and a certificate of merger has been filed
with the Secretary of State of Ohio. However, we may agree on a later time and
specify that time in the articles of merger or the certificate of merger. We
will file the articles of merger and the certificate of merger as soon as
practicable after the satisfaction or waiver of all of the conditions in the
merger agreement. We cannot assure you when, or if, all of the conditions to
consummation of the merger will be satisfied or waived.
PROCEDURES FOR EXCHANGE OF CERTIFICATES
After the merger, Fifth Third Bank, N.A., as the exchange agent, will mail
to each person who held shares of DAI at the time of the merger a letter of
transmittal. The holder should use this letter of transmittal to forward DAI
stock certificates. This letter of transmittal will include instructions for the
exchange of DAI stock certificates for Symix share certificates. After
surrendering a DAI stock certificate together with a letter of transmittal, the
holder of the DAI stock certificate will be entitled to receive a Symix share
certificate. DAI SHAREHOLDERS SHOULD NOT SEND IN THEIR DAI STOCK CERTIFICATES
UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.
In addition to a certificate representing Symix shares, the holder of a
surrendered DAI stock certificate will receive any cash in lieu of a fractional
share of Symix to which the holder is entitled. The amount of cash payable for
the fractional share will be equal to the closing price per share for Symix
shares at the effective time of the merger multiplied by the fractional interest
of a Symix share to which the holder is entitled.
After the merger, there will be no further transfers of DAI shares on the
transfer books of DAI.
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REPRESENTATIONS AND WARRANTIES
The merger agreement contains customary representations and warranties of
Symix and DAI, including essentially reciprocal representations and warranties
made by each of us relating to:
- due organization, good standing and corporate power;
- authorization, execution, delivery and enforceability of the merger
agreement;
- noncontravention of charter documents;
- no violations of any laws, regulations, governmental order, contracts,
leases and other agreements;
- receipt of required consents and approvals;
- subsidiaries;
- capitalization and securities;
- absence of matters that would prevent the merger from being treated as a
tax-free merger;
- brokers and finder's fees;
- absence of any untrue statement in the merger agreement and related
documents; and
- receipt of governmental authorizations and compliance with regulations.
In addition, the merger agreement contains representations and warranties of DAI
relating to:
- delivery, accuracy and fair presentation of financial statements;
- no material changes or events since January 31, 1999;
- ownership and condition of property and other assets;
- absence of defaults under leases of material properties;
- tax matters;
- contracts and commitments;
- material litigation;
- intellectual property and year 2000 compliance;
- compliance with applicable laws;
- compliance with environmental laws;
- compliance of benefit plans with applicable laws:
- transactions with affiliates;
- accounting practices and minute books;
- insurance;
- product and service warranties; and
- customer relations.
The merger agreement also contains representations and warranties of Symix
relating to:
- accuracy of reports filed under the Securities Exchange Act of 1934 since
June 30, 1998;
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- accuracy and compliance with generally accepted accounting principles of
financial statements; and
- absence of material nondisclosed liabilities.
COVENANTS
In the merger agreement, Symix and DAI each have agreed to use its best
efforts to cause the merger to be treated as a tax-free reorganization for
federal income tax purposes, except for cash paid for fractional share interests
or to dissenting shareholders of DAI; and
In the merger agreement, DAI also has agreed to:
- conduct its business in the ordinary course, consistent with past
practices;
- use its reasonable best efforts to keep its business organization and
relationships with third parties intact; and
- keep available the services of its officers and employees.
In addition, DAI has agreed that before the merger, it will not:
- take any action which will result in any material adverse change in its
financial condition, properties or operations;
- issue any additional securities;
- declare or pay any dividends;
- make any commitment to purchase or spend more than $25,000 in any single
transaction;
- redeem, purchase or otherwise acquire any of its own securities or agree
to do so;
- pay or agree to pay any compensation or severance to DAI personnel, except
as specifically provided in a schedule to the merger agreement or for
regular payments at the rate in effect on the date of the merger
agreement;
- agree to dispose of or encumber any of its assets, except in the ordinary
course of business;
- amend its charter documents or by-laws;
- incur any indebtedness for borrowed money;
- create or allow to be created any new encumbrances of any nature on its
assets, except in the ordinary course of business;
- take any action that would make any representation and warranty of DAI in
the merger agreement inaccurate;
- omit to take any action necessary to prevent any representation or
warranty of DAI in the merger agreement from being inaccurate in any
material respect;
- provide any information concerning the merger to, or initiate or solicit
discussions with, any third party concerning any merger in which DAI is
not the acquirer, or the sale of any of its capital stock or substantial
assets or similar transaction; or
- agree to do any of the foregoing.
In addition, DAI has agreed to:
- consult with Symix regarding all significant developments relating to DAI;
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- cooperate with Symix in preparing and filing a registration statement with
the SEC covering the Symix shares to be issued in the merger;
- provide Symix and its representatives with access to DAI books and records
and personnel, subject to confidentiality provisions contained in the
merger agreement;
- cause a meeting of DAI shareholders to be held to vote on approval of the
merger agreement, or to obtain the required written consents from DAI
shareholders regarding approval of the merger agreement, as permissible
under Texas law; and
- use its best efforts to cause each affiliate of DAI to sign and deliver a
letter to Symix agreeing not to dispose of the Symix shares received by
the affiliates in the merger except in compliance with the requirements of
Rule 145 under the Securities Act.
In the merger agreement, Symix also has agreed to:
- prepare and file a registration statement with the SEC under the
Securities Act to register the Symix shares to be issued in the merger;
- cause the Symix shares to be issued in the merger to be listed on the
Nasdaq National Market;
- provide DAI and its representatives with access to Symix's books and
records and personnel, subject to confidentiality provisions contained in
the merger agreement; and
- use its best efforts to file on a timely basis all reports required to be
filed by Symix under Section 13 of the Exchange Act.
CONDITIONS TO THE MERGER
The obligations of both Symix and DAI to complete the merger are subject to
the satisfaction or waiver of various conditions, which include, in addition to
other customary closing conditions:
- the merger agreement shall have been approved by DAI shareholders; and
- the registration statement of which this proxy statement/prospectus is a
part shall have become effective and no stop order suspending its
effectiveness or proceedings shall have been issued or commenced.
In the merger agreement, each party is obligated to complete the merger only
if, prior to the merger, nothing has happened to the other party's capital
stock, assets or business, and there are no claims asserted against the other
party, which is likely to have a material adverse affect on the operations, net
worth, business or assets of the other party. In addition, the merger agreement
obligates each party to complete the merger only if, before the merger, the
following conditions are satisfied:
- the representations and warranties of the other party in the merger
agreement are accurate in all material respects as of the closing date;
- the other party has materially complied with all terms, covenants and
conditions required by the merger agreement to be complied with by it on
or prior to the merger; and
- the other party has obtained all consents required to be obtained by it to
complete the merger.
Also, Symix is not obligated to complete the merger:
- unless each affiliate of DAI has signed and delivered to Symix a letter
agreeing to comply with the requirements of Rule 145 under the Securities
Act;
- if there is any damage or destruction to or loss of any assets of DAI
which, in the aggregate, has a material adverse effect on DAI; and
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- unless DAI gives notice that specified employment agreements with DAI
employees will not be renewed.
TERMINATION OF THE MERGER AGREEMENT
The parties to the merger agreement may terminate and abandon the merger by
mutual consent at any time before completing the merger. The merger agreement
may be terminated by either Symix or DAI at any time before and including the
closing date specified in the merger agreement if:
- a material default is made by the other party in observing or timely
performing any of the terms of the merger agreement to be performed by it
and the default cannot be cured prior to the closing;
- any of the conditions precedent to its obligation to close has not been
satisfied before the closing; or
- the merger has not been completed by June 30, 1999.
If the merger agreement is terminated, it will become void and have no
effect, and there will be no liability of either party to the other party,
except that:
- Symix may recover from DAI an amount equal to the expenses incurred by
Symix in connection with the merger if the merger agreement is terminated
by DAI other than as permitted under its terms or if the merger agreement
is terminated by Symix because of one or more of Symix's conditions to the
merger has not been satisfied, including:
(1) Symix discovers an error or misstatement in any representations or
warranties of DAI in the merger agreement which would likely have a
material adverse effect on DAI or the surviving corporation in the
merger or would prevent the merger from qualifying as a tax-free
reorganization;
(2) DAI fails to perform and comply with, in all material respects, the
terms and conditions of the merger agreement;
(3) there occurs a change in DAI's stock, assets or business, or a claim
is asserted against DAI, which is reasonably likely to materially
and adversely affect DAI;
(4) DAI fails to obtain all consents required in connection with the
performance of its obligations under the merger agreement, or all
consents required under any contracts or commitments which are
deemed material by Symix;
(5) DAI shareholders fail to approve the merger agreement or the merger;
(6) holders of more than 5% of the outstanding shares of DAI demand
appraisal rights with respect to their shares;
(7) less than all of DAI's affiliates sign and deliver a letter to Symix
agreeing to comply with the requirements of Rule 145 under the
Securities Act in transferring the Symix shares received by them in
the merger; or
(8) there occurs any loss of any assets of DAI which, taken as a whole,
would have a material adverse effect on DAI's business or
operations,
provided, however, that DAI will not be liable to Symix as the result of the
failure of any condition described in (6), (7), or (8) above unless DAI has
taken or failed to take any action which causes the failure of the condition;
and
- DAI may recover from Symix an amount equal to the expenses incurred by DAI
in connection with the merger if the merger agreement is terminated by
Symix other than as permitted under
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its terms or if the merger agreement is terminated by DAI because of one
or more of DAI's conditions to the merger has not been satisfied,
including:
(1) any of the representations and warranties of Symix in the merger
agreement are materially breached;
(2) Symix or Symix Acquisition Corp. fails to perform and comply with in
all material respects the terms and conditions of the merger
agreement;
(3) Symix and Symix Acquisition Corp. fail to obtain all consents
required in connection with the performance of their obligations
under the merger agreement;
(4) Symix and Symix Acquisition Corp. fail to support the merger
agreement in any proceeding before any regulatory authority; or
(5) Symix and Symix Acquisition Corp. knowingly takes action which may
interfere unreasonably with the business or operations of DAI;
provided, however, that Symix will not be liable to DAI as the result of the
failure of any condition described in (3) or (5) above unless Symix or Symix
Acquisition Corp. has taken or failed to take any action which causes the
failure of the condition.
AMENDMENT AND WAIVER
The parties may amend the merger agreement at any time before or after the
special meeting. However, the merger agreement may not be amended by the parties
if further shareholder approval is required under law without that shareholder
approval. Any provision of the merger agreement may be waived in writing by the
party entitled to the benefits of the provision.
BOARD OF DIRECTORS AND MANAGEMENT OF SYMIX FOLLOWING THE MERGER
After the merger, the board of directors and executive officers of Symix and
Symix Acquisition Corp. will be the same persons who presently serve on the
boards of directors and as the executive officers of Symix and Symix Acquisition
Corp., respectively, except that Thomas Cain, the current president and chairman
of the board of DAI, will be elected to serve as the chairman of the board of
Symix Acquisition Corp.
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RIGHTS OF DISSENTING SHAREHOLDERS
The Texas Business Corporations Act generally provides that any shareholder
of a Texas corporation shall have the right to DISSENT from any plan of merger
to which the corporation is a party if shareholder approval is required.
Set forth below is a summary of the procedures relating to the exercise of
the right to dissent as provided in the Texas Act. The summary does not purport
to be complete and is qualified in its entirety by reference to Articles 5.11,
5.12 and 5.13 of the Texas Act. A copy of these provisions are attached to this
proxy statement/prospectus as Appendix B. FAILURE TO COMPLY WITH ANY OF THE
REQUIRED STEPS MAY RESULT IN TERMINATION OF A SHAREHOLDER'S RIGHT TO DISSENT.
Each DAI shareholder has a right to DISSENT to the merger which can be
exercised only by complying with the following procedures:
- the DAI shareholder must file with DAI, prior to the special meeting, a
written objection to the merger, stating that the shareholder's right to
dissent will be exercised if the merger becomes effective. The objection
must include the shareholder's address to which notice shall be delivered
in the event that the merger is consummated;
- if the merger is completed the shareholder must not vote in favor of the
merger;
- the surviving corporation must, within ten days after the merger is
effective, deliver to the shareholder written notice that the merger has
been effected;
- the shareholder may, within ten days from the delivery or mailing of the
notice, make written demand on the surviving corporation for payment of
the fair value of the shareholder's shares of DAI.
- the demand must state the number of shares of DAI owned by the shareholder
and the fair value of the shares as estimated by the shareholder.
- within twenty days after demanding payment for his shares, each
share-holder so demanding payment must submit the certificates formerly
representing shares of DAI to the surviving corporation for notation on
the certificates that demand for payment has been made; The failure of a
shareholder to do so will, at the option of the surviving corporation,
terminate the shareholder's rights to dissent, unless a court of competent
jurisdiction for good and sufficient cause otherwise directs.
- within twenty days after receipt by the surviving corporation of a demand
for payment made by a dissenting shareholder, the surviving corporation
must deliver to the dissenting shareholder a written notice that will
either:
- state that the surviving corporation will accept the amount claimed in
the demand and agrees to pay that amount within ninety days after the
date on which the merger was effected, upon the surrender of the share
certificates duly endorsed; or
- contain an estimate by the surviving corporation of the fair value of
the shares of DAI, together with an offer to pay the amount of that
estimate within ninety days after the date on which the merger was
effected, upon receipt of notice within sixty days after that date from
the shareholder that the shareholder agrees to accept that amount, upon
the surrender of the certificates duly endorsed.
A DAI shareholder who votes in favor of the merger will be deemed to have
waived the right to dissent. However, as described above, a vote against the
merger alone will not satisfy the requirements of the Texas Act relative to the
right to dissent.
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The fair value of the DAI stock will be its value as of the day immediately
preceding the special meeting, excluding any appreciation or depreciation in
anticipation of the merger.
Any DAI shareholder who has demanded payment for his shares in accordance
with the Texas Act will not subsequently be entitled to vote and will not have
any other rights of a shareholder except the right to receive payment for his
shares of DAI in accordance with the Texas Act and the right to maintain an
appropriate action to obtain relief on the ground that the merger would be or
was fraudulent. The respective shares of DAI for which payment has been properly
demanded will not subsequently be considered outstanding for the purposes of any
vote of shareholders.
If, within sixty days after the date on which the merger was effected, the
value of the shares of DAI is agreed upon between the shareholder and the
surviving corporation, payment for the shares must be made within ninety days
after the date on which the merger was effected. Payment is subject to surrender
of the share certificates duly endorsed for transfer to the surviving
corporation.
If, within the period of sixty days after the date on which the merger was
effected, the dissenting shareholder and the surviving corporation do not so
agree, then the shareholder or the surviving corporation may, within sixty days
after the expiration of the sixty day period, file a petition in any court of
competent jurisdiction in Angelina County, Texas asking for a finding and
determination of the fair value of the shareholder's shares of DAI.
After the hearing on the petition, the court is required to determine the
shareholders who have complied with the provisions of Article 5.12 of the Texas
Act and have become entitled to the valuation of and payment for their shares
and must appoint one or more qualified appraisers to determine that value. In
addition to having the power to examine the books and records of the surviving
corporation, the appraisers are required to afford a reasonable opportunity to
the interested parties to submit to the appraisers pertinent evidence as to the
value of the shares of DAI. The appraisers must determine the fair value of the
shares and file their report of that value in the office of the court clerk.
Notice of the filing of the appraisers' report is required to be given by
the clerk to the parties in interest. The report is subject to exceptions to be
heard before the court both upon the law and the facts. The court is required by
its judgment to determine the fair value of the shares and is required to direct
the payment of that value by DAI together with interest to the date of the
judgment. The judgment is required to be paid to the holders of shares
represented by certificates only upon, and simultaneously with, the surrender to
the surviving corporation of duly endorsed certificates for the shares. Upon
payment of the judgment, the dissenting shareholders will cease to have any
interest in the shares or in the surviving corporation.
Any shareholder who has demanded payment for his shares of DAI in accordance
with the Texas Act may withdraw his demand at any time before payment for his
shares or before any petition has been filed under the Texas Act asking for a
finding and determination of the fair value of the shares, but no demand may be
withdrawn after payment has been made or, unless the surviving corporation
consents, after the petition has been filed. However, if:
- the demand is withdrawn as provided above;
- the surviving corporation terminates the shareholder's rights to dissent
under the Texas Act;
- no petition asking for a finding and determination of fair value of the
shares of DAI by a court has been filed within the time provided in the
Texas Act; or
- after the hearing of a petition filed under the Texas Act, the court
determines that the shareholder is not entitled to the relief provided by
the Texas Act;
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then the shareholder and all persons claiming under him will be conclusively
presumed to have approved and ratified the merger and will be bound by the
merger. He will be entitled to receive any dividends or other distributions made
to shareholders in the interim.
It is a condition to Symix's obligation to consummate the merger that not
more than five percent of the outstanding shares of DAI will constitute
dissenting shares.
Exercise of the right to dissent under the Texas Act may result in a
judicial determination that the "fair value" of a dissenting shareholder's
shares of DAI is higher or lower than the value of the consideration to be
received under the merger agreement.
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements reflect adjustments to the historical consolidated balance sheets and
statements of operations of Symix and DAI to give effect to the merger, using
the purchase method of accounting for a business combination. The unaudited pro
forma condensed consolidated statements of operations for the six months ended
December 31, 1998 and for the year ended June 30, 1998 assume the merger was
effected as of the beginning of each period presented. The unaudited pro forma
condensed consolidated balance sheet as of December 31, 1998 assumes the merger
was effected as of December 31, 1998. The unaudited pro forma condensed
consolidated financial statements also give effect to the November 27, 1997
acquisition of the Pritsker Corporation assuming the acquisition occurred on
July 1, 1997.
The fiscal year ends of Symix and DAI occur at different dates. Symix's
fiscal year end is June 30 and DAI's fiscal year end is September 30. In order
to present the pro forma consolidated results on a comparable basis, various
adjustments were made to DAI's results of operations for the periods presented
to conform to those of Symix.
The following unaudited pro forma condensed consolidated financial
statements have been prepared from, and should be read in conjunction with, the
historical consolidated financial statements and notes thereto of Symix,
incorporated by reference into this proxy statement/prospectus, and the
historical consolidated financial statements of DAI included in this proxy
statement/prospectus. The following unaudited pro forma condensed consolidated
statements of operations are not necessarily indicative of the results of
operations that would have occurred had the merger occurred at the dates
indicated, nor are they necessarily indicative of future operating results of
the combined company.
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<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PRO FORMA PRO FORMA
SYMIX DAI, INC. ADJUSTMENTS CONSOLIDATED
------- --------- -------------- ------------
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............. $ 3,024 $ 948 $ (225)(C) $ 3,747
Trade accounts receivable............. 39,980 4,140 44,120
Other current assets.................. 3,995 776 4,771
------- --------- ------- ------------
Total current assets.................... 46,999 5,864 (225) 52,638
Other assets:
Capitalized software.................. 12,104 -- 3,313(D) 15,417
Intangibles, net...................... 6,020 -- 529(D) 6,549
Other assets.......................... 2,039 159 2,198
------- --------- ------- ------------
Total other assets...................... 20,163 159 3,842 24,164
Net equipment and improvements.......... 6,761 3,091 (2,183)(D) 7,669
------- --------- ------- ------------
Total assets............................ $73,923 $9,114 $ 1,434 $84,471
------- --------- ------- ------------
------- --------- ------- ------------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued
expenses............................ $10,711 $ 935 $11,646
Deferred revenue...................... 16,997 -- 16,997
Other current liabilities............. 2,355 2,615 350(C) 5,320
------- --------- ------- ------------
Total current liabilities............... 30,063 3,550 350 33,963
Non-current liabilities................. 8,494 616 1,460(D) 10,570
Shareholders' equity:
Common stock.......................... 24,908 180 5,445(A) 30,533
Convertible preferred stock of
subsidiary.......................... 783 -- -- 783
Retained earnings..................... 10,995 4,870 (4,870)(B) --
-- -- (1,053)(D) 9,942
Treasury stock (1,320) (102) 102(B) (1,320)
------- --------- ------- ------------
Total shareholders' equity............ 35,366 4,948 (376) 39,938
------- --------- ------- ------------
Total liabilities and shareholders'
equity................................ $73,923 $9,114 $ 1,434 $84,471
------- --------- ------- ------------
------- --------- ------- ------------
</TABLE>
30
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED DECEMBER 31, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SYMIX DAI PRO FORMA
SIX MONTHS SIX MONTHS SIX MONTHS
ENDED ENDED PRO FORMA ENDED
DEC. 31, 1998 DEC. 31, 1998 ADJUSTMENTS DEC. 31, 1998
------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Net revenue............................. $59,992 $6,942 $66,934
Cost of revenue......................... 22,916 2,808 $ (161)(E) 25,885
------------- ------ ------- -------------
Gross margin............................ 37,076 4,134 (161) 41,049
------------- ------ ------- -------------
Selling, general and administrative..... 27,423 3,099 30,522
Research and product development........ 4,446 1,200 5,646
------------- ------ ------- -------------
Total operating expenses................ 31,869 4,299 36,168
------------- ------ ------- -------------
Operating income (loss)................. 5,207 (165) (161) 4,881
Other income, net....................... 92 87 179
------------- ------ ------- -------------
Income (loss) before income taxes....... 5,299 (78) (161) 5,060
Provision (benefit) for income taxes.... 2,112 (10) 2,102
------------- ------ ------- -------------
Net income (loss)....................... $ 3,187 ($ 68) (161) $ 2,958
------------- ------ ------- -------------
------------- ------ ------- -------------
Basic EPS:
Net income (loss) per share........... $ 0.48 ($0.02) $ 0.41
------------- ------ ------- -------------
------------- ------ ------- -------------
Diluted EPS:
Net income (loss) per share........... $ 0.44 ($0.02) $ 0.37
------------- ------ ------- -------------
------------- ------ ------- -------------
Weighted average number of common shares
outstanding........................... 6,635 4,278 (3,653)(F) 7,260
------------- ------ ------- -------------
------------- ------ ------- -------------
Weighted average number of common shares
outstanding assuming dilution......... 7,270 4,278 (3,653)(F) 7,895
------------- ------ ------- -------------
------------- ------ ------- -------------
</TABLE>
31
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED JUNE 30, 1998
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
SYMIX DAI PRO FORMA
TWELVE MONTHS TWELVE MONTHS DAI PRITSKER TWELVE MONTHS
ENDED ENDED PRO FORMA PRO FORMA ENDED
JUNE 30, 1998 JUNE 30, 1998 ADJUSTMENTS ADJUSTMENTS(G) JUNE 30, 1998
------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Net revenue............................. $97,597 $13,456 -- $ 1,164 $112,217
Cost of revenue......................... 35,701 5,986 $ 322(E) 42,009
------------- ------------- ------- ------- -------------
Gross margin............................ 61,896 7,470 (322) 1,164 70,208
------------- ------------- ------- ------- -------------
Selling, general and administrative..... 45,474 6,147 -- 1,673 53,294
Research and product development........ 7,901 2,025 -- 9,926
Acquisition research and development
write-off............................. 6,503 -- (6,503)
------------- ------------- ------- ------- -------------
Total operating expenses................ 59,878 8,172 -- (4,830) 63,220
------------- ------------- ------- ------- -------------
Operating income (loss)................. 2,018 (702) (322) 5,994 6,988
Other income (expense), net............. (178) 11 (59) (226)
------------- ------------- ------- ------- -------------
Income (loss) before income taxes....... 1,840 (691) (322) 5,935 6,762
Provision (benefit) for income taxes.... 3,196 (414) -- 21 2,803
------------- ------------- ------- ------- -------------
Net income (loss)....................... ($1,356) ($ 277) (322) $ 5,914 $ 3,959
------------- ------------- ------- ------- -------------
------------- ------------- ------- ------- -------------
Basic EPS:
Net income (loss) per share........... ($ 0.21) ($ 0.06) -- -- $ 0.55
------------- ------------- ------- ------- -------------
------------- ------------- ------- ------- -------------
Diluted EPS:
Net income (loss) per share........... ($ 0.21) ($ 0.06) -- -- $ 0.51
------------- ------------- ------- ------- -------------
------------- ------------- ------- ------- -------------
Weighted average number of common shares
outstanding........................... 6,317 4,276 (3,651)(F) 202 7,144
------------- ------------- ------- ------- -------------
------------- ------------- ------- ------- -------------
Weighted average number of common shares
outstanding assuming dilution......... 6,317 4,276 (3,651)(F) 807 7,749
------------- ------------- ------- ------- -------------
------------- ------------- ------- ------- -------------
</TABLE>
32
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Under the terms of the merger, each outstanding share of DAI would be
converted into the right to receive Symix's shares at the rate of 0.1313 Symix
share for each share of DAI. DAI's outstanding employee stock options would also
be converted in the merger into Symix shares using the formula specified herein.
The pro forma financial statements assume receipt of 100% of the outstanding DAI
stock in a transaction to be accounted for as a purchase.
The cost of the acquisition and allocation of purchase price follow:
<TABLE>
<S> <C>
Market value of Symix shares exchanged for DAI stock and options
(625,000 shares at $9.00)......................................... $ 5,625
Transaction costs................................................... 575
---------
Cost of acquisition................................................. $ 6,200
---------
---------
</TABLE>
Based on a preliminary valuation, the cost of acquisition is allocated as
follows:
<TABLE>
<S> <C>
Current assets..................................................... $ 5,864
Other noncurrent assets............................................ 159
Fixed assets....................................................... 3,091
Developed technology............................................... 11,281
Deferred tax liability............................................. (1,460)
Liabilities........................................................ (4,166)
Workforce in place................................................. 575
Trademark and tradenames........................................... 1,226
---------
Acquired assets.................................................... 16,570
In-process technology to be charged to expense at acquisition
date............................................................. 3,588
---------
20,158
Cost of acquisition................................................ 6,200
---------
Fair value of acquired assets and in-process technology in excess
of costs of acquisition.......................................... $ 13,958
---------
---------
</TABLE>
The excess of fair values was allocated to reduce the values assigned to
acquired noncurrent assets and in-process technology, as follows:
<TABLE>
<CAPTION>
ALLOCATION
FAIR VALUE OF EXCESS NET
----------- ---------- ---------
<S> <C> <C> <C>
Workforce in place........................................... $ 575 $ (406) $ 169
Fixed assets................................................. 3,091 (2,183) 908
Developed technology......................................... 11,281 (7,968) 3,313
Trademark and tradenames..................................... 1,226 (866) 360
In-process technology........................................ 3,588 (2,535) 1,053
----------- ---------- ---------
$ 19,761 $ (13,958) $ 5,803
----------- ---------- ---------
----------- ---------- ---------
</TABLE>
The pro forma statement of income has not been adjusted for a material
nonrecurring charge currently estimated to be $1,053 relating to the immediate
write-off of acquired in-process technology of DAI. This charge will be taken in
the quarter in which the merger is consummated. The pro forma statement of
operations also has been adjusted to reflect the elimination of the material
non-recurring
33
<PAGE>
NOTES TO PRO FORMA CONDENSED CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
charge of $6,503 taken in the second quarter of fiscal 1998 relating to the
immediate write-off of acquired in-process technology of Pritsker.
(A) Reflects issuance of Symix shares in exchange for 100% of the outstanding
stock and options of DAI.
<TABLE>
<S> <C>
Market Value of Symix shares issued................................. $ 5,625
Elimination of DAI Stock............................................ (180)
---------
$ 5,445
---------
---------
</TABLE>
(B) Reflects elimination of DAI treasury stock and retained earnings.
(C) Reflects cash paid for transaction related expenses estimated to be $225
and an accrual for severance of certain DAI employees estimated to be $350.
(D) Under purchase accounting, DAI's assets and liabilities are required to be
adjusted to their estimated fair values. The estimated fair value
adjustments have been determined by Symix based upon information provided by
DAI and are subject to adjustments based on a final valuation. Symix cannot
be sure that such estimated fair values represent fair values that would
ultimately be determined at the consummation date of the merger. The
following are the pro forma adjustments made to reflect DAI's fair values
assuming the merger was consummated on December 31, 1998:
<TABLE>
<S> <C>
Workforce in place.................................................. $ 169
Developed technology................................................ 3,313
Reduce fixed assets................................................. (2,183)
Trademark and tradenames............................................ 360
Deferred tax liability.............................................. (1,460)
Retained earnings effect resulting from the immediate write-off
of acquired in-process technology................................. 1,053
</TABLE>
(E) For purposes of determining the pro forma effect of the merger on the Symix
consolidated statement of operations, the following pro forma adjustments
have been made and are based on the assumption that the merger was
consummated on the first day of the period indicated:
<TABLE>
<CAPTION>
SIX MONTHS YEAR
ENDED ENDED
DECEMBER 31, 1998 JUNE 30, 1998
------------------- ---------------
<S> <C> <C>
Amortization of the reduction in fixed assets (5 years)..... $ (218) $ (436)
Amortization of developed technology (5 years).............. 332 664
Amortization of workforce in place (3 years)................ 29 57
Amortization of trademark and trade names
(10 years)................................................ 18 37
----- -----
161 322
----- -----
----- -----
</TABLE>
(F) Assumes an increase of 625,000 weighted average Symix shares outstanding as
a result of the consummation of the merger.
(G) Symix acquired Pritsker Corporation on November 24, 1997. Results of
Pritsker have been included in Symix's historical results since that date.
These adjustments reflect the acquisition as if it occurred on July 1, 1997.
The material non-recurring charge of $6,503 taken in the second quarter of
fiscal 1998 related to the immediate write-off of acquired in-process
technology of Pritsker has been eliminated.
34
<PAGE>
DAI'S MANAGEMENT DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
DAI's revenues are derived from (a) licensing its software (b) providing
product support and related services and (c) selling computer hardware to its
customers. Product support is provided pursuant to agreements that are generally
renewed annually. Related services consist of installation, implementation,
training, programming and systems integration services for DAI software users.
Revenue is recognized in accordance with Statement of Position 97-2,
SOFTWARE REVENUE RECOGNITION. Accordingly, revenue from software licensing is
recognized when delivery of the software has occurred, a signed noncancelable
license agreement has been received from the customer and any remaining
obligations under the license agreement are insignificant. Revenue from software
licensing arrangements which require significant customization, modification or
production of the licensed software is deferred and recognized using the
percentage of completion method of accounting. Revenue from software license
fees related to DAI's obligation to provide certain post-contract customer
support without charge for the first year of the license is unbundled from the
license fee at its fair value and is deferred and recognized on a straight-line
basis over the contract support period. Revenue from annual or other renewals of
a maintenance contract, including a long-term contract, is deferred and
recognized on a straight-line basis over the term of the contract. Revenue from
system integration services is recognized as the related services are provided.
RESULTS OF OPERATIONS
YEAR ENDED SEPTEMBER 30, 1998 COMPARED TO SEPTEMBER 30, 1997
During 1998, DAI made a concerted effort to bring to market its new products
which have been under development for several years. DAI invested a significant
amount of resources to complete this development and to finalize these products.
Management believes that these new products will position DAI to pursue the
middle market with a solutions-oriented software package. The re-positioning of
DAI's product offerings was essential as the middle market continued to expand
and demand packaged solutions built on an open platform and using state of the
art technology which provide for more efficient installations.
DAI intends to continue to market its existing distribution software with
new products, specifically products relating to electronic commerce and Internet
order entry. These new products have recently become available to the
marketplace. DAI is focused on delivering these new products along with its
enterprise software to expand its existing market. DAI intends to pursue all
avenues in expanding its market position including but not limited to, strategic
partnerships with consulting companies, other enterprise resource planning
software firms and niche software companies. DAI plans to hire additional key
personnel in sales, development and marketing as necessary to execute this plan.
As a result of the focus on the development of DAI's new product offerings
during 1998, DAI's financial results suffered. However, DAI believes that it has
adequate working capital, including cash generated from operations and existing
bank financing to fund the additional product development and marketing and
sales efforts if required to launch its new products and to fund its operations
for at least the next 12 months.
Net revenue was $13,275,000 for the year ended September 30, 1998, a
decrease of 7% from the previous year. The decrease in revenue was attributable
to a decline in license fee revenue from $2,087,000 in fiscal 1997 to $692,000
in fiscal 1998. Services revenue increased from $12,195,000 in fiscal 1997 to
$12,583,000 in fiscal 1998. During fiscal 1998, DAI focused its efforts on
expanding product functionality and migrating to open platform technology such
as the NT and UNIX operating systems. Emphasis was directed to a few key
services engagements where these development efforts were partially funded
through customer projects.
35
<PAGE>
Cost of revenues consist principally of personnel costs for billable
resources in programming, business analysis, trainers, projects managers,
customer support, documentation, and implementation services. The related gross
margins improved from 55%, or $7,845,000 in fiscal 1997, to 58%, or $7,654,000
in fiscal 1998. The improvement in gross margins was due to improved utilization
in the services offerings, including the customer funded development projects
mentioned above.
Selling, general and administrative expense consists primarily of personnel
costs in sales, marketing, finance, legal, human resources, corporate
information systems and other administrative functions of DAI. This expense was
$6,214,000 for fiscal 1998 compared to $5,484,000 for fiscal 1997, a 13%
increase. Selling, general and administrative expense as a percentage of total
revenue for fiscal 1998 and fiscal 1997 was 47% and 38%, respectively. The
increase in the selling, general and administrative expense percentage was the
result of a decline in license fee revenues and an increase in the provision for
doubtful accounts, while the level of sales and administrative support staff
remained constant.
Research and product development expenses consist principally of personnel
costs of the research and development staff and the facilities, computing,
benefits and other administrative costs allocated to that personnel. These
expenses for fiscal 1998 were $2,000,000 compared to $2,100,000 in fiscal 1997.
The reason for the decline was the planned increase in the customer funded
development activities and decrease in the non-billable development activities
within the organization.
Other income decreased $76,000 in fiscal 1998 compared to fiscal 1997 to
$25,000. The primary reason for this decrease was the effects of fluctuations in
foreign exchange, primarily in Canada, during the year. In addition, interest
income was reduced as there was less cash available for investment as more cash
flow was used within the operations.
The income tax benefit for fiscal 1998 was $307,000 compared to an income
tax provision of $55,000 for fiscal 1997. DAI's effective tax benefit rate was
15% in fiscal 1997 due to the use of Canadian tax operating loss carryforwards
available to DAI. The effective tax benefit rate for 1998 was 57% as DAI has
available net operating loss carryforwards in Canada in addition to research and
development tax credits generated in prior years.
In fiscal 1998, DAI had a net loss of $228,000, or $0.05 loss per share
(diluted), compared to net income of $307,000, or $0.06 earnings per share
(diluted) in fiscal 1997. The primary reasons for the decrease in income were a
decrease in new license fees along with a focus on expanding product
functionality and migrating to open platform technology. In addition, DAI
increased its provision for doubtful accounts and maintained the level of sales,
marketing and administrative support staff to that in fiscal 1997.
THREE MONTHS ENDED DECEMBER 31, 1998 COMPARED TO DECEMBER 31, 1997
For the three months ended December 31, 1998, net revenue decreased 3% to
$2,953,000 from $3,041,000 for the same period the prior year. The decline in
net revenue was the result of a decline in services revenue as traditional
billable services personnel were assigned to product development activities.
This development effort was a continuation of the development process started in
fiscal 1998 to expand product functionality and to migrate to open platform
technologies.
Cost of revenues consist principally of personnel costs for billable
resources in programming, business analysis, trainers, projects managers,
customer support, documentation, and implementation services. The related gross
margins decreased from 60%, or $1,813,000 in fiscal 1997, to 59%, or $1,750,000
in fiscal 1998. The increased emphasis of completing the development activities
described above adversely impacted the use of billable services personnel in the
quarter ended December 31, 1998.
36
<PAGE>
Selling, general and administrative expense consists primarily of personnel
costs in sales, marketing, finance, legal, human resources, corporate
information systems and other administrative functions of DAI. This expense was
$1,356,000 for the three months ended December 31, 1998, compared to $1,384,000
for the corresponding period of the prior year. The amounts remained constant as
the level of sales and administrative support staff remained the same throughout
the year.
Research and product development expenses consist principally of personnel
costs of the research and development staff and the facilities, computing,
benefits and other allocated administrative costs. Research and development
expenditures for the three months ended December 31, 1998, were $700,000
compared to $500,000 for the same period in the prior year. The reason for the
increase was the increased development expenditures relating to the development
efforts mentioned above.
Other income increased $44,000 to $51,000 for the quarter ended December 31,
1998 compared to the quarter ended December 31, 1997. This was due to the sale
of corporate owned real property.
For the quarter ended December 31, 1998, DAI had a net loss of $135,000, or
$0.03 loss per share (diluted), compared to a net loss of $50,000, or $0.01 loss
per share (diluted), for the same quarter in fiscal 1997. The primary reason for
the decrease was the decrease in net revenues. This decline was the result of a
decline in services revenue as traditional billable services personnel were
assigned to product development activities.
LIQUIDITY AND CAPITAL RESOURCES
DAI's net cash used in operating activities was $393,000 and $134,000 for
fiscal 1998 and fiscal 1997, respectively. Net cash used in operating activities
in fiscal 1998 was derived primarily from increases in accounts receivable and
prepaid expenses and other assets. Net cash used in operating activities in
fiscal 1997 related primarily to the payment of deferred taxes that had accrued
in prior years and became payable in fiscal 1997.
DAI's investing activities used cash of $727,000 and $702,000 in fiscal 1998
and 1997, respectively. In fiscal 1998, cash was used principally for the
purchase of real property, furniture, fixtures and equipment. In fiscal 1997,
cash was used primarily for the purchase of furniture, fixtures and equipment.
DAI's financing activities provided cash in fiscal 1998 in the amount of
$248,000. These funds were provided primarily from the increase in short-term
borrowings. In fiscal 1997, financing activities used cash in the amount of
$1,202,000. These funds were used to pay down DAI's bank line of credit as cash
became available during the course of the year. At September 30, 1998, DAI was
out of compliance with a cash flow requirement covenant under its primary bank
line of credit agreement. DAI's lender, however, has waived the cash flow
requirement covenant through October 1, 1999. DAI expects to renew its line of
credit agreement under similar terms in the future, however, there is no
assurance that DAI will be able to do so on acceptable terms
At December 31, 1998, DAI did not have any material commitments for capital
expenditures. In fiscal 1999, DAI does not anticipate any material capital
expenditures outside of the normal course of business.
At December 31, 1998, DAI had working capital of $2,314,000, including cash
and cash equivalents of $948,000, compared to $3,580,000, including cash and
cash equivalents of $1,506,000, at December 31, 1997. Net accounts receivable
increased to $4,140,000 at December 31, 1998, from $3,991,000 at December 31,
1997. At December 31, 1998, the accounts receivable days sales outstanding was
128 days compared to 120 days at December 31, 1997. The increase in days sales
outstanding is attributable to an increase in installment payments that are
being collected over the product implementation cycle and extended payment terms
granted to DAI's larger international distributors.
37
<PAGE>
During the first three months of fiscal 1998, cash from operating activities
was sufficient to satisfy DAI's operating needs.
YEAR 2000 READINESS
DAI faces "year 2000 compliance" issues similar to those faced by other
companies in the information technology industry. Year 2000 compliance issues
typically arise with respect to computer software systems and programs that use
only two digits, rather than four digits, to represent a particular year.
Consequently, these systems and programs may not process dates beyond the year
1999 and may result in miscalculations or system failures. Year 2000 compliance
problems also may arise in embedded systems, such as environmental system
controls, elevators and other products that use microprocessors or computer
chips.
DAI's current product and service offerings, including those products
developed and supported by third party software vendors, have been designed to
be Year 2000 compliant. New products also are being designed by DAI to be year
2000 compliant. DAI's existing contracts with active customers who have
effective maintenance and support agreements with DAI cover recent software
products that are year 2000 compliant or for which a year 2000 ready upgrade is
available, or do not expressly obligate DAI to furnish an updated release that
is year 2000 compliant. DAI has communicated with its customers regarding year
2000 compliance, notifying them of the availability of upgraded or new releases
of DAI's products which are year 2000 compliant for certain older software
products released by DAI which may still be in use by them. In certain cases,
DAI has warranted that DAI's current software product offerings are year 2000
ready when specifically requested by the customer. Although the software
products currently offered by DAI have been tested for year 2000 readiness, any
failure of DAI's software products to perform, including the failure to process
dates beyond the year 2000, could have a material adverse effect on DAI's
business, financial condition and results of operations.
DAI is in the process of assessing the year 2000 readiness of products of
selected third parties, including key suppliers, subcontractors, business
partners and customers. To the extent that DAI uses third party products or
technology in its computer software products, DAI has obtained confirmation of
year 2000 compliance from such third party providers. A failure of one or more
of these suppliers, subcontractors, business partners or customers to
sufficiently address their year 2000 compliance issues could materially
adversely affect DAI's business, financial condition and results of operations.
DAI also is in the process of reviewing its internal computer information
system and non-computer systems, such as telecommunications equipment and
building elevators, which contain embedded computer technology, to determine
whether such systems are year 2000 compliant. Some of the embedded systems of
which DAI relies in its daily operations are owned and managed by the lessors of
the facilities in which DAI's operations are located, or by agents of the
lessors. DAI presently believes that such systems are year 2000 compliant. DAI
is less certain of the year 2000 readiness of third parties who provide external
services, including public utilities, which could adversely impact DAI's
operations. For example, the failure or interruption of telephone or electrical
services would disrupt DAI's ability to communicate with its customers,
suppliers, business partners and others. DAI does not anticipate any material
costs associated with year 2000 compliance relating to its internal computer
information system or non-computer systems.
All costs that relate to year 2000 issues are being expensed by DAI. DAI
does not expect that the total costs of evaluation and compliance with DAI's
year 2000 issues will be material.
To date, DAI has not completed its contingency plans in the event that its
internal operating systems, vendors, facilities or products, or any other
components of its business operations fail to operate in compliance with the
year 2000 date changes. DAI expects to develop its contingency plans by the end
of fiscal 1999.
38
<PAGE>
EFFECTS OF QUARTERLY AND SEASONAL ISSUES
Due to the nature of its business, DAI does not experience material
fluctuations in its operations from quarter to quarter or from season to season.
EFFECTS OF INFLATION AND FOREIGN CURRENCY EXCHANGE FLUCTUATIONS
The results of operations of DAI for the periods discussed above have not
been significantly effected by inflation or foreign currency fluctuations. Sales
made by DAI's foreign subsidiaries are principally denominated in the local
currency where the sale is made. DAI experienced a loss of approximately $45,000
in fiscal 1998 and a gain of approximately $3,000 in fiscal 1997 relating to
fluctuations in foreign currency exchange rates. DAI has not attempted to hedge
risks associated with fluctuations in foreign exchange rates. DAI continues to
evaluate the relative costs and benefits of hedging and may seek to hedge these
risks in the future, if appropriate.
INFORMATION CONCERNING SYMIX
Symix designs, develops, markets and supports enterprise application
software that serves the manufacturing and financial requirements of discrete
manufacturers. Discrete manufacturers produce individual items in lots or
batches. Symix's products are designed to improve:
- customer service;
- planning and scheduling of manufacturing resources;
- production and inventory management; and
- financial management.
In addition to generating revenue from licensing and supporting its
software, Symix provides implementation and training services to its customers.
Symix's principal customers are manufacturers with annual revenues up to $500
million and individual manufacturing sites or divisions of larger manufacturers.
Symix's two primary products, SyteLine and SyteCentre, target different
markets. SyteLine is focused on serving make-to-order manufacturers of highly
configured industrial products. The targeted vertical markets of SyteLine are:
- industrial equipment;
- fabricated metals;
- industrial electronic equipment;
- furniture and fixtures; and
- containers and packaging.
SyteCentre was initially released in February 1999 and serves repetitive and
make-to-stock manufacturers of consumer products. The targeted vertical markets
of SyteCentre are:
- consumer electronics;
- consumer durable goods; and
- computers and related peripherals.
Symix also markets and supports products provided by third party software
vendors that are integrated with SyteLine and SyteCentre. These products provide
additional functionality, including:
- sales order configuration and pricing;
39
<PAGE>
- electronic and web commerce; and
- business analysis and reporting tools.
Approximately 80% of Symix's license fee revenue is generated from its
world-wide direct sales organization. Symix also has approximately 40 business
partners throughout the world that sell and service its products. Symix has 24
sales and support offices in North America, Europe and Asia with about 25% of
its revenue being generated from outside of North America.
Symix was incorporated in 1984 in Ohio. Its principal executive offices are
located at 2800 Corporate Exchange Drive, Columbus, Ohio 43231, and its
telephone number is (614) 523-7000. Symix's web site address is symix.com.
INFORMATION CONCERNING DAI
DAI designs, develops, markets and supports enterprise application software
that serves the supply chain management requirements of distribution operations.
Supply chain management refers to the overall process through which an
organization creates and distributes its products and services to the end
consumer. This process involves the relationship between predicting demand for a
product and fulfilling that demand. DAI's products have extensive functionality
across a number of business processes and are designed to improve:
- customer service (including electronic commerce and internet order entry);
- demand, inventory and distribution planning;
- warehouse management;
- transportation management; and
- financial management.
DAI's revenues are generated from software licensing and business
consulting, implementation and training services. Since 1976, DAI has sold its
supply chain management solution to over 100 customers throughout North America.
These customers have annual revenues ranging from $30 million to $5 billion and
represent various vertical industries, including;
- retail distribution;
- food wholesale distribution;
- consumer durable goods distribution;
- chemical distribution; and
- automotive distribution.
Historically, DAI has sold its software products in flexible modular
components, customizing solutions to address the individual needs of the
customer. Services revenue has consequently represented more than 80% of DAI's
total revenue in recent years. In December 1998, DAI launched an initiative to
define 188 world class distribution process flows and have them supported by DAI
applications. This initiative will enable DAI to sell a more "packaged solution"
with the benefit to the customer being reduced time to implement a new system.
DAI has approximately 110 employees. Revenues are generated from a direct
sales and support staff. Consulting services are provided through employee
business consultants and engineers.
DAI was incorporated in 1977 in Texas. DAI's headquarters are located at 905
East Westchester Avenue, Tempe, Arizona, 85283-2938 (telephone number
602-777-7000), with additional remote offices located in Toronto, Ontario and
Vancouver, British Columbia. DAI's web site is distribution.com.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information regarding the beneficial
ownership of DAI stock as of April 1, 1999, by
- each of DAI's directors,
- DAI's executive officers,
- all current directors and executive officers of DAI as a group; and
- each person or entity known to DAI to beneficially own more than 5% of
DAI's stock at that date.
Except as indicated in a footnote, each person or entity possesses sole
voting and investment power with respect to the shares indicated as beneficially
owned by that person or entity.
<TABLE>
<CAPTION>
NUMBER OF
SHARES PERCENTAGE OF
BENEFICIALLY OUTSTANDING SHARES
OWNED BENEFICIALLY OWNED(5)
----------- ---------------------
<S> <C> <C>
Thomas E. Cain............................................. 4,151,500(2) 93.8%
Nancy Cain................................................. None *
Edward Katz................................................ 415,400(3) 8.9%
James Meyers............................................... None *
Steve Strohacker........................................... 105,500 2.5%
Jeff Viehmeyer............................................. 1,500 *
All current directors and executive officers
as a group (12 persons).................................. 4,700,672(4) 97.7%
</TABLE>
- ------------------------
* Represents less than 1% of the outstanding shares of DAI.
(1) The address of each person named in the table is 905 E. Westchester Avenue,
Tempe, Arizona 85283-2938.
(2) Includes 150,500 shares issuable upon exercise of presently exercisable
stock options. Also includes 4,001,500 shares held by The Cain Family Trust.
Thomas Cain and his spouse, Nancy Cain, share voting and dispositive power
over the trust.
(3) Includes 384,273 shares issuable upon exercise of presently exercisable
stock options.
(4) Includes 534,773 shares issuable upon exercise of presently exercisable
stock options.
(5) The percentage of shares of DAI is based upon 4,275,452 shares outstanding
and assumes the exercise of presently exercisable options held by each
person or group.
DESCRIPTION OF CAPITAL STOCK OF SYMIX
The authorized capital stock of Symix consists of 21,000,000 shares, of
which 20,000,000 shares are common shares, each without par value, and 1,000,000
shares are preferred shares, each without par value. At April 23, 1999, there
were approximately 6,856,797 Symix common shares outstanding. No preferred
shares are currently outstanding. The outstanding Symix common shares are, and
the shares to be issued in the merger will be, fully paid and nonassessable.
Holders of Symix common shares and preferred shares are entitled to one vote
for each share held of record on each matter submitted to a vote of
shareholders. Shareholders have no cumulative voting rights, which means that
the holders of shares entitled to exercise more than fifty percent (50%) of the
voting power of Symix shareholders are able to elect all of the directors.
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COMMON SHARES
Holders of Symix common shares are entitled to receive dividends when and if
declared by the Symix board of directors out of funds legally available for
payment as dividends, subject to the rights of holders of any preferred shares
that may be issued and to any contractual restrictions on the payment of
dividends. Symix currently intends to continue to retain its earnings for use in
its business and to pay no cash dividends in the foreseeable future.
Under Ohio law and Symix's amended articles of incorporation, the
affirmative vote of the holders of shares entitled to exercise at least
two-thirds ( 2/3) of the voting power of Symix shareholders is necessary for
major corporate actions, including:
- merger or consolidation with another corporation,
- combination or majority share acquisition,
- sale or other disposition of all or substantially all of Symix's property
and assets,
- voluntary dissolution of Symix, or
- amendment of Symix's amended articles of incorporation.
Upon dissolution, liquidation or sale of all or substantially all of the
assets of Symix, after payment in full of all amounts required to be paid to
creditors and to holders of outstanding preferred shares, if any, the holders of
Symix common shares will be entitled to receive pro rata the remaining assets of
Symix available for distribution.
The holders of Symix common shares do not have preemptive, subscription,
redemption or conversion rights.
PREFERRED SHARES
The Symix amended articles of incorporation authorize its board of directors
to issue preferred shares from time to time in one or more series. The Symix
board of directors is authorized to fix and to determine the relative rights and
preferences of the shares of any series so established with respect to:
- dividend or distribution rights,
- the dates of payments of dividends or distributions and the dates from
which they are cumulative,
- liquidation price,
- redemption rights and price,
- sinking fund requirements,
- conversion rights, and
- restrictions on the issuance of shares of any class or series.
The Symix board of directors, without shareholder approval, could issue
preferred shares with voting and conversion rights which could adversely affect
the voting power of the holders of Symix common shares. There are no present
plans to issue any Symix preferred shares.
COMPARISON OF SHAREHOLDERS' RIGHTS
The rights of Symix shareholders are currently governed by Ohio law and by
its articles of incorporation and code of regulations. The rights of DAI
shareholders are currently governed by Texas
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law and its articles of incorporation and by-laws. Upon completion of the
merger, the rights of DAI shareholders who become shareholders of Symix in the
merger will be governed by Ohio law, Symix's articles of incorporation and code
of regulations. The following is a summary of the material differences between
the current rights of DAI shareholders and the rights of shareholders of Symix.
APPRAISAL AND DISSENTERS' RIGHTS
SYMIX. Under Ohio law, dissenting shareholders are entitled to appraisal
rights in connection with the lease, sale, exchange, transfer or other
disposition of all or substantially all of the assets of a corporation and in
connection with amendments to the corporation's articles of incorporation which
change the rights of shareholders in a substantially prejudicial manner.
Shareholders of an Ohio corporation being merged into or consolidated with
another corporation are also entitled to appraisal rights. In addition,
shareholders of an acquiring corporation are entitled to appraisal rights in any
merger, combination or majority share acquisition in which those shareholders
are entitled to voting rights. Ohio law provides shareholders of an acquiring
corporation with voting rights if the acquisition involves the transfer of
shares of the acquiring corporation entitling the recipients of the shares to
exercise one-sixth or more of the voting rights of the acquiring corporation
immediately after the transaction is completed. A shareholders' written demand
must be delivered to the corporation not later than ten days after the taking of
the vote on the matter giving rise to the appraisal rights.
DAI. Under Texas law, a security holder of a corporation participating in
certain major corporate transactions may, under varying circumstances, be
entitled to an appraisal or dissenter's right under which the security holder
may receive cash in the amount of the fair market value of the security holder's
shares in lieu of the consideration the security holder would otherwise receive
in the transaction. The fair value of the stock is the value of the stock
immediately before the completion of the corporate action to which the dissenter
objects, excluding any appreciation or depreciation in the value of the stock in
anticipation of the corporate action.
Texas law provides that dissenters' rights do not apply to the shareholder
if:
- the class or series of capital stock of which the shareholders are a part
are listed on a national securities exchange or the Nasdaq Stock Market or
designated as a national market security on an interdealer quotation
system by the NASD or are held of record by not less than 2,000
shareholders;
- the shareholder is not required to accept for the shareholder's shares any
consideration that is different than the consideration, other than cash in
lieu of fractional shares, to be provided to any other holder of shares of
the same class or series of shares held by that shareholder; and
- the shareholder is not required to accept for the shareholder's shares any
consideration other than:
- shares of the corporation that are listed, or authorized for listing
upon official notice of issuance, on a national securities exchange,
approved for quotation as national market security on an interdealer
quotation system by NASD, or held of record by not less than 2,000
holders;
- cash in lieu of fractional shares; or
- any combination of the foregoing.
CONTROL SHARE ACQUISITIONS
SYMIX. Section 1701.831 of the Ohio law provides that certain notice and
informational filings and special shareholder meeting and voting procedures must
be followed prior to completing a proposed "control share acquisition" of an
"issuing public corporation," unless the articles of incorporation or
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code or regulations of the corporation otherwise provide. Symix's articles of
incorporation provide that Section 1701.831 does not apply to control share
acquisitions of Symix.
DAI. Texas has not enacted legislation that imposes requirements on a
corporation in the event of a "control share acquisition".
CONSTITUENCY PROVISIONS
SYMIX. Section 1701.59 of the Ohio law permits a director, in determining
what that director reasonably believes to be in the best interests of the
corporation, to consider, in addition to the interests of the corporation's
shareholders, any of the following:
- the interests of the corporation's employees, suppliers, creditors, and
customers;
- the economy of the state and nation;
- community and societal considerations; and
- the long-term as well as short-term interests of the corporation and its
shareholders, including the possibility that these interests may be best
served by the continued independence of the corporation.
DAI. Texas has not enacted legislation specifying matters that directors of
a Texas corporation can consider in addition to the interests of the
corporation's shareholders.
AMENDMENT OF CHARTER DOCUMENTS
SYMIX. Ohio law permits the adoption of amendments to articles of
incorporation if those amendments are approved at a meeting held for that
purpose by the holders of shares entitling them to exercise two-thirds of the
voting power of the corporation, or a lesser, but not less than a majority, or
greater vote as specified in the articles of incorporation. Amendment of Symix's
articles of incorporation requires the approval of the holders of at least
two-thirds of the voting power then outstanding.
Under Ohio law, a code of regulations may be adopted, amended or repealed
only by approval of the shareholders either at a meeting of shareholders by the
affirmative vote of the holders of shares entitling them to exercise a majority
of the voting power on that proposal or by written consent signed by holders of
shares entitling them to exercise two-thirds of the voting power on that
proposal. Symix's code of regulations provides that they may be amended by the
affirmative vote of the holders of shares entitling them to exercise a majority
of the voting power on that proposal, but no amendment to Symix's code of
regulations reducing the number of directors can have the effect of removing any
director prior to the expiration of the director's term of office.
DAI. Article 4.02 of the Texas law provides that an amendment to a
corporations articles of incorporation must be approved by the board of
directors and by the affirmative vote of holders of at least two-thirds of the
outstanding shares entitled to vote, unless the corporation's articles of
incorporation provide otherwise. DAI's articles of incorporation do not provide
otherwise.
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BUSINESS COMBINATIONS WITH CERTAIN PERSONS
SYMIX. Chapter 1704 of the Ohio law prohibits a wide range of business
combinations and transactions between or involving an "issuing public
corporation" that is a reporting company under the Exchange Act and a person
who, alone or with others, beneficially owns ten percent or more of the voting
power of the corporation. A corporation may provide in its articles of
incorporation that Chapter 1704 does not apply to the corporation. Symix's
articles of incorporation provide that Chapter 1704 does not apply to Symix.
DAI. Texas has not enacted legislation prohibiting business combinations
and transactions similar to the ones described in the immediately preceding
paragraph.
DIRECTOR AND OFFICER LIABILITY AND INDEMNIFICATION
SYMIX. Under Ohio law, Ohio corporations are permitted to indemnify
directors, officers, employees and agents within prescribed limits, and must
indemnify them under certain circumstances. Ohio law does not authorize payment
by a corporation of judgments against a director, officer, employee or agent
after a finding of negligence or misconduct in a derivative suit absent a court
order. Indemnification is required, however, to the extent that person succeeds
on the merits. In all other cases, if it is determined that a director, officer,
employee or agent acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation,
indemnification is discretionary, except as otherwise provided by a
corporation's articles of incorporation or code of regulations, or by contract,
except with respect to the advancement of expenses of directors. The statutory
right to indemnification is not exclusive in Ohio, and Ohio corporations may,
among other things, purchase insurance to indemnify those persons. Symix's code
of regulations provides for the purchase of this insurance.
Ohio law provides that a director is entitled to mandatory advancement of
expenses, including attorneys' fees, incurred in defending any action, including
derivative actions, brought against the director. The director must agree,
however, to cooperate with the corporation concerning the matter and to repay
the amount advanced if it is proved by clear and convincing evidence that his or
her act or failure to act was done with deliberate intent to cause injury to the
corporation or with reckless disregard for the corporation's best interests.
Symix's code of regulations provides for indemnification by Symix consistent
with Ohio law of any person made or threatened to be made a party to any action,
suit, or proceeding by reason of the fact that he or she is or was a director,
officer, employee or agent of Symix or of any other corporation or entity for
which he or she was serving as a director, trustee, officer, employee or agent
at the request of Symix. Symix's code of regulations provides that Symix must
indemnify those persons against expenses, including attorneys' fees, judgments,
fines and amounts paid in settlement incurred in connection with any pending,
threatened or completed action. However, indemnification is required only if the
person acted in good faith and in a manner he or she reasonably believed was in,
or not opposed to, the best interests of Symix. With respect to any criminal
matter, he or she also must not have had any reasonable cause to believe that
his or her conduct was unlawful. Symix's code of regulations forbids Symix from
indemnifying an officer or director if such person is held liable for acting
with reckless disregard for the best interests of Symix or misconduct, other
than for negligence, in the performance of his or her duty to Symix, unless a
court otherwise concludes that the person is entitled to be indemnified.
Under Symix's code of regulations, a director or officer is presumed to have
acted in good faith and in a manner he or she reasonably believed to be in, or
not opposed to, the best interest of Symix. It also is presumed that a director
or officer had no reasonable cause to believe his conduct was unlawful with
respect to a criminal matter. Because of this presumption, Symix believes that a
director or officer will not have the initial burden of showing that he acted in
good faith or in a manner he
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<PAGE>
reasonably believed to be in, or not opposed to, the best interests of Symix. In
addition, Symix's code of regulations requires Symix to advance expenses on
behalf of officers and directors if they agree in writing to repay such amounts
if they are not successful in the litigation.
DAI. Under Texas law, a corporation may set limits on the extent of a
director's liability. A Texas corporation may indemnify its officers, directors,
employees and agents if such person acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation. Indemnification is not allowed under Texas law, absent court order
to the contrary, if an officer, director, employee or agent of the bank or
corporation is finally adjudged liable to the corporation.
DAI's articles of incorporation provide for indemnification of any person
who is or was a director, officer, employee or agent of DAI or of any other
entity for which he or she was serving in a similar capacity at the request of
DAI. Such persons may be indemnified for judgments, penalties, fines,
settlements and reasonable expenses actually incurred by them in connection with
the proceeding to the fullest extent permitted by law:
DAI's articles of incorporation provide that the corporation must follow the
procedures required by law for the determination that indemnification is
permissible, is authorized, and that the expenses are reasonable. DAI is
required to pay the expenses actually incurred by the person in connection with
the proceeding prior to making the determinations to the fullest extent
permitted by law.
REMOVAL OF DIRECTORS AND FILLING VACANCIES
SYMIX. Ohio law provides that, unless the governing documents of a
corporation provide otherwise, directors may be removed, with or without cause,
by the affirmative vote of the holders of a majority of the voting power of the
corporation with respect to the election of directors. However, unless all the
directors or all the directors of a particular class are removed, no individual
director may be removed if the votes of a sufficient number of shares are cast
against that director's removal which, if cumulatively voted at an election of
all the directors, or all the directors of a particular class, as the case may
be, would be sufficient to elect at least one director. Under Symix's code of
regulations, a director or directors may be removed from office, with or without
cause, by the affirmative vote of the holders of at least a majority of the
voting power of Symix which entitles them to elect directors in place of those
to be removed.
DAI. A Texas corporation may provide in its articles of incorporation or
bylaws, and DAI's bylaws do provide, that a director can be removed with or
without cause by the affirmative vote of not less than a majority of the shares
entitled to vote. DAI's bylaws provide for a vote of a majority of the shares
present, which is contrary to Section 2.32 of the Texas Corporation Act.
SPECIAL MEETINGS OF SHAREHOLDERS
SYMIX. Under Ohio law, a special meeting of shareholders may be called by
the chairman, the president, the directors by action at a meeting, a majority of
the directors voting without a meeting, persons owning 25% of the outstanding
shares entitled to vote at that meeting, or a lesser or greater proportion as
specified in the articles or regulations but not greater than 50%, or the
person(s) authorized to do so by the articles of incorporation or the code of
regulations. Symix's code of regulations provides that special meetings of
shareholders may be called by the chairman of the board, the president or , in
the case of the president's absence, death or disability, the vice president
authorized to exercise the authority of the president, the secretary, the Symix
board of directors, a majority of the directors acting without a meeting or by
persons who hold not less than a majority of all shares entitled to vote at that
shareholders' meeting.
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DAI. A special meeting of shareholders of a Texas corporation may be called
by the holders of shares entitled to cast not less than 10% of all shares
entitled to vote at the meeting, unless a different percentage, not to exceed
50%, is provided in the articles of incorporation. DAI's bylaws provide that
special meetings of shareholders may be called by the president, the DAI board
of directors, or the holders of not less than 10% of all shares of DAI entitled
to vote at the meeting.
MERGERS AND BUSINESS COMBINATIONS
SYMIX. Under Ohio law and Symix's articles of incorporation, an agreement
of merger or consolidation must be approved by the directors of each constituent
corporation and adopted by shareholders of each constituent Ohio corporation,
other than the surviving corporation in the case of a merger, holding at least
two-thirds of the corporation's voting power. In the case of a merger, the
agreement also must be adopted by the shareholders of the surviving corporation
by similar vote, if one or more of the following conditions exist:
- the articles or regulations of the surviving corporation require the
agreement to be adopted by the shareholders or by the holders of a
particular class of shares of that corporation;
- the agreement conflicts with the articles or regulations of the
surviving corporation, or changes the articles or regulations, or
authorizes any action that, if it were being made or authorized apart
from the merger, would otherwise require adoption by the shareholders or
by the holders of a particular class of shares of that corporation;
- the merger involves the issuance or transfer by the surviving
corporation to the shareholders of the other constituent corporation or
corporations of shares of the surviving corporation as will entitle the
holders of the shares immediately after the consummation of the merger
to exercise one-sixth or more of the voting power of that corporation in
the election of directors; or
- the agreement of merger makes such change in the directors of the
surviving corporation as would otherwise require action by the
shareholders or by the holders of a particular class of shares of that
corporation.
DAI. Texas law generally requires approval by the shareholders of each
corporation that is a party to a merger, or the shareholders of the corporation
whose shares will be acquired in the exchange. Texas law requires that at least
two thirds of the outstanding shares approve the plan of merger or exchange.
Texas law does not require a shareholder vote of the surviving corporation
in a merger (unless the corporation provides otherwise in its articles of
incorporation) if:
- the articles of the incorporation of the corporation do not differ from
its articles of incorporation before the merger;
- each security holder of the corporation will hold the same number of
shares with identical rights immediately after the merger; and
- each of the shares that entitle the holders thereof to vote
unconditionally in the election of directors and the shares that entitle
the holders thereof to participate without limitation in distributions
outstanding immediately after the merger, plus the number of shares
issuable as a result of the merger will not exceed by more than 20% of
the total number of shares outstanding immediately before the merger.
Texas law provides that, except as otherwise provided in the articles of
incorporation, the sale or other disposition of all, or substantially all, the
property and assets of a corporation, made in the usual and regular course of
business of the corporation may be authorized by its board of directors without
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authorization of the shareholders. Texas law requires that mergers and share
exchanges be approved by each class of shares outstanding. Texas law also
provides that class voting is required with respect to proposed amendments to a
corporation's articles of incorporation that adversely affects a specific class
of stock.
AUTHORIZED CAPITAL
SYMIX. The authorized capital stock of Symix consists of 20,000,000 common
shares, each without par value, and 1,000,000 preferred shares, each without par
value.
Ohio law provides that the governing documents of a corporation may
authorize the corporation's board of directors to issue, without shareholder
approval, a series of preferred or preference shares and to designate the
rights, preferences, privileges and restrictions of those shares. Ohio law,
however, does not permit the board of directors to fix the voting rights of any
series of preferred or preference shares.
DAI. The authorized capital stock of DAI consists of 10,000,000 shares of
Class A voting common stock, no par value, and 1,000,000 shares of Class B
non-voting common stock, no par value.
COMMITTEES OF THE BOARD OF DIRECTORS
SYMIX. Symix's code of regulations allows for the creation of an executive
committee and other committees the Symix board of directors deems advisable. All
committees are to be comprised of not fewer than three board members. Each
committee is delegated its powers and duties as determined by the Symix board of
directors, and may act by majority vote at a meeting in writing signed by all of
its members.
DAI. DAI's bylaws provide only for the formation of an executive committee,
which shall consist of one or more directors, one of who must be the president.
DIVIDENDS
SYMIX. Ohio law provides that dividends may be paid in cash, property or
shares of a corporation's capital stock. Ohio law provides that a corporation
may pay dividends out of surplus, however created, and must notify its
shareholders if a dividend is paid out of capital surplus. No dividend may be
paid if the corporation is insolvent or there is reasonable grounds to believe
that by payment of the dividend it would be rendered insolvent.
DAI. Under Texas law a corporation may declare and pay dividends unless
after giving effect:
- the corporation would not be able to pay its debts as they become due in
the usual course of business, or
- except as otherwise specifically allowed by the articles of
incorporation, the corporations total assets would be less than the sum
of its total liabilities plus the amount that would be needed, if the
corporation were to be dissolved at the time of distribution, to satisfy
the preferential rights upon dissolution to shareholders whose
preferential rights are superior to those receiving the distribution.
AMENDMENT TO ARTICLES AND REGULATIONS
SYMIX. Under Ohio law, the directors of Symix may adopt an amendment to its
articles:
- with respect to unissued or treasury shares when and to the extent
authorized by Symix's articles of incorporation;
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- to authorize shares to satisfy conversion or option rights with respect
to securities authorized in Symix's articles of incorporation or
approved by Symix shareholders;
- to reduce the number of authorized shares of any class that have been
reacquired by Symix or to eliminate reference to the shares of any class
when all of the shares of the class have been reacquired by Symix;
- to eliminate all references to the change of shares as provided for in
amended articles of incorporation or an amendment to its articles of
incorporation; or
- to eliminate any statement in Symix's articles of incorporation relating
exclusively to a merger or consolidation.
Symix's articles of incorporation authorize the directors to adopt an amendment
in respect of any unissued or treasury shares.
Under Ohio law, the shareholders of Symix may adopt an amendment to Symix's
articles of incorporation by the affirmative vote of the holders of shares
entitling them to exercise two-thirds of the voting power of Symix on the
proposal.
Under Ohio law, and Symix's code of regulations, an amendment to Symix's
code of regulations requires the approval of the holders of shares entitling
them to exercise a majority of the voting power of Symix on the proposal or,
without a meeting, by the written consent of the holders of shares entitling
them to exercise a majority of the voting power of Symix on the proposal, and by
the holders of at least two-thirds of the shares of each class entitled to vote
on the amendment.
DAI. Under Texas law, an amendment to a corporation's articles of
incorporation requires the approval of the holders of at least two-thirds of the
outstanding shares of the corporation entitled to vote thereon, and the holders
of two-thirds of the outstanding shares of each class or series entitled to vote
thereon as a class, unless a different number, not less than a majority, is
specified in the articles of incorporation. The articles of incorporation of DAI
do not so specify.
The bylaws of DAI may be amended by the affirmative vote of a majority of
the DAI directors present at a meeting of the DAI board of directors, if a
quorum is present, or by the affirmative vote of the holders of a majority of
the shares of DAI represented at a meeting of DAI shareholders, if a quorum is
present.
LIMITATION ON DIRECTORS' LIABILITY
SYMIX. Ohio has codified directors' common law duty of care and, in part,
their common law duty of loyalty. Under Section 1701.59(B) of Ohio law, a
director is required to perform his duties as a director, including his duties
as a member of any committee of the directors on which he serves, in good faith,
in a manner he reasonably believes to be in or not opposed to the best interests
of the corporation, and with the care that an ordinarily prudent person in a
like position would use under similar circumstances.
Under Ohio law, a director is not liable for monetary damages unless it is
proved by clear and convincing evidence that his action or failure to act was
undertaken with deliberate intent to cause injury to the corporation or with
reckless disregard for the best interests of the corporation. This higher
standard of proof must be met in any action brought against a director for
breach of his duties, including any action involving or affecting:
- a change or potential change in control of the corporation;
- a termination or potential termination of a director's service to the
corporation as a director; or
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- a director's service in any other position or relationship with the
corporation.
The higher standard of proof, however, does not affect the liability of
directors for unlawful loans, dividends or distributions under Ohio law. There
is no comparable provision limiting the liability of officers, employees or
agents of Ohio corporations.
DAI. Texas law provides that a corporation's articles of incorporation may
provide that a director will not be liable to the corporation or its
shareholders for monetary damages for an act or omission in the director's
capacity as a director, except for:
- a breach of the director's duty of loyalty to the corporation or its
shareholders;
- an act or omission not in good faith that constitutes a breach of duty of
the director to the corporation or an act or omission that involves
intentional misconduct or knowing violation of the law;
- a transaction from which the director received an improper benefit,
whether or not the benefit resulted from an action taken within the scope
of the director's office; or
- an act or omission for which the liability of a director is expressly
provided by applicable statute.
DAI's articles of incorporation do not include such a provision eliminating the
personal liability of its directors.
SIZE AND CLASSIFICATION OF BOARD OF DIRECTORS
SYMIX. Ohio law provides that a board of directors must consist of not less
than three individuals unless there are fewer than three shareholders, with the
number specified in or fixed in accordance with the articles of incorporation or
regulations. Ohio law also provides that the articles of incorporation or code
of regulations may provide for staggering the terms of directors by dividing the
total number of directors into either two or three classes consisting of not
less than three directors each. The Symix board of directors is not classified.
DAI. Texas law provides that a board of directors must consist of one or
more members, with the number fixed in accordance with the articles of
incorporation or bylaws. Texas law also provides that the bylaws of a
corporation may provide for staggering the terms of directors in the same manner
as Ohio law. DAI's board of directors is not classified.
LOANS TO DIRECTORS
SYMIX. Under Ohio law, the directors of an Ohio corporation are personally
liable for a loan made to an officer, director or shareholder, other than in the
usual course of business, unless, at the time the loan is made, a majority of
the disinterested directors voted for the loan and determined that making the
loan could reasonably be expected to benefit the corporation.
DAI. No similar provision exists under Texas law.
INSPECTION OF BOOKS AND RECORDS
SYMIX. Under Ohio law, any shareholders of a corporation may inspect and
copy, at any reasonable time and for any reasonable and proper purpose, the
corporation's books and records of account, minutes, and records of
shareholders, and voting trust agreements on file with the corporation.
DAI. Texas law allows any person who has been a shareholder for at least
six months prior to that person's demand or as a holder of at least 5% of the
outstanding shares of a corporation to
50
<PAGE>
inspect and copy its relevant books and records of account, minutes, and share
transfer record for any proper purpose.
WHERE YOU CAN FIND MORE INFORMATION
Symix files annual, quarterly and special reports, proxy statements and
other information with the SEC. You may read and copy any reports, statements or
other information Symix files at the SEC's public reference rooms at Room 1024,
450 Fifth Street, N.W., Washington, D.C. 20549, as well as at the SEC's regional
offices at 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and 7
World Trade Center, Suite 1300, New York, New York 10048. Copies of these
materials may also be obtained from the SEC at prescribed rates by writing to
the Public Reference Section of the SEC, 450 Fifth Street, N.W., Washington,
D.C. 20549. Please call the SEC at 1-800-SC-0330 for further information on the
public reference rooms. Symix's filings also are available to the public from
commercial document retrieval services and at the web site maintained by the SEC
at "http://www.sec.gov."
Symix has filed with the SEC a registration statement on Form S-4 with
respect to the Symix shares to be issued to holders of DAI stock under the
merger agreement. This proxy statement/ prospectus constitutes the prospectus of
Symix that is filed as part of the registration statement. Other parts of the
registration statement are omitted from this proxy statement/prospectus in
accordance with the rules and regulations of the SEC. Copies of the registration
statement, including exhibits, may be inspected, without charge, at the offices
of the SEC at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies may be
obtained from the SEC at prescribed rates.
The SEC permits Symix to "incorporate by reference" information into this
proxy statement/ prospectus, which means that Symix can disclose important
information to you by referring you to another document filed separately with
the SEC. The following documents previously filed with the SEC by Symix
(Commission File Number 0-19024) are incorporated by reference into this proxy
statement/prospectus:
- Symix's Annual Report on Form 10-K, Form 10-K/A No. 1 and Form 10-K/A No.
2 for the fiscal year ended June 30, 1998;
- Symix's Quarterly Report on Form 10-Q for the quarterly period ended
September 30, 1998;
- Symix's Quarterly Report on Form 10-Q for the quarterly period ended
December 31, 1998; and
- Symix's Proxy Statement relating to the Annual Meeting of Shareholders of
Symix held on November 11, 1998.
Symix also is incorporating by reference additional documents that Symix
files with the SEC between the date of this proxy statement/prospectus and the
date of the special meeting.
If you are a DAI stockholder, you can obtain any of the documents
incorporated by reference through Symix or the SEC. Documents incorporated by
reference are available from Symix without charge, excluding all exhibits unless
it has been specifically incorporated by reference as an exhibit in this proxy
statement/prospectus. You may obtain documents incorporated by reference in this
proxy statement/prospectus by requesting them in writing or by telephone from
Symix at the following address or telephone number:
Symix Systems, Inc.
2800 corporate Exchange Drive
Suite 400
Columbus, Ohio 43231
Telephone: 1-614-523-7379
Attn: Lawrence W. DeLeon, Secretary
51
<PAGE>
If you would like to request documents from Symix, please do so by June 1,
1999, to receive them before the special meetings.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE PROPOSAL(S)
PRESENTED AT THE SPECIAL MEETING. WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU
WITH INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS DATED MAY 6, 1999. YOU
SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN THAT DATE, AND
NEITHER THE MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO YOU NOR THE ISSUANCE
OF SYMIX SHARES IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE CONTRARY.
Symix has supplied all information contained or incorporated by reference in
this proxy statement/ prospectus relating to Symix, and DAI has supplied all
information contained in this document relating to DAI.
LEGAL MATTERS
The validity of the issuance of the Symix shares to be issued in the merger
will be passed upon by Vorys, Sater, Seymour and Pease LLP, Columbus, Ohio. As
of April 12, 1999, members of Vorys, Sater, Seymour and Pease LLP beneficially
owned an aggregate of 148,057 Symix shares. Duke W. Thomas, a member of that
firm, is a director of Symix.
Legal matters on behalf of DAI in connection with the merger will be passed
upon by Squire, Sanders & Dempsey L.L.P., Phoenix, Arizona.
EXPERTS
Ernst & Young LLP, independent auditors, have audited the consolidated
financial statements and schedule included in Symix's Annual Report on Form 10-K
for the year ended June 30, 1998, as set forth in their report, which is
incorporated by reference in this proxy statement/prospectus and elsewhere in
the registration statement. Symix's financial statements and schedule are
incorporated by reference in reliance on Ernst & Young LLP's report, given on
their authority as experts in accounting and auditing.
The consolidated financial statements of DAI at September 30, 1998 and 1997,
and for each of the two years in the period ended September 30, 1998, included
in this proxy statement/prospectus have been audited by Arthur Andersen LLP,
independent public accountants, as indicated in their report with respect
thereto, and are included in this proxy statement/prospectus in reliance upon
the authority of that firm as experts in auditing and accounting in giving their
report.
SHAREHOLDER PROPOSALS
Any qualified shareholder of Symix who intends to submit a proposal to Symix
shareholders at the 1999 annual meeting of shareholders must submit the proposal
to Symix not later than June 10, 1999 to be considered for inclusion in Symix'
proxy statement and form of proxy relating to that meeting. If a shareholder
intends to present a proposal at the 1999 annual meeting of Symix shareholders,
but has not sought the inclusion of the proposal in Symix's proxy materials, the
proposal must be received by Symix prior to August 24, 1999 or Symix's
management proxies for the 1999 annual meeting will be entitled to use their
discretionary voting authority should the proposal then be raised, without any
discussion of the matter in Symix's proxy materials.
52
<PAGE>
INDEX TO FINANCIAL STATEMENTS
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
<TABLE>
<S> <C>
Report of Independent Public Accountants.............................................. F-3
Consolidated Balance Sheets--September 30, 1998 and 1997 and December 31, 1998 F-4
(unaudited).........................................................................
Consolidated Statements of Operations--Years ended September 30, 1998 and 1997 and for F-5
the quarters ended December 31, 1998 and 1997 (unaudited)...........................
Consolidated Statements of Shareholders' Equity--Years ended September 30, 1998 and F-6
1997................................................................................
Consolidated Statements of Cash Flows--Years ended September 30, 1998 and 1997 and for F-7
the quarters ended December 31, 1998 and 1997 (unaudited)...........................
Notes to Consolidated Financial Statements--September 30, 1998 and 1997............... F-8
</TABLE>
F-1
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
FINANCIAL STATEMENTS
F-2
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Distribution Architects International, Inc.:
We have audited the accompanying consolidated balance sheets of DISTRIBUTION
ARCHITECTS INTERNATIONAL, INC. (a Texas Corporation) and subsidiaries as of
September 30, 1998 and 1997, and the related consolidated statements of
operations, shareholders' equity and cash flows for the years then ended. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures 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 financial position of Distribution Architects
International, Inc. and subsidiaries as of September 30, 1998 and 1997, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The schedule accompanying the financial
statements is presented for the purpose of complying with the Securities and
Exchange Commission's rules and is not a required part of the basic financial
statements. This schedule has been subjected to the auditing procedures applied
in our audits of the basic financial statements and, in our opinion, fairly
states in all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Phoenix, Arizona,
March 5, 1999.
F-3
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER SEPTEMBER SEPTEMBER
31, 30, 30,
1998 1998 1997
----------- ----------- -----------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C>
ASSETS
CURRENT ASSETS:
Cash.............................................................. $ 948 $ 783 $ 1,695
Trade receivables, less allowance for doubtful accounts of $123 at
Dec. 31, 1998, and $245 and $430 at Sept. 30, 1998 and 1997,
respectively.................................................... 4,140 4,929 4,232
Tax receivable.................................................... 489 886 --
Prepaid expenses and other assets................................. 287 318 618
----------- ----------- -----------
Total current assets.......................................... 5,864 6,916 6,545
----------- ----------- -----------
UNSECURED NOTES RECEIVABLE FROM SHAREHOLDERS........................ 143 200 133
----------- ----------- -----------
PROPERTY AND EQUIPMENT:
Land.............................................................. 621 721 641
Buildings and improvements........................................ 1,731 1,978 1,772
Equipment......................................................... 3,656 3,576 3,287
----------- ----------- -----------
6,008 6,275 5,700
Less-accumulated depreciation....................................... (2,917) (2,764) (2,256)
----------- ----------- -----------
3,091 3,511 3,444
----------- ----------- -----------
OTHER ASSETS........................................................ 16 44 50
----------- ----------- -----------
Total assets.................................................. $ 9,114 $ 10,671 $ 10,172
----------- ----------- -----------
----------- ----------- -----------
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term borrowings............................................. $ -- $ 1,038 $ 599
Current portion of long-term debt................................. 1,400 1,361 605
Trade accounts payable............................................ 851 424 372
Accrued expenses and other current liabilities.................... 84 503 210
Deferred tax liability............................................ 1,215 1,215 1,025
----------- ----------- -----------
Total current liabilities..................................... 3,550 4,541 2,811
----------- ----------- -----------
LONG-TERM DEBT, less current portion................................ 616 1,047 2,026
----------- ----------- -----------
DEFERRED TAX LIABILITY.............................................. -- -- 72
----------- ----------- -----------
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, Class A, no par value, 1,000 shares authorized;
4,396 shares issued at December 31, 1998 and 4,396 and 4,335
shares issued at September 30, 1998 and 1997, respectively.... 180 180 107
Common stock, Class B, no voting, no par value, 1,000 shares
authorized and -0- shares outstanding at December 31, 1998 and
Septemer 30, 1998 and 1997, respectively
Less-Treasury stock, at cost, 118 shares at December 31, 1998
and 118 and 97 shares at September 30, 1998 and 1997,
respectively.................................................. (102) (102) (77)
Retained earnings............................................... 4,870 5,005 5,233
----------- ----------- -----------
Total shareholders' equity.................................... 4,948 5,083 5,263
----------- ----------- -----------
Total liabilities and shareholders' equity.................... $ 9,114 $ 10,671 $ 10,172
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
F-4
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEARS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
REVENUE:
System integration services and hardware commissions.... $ 2,826 $ 3,041 $ 12,583 $ 12,195
License fees............................................ 127 -- 692 2,087
--------- --------- --------- ---------
Total Revenue......................................... 2,953 3,041 13,275 14,282
COST OF REVENUE........................................... 1,203 1,228 5,621 6,437
--------- --------- --------- ---------
Gross margin............................................ 1,750 1,813 7,654 7,845
--------- --------- --------- ---------
OPERATING EXPENSES:
Selling, general and administrative..................... 1,356 1,384 6,214 5,484
Research and development................................ 700 500 2,000 2,100
--------- --------- --------- ---------
Total operating expenses.............................. 2,056 1,884 8,214 7,584
--------- --------- --------- ---------
Income (loss) from operations........................... (306) (71) (560) 261
--------- --------- --------- ---------
OTHER INCOME (EXPENSE):
Interest income......................................... 13 18 48 104
Interest expense........................................ (67) (63) (244) (216)
Other income, net....................................... 105 52 221 213
--------- --------- --------- ---------
51 7 25 101
--------- --------- --------- ---------
INCOME (LOSS) BEFORE BENEFIT FROM (PROVISION FOR) INCOME
TAXES................................................... (255) (64) (535) 362
BENEFIT FROM (PROVISION FOR) INCOME TAXES................. 120 14 307 (55)
--------- --------- --------- ---------
NET INCOME (LOSS)......................................... $ (135) $ (50) $ (228) $ 307
--------- --------- --------- ---------
--------- --------- --------- ---------
EARNINGS (LOSS) PER SHARE:
Basic:
Net income (loss)..................................... $ (0.03) $ (0.01) $ (0.05) $ 0.07
Diluted:
Net income (loss)..................................... $ (0.03) $ (0.01) $ (0.05) $ 0.06
WEIGHTED AVERAGE NUMBER OF COMMON AND COMMON SHARE
EQUIVALENTS OUTSTANDING:
Basic:.................................................. 4,278 4,261 4,280 4,239
--------- --------- --------- ---------
--------- --------- --------- ---------
Diluted:................................................ 4,278 4,261 4,280 5,444
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-5
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
COMMON STOCK TREASURY STOCK
------------------------ ------------------------ RETAINED
SHARES AMOUNT SHARES AMOUNT EARNINGS TOTAL
----------- ----------- ----------- ----------- ----------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE, SEPTEMBER 30, 1996......................... 4,215 $ 58 78 $ (55) $ 4,926 $ 4,929
Exercise of common stock options.................. 42 49 -- -- -- 49
Repurchase of common stock........................ (19) -- 19 (22) -- (22)
Net income........................................ -- -- -- -- 307 307
----- ----- --- ----- ----------- ---------
BALANCE, SEPTEMBER 30, 1997......................... 4,238 107 97 (77) 5,233 5,263
Exercise of common stock options.................. 61 73 -- -- -- 73
Repurchase of common stock........................ (21) -- 21 (25) -- (25)
Net loss.......................................... -- -- -- -- (228) (228)
----- ----- --- ----- ----------- ---------
BALANCE, SEPTEMBER 30, 1998......................... 4,278 $ 180 118 $ (102) $ 5,005 $ 5,083
----- ----- --- ----- ----------- ---------
----- ----- --- ----- ----------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-6
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE
MONTHS ENDED YEARS ENDED
DECEMBER 31, SEPTEMBER 30,
-------------------- --------------------
1998 1997 1998 1997
--------- --------- --------- ---------
(UNAUDITED)
(IN THOUSANDS)
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)....................................... $ (135) $ (50) $ (228) $ 307
Adjustments to reconcile net income (loss) to net cash
(used in) provided by operating activities:
Depreciation and amortization..................... 165 165 660 597
Provision for losses on trade receivable.......... 40 52 1,160 960
Gain on sales of assets........................... (50) -- -- --
Changes in assets and liabilities:
Decrease (increase) in trade receivables........ 749 189 (1,818) (48)
Decrease (increase) in prepaid expenses and
other assets.................................. 456 (58) (630) (432)
Increase in trade accounts payable, accrued
expenses and other current liabilities........ 8 236 345 108
Decrease (increase) in deferred income taxes.... -- (349) 118 (1,626)
--------- --------- --------- ---------
Net cash (used in) provided by operating
activities.................................... 1,233 185 (393) (134)
--------- --------- --------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment, net................ (89) (103) (727) (702)
Proceeds from sale of real property..................... 393 -- -- --
--------- --------- --------- ---------
Net cash provided by (used in) investing
activities.................................... 304 (103) (727) (702)
--------- --------- --------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt............................ -- -- 259 1,627
Principal payments on long-term debt.................... (391) (96) (482) (243)
Net (payments on) proceeds from short-term borrowings... (1,038) (186) 439 (2,551)
Net payments from (advances on) notes receivable from
shareholders.......................................... 57 (9) (17) (62)
Proceeds from issuance of stock......................... -- 19 73 49
Purchase of treasury stock.............................. -- -- (24) (22)
--------- --------- --------- ---------
Net cash (used in) provided by financing
activities.................................... (1,372) (272) 248 (1,202)
--------- --------- --------- ---------
EFFECT OF EXCHANGE RATE CHANGES ON CASH................... -- -- (40) (8)
--------- --------- --------- ---------
NET INCREASE (DECREASE) IN CASH........................... 165 (190) (912) (2,046)
CASH, BEGINNING OF PERIOD................................. 783 1,695 1,695 3,741
--------- --------- --------- ---------
CASH, END OF PERIOD....................................... $ 948 $ 1,505 $ 783 $ 1,695
--------- --------- --------- ---------
--------- --------- --------- ---------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for--
Interest.............................................. $ 67 $ 63 $ 244 $ 216
--------- --------- --------- ---------
--------- --------- --------- ---------
Income taxes.......................................... $ 2 $ 363 $ 461 $ 1,902
--------- --------- --------- ---------
--------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
F-7
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 1998 AND 1997
(1) OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
NATURE OF OPERATIONS
The accompanying consolidated financial statements include the operations of
Distribution Architects International, Inc. (DAI, Inc.) and its wholly-owned
subsidiaries (collectively the Company). The Company designs, develops, markets
and supports software products that address the distribution requirements of its
customers. These products consist of supply chain management software and are
designed to operate across a wide range of hardware platforms, including Windows
NT and UNIX operating systems. The Company also sells and provides
implementation and post sales support services for its products.
All significant intercompany transactions and balances have been eliminated
in consolidation.
MANAGEMENT PLANS
During fiscal year 1998, the Company undertook a concerted effort to bring
to market its' new products which have been under development for several years.
The Company invested a significant amount of resources to complete this
development and finalize these products. Management believes that these new
products will position the Company to pursue the middle market with a solutions-
oriented software package. The re-positioning of the Company's product offerings
was essential as the middle market continued to expand and demand packaged
solutions that are built on an open platform and using state of the art
technology which provides for more efficient installations.
The Company intends to continue to market its existing distribution software
with new products, specifically electronic commerce and Internet order entry.
These new products have recently become available to the marketplace. The
Company is focused to deliver these new products along with its enterprise
software applications to expand its existing market. The Company intends to
pursue all avenues in expanding its market position including but not limited
to, strategic partnerships with consulting companies, other enterprise resource
planning software firms and niche software companies. Management plans to hire
additional key personnel in sales, development and marketing as necessary to
execute this plan.
As a result of the focus on the development of the Company's new product
offering during fiscal 1998, the Company's financial results suffered. However,
the Company believes that it has adequate working capital, including cash
generated from operations and existing bank financing to fund the additional
product development and the marketing and sales efforts required to launch its
new products and fund its operations.
SPECIAL CONSIDERATIONS
COMPETITION
The Company expects that the market for sale of its products will be highly
competitive, and that many of its competitors will have greater financial and
other resources than the Company. There can be no assurance that existing or new
competitors will not develop products that are superior to or more commercially
acceptable than those of the Company.
F-8
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 AND 1997
RISKS ASSOCIATED WITH PROFESSIONAL SERVICES
During the fiscal years ended September 30, 1998 and 1997, fees from the
Company's professional services constituted 93% and 84% of the Company's total
revenues, respectively. With the growing percentage of revenue coming from
professional services, a lower margin business than software product licensing,
the Company will be subject to the risks associated with such service
businesses, including volatility of workload and dependence on the Company's
ability to attract and retain qualified technical personnel in an increasingly
competitive market.
ABILITY TO RESPOND TO TECHNOLOGICAL CHANGE
The Company's future success will depend significantly on its ability to
enhance its current products and develop or acquire and market new products that
keep pace with technological developments and evolving industry standards as
well as respond to changes in customer needs. There can be no assurance that the
Company will be successful in developing or acquiring product enhancements or
new products to address changing technologies and customer requirements
adequately, that it can introduce such products on a timely basis, or that any
such products or enhancements will be successful in the marketplace. The
Company's delay or failure to develop or acquire technological improvements or
to adapt its products to technological change would have a material adverse
effect on the Company's business, results of operations and financial condition.
CONSOLIDATION
The accompanying consolidated financial statements include the accounts of
Distribution Architects International, Inc. and its subsidiaries D.A.
Distribution Software Systems, Ltd. (Canada), Systems by MICA (Ireland) Limited
tand Distribution Applications, Ltd. (U.K.). The subsidiary books are prepared
in local currency and converted using the required method of Statement of
Financial Accounting Standards (SFAS) No. 52, Foreign Currency Translation (see
below). All significant intercompany accounts and transactions have been
eliminated.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost. For financial statement purposes,
depreciation and amortization are computed on a straight-line basis using a
half-year convention over the following estimated useful lives:
<TABLE>
<S> <C>
Buildings and improvements........................................ 25 years
Equipment......................................................... 3-5 years
</TABLE>
LONG-LIVED ASSETS
The Company periodically evaluates the carrying value of long-lived assets
in accordance with SFAS No. 121, ACCOUNTING FOR THE IMPAIRMENT OF LONG-LIVED
ASSETS AND FOR LONG-LIVED ASSETS TO BE DISPOSED OF. Under SFAS No. 121,
long-lived assets and certain identifiable intangible assets to be held and used
in operations are reviewed for impairment whenever events or circumstances
indicate that the carrying amount of an asset may not be fully recoverable. An
impairment loss is recognized if the sum of the expected long-term undiscounted
cash flows is less than the carrying amount of the long-lived assets being
evaluated.
F-9
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 AND 1997
REVENUE RECOGNITION
Revenue is recognized in accordance with Statement of Position 97-2,
SOFTWARE REVENUE RECOGNITION. Accordingly, revenue from software licensing is
recognized when delivery of the software has occurred, a signed noncancelable
license agreement has been received from the customer and any remaining
obligations under the license agreement are insignificant. Revenue from software
licensing arrangements which require significant customization, modification or
production of the licensed software is deferred and recognized using the
percentage of completion method of accounting. Revenue from software license
fees related to the Company's obligation to provide certain post-contract
customer support without charge for the first year of the license is unbundled
from the license fee at its fair value and is deferred and recognized
straight-line over the contract support period. Revenue from annual or other
renewals of maintenance contracts (including long-term contracts) is deferred
and recognized straight-line over the term of the contracts. Revenue from system
integration services is recognized as the related services are provided, and
commissions on sales of hardware are recognized upon shipment.
FAIR VALUE OF FINANCIAL INSTRUMENTS
At September 30, 1998 and 1997, the carrying value of cash, trade accounts
receivable, and trade accounts payable approximate fair values since they are
short-term in nature or payable upon demand. Short-term borrowings and notes
payable approximate fair value as they are short-term in nature or have stated
interest rates based on current market rates.
The Company estimates fair values of financial instruments by using
available market information. Considerable judgment is required in estimating
fair values. Accordingly, the estimates may not be indicative of the amounts
that the Company could realize in a current market exchange.
GEOGRAPHIC DATA
The Company's business activities are carried out primarily in the United
States and Canada. Total revenue generated in each country was as follows at
September 30:
<TABLE>
<CAPTION>
1998 1997
------------------------ ------------------------
AMOUNT % AMOUNT %
------------- --------- ------------- ---------
<S> <C> <C> <C> <C>
United States................................ $ 12,540,309 94% $ 13,400,453 94%
Canada....................................... 734,949 6 881,918 6
------------- --------- ------------- ---------
Total.................................. $ 13,275,258 100% $ 14,282,371 100%
------------- --------- ------------- ---------
------------- --------- ------------- ---------
</TABLE>
FOREIGN CURRENCY TRANSLATION
The functional currency of each of the Company's subsidiaries is the U.S.
dollar. However, each subsidiary's books are maintained in its local currency.
In accordance with Statement of Financial Accounting Standards (SFAS) No. 52,
FOREIGN CURRENCY TRANSLATION, each subsidiaries' financial statements have been
remeasured as of September 30, 1998 and 1997. The resulting remeasurement (loss)
gain of ($45,286) and $2,916 for the years ended September 30, 1998 and 1997,
respectively, is included in other (expense) income in the accompanying
financial statements.
F-10
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 AND 1997
RESEARCH AND DEVELOPMENT
Under the criteria set forth in SFAS No. 86, ACCOUNTING FOR THE COSTS OF
COMPUTER SOFTWARE TO BE SOLD, LEASED OR OTHERWISE MARKETED, capitalization of
software development costs begins upon the establishment of technological
feasibility of the product. The establishment of technological feasibility and
the ongoing assessment of the recoverability of these costs require considerable
judgment by management with respect to certain external factors, including, but
not limited to, anticipated future gross product revenues, estimated economic
product lives and changes in software and hardware technology. Amounts related
to internal software development that could be capitalized under this statement
were immaterial.
CONCENTRATIONS OF CREDIT RISK
Financial instruments which potentially expose the Company to concentrations
of credit risk, as defined by SFAS No. 105, DISCLOSURE OF INFORMATION ABOUT
FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND FINANCIAL INSTRUMENTS WITH
CONCENTRATIONS OF CREDIT RISK, consist primarily of trade receivables. The
Company's customer base is geographically disbursed and is primarily of medium
to large size companies. The Company does not require collateral upon delivery
of its products.
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. In
management's opinion, methodologies used to determine estimates are adequate and
consistent with prior periods.
INTERIM FINANCIAL REPORTING
The unaudited consolidated balance sheet as of December 31, 1998 and the
related consolidated statements of income and cash flows for the three month
periods ended December 31, 1998 and 1997 have been prepared in accordance with
generally accepted accounting principals for interim financial information.
Accordingly, they do not include all of the information and notes required by
generally accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting only of adjustments of a
normal and recurring nature) considered necessary for a fair presentation of the
financial position and the results of operations have been included. Operating
results for the three month period ended December 31, 1998, are not necessarily
indicative of the results that might be expected for the year ending September
30, 1999.
F-11
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 AND 1997
(2) SHORT-TERM BORROWINGS:
Short-term borrowings at September 30 consist of the following:
<TABLE>
<CAPTION>
1998 1997
------------ ----------
<S> <C> <C>
Multiple Advance Promissory Note, $1,500,000 limit at September 30,
1998, interest payable monthly at the bank's prime rate (8.25% at
September 30, 1998), secured by a deed of trust on real property,
matures January 31, 2000............................................ $ 925,000 $ 598,406
Credit Facility, $200,000 limit at September 30, 1998, interest
payable monthly at the bank's prime rate (8.25% at September 30,
1998) plus 0.5%, secured by certificates of deposit and trade
receivables, matures February 28, 1999.............................. 113,084 --
------------ ----------
$ 1,038,084 $ 598,406
------------ ----------
------------ ----------
</TABLE>
The multiple advance promissory note contains certain financial covenants
including tangible net worth, and a cash flow requirement among other
restrictions. As of September 30, 1998, the Company is out of compliance with
the cash flow requirement covenant. The Company's lender, however, has waived
the cash flow requirement covenant through October 1, 1999.
The Company expects to be able to renew these borrowings under similar terms
in the future, however, there is no assurance that the Company will be able to
do so on acceptable terms.
(3) LONG-TERM DEBT:
Long-term debt at September 30 consists of the following:
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Note payable, interest at the bank's prime rate (8.25% at
September 30, 1998) plus 0.5%, payable in monthly installments
of $25,000 plus interest, maturing June 1999, secured by
accounts receivables and other assets........................... $ 1,100,000 $ 1,400,000
Mortgage note payable, interest at 9.75%, payable in monthly
installments of principal and interest of $6,356 through July
2000, secured by a first deed of trust on real property......... 535,502 557,628
Mortgage note payable, interest at 9.75%, payable in monthly
installments of principal and interest of $8,086 through October
2000, secured by a first deed of trust on real property......... 305,537 365,833
Mortgage note payable, interest at 8.45%, payable in monthly
installments of principal and interest of $1,886 through May
2003, whereupon the entire balance of $152,618 is due, secured
by a first deed of trust on real property....................... 188,185 --
</TABLE>
F-12
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Mortgage note payable, interest at 7.25%, payable in monthly
installments of principal and interest of $675 through December
2000, whereupon the entire balance of $43,848 is due, secured by
a first deed of trust on real property.......................... 59,094 62,711
Other long-term notes payable, interest at rates ranging from
6.25% to prime (8.25% at September 30, 1998) plus 0.5%, payable
in monthly installments of principal and interest, maturing
through September 2003, secured by vehicles and equipment....... 219,085 245,315
------------ ------------
2,407,403 2,631,487
Less--current portion............................................. (1,360,836) (605,234)
------------ ------------
Long-term debt.................................................... $ 1,046,567 $ 2,026,253
------------ ------------
------------ ------------
</TABLE>
Long-term debt is scheduled to mature as follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30, AMOUNT
- ------------------------------------------------------------------------------- -------------
<S> <C>
1999........................................................................... $ 1,360,836
2000........................................................................... 613,762
2001........................................................................... 235,700
2002........................................................................... 24,428
2003........................................................................... 172,677
-------------
$ 2,407,403
-------------
-------------
</TABLE>
(4) COMMITMENTS AND CONTINGENCIES:
OPERATING LEASES
The Company leases certain equipment and office space under noncancelable
operating leases. Rent expense relating to these lease agreements totaled
approximately $182,000 and $104,000 for the fiscal years ended September 30,
1998 and 1997, respectively.
Future lease payments under these noncancelable operating leases are as
follows:
<TABLE>
<CAPTION>
YEAR ENDING SEPTEMBER 30, AMOUNT
- -------------------------------------------------------------------- ------------------------
<S> <C>
1999................................................................ $ 104,728
2000................................................................ 73,362
--------
$ 178,090
--------
--------
</TABLE>
LITIGATION
The Company is involved in certain legal actions and claims arising in the
ordinary course of its business. Management is of the opinion that such matters
will be resolved without material effect on the Company's results of operations
or financial condition.
F-13
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 AND 1997
(5) INCOME TAXES:
The provision for income taxes for the fiscal years ended September 30
consists of the following:
<TABLE>
<CAPTION>
1998 1997
----------- ---------
<S> <C> <C>
Current
Federal............................................................. $ -- $ --
State and Provincial................................................ 8,500 --
Deferred.............................................................. (315,500) 55,400
----------- ---------
Provision for (benefit from) income taxes............................. $ (307,000) $ 55,400
----------- ---------
----------- ---------
</TABLE>
The components of the net deferred tax liability are as follows:
<TABLE>
<CAPTION>
SEPTEMBER 30,
--------------------------
1998 1997
------------ ------------
<S> <C> <C>
Deferred tax liabilities:
Accrual to cash adjustments, net................................ $ 904,000 $ 968,000
Accelerated tax depreciation.................................... 282,000 208,000
Other........................................................... 94,000 86,318
------------ ------------
1,280,000 1,262,318
Deferred tax assets:
Tax effect of US net operating losses........................... -- 51,000
Tax effect of Canadian net operating losses..................... 65,000 114,000
------------ ------------
Net deferred tax liability...................................... $ 1,215,000 $ 1,097,318
------------ ------------
------------ ------------
</TABLE>
The Company has adopted SFAS No. 109, ACCOUNTING FOR INCOME TAXES. SFAS No.
109 requires the use of an asset and liability approach in accounting for income
taxes. Deferred tax assets and liabilities are recorded based on the differences
between the financial statement and tax bases of assets and liabilities and the
tax rates in effect when these differences are expected to reverse. SFAS No. 109
requires the reduction of deferred tax assets by a valuation allowance if, based
on the weight of available evidence, it is more likely than not that some or all
of the deferred tax assets will not be realized. In the Company's opinion, it is
more likely than not that the Company will generate sufficient taxable income in
the future to fully utilize the deferred tax asset recorded at September 30,
1998.
Net operating loss carryforwards for Canadian tax purposes totaled
approximately $144,000 at September 30, 1998. These carryforwards begin expiring
in fiscal 1999.
F-14
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 AND 1997
A reconciliation of the U.S. federal statutory rate to the Company's
effective tax rate is as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
------------------------------------------
1998 1997
-------------------- --------------------
<S> <C> <C> <C> <C>
Statutory federal rate.................. $(187,000) 35.0% $ 127,000 35.0%
State taxes, net of federal benefit..... (31,000) 5.8 7,000 1.9
Effect of permanent differences......... (15,000) 2.8 (78,600) (21.6)
Effect of foreign loss and rate......... (26,000) 4.8 -- --
Research and development credit......... (48,000) 8.9 -- --
--------- --- --------- ---------
$(307,000) 57.3% $ 55,400 15.3%
--------- --- --------- ---------
--------- --- --------- ---------
</TABLE>
Included in the accompanying financial statements is a tax receivable of
approximately $885,000 at September 30, 1998. This amount represents refunds to
be received related to a net operating loss carryback and an R&D tax credit
generated in prior years.
(6) RELATED PARTY TRANSACTIONS:
The Company has unsecured notes receivable from certain shareholders,
employees and officers which total $200,207 at September 30, 1998 and bear
interest at a rate of 6% with varying maturity dates.
(7) EARNINGS PER SHARE:
In February 1997, the Financial Accounting Standards Board issued SFAS No.
128, EARNINGS PER SHARE. SFAS No. 128 is effective for financial statements for
fiscal years ending after December 15, 1997. Earnings (loss) per share is
computed by dividing net income (loss) by the weighted average number of common
and common share equivalents assumed outstanding during the period. Shares
issuable upon the exercise of employee stock options that are considered
anti-dilutive are not included in the weighted average number of common and
common share equivalents outstanding.
The following table summarizes the components of earnings per share for the
years ended September 30, 1998 and 1997.
<TABLE>
<CAPTION>
1998 1997
----------- ----------
<S> <C> <C>
Basic earnings (loss) per share:
Net (loss) income................................................. $ (228,475) $ 306,517
Weighted average common shares.................................... 4,280,370 4,239,005
----------- ----------
Basic earnings (loss) per share................................. $ (0.05) $ 0.07
----------- ----------
----------- ----------
Diluted earnings (loss) per share:
Net (loss) income................................................. $ (228,475) $ 306,517
----------- ----------
----------- ----------
Weighted average common shares.................................... 4,280,370 4,239,005
Options assumed converted......................................... -- 1,205,144
----------- ----------
Weighted average common shares plus assumed conversion............ 4,280,370 5,444,149
----------- ----------
Diluted earnings (loss) per share............................... $ (0.05) $ 0.06
----------- ----------
----------- ----------
</TABLE>
F-15
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 AND 1997
(8) STOCK OPTION PLANS:
The Company's Board of Directors and shareholders have adopted various stock
option plans (collectively referred to as the Plans). Under the Plans, a total
of 3,245,000 shares of common stock have been reserved for issuance pursuant to
the exercise of options granted under the Plans. The terms of the options vary
from one year to perpetuity (except in the case of a reorganization or
dissolution of the Company or the death of the option holder) vest immediately,
and are exercisable at any time prior to the expiration date.
Pursuant to the terms of the Plans, the exercise price of all options
outstanding at the beginning of fiscal years 1997 and 1998 were adjusted to the
common stock's book value at the end of the preceding fiscal year.
Common stock issued under the Plans is subject to repurchase (right of first
refusal) by the Company upon termination of the shareholder at a purchase price
equal to original cost plus interest during the holding period.
A summary of the activity for the Plans at September 30 is as follows:
<TABLE>
<CAPTION>
1998 1997
-------------------- ----------------------
WEIGHTED WEIGHTED
AVERAGE AVERAGE
EXERCISE EXERCISE
NUMBER PRICE PER NUMBER PRICE PER
OF SHARES SHARE OF SHARES SHARE
--------- --------- --------- -----------
<S> <C> <C> <C> <C>
Options outstanding beginning of
year............................... 1,183,773 $ 1.169 1,183,773 $ 0.884
Exercised.......................... (61,599) 1.182 (41,769) 1.169
Granted............................ 111,924 1.242 41,769 1.169
Lapsed/canceled.................... -- -- -- --
--------- ---------
Outstanding and exercisable at end of
year............................... 1,234,098 $ 1.242 1,183,773 $ 1.169
--------- ---------
Options available for grant.......... 88,076 108,231
--------- ---------
--------- ---------
Weighted average fair value of
options granted.................... $ .04 $ .03
--------- -----------
--------- -----------
</TABLE>
STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 123
During 1995, the Financial Accounting Standards Board issued SFAS No. 123,
ACCOUNTING FOR STOCK-BASED COMPENSATION, which defines a fair value based method
of accounting for an employee stock option or similar equity instrument and
encourages all entities to adopt that method of accounting for all of their
employee stock compensation plans. However, it also allows an entity to continue
to measure compensation cost related to stock options issued to employees under
these plans using the method of accounting prescribed by Accounting Principles
Board Opinion (APB) No. 25, ACCOUNTING FOR STOCK ISSUED TO EMPLOYEES. The
Company has elected to account for its stock-based compensation plans under APB
No. 25; therefore, no compensation cost is recognized in the accompanying
financial statement for stock-based employee option awards. However, the Company
has
F-16
<PAGE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SEPTEMBER 30, 1998 AND 1997
(8) STOCK OPTION PLANS: (CONTINUED)
computed for pro forma disclosure purposes the value of all options granted
during 1998 and 1997, using the Black-Scholes option pricing model with the
following weighted average assumptions:
<TABLE>
<CAPTION>
1998 1997
--------- ---------
<S> <C> <C>
Risk free interest rate................................................... 6.0% 6.0%
Expected dividend yield................................................... -- --
Expected lives............................................................ .5 year .5 year
Expected volatility....................................................... N/A N/A
</TABLE>
Certain pro forma disclosures required under SFAS No. 123 have been omitted
as the estimated compensation expense associated with the granting of options
under the plan is immaterial.
(9) SIGNIFICANT CUSTOMERS:
The Company derives a significant portion of its total revenues from
relatively few customers. The percentage of total revenues of customers to whom
sales exceed 10% of total revenue were as follows:
<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER
30,
--------------------
1998 1997
--------- ---------
<S> <C> <C>
Customer #1............................................................... 30.4% 26.6%
Customer #2............................................................... 13.6 --
Customer #3............................................................... 10.3 --
Customer #4............................................................... -- 12.5
</TABLE>
Because of the nature of the Company's business operations, the Company
anticipates that customers that represent more than 10% of total revenue will
vary from period to period depending on the placement of orders by a particular
customer or customers in any given period.
(10) SUBSEQUENT EVENTS:
In February 1999, the Company entered into an Agreement of Merger with Symix
Systems, Inc. (Symix), a company that develops, markets and supports integrated
enterprise management systems for midsize manufacturers. Symix intends to issue
shares of its common stock in exchange for all of the outstanding common stock
of the Company. The acquisition is subject to regulatory approval, approval by
the stockholders' of the Company, and other conditions of closing.
F-17
<PAGE>
APPENDIX A
AGREEMENT OF MERGER
DATED AS OF FEBRUARY 24, 1999
AMONG
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC.
SYMIX SYSTEMS, INC.,
AND
SYMIX ACQUISITION CORP.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------------
<S> <C> <C>
ARTICLE I THE MERGER.............................................................................. 2
1.1 The Merger........................................................................... 2
1.2 Consummation of the Merger........................................................... 2
1.3 Conversion of Outstanding Shares..................................................... 3
1.4 Cancellation of Options.............................................................. 3
1.5 Fractional Shares.................................................................... 4
1.6 Surrender and Exchange............................................................... 5
1.7 Dissenting Shares.................................................................... 6
1.8 No Further Transfers................................................................. 6
ARTICLE II THE SURVIVING CORPORATION.............................................................. 7
2.1 Articles of Incorporation............................................................ 7
2.2 Regulations.......................................................................... 7
2.3 Directors and Officers............................................................... 7
ARTICLE III CLOSING............................................................................... 7
3.1 Closing.............................................................................. 7
3.2 Instruments of Conveyance and Transfer, Further Assurances and Accounting
Treatment............................................................................ 8
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE COMPANY.......................................... 9
4.1 Corporate Existence and Power........................................................ 9
4.2 Corporate Authorization.............................................................. 10
4.3 Governmental Authorization........................................................... 10
4.4 Non-Contravention.................................................................... 10
4.5 Capitalization....................................................................... 11
4.6 Subsidiaries......................................................................... 12
4.7 Financial Statements................................................................. 12
4.8 No Material Change................................................................... 13
4.9 Title to and Condition of Properties and Assets...................................... 15
4.10 Certain Properties................................................................... 16
4.11 Tax Matters.......................................................................... 18
4.12 Contracts and Commitments............................................................ 21
4.13 Litigation........................................................................... 23
4.14 Intellectual Property................................................................ 23
4.15 Compliance with Laws................................................................. 26
4.16 Environmental Matters................................................................ 26
4.17 ERISA Matters........................................................................ 28
4.18 Governmental Authorizations and Regulations.......................................... 29
4.19 SEC and Antitrust Filings............................................................ 29
4.20 Certain Transactions................................................................. 30
4.21 Accounting Practices................................................................. 30
4.22 Minute Books......................................................................... 30
4.23 Insurance............................................................................ 31
4.24 Bank Accounts; Powers of Attorney.................................................... 31
4.25 Product/Service Warranties........................................................... 31
4.26 Certain Disclosures.................................................................. 31
4.27 Customer Relations................................................................... 32
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------------
<S> <C> <C>
4.28 Brokers.............................................................................. 32
4.29 No Untrue Statements................................................................. 32
4.30 Tax and Regulatory Matters........................................................... 32
4.31 State Takeover Laws.................................................................. 33
ARTICLE V REPRESENTATIONS AND WARRANTIES OF THE BUYER............................................. 33
5.1 Corporate Organization and Good Standing............................................. 33
5.2 Corporate Authorization.............................................................. 34
5.3 Governmental Authorization........................................................... 34
5.4 Non-Contravention.................................................................... 34
5.5 Buyer Common Stock................................................................... 35
5.6 Tax and Regulatory Matters........................................................... 35
5.7 Brokers.............................................................................. 35
5.8 Reports and Financial Statements..................................................... 36
5.9 No Untrue Statements................................................................. 36
ARTICLE VI CERTAIN COVENANTS...................................................................... 37
6.1 Conduct of Business Pending Closing.................................................. 37
6.2 Registration Statement; Stockholder Meeting; Proxy Material.......................... 39
6.3 Access to Information................................................................ 41
6.4 Affiliate's Letter................................................................... 41
6.5 Other Negotiations................................................................... 41
6.6 Employee Benefits.................................................................... 42
6.7 Certain Matters Relating to Merger................................................... 42
ARTICLE VII CONDITIONS TO CLOSING................................................................. 42
7.1 Conditions to the Buyer's Obligation to Close........................................ 42
7.2 Conditions to the Company's Obligation to Close...................................... 45
ARTICLE VIII MISCELLANEOUS........................................................................ 47
8.1 Survival of Representations and Warranties; Effect of Closing........................ 47
8.2 Specific Performance................................................................. 47
8.3 Termination by the Buyer............................................................. 48
8.4 Termination by the Company........................................................... 48
8.5 Effect of Termination................................................................ 48
8.6 Updating Information................................................................. 50
8.7 Stock Legends........................................................................ 51
8.8 Expenses............................................................................. 51
8.9 Waiver............................................................................... 51
8.10 Public Announcements................................................................. 52
8.11 Notices.............................................................................. 52
8.12 Severability......................................................................... 53
8.13 Entire Agreement..................................................................... 53
8.14 Assignability of Rights Under this Agreement......................................... 53
8.15 Confidentiality...................................................................... 54
8.16 Governing Law........................................................................ 54
8.17 Headings; References to Sections, Exhibits and Schedules............................. 54
8.18 Counterparts......................................................................... 54
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------------
<S> <C> <C>
LIST OF EXHIBITS
Exhibit A Articles of Merger
Exhibit B Form of Affiliate's Letter
Exhibit C Cain Employment Agreement
</TABLE>
LIST OF SCHEDULES
<TABLE>
<CAPTION>
REFERENCE PAGE
--------------
<S> <C> <C>
4.1 Corporate Existence and Power....................................................... 9
4.3 Governmental Authorizations......................................................... 10
4.4 Non-Contravention................................................................... 10
4.5 Capitalization...................................................................... 11
4.6 Subsidiaries........................................................................ 12
4.7 Financial Statements................................................................ 12
4.8 No Material Change.................................................................. 13
4.9 Title to and Condition of Properties and Assets..................................... 15
4.10 Certain Properties.................................................................. 16
4.11 Tax Matters......................................................................... 18
4.12 Contracts and Commitments........................................................... 22
4.13 Litigation.......................................................................... 23
4.14 Intellectual Property............................................................... 24
4.17 Plans............................................................................... 28
4.18 Governmental Authorizations and Regulations......................................... 29
4.20 Certain Transactions................................................................ 30
4.23 Insurance........................................................................... 31
4.24 Bank Accounts; Powers of Attorney................................................... 31
4.25 Product/Service Warranties.......................................................... 31
4.26 Certain Disclosures................................................................. 32
6.1 Compensation Payments............................................................... 37
7.1 List of Employees................................................................... 43
LIST OF DEFINED TERMS:
Affiliate's Letter................................................................................ 6.4
Agreement......................................................................................... Introduction
Articles of Merger................................................................................ 1.2
Buyer............................................................................................. Introduction
Buyer Common Stock................................................................................ 1st Recital
Buyer Reports..................................................................................... 5.8
Charges........................................................................................... 4.11(a)
Closing, Closing Date, time of Closing............................................................ 3.1
Code.............................................................................................. 4.11(e)
Company........................................................................................... Introduction
Company Common Stock.............................................................................. 1st Recital
Company Personnel................................................................................. 4.8(j)
Company Proxy Statement........................................................................... 6.2(a)
Company Securities................................................................................ 4.5
Company Stockholder Meeting....................................................................... 6.2(b)
Dissenting Shares................................................................................. 1.7
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
REFERENCE PAGE
--------------
<S> <C> <C>
Effective Time.................................................................................... 1.2
Employment Agreements............................................................................. 7.1(o)
ERISA............................................................................................. 4.17
Exchange Agent.................................................................................... 1.6(a)
Financial Statements.............................................................................. 4.7
Intellectual Property............................................................................. 4.14(a)
Interim Financials................................................................................ 4.7(b)
IRS............................................................................................... 4.11(c)
Material Adverse Effect........................................................................... 4.1 and 5.1
Merger............................................................................................ 1st Recital
Merger Consideration.............................................................................. 1.3(d)
Merger Sub........................................................................................ Introduction
Merger Sub Common Stock........................................................................... 1.3(a)
1933 Act.......................................................................................... 4.5
1934 Act.......................................................................................... 4.19
Ohio Act.......................................................................................... 1st Recital
Options........................................................................................... 1.4
Products.......................................................................................... 4.14(b)
SEC............................................................................................... 4.19
Surviving Corporation............................................................................. 1.1
Taxes............................................................................................. 4.11
Tax Returns....................................................................................... 4.11
Texas Act......................................................................................... 1st Recital
</TABLE>
iv
<PAGE>
AGREEMENT OF MERGER
THIS AGREEMENT OF MERGER (together with the schedules and exhibits attached
hereto being referred to as the "Agreement"), is made and entered into as of the
24th day of February, 1999, by and among SYMIX SYSTEMS, INC., an Ohio
corporation (the "Buyer"); DISTRIBUTION ARCHITECTS INTERNATIONAL, INC., a Texas
corporation (the "Company"); and SYMIX ACQUISITION CORP., an Ohio corporation
and a wholly-owned subsidiary of Buyer ("Merger Sub");
WITNESSETH:
WHEREAS, the Buyer and the Company deem it advisable and in their best
interests and in the best interests of their respective shareholders that the
Company be acquired by the Buyer through a merger (the "Merger") of the Company
and Merger Sub in accordance with The Texas Business Corporation Law (the "Texas
Act") and the Ohio General Corporation Law (the "Ohio Act"), with the effect
that the holders of the Class A Common Stock, no par value, of the Company
("Company Common Stock") will receive common shares, no par value, of the Buyer
("Buyer Common Stock") and the Company will become a wholly-owned subsidiary of
the Buyer;
WHEREAS, it is intended that for federal income tax purposes the Merger
shall be tax free to the parties to this Agreement and the holders of Company
Common Stock and that for accounting purposes the Merger shall be treated as a
pooling of interests; and
WHEREAS, the parties hereto have agreed to take all actions that are
necessary and appropriate to effect the Merger as set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises, representations, warranties and covenants hereinafter set forth, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. On the terms and conditions set forth in this
Agreement, at the Effective Time (as defined below), the Company shall be merged
with and into Merger Sub in accordance with the Texas Act and the Ohio Act,
whereupon the separate existence of the Company shall cease, and Merger Sub
shall be the Surviving Corporation (the "Surviving Corporation") and shall
continue to be governed by the Ohio Act. From and after the Effective Time, the
Surviving Corporation shall possess all the rights, privileges, powers and
franchises of, and shall be subject to all of the restrictions, disabilities and
duties of, the Company and Merger Sub, all as provided under the applicable
provisions of the Texas Act and the Ohio Act.
Section 1.2 CONSUMMATION OF THE MERGER. As soon as practicable after the
Closing (as defined below), the Company and Merger Sub will file, or cause to be
filed, Articles of Merger substantially in the form attached hereto as Exhibit A
(the "Articles of Merger") with the Secretary of State of the State of Texas and
a certificate of merger with the Secretary of State of the State of Ohio and
will make all other filings or recordings required by the Texas Act and the Ohio
Act in connection with the Merger. The Merger shall become effective (the
"Effective Time") at the latest of (a) the time the Articles of Merger are duly
filed with the Secretary of State of the State of Texas, (b) the time the
certificate of merger is duly filed with the Secretary of State of the State of
Ohio, or (c) at such later time as may be mutually agreed upon by the parties
and specified in the certificate of merger and the Articles of Merger.
1
<PAGE>
Section 1.3 CONVERSION OF OUTSTANDING SHARES. At the Effective Time, by
virtue of the Merger and without any action on the part of any holder of the
capital stock of the Company or the capital stock of Merger Sub ("Merger Sub
Common Stock"):
(a) Each share of Company Common Stock outstanding immediately prior to the
Effective Time shall, except as otherwise provided in Section 1.7 herein,
automatically be canceled and extinguished and be converted into the right to
receive 0.13099 shares of Buyer Common Stock.
(b) Each share of Company Common Stock held by the Company as treasury stock
immediately prior to the Effective Time or owned by the Buyer, Merger Sub or any
other direct or indirect subsidiary of the Buyer immediately prior to the
Effective Time shall be canceled and extinguished, and no payment shall be made
with respect thereto under this Agreement.
(c) Each share of Merger Sub Common Stock outstanding immediately prior to
the Effective Time shall be converted into and shall represent one fully paid
and non-assessable share of the Surviving Corporation.
(d) The shares of Buyer Common Stock usable pursuant to Section 1.3(a) and
the cash to be paid for fractional shares of Buyer Common Stock pursuant to
Section 1.5 are herein referred to as the "Merger Consideration."
Section 1.4 CANCELLATION OF OPTIONS. All rights under any and all stock
options granted by the Company pursuant to the Company's stock option plans that
remain unexercised immediately prior to the Effective Time (collectively,
"Options") shall be automatically terminated and be canceled. Without further
action by the holders of such Options, each holder of an Option shall be
entitled to receive in and as the result of the Merger, for the shares of
Company Common Stock with respect to which such Option would have been
exercisable immediately prior to the Effective Time, that number of shares of
Buyer Common Stock determined in accordance with the following formula:
<TABLE>
<CAPTION>
Formula: (A-B) x C
-----------
<S> <C>
$ 21.50
</TABLE>
with "A" being $2.518 (the agreed value of a share of Company Common Stock as of
the date hereof), "B" being $1.242 (the exercise price per share of such
Option), and "C" being the number of shares of Company Common Stock covered by
the Option. Notwithstanding anything else contained in this Agreement, the
number of shares of Buyer Common Stock issuable pursuant to Sections 1.3 and 1.4
shall not exceed 610,000 shares.
Section 1.5 FRACTIONAL SHARES. All fractional shares of Buyer Common Stock
which a holder of Company Common Stock immediately prior to the Effective Time
would otherwise be entitled to receive immediately after the Effective Time
shall be aggregated for each Company stockholder. If a fractional share results
from such aggregation, such stockholder shall be entitled, after the later of
the Effective Time and the surrender of such stockholder's certificate or
certificates representing such shares of Company Common Stock, to receive from
the Buyer an amount in cash, in lieu of such fractional share, equal to the
closing price per share of Buyer Common Stock on the NASDAQ-NMS System on the
last trading day preceding the Effective Time multiplied by the fraction of a
share of Buyer Common Stock to which such stockholder would otherwise be
entitled.
Section 1.6 SURRENDER AND EXCHANGE.
(a) As soon as practicable after the Effective Time, the Buyer will deliver
to an agent designated by it for this purpose and reasonably acceptable to the
Company (the "Exchange Agent") the number of shares of Buyer Common Stock
issuable in the Merger pursuant to Sections 1.3(a) and 1.4. In addition, the
Buyer shall make available to the Exchange Agent when and as needed funds
sufficient to make the payments required by Section 1.5 in respect of fractional
shares.
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(b) Each holder of shares of Company Common Stock that have been converted
into a right to receive the Merger Consideration, upon surrender to the Exchange
Agent of a certificate or certificates representing such Company Common Stock,
will be entitled to receive the Merger Consideration payable in respect thereof.
Until so surrendered, each such certificate shall, after the Effective Time,
represent for all purposes only the right to receive the Merger Consideration
payable in respect thereof.
(c) Any portion of the Merger Consideration made available to the Exchange
Agent pursuant to subparagraph (a) hereof that remains unclaimed by the holders
of Company Common Stock six months after the Effective Time shall be returned to
Buyer, upon demand, and any such holder who has not exchanged his Company Common
Stock for the Merger Consideration in accordance with this Section 1.6 prior to
that time shall thereafter look only to Buyer for payment of the Merger
Consideration payable in respect thereof. Notwithstanding the foregoing, Buyer
shall not be liable to any holder of Company Common Stock for any amount paid to
a public official pursuant to applicable abandoned property laws. Any amounts
remaining unclaimed by holders of Company Common Stock two years after the
Effective Time (or such earlier date immediately prior to such time as such
amounts would otherwise escheat to or become property of any governmental
entity) shall, to the extent permitted by applicable law, become the property of
Buyer free and clear of any claims or interest of any person previously entitled
thereto.
Section 1.7 DISSENTING SHARES. Notwithstanding Section 1.3, shares of
Company Common Stock outstanding immediately prior to the Effective Time and
held by a holder who has not voted in favor of the Merger or consented thereto
in writing and who has demanded appraisal for such shares in accordance with the
Texas Act ("Dissenting Shares") shall not be converted into a right to receive
the Merger Consideration, unless such holder fails to perfect or withdraws or
otherwise loses his right to appraisal. If, after the Effective Time, such
holder fails to perfect or withdraws or loses his right to appraisal, such
shares shall be treated as if they had been converted as of the Effective Time
into a right to receive the Merger Consideration. The Company or the Surviving
Corporation shall give the Buyer prompt notice of any demands received by the
Company for appraisal of Company Common Stock and the Buyer shall have the right
to participate in all negotiations and proceedings with respect to such demands.
The Surviving Corporation shall not, except with the prior written consent of
the Buyer, make any payment with respect to, or settle or offer to settle, any
such demands.
Section 1.8 NO FURTHER TRANSFERS. The stock transfer books of the Company
shall be closed at the close of business on the business day immediately
preceding the Effective Time, and no transfer of shares of Company Common Stock
shall be made thereafter. If, after the Effective Time, certificates
representing Company Common Stock are presented to the Surviving Corporation,
such certificates shall be canceled and exchanged for the consideration provided
for, and in accordance with the provisions set forth, in this Article I.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 ARTICLES OF INCORPORATION. The Articles of Incorporation of
Merger Sub in effect immediately before the Effective Time shall be the articles
of incorporation of the Surviving Corporation until amended in accordance with
the articles of incorporation of the Surviving Corporation and applicable law.
The name of the Surviving Corporation shall be "Distribution Architects
International, Inc."
Section 2.2 REGULATIONS. The Code of Regulations of Merger Sub in effect
immediately before the Effective Time shall be the regulations of the Surviving
Corporation until amended or repealed in accordance with the Code of Regulations
of the Surviving Corporation and applicable law.
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Section 2.3 DIRECTORS AND OFFICERS. The directors of Merger Sub and the
officers of Merger Sub at the Effective Time shall be the directors and
officers, respectively, of the Surviving Corporation, until successors are duly
elected or appointed in accordance with applicable law and the Articles of
Incorporation and Code of Regulations of the Surviving Corporation.
Notwithstanding the foregoing, at the Effective Time Thomas Cain shall be
appointed Chairman of Board of the Surviving Corporation
ARTICLE III
CLOSING
Section 3.1 CLOSING. The closing shall take place at the offices of Vorys,
Sater, Seymour and Pease, 52 E. Gay Street, Columbus, Ohio (or at such other
place as the parties may mutually agree), on a date and at a time upon which the
parties shall mutually agree, as soon as practicable after all of the conditions
set forth in Sections 7.1 and 7.2 have been satisfied or, to the extent
permitted hereunder, waived (the "Closing Date", "Closing" or "time of
Closing").
Section 3.2 INSTRUMENTS OF CONVEYANCE AND TRANSFER, FURTHER ASSURANCES AND
ACCOUNTING TREATMENT.
(a) If, at any time after the Effective Time, the Surviving Corporation
shall determine or be advised that any further deeds, assignments or assurances
in law or any other acts are necessary or desirable to (i) vest, perfect or
confirm, of record or otherwise, in the Surviving Corporation its right, title
or interest in, to or under any of the rights, properties or assets of the
Company, or (ii) otherwise carry out the purposes of this Agreement, the
Company, its officers and its directors shall be deemed to have granted to the
Surviving Corporation an irrevocable power of attorney to execute and deliver
all such deeds, assignments or assurances in law and to do all acts necessary or
proper to vest, perfect or confirm title to and possession of such rights,
properties or assets in the Surviving Corporation and otherwise to carry out the
purposes of this Agreement, and the officers and directors of the Surviving
Corporation are authorized in the name of the Company or otherwise to take any
and all such action.
(b) The parties agree to use their best efforts to cause the Merger
transaction to be treated as a tax-free reorganization for federal income tax
purposes (except to the extent cash is received for fractional shares pursuant
to Section 1.5 hereof or in respect of Dissenting Shares pursuant to Section 1.7
hereof).
(c) The parties agree to use their best efforts to cause the Merger
transaction to be treated as a pooling of interest for accounting purposes. The
Company agrees that it shall take no action from the date of this Agreement to
the Closing Date which would prevent the Buyer from receiving pooling of
interest accounting treatment in connection with the Merger.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
In order to induce the Buyer and Merger Sub to enter into this Agreement,
the Company represents and warrants to the Buyer and Merger Sub as follows:
Section 4.1 CORPORATE EXISTENCE AND POWER. The Company is a corporation
duly organized and validly existing and in good standing under the laws of the
State of Texas, and has all corporate powers and authority required to carry on
its business as now being conducted and to own and operate the properties and
assets now owned and being operated by the Company. The Company has not been a
controlled or majority-owned subsidiary or division of another corporation at
any time since January 1, 1997. The Company is duly qualified or licensed to do
business and in good standing as a foreign corporation in each jurisdiction
where the character of the property owned or leased by it or the nature
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<PAGE>
of its activities makes such qualification necessary, except for those
jurisdictions where the failure to be so qualified or licensed would not,
individually or in the aggregate, have or be reasonably likely to have a
Material Adverse Effect. (As used in this Section 4, "Material Adverse Effect"
means an effect that is materially adverse to the condition (financial or
otherwise), business, assets or results of operations of the Company and its
subsidiaries taken as a whole.) Schedule 4.1 sets forth the states in which the
Company is qualified to do business. The Company has heretofore made available
to the Buyer true and complete copies of the Company's Articles of
Incorporation, including all amendments thereto, and the Company's By-laws,
including all amendments thereto, as currently in effect.
Section 4.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by the Company of this Agreement and the consummation by the Company
of the transactions contemplated hereby are within the Company's corporate
powers and, except for any required approval by the Company's stockholders in
connection with the consummation of the Merger, have been duly authorized by all
necessary corporate action. This Agreement constitutes a valid and binding
agreement of the Company.
Section 4.3 GOVERNMENTAL AUTHORIZATION. Except as disclosed on Schedule
4.3 hereto, the execution, delivery and performance by the Company of this
Agreement and the consummation of the Merger by the Company require no action by
or in respect of, or filing with, any governmental body, agency, official or
authority other than the filing of the Articles of Merger in accordance with the
Texas Act and a certificate of merger in accordance with the Ohio Act.
Section 4.4 NON-CONTRAVENTION. Except as disclosed in Schedule 4.4,
neither the execution nor the delivery of this Agreement by the Company, nor the
Company's consummation of the transactions contemplated hereby, will (a) violate
or conflict with or result in a breach of any provision of or constitute a
default (or an event which with notice or lapse of time, or both, would
constitute a default) under or result in the termination of, or accelerate the
performance required by, or result in the creation of any lien, security
interest, charge, or encumbrance of any kind or nature upon, any of the terms,
conditions or provisions of the Company's Articles of Incorporation or By-Laws
or any promissory note, bond, mortgage, indenture, deed of trust, license,
agreement or other material instrument or obligation to which the Company is a
party or by which the Company, any of its assets or any of the Company Common
Stock may be bound or affected, or (b) to the knowledge of the Company, violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Company, any of its properties, its assets or any of the Company Common
Stock.
Section 4.5 CAPITALIZATION. The authorized capital stock of the Company
consists of 10,000,000 shares of Company Common Stock and 1,000,000 Shares of
Class B Non-Voting Common Stock ("Class B Stock"). There are presently issued
and outstanding (a) 4,275,452 shares of Company Common Stock and (b) no Shares
of Class B Stock and (c) stock options to purchase an aggregate of 783,773
shares of the Company Common Stock. Such shares of Company Common Stock and
stock options are held by the persons named and in the amounts set forth in
Schedule 4.5. Except as set forth in this Section or in Schedule 4.5, there are
outstanding (i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company, (iii) no options,
warrants or other rights to acquire from the Company, and no obligation of the
Company to issue, any capital stock, voting securities or securities convertible
into or exchangeable for capital stock or voting securities of the Company (the
items in clauses (i), (ii) and (iii) being referred to collectively as the
"Company Securities"). There are no outstanding obligations of the Company to
repurchase, redeem or otherwise acquire any Company Securities. Schedule 4.5
identifies each person who may be deemed to be an "affiliate" of the Company
(each, an "Affiliate") for purposes of Rule 145 under the Securities Act of
1933, as amended (the "1933 Act"). Schedule 4.5 also lists each distribution to
Company stockholders, and each issuance, exchange, repurchase and retirement of
Company Common Stock and Company Securities effected since January 1, 1997.
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Section 4.6 SUBSIDIARIES. Except as set forth on Schedule 4.6, the Company
does not own any equity interests in any corporation, partnership, limited
liability company or similar entity.
Section 4.7 FINANCIAL STATEMENTS. The Company has delivered to the Buyer
copies of the following financial statements (hereinafter sometimes collectively
referred to as the "Financial Statements"):
(a) The audited balance sheets of the Company as of September 30, 1998, 1997
and 1996 and statements of income, and changes in stockholders' equity for the
calendar years ended on those dates, together with supporting schedules and
auditors' reports thereon; and
(b) The unaudited balance sheets of the Company as of January 31, 1999 and
related statements of income, changes in stockholders' equity and cash flow for
the four-month period ended on such date, together with supporting schedules
certified by the President and Chief Financial Officer of the Company
(hereinafter sometimes "Interim Financials").
Except as set forth in the notes thereto or as set forth in Schedule 4.7,
all of the Financial Statements are complete and correct and present fairly and
accurately, in all material respects, the financial position of the Company at
the respective dates of said balance sheets and the results of its operations
and changes in its financial position for the respective periods then ended,
except, in the case of the Interim Financial Statements, for normal year-end
adjustments and the absence of footnotes. Each of the Financial Statements was
prepared on a basis consistent with each other. The Company has good and
marketable title to all of the assets described in the Interim Financials and to
such additional assets as may have been acquired by the Company after January
31, 1999. The Company has no liabilities of any nature, whether absolute,
accrued, contingent or otherwise, of a kind or nature required by generally
accepted accounting principles to be disclosed in the Financial Statements,
other than (i) those expressly disclosed in any of the Financial Statements
and/or this Agreement and (ii) any liabilities incurred in the ordinary course
of business of the Company after January 31, 1999 which are not, singly or in
the aggregate, materially adverse to the Company.
Section 4.8 NO MATERIAL CHANGE. Since January 31, 1999, except for the
execution and delivery of this Agreement and as set forth in Schedule 4.8, the
Company has not:
(a) Had any change in its financial condition, current operations, current
business, properties, assets or liabilities, other than changes in the ordinary
course of business, which changes have not individually or in the aggregate been
materially adverse to the Company;
(b) Suffered any damage, destruction or loss of physical property (whether
or not covered by insurance) that has had or may have a Material Adverse Effect;
(c) Issued, sold or otherwise disposed of, or agreed to issue, sell or
otherwise dispose of, any Company Securities;
(d) Incurred or agreed to incur any indebtedness for borrowed money other
than in the ordinary course of business;
(e) Paid or obligated itself to pay in excess of $25,000 in the aggregate
for any fixed assets;
(f) Suffered any substantial loss or waived any substantial right;
(g) Sold, transferred or otherwise disposed of, or agreed to sell, transfer
or otherwise dispose of, any assets or canceled, or agreed to cancel, any debts
or claims, other than in the ordinary course of business;
(h) Mortgaged, pledged or subjected to any charge, lien, claim or
encumbrance, or agreed to mortgage, pledge or subject to any charge, lien, claim
or encumbrance, any of its properties or assets, other than in the ordinary
course of business;
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(i) Declared, set aside or paid any dividend or made any distribution
(whether in cash, property or stock) with respect to any of its capital stock or
redeemed, purchased or otherwise acquired, or agreed to redeem, purchase or
otherwise acquire, any of its capital stock;
(j) Increased, or agreed to increase, the compensation payable to any of its
officer, employees or agents ("the Company Personnel"), adopted or increased or
agreed to adopt or increase any benefit under any insurance, pension or other
employee benefit plan, payment or arrangement made to, for or with any of the
Company Personnel or; paid or agreed to pay any bonus or incentive compensation,
or any other like benefit to any Company Personnel; or entered into or agreed to
enter into any severance arrangement with any of the Company's employees other
than increases in the ordinary course of business;
(k) Lost any major customer or had any material order canceled or become
aware of any threatened cancellation of any material order or had any real
property or personal property leases to which it has been a party either
terminated or not renewed;
(l) Made or permitted any amendment or termination of any material contract,
agreement or license to which it is a party other than in the ordinary course of
business or as otherwise contemplated by this Agreement;
(m) Had any resignation or termination of employment of any of its officers
or key employees or become aware of any impending or threatened resignation or
resignations or termination or terminations of employment that would have a
material adverse effect on its operations or business;
(n) Had any material labor trouble or become aware of any impending or
threatened material labor trouble;
(o) Experienced any shortage or difficulty in obtaining any raw material;
(p) Made any change in its accounting methods or practices with respect to
its condition, operations, business, or practices with respect to its condition,
operations, business, properties, assets or liabilities;
(q) Made any charitable or political contribution(s), which in the aggregate
exceeds $1,000.00;
(r) Entered into any transaction not in the ordinary course of its business;
(s) Entered into or become aware of any agreement with respect to the shares
of the Company Common Stock;
(t) Encouraged, solicited or held discussions (directly or indirectly) with
any person other than the Buyer concerning any merger, consolidation or sale of
all or substantially all of the assets of the Company; or
(u) Entered into agreements or commitments of any nature to do any of the
foregoing.
Section 4.9 TITLE TO AND CONDITION OF PROPERTIES AND ASSETS. Except as
disclosed in either Schedule 4.9 or Schedule 4.10, the Company has good and
marketable title to all of its owned properties and assets, including, without
limitation, (i) all such owned properties and assets used in the Company's
business, and (ii) those reflected in the Interim Financials (except as
thereafter sold or otherwise disposed of in the ordinary course of business)
subject to no mortgage, pledge, conditional sales contract, lien, security
interest, right of possession in favor of any third party, claim or other
encumbrance, except for liens for taxes not yet due and payable or being
contested in good faith or liens which do not materially detract from the value
of such property or assets now used or materially interfere with any present or
intended use of such property or assets. Subsequent to January 31, 1999, the
Company has not sold or disposed of any of its properties or assets or obligated
itself to do so except in the ordinary course of business. The facilities,
machinery, furniture, office and other
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equipment of the Company that are used in its business are in good operating
condition and repair, subject only to the ordinary wear and tear, and, to the
knowledge of the Company, neither the Company nor any property or asset owned or
leased by the Company is in violation of any applicable ordinance, regulation or
building, zoning, environmental or other law in respect thereof. Said
facilities, machinery, furniture, office and other equipment and assets of every
type and kind owned or leased by the Company are sufficient to enable the
Company to operate its business.
Section 4.10 CERTAIN PROPERTIES. Schedule 4.10 sets forth all real estate
either leased to the Company or owned by the Company and all personal property
leased, orally or in writing, to the Company and specifies, in the case of real
estate, the location of each property, the use of the facility thereon, the name
of the owner or the names of the lessor and the lessee. The Company has
delivered to the Buyer:
(a) A copy of each lease by which the Company acquired title to or its
interest in the leased real estate described in Schedule 4.10;
(b) A copy of all title abstracts and title insurance policies the Company
has for the real estate described in Schedule 4.10;
(c) A copy of all environmental reports and a copy of the most recent survey
or surveys the Company has for the real estate described in Schedule 4.10;
(d) A copy of all certificates of occupancy for the improvements on the real
estate described in Schedule 4.10 and a copy of any variance granted with
respect to any of such real estate described in Schedule 4.10 pursuant to
applicable zoning laws or ordinances; and
(e) A copy of each lease by which the Company acquired its interest in the
personal property described in Schedule 4.10; all of which documents are true
and complete copies thereof as in effect on the date hereof. The Company has not
received any written notice from any governmental agency, board, bureau, body,
department or authority of any United States or foreign jurisdiction, with
respect to the use of any of the real estate described in Schedule 4.10. Except
as set forth in Schedule 4.10, to the knowledge of the Company, there is no
easement, right-of-way agreement, license, sublease, occupancy agreement or like
instrument with respect to any of the real estate described in Schedule 4.10
that would materially and adversely affect the Company's business or its
operations. Each lease pursuant to which the Company leases any real or personal
property is, to the knowledge of the Company, in full force and effect and is
valid and enforceable in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally, and subject, as
to enforceability, to the general principles of equity (regardless of whether
enforcement is sought in a court of law or equity). There is not under any such
lease any default by the Company, or any event that with notice or lapse of time
or both would constitute such a default by the Company and with respect to which
the Company has not taken adequate steps to prevent such default from occurring;
all of such events, if any, and the aforesaid steps taken by the Company are set
forth in Schedule 4.10. There is not under any such lease (i) to the knowledge
of the Company, any default by any other party thereto or (ii) any event that
with notice or lapse of time or both would constitute such a default thereunder
by the Company or, to the knowledge of the Company, any other party. Each
property used in the business of the Company is reflected in the Interim
Financials to the extent required by generally accepted accounting principles.
Section 4.11 TAX MATTERS.
(a) All federal, state, local and foreign tax returns, reports and
statements for any tax period ending on or prior to the Effective Date required
to be filed by the Company on or prior to the Effective Date (the "Tax Returns")
have been or will be properly and timely filed with the appropriate governmental
agencies in all jurisdictions in which such Tax Returns are required to be
filed. The Tax Returns filed prior to the Effective Date correctly reflected or
will correctly reflect the facts requiring
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the income, business, assets, operations, activities, status or other matters of
the Company or any other information required to be shown thereon and the
Company has paid or will pay all Taxes (as hereinafter defined) required to be
paid prior to the Effective Date. All such Tax Returns (i) were prepared in the
manner required by applicable law (ii) are true, correct and complete in all
material respects and (iii) reflect the liability for all applicable Taxes (as
hereinafter defined) of the Company. All Charges (as hereinafter defined) and
other impositions shown on the Tax Returns to be due and payable have been or
will be paid prior to the date on which any fine, penalty, interest, late charge
or loss may be added thereto for the nonpayment thereof, unless any such amounts
are being contested in good faith by appropriate proceedings and an adequate
reserve has been established on the Interim Financials, or any such fine,
penalty, interest, late charge or loss has been paid. For purposes of this
Agreement, "Charges" shall mean all federal, state, county, city, municipal,
local, foreign or other governmental taxes, levies, assessments and charges,
liens, claims or encumbrances upon or relating to:
(i) the Company's employees, payroll, income or gross receipts,
(ii) the Company's ownership or use of any of its assets, and
(iii) any other aspect of the Company's business, in each case including
any and all interest and penalties.
(b) The Company has paid when due and payable all Charges required to be
paid by it. The provisions for taxes due in the Interim Financials are
sufficient for all unpaid Charges.
(c) Schedule 4.11 sets forth for the Company those taxable years for which
its Tax Returns are currently being audited by the Internal Revenue Service
("IRS"). No issue has been raised or settled in any such examination that, by
application of similar principles, reasonably may be expected to result in an
assertion of a material deficiency for any other taxable year not so examined
that has not been accrued on the balance sheets of the Company as of January 31,
1999. The Company has not settled, issued or entered into a closing agreement
with respect to any tax year for which an audit or examination has been
concluded that, by application of similar principles, reasonably may be expected
to result in a material deficiency for any other taxable year not so examined
(or currently under examination) that has not been accrued on the Interim
Financials on a basis consistent with that applied in all of the Financial
Statements. There is no issue known to the Company relating to any Charge
(federal or otherwise) that, if determined adversely to the Company, would
result in the assertion of any material deficiency for any taxable year that has
not been accrued on the Interim Financials.
(d) Except as set forth in Schedule 4.11, the Company has not executed or
filed with the IRS or any other governmental authority any agreement or other
document extending, or having the effect of extending, the period for assessment
or collection of any Charge.
(e) Except as set forth in Schedule 4.11, the Company has not filed a
consent pursuant to Section 341(f) of the Internal Revenue Code of 1986, as
amended (the "Code"), or agreed to have Section 341(f)(2) of the Code apply to
any disposition of Subsection (f) assets (as such term is defined in Section
341(f)(4) of the Code). The Company has not made any payment, is not obligated
to make any payment and is not a party to any agreement that could under certain
circumstances obligate it to make any payment, that will not be deductible under
Section 280G of the Code. The Company has disclosed on its federal income tax
returns all positions taken thereon that could give rise to a substantial
understatement of federal income tax within the meaning of Section 6661 of the
Code.
(f) Except as set forth in Schedule 4.11, none of the property owned by the
Company is property which the Company is required to treat as being owned by any
other person pursuant to the provisions of Section 168(f)(8) of the Code and in
effect immediately prior to the enactment of the Tax Reform Act of 1986 or is
"tax-exempt use property" within the meaning of Section 168(h) of the Code.
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(g) Except as set forth in Schedule 4.11, the Company has not agreed or has
been requested to make any adjustment under Section 481(a) of the Code by reason
of a change in accounting method initiated by the Company and the Company has no
knowledge that the IRS has proposed any such adjustment or change in accounting
methods.
(h) Except as set forth in Schedule 4.11, the Company has no obligation
under any written tax sharing agreement.
(i) There are no liens for Taxes (other than for current Taxes not yet due
and payable) upon the assets of the Company.
(j) The Company has never been a member of an affiliated group of
corporations within the meaning of Section 1504 of the Code.
(k) None of the assets of the Company directly or indirectly secures any
debt, the interest on which is tax-exempt under Section 103(a) of the Code.
(l) The Company is not, and has not been, a United States real property
holding corporation (as defined in Section 897(c)(2) of the Code) during the
applicable period specified in Section 897(c)(1)(A)(ii) of the Code.
(m) The Company does not have and has not had a permanent establishment in
any foreign country, as defined in any applicable Tax Treaty or convention
between the United States of America and such foreign
For purposes of this Agreement "Taxes" shall mean all federal, local,
foreign and other net income, gross income, gross receipts, sales, use, ad
valorem, transfer, franchise, profits, license, lease, service, service use,
withholding, payroll, employment, excise, severance, stamp, occupation, premium,
property, windfall profits, customs, duties or other taxes, fees, assessments or
charges of any kind whatever, together with any interest and any penalties,
additions to tax or additional amounts with respect thereto, and the term "Tax"
means any one of the foregoing Taxes.
Section 4.12 CONTRACTS AND COMMITMENTS. Except as set forth in Schedule
4.12, the Company is not a party to any material written or oral contract,
agreement or commitment to be performed in whole or in part after the date
hereof, including any:
(a) Contract with any labor union;
(b) Employment (other than those which are deemed to be at will) or
consulting contract or other contract for services;
(c) Lease, whether as lessee or lessor, with respect to any property, real
or personal;
(d) Loan agreement or instrument relating to any indebtedness;
(e) Contract of purchase or sale with respect to the assets or business
except in the ordinary course;
(f) Contract with any agent, dealer or distributor;
(g) Stand-by letter of credit, guarantee or performance bond;
(h) Contract or agreement restricting the ability of any person from freely
engaging in any business or competing anywhere in the world;
(i) Severance or bonus agreements with current or past employees; or
(j) Contract with customers (excluding maintenance and support and
consulting agreements made in the ordinary course of business, but including all
commitments for product development, enhancement, modification and
customization). Except as set forth in Schedule 4.12, the Company is
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not a party to any contract with any governmental authority or any other
contract that materially and adversely affects its condition, operations,
business properties, assets or liabilities. Each contract or other agreement
listed in Schedule 4.12 is in full force and effect and is valid and enforceable
by the Company, in accordance with its terms, except to the extent that
enforceability may be limited by applicable bankruptcy, insolvency or similar
laws affecting the enforcement of creditors' rights generally, and subject, as
to enforceability, to the general principles of equity (regardless of whether
enforcement is sought in a court of law or equity). Neither the Company nor any
other party is in material default in the observance or the performance of any
term or obligation to be performed by them under any contract listed in Schedule
4.12. The Company is not a party to nor has it made any outstanding bid or
contract proposal that, if accepted or entered into, might result in a material
loss to the Company. The Company has delivered to the Buyer true and complete
copies of all written contracts listed in Schedule 4.12 in effect on the date
hereof.
Section 4.13 LITIGATION. Except as set forth in Schedule 4.13, there are
no pending, or, to the knowledge of the Company, threatened, actions, suits,
claims, proceedings, arbitrations or investigations, either at law or in equity,
or before any commission or other administrative authority in any United States
or foreign jurisdiction, of any kind now pending or, to the knowledge of the
Company, threatened or proposed in any manner or any circumstances which should
or could reasonably form the basis of any such action, suit, proceeding or
investigation, involving the Company or any of its properties or assets that (a)
if asserted and decided adversely to the Company, would materially and adversely
affect the operations or the business of the Company, (b) questions the validity
of this Agreement or (c) seeks to delay, prohibit or restrict in any manner any
action taken or to be taken by the Company or any of its stockholders pursuant
to this Agreement. Neither the Company nor any of its properties or assets is
subject to any judicial or administrative judgment, order, decree or restraint.
Schedule 4.13 lists all actions, arbitrations and lawsuits instituted against
the Company during the preceding five-year period.
Section 4.14 INTELLECTUAL PROPERTY.
(a) The patents and inventions, trademarks and service marks, trade names
and styles, logos and designs, trade secrets, technical information, engineering
procedures, designs, know-how and processes (whether confidential or otherwise),
software, copyrights and other intellectual property (including applications for
any of the aforesaid), in each case used or reasonably necessary to permit
satisfactory operation of the business of the Company as presently constituted
are collectively referred to hereinafter as the "Intellectual Property".
Schedule 4.14 identifies any and all United States and foreign patents and filed
applications for patent owned by the Company, and any and all state, federal,
foreign or provincial registrations, or applications for registration, of any
trademarks, service marks, trade names and copyrights owned by the Company.
Schedule 4.14 also identifies each license and other agreement that: (i) relates
to the granting by the Company of any rights, including without limitation
rights of use and ownership, in any of the Intellectual Property, other than
standard software license agreements of the Company (the forms of which have
been provided to Buyer), and (ii) requires the payment to the Company of at
least $15,000 in the aggregate. Schedule 4.14 identifies each license and other
agreement that: (i) relates to the acquisition by the Company of any rights,
including without limitation rights of use and ownership, in any of the
Intellectual Property, and (ii) requires the payment by the Company of at least
$15,000 in the aggregate. Other than as disclosed on Schedule 4.14, to the
knowledge of the Company, no person has a right to receive a royalty, or has
claimed a right to receive a royalty, with respect to any of the Intellectual
Property. Other than as disclosed on Schedule 4.14, there are no claims or
proceedings pending, or, to the knowledge of the Company, threatened, against
the Company asserting that its use of any of the Intellectual Property infringes
upon the rights of any other person. There is no basis for any claim that the
use by the Company of any of the Intellectual Property or rights listed on
Schedule 4.14 infringes upon the rights of any other person. All patents,
trademarks, trade names, trade secrets, service marks and copyrights
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owned by the Company are valid and in full force and effect. Other than as
disclosed on Schedule 4.14, the rights of the Company in and to the Intellectual
Property is, and at Closing will be, transferable as contemplated by this
Agreement.
(b) Except as disclosed on Schedule 4.14, the Company is the sole and
exclusive owner throughout the world of the software products listed on Schedule
4.14 (the "Products"), including without limitation all source code and
algorithms embodied therein. Except as disclosed on Schedule 4.14, no person
other than the Company has the right to market any source code of the Products
to any person. Except as disclosed on Schedule 4.14, the Products accurately
process date/time data (including, but not limited to, calculating, comparing
and sequencing) from, into and between the 20th and 21st centuries, including
the years 1999 and 2000 and leap year calculations.
(c) Any reprogramming known to the Company and required to permit the proper
functioning (but only to the extent that such proper functioning would otherwise
be impaired by the occurrence of the year 2000) in and following the year 2000
of computer systems and other equipment containing embedded microchips, in
either case owned or operated by the Company, or used or relied upon in the
conduct of the business of the Company (including any such systems and other
equipment supplied by others or with which the computer systems and other
equipment as so reprogrammed, has been completed. The costs to the Company that
have not been incurred as of the date hereof for such reprogramming and testing
and for the other reasonably foreseeable consequences to the Company of any
improper functioning of other computer systems and equipment containing embedded
microchips due to the occurrence of the year 2000 could not reasonably be
expected to have a material adverse effect on the business, operations, property
or assets of the Company. Except for any reprogramming required to be completed
and referred to above, the computer systems owned and/or operated by the Company
are, and with ordinary course upgrading and maintenance, will continue to be,
sufficient for the conduct of the Company's business as currently conducted.
Section 4.15 COMPLIANCE WITH LAWS. The Company has complied with and is in
compliance with all federal, state, local and foreign statutes, laws,
ordinances, regulations, rules, permits, judgments, orders and decrees
applicable to it or any of its properties, assets, operations and businesses,
and there does not exist any basis for any claim of default under or violation
of any such statute, law, ordinance, regulation, rule, judgment, order or
decree, except such defaults or violations or such bases for any claims of such
defaults or violations, if any, that in the aggregate do not and will not
materially and adversely affect the property, operations, financial condition of
the Company. Without limiting any of the foregoing or any other provisions of
this Agreement, and by way of example only, included herein are violations
arising in the following areas: all matters relating to the environment,
employee safety, fair labor standards, product safety, equal employment
opportunity, Workers' Compensation and Unemployment Compensation, federal, state
and local taxes of all types, ERISA, COBRA, Immigration and Naturalization, and
zoning. The Company has no knowledge of any presently pending proceeding,
hearing or investigation with respect to the adoption of amendments or
modifications to existing laws, ordinances, rules, regulations or restrictions
with respect to such matters which, if adopted, would materially and adversely
affect the business and/or operations of the Company.
Section 4.16 ENVIRONMENTAL MATTERS.
(a) The Company is in compliance with all federal, state, local and foreign
statutes, laws, ordinances, regulations, rules, permits, licenses,
authorizations, reporting requirements, judgments, orders and decrees relating
to the protection of the environment or human health applicable to the Company
or the Company's use, maintenance, ownership or operation of any of its
properties, assets, or businesses, including but not limited to standards for
air, wastewater, drinking water, groundwater, storm water, and the generation,
manufacture, storage, transportation, treatment or disposal of any "Solid
Waste", "Hazardous Material", "Hazardous Substance" or "Hazardous Waste" (as
such terms are defined in any applicable federal, state or local law or
regulation).
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(b) The Company has obtained and is in possession of valid and effective
environmental permits, licenses, identifications, authorizations or approvals
required under any environmental law on account of any of the Company's
activities, including but not limited to the discharge or release of air or
water pollutants, and the generation, manufacture, storage, transportation,
treatment or disposal of Solid Wastes, Hazardous Materials, Hazardous Substances
or Hazardous Wastes.
(c) The Company has no knowledge of any Solid Waste, Hazardous Material,
Hazardous Substance or Hazardous Waste, presently or formerly located in, on, or
about any past or present sites owned or operated by the Company which could
lead to any type of investigation, study, cleanup, corrective action, or
remedial activity, or a claim for natural resource damages, fines, penalties,
personal injuries or property damages, asserted by any party against the
Surviving Corporation, the Company or the Buyer for the payment of any
investigation, study, cleanup, corrective action, remedial activity, natural
resource damages, fines, penalties, personal injuries or property damages,
including, but not limited to, any claim under the Comprehensive Environmental
Response, Compensation and Liability Act or the Solid Waste Disposal Act.
(d) The Company has no knowledge of any on-site or off-site location to
which the Company has transported or arranged for the transportation of Solid
Wastes, Hazardous Materials, Hazardous Wastes or Hazardous Substances which site
is the subject of any federal, state, local or foreign investigation, study,
cleanup, corrective action or remedial activity which could lead to any claim
asserted by any party against the Surviving Corporation, the Company or the
Buyer for payment of any investigation, study, cleanup, corrective action,
remedial activity, natural resource damages, fines, penalties, personal injuries
or property damages, including, but not limited to, any claim under the
Comprehensive Environmental Response, Compensation and Liability Act or the
Solid Waste Disposal Act.
(e) The Company has no contingent liability in connection with any release
or discharge of any Hazardous Material into the environment.
Section 4.17 ERISA MATTERS. All employee pension benefit plans (within the
meaning of Section 3(2) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")) maintained by the Company are listed in Schedule 4.17, and
all such plans: (a) are qualified to the extent required by law under Section
401(a) of the Code; (b) have been operated in all material respects in
accordance with ERISA including, but not limited to, the fiduciary standards
required by Title I, Subtitle B, Part 4 of ERISA; (c) have not engaged in any
prohibited transactions (as defined in Section 406 of ERISA and Section 4975 of
the Code); (d) have met the minimum funding standards contained in Title I,
Subtitle B, Part 3 of ERISA and Section 412 of the Code; (e) have not and are
not currently undergoing (except as otherwise contemplated herein) a "partial"
or "complete" termination (as defined in ERISA); and (f) are not subject to any
"reportable events" (as defined in Section 4043 of ERISA), as of the Closing
Date, except as otherwise contemplated herein. All employee welfare benefit
plans of the Company, within the meaning of Section 3(1) of ERISA, are listed on
Schedule 4.17, have been operated in all material respects in accordance with
ERISA and are not underfunded. Each "group health plan," as defined in Section
5000(b)(i) of the Code, has been administered in material compliance with the
continuation of coverage provisions required under Section 4980B of the Code.
The Company has never had any obligation to contribute to a multiemployer plan,
as defined in Section 3(37) of ERISA. The Company has heretofore made available
to Buyer true and complete copies of all of the plans listed on Schedule 4.17.
Section 4.18 GOVERNMENTAL AUTHORIZATIONS AND REGULATIONS. Schedule 4.18
lists all licenses, franchises, permits and other governmental authorizations
held by the Company relative to the conduct of its business. Such licenses,
franchises, permits and other governmental authorizations are valid, and the
Company has not received any notice that any governmental authority intends to
cancel, terminate or not renew any such license, franchise, permit or other
governmental authorization. The Company holds all licenses, franchises, permits
and other governmental authorizations the absence of any of
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which could have a material adverse effect on any of its business. The business
of the Company is not being conducted, and no properties or assets of the
Company relating thereto are owned or are being used by the Company, in
violation of any statute, law, ordinance, regulation, rule or permit of any
governmental entity or any judgment, order or decree which would have a
materially adverse effect upon the Company, its business or its operations. All
services provided and/or products sold by the Company comply in all material
respects with all statutes, laws, ordinances, regulations and rules and criteria
governing the design, manufacture and intended use thereof, the failure of which
would have a materially adverse effect upon the Company, its business or its
operations.
Section 4.19 SEC AND ANTITRUST FILINGS. The Company has not issued any
security covered by a registration statement filed with the Securities and
Exchange Commission ("SEC") pursuant to the 1933 Act or the Investment Company
Act of 1940, as amended, and no security issued by the Company has ever been
registered pursuant to the Securities Exchange Act of 1934, as amended ("1934
Act"). The Company is not required to file a report under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 or any other antitrust law in respect to any
action pursuant to or contemplated by this Agreement.
Section 4.20 CERTAIN TRANSACTIONS. Except as set forth in Schedule 4.20,
since January 31, 1999, there has been no transaction, and no transaction is now
proposed, to which the Company was or is to be a party and in which any director
or officer of the Company or any person owning of record or beneficially more
than 10% of the outstanding capital stock of any class of the Company or any
associate of any such person had or has a direct or indirect material interest.
Section 4.21 ACCOUNTING PRACTICES. The Company makes and keeps accurate
books and records reflecting its assets and its business operations and the
Company maintains internal accounting controls that provide reasonable assurance
that (a) transactions are executed with management's authorization, (b)
transactions are recorded as necessary to permit preparation of the Company's
financial statements and to maintain accountability for the assets of the
Company, (c) access to the assets of the Company is permitted only in accordance
with management's authorization and (d) the reported accountability of the
assets of the Company is compared with existing assets at reasonable intervals.
Section 4.22 MINUTE BOOKS. The Company's minute books contain complete and
accurate records of all meetings and other corporate actions of its stockholders
and Board of Directors and committees thereof. The Company has heretofore made
available to Buyer all of its minute books containing complete records of all
such meetings held and actions taken since January 1, 1994.
Section 4.23 INSURANCE. All properties and operations of the Company are
insured for its benefit, in amounts deemed adequate by the Company, against all
risks usually insured against by persons operating similar properties or
conducting similar operations in the localities where such properties are
located or such operations are conducted under valid and enforceable policies
issued by insurers of recognized responsibility. Schedule 4.23 lists all such
policies and the policy coverage amounts. The Company has delivered to the Buyer
true and complete copies of all such policies as in effect on the date hereof.
Section 4.24 BANK ACCOUNTS; POWERS OF ATTORNEY. Schedule 4.24 sets forth
(a) the name of each bank in which the Company has an account or safe deposit
box and the names of all persons authorized to draw thereon or to have access
thereto and (b) the names of all persons, if any, holding powers of attorney
from the Company and a summary statement of the terms thereof.
Section 4.25 PRODUCT/SERVICE WARRANTIES. Except as set forth in Schedule
4.25: (a) the Company has no unexpired, expressed, product or service warranty
with respect to any product that it sells or that it has heretofore sold or any
service that it provides or sells or has heretofore provided or sold, other than
standard software warranties, the forms of which have been provided to Buyer;
(b) the Company has not received any notice of any claim based on any such
product or service warranty; and
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(c) the Company has no knowledge of any claim (actual or threatened) based on
any such product or service warranty of which the Company has not received
notice.
Section 4.26 CERTAIN DISCLOSURES. Schedule 4.26 contains a list of all
officers and other employees, agents and consultants of the Company whose
current annual salary or rate of compensation from the Company (including bonus
and incentive compensation) is $25,000 or more or to whom the Company has loaned
funds.
Section 4.27 CUSTOMER RELATIONS. The Company has previously provided Buyer
with a list of the Company's twenty (20) largest customers since January 1,
1998, together with an itemization of the Company's sales to such customers. The
Company is not aware of any facts, conditions or circumstances which would
indicate that any of such customers intend to materially alter (a) the amount of
their purchases from the Company or (b) their relationship with the Company, or
if any facts, conditions or circumstances which would have a material adverse
effect upon the sales or earnings of the Company.
Section 4.28 BROKERS. All negotiations relative to this Agreement and the
transactions contemplated hereby have been carried on by the Company directly
with the Buyer and without the intervention of any other person and in such
manner as not to give rise to any valid claim against any of the parties for any
finder's fee, brokerage commission or like payment.
Section 4.29 NO UNTRUE STATEMENTS. No statements by the Company contained
in this Agreement and no written statement furnished by the Company to the Buyer
pursuant to or in connection with this Agreement, contains or will contain any
untrue statement of a material fact. There is no fact known to the Company that
affects, or in the future might reasonably be expected to affect, adversely the
financial condition, operations, business, properties, assets or liabilities of
the Company or the Company Common Stock in any material respect that is not set
forth in this Agreement or the schedules hereto.
Section 4.30 TAX AND REGULATORY MATTERS. Neither the Company nor any
Affiliate has taken any action since January 1, 1997, or has any knowledge of
any fact or circumstance, that is reasonably likely to (a) prevent the
transactions contemplated by this Agreement, including the Merger, from
qualifying as a reorganization within the meaning of Section 368(a) of the Code,
or (b) prevent Buyer from accounting for the Merger as a pooling of interests in
accordance with GAAP and applicable SEC regulations.
Section 4.31 STATE TAKEOVER LAWS. The Company has taken all necessary
steps to exempt the transactions contemplated by this Agreement from any
applicable state takeover law.
ARTICLE V
REPRESENTATIONS AND WARRANTIES
OF
THE BUYER
In order to induce the Company to enter into this Agreement, the Buyer
represents and warrants to the Company as follows:
Section 5.1 CORPORATE ORGANIZATION AND GOOD STANDING. Each of Merger Sub
and the Buyer is a corporation duly organized, validly existing and in good
standing under the laws of the State of Ohio, and each has all corporate powers
and authority required to carry on its business as now being conducted and to
own and operate the properties and assets now owned and being operated by it.
The Buyer is duly qualified or licensed to do business and is in good standing
as a foreign corporation in each jurisdiction where the character of the
property owned or leased by it or the nature of its activities make such
qualification necessary, except for those jurisdictions where the failure to be
so
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qualified or licensed would not, individually or in the aggregate, have or be
reasonably likely to have a Material Adverse Effect. (As used in this Section 5,
"Material Adverse Effect" means an effect that is materially adverse to the
condition (financial or otherwise), business, assets or results of operations of
Buyer and its subsidiaries taken as a whole.) Since the date of its
incorporation, Merger Sub has not engaged in any activities other than in
connection with or as contemplated by this Agreement.
Section 5.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by the Buyer and Merger Sub of this Agreement and the consummation
by the Buyer and Merger Sub of the transactions contemplated hereby are within
the corporate powers of the Buyer and Merger Sub and have been duly authorized
by all necessary corporate action. This Agreement constitutes a valid and
binding agreement of the Buyer and Merger Sub.
Section 5.3 GOVERNMENTAL AUTHORIZATION. The execution, delivery and
performance by Buyer and Merger Sub of this Agreement and the consummation of
the Merger by them require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than the filing of the
Articles of Merger in accordance with the Indiana Act, the filing of a
certificate of merger in accordance with the Ohio Act and compliance with the
applicable requirements of federal and state securities laws.
Section 5.4 NON-CONTRAVENTION. either the execution nor the delivery of
this Agreement by Buyer and Merger Sub, nor the consummation of the transactions
contemplated hereby, will (a) violate or conflict with or result in a breach of
any provision of or constitute a default (or an event which with notice or lapse
of time, or both, would constitute a default) under or result in the termination
of, or accelerate the performance required by, or result in the creation of any
lien, security interest, charge, or encumbrance of any kind or nature upon any
of the terms, conditions or provisions of the Articles of Incorporation or Code
of Regulations of the Buyer or Merger Sub or any promissory note, bond,
mortgage, indenture, deed of trust, license, agreement, or other material
instrument or obligation to which the Buyer or Merger Sub is a party or by which
the Buyer or Merger Sub, any of their respective assets or any of the Buyer
Common Stock may be bound or affected, or (b) to the knowledge of Buyer, violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
the Buyer or Merger Sub, any of their respective properties or assets or any of
the Buyer Common Stock.
Section 5.5 BUYER COMMON STOCK. The authorized capital stock of Buyer
consists of 20,000,000 common shares, each without par value, of which 7,015,069
shares were issued and outstanding as of February 19, 1999, and 1,000,000
preferred shares, none of which are designated, issued or outstanding. All of
the issued and outstanding shares of Buyer Common Stock are, and all of the
shares of Buyer Common Stock to be issued in exchange for shares of Company
Common Stock upon consummation of the Merger, when issued in accordance with the
terms hereof, will be duly and validly issued, fully paid and nonassessable and
will be issued in accordance with the terms of this Agreement free and clear of
any preemptive right or any lien, charge or encumbrance arising through the
Buyer.
Section 5.6 TAX AND REGULATORY MATTERS. Neither Buyer nor any affiliate
thereof has taken any action or has any knowledge of any fact or circumstance
that is reasonably likely to (a) prevent the transactions contemplated by this
Agreement, including the Merger, from qualifying as a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code, or (b) prevent Buyer
from accounting for the Merger as a pooling of interest in accordance with GAAP
and applicable SEC regulations.
Section 5.7 BROKERS. All negotiations relative to this Agreement and the
Transactions contemplated hereby have been carried on by the Buyer directly with
the Company and without the intervention of any other person and in such manner
as not to give rise to any valid claim against any of the parties for any
finder's fee, brokerage commission or like payment.
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Section 5.8 REPORTS AND FINANCIAL STATEMENTS. Since January 1, 1998, Buyer
has filed all reports, registrations and statements, together with any required
amendments thereto, that it was required to file with the SEC under Sections
12(b), 12(g), 13(a) or 14(a) of the 1934 Act, including, but not limited to
Forms 10-K, Forms 10-Q and proxy statements (the "Buyer Reports"). Buyer has
previously furnished the Company with true and complete copies of Buyer's annual
report on Form 10-K for the fiscal year ended June 30, 1998, and its quarterly
reports on Form 10-Q and current reports on Form 8-K filed since that date, as
well as the most recent proxy statement distributed to its shareholders. As of
their respective dates, the Buyer Reports complied with the requirements of the
SEC and did not contain any untrue statement of a material fact or omit to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstance under which they were made not
misleading. The audited consolidated financial statements and unaudited interim
financial statements of Buyer included in the Buyer Reports have been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated therein or in the notes thereto)
and fairly present the financial position of Buyer and its consolidated
subsidiaries taken as a whole as at the dates thereof and the consolidated
results of their operations and changes in cash flows for the period then ended
subject, in the case of the unaudited interim financial statements, to normal
year-end and audit adjustments and any other adjustments described therein.
There exist no material liabilities of Buyer and its consolidated subsidiaries,
contingent or otherwise, except as disclosed in the Buyer Reports. Except as
disclosed in the Buyer Reports, since January 1, 1999 Buyer has not suffered a
Material Adverse Effect.
Section 5.9 NO UNTRUE STATEMENTS. No statements by the Buyer contained in
this Agreement and no written statement furnished by the Buyer to the Company
pursuant to or in connection with this Agreement, contains or will contain any
untrue statement of a material fact, or omits or will omit to state a material
fact necessary in order to make the statements therein contained not misleading.
ARTICLE VI
CERTAIN COVENANTS
Section 6.1 CONDUCT OF BUSINESS PENDING CLOSING. From and after the date
of this Agreement until the Effective Time, the Company shall conduct its
business in the ordinary course consistent with past practices and shall use its
reasonable efforts to preserve intact its business organizations and
relationships with third parties and to keep available the services of its
present officers and employees. Without limiting the generality of the
foregoing, from the date hereof until the Effective Time, unless the Company
obtains the prior written consent of Buyer:
(a) The Company will maintain itself at all times as a corporation duly
organized and validly existing under the laws of its state of incorporation and
each other state in which it is qualified or licensed to do business;
(b) The Company will not take any action which will result in, and will use
its best efforts to avoid, any material adverse change in the financial
condition, properties or operation of the business of the Company;
(c) The Company will not issue or sell, or agree to issue or sell, any
Company Securities; there will be no dividends declared or paid or other
distributions made in respect of the shares of the Company Common Stock;
(d) The Company shall maintain in full force and effect all of its presently
existing insurance coverage or insurance comparable to such existing coverage;
(e) The Company will not engage in any activity or transaction or make any
commitment to purchase or spend funds other than in the ordinary course of
business as heretofore conducted; provided, however, without the prior written
consent of the Buyer, the Company will not make any commitment to purchase or
spend more than $25,000 or more in any single transaction;
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(f) The Company will not redeem, purchase or otherwise acquire, or agree to
redeem purchase or otherwise acquire, any Company Securities;
(g) The Company will not pay or obligate itself to pay any compensation,
commission, bonus or severance to any Company Personnel as such, except as
otherwise set forth in Schedule 6.1 to this Agreement and except for the regular
compensation and commissions payable to such director, officer, employee or
independent contractor at the rate in effect on the date of this Agreement;
(h) The Company will use its best efforts to preserve its business
organization intact, to keep available to the Buyer and the Surviving
Corporation the services of the Company's employees and independent contractors
and to preserve for the Buyer and the Surviving Corporation the Company's
relationships with suppliers, licensees, distributors and customers and all
others having business relationships with the Company;
(i) The Company will not obligate itself to sell or otherwise dispose of, or
pledge or otherwise encumber, any of its properties or assets except in the
ordinary course of business, and the Company will maintain its facilities,
machinery and equipment in good operating condition and repair, subject only to
ordinary wear and tear;
(j) The Company will not amend its Articles of Incorporation or By-Laws;
(k) The Company will not engage in any activity or transaction other than in
the ordinary course of its business as heretofore conducted;
(l) The Company will not incur or agree to incur any indebtedness for
borrowed money, or create or allow to be created any new liens, security
interests, charges or encumbrances of any nature whatsoever on any of its
properties or assets, except in the ordinary course of business;
(m) The Company will not (i) take or agree or commit to take any action that
would make any representation and warranty of the Company hereunder inaccurate
in any respect at or as of any time prior to the Effective Time or (ii) omit or
agree or commit to omit to take any action necessary to prevent any such
representation or warranty from being inaccurate in any material respect at any
such time; and
(n) Without limiting the foregoing, the Company will consult with the Buyer
regarding all significant developments, transactions and proposals relating to
the business or operations or any of the assets or liabilities of the Company.
Section 6.2 REGISTRATION STATEMENT; STOCKHOLDER MEETING; PROXY MATERIAL.
(a) As soon as reasonably practicable after the date hereof, Buyer shall
prepare and file with the SEC a registration statement covering the Buyer Common
Stock to be issued in the Merger (the "Registration Statement"), which will
include a proxy statement for a meeting of, or solicitation of consents from,
Company stockholders (the "Company Proxy Statement"). The Company will cooperate
with the Buyer in preparing and filing the Registration Statement.
(b) As soon as reasonably practicable after the Registration Statement
becomes effective under all applicable securities laws, the Company shall cause
a meeting of its stockholders (the "Company Stockholder Meeting") to be duly
called and held for the purpose of voting on the approval and adoption of this
Agreement and the Merger and the transactions contemplated hereby, or obtain the
written consent of the stockholders of the Company to the foregoing matters, as
permissible under the Texas Act. The Directors of the Company shall, subject to
their fiduciary duties as advised by counsel, recommend approval and adoption by
the Company's stockholders of this Agreement and the Merger and the transactions
contemplated hereby. The Company will (i) mail to its stockholders the Company
Proxy Statement and all other proxy materials for such meeting, (ii) will use
its reasonable efforts to obtain the necessary approvals by its stockholders of
this Agreement and (iii) will otherwise comply with all legal requirements
applicable to such meeting or obtaining such consents.
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<PAGE>
(c) None of the information supplied or to be supplied by Buyer for
inclusion in the Registration Statement or the Company Proxy Statement will, at
the time of filing thereof, and with respect to the Company Proxy Statement,
when first mailed to the stockholders of the Company, be false or misleading
with respect to any material fact, or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which they
were made, not misleading, or, in the case of the Company Proxy Statement or any
amendment thereof or supplement thereto, at the time of the Company Stockholder
Meeting, be false or misleading with respect to any material fact, or omit to
state any material fact necessary to correct any statement in any earlier
communication with respect to the solicitation of any proxy for the Company
Stockholders Meeting. All documents that Buyer is responsible for filing with
the SEC in connection with the transactions contemplated by this Agreement will
comply as to form in all material respects with the provisions of applicable
law.
(d) The information with respect to the Company that the Company furnishes
to the Buyer or Merger Sub in writing specifically for use in the Registration
Statement or Company Proxy Statement will not, at the time of the filing
thereof, at the time of any distribution thereof and at the time of the
consummation of the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they were made, not misleading.
(e) Buyer shall take all necessary steps to cause the Buyer Common Stock to
be issued in the Merger to be listed on the NASDAQ-NMS System.
Section 6.3 ACCESS TO INFORMATION. From the date hereof until the
Effective Time, each party hereto shall give to the other party, its counsel,
financial advisors, auditors and other authorized representatives, full and
complete access to the books and records and personnel of such party, all as
provided by and subject to the confidentiality requirements of Section 8.15
hereof.
Section 6.4 AFFILIATE'S LETTER. The Company will use its best efforts to
cause each Affiliate listed in Schedule 4.5 to sign a letter, in substantially
the form attached hereto as Exhibit B (the "Affiliate's Letter"), agreeing not
to sell, pledge, transfer or otherwise dispose of the shares of Buyer Common
Stock to be received by such Affiliate upon consummation of the Merger except
(a) in compliance with applicable provisions of the 1933 Act and Rule 145
promulgated thereunder and (b) in a manner which will not prevent Buyer from
accounting for the Merger as a pooling of interests in accordance with GAAP and
applicable SEC regulations.
Section 6.5 OTHER NEGOTIATIONS. During the period from the date of this
Agreement until June 1, 1999, except with the prior approval of Buyer, the
Company shall not, and shall not permit its representatives, directly or
indirectly, to provide any information (other than information contained in a
press release issued by the parties hereto) concerning this transaction to, or
initiate or solicit discussions with, any corporation, partnership, person or
other entity or group concerning any merger in which the Company is not the
acquirer or sale of substantial assets, sale of shares of capital stock (or
securities convertible or exchangeable into or otherwise evidencing, or any
agreement or instrument evidencing, the right to acquire capital stock) or
similar transaction involving the Company.
Section 6.6 EMPLOYEE BENEFITS. At the Effective Time, each of the employee
benefit plans (as defined in Section 3(3) of ERISA), each of the fringe benefit
plans (as defined in Section 6039D(d)(1) of the Code) and each of the employment
practices included in Schedule 4.17 shall be terminated.
Section 6.7 CERTAIN MATTERS RELATING TO MERGER. From and after the
Effective Time and for so long as is necessary in order to permit the Company's
Affiliates to sell Buyer's stock acquired in the Merger pursuant to Rule 145,
and to the extent practicable Rule 144, under the 1933 Act, Buyer shall use its
best efforts to file on a timely basis all reports required to be filed by it
pursuant to Section 13 of the 1934 Act, referred to in paragraph (c)(1) of Rule
144, in order to permit the Company's Affiliates to
19
<PAGE>
sell Buyer's Common Stock held by them pursuant to the terms and conditions of
Rule 145 and the applicable provisions of Rule 144.
ARTICLE VII
CONDITIONS TO CLOSING
Section 7.1 CONDITIONS TO THE BUYER'S OBLIGATION TO CLOSE. The obligation
of the Buyer to close the transaction is subject to the condition that, between
the date of this Agreement and the Closing Date:
(a) It shall not have discovered any error or misstatement in any
representations and warranties of the Company which, either individually or in
the aggregate, would reasonably be likely to have a material adverse effect on
the Company or the Surviving Corporation or would prevent the Merger from
qualifying as a tax-free reorganization; and it shall have received a
certificate dated as of the Closing Date signed by the Chairman of the Board and
the President of the Company certifying that the representations and warranties
as set forth in Article IV are accurate in all material respects as of the
Closing Date;
(b) All terms and conditions of this Agreement to be performed and complied
with by the Company shall have been performed and complied with in all material
respects on or before the Closing Date;
(c) Nothing shall have happened to the Company Common Stock, the Company's
assets or the Company's business, nor shall there have been any claim asserted
against the Company, which would reasonably be likely to materially and
adversely affect (i) the operations or net worth of the Company, (ii) its
business, or (iii) its assets; and the Company shall have delivered to the Buyer
a certificate dated as of the Closing Date, covering the time period from the
date of this Agreement to the Closing Date, signed by the Chairman of the Board
and the President of the Company to all such effects;
(d) The Company shall have delivered to the Buyer an accurate list as of the
Closing Date showing all material contracts and commitments entered into by the
Company since the date hereof;
(e) The Company shall have provided the Buyer with certificates of good
standing for the Company issued by the Secretary of State of Texas and by the
secretary of state of each jurisdiction listed on Schedule 4.1, each as of a
date reasonably close to such Closing Date;
(f) The Company shall have obtained and delivered to the Buyer all consents,
authorizations and approvals under all statutes, laws, ordinances, regulations,
rules, judgments, decrees and orders of any court or governmental agency, board,
bureau, body, department or authority required to be obtained by the Company in
connection with the execution, delivery and performance of this Agreement and
the consummation of the transactions contemplated hereby and all necessary
consents under any contracts or commitments to which the Company is a party and
which Buyer reasonably believes are material to the Company's business;
(g) The Buyer shall have received an opinion, dated the Closing Date, of
Squire, Sanders & Dempsey L.L.P., counsel for the Company, in form and substance
reasonably satisfactory to Buyer and its counsel;
(h) The Company shall have delivered to the Buyer the original corporate
record books of the Company;
(i) The Company shall have diligently supported this Agreement in any
proceeding before any regulatory authority whose approval of the transaction
contemplated hereby is required;
(j) The required approval of the Company's stockholders shall have been
obtained, and the Company shall have delivered to the Buyer true and complete
copies, certified by the Company's secretary, of the resolutions which have been
adopted by the Company's Board of Directors and its
20
<PAGE>
stockholders authorizing the Merger and the consummation of such other
transactions related to the Agreement;
(k) The holders of not more than 5% of the outstanding shares of the Company
Common Stock shall have demanded appraisal of their shares of the Company Common
Stock in accordance with Texas law;
(l) Each Affiliate of the Company shall have signed an Affiliate's Letter;
(m) There shall have occurred no damage to or destruction or loss of
(whether or not covered by insurance) any of the Company's facilities,
machinery, equipment or other assets which, taken as a whole, would have a
material adverse effect on the business or operations of the Company;
(n) The transactions contemplated by this Agreement shall have been approved
as a pooling of interests for all accounting and reporting purposes of the Buyer
by its independent public accountants;
(o) The Company shall have given notice of termination of the employment
agreements between the Company and each of the Company's employees listed on
Schedule 7.1, respectively (the "Employment Agreements"), and the Company shall
have issued to such employees all shares of Company Common Stock required to be
issued under the Employment Agreements, all in accordance with the respective
terms of such agreements; and
(p) This Agreement and the Merger shall have been approved by the Board of
Directors of Buyer, provided that Buyer shall use its best efforts to submit
this Agreement and such matter to its Board of Directors for such approval
within five (5) business days after the date hereof.
Section 7.2 CONDITIONS TO THE COMPANY'S OBLIGATION TO CLOSE. The
obligation of the Company to close the transactions is subject to the condition
that at or before the Closing:
(a) All representations and warranties of the Buyer contained in Article V
hereof shall be accurate in all material respects as of the Closing Date; all of
the terms, covenants and conditions of this Agreement to be complied with and
performed by the Buyer and the Merger Sub have been performed and complied with
in all material respects on or before the Closing Date; and a certificate to the
foregoing effect dated as of the Closing Date and signed by an officer of the
Buyer shall have been delivered to the Company;
(b) The Company shall have received a certified copy of the resolutions of
the directors of the Buyer authorizing the execution of this Agreement and the
consummation of the transactions contemplated hereby;
(c) The Company shall have received an opinion, dated the Closing Date, of
Vorys, Sater, Seymour and Pease LLP, counsel for the Buyer and the Merger Sub,
in form and substance reasonably satisfactory to the Company and its counsel;
(d) The Buyer and the Merger Sub shall have obtained and delivered to the
Company all consents, authorizations and approvals under all statutes, laws,
ordinances, regulations, rules, judgments, decrees and orders of any court or
governmental agency, board, bureau, body, department or authority or of any
other person required to be obtained by the Buyer and Merger Sub in connection
with the execution, delivery and performance of this Agreement and the
consummation of the transactions contemplated hereby;
(e) The Buyer and Merger Sub shall have diligently supported this Agreement
in any proceeding before any regulatory authority whose approval of the
transactions contemplated hereby is required;
(f) The Buyer and Merger Sub shall not have knowingly taken any action which
could reasonably be expected to interfere unreasonably with the business or
operations of the Company; and
(g) Nothing shall have happened to the Buyer Common Stock, the Buyer's
assets or the Buyer's business, nor shall there have been any claim asserted
against the Buyer, which would reasonably be
21
<PAGE>
likely to materially and adversely affect (i) the operations or net worth of the
Buyer, (ii) its business, or (iii) its assets; and the Buyer shall have
delivered to the Company a certificate dated as of the Closing Date, covering
the time period from the date of this Agreement to the Closing Date, signed by
the President of the Buyer to all such effects.
(h) The Surviving Corporation and Thomas Cain shall have executed the Cain
Employment Agreement substantially in the form of Exhibit C attached hereto.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.1 SURVIVAL OF REPRESENTATIONS AND WARRANTIES; EFFECT OF CLOSING.
The parties hereto agree that the representations and warranties of the Company,
the Buyer and Merger Sub in Articles IV and V of this Agreement shall not
survive the Closing.
SECTION 8.2 SPECIFIC PERFORMANCE. The parties hereto acknowledge that
irreparable damage would result if this Agreement is not specifically enforced
and that, therefore, the rights and obligations of the Buyer and the Company
under this Agreement, including, without limitation, the Buyer's rights to
proceed with the Merger, may be enforced by a decree of specific performance
issued by a court of competent jurisdiction. Such remedy shall, however, not be
exclusive and shall be in addition to any other remedies which the Buyer or the
Company may have under this Agreement or otherwise.
SECTION 8.3 TERMINATION BY THE BUYER. The Buyer may, without liability to
the Company, terminate this Agreement by notice to the Company at any time prior
to (except for (b) below which must be true only at Closing) and including the
Closing Date:
(a) If a material default shall be made by the Company in the observance or
in the due and timely performance of any of the terms hereof to be performed by
the Company that cannot be cured by the Company prior to Closing;
(b) If any of the conditions precedent to Buyer's obligation to close shall
not have been fulfilled at or prior to the Closing; or
(c) If the Merger has not been consummated by June 30, 1999.
SECTION 8.4 TERMINATION BY THE COMPANY. The Company may, without liability
to the Buyer, terminate this Agreement by notice to the Buyer at any time prior
to (except for (b) below which must be true only at Closing) and including the
Closing Date:
(a) If a material default shall be made by Buyer in the observance or in the
due and timely performance of any of the terms hereof to be performed by Buyer
that cannot be cured by Buyer prior to Closing; or
(b) If any of the conditions precedent to the Company's obligation to close
shall not have been fulfilled at or prior to the Closing; or
(c) If the Merger has not been consummated by June 30, 1999.
SECTION 8.5 EFFECT OF TERMINATION. (a) If this Agreement is terminated,
this Agreement shall no longer be of any force or effect and there shall be no
liability on the part of any party or their respective directors, officers or
shareholders or agents except:
(i) in the case of termination by Buyer because of a failure of the
conditions of any of subparagraphs (a), (b), (c) (f), (i), (j), (k), (l)
(m), or (n) of Section 7.1 or by the Company other than in accordance with
Section 8.4 hereof, the Buyer may recover from the Company the amount of
expenses incurred by the Buyer in connection with this Agreement and the
transactions contemplated hereby which the Buyer would otherwise have to
bear pursuant to Section 8.8 of this Agreement; PROVIDED THAT, the Company
shall not have any liability to Buyer under this provision
22
<PAGE>
because of the failure of the conditions of any of subparagraph (g), (k),
(l), (m) or (n) of Section 7.1 unless the Company specifically has taken or
has failed to take any action which causes such failure; and
(ii) in the case of termination by the Company because of a failure of
the conditions of any of subparagraphs (a), (b), (d), (e) or (f) of Section
7.2 or by Buyer other than in accordance with Section 8.3 hereof, the
Company may recover from Buyer the amount of expenses incurred by the
Company in connection with this Agreement and the transactions contemplated
hereby which the Company would otherwise have to bear pursuant to Section
8.8 of this Agreement; PROVIDED THAT, Buyer shall not have any liability to
the Company under this provision because of a failure of the conditions of
any of subparagraphs (d) or (f) of Section 7.2 unless Buyer or Merger Sub
specifically has taken or has failed to take any action which causes such
failure.
(b) If this Agreement shall be terminated, each party will
(i) redeliver all documents and work papers relating to this Agreement
or the transactions contemplated hereby, whether obtained before or after
the execution of this Agreement, to the party furnishing the same, and
(ii) destroy all documents, work papers and other materials developed by
its accountants, agents and employees in connection with the transactions
contemplated hereby which embody proprietary information or trade secrets
furnished by any party hereto or deliver such documents, work papers and
other materials to the party furnishing the same or excise such information
or secrets therefrom. All information received by any party hereto with
respect to the business of any other party or any of its subsidiaries (other
than information which is a matter of public knowledge or which has
heretofore been or is hereafter published in any publication for public
distribution or filed as public information with any governmental authority)
shall not at any time be used for personal advantage or disclosed by such
party to any third person to the detriment of the party furnishing such
information.
SECTION 8.6 UPDATING INFORMATION. The Company shall promptly deliver to
the Buyer any information concerning events subsequent to the date of this
Agreement which is necessary to supplement the information contained in and made
a part of the representations and warranties of the Company contained herein,
including in the schedules hereto, in order that the information herein and
therein is kept current, complete and accurate, it being understood and agreed
that the delivery of such information shall not in any manner constitute a
waiver by the Buyer of any of the other provisions of this Agreement.
SECTION 8.7 STOCK LEGENDS. Certificates evidencing any of the shares of
Buyer Common Stock to be delivered pursuant to this Agreement to the Affiliates
listed in Schedule 4.5 shall, until such time as the same is no longer required
under applicable requirements of the 1933 Act and the rules and regulations
thereunder, contain a legend, substantially in the form set forth below:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE
TRANSFERRED IN ACCORDANCE WITH THE TERMS OF AN AFFILIATE'S LETTER
AGREEMENT DATED AS OF , 1999, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL OFFICES OF SYMIX SYSTEMS, INC.
SECTION 8.8 EXPENSES. Whether or not the Closing is consummated, except as
otherwise provided in Section 8.5, each of the parties will pay all of their own
legal and accounting fees and other expenses incurred in the preparation of this
Agreement and the performance of the terms and provisions of this Agreement.
SECTION 8.9 WAIVER. The parties hereto may by written agreement (a) extend
the time for or waive or modify the performance of any of the obligations or
other acts of the parties hereto or
23
<PAGE>
(b) waive any inaccuracies in the representations and warranties contained in
this Agreement or in any document delivered pursuant to this Agreement.
SECTION 8.10 PUBLIC ANNOUNCEMENTS. Unless legally obligated to announce
the transaction contemplated by this Agreement, neither party nor any of their
respective officers, directors, employees, representatives or agents shall
disclose to any third party or publicly announce the proposed transaction until
such time as the parties agree to make such disclosure or announcement. The
parties agree to cooperate and to consult with each other in advance concerning
the form and content of any press release or other public disclosure relating to
the subject matter hereof and, subject to legal requirements to the contrary, no
public disclosure of these matters will be made without the express written
consent of both Buyer and the Company.
SECTION 8.11 NOTICES. All notices, requests or other communications
hereunder shall be in writing and shall be deemed to have been duly given if
delivered or three days after being mailed first class certified mail, return
receipt requested, postage prepaid addressed as follows:
In the case of the Buyer or the Merger Sub:
Symix Systems, Inc.
2800 Corporate Exchange Drive
Columbus, Ohio 43231
Attention: Lawrence W. DeLeon
Vice President and Chief Financial Officer
with a copy to:
Ivery D. Foreman, Esq.
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
Columbus, Ohio 43215
In the case of the Company:
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC.
901 East Westchester
Tempe, Arizona 85283-2938
Attention: Thomas Cain
President
with a copy to:
Christopher D. Johnson, Esq.
Squire, Sanders & Dempsey L.L.P.
Two Renaissance Square
40 North Central Avenue, Suite 2700
Phoenix, Arizona 85004
or to such other address as may have been furnished in writing to the party
giving the notice by the party to whom notice is to be given.
SECTION 8.12 SEVERABILITY. In case any provision of this Agreement shall
be held by a court of competent jurisdiction to be invalid, illegal or
unenforceable, the validity and enforceability of the remaining provisions shall
not in any way be affected or impaired thereby.
SECTION 8.13 ENTIRE AGREEMENT. This Agreement embodies the entire
agreement among the parties and there have been and are no agreements,
representations or warranties, oral or written, among the parties other than
those set forth or provided for in this Agreement. This Agreement may not be
modified or changed, in whole or in part, except by a supplemental agreement
signed by each of the parties.
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<PAGE>
SECTION 8.14 ASSIGNABILITY OF RIGHTS UNDER THIS AGREEMENT. This Agreement
shall bind and inure to the benefit of the parties hereto and their respective
successors and assigns, but shall not be assignable by any party without the
prior written consent of the other parties, except that the Buyer shall have the
right at any time to assign its rights, but not its obligations, hereunder to
any wholly-owned subsidiary. Except for the rights of persons to receive the
Merger Consideration pursuant to Article I of this Agreement, nothing contained
in this Agreement is intended to confer upon any person, other than the parties
to this Agreement and their respective successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
SECTION 8.15 CONFIDENTIALITY. Each of the parties hereto agrees to
maintain in confidence, and to cause its respective directors, officers,
employees, agents and advisors to maintain in confidence, any and all
information furnished to it by another party hereto in connection with this
Agreement or the transactions contemplated hereby, unless (i) such information
is already known to such party or to others not bound by a duty of
confidentiality or such information becomes publicly available through no fault
of such party, (ii) the use of such information is necessary or appropriate in
making any filing or obtaining any consent or approval required for the
consummation of the transactions contemplated hereby, or (iii) the furnishing or
use of such information is required by, or necessary or appropriate in
connection with, legal proceedings.
SECTION 8.16 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Ohio, without regard to
choice of law or conflicts of law principles.
SECTION 8.17 HEADINGS; REFERENCES TO SECTIONS, EXHIBITS AND SCHEDULES. The
headings of the sections, paragraphs and subsidiary paragraphs of this Agreement
are solely for convenience and reference and shall not limit or otherwise affect
the meaning of any of the terms or provisions of this Agreement. The reference
herein to sections, exhibits and schedules, unless otherwise indicated, are
references to sections of and exhibits and schedules to this Agreement.
SECTION 8.18 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but which together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the
date first above written.
<TABLE>
<S> <C> <C> <C>
SYMIX SYSTEMS, INC. SYMIX ACQUISITION CORP.
By /s/ LAWRENCE W. DELEON By /s/ LAWRENCE W. DELEON
--------------------------------------- ---------------------------------------
Lawrence W. DeLeon Lawrence W. DeLeon
Vice President Vice President
DISTRIBUTION ARCHITECT INTERNATIONAL, INC.
By: /s/ THOMAS CAIN
---------------------------------------
Thomas Cain
President
</TABLE>
25
<PAGE>
AMENDMENT NO. 1
TO
AGREEMENT OF MERGER
AMONG
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC.
SYMIX SYSTEMS, INC.
AND
SYMIX ACQUISITION CORP.
This Amendment No. 1 to the Agreement of Merger dated February 24, 1999
among Distribution Architects International, Inc., Symix Systems, Inc. and Symix
Acquisition Corp. is made to be effective as of the 8th day of April, 1999.
WITNESSETH
WHEREAS, the parties hereto have entered into an Agreement of Merger dated
February 24, 1999 (the "Merger Agreement") which provides, among other things,
for the merger of the Company with and into Merger Sub;
WHEREAS, the parties no longer intend that the Merger shall be treated as a
pooling of interests for accounting and financial reporting purposes; and
WHEREAS, pursuant to Section 8.13 of the Merger Agreement, the parties
hereto desire to amend the Merger Agreement as provided herein;
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
promises, representation, covenants and agreements hereinafter set forth, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. The language which reads "and that for accounting purposes the Merger
shall be treated as a pooling of interests" in the second WHEREAS clause on
page one of the Merger Agreement is hereby deleted in its entirety.
2. Section 1.3(a) of the Merger Agreement is hereby revised to read in
its entirety as follows:
"(a) Each share of Company Common Stock outstanding immediately prior
to the Effective Time shall, except as otherwise provided in Section 1.7
herein, automatically be canceled and extinguished and be converted into
the right to receive 0.1313 shares of Buyer Common Stock."
3. Section 1.4 of the Merger Agreement is hereby revised to read in its
entirety as follows:
"SECTION 1.4 Cancellation of Options. All rights under any and all
stock options granted by the Company pursuant to the Company's stock
option plans that remain unexercised immediately prior to the Effective
Time (collectively, "Options") shall be automatically terminated and be
canceled. Without further action by the holders of such Options, each
holder of an Option shall be entitled to receive in and as the result of
the Merger, for the shares of Company Common Stock with respect to which
such Option would have been exercisable immediately prior to the
Effective Time, that number of shares of Buyer Common Stock determined in
accordance with the following formula:
Formula: (A-B) x C
$18.50
26
<PAGE>
with "A" being $2.17 (the agreed value of a share of Company Common
Stock as of the date hereof), "B" being $1.242 (the exercise price per
share of such Option), and "C" being the number of shares of Company
Common Stock covered by the Option. Notwithstanding anything else
contained in this Agreement, the aggregate number of shares of Buyer
Common Stock issuable pursuant to Sections 1.3 and 1.4 shall not exceed
625,000 shares."
4. Sections 3.2(c) and 7.1(n) of the Merger Agreement are hereby deleted
in their entirety.
5. Subparagraph (b) of Section 4.30 of the Merger Agreement is hereby
deleted in its entirety.
6. Subparagraph (b) of Section 5.6 of the Merger Agreement is hereby
deleted in its entirety.
7. Subparagraph (b) of Section 6.4 of the Merger Agreement is hereby
deleted in its entirety.
8. The references to subparagraph (n) in Section 8.5(a)(i) of the Merger
Agreement are hereby deleted.
9. In addition to the foregoing, the parties hereto agree that the
second sentence in paragraph 3(b) of the form of Cain Employment Agreement
attached to the Merger Agreement as Exhibit C shall be revised to read in
its entirety as follows:
"During the Term, and subject to the performance by Employee of the
duties described in Section 4, Employee shall be entitled to
additional compensation in the form of an annual performance bonus
in the amount of $125,000.00, payable within 30 days after the end
of each one year anniversary of the date of this Agreement."
10. Except as provided in this Amendment No. 1 to the Merger Agreement,
the terms and provisions of the Merger Agreement shall remain in full force
and effect and shall apply to this Amendment No. 1 to the Merger Agreement
as if fully written or incorporated herein. Capitalized terms used in this
Amendment No. 1 to the Merger Agreement and not otherwise defined herein
shall have the respective meaning assigned to them in the Merger Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment No. 1 to
the Merger Agreement to be executed by their respective duly authorized officer
to be effective as of the date first written hereinabove.
<TABLE>
<S> <C>
SYMIX SYSTEMS, INC. SYMIX ACQUISITION CORP.
By /s/ Lawrence W. DeLeon By /s/ Lawrence W. DeLeon
Lawrence W. DeLeon Lawrence W. DeLeon
Vice President Vice President
</TABLE>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC.
By /s/ Thomas Cain_______
Thomas Cain, President
27
<PAGE>
EXHIBIT A
TO AGREEMENT OF MERGER
------------------------
ARTICLES OF MERGER
OF
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC.
INTO
SYMIX ACQUISITION CORP.
(WHOSE NAME WILL BE CHANGED TO DISTRIBUTION ARCHITECTS INTERNATIONAL, INC.
AS A RESULT OF THE MERGER)
In accordance with the requirements of the Texas Business Corporation Act,
the undersigned parties to a merger pursuant to the Texas Business Corporation
Act and the Ohio General Corporation Law (the "Merger"), set forth the following
facts:
ARTICLE 1. The parties to the Agreement of Merger dated February 24, 1999
(the "Plan of Merger") relating to the Merger and the state of incorporation of
each such party are as follows:
<TABLE>
<CAPTION>
STATE OF
NAME INCORPORATION
- ------------------------------------------------------------------------ ---------------------
<S> <C>
Distribution Architects International, Inc. ("DAI") Texas
Symix Systems, Inc. Ohio
Symix Acquisition Corp. Ohio
</TABLE>
ARTICLE 2. The Plan of Merger has been approved.
ARTICLE 3. The only amendment to the Articles of Incorporation of Symix
Acquisition Corp., the surviving corporation in the Merger (the "Surviving
Corporation"), to be effected by the Merger is the change of the name of the
surviving corporation to "Distribution Architects International, Inc."
ARTICLE 4. A executed copy of the Plan of Merger is on file at the
principal place of business of the Surviving Corporation, located at 901 East
Westchester, Tempe, Arizona 85283-2938.
ARTICLE 5. A copy of the Plan of Merger will be furnished by the Surviving
Corporation, on written request and without cost, to any shareholder of DAI.
ARTICLE 6. The shareholders of DAI entitled to vote in respect of the Plan
of Merger at a special meeting thereof duly called, constituted and held on
, 1999, approved the Plan of Merger. The votes cast and other information
relating to such special meeting are as follows:
Number of shares of DAI common stock outstanding on the record date: Number
of shares voted in for the Plan of Merger Number of shares voted against the
Plan of Merger
ARTICLE 7. The Plan of Merger and performance of its terms were duly
authorized by all action required by the Ohio General Corporation Law and by the
Articles of Incorporation and Code of Regulations of the Surviving Corporation.
IN WITNESS WHEREOF, the undersigned parties to the Merger have caused these
Articles of Merger to be executed by their respective duly authorized officers
to be effective as of the day of , 1999.
<TABLE>
<S> <C>
DISTRIBUTION ARCHITECTS INTERNATIONAL, INC. SYMIX ACQUISITION CORP.
By: By:
</TABLE>
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EXHIBIT B
TO
AGREEMENT OF MERGER
------------------------
[FORM OF AFFILIATE'S LETTER]
, 1999
Symix Systems, Inc.
2800 Corporate Exchange Drive
Suite 400
Columbus, Ohio 43231
Ladies and Gentlemen:
I have been advised that, as of the date hereof, I may be deemed to be an
"affiliate" of Distribution Architects International, Inc., a Texas corporation
("DAI"), as that term is defined for purposes of paragraphs (c) and (d) of Rule
145 of the Rules and Regulations (the "Rules and Regulations") of the Securities
and Exchange Commission (the "Commission") under the Securities Act of 1933, as
amended (the "Act").
Pursuant to the terms of the Agreement of Merger dated as of , 1999
(the "Agreement"), by and among Symix Systems, Inc., an Ohio corporation
("Buyer"), Symix Acquisition Corp., an Ohio corporation and a wholly-owned
subsidiary of Buyer ("Merger Sub"), and DAI providing for the merger of DAI with
and into Merger Sub (the "Merger"), and as a result of the Merger, I may receive
common shares of Buyer ("Buyer Common Stock") in exchange for the shares of
common stock of DAI owned by me at the Effective Time of the Merger.
I represent and warrant to Buyer and covenant with Buyer that in such event:
1. I shall not make any sale, transfer or other disposition of the Buyer
Common Stock in violation of the Act or the Rules and Regulations.
2. I have carefully read this letter and the Agreement and discussed its
requirements and other applicable limitations upon my ability to sell,
transfer or otherwise dispose of the Buyer Common Stock to the extent I felt
necessary with my counsel or counsel for DAI.
3. I have been advised that the issuance of the Buyer Common Stock to me
pursuant to the Merger has been registered with the Commission under the Act
on a Registration Statement on Form S-4. However, I have also been advised
that, because I may be deemed to have been an affiliate of DAI at the time
the Merger was submitted for a vote of the stockholders of DAI and because
the resale by me of the Buyer Common Stock received in the Merger has not
been registered under the Act, the Buyer Common Stock must be held by me
until the first anniversary of the Effective Time of the Merger unless (i)
my sale of the Buyer Common Stock has been registered under the Act, (ii) my
sale of the Buyer Common Stock is made in conformity with the volume and
other limitations of Rule 145 promulgated by the Commission under the Act
and Buyer has received evidence reasonably satisfactory to it of compliance
with said Rule 145, or (iii) in the opinion of counsel reasonably acceptable
to Buyer, some other exemption from registration is available with respect
to any such proposed sale, transfer or other disposition by me of the Buyer
Common Stock.
4. I understand that Buyer is under no obligation to register on my
behalf the sale, transfer or other disposition of the Buyer Common Stock by
me or to take any other action necessary in
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order to make compliance with an exemption from registration available,
except as provided in Section of the Agreement.
5. I also understand that stop transfer instructions will be given to
Buyer's transfer agents with respect to the Buyer Common Stock issued to me
in connection with the Merger and that there will be placed on the
certificates for such Buyer Common Stock, or any substitutions therefor, a
legend stating in substance:
"The shares represented by this certificate were issued in a transaction to
which Rule 145 promulgated under the Securities Act of 1933, as amended,
applies. The shares represented by this certificate may only be transferred
in accordance with the terms of an affiliate's letter agreement, a copy of
which agreement is on file at the principal offices of Symix Systems, Inc."
6. I also understand that, unless the transfer by me of the Buyer Common
Stock issued to me in connection with the Merger has been registered under
the Act or is a sale made in conformity with the provisions of Rule 145,
Buyer reserves the right to put the following legend on the certificates of
Buyer Common Stock issued to any transferee:
"The shares represented by this certificate have not been registered under
the securities act of 1933, as amended, and were acquired from a person who
received such shares in a transaction to which Rule 145 promulgated under
the Securities Act of 1933, as amended, applies. The shares have been
acquired by the holder not with a view to, or for resale in connection with,
any distribution thereof within the meaning of the Securities Act of 1933,
as amended and may not be sold, pledged or otherwise transferred except in
accordance with an exemption from the registration requirements of the
Securities Act of 1933, as amended.
It is understood and agreed that the legends set forth in Paragraphs 5 and 6
above shall be removed by delivery of substitute certificates of Buyer Common
Stock without such legend (i) if the undersigned shall have delivered to Buyer a
copy of a letter from the staff of the Commission, or an opinion of counsel in
form and substance reasonably satisfactory to Buyer, to the effect that such
legend is not required for purposes of the Act, or (ii) upon my request at any
time after the first anniversary of the Effective Time of the Merger provided
that I am not then an Affiliate of Buyer.
Very truly yours,
- --------------------------------------------------------------------------------
Name:
Accepted this day of
, 1999, by
SYMIX SYSTEMS, INC.
By:
- --------------------------------------
Name:
Title:
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<PAGE>
APPENDIX B
ARTICLES 5.11, 5.12 AND 5.13 OF THE TEXAS
BUSINESS CORPORATION ACT RELATING TO THE
RIGHTS OF DISSENTING SHAREHOLDERS
ART. 5.11 RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN
CORPORATE ACTIONS
A. Any shareholder of a domestic corporation shall have the right to DISSENT
from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if
shareholder approval is required by Article 5.03 or 5.16 of this Act and the
shareholder holds shares of a class or series that was entitled to vote
thereon as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise provided
in the articles of incorporation) or all, or substantially all, the property
and assets, with or without good will, of a corporation if special
authorization of the shareholders is required by this Act and the
shareholders hold shares of a class or series that was entitled to vote
thereon as a class or otherwise;
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which
the shares of the corporation of the class or series held by the shareholder
are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to DISSENT from any plan of merger in which
there is a single surviving or new domestic or foreign corporation, or from any
plan of exchange, if (1)the shares held by the shareholder are part of a class
or series, shares of which are on the record date fixed to determine the
shareholders entitled to vote on the plan of merger or plan of exchange: (a)
listed on a national securities exchange; (b) listed on the Nasdaq Stock Market
(or successor quotation system) or designated as a national market security on
an interdealer quotation system by the National Association of Securities
Dealers, Inc., or successor entity; or (c) held of record by not less than 2,000
holders; (2) the shareholder is not required by the terms of the plan of merger
or plan of exchange to accept for the shareholder's shares any consideration
that is different than the consideration (other than cash in lieu of fractional
shares that the shareholder would otherwise be entitled to receive) to be
provided to any other holder of shares of the same class or series of shares
held by such shareholder; and (3) the shareholder is not required by the terms
of the plan of merger or the plan of exchange to accept for the shareholder's
shares any consideration other than: (a) shares of a domestic or foreign
corporation that, immediately after the effective time of the merger or
exchange, will be part of a class or series, shares of which are: listed, or
authorized for listing upon official notice of issuance, on a national
securities exchange, (ii) approved for quotation as a national market security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc., or successor entity; or (iii) held of record by not less than
2,000 holders; (b) cash in lieu of fractional shares otherwise entitled to be
received; or (c) any combination of the securities and cash described in
Subdivisions (a) and (b) of this subsection.
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ART. 5.12. PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATION
ACTIONS
A. Any shareholder of any domestic corporation who has the right to DISSENT
from any of the corporate actions referred to in Article 5.11 of this Act may
exercise that right to DISSENT only by complying with the following procedures:
(1) (a) With respect to proposed corporate action that is submitted to a
vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action,
setting out that the shareholder's right to DISSENT will be exercised if the
action is effective and giving the shareholder's address, to which notice
thereof shall be delivered or mailed in that event. If the action is
effected and the shareholder shall not have voted in favor of the action,
the corporation, in the case of action other than a merger, or the surviving
or new corporation (foreign or domestic) or other entity that is liable to
discharge the shareholder's right of DISSENT, in the case of a merger,
shall, within ten (10) days after the action is effected, deliver or mail to
the shareholder written notice that the action has been effected, and the
shareholder may, within ten (10) days from the delivery or mailing of the
notice, make written demand on the existing, surviving or new corporation
(foreign or domestic) or other entity, as the case may be, for payment of
the fair value of the shareholder's shares. The fair value of the shares
shall be the value thereof as of the day immediately preceding the meeting,
excluding any appreciation or depreciation in anticipation of the proposed
action. The demand shall state the number and class of the shares owned by
the shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the ten (10) day
period shall be bound by the action.
(b) With respect to proposed corporate action that is approved pursuant
to Section A of Article 9.10 of this Act, the corporation, in the case of
action other than a merger, and the surviving or new corporation (foreign or
domestic) or other entity that is liable to discharge the shareholder's
right of DISSENT, in the case of a merger, shall, within ten (10) days after
the date t-he action is effected, mail to each shareholder of record as of
the effective date of the action notice of the fact and date of the action
and that the shareholder may exercise the shareholder's right to DISSENT
from the action. The notice shall be accompanied by a copy of this Article
and any articles or documents filed by the corporation with the Secretary of
State to effect the action. If the shareholder shall not have consented to
the taking of the action, the shareholder may, within twenty (20) days after
the mailing of the notice, make written demand on the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may
be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the date the written
consent authorizing the action was delivered to the corporation pursuant to
Section A of Article 9.10 of this Act excluding any appreciation or
depreciation in anticipation of the proposed action. The demand shall state
the number and class of shares owned by the dissenting shareholder and the
fair value of the shares as estimated by the shareholder. Any shareholder
failing to make demand within the twenty (20) day period shall be bound by
the action.
(2) Within twenty (20) days after receipt by the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be,
of a demand for payment made by a dissenting shareholder in accordance with
Subsection (1) of this Section, the corporation (foreign or domestic) or
other entity shall deliver or mail to the shareholder a written notice that
shall either set out that the corporation (foreign or domestic) or other
entity accepts the amount claimed in the demand and agrees to pay that
amount within ninety (90) days after the date on which the action was
effected, and, in the case of shares represented by certificates, upon the
surrender of the certificates duly endorsed, or shall contain an estimate by
the corporation (foreign
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or domestic) or other entity of the fair value of the shares, together with
an offer to pay the amount of that estimate within ninety (90) days after
the date on which the action was effected, upon receipt of notice within
sixty (60) days after that date from the shareholder that the shareholder
agrees to accept that amount and, in the case of shares represented by
certificates, upon the surrender of the certificates duly endorsed.
(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall
be made within ninety (90) days after the date on which the action was
effected and, in the case of shares represented by certificates, upon
surrender of the certificates duly endorsed. Upon payment of the agreed
value, the shareholder shall cease to have any interest in the shares or in
the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The appraisers
shall have power to examine any of the books and records of the corporation the
shares of which they are charged with the duty of valuing, and they shall make a
determination of the fair value of the shares upon such investigation as to them
may seem proper. The appraisers shall also afford a reasonable opportunity to
the parties interested to submit to them pertinent evidence as to the value of
the shares. The appraisers shall also have such powers and authority as may be
conferred on Masters in Chancery by the Rules of Civil Procedure or by the order
of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning 91 days after the date on which the
applicable corporate action from which the shareholder elected to DISSENT was
effected to the date of such judgment, to the shareholders entitled to payment.
The judgment shall be payable to the holders of uncertificated shares
immediately but to the holders of
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shares represented by certificates only upon, and simultaneously with, the
surrender to the existing, surviving, or new corporation (foreign or domestic)
or other entity, as the case may be, of duly endorsed certificates for those
shares. Upon payment of the judgment, the dissenting shareholders shall cease to
have any interest in those shares or in the corporation. The court shall allow
the appraisers a reasonable fee as court costs, and all court costs, shall be
allotted between the parties in the manner that the court determines to be fair
and equitable.
E. Shares acquired by the existing, surviving, or new corporation (foreign
or domestic) or other entity, as the case may be, pursuant to the payment of the
agreed value of the share or pursuant to payment of the judgment entered for the
value of the shares, as in this Article provided, shall, in the case of a
merger, be treated as provided in the plan of merger and, in all other cases,
may be held and disposed of by the corporation as in the case of other treasury
shares.
F. The provisions of this Article shall not apply to a merger if, on the
date of the filing of the articles of merger, the surviving corporation is the
owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by this
Article to a shareholder objecting to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action. If
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article, any
shareholder who fails to comply with the requirements of this Article shall not
be entitled to bring suit for the recovery of the value of his shares or money
damages to the shareholder with respect to the action.
ART. 5.13. PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was fraudulent, and the respective shares for which
payment has been demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder, the
corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fail
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 asking for a finding and determination of the fair
value of such shares, but no such demand may be withdrawn after such payment has
been made or, unless the corporation shall consent thereto, after any such
petition has been filed. If,
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however, such demand shall be withdrawn as hereinbefore provided, or if pursuant
to Section B of this Article the corporation shall terminate the shareholder's
rights under Article 5.12 or 5.16 of this Act, as the case may be, or if no
petition asking for a finding and determination of fair value of such shares by
a court shall have been filed within the time provided in Article 5.12 or 5.16
of this Act, as the case may be, or if after the hearing of a petition filed
pursuant to Article 5.12 or 5.16, the court shall determine that such
shareholder is not entitled to the relief provided by those articles, then, in
any such case, such shareholder and all persons claiming under him shall be
conclusively presumed to have approved and ratified the corporate action from
which he dissented and shall be bound thereby, the right of such shareholder to
be paid the fair value of his shares shall cease, and his status as a
shareholder shall be restored without prejudice to any corporate proceedings
which may have been taken during the interim, and such shareholder shall be
entitled to receive any dividends or other distributions made to shareholders in
the interim.
5
