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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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SCHEDULE 13D
Under the Securities Exchange Act of 1934
SYMIX SYSTEMS, INC.
(Name of Issuer)
Common Stock
without par value
(Title of Class of Securities)
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871535 10 0
(CUSIP Number)
Fallen Angel Capital, L.L.C.
(Name of Persons Filing Statement)
Barry Goldsmith
Fallen Angel Capital, L.L.C.
960 Holmdel Road
Holmdel, New Jersey 07733
Tel. No. 732-946-9495
with a copy to:
John A. Bick
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Tel. No.: 212-450-4350
(Name, Address and Telephone Number of Person Authorized
to Receive Notices and Communications)
May 10, 2000
(Date of Event which Requires Filing of this Statement)
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If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this statement because of Rule 13d-1(b)(3) or (4), check the
following: [ ]
Page 1 of 10
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SCHEDULE 13D
CUSIP No. 871535 10 0 Page 2 of 10 Pages
- --------------------- ------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Fallen Angel Equity Fund, L.P.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
Not applicable
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DE
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED BY
EACH REPORTING PERSON -0-
WITH
8 SHARED VOTING POWER
466,668
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
466,668
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
466,668 - See Item 4 and Item 5
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.1% - See Item 4 and Item 5
14 TYPE OF REPORTING PERSON*
PN, IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 2 of 10
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SCHEDULE 13D
CUSIP No. 871535 10 0 Page 3 of 10 Pages
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1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Fallen Angel Capital, L.L.C.
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP*
(a) [ ]
(b) [ ]
3 SEC USE ONLY
4 SOURCE OF FUNDS*
OO
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT
TO ITEMS 2(d) or 2(e) [ ]
6 CITIZENSHIP OR PLACE OF ORGANIZATION
DE
NUMBER OF SHARES 7 SOLE VOTING POWER
BENEFICIALLY OWNED BY
EACH REPORTING PERSON -0-
WITH
8 SHARED VOTING POWER
466,668
9 SOLE DISPOSITIVE POWER
-0-
10 SHARED DISPOSITIVE POWER
466,668
11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
466,668 - See Item 4 and Item 5
12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES [ ]
CERTAIN SHARES*
13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11)
5.1% - See Item 4 and Item 5
14 TYPE OF REPORTING PERSON*
CO, IA
*SEE INSTRUCTIONS BEFORE FILLING OUT!
Page 3 of 10
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Item 1. Security and Issuer.
This statement relates to the common stock, without par value per share
("Common Stock"), the Series A Convertible Preferred Stock, without par value
per share ("Preferred Stock") and warrants to purchase Common Stock ("Warrants")
of Symix Systems, Inc., an Ohio corporation ("Symix" or the "Company"). The
principal executive offices of Symix are located at 2800 Corporate Exchange
Drive, Columbus, Ohio, 43231.
As more fully described in item 4 below, the Fund (as defined below)
beneficially owned 166,667 shares of Preferred Stock, each convertible on a
two-for-one basis into shares of Common Stock, and 133,334 Warrants to acquire
shares of Common Stock at an exercise price of $15.00 per share.
Item 2. Identity and Background.
This Schedule 13D is being filed jointly on behalf of the following
persons (collectively, the "Reporting Persons"): (1) Fallen Angel Equity Fund,
L.P. (the "Fund") and (7) Fallen Angel Capital, L.L.C. ("FAC").
The general partner of the Fund is FAC.
The address of the principal business and office of the Fund and FAC is
960 Holmdel Road, Holmdel, New Jersey 07733.
During the past five (5) years, neither any of the Reporting Persons
nor, to the best knowledge of any of the Reporting Persons, any of the members
of FAC, has been (i) convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors) or (ii) a party to a civil proceeding of a
judicial or administrative body of competent jurisdiction and as a result of
such proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to United
States federal or state securities laws or finding any violation with respect to
such laws.
Item 3. Source and Amount of Funds or Other Consideration.
The general and limited partners of the Fund contributed, in the
aggregate, $4,000,008 for 166,667 shares of Preferred Stock and 133,334
Warrants. See also Item 4.
Item 4. Purpose of Transaction.
On May 10, 2000, Symix entered into a Securities Purchase Agreement
(the "Securities Purchase Agreement") with the Fund, Morgan Stanley Dean Witter
Venture Partners IV, L.P. ("MSVP IV"), Morgan Stanley Dean Witter Venture
Investors IV, L.P. ("MSVI IV"), Morgan Stanley Dean Witter Venture Offshore
Investors IV, L.P. ("MSVOI IV") and Morgan Stanley Dean Witter Equity Funding,
Inc. ("Equity Funding") pursuant to which Symix issued and sold in a private
placement 566,933 shares of its Preferred Stock and 453,546 Warrants for an
aggregate of $13,606,392. Simultaneously, Symix, the Fund, MSVP IV, MSVI IV,
MSVOI IV, Equity Funding and Lawrence J. Fox, a shareholder of Symix ("Fox")
entered into an Investor Rights Agreement (the "Investor Rights Agreement").
Subsequent to the private placement, the Fund beneficially owns an
aggregate of 166,667 shares of Preferred Stock of Symix, which represents
approximately 29.4% of the Preferred Stock of Symix. The shares of Preferred
Stock owned by the Fund are convertible on a two-for-one basis into shares of
Common Stock and the Preferred Stock is the only series of capital stock of
Symix outstanding other than the Common Stock.
If all of the outstanding Preferred Stock were converted into Common
Stock as of the date of purchase, the Fund would have owned 333,334 shares of
Common Stock, which would have represented approximately 3.7% of the Common
Stock (if all outstanding options held by employees of Symix that were
exercisable had been exercised at the time of the purchase by the Fund, then the
Fund would have owned approximately 3.0% of the Common Stock).
The Fund also received 133,334 Warrants. The Warrants have a term of
five years. If all of the outstanding Warrants were exercised and all of the
Preferred Stock were converted into Common Stock as of the date of purchase, the
Fund would have held an aggregate of 466,668 shares of Common Stock, which would
have represented approximately 5.1% of the Common Stock (if all outstanding
options held by employees of Symix that were exercisable had been exercised at
the time of the purchase by the Fund, then the Fund would have owned
Page 4 of 10
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approximately 4.2% of the Common Stock).
Description of Preferred Stock
Seniority; Dividends. The Preferred Stock ranks senior in right of
payment to all other classes of equity of the Company, including the Common
Stock. To the extent the Company declares dividends or other distributions on
the Common Stock, the holders of Preferred Stock are entitled to receive such
dividends on an as-converted basis. In addition, the Preferred Stock is entitled
to an annual cash dividend equal to $3.36 per share for any period during which
the Company fails to meet the registration obligations described below. In such
event, dividends are cumulative to the extent not paid.
Liquidation Preference. Upon any dissolution or liquidation of the
Company, each share of Preferred Stock is entitled to receive an amount in cash
equal to the greater of (a) $24, as adjusted, plus accumulated but unpaid
dividends, prior to any payment on the Common Stock and (b) the amount that
would be received by a holder of the number of shares of Common underlying the
Preferred Stock (subject to anti-dilution adjustments described below) in such
liquidation or winding up if all of the Preferred Stock were converted into
Common Stock immediately prior to the liquidation or winding up. A consolidation
or merger of the Company, a sale of all or substantially all of its assets or
the acquisition by any person or group of a majority of the outstanding voting
power of the Company will be deemed, at the election of 70% of the outstanding
shares of the Preferred Stock, to be a liquidation.
Conversion. Each share of Preferred Stock is initially convertible into
two shares of Common Stock of the Company (subject to anti-dilution and duration
adjustments as described below) at any time at the option of the holder. The
Preferred Stock (and the Warrants on a net-issuance basis) automatically convert
into Common Stock if the closing price of the Common Stock on the NASDAQ stock
market for any 40 consecutive trading day period after May 10, 2002 exceeds $24
(as adjusted).
The conversion ratio of the Preferred Stock and the exercise price of
the Warrants will be adjusted on a weighted average basis in the event of a
dilutive issuance at below the conversion price for the Preferred Stock or the
exercise for the Warrants. "Dilutive issuance" does not include shares of Common
Stock issued pursuant to employee stock plans or shares issued in connection
with a merger or acquisition other than a merger or acquisition involving a
change in control of the Company.
Additional Warrants. If the Company, by dividend to holders of the
Common Shares, transfers ownership of all or a part of any subsidiary to
shareholders of the Company, then the Company has agreed to issue to the holders
of any Warrants then outstanding additional warrants to purchase common shares
in such Subsidiary having substantially the same terms and conditions as the
Warrants except as noted below. The number of common shares of the subsidiary
covered by the additional warrants issued to each holder must be sufficient to
give the holder the same percentage ownership in the outstanding common shares
(calculated on a fully diluted basis) of the subsidiary that the holder has in
the outstanding common stock (calculated on a fully diluted basis) under the
Warrants. The exercise price of each such additional warrant is to be a dollar
amount determined by dividing (1) the product of the exercise price of a Warrant
immediately prior to the public announcement of the dividend multiplied by the
market price per common share of the subsidiary immediately after such dividend
by (2) the market price per common share immediately prior to the public
announcement of such dividend.
Optional Redemption. If the Preferred Stock has not been converted to
common stock prior to the fourth anniversary of the closing date, then the
Company has the option to redeem for cash all, but not less than all, of the
Preferred Stock at a redemption price of $30.72 per share during a limited
period after the fourth anniversary of the closing date. If, by the fourth
anniversary of the closing date, the Preferred Stock has not been converted to
common or redeemed pursuant to the preceding sentence, the conversion ratio will
adjust upwards if the common stock price for the 40 consecutive trading days
prior to the fourth anniversary is less than $12, as adjusted for any
antidilution adjustments. The effect of this adjustment will be to lower the
effective conversion price to two times the average common stock price for the
40 consecutive trading days prior to the fourth anniversary.
Voting Rights. The Preferred Stock has one vote per share and votes
with the Common Stock as a class, but also has a class vote (70% of the
outstanding shares of Preferred Stock) as required by law and on (i) the
creation of any senior or pari passu capital stock, (ii) repurchase or
redemption of any other capital stock of the Company, except repurchases upon
termination of employment, (iii) an increase in the authorized number of
Preferred Stock and (iv) any amendment of the Company's charter or by-laws
(including by way of merger, consolidation or conversion) that adversely affects
the rights or preferences of the Preferred Stock (it being understood that any
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increase in the number of authorized Common Stock or the creation of any new
class of capital stock ranking junior to the Preferred Stock will not require
the approval of the Preferred Stock). The Company has agreed to use its best
efforts to amend its articles of incorporation to permit the Preferred Stock to
vote on an as converted basis.
Investor Rights Agreement
Pursuant to the terms of the Investor Rights Agreement, the Fund has
certain rights, as discussed below.
Board representation. The Fund has the right to nominate a member of
the Board of Directors. On May 10, 2000, the Amended Articles of Incorporation
of the Company were amended to, among other things, increase the number of
members of the Board of Directors from six to nine persons; on the same date,
the Board of Directors appointed Barry Goldsmith, a representative of the Fund,
to fill one of the three new Director positions created by the amendment.
Registration rights. Within 90 days of May 10, 2000, Symix must file a
registration statement on Form S-3 or any successor form for a public offering
of all or any portion of the Preferred Stock held by, among other parties, the
Fund. Symix must maintain the effectiveness of the Form S-3 until the Preferred
Stock so registered may be sold pursuant to Rule 144 promulgated by the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), without volume restrictions under
subsection (k).
At any time after the Form S-3 is no longer effective, if Symix files a
registration statement in connection with the proposed offer and sale for money
of any of its securities by it or any of its securityholders, the Fund may
request that Symix register shares beneficially owned by the Fund if Symix
proposes to register any of its shares with the Commission. Upon the receipt of
such a request, Symix is generally required to use its best efforts to effect a
registration. Commencing nine months from May 10, 2000, the holders of Preferred
Stock, including the Fund, have a priority right to sell the first 30% of any
securities registered under such a registration statement.
In general, all expenses of such registrations, other than underwriting
discounts and selling commission, will be borne by Symix.
Preemptive Rights. The Fund has the preemptive right to purchase a
portion of an offering by the Company, or any subsidiary of the Company, of any
equity security in an amount sufficient to maintain their respective percentage
ownership of the Company. The Fund does not have any preemptive rights in
connection with any of the following: (i) exercise of options or warrants or the
conversion of convertible securities (including the Preferred Stock) that were
issued or outstanding on May 10,2000; (ii) any shares issued or issuable to
officers, directors, employees, agents or consultants of the Company or any
subsidiary of the Company, upon exercise of any option granted or to be granted
pursuant to any stock option plan or arrangements approved by the Board of
Directors of the Company, or the board of directors of any subsidiary, as the
case may be, or any options granted or to be granted thereunder; or (iii) shares
issued or issuable in the acquisition by the Company or by a subsidiary of the
Company of any other corporation, association, partnership or another entity or
the assets or securities thereof.
Information Rights. The Company has agreed to provide the Fund with
standard information rights, including audited annual financial reports within
90 days of fiscal year end, unaudited quarterly and monthly financial reports
within 45 and 30 days of the end of such periods, respectively, and annual
budget and business plan no later than 30 days before fiscal year end, as well
as standard inspection rights.
Transfer Restrictions and Tag-Along Rights. As long as any of the
Preferred Stock, Warrants, or, upon conversion of any Preferred Stock or
exercise of any Warrant, Common Stock beneficially owned by the Fund are
considered "restricted securities" pursuant to Rule 144 promulgated by the
Commission under the Securities Act, the Fund may only transfer such securities
in accordance with the provisions of Rule 144 or upon registration of such
securities under the Securities Act. Fox has agreed not to sell any of his
shares of Common Stock in the Company until May 10, 2002, except that he can
sell up to 10% of his holdings in each year. The Investor Rights Agreement also
contains tag-along rights providing that before Fox may sell any of his shares,
he will first give the Fund, MSVP IV, MSVI IV, MSVOI IV and Equity Funding an
opportunity to participate in such sale on a basis proportionate to the amount
of securities held by Fox and those held by the Fund, MSVP IV, MSVI IV, MSVOI IV
and Equity Funding.
Termination. The Investor Rights Agreement terminates upon the
occurrence of certain events including at such time that the Funds, Equity
Funding and FAEF beneficially own in aggregate less than 20% of the underlying
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shares of Common Stock initially acquired by them.
The Fund has acquired the Shares for investment. The Fund intends to
review from time to time the Company's business affairs and financial position.
Based on such evaluation and review, as well as general economic and industry
conditions existing at the time, the Fund may consider from time to time various
alternative courses of action. Subject to market conditions and other factors,
the Fund or other affiliates of FAC may acquire or dispose of shares of Symix
from time to time in future open-market, privately negotiated or other
transactions, including a possible distribution of the shares of Common Stock to
the partners of the Fund. Except as set forth above, the Fund has no plan or
proposals that relate to or would result in any of the transactions described in
subparagraphs (a) through (j) of Item 4 of Schedule 13D.
Item 5. Interest in Securities of the Issuer.
The Fund has acquired and, for purposes of Rule 13d-3 promulgated under
the Exchange Act, may be deemed to own beneficially, in the aggregate, 166,667
shares of Preferred Stock into 333,334 shares of Common Stock, as well as
133,334 Warrants exercisable for 133,334 shares of Common Stock. The Securities
held by the Fund, including the Preferred Stock and the Warrants exercisable for
shares of Common Stock, represent approximately 5.1% of the voting stock of
Symix (if all outstanding options held by employees of Symix that were
exercisable had been exercised at the time of the purchase by the Fund, then the
Fund would have owned approximately 4.2% of the voting stock).
Each of the Fund and FAC may be deemed to have shared voting and
dispositive power with respect to the Preferred Stock and the Warrants
beneficially held by the Fund.
Page 7 of 10
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Item 6. Contracts, Arrangements, Understandings or Relationships with
Respect to Securities of the Issuer.
See response to Item 4.
Except for the agreements described in the response to Item 4, to the
best knowledge of the Reporting Persons, there are no contracts, arrangements,
understandings or relationships (legal or otherwise) between the persons
enumerated in Item 2, and any other person, with respect to any securities of
Symix, including, but not limited to, transfer or voting of any of the
securities, finder's fees, joint ventures, loan or option arrangements, puts or
calls, guarantees of profits, division of profits or loss, or the giving or
withholding of proxies.
Item 7. Material to be Filed as Exhibits.
Exhibit 1: Joint Filing Agreement among the Reporting Persons
Exhibit 2: Form of Article Fourth of the Amended Articles of
Incorporation
Exhibit 3: Investor Rights Agreement
Exhibit 4: Securities Purchase Agreement
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SIGNATURES
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Date: May 19, 2000
FALLEN ANGEL CAPITAL, L.L.C.
By: /s/ Barry Goldsmith
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Name: Barry Goldsmith
Title: Member
Page 9 of 10
<PAGE>
After reasonable inquiry and to the best knowledge and belief of the
undersigned, the undersigned certifies that the information set forth in this
statement is true, complete and correct.
Date: May 19, 2000
FALLEN ANGEL EQUITY FUND, L.P.
By: Fallen Angel Capital, L.L.C.
its General Partner
By: /s/ Barry Goldsmith
--------------------------
Name: Barry Goldsmith
Title: Member
Page 10 of 10
EXHIBIT 1
JOINT FILING AGREEMENT
In accordance with Rule 13d-1(f) under the Securities Exchange Act of
1934, as amended, each of the persons named below agrees to the joint filing of
a Statement on Schedule 13D (including amendments thereto) with respect to the
common stock, par value, preferred stock, without par value, and warrants to
purchase common stock of Symix Systems, Inc., an Ohio corporation and further
agrees that this Joint Filing Agreement be included as an exhibit to such
filings provided that, as contemplated by Section 13d-1(f)(l)(ii), no person
shall be responsible for the completeness or accuracy of the information
concerning the other persons making the filing, unless such person knows or has
reason to believe that such information is inaccurate. This Joint Filing may be
executed in any number of counterparts, all of which together shall constitute
one and the same instrument.
FALLEN ANGEL CAPITAL, L.L.C. FALLEN ANGEL EQUITY FUND, L.P.
By: /s/ Barry Goldsmith By Fallen Angel Capital, L.L.C.
------------------------ its General Partner
Name: Barry Goldsmith
Title: Member By /s/ Barry Goldsmith
---------------------------
Name: Barry Goldsmith
Title: Member
EXHIBIT 2
FORM OF ARTICLE FOURTH OF
AMENDED CERTIFICATE OF INCORPORATION
FOURTH: The authorized number of shares of the corporation shall be
21,000,000, of which 20,000,000 shares shall be common shares, each without par
value, and 1,000,000 shares shall be preferred shares, each without par value.
Each outstanding common share and each outstanding preferred share shall
entitle the holder thereof to one vote on each matter properly submitted to the
shareholders for their vote, consent, waiver, release or other action. No
shareholder of the corporation shall have, as a matter of right, the right to
cumulate his voting power.
1. Number and Designation. 566,933 preferred shares of the corporation
shall be designated as Series A Convertible Participating Preferred Shares (the
"Series A Preferred Shares").
2. Rank. The Series A Preferred Shares shall, with respect to the dividend
rights specified herein and rights on liquidation, dissolution and winding up,
rank prior to all classes the Corporation's capital stock, including the
Corporation's common shares, no par value (the "Common Shares"). All equity
securities of the Corporation to which the Series A Preferred Shares rank prior
(whether with respect to dividends or upon liquidation, dissolution, winding up
or otherwise), including the Common Shares, are collectively referred to herein
as the "Junior Securities." All equity securities of the Corporation with which
the Series A Preferred Shares ranks on a parity (whether with respect to
dividends or upon liquidation, dissolution or winding up) are collectively
referred to herein as the "Parity Securities." The respective definitions of
Junior Securities and Parity Securities shall also include any rights or
options exercisable for or convertible into any of the Junior Securities and
Parity Securities, as the case may be. The Series A Preferred Shares shall be
subject to the creation of Junior Securities.
3. Voting Rights. Except as otherwise provided herein or as otherwise
provided by applicable law, the Holders of the Series A Preferred Shares (i)
shall be entitled to vote with the Holders of the Common Shares, voting
together as a single class, on all matters submitted for a vote of Holders of
Common Shares, (ii) shall be entitled to one vote per Series A Preferred Share
held; provided that upon amendment of the corporation's articles of
incorporation to permit the corporation's authorized preferred shares to have
more than one vote per share as permitted under the Act, the Holders of the
Series A Preferred Shares shall have a number of votes equal to the number of
votes to which Common Shares issuable upon conversion of such Series A
Preferred Shares would have been entitled if such Common Shares had been
outstanding at the time of the
<PAGE>
applicable vote and related record date and (iii) shall be entitled to notice
of any shareholders' meeting in accordance with the articles of incorporation
and regulations of the corporation.
4. Liquidation Rights. If the corporation shall be voluntarily or
involuntarily liquidated, dissolved or wound up (each a "Liquidation Event") at
any time when any of the Series A Preferred Shares shall be outstanding, the
Holders of the then outstanding Series A Preferred Shares shall have a
preference against the assets of the corporation available for distribution to
the Holders of the corporation's equity Securities equal to the greater of (a)
$24 per Series A Preferred Shares (as adjusted for any share dividends,
combinations or splits with respect to the Series A Preferred Shares), plus
accumulated, but unpaid, dividends, if any (the "Preference Amount") or (b) the
amount that would be received by a Holder of the number of Common Shares
underlying the Series A Preferred Shares (subject to anti-dilution adjustments
described below) in such liquidation or winding up if all of the Series A
Preferred Shares were converted into Common Shares immediately prior to the
liquidation or winding up. Notwithstanding the foregoing, at the election of
the Holders of 75% or more of the Series A Preferred Shares then outstanding,
(i) the consolidation or merger of the corporation into or with any other
entity or entities which results in the exchange of outstanding shares of the
corporation for securities or other consideration issued or paid or caused to
be issued or paid by any such entity or Affiliate thereof (other than (x) a
merger solely for the purpose of reincorporating the corporation in a different
jurisdiction or (y) a consolidation or merger in which the corporation is the
surviving entity and in which the corporation's Voting Shares outstanding
immediately prior to such merger or consolidation are exchanged or converted
into or constitute more than 50% of the corporation's Voting Stock after such
consolidation or merger); (ii) the sale or transfer by the corporation of all
or substantially all of its assets otherwise than to one or more Subsidiaries;
or (iii) a transaction or series of transactions in which a person or group of
persons (as defined in Rule 13d-5(b)(1) of the Exchange Act), acquires
beneficial ownership (as determined in accordance with Rule 13d-3 of the
Exchange Act) of more than 50% of the voting power of the corporation, shall be
deemed to be a Liquidation Event within the meaning of the provisions of
Section 3 (each of the events specified in clauses (i), (ii) and (iii) of
Section 3 being referred to herein as a "Change-in-Control Liquidation Event").
Notwithstanding the foregoing, no reduction of the authorized or issued Shares
of the corporation of any class, whether now or hereafter authorized shall be
deemed to be a Liquidation Event within the meaning of any of the provisions of
Section 3.
Upon any such Liquidation Event, after the Holders of Series A Preferred
Shares shall have been paid in full their preferential amounts to which they
shall
2
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be entitled as provided in this Section 4, the remaining Property of the
corporation may be distributed to the Holders of any other equity Securities of
the corporation, including, without limitation, Junior Securities whether now
or hereafter authorized, in connection with such Liquidation Event. Written
notice of such Liquidation Event, stating a payment date, the preferential
amount and the place where said preferential amount shall be payable, shall be
delivered in person, mailed by certified or registered mail, return receipt
requested, or sent by telecopier or telex, not less than 20 days prior to the
payment date stated therein, to the Holders of record of Series A Preferred
Shares, such notice to be addressed to each such Holder at its address as shown
by the records of the corporation. If, upon any Liquidation Event, the
corporation's assets available for distribution to its shareholders are
insufficient to permit payment in full to the Holders of the Series A Preferred
Shares of the aggregate amount which such Holders shall be entitled under this
Section 4, then the entire assets available for distribution to shareholders of
the corporation shall be distributed among the Holders of the Series A
Preferred Shares pro rata based upon the number of Series A Preferred Shares
held by each such Holder.
After payment in full to a Holder of the Series A Preferred Shares of the
preferential amount which such Holder shall be entitled as set forth in this
Section 4, the Series A Preferred Shares held by such Holder shall be deemed to
be no longer outstanding and such Holder no longer shall have any rights as a
shareholder of the corporation.
5. Dividends. (a) Each Holder of Series A Preferred Shares shall be
entitled to receive, when, as and if declared by the Board of Directors, out of
funds legally available for the payment of dividends, cash dividends
contemporaneously with cash dividends when, as and if declared by the Board of
Directors with respect to Common Shares in an amount equal to the product of
the cash dividend payable per Common Share times the Conversion Rate (as
hereinafter defined) for the Series A Preferred Shares then in effect. Such
dividends shall be payable on the dates specified by the Board of Directors as
the dates for payment of dividends in respect of Common Shares (each of such
dates being a "Dividend Payment Date") (unless such day is not a business day,
in which event on the next succeeding business day). Such dividends shall be
paid to the holders of record at the close of business on the date specified by
the Board of Directors of the corporation at the time such dividend is
declared, provided, however, that such date shall not be more than 60 days nor
less than 10 days prior to the respective Dividend Payment Date.
(b) In addition, if at any time the corporation is in material breach of
its registration obligations under Article 5 of the Investor Rights Agreement,
the Holders of Series A Preferred Shares shall be entitled to receive
3
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for and during the period the corporation continues in breach of the Investor
Rights Agreement, when, as and if declared by the Board of Directors, out of
funds legally available for the payment of dividends, cash dividends at an
annual rate of $3.36 per share. Such dividends shall be payable in arrears in
equal amounts quarterly on June 30, September 30, December 31, and March 31 of
each year unless such day is not a business day, in which event on the next
succeeding business day). The amount of such dividends and any accumulations
shall be pro rated and calculated on the basis of the actual days elapsed from
the date of such material breach by the corporation. Such dividends shall be
cumulative from the date of default to the date of cure, whether or not in any
dividend period or periods there shall be funds of the corporation legally
available for the payment of such dividends. Such dividends shall be payable to
Holders of the Series A Preferred Shares at the close of business on the record
date specified by the Board of Directors at the time such dividends are
declared, which record date shall not be more than 60 days prior to the
Dividend Payment Date. No such cumulative dividends shall be declared or become
payable or be deemed to have accrued with respect to any Series A Preferred
Shares (including, without limitation, upon any liquidation, dissolution or
winding up of the corporation, or upon any redemption of any such shares)
unless a Dividend Payment Date occurs while such share is outstanding.
(c) So long as any Series A Preferred Shares are outstanding, no
dividends, except as described in the next succeeding sentence, shall be
declared or paid or set apart for payment on Junior Securities, for any period
unless full cumulative dividends if required pursuant to the preceding
paragraph (b) have been or contemporaneously are declared and paid or declared
and a sum sufficient for the payment thereof set apart for such payment on the
Series A Preferred Shares for all dividend periods terminating on or prior to
the date of payment of the dividend on such class or series of Junior
Securities. When dividends are not paid in full or a sum sufficient for such
payment is not set apart, as aforesaid, all dividends declared upon the Series
A Preferred Shares and all dividends declared upon any Parity Securities shall
be declared ratably in proportion to the respective amounts of dividends
accumulated and unpaid on the Series A Preferred Shares and accumulated and
unpaid on such Parity Securities.
6. Optional Redemption. The Series A Preferred Shares shall not be
redeemable by the corporation prior to the fourth anniversary of the date of
issuance of the Series A Preferred Shares. Within 30 days after the fourth
anniversary of the date of issuance of the Series A Preferred Shares, the
corporation may elect to redeem all, but not less than all, of the Series A
Preferred Shares outstanding on the date of redemption as determined by the
Board of Directors (the "Redemption Date") which date shall not be more than 60
days after such fourth anniversary date.
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(a) Preference Amount and Payment. The Series A Preferred Shares shall be
redeemed by paying for each share an amount in cash equal to $30.72, plus
accumulated, but unpaid, dividends, if any (the "Redemption Price"). Such
payment shall be made in full on the Redemption Date to the Holders entitled
thereto.
(b) Redemption Mechanics. At least 20 but not more than 30 days prior to
any Redemption Date, written notice (the "Redemption Notice") shall be given by
the corporation by delivery in person, certified or registered mail, return
receipt requested, telecopier or telex, to each Holder (at the close of
business on the Business Day next preceding the day on which the Redemption
Notice is given) of Series A Preferred Shares notifying such Holder of the
redemption and specifying the Redemption Price, the Redemption Date and the
place where the Redemption Price shall be payable. The Redemption Notice shall
be addressed to each Holder at its address as shown by the records of the
corporation. From and after the close of business on the Redemption Date,
unless there shall have been a default in the payment of the Redemption Price,
all rights of Holders of shares of Series A Preferred Shares (except the right
to receive the Redemption Price) shall cease with respect to such shares, and
such shares shall not thereafter be transferred on the books of the corporation
or be deemed to be outstanding for any purpose whatsoever. If the funds of the
corporation legally available for redemption of Series A Preferred Shares on
the Redemption Date are insufficient to redeem the total number of outstanding
Series A Preferred Shares, the Holders of Series A Preferred Shares shall share
ratably in any funds legally available for redemption of such shares according
to the respective amounts which would be payable with respect to the full
number of shares owned by them if all such outstanding shares were redeemed in
full. The Series A Preferred Shares not redeemed shall remain outstanding and
entitled to all rights and preferences provided herein. At any time thereafter
when additional funds of the corporation are legally available for the
redemption of such Series A Preferred Shares, such funds will be used, at the
end of the next succeeding fiscal quarter, to redeem the balance of such
shares, or such portion thereof for which funds are then legally available, on
the basis set forth above.
(c) Redeemed or Otherwise Acquired Shares to be Retired. Any Series A
Preferred Shares redeemed pursuant to this Section 6 or otherwise acquired by
the corporation in any manner whatsoever shall be cancelled and shall not under
any circumstances be reissued; provided that each such share, after being
retired and cancelled, shall be restored to the status of an authorized but
unissued Preferred Share without designation as to series and may thereafter be
issued as a Preferred Share not designated as a Series A Preferred Share unless
such reissuance shall violate Section 10 hereof or any other provision of these
articles of incorporation.
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7. Conversion. (a) The Series A Preferred Shares shall be convertible at
any time, in whole or in part, at the option of the Holder thereof and upon
notice to the corporation as set forth below, into fully paid and nonassessable
Common Shares at the Conversion Rate. The Series A Preferred Shares shall be
convertible initially at the rate of two Common Shares for each full Series A
Preferred Share and shall be subject to adjustment as provided herein. The
initial base conversion price per Common Share is $12.00 and shall be subject
to adjustment as provided herein (the "Conversion Price"). For purposes of this
Article FOURTH, the "Conversion Rate" applicable to a Series A Preferred Share
shall be the number of Common Shares into which a Series A Preferred Share is
then convertible and shall be equal to the product of (i) two multiplied by
(ii) the quotient resulting from dividing the then existing Conversion Price
into $12.00.
(b) The Conversion Price (and the corresponding Conversion Rate) shall be
subject to adjustment from time to time as follows:
(i) In case the corporation shall (A) pay a dividend in Common Shares
or make a distribution in Common Shares, (B) subdivide its outstanding
Common Shares, (C) combine its outstanding Common Shares into a smaller
number of Common Shares or (D) issue by reclassification of its Common
Shares other securities of the corporation, then in each such case the
Conversion Rate in effect immediately prior thereto shall be adjusted so
that the Holder of any Series A Preferred Shares thereafter surrendered
for conversion shall be entitled to receive the kind and number of Common
Shares or other securities of the corporation which such Holder would have
owned or would have been entitled to receive immediately after the
happening of any of the events described above had such Series A Preferred
Shares been converted immediately prior to the happening of such event or
any record date with respect thereto. Any adjustment made pursuant to this
subsection (i) shall become effective immediately after the effective date
of such event retroactive to the record date, if any, for such event.
(ii) In case the corporation shall issue or sell any Common Shares
(other than Common Shares issued (1) pursuant to the corporation's
non-qualified stock option plans for officers, directors or key employees,
or pursuant to any similar Common Share related employee compensation plan
of the corporation approved by the corporation's Board of Directors, (2)
in connection with a merger or consolidation with or other acquisition of,
another Person or the acquisition of the assets of another Person, other
than any such transaction that constitutes a Change in Control Liquidation
Event or (3) upon exercise or conversion of any security the issuance of
which caused an adjustment under Section 7(b)(iii) or (iv) hereof) without
consideration or for a consideration per share less than the Conversion
Price (the "Issue Price"),
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the Conversion Price to be in effect after such issuance or sale shall be
determined by multiplying the Conversion Price in effect immediately prior
to such issuance or sale by a fraction, the numerator of which shall be
the sum of (x) the number of Common Shares outstanding immediately prior
to the time of such issuance or sale multiplied by the Issue Price and (y)
the aggregate consideration, if any, to be received by the corporation
upon such issuance or sale, and the denominator of which shall be the
product of the aggregate number of Common Shares outstanding immediately
after such issuance or sale and the Conversion Price. In case any portion
of the consideration to be received by the corporation shall be in a form
other than cash, the fair market value of such noncash consideration shall
be utilized in the foregoing computation. Such fair market value shall be
determined by the Board of Directors; provided that if Holders of 75% or
more of the outstanding Series A Preferred Shares shall object to any such
determination, the Board of Directors shall retain an independent
appraiser reasonably satisfactory to a majority of such Holders to
determine such fair market value. Such Holders shall be notified promptly
of any consideration other than cash to be received by the corporation and
furnished with a description of the consideration and the fair market
value thereof, as determined by the Board of Directors.
(iii) In case the corporation shall fix a record date for the
issuance of rights, options or warrants to the Holders of Common Shares or
other securities entitling such Holders to subscribe for or purchase for a
period expiring within 60 days of such record date Common Shares (or
securities convertible into Common Shares) at a price per Common Share (or
having a conversion price per Common Share, if a security convertible into
Common Shares) less than the Conversion Price on such record date, the
maximum number of Common Shares issuable upon exercise of such rights,
options or warrants (or conversion of such convertible securities) shall
be deemed to have been issued and outstanding as of such record date and
the Conversion Price shall be adjusted pursuant to paragraph (b)(ii)
hereof, as though such maximum number of Common Shares had been so issued
for an aggregate consideration payable by the Holders of such rights,
options, warrants or convertible securities prior to their receipt of such
Common Shares. In case any portion of such consideration shall be in a
form other than cash, the fair market value of such noncash consideration
shall be determined as set forth in Section 7(b)(ii) hereof. Such
adjustment shall be made successively whenever such record date is fixed;
and in the event that such rights, options or warrants are not so issued
or expire unexercised, or in the event of a change in the number of Common
Shares to which the Holders of such rights, options or warrants are
entitled (other than pursuant to adjustment provisions therein comparable
to those contained in this Section 7(b)), the Conversion Price shall again
be adjusted to be the Conversion Price which would then be in effect if
such record date had not been fixed, in the former event, or the
Conversion Price which
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would then be in effect if such Holder had initially been entitled to such
changed number of Common Shares, in the latter event.
(iv) In case the corporation shall issue rights, options (other than
options issued pursuant to a plan described in Section 7(b)(ii)) or
warrants entitling the holders thereof to subscribe for or purchase Common
Shares (or securities convertible into Common Shares) or shall issue
convertible securities, and the price per Common Share of such rights,
options, warrants or convertible securities (including, in the case of
rights, options or warrants, the price at which they may be exercised) is
less than the Conversion Price, the maximum number of Common Shares
issuable upon exercise of such rights, options or warrants or upon
conversion of such convertible securities shall be deemed to have been
issued and outstanding as of the date of such sale or issuance, and the
Conversion Price shall be adjusted pursuant to Section 7(b)(ii) hereof as
though such maximum number of Common Shares had been so issued for an
aggregate consideration equal to the aggregate consideration paid for such
rights, options, warrants or convertible securities and the aggregate
consideration payable by the Holders of such rights, options, warrants or
convertible securities prior to their receipt of such Common Shares. In
case any portion of such consideration shall be in a form other than cash,
the fair market value of such noncash consideration shall be determined as
set forth in Section 7(b)(ii) hereof. Such adjustment shall be made
successively whenever such rights, options, warrants or convertible
securities are issued; and in the event that such rights, options or
warrants expire unexercised, or in the event of a change in the number of
Common Shares to which the Holders of such rights, options, warrants or
convertible securities are entitled (other than pursuant to adjustment
provisions therein comparable to those contained in this Section 7(b)),
the Conversion Price shall again be adjusted to be the Conversion Price
which would then be in effect if such rights, options, warrants or
convertible securities had not been issued, in the former event, or the
Conversion Price which would then be in effect if such Holders had
initially been entitled to such changed number of Common Shares, in the
latter event. No adjustment of the Conversion Price shall be made pursuant
to this Section 7(b)(iv) to the extent that the Conversion Price shall
have been adjusted pursuant to Section 7(b)(iii) upon the setting of any
record date relating to such rights, options, warrants or convertible
securities and such adjustment fully reflects the number of Common Shares
to which the Holders of such rights, options, warrants or convertible
securities are entitled and the price payable therefor.
(v) In case the corporation shall fix a record date for the making of
a dividend or distribution to Holders of Common Shares (including any such
distribution made in connection with a consolidation or merger in which
the corporation is the continuing corporation) of evidences of
indebtedness, cash,
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assets or other property (other than dividends payable in Common Shares or
rights, options or warrants referred to in, and for which an adjustment is
made pursuant to, Section 7(b)(iii) hereof), the Conversion Price to be in
effect after such record date shall be determined by multiplying the
Conversion Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the Current Market Price Per
Common Share on such record date, less the fair market value (determined
as set forth in Section 7(b)(ii) hereof) of the portion of the cash,
assets, other property or evidence of indebtedness so to be distributed
which is applicable to one Common Share, and the denominator of which
shall be such Current Market Price Per Common Share. Such adjustments
shall be made successively whenever such a record date is fixed; and in
the event that such distribution is not so made, the Conversion Price
shall again be adjusted to be the Conversion Price which would then be in
effect if such record date had not been fixed.
(vi) If the average (weighted by daily trading volume) of the Daily
Prices (as defined below) per Common Share for the 40 consecutive trading
days immediately preceding the fourth anniversary of the date of issuance
of the Series A Preferred Shares (the "Average Weighted Price") is less
than $12.00, then the Conversion Price then in effect shall be reduced to
the Average Weighted Price, such adjustment to be effective as of the
close of business 30 days after the fourth anniversary of the date of
issuance of the Series A Preferred Shares unless the corporation has
previously delivered a Redemption Notice in accordance with Section 6(b)
hereof. If the corporation shall at any time after the date of issuance of
the Series A Preferred Shares pay any dividend on Common Shares payable in
Common Shares or effect a subdivision or combination of the outstanding
Common Shares (by reclassification, stock split or otherwise) into a
greater or lesser number of Common Shares, then the share price referred
to in the first sentence of this 7(b)(vi) shall be adjusted upon the
earlier of the public announcement or the occurrence of any such event by
multiplying the share price by a fraction of which the numerator is the
number of Common Shares outstanding immediately after such event and of
which the denominator is the number of Common Shares that were outstanding
immediately prior to such event.
(vii) For the purpose of any computation under Section 7(b) hereof,
on any determination date, the "Current Market Price Per Common Share"
shall be deemed to be the average (weighted by daily trading volume) of
the Daily Prices (as defined below) per Common Share for the 20
consecutive trading days immediately prior to such date. "Daily Price"
means (1) if the Common Shares then are listed and traded on the New York
Stock Exchange, Inc. ("NYSE"), the closing price per share on such day as
reported on the NYSE Composite Transactions Tape; (2) if the Common Shares
then are not
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listed and traded on the NYSE, the closing price per share on such day as
reported by the principal national securities exchange on which the shares are
listed and traded; (3) if the Common Shares then are not listed and traded on
any such securities exchange, the last reported sale price per share on such
day on the NASDAQ National Market; or (4) if the shares of such class of Common
Shares then are not traded on the NASDAQ Stock Market, the average of the
highest reported bid and lowest reported asked price per share on such day as
reported by NASDAQ. If on any determination date the Common Shares are not
quoted by any such organization, the Current Market Price Per Common Share
shall be the fair market value per share of such shares on such determination
date as determined by the Board of Directors. If Holders of 75% or more of the
outstanding Series A Preferred Shares shall object to any determination by the
Board of Directors of the Current Market Price Per Common Share, the Current
Market Price Per Common Share shall be the fair market value per Common Share
as determined by an independent appraiser retained by the corporation at its
expense and reasonably acceptable to such Holders. For purposes of any
computation under this Section 7(b), the number of Common Shares outstanding at
any given time shall not include shares owned or held by or for the account of
the corporation.
(viii) All calculations under this Section 7(b) shall be made to the
nearest one tenth of a cent or to the nearest hundredth of a share, as the
case may be.
(ix) In the event that, at any time as a result of the provisions of
this Section 7(b), the Preferred Holders upon subsequent conversion of the
Series A Preferred Shares shall become entitled to receive any capital
shares of the corporation other than Common Shares, the number of such
other shares so receivable upon conversion of the Series A Preferred
Shares shall thereafter be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions
contained herein.
(x) If the Corporation shall take a record of the Holders of Common
Shares for the purpose of entitling them to receive a dividend or other
distribution (which results in an adjustment to the Conversion Price under
the terms hereof) and shall, thereafter and before such dividend or
distribution is paid or delivered to shareholders entitled thereto,
legally abandon its plan to pay or deliver such dividend or distribution,
then any adjustment made to the Conversion Price and number of Common
Shares purchasable upon conversion of the Series A Preferred Shares by
reason of the taking of such record shall be reversed, and any subsequent
adjustments, based thereon, shall be recomputed.
10
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8. Mandatory Conversion. (a) If at any time after the second anniversary
of the date of issuance of the Series A Preferred Shares the Daily Price for a
Common Share for each and every day of any period of 40 consecutive trading
days exceeds $24.00, then each outstanding Series A Preferred Share shall be
automatically converted, at the Conversion Rate then in effect pursuant to
Section 7 as of the close of business on the last trading day of the 40 trading
day period (a "Mandatory Conversion Event") into Common Shares (or other
securities or property into which the Series A Preferred Shares are then
convertible). Any Series A Preferred Shares so converted shall be treated as
having been surrendered by the Holder thereof for conversion pursuant to
Section 7 as of the close of business on the last trading day of the 40 trading
day period.
(b) If the corporation shall at any time after the date of issuance of the
Series A Preferred Shares pay any dividend on Common Shares payable in Common
Shares or effect a subdivision or combination of the outstanding Common Shares
(by reclassification, stock split or otherwise) into a greater or lesser number
of Common Shares, then the Daily Price referred to in clause (a) above shall be
adjusted upon the earlier of the public announcement or the occurrence of any
such event by multiplying the Daily Price by a fraction of which the numerator
is the number of Common Shares outstanding immediately after such event and of
which the denominator is the number of Common Shares that were outstanding
immediately prior to such event.
9. Consolidation, Merger, or Sale of Assets. Subject to the provisions of
Section 4 hereof, in case of any consolidation of the corporation with, or
merger of the corporation into, any other Person, any merger of another Person
into the corporation (other than a merger which does not result in any
reclassification, conversion, exchange or cancellation of outstanding Common
Shares) or any sale or transfer of all or substantially all of the assets of
the corporation or of the Person formed by such consolidation or resulting from
such merger or which acquires such assets, as the case may be, the Preferred
Holders shall have the right thereafter to convert the Series A Preferred
Shares into the kind and amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer by a Holder of the
number of Common Shares into which the Series A Preferred Shares may have been
converted immediately prior to such consolidation, merger, sale or transfer,
assuming (i) such Holder of Common Shares is not a Person with which the
corporation consolidated or into which the corporation merged or which merged
into the corporation or to which such sale or transfer was made, as the case
may be ("Constituent Person"), or an Affiliate of a Constituent Person and (ii)
in the case of a consolidation, merger, sale or transfer which includes an
election as to the consideration to be received by the Holders, such Holder of
Common Shares failed to exercise its rights of election, as to the kind or
amount of securities, cash
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and other property receivable upon such consolidation, merger, sale or transfer
(provided that if the kind or amount of securities, cash and other property
receivable upon such consolidation, merger, sale or transfer is not the same
for each Common Share held immediately prior to such consolidation, merger,
sale or transfer by other than a Constituent Person or an Affiliate thereof and
in respect of which such rights of election shall not have been exercised
("non-electing share"), then for the purpose of this Section 9 the kind and
amount of securities, cash and other property receivable upon such
consolidation, merger, sale or transfer by each non-electing share shall be
deemed to be the kind and amount so receivable per share by a plurality of the
non-electing shares). Adjustments for events subsequent to the effective date
of such a consolidation, merger and sale of assets shall be as nearly
equivalent as may be practicable to the adjustments provided for herein. In any
such event, effective provisions shall be made in the certificate or articles
of incorporation of the resulting or surviving corporation, in any contract of
sale, conveyance, lease or transfer, or otherwise so that the provisions set
forth herein for the protection of the rights of the Preferred Holders shall
thereafter continue to be applicable; and any such resulting or surviving
corporation shall expressly assume the obligation to deliver, upon exercise,
such Shares, other securities, cash and property. The provisions of this
Section 9 shall similarly apply to successive consolidations, mergers, sales,
or transfers.
10. Protective Provisions. So long as any Series A Preferred Shares shall
be outstanding, except where the vote or written consent of the Holders of a
greater number of shares of the corporation is required by law or by these
articles of incorporation, and in addition to any other vote required by law or
these articles of incorporation, without the approval of the Holders of seventy
five percent (75%) of then outstanding Series A Preferred Shares, given in
writing or by vote at a meeting, consenting or voting (as the case may be)
separately as a series, the corporation will not:
(a) Create or authorize the creation of any additional class or series of
Shares other than Junior Securities, or increase the authorized amount of the
Series A Preferred Shares or increase the authorized amount of any additional
class or series of shares other than Junior Securities, or create or authorize
any obligation or Security convertible into shares of Series A Preferred Shares
or into shares of any other class or series of shares other than Junior
Securities, whether any such creation, authorization or increase shall be by
means of amendment or restatement of these articles of incorporation or by
merger, consolidation or otherwise;
(b) To the extent it materially adversely affects the rights of the Series
A Preferred Shares, amend, alter, restate or repeal the corporation's articles
of incorporation, or the corporation's code of regulations, other than any
12
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amendment solely to authorize or create any additional class or series of
Junior Securities or increase the authorized amount of any Junior Securities;
(c) Redeem or otherwise acquire any shares of Junior Securities other than
Common Shares pursuant to Stock Restriction Agreements.
11. Definitions. As used in this Article FOURTH, the following terms have
the following meanings:
"Affiliate" shall mean any entity controlling, controlled by or under
common control with a designated Person. For the purposes of this definition,
"control" shall have the meaning specified for that word in Rule 405
promulgated by the Securities and Exchange Commission under the Securities Act.
"Board of Directors" shall mean the Board of Directors of the corporation.
"Business Day" means a day, except Saturday, Sunday or a public or bank
holiday or the equivalent for banks generally under the laws of the State of
New York, on which banks are not required or authorized to close in New York,
New York.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as amended
prior or after the date hereof, or any federal statute or statutes which shall
have been enacted to take the place of such Act, together with all rules and
regulations promulgated thereunder.
"Holders" shall mean the Persons who shall, from time to time, own of
record any Security. The term "Holder" shall mean one of the Holders.
"Investor Rights Agreement" shall mean the Investor Rights Agreement dated
as of May __, 2000 among the corporation and the shareholders listed therein.
"Person" shall mean an individual, a corporation, a partnership, a limited
liability company, a trust, an unincorporated organization or a government
organization or an agency or political subdivision thereof.
"Preferred Holders" shall mean the Persons, who shall from time to time,
own of record any Series A Preferred Shares. The term "Preferred Holder" shall
mean one of the Preferred Holders.
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"Property" shall mean any interest in any kind of property or assets,
whether real, personal or mixed, or tangible or intangible.
"Securities" shall mean any debt or equity securities of the corporation,
whether now or hereafter authorized, and any instrument convertible into or
exchangeable for Securities or a Security. The term "Security" shall mean one
of the Securities.
"Securities Act" shall mean the Securities Act of 1933, as amended prior
to or after the date hereof, or any federal statute or statutes which shall be
enacted to take the place of such Act, together with all rules and regulations
promulgated thereunder.
"Shares" shall include any and all shares, interests or other equivalents
(however designated) of, or participation in, capital stock.
"Stock Restriction Agreements" shall mean any agreement entered into
between the corporation and an employee, consultant, director, officer or agent
or any former employee, consultant, director, officer or agent of the
corporation or a Subsidiary under the terms of each of which the corporation is
permitted or obligated to purchase Securities from such Person in connection
with his or her offering the Securities to another Person or the termination of
his or her relationship with the corporation or a Subsidiary.
"Subsidiary" shall mean any corporation, more than 50% of whose
outstanding Voting Shares shall at the time be owned directly or indirectly by
the corporation or by one or more Subsidiaries or by the corporation and one or
more Subsidiaries.
"Voting Shares" as applied to the Shares of any corporation shall mean
Shares of any class or classes (however designated) having ordinary voting
power for the election of a majority of the members of the board of directors
(or other governing body) of such corporation, other than Shares having such
power only by reason of the happening of a contingency.
The directors of the corporation may adopt an amendment to the articles in
respect of any unissued or treasury shares of any class and thereby fix or
change: the division of such shares into series and the designation and
authorized number of shares of each series; the dividend or distribution rate;
the dates of payment of dividends of 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.
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* * * * *
15
EXHIBIT 3
INVESTOR RIGHTS AGREEMENT
INVESTOR RIGHTS AGREEMENT
among
SYMIX SYSTEMS, INC.,
THE SEVERAL INVESTORS NAMED IN SCHEDULE I
and
THE SHAREHOLDER NAMED HEREIN
Dated as of May 10, 2000
<PAGE>
TABLE OF CONTENTS
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PAGE
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ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions..................................................1
ARTICLE 2
SECURITIES TRANSFER RESTRICTIONS
SECTION 2.01. Restrictive Legends..........................................4
SECTION 2.02. Notice of Proposed Transfer..................................4
SECTION 2.03. Termination of Restrictions..................................4
SECTION 2.04. Non-Applicability of Restrictions on Transfer................5
SECTION 2.05. Shareholder Sales............................................6
ARTICLE 3
INFORMATION RIGHTS
SECTION 3.01. Financial Statements, Reports, Etc...........................6
SECTION 3.02. Inspection, Consultation and Advice..........................7
SECTION 3.03. Confidentiality Agreement....................................7
ARTICLE 4
PRE-EMPTIVE RIGHTS
SECTION 4.01. Pre-emptive Rights...........................................8
ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.01. Registration on Form S-3....................................10
SECTION 5.02. Incidental Registration.....................................10
SECTION 5.03. Registration Procedures.....................................11
SECTION 5.04. Expenses....................................................14
SECTION 5.05. Rule 144 Requirements.......................................14
SECTION 5.06. Investors' Information......................................15
SECTION 5.07. Transfer of Registration Rights.............................15
SECTION 5.08. Hold-back Agreement.........................................15
SECTION 5.09. Other Shareholders..........................................15
<PAGE>
PAGE
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ARTICLE 6
INDEMNIFICATION
SECTION 6.01. Indemnification.............................................16
ARTICLE 7
TAG-ALONG RIGHTS
SECTION 7.01. Tag-Along Right.............................................17
SECTION 7.02. Notice of Intent to Participate.............................18
SECTION 7.03. Sale of Tag-Along Shares....................................18
ARTICLE 8
REPRESENTATION RIGHTS
SECTION 8.01. Board of Directors..........................................18
SECTION 8.02. Voting Restriction..........................................20
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Term of Agreement...........................................20
SECTION 9.02. Severability; Governing Law.................................20
SECTION 9.03. Injunctive Relief...........................................21
SECTION 9.04. Binding Effect..............................................21
SECTION 9.05. Modification or Amendment...................................21
SECTION 9.06. Aggregation.................................................21
SECTION 9.07. Counterparts................................................21
SECTION 9.08. Notices.....................................................21
SECTION 9.09. Entire Agreement............................................22
SCHEDULE I Investors
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INVESTOR RIGHTS AGREEMENT
INVESTOR RIGHTS AGREEMENT, dated as of May 10, 2000 among SYMIX SYSTEMS,
INC., an Ohio corporation (the "Company"), the several investors named in the
attached Schedule I who are purchasing Series A Convertible Participating
Preferred Shares and Warrants to purchase common shares (individually, an
"Investor" and collectively, the "Investors") pursuant to a Securities Purchase
Agreement dated May 10, 2000 (the "Securities Purchase Agreement") and the
shareholder of the Company listed on the signature page hereof (the
"Shareholder").
WHEREAS, the Company wishes to issue and sell to the Investors an
aggregate of 566,933 shares (the "Preferred Shares") of the authorized but
unissued Series A Convertible Participating Preferred Shares, without par
value, of the Company (the "Series A Preferred Shares"), which are convertible
into common shares, without par value, of the Company (the "Common Shares ") as
contemplated by the Securities Purchase Agreement and warrants (the "Warrants")
to purchase an aggregate of 453,546 shares of the authorized but unissued
Common Shares; and
WHEREAS, one of the conditions to the investment in the Company by the
Investors is the execution of this Investor Rights Agreement providing for,
inter alia, the ability of the Investors to purchase and/or participate in
subsequent sales of equity securities of the Company by the Company or the
Shareholder;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and the investment by the Investors pursuant to the Securities
Purchase Agreement and other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE 1
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"Affiliate" shall mean any entity controlling, controlled by or under
common control with a designated Person. For the purposes of this definition,
"control" shall have the meaning specified for that word in Rule 405
promulgated by the Securities and Exchange Commission under the Securities Act.
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"Commission" shall mean the Securities and Exchange Commission.
"Exchange Act" means the Securities Exchange Act of 1934, as amended prior
or after the date hereof, or any federal statute or statutes which shall have
been enacted to take the place of such Act, together with all rules and
regulations promulgated thereunder.
"FAEF" means Fallen Angel Equity Fund, L.P.
"Holder" means the Persons who shall, from time to time, own of record any
Restricted Security.
"MSDW Investor" means any of Morgan Stanley Dean Witter Venture Partners
IV, L.P., Morgan Stanley Dean Witter Venture Investors IV, L.P., Morgan Stanley
Dean Witter Venture Offshore Investors IV, L.P. or Morgan Stanley Dean Witter
Equity Funding, Inc.
"Person" means an individual, a corporation, a partnership, a limited
liability company, a trust, an unincorporated organization or a government
organization or an agency or political subdivision thereof.
"Registrable Stock" shall mean all Common Shares held by the Investors
from time to time, including all of the Common Shares into which the Preferred
Shares may be converted and for which the Warrants may be exercised; provided,
however, that such Common Shares shall only be treated as Registrable Stock if
and so long as they have not been (i) sold to or through a broker or dealer or
underwriter in a public distribution or a public securities transaction, or
(ii) sold in a transaction exempt from the registration and prospectus delivery
requirements of the Securities Act under Section 4(1) thereof so that all
transfer restrictions and restrictive legends with respect to such Common
Shares are removed upon the consummation of such sale.
"Registration Statement" shall mean a registration statement filed by the
Company with the Commission for a public offering and sale of securities of the
Company (other than a registration statement on Form S-8, Form S-4, or
successor forms, or any registration statement covering only securities
proposed to be issued in exchange for securities or assets of another
corporation).
"Restricted Security" means any of the Preferred Shares, Warrants or the
Common Shares issuable upon conversion of the Preferred Shares or exercise of
the Warrants to the extent such securities are not registered under the
Securities Act.
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"Securities Act" means the Securities Act of 1933, as amended prior to or
after the date hereof, or any federal statute or statutes which shall be
enacted to take the place of such Act, together with all rules and regulations
promulgated thereunder.
"Transfer" means any direct or indirect sale, transfer, assignment, pledge
or other disposition (whether with or without consideration and whether
voluntary or involuntary or by operation of law). Derivatives thereof will be
similarly defined.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Company Preamble
Shareholder Preamble
LLC 2.04
Board of Directors 4.01(a)(ii)
Notice Period 4.01(a)(iii)
right of overallotment 4.01(a)(iii)
Indemnified Person 6.01(a)
Company Indemnified Person 6.01(b)
indemnified party 6.01(c)
Proposed Transferee 7.01
Tag-Along Shares 7.01
Change in Control Liquidation Event 9.01(a)(ii)
ARTICLE 2
SECURITIES TRANSFER RESTRICTIONS
Each Holder agrees that Restricted Securities shall not be Transferable
except upon the conditions specified in this Article 2, which conditions are
intended to insure compliance with the provisions of the Securities Act and
state securities laws in respect of the Transfer of any Restricted Security.
Shareholder agrees that shares of Common Stock held by him shall not be
Transferable except upon compliance with the conditions specified in Section
2.05 and Article 7 hereof.
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SECTION 2.01. Restrictive Legends.
(a) Unless and until otherwise permitted by this Article 2, each
certificate for a Restricted Security issued to a Holder, or to any subsequent
transferee of such certificate shall be stamped or otherwise imprinted with a
legend in substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED OR SOLD
EXCEPT IN COMPLIANCE THEREWITH. THIS SECURITY IS ALSO SUBJECT TO
ADDITIONAL RESTRICTIONS ON TRANSFER, VOTING AND OTHER MATTERS AS SET FORTH
IN THE INVESTOR RIGHTS AGREEMENT DATED AS OF MAY __, 2000, COPIES OF WHICH
MAY BE OBTAINED UPON REQUEST FROM THE COMPANY."
(b) The Company may order the transfer agent for any Restricted Security
to stop the Transfer of any Restricted Security bearing the legend set forth in
subsections (a) of this Section 2.01 until the conditions of this Article 2
with respect to the Transfer of such shares have been satisfied.
SECTION 2.02. Notice of Proposed Transfer. If, prior to any Transfer of
any Restricted Security, the Holder desiring to effect such Transfer delivers
to the Company a written notice describing briefly the manner of such Transfer
and a written opinion of counsel for such Holder (who may be inside counsel in
the case of an institutional holder), provided that such counsel and the form
and substance of such opinion are reasonably satisfactory to the Company, or
counsel for the Company, to the effect that such Transfer may be effected
without the registration of such securities under the Securities Act or
registration or qualification under applicable state securities laws or
regulations, the Company shall thereupon permit or cause its transfer agent (if
any) to permit such Transfer to be effected; provided, that if in such written
notice the transferring holder represents and warrants to the Company that the
Transfer is to (i) an Affiliate of the Holder or (ii) a purchaser or transferee
whom the transferring holder knows or reasonably believes to be a "qualified
institutional buyer", as that term is defined in Rule 144A promulgated under
the Securities Act, then in each such case, no opinion shall be required.
SECTION 2.03. Termination of Restrictions.
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(a) Notwithstanding the foregoing provisions of this Article 2, the
restrictions imposed by this Article 2 upon the Transferability of Restricted
Securities shall terminate as to any particular Restricted Security when (i)
such Restricted Security shall have been effectively registered under the
Securities Act and sold by the Holder thereof in accordance with such
registration; (ii) a written opinion of counsel for the Holder thereof
(provided that such counsel, and the form and substance of such opinion, are
reasonably satisfactory to the Company) or counsel for the Company to the
effect that such restrictions are no longer required or necessary under any
federal or state securities law or regulation has been received by the Company;
(iii) such Restricted Security shall have been sold without registration under
the Securities Act in compliance with Rule 144 promulgated by the Commission
under the Securities Act and the Company is reasonably satisfied that the
Holder of the Restricted Security, in accordance with the terms of subsection
(k) of Rule 144 promulgated by the Commission under the Securities Act, shall
be entitled to sell such securities pursuant to such subsection; or (iv) a
letter or an order shall have been issued to the Holder thereof by the staff of
the Commission or the Commission in form and substance reasonably satisfactory
to the Company, stating that no enforcement action shall be recommended by such
staff or taken by the Commission, as the case may be, if such Restricted
Security is transferred without registration under the Securities Act in
accordance with the conditions set forth in such letter or order and such
letter or order specifies that no restrictions on Transfer are required.
(b) Whenever the restrictions imposed by this Article 2 shall terminate,
as herein above provided, the Holder of any Restricted Securities then
outstanding as to which such restrictions shall have terminated shall be
entitled to receive from the Company, without expense to such Holder, one or
more new certificates for the Restricted Securities so held not bearing the
restrictive legend set forth in Subsection (a) of Section 2.01 hereof, as
applicable.
SECTION 2.04. Non-Applicability of Restrictions on Transfer.
Notwithstanding the provisions of Section 2.02 hereof, any Holder may from time
to time Transfer all or part of such Holder's Restricted Securities to (i) a
nominee identified in writing to the Company as being the nominee of or for
such Holder, and any nominee of or for a beneficial owner of Restricted
Securities identified in writing to the Company as being the nominee of or for
such beneficial owner may from time to time Transfer all or part of the
Restricted Securities registered in the name of such nominee but held as
nominee on behalf of such beneficial owner, to such beneficial owner, (ii) to
an Affiliate of such Holder, or (iii) if such Holder is a partnership, limited
liability company ("LLC"), or the nominee of a partnership or an LLC, to a
partner, retired partner, or estate of a partner or retired partner, of such
partnership or a member, retired member, or estate of a member or retired
member of such LLC, so long as such Transfer is in accordance with the
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transferee's interest in such partnership or LLC and is without consideration;
provided, that each such transferee referred to in clauses (i), (ii) and (iii)
above shall remain subject to all restrictions on the Transfer of the
Restricted Securities herein contained and shall agree in writing to be bound
by the other terms and conditions of this Agreement.
SECTION 2.05. Shareholder Sales. Prior to the second anniversary of the
date hereof, Shareholder agrees not to Transfer any Common Shares (or any
derivative thereof) that he beneficially owns; provided that Shareholder shall
have the right to Transfer in any twelve month period up to ten percent (10%)
of the Common Shares that he beneficially owns.
ARTICLE 3
INFORMATION RIGHTS
SECTION 3.01. Financial Statements, Reports, Etc. The Company shall
furnish to each Investor:
(a) within forty-five (45) days after the end of each quarter in each
fiscal year (other than the last quarter in each fiscal year) a balance sheet
of the Company, if any, and the related statements of income, shareholders'
equity and cash flows, unaudited but prepared in accordance with generally
accepted accounting principles and certified by the Chief Financial Officer of
the Company, such balance sheet to be as of the end of such quarter and such
statements of income, shareholders' equity and cash flows to be for such
quarter and for the period from the beginning of the fiscal year to the end of
such quarter, in each case with comparative statements for the prior fiscal
year, provided that, the Company may comply with this provision by delivering
to each Investor a copy of its quarterly report on Form 10-Q for such quarter;
(b) within thirty (30) days after the end of each month in each fiscal
year (other than the last month in each quarter) a summary balance sheet of the
Company and the related summary statements of income, shareholder's equity and
cash flows, unaudited but prepared in accordance with generally accepted
accounting principles;
(c) at the time of delivery of each quarterly statement pursuant to
Section 3.01(a), a management narrative report explaining all significant
variances from forecasts and all significant current developments in staffing,
marketing, sales and operations;
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(d) prior to the start of each fiscal year, capital and operating expense
budgets, cash flow projections, income and loss projections and annual business
plan for the Company in respect of such fiscal year, all itemized in reasonable
detail and prepared on a monthly basis, and, promptly after preparation, any
revisions to any of the foregoing;
(e) promptly following receipt by the Company, each audit response letter,
accountant's management letter and other written report submitted to the
Company by its independent public accountants in connection with an annual or
interim audit of the books of the Company;
(f) promptly after the commencement thereof, notice of all actions, suits,
claims, proceedings, and to the knowledge of the Company, investigations and
inquiries that could materially adversely affect the Company, if any;
(g) promptly upon sending, making available or filing the same, all press
releases, reports and financial statements that the Company sends or makes
available to its shareholders or files with the Commission; and
(h) promptly, from time to time, such other information regarding the
business, prospects, financial condition, operations, property or affairs of
the Company as such Investor reasonably may request.
SECTION 3.02. Inspection, Consultation and Advice. The Company shall
permit each Investor and such persons as it may designate, at such Investor's
expense, to visit and inspect any of the properties of the Company, examine its
books and take copies and extracts therefrom, discuss the affairs, finances and
accounts of the Company with its officers, employees and public accountants
(and the Company hereby authorizes said accountants to discuss with such
Investor and such designees such affairs, finances and accounts), and consult
with and advise the management of the Company as to its affairs, finances and
accounts, all at reasonable times and upon reasonable notice to the Company.
SECTION 3.03. Confidentiality Agreement. Each Investor receiving
information pursuant to Section 3.01 or 3.02 shall use its best efforts to
ensure that any information which is delivered by the Company to such Investor
pursuant to Section 3.01 or 3.02 will be kept confidential, not be copied
except for internal use and for provision to attorneys, accountants and other
fiduciaries with duties to maintain confidentiality, and be used solely to
evaluate and protect such Investor's investment in the Restricted Securities,
including through the provision of routine reports to limited partners of the
Investors; provided, that the foregoing obligation shall not prohibit any such
Investor from divulging any information, whether or not confidential, to any
regulatory authority having jurisdiction over such Investor,
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if such Investor is compelled to do so by any judicial or administrative
process or by other requirements of law provided such Investor seeks a
protective order with respect to such information, or to any prospective
purchaser of Restricted Securities from such Investor so long as such
prospective purchaser agrees to be bound by the confidentiality provisions
contained herein; and provided, further, that the foregoing obligation shall
remain in effect as to any confidential information except to the extent that
such information can be shown to have been (i) previously known on a
non-confidential basis by such Investor, (ii) in the public domain through no
fault of such Investor or (iii) later lawfully acquired by such Investor from
sources other than the Company other than information known by such Investor to
be acquired in violation of an existing confidentiality agreement. The
obligation of each Investor to hold any confidential information in confidence
shall be satisfied if such Investor exercises the same care with respect to
such information as it would take to preserve the confidentiality of its own
confidential and proprietary information.
ARTICLE 4
PRE-EMPTIVE RIGHTS
SECTION 4.01. Pre-emptive Rights. (a) Each Investor shall have a
preemptive right to purchase all or any portion of an offering by the Company,
or any subsidiary of the Company, of any equity security (or any security which
is or may become convertible into or exchangeable or exercisable for an equity
security) equal to the number or amount of securities being offered, multiplied
by a fraction, the numerator of which shall be the number of Common Shares held
by such Investor and the denominator of which shall be the number of Common
Shares held by all shareholders (including the Investors); provided that, in
the case of any such offering by a subsidiary of the Company, if the number of
equity securities that the Investors collectively have preemptive rights to
purchase from the company is less than 20% of the equity securities being
offered by such subsidiary then the number of equity securities that each
Investor has a preemptive right to purchase shall be increased pro rata so
that, collectively, the Investors have a preemptive right to purchase at least
20% of such equity securities; provided further that there will be no such
preemptive right in the case of (i) shares issued or issuable pursuant to the
exercise of options or warrants or the conversion of convertible securities
(including the Preferred Shares) that were issued or outstanding on the date
hereof; (ii) any shares issued or issuable to officers, directors, employees,
agents or consultants of the Company or any subsidiary of the Company, upon
exercise of any option granted or to be granted pursuant to any stock option
plan or arrangements approved by the Board of Directors of the Company (the
"Board of Directors"), or the board of directors of
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such subsidiary, as the case may be, or any options granted or to be granted
thereunder; or (iii) shares issued or issuable in the acquisition by the
Company or by a subsidiary of the Company of any other corporation,
association, partnership or another entity or the assets or securities thereof.
Each Investor shall have such right to purchase when the securities are issued
or sold by the Company, or any subsidiary of the Company, on the best terms and
conditions as such securities are offered to other purchasers thereof. For
purposes of this Section 4.01 it shall be assumed that all securities held by
the Investors which may be converted into or exercised for Common Shares have
been so converted or exercised. The Company shall give the Investors at least
thirty (30) days prior written notice (the "Notice Period") of any proposed
securities issuance that would give rise to preemptive rights as contemplated
in this Section 4.01 describing the amount and type of securities to be issued,
and the price and other terms upon which the Company, or any subsidiary of the
Company, proposes to issue the same. Each Investor exercising all of its
preemptive rights in such offering shall have a further pro rata right (a
"right of over allotment") to purchase the securities refused by any Investor
who declines to fully exercise its preemptive right. Each Investor desiring to
exercise its preemptive right must notify the Company in writing prior to the
close of business on the last day of the Notice Period, stating (i) its intent
to purchase, (ii) whether or not it intends to exercise its right of over
allotment; and (iii) the maximum amount of securities it is willing to
purchase.
(b) In the event that the Investors have not elected pursuant to this
Section 4.01(b) to purchase all of the contemplated offering, the Company shall
have ninety (90) days thereafter to sell the securities not elected to be
purchased by the Investors at the price and upon the terms no more favorable to
the purchasers of such securities than specified in the Company notice
hereunder. In the event the Company has not sold some or all of the securities
within such ninety (90) day period, the Company shall not thereafter issue or
sell any unsold securities without first offering such securities to the
Investors in the manner provided above.
(c) The rights of each Investor under this Article 4 shall be subject to
the ability of such Investor to make representations to the Company reasonably
required to comply with Rule 506 of Regulation D under the Securities Act in
connection with the purchase of any restricted securities.
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ARTICLE 5
REGISTRATION RIGHTS
SECTION 5.01. Registration on Form S-3. (a) Within ninety (90) days of the
date of this Agreement, the Company shall file with the Commission a shelf
Registration Statement on Form S-3 covering all of the shares of Registrable
Stock beneficially owned by the Investors and the Company shall use its
reasonable best efforts to effect the registration of the Registrable Stock in
order to permit the sale and distribution of all of the Registrable Stock on a
continuous basis under Rule 415. Except as expressly provided in paragraph
5.01(b), the Company shall use its reasonable best efforts to cause such
Registration Statement to become and remain effective until such time as each
Investor can sell all of its Registrable Stock pursuant to Rule 144 promulgated
by the Commission under the Securities Act without volume restrictions under
subsection (k) thereof.
(b) Notwithstanding anything to the contrary contained herein, the Company
shall not be obligated to make any filing in any particular jurisdiction in
which the Company would be required to execute a general consent to service of
process in order to effect such registration, qualification or compliance
unless the Company is already subject to service in such jurisdiction in the
opinion of the Company's counsel. If the Company shall furnish to the Investors
a certificate signed by the Chief Executive Officer or Chief Financial Officer
of the Company stating that in the good faith judgment of the Board of
Directors it would be seriously detrimental to the Company or its shareholders
for the Investors to continue to sell or distribute Registrable Stock under the
shelf Registration Statement filed by the Company pursuant to paragraph
5.01(a), then the Investors shall cease any such sale or distribution of
Registrable Stock for a period not to exceed sixty (60) days as specified by
the Company. The Company may not deliver the certificate specified in the
preceding sentence more than once in any 360-day period.
(c) The Investors, in consultation with the Company and subject to the
Company's reasonable approval, may designate the managing underwriter(s), if
any, of any underwritten distribution made under the shelf Registration
Statement filed pursuant to Section 5.01(a) hereof; provided that Morgan
Stanley & Co. Incorporated or any successor entity shall be reasonably
acceptable to the Company. The Company shall cause its senior management to
participate in any "road show" as and to the extent reasonably requested by the
managing underwriters.
SECTION 5.02. Incidental Registration. At such time when the Company is no
longer required to maintain the effectiveness of the shelf registration
statement pursuant to Section 5.01(a), each time the Company shall determine to
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file a Registration Statement in connection with the proposed offer and sale
for money of any of its securities by it or any of its securityholders, the
Company will give written notice of its determination to the Investors. Upon
the written request of the Investors given within thirty (30) days after the
giving of any such notice by the Company, the Company will use its reasonable
efforts to cause all shares of Registrable Stock which the Investors have
requested to register to be included in such Registration Statement, all to the
extent requisite to permit the sale or other disposition by the prospective
seller of the Registrable Stock to be so registered. If the Registration
Statement is to cover an underwritten distribution, the Company shall use its
reasonable efforts to cause the Registrable Stock requested for inclusion
pursuant to this Section 5.02 to be included in the underwriting on the same
terms and conditions as the securities otherwise being sold through the
underwriters. If, in the good faith judgment of the managing underwriter(s) of
such public offering, the inclusion of all of the Registrable Stock requested
for inclusion pursuant to this Section 5.02 would interfere with the successful
marketing of the shares to be offered, then the number of shares of Registrable
Stock to be included in the offering shall be reduced to the required level
with the participation in such offering to be pro rata among the Holders
thereof requesting such registration, based upon the number of shares of
Registrable Stock owned by such Holders; provided that commencing nine months
after the date hereof, each Investor shall have a priority right (prior to the
Company and any other securityholder) to have included pursuant to this Section
5.02 not less 30% of the Registrable Stock requested for inclusion by such
Investor.
SECTION 5.03. Registration Procedures. If and whenever the Company is
required by the provisions of Section 5.01 or 5.02 hereof to effect the
registration of shares of Registrable Stock under the Securities Act, the
Company will, at its expense, as expeditiously as reasonably possible:
(a) In accordance with the Securities Act and the rules and regulations of
the Commission, prepare and file with the Commission a Registration Statement
with respect to such securities and use its reasonable efforts to cause such
Registration Statement to become and remain effective;
(b) (i) Prepare and file with the Commission such amendments and
supplements to such Registration Statement and prospectus used in connection
therewith as may be necessary to keep such Registration Statement effective (x)
until the time specified in Section 5.01(a) or (y) in the case of any
Registration Statements filed under Section 5.02 for at least one hundred
twenty (120) days after the effective date of such Registration Statement; and
comply with the provisions of the Securities Act with respect to the sale or
other disposition of all securities covered by such Registration Statement
during such periods in
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accordance with the intended method or methods of disposition by the sellers
thereof set forth in such Registration Statement;
(c) If the offering is to be underwritten in whole or in part, enter into
a written underwriting agreement in form and substance reasonably satisfactory
to the managing underwriter of the public offering and the Investors;
(d) Furnish to the Investors and to the underwriters such reasonable
number of copies of the Registration Statement, preliminary prospectus, final
prospectus and such other documents as such underwriters and Investors may
reasonably request in order to facilitate the public offering of such
securities;
(e) Use its reasonable efforts to register or qualify the securities
covered by such Registration Statement under such state securities or blue sky
laws of such jurisdictions (i) as shall be reasonably appropriate for the
distribution of the securities covered by such Registration Statement or (ii)
as the Investors and the underwriters may reasonably request within twenty (20)
days following the original filing of such Registration Statement, except that
the Company shall not for any purpose be required to execute a general consent
to service of process, to qualify to do business as a foreign corporation in
any jurisdiction where it is not so qualified or to subject itself to taxation
in such jurisdiction;
(f) Notify the Investors promptly after it shall receive notice thereof of
the date and time when such Registration Statement and each post-effective
amendment thereto has become effective or a supplement to any prospectus
forming a part of such Registration Statement has been filed;
(g) Notify the Investors promptly of any request by the Commission or any
state securities commission or agency for the amending or supplementing of such
Registration Statement or prospectus or for additional information;
(h) Prepare and file with the Commission, promptly upon the request of the
Investors, any amendments or supplements to such Registration Statement or
prospectus which, in the opinion of counsel representing the Company in such
Registration (and which counsel is Vorys, Sater, Seymour and Pease LLP or
another nationally recognized law firm reasonably acceptable to the Investors),
is required under the Securities Act or the rules and regulations thereunder in
connection with the distribution of the Registrable Stock by the Investors;
(i) Prepare and promptly file with the Commission, and promptly notify the
Investors of the filing of, such amendments or supplements to such Registration
Statement or prospectus as may be necessary to correct any statements or
omissions if, at the time when a prospectus relating to such
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securities is required to be delivered under the Securities Act, any event has
occurred as the result of which any such prospectus or any other prospectus as
then in effect would include an untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary to make the
statements therein not misleading;
(j) During the time period during which the Company is required, pursuant
to Section 5.03(a), to cause a Registration Statement to be effective, in case
the Investors or any underwriter for the Investors is required to deliver a
prospectus at a time when the prospectus then in circulation is not in
compliance with the Securities Act or the rules and regulations of the
Commission, prepare promptly upon request such amendments or supplements to
such Registration Statement and such prospectus as may be necessary in order
for such prospectus to comply with the requirements of the Securities Act and
such rules and regulations;
(k) Advise the Investors, promptly after it shall receive notice or obtain
knowledge thereof, of the issuance of any stop order by the Commission or any
state securities commission or agency suspending the effectiveness of such
Registration Statement or the initiation or threatening of any proceeding for
that purpose and promptly use its reasonable best efforts to prevent the
issuance of any stop order or to obtain its withdrawal if such stop order
should be issued;
(l) Not file any amendment or supplement to such Registration Statement or
prospectus to which counsel for the Investors has reasonably objected on the
grounds that such amendment or supplement does not comply in all material
respects with the requirements of the Securities Act or the rules and
regulations thereunder, after having been furnished with a copy thereof at
least three (3) business days prior to the filing thereof (which advance
furnishing of copies the Company hereby agrees to);
(m) At the request of the Investors (i) furnish to the Investors on the
effective date of the Registration Statement or, if such registration includes
an underwritten public offering, at the closing provided for in the
underwriting agreement, an opinion, dated such date, of the counsel
representing the Company for the purposes of such registration, addressed to
the underwriters, if any, and to the Investors, covering such matters with
respect to the Registration Statement, the prospectus and each amendment or
supplement thereto, proceedings under state and Federal securities laws, other
matters relating to the Company, the securities being registered and the offer
and sale of such securities as are customarily the subject of opinions of
issuer's counsel provided to underwriters in underwritten public offerings, and
(ii) use its best efforts to furnish to the Investors letters dated each such
effective date and such closing date, from the
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independent certified public accountants of the Company, addressed to the
underwriters, if any, and to the Investors, stating that they are independent
certified public accountants within the meaning of the Securities Act and
dealing with such matters as the underwriters may request, or, if the offering
is not underwritten, that in the opinion of such accountants the financial
statements and other financial data of the Company included in the Registration
Statement or the prospectus or any amendment or supplement thereto comply in
all material respects with the applicable accounting requirements of the
Securities Act, and additionally covering such other financial matters,
including information as to the period ending not more than three (3) business
days prior to the date of such letter with respect to the Registration
Statement and prospectus, as the Investors may reasonably request;
(n) With respect to any public offering made by any Investor under a
Registration Statement filed pursuant to Section 5.02, refrain from making any
sale or distribution of its securities except pursuant to any stock option plan
or other employee benefit plan, any pre-existing agreement for the sale of such
securities or the issuance of securities in connection with future acquisitions
or a private placement for at least one hundred twenty (120) days after the
closing of the public offering pursuant to such Registration Statement; and
(o) Use its best efforts to ensure the obtaining of all necessary
approvals from the applicable stock exchange or electronic quotation system.
SECTION 5.04. Expenses. (a) With respect to each registration effected
pursuant to Sections 5.01 or 5.02 hereof, all fees, costs and expenses of and
incidental to such registration and the public offering in connection therewith
shall be borne by the Company; provided that the Investors shall bear their pro
rata share of the underwriting discounts and selling commissions.
(b) The fees, costs and expenses of registration to be borne as provided
in paragraph (a) above, shall include, without limitation, all registration,
filing and stock exchange fees, printing expenses, fees and disbursements of
counsel and accountants for the Company, all legal fees and disbursements and
other expenses of complying with state securities laws in states where the
securities are to be registered or qualified and the costs and expenses of the
Company relating to investor presentations on any "road-show" undertaken in
connection with the marketing of the offering of the securities.
SECTION 5.05. Rule 144 Requirements. The Company agrees to:
(a) comply with the requirements of Rule 144(c) under the Securities Act
with respect to current public information about the Company;
14
<PAGE>
(b) use its reasonable best efforts to file with the Commission in a
timely manner all reports and other documents required of the Company under the
Securities Act and the Exchange Act (at any time after it has become subject to
such reporting requirements); and
(c) furnish to any Holder of Registrable Stock upon written request (x) a
written statement by the Company as to its compliance with the requirements of
said Rule 144(c) and the reporting requirements of the Securities Act or the
Exchange Act (at any time after it has become subject to such reporting
requirements), (y) a copy of the most recent annual or quarterly report of the
Company and (z) such other reports and documents of the Company as such Holder
may reasonably request to avail itself of any similar rule or regulation of the
Commission allowing it to sell any such securities without registration.
SECTION 5.06. Investors' Information. Each Investor agrees to furnish in
writing to the Company in a timely manner such information with respect to
itself and the distribution of such Registrable Stock as the Company may from
time to time reasonably request in writing and as shall be required by law or
by the Commission in connection therewith.
SECTION 5.07. Transfer of Registration Rights. Each Investor may at any
time Transfer to any Person that acquires at least fifty one percent (51%) of
the then outstanding Common Share equivalents then held by such Investor the
registration rights set forth in Sections 5.01 and 5.02 hereof. Such Transfer
shall be subject to the transferee agreeing in writing to be bound by the terms
of this Agreement.
SECTION 5.08. Hold-back Agreement. If requested by the underwriter, each
Investor will agree not to offer, sell, contract to sell or Transfer any
Registrable Stock, during the fourteen (14) days prior to, and during the
ninety (90) day period beginning on, the effective date of any Registration
Statement filed pursuant to Section 5.02 other than the Registrable Stock to be
sold pursuant to such Registration Statement.
SECTION 5.09. Other Shareholders. The Company may grant to any Person
other than the Investors the right to request a registration of securities of
the Company under the Securities Act and the right to be included as a selling
shareholder in connection with any registration of Registrable Stock; provided,
however, that without the consent of Investors holding a majority of the
Registrable Stock, the granting of any such rights shall not conflict with or
otherwise alter any rights granted under Section 5.01 above and, in all cases,
the rights of the Investors to include shares in any Registration Statement
shall be
15
<PAGE>
given priority over any registration rights granted to other Persons as
permitted by this Section 5.09.
ARTICLE 6
INDEMNIFICATION
SECTION 6.01. Indemnification. (a) To the fullest extent permitted by law,
the Company will indemnify and hold harmless the Investors and their respective
directors, officers, employees, partners, members and Affiliates (each such
person, an "Indemnified Person"), whether or not their shares have been sold in
the offering, and any underwriter (as defined in the Securities Act) for the
Investors, and any person who controls any such underwriter within the meaning
of the Securities Act, from and against, and will reimburse the Indemnified
Persons and each such underwriter and controlling person with respect to, any
and all claims, actions, demands, losses, damages, liabilities, costs and
expenses to which any Indemnified Persons or any such underwriter or
controlling person may become subject under the Securities Act or otherwise,
insofar as such claims, actions, demands, losses, damages, liabilities, costs
or expenses arise out of or are based upon any untrue statement or alleged
untrue statement or omission of any material fact contained in a Registration
Statement, any prospectus contained therein or any amendment or supplement
thereto, or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances under which they
were made, not misleading; provided, however, that the Company will not be
liable in any such case to the extent that any such claim, action, demand,
loss, damage, liability, cost or expense is caused by an untrue statement or
alleged untrue statement or omission or alleged omission so made in reliance
upon information furnished in writing by one or more of the Investors, any such
underwriter or any such controlling person for use in the preparation of such
Registration Statement, prospectus or any amendment or supplement thereto.
(b) Each Indemnified Person severally (not jointly), will indemnify and
hold harmless the Company, its directors, officers, employees and Affiliates
(each such person, a "Company Indemnified Person") from and against, and will
reimburse the Company Indemnified Persons with respect to, any and all claims,
actions, demands, losses, damages, liabilities, costs or expenses to which any
Company Indemnified Person may become subject under the Securities Act or
otherwise, insofar as such losses, damages, liabilities, costs or expenses are
caused by any untrue or alleged untrue statement or omission of any material
fact contained in a Registration Statement, any prospectus contained therein or
any amendment or supplement thereto, or are caused by the omission or alleged
16
<PAGE>
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances under
which they are made, not misleading, in each case to the extent that such
untrue statement or alleged untrue statement or omission or alleged omission
was made in reliance upon information furnished in writing by the Indemnified
Person for use in the preparation of such Registration Statement, prospectus or
any amendment or supplement thereto.
(c) Promptly after receipt by a party to be indemnified pursuant to the
provisions of paragraph (a) or (b) of this Section 6.01 (an "indemnified
party") of notice of the commencement of any action involving the subject
matter of the foregoing indemnity provisions, such indemnified party will, if a
claim thereof is to be made against the indemnifying party pursuant to the
provisions of paragraph (a) or (b), notify the indemnifying party of the
commencement thereof. In case such action is brought against any indemnified
party and it notifies the indemnifying party of the commencement thereof, the
indemnifying party shall have the right to participate in, and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, and after notice from the indemnifying party to
such indemnified party of its election so to assume the defense thereof, the
indemnifying party will not be liable to such indemnified party pursuant to the
provisions of such paragraph (a) or (b) for any legal or other expense
subsequently incurred by such indemnified party in connection with the defense
thereof. No indemnifying party shall be liable to an indemnified party for any
settlement of any action or claim without the consent of the indemnifying
party. No indemnifying party will consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability in respect to such claim or litigation.
ARTICLE 7
TAG-ALONG RIGHTS
SECTION 7.01. Tag-Along Right. Except as permitted under Section 2.05
hereof, if Shareholder desires to sell all or any part of his shares of capital
stock of the Company (the "Tag-Along Shares") to a third-party purchaser (a
"Proposed Transferee"), Shareholder shall provide to the Investors notice of
such intention to sell and of the terms and conditions, including price, of
such proposed sale. Each Investor shall have the right to sell to the Proposed
Transferee, at the same price per share and on the same terms and conditions as
involved in such sale by Shareholder, up to that number of Common Shares then
held by such Investor (calculated on a fully diluted basis) that equals a
portion of the Tag-Along Shares
17
<PAGE>
equal to the product of (i) the Tag-Along Shares multiplied by (ii) a fraction,
the numerator of which is the aggregate number of Common Shares then owned by
such Investor (calculated on a fully diluted basis) and the denominator of
which is the aggregate number of Common Shares then owned by all of the
Investors and the Shareholder (calculated on a fully diluted basis).
SECTION 7.02. Notice of Intent to Participate. If an Investor wishes to
participate in any sale under this Article 7, such Investor shall notify
Shareholder and the Company in writing of such intention as soon as practicable
after the Investor's receipt of the notice made pursuant to Section 7.01, and
in any event within twenty (20) days after the date of receipt of the notice.
SECTION 7.03. Sale of Tag-Along Shares. Any purchase of less than all of
the Tag-Along Shares and the Common Shares (calculated on a fully diluted
basis) that the Investors are entitled to and elect to sell to the Proposed
Transferee pursuant to Sections 7.01 and 7.02 hereof, considered collectively,
by the Proposed Transferee shall be made from Shareholder and the Investors who
elect to participate pro rata based upon the relative amount of the shares that
Shareholder and the Investors who elect to participate are otherwise entitled
to sell pursuant to Section 7.01. If the Investors do not wish to participate
in any sale under this Article 7, Shareholder shall sell to the Proposed
Transferee all, or at the option of the Proposed Transferee, any part of the
shares proposed to be sold at not less than the price and upon other terms and
conditions, if any, not more favorable to the Proposed Transferee than those in
the notice provided by Shareholder pursuant to 7.01. If the Tag-Along Shares
and the shares of the Investors are sold under this Article 7 to any purchaser
who is not a party to this Agreement, the Tag-Along Shares and the share of the
Investors so sold shall no longer be subject to any of the restrictions imposed
by this Agreement, except for any restrictions imposed by Article 2, which
shall continue in force until such time as they lapse pursuant to the terms of
such Article 2 or Article 7 hereof.
ARTICLE 8
REPRESENTATION RIGHTS
SECTION 8.01. Board of Directors. (a) Each Holder (other than the MSDW
Investors) shall vote such Holder's voting securities and shall take all other
reasonably necessary or desirable actions within its control (whether in such
Holder's capacity as a shareholder, director, member of a Board of Directors
committee or officer of the Company or otherwise and including, without
limitation, attendance at meetings in person or by proxy for purposes of
obtaining a quorum and execution of written consents in lieu of meetings), and
the
18
<PAGE>
Company shall take all reasonably necessary or desirable legal actions within
its control, including in preparation of proxy materials, the recommendation of
a management slate of directors in elections for directors, and in proposing
and effecting amendments to the articles of incorporation and code of
regulations of the Company, so that:
(i) At Closing, the authorized number of directors on the board of
directors of the Company shall be increased from six (6) to nine (9)
directors;
(ii) FAEF shall have the right to have one representative, currently
expected to be Barry Goldsmith, to be nominated as a Director of the
Company;
(iii) the management slate of directors, including the representative
of FAEF, shall be elected to the Board of Directors;
(iv) at least one of the representatives of the Investors, if at
least one such representative is elected to the Board of Directors, shall
be designated a member of every committee of the Board of Directors
existing now or in the future;
(v) if a representative of Morgan Stanley Dean Witter Venture
Partners IV, L.P. is not a Director of the Company, a representative of
such Investor, which representative shall not be a member of the Board of
Directors, shall have the right to attend all meetings of the Board of
Directors as a non-voting observer and to receive all notices and other
written information sent to Directors by the Company;
(vi) the required quorum for Board of Directors action shall be the
presence at a Board of Directors meeting of at least a majority of
directors, except that a majority of the directors in office shall
constitute a quorum for filling a vacancy in the Board of Directors;
(vii) all action of the Board of Directors shall require (a) the
affirmative vote of at least a majority of the directors at a duly
convened meeting of the Board of Directors at which a quorum is present or
(b) the unanimous written consent of the Board of Directors; provided that
in the event there is a vacancy on the Board of Directors and an
individual has been nominated to fill such vacancy, the first order of
business shall be to fill such vacancy; and
19
<PAGE>
(viii) in the event any director nominated by FAEF ceases to serve as
a member of the Board of Directors during his or her term of office, FAEF
shall be entitled to nominate a designee to fill such vacancy, and the
Board of Directors as constituted immediately prior to such time shall
designate a replacement director, nominated by FAEF and reasonably
satisfactory to the Board of Directors, to fill the remainder of the term
of the director who has ceased to be a member of the Board of Directors.
SECTION 8.02. Voting Restriction. Each MSDW Investor hereby irrevocably
agrees with the Company to vote all Common Shares and Series A Preferred Shares
beneficially owned by the MSDW Investors in excess of 9.9% of the total voting
power of the outstanding Common Shares and Series A Preferred Shares in
proportion to all votes cast by the other holders of Common Shares and Series A
Preferred Shares (as determined by the Company and excluding for these purposes
all Common Shares and Series A Preferred Shares beneficially owned by the MSDW
Investors).
ARTICLE 9
MISCELLANEOUS
SECTION 9.01. Term of Agreement. Except as otherwise provided herein, the
provisions of this Agreement shall terminate upon the earliest to occur of any
one of the following events:
(i) the voluntary or involuntary liquidation or dissolution of the
Company;
(ii) the occurrence of a Change-in-Control Liquidation Event (as such
term is defined in the amendment to the Company's Amended Articles of
Incorporation, as amended, as set forth in Exhibit A to the Securities
Purchase Agreement);
(iii) the Investors beneficially own in aggregate less than twenty
percent (20%) of the Common Shares equivalents initially purchased by the
Investors pursuant to the Securities Purchase Agreement.
SECTION 9.02. Severability; Governing Law. If any provisions of this
Agreement shall be determined to be illegal or unenforceable by any court of
law, the remaining provisions shall be severable and enforceable in accordance
with their terms. This Agreement shall be governed by, and construed in
accordance with, the laws of the State of Ohio.
20
<PAGE>
SECTION 9.03. Injunctive Relief. It is acknowledged that it will be
impossible to measure the damages that would be suffered by the parties if any
party fails to comply with the provisions of this Agreement. Accordingly, the
parties shall be entitled to obtain specific performance of this Agreement and
to obtain immediate injunctive relief.
SECTION 9.04. Binding Effect. This Agreement shall be binding upon and
inure to the benefit of the parties hereto and their respective permitted
successors and assigns, legal representatives and heirs.
SECTION 9.05. Modification or Amendment. This Agreement or any term hereof
may be amended or waived, only with the written consent of the Company and
Investors holding more than seventy-five percent (75%) of the Common Shares
issued or issuable upon conversion of any Restricted Securities; additionally,
Section 2.05 and Article 7 hereof may not be amended or waived without the
written consent of Shareholder.
SECTION 9.06. Aggregation. All Restricted Securities held or acquired by
affiliated Persons shall be aggregated for the purpose of determining the
availability of any rights under this Agreement.
SECTION 9.07. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all of which
taken together shall constitute one and the same instrument.
SECTION 9.08. Notices. All notices to be given or otherwise made to any
party to this Agreement shall be deemed to be sufficient if contained in a
written instrument, delivered by hand in person, or by express overnight
courier service, or by electronic facsimile transmission, or by registered or
certified mail, return receipt requested, postage prepaid, addressed to such
party at the address set forth below or at such other address as may hereafter
be designated in writing by the addressee to the Company:
If to the Company to:
Symix Systems, Inc..
2400 Corporate Exchange Drive
Columbus, Ohio 43231
Attn: President and Chief Executive Officer
Fax No.: (614) 895-2972
21
<PAGE>
with a copy to:
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
Columbus, Ohio 43215
Attn: Ivery D. Foreman, Esq.
Fax No.: 614-464-6350
If to Shareholder:
to his address set forth on the signature pages hereto
If to any Investor:
to its address set forth on the signature pages hereto
with a copy to:
Davis Polk & Wardwell
450 Lexington Avenue
New York, New York 10017
Attn: John A. Bick, Esq.
Fax No.: 212-450-4800
and, if not an addressee of any notice to an Investor, with a copy to:
Morgan Stanley Venture Partners IV, L.P., at its address set forth on
the signature pages hereto
All such notices shall, when mailed or telegraphed, be effective when
received or when attempted delivery is refused.
SECTION 9.09. Entire Agreement. This Agreement embodies the entire
agreement and understanding between the parties hereto with respect to the
subject matter hereof and supersedes all prior oral or written agreements and
understandings relating to the subject matter hereof. No statement,
representation, warranty, covenant or agreement of any kind not expressly set
forth in this Agreement shall affect, or be used to interpret, change or
restrict, the express terms and provisions of this Agreement.
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Investor Rights
Agreement to be executed as of the date first above written.
SYMIX SYSTEMS, INC.,
By: /s/ Stephen A. Sasser
-----------------------------------------
Stephen A. Sasser
President and Chief Executive Officer
SHAREHOLDER:
LAWRENCE J. FOX, in his individual capacity
By: /s/ Lawrence J. Fox
-----------------------------------------
Address:
------------------------------------
------------------------------------
23
<PAGE>
MORGAN STANLEY DEAN WITTER VENTURE PARTNERS IV, L.P.
MORGAN STANLEY DEAN WITTER VENTURE INVESTORS IV, L.P.
MORGAN STANLEY DEAN WITTER VENTURE OFFSHORE
INVESTORS IV, L.P.
By: MSDW Venture Partners IV, LLC,
as General Partner of each of the limited partnerships
By: MSDW Venture Partners IV, Inc.,
as Member
By: /s/ Guy de Chazal
---------------------------------
Name: Guy de Chazal
Title: Managing Director
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: 212-762-8424
Attention: Controller
MORGAN STANLEY DEAN WITTER
EQUITY FUNDING, INC.
By: /s/ Thomas Clayton
---------------------------------
Name: Thomas Clayton
Title: Vice President
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: 212-762-8424
Attention: Controller
24
<PAGE>
FALLEN ANGEL EQUITY FUND, L.P.
By: Fallen Angel Capital, L.L.C.
as its General Partner
By: Barry Goldsmith,
as Member
By: /s/ Barry Goldsmith
---------------------------------
Name: Barry Goldsmith
Title: Member
Address: 960 Holmdel Road
Holmdel, New Jersey 07733
Fax: 732-946-0519
25
<PAGE>
SCHEDULE 1
The following is a full and complete list of the Investors who are
purchasing Series A Convertible Participating Preferred Shares and Warrants of
the Company:
Number of Number
Inventor Preferred Shares of Warrants %
-------- ---------------- ----------- -------
Morgan Stanley Dean Witter 271,650 217,320 47.92
Venture Partners IV, L.P.
Morgan Stanley Dean Witter 31,516 25,212 5.56
Venture Investors IV, L.P.
Morgan Stanley Dean Witter 10,598 8,478 1.87
Venture Offshore
Investors IV, L.P.
Morgan Stanley Dean Witter 86,502 69,202 15.26
Equity Funding, Inc.
Fallen Angel Equity 166,667 133,334 29.40
Fund, L.P.
Total: 566,933 453,546 100.00
26
EXHIBIT 4
SECURITIES PURCHASE AGREEMENT
dated as of May 10, 2000
between
Symix Systems, Inc.
and
The Investors named herein
<PAGE>
TABLE OF CONTENTS
----------------------
PAGE
----
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions..................................................1
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale............................................4
SECTION 2.02. Closing......................................................5
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Corporate Existence and Power................................5
SECTION 3.02. Corporate Authorization......................................6
SECTION 3.03. Governmental Authorization; Consents.........................6
SECTION 3.04. Non-contravention............................................7
SECTION 3.05. Capitalization...............................................7
SECTION 3.06. SEC Filings..................................................7
SECTION 3.07. Financial Statements.........................................8
SECTION 3.08. Absence of Certain Changes...................................9
SECTION 3.09. Litigation..................................................10
SECTION 3.10. Compliance with Contracts...................................10
SECTION 3.11. Erisa Representations.......................................11
SECTION 3.12. Tax Representations.........................................12
SECTION 3.13. Insurance Coverage..........................................13
SECTION 3.14. Compliance with Laws........................................13
SECTION 3.15. Transactions with Affiliates................................14
SECTION 3.16. Finders' Fees...............................................14
SECTION 3.17. Antitakeover Statutes.......................................14
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTORS
SECTION 4.01. Organization and Existence..................................15
SECTION 4.02. Authorization...............................................15
SECTION 4.03. Governmental Authorization..................................15
SECTION 4.04. Non-contravention...........................................15
SECTION 4.05. Finders' Fees...............................................15
<PAGE>
PAGE
----
SECTION 4.06. Financing....................................................16
SECTION 4.07. Purchase for Investment......................................16
ARTICLE V
COVENANTS OF THE COMPANY
SECTION 5.01. Access to Information........................................16
SECTION 5.02. Notices of Certain Events....................................17
SECTION 5.03. Use of Proceeds..............................................17
SECTION 5.04. Corporate Governing Documents................................17
SECTION 5.05. Restrictive Agreements Prohibited............................18
SECTION 5.06. Voting Power.................................................18
SECTION 5.07. Additional Warrants..........................................18
ARTICLE VI
COVENANTS OF INVESTORS
SECTION 6.01. Notices of Certain Events....................................18
SECTION 6.02. Confidentiality..............................................19
ARTICLE VII
COVENANTS OF ALL PARTIES
SECTION 7.01. Best Efforts.................................................19
SECTION 7.02. Certain Filings; NASDAQ listing..............................20
SECTION 7.03. Public Announcements.........................................20
SECTION 7.04. Tax Consistency..............................................20
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to the Obligations of Each Party..................20
SECTION 8.02. Conditions to Obligation of Investors........................20
SECTION 8.03. Conditions to Obligation of the Company......................21
ARTICLE IX
SURVIVAL
SECTION 9.01. Survival.....................................................22
ii
<PAGE>
ARTICLE X
TERMINATION
SECTION 10.01. Grounds for Termination.....................................22
SECTION 10.02. Effect of Termination.......................................22
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices.....................................................23
SECTION 11.02. Amendments; No Waivers......................................23
SECTION 11.03. Expenses....................................................24
SECTION 11.04. Successors and Assigns......................................24
SECTION 11.05. Governing Law...............................................24
SECTION 11.06. Counterparts................................................24
SECTION 11.07. Entire Agreement............................................24
SECTION 11.08. Specific Performance........................................24
SECTION 11.09. Captions....................................................25
Exhibit A Amendment to Amended Articles of Incorporation
Exhibit B Investor Rights Agreement
Exhibit C Warrant
iii
<PAGE>
SECURITIES PURCHASE AGREEMENT
AGREEMENT dated as of May 10, 2000 between Symix Systems, Inc., an Ohio
corporation (the "Company"), and the several investors set forth on Schedule I
hereto (individually, an "Investor" and collectively the "Investors").
W I T N E S S E T H :
WHEREAS, the Investors desire to purchase from the Company the Securities
(as hereinafter defined) and the Company desires to sell the Securities to the
Investors, upon the terms and subject to the conditions hereinafter set forth;
WHEREAS, the Investors and the Company desire to enter into certain other
agreements;
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01. Definitions. (a) The following terms, as used herein, have
the following meanings:
"Affiliate" means, with respect to any Person, any other Person directly
or indirectly controlling, controlled by, or under common control with, such
Person. For the purposes of this definition, "control" when used with respect
to any Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management and policies of such Person,
whether through the ownership of voting securities, by contract or otherwise;
and the terms "controlling" and "controlled" have meanings correlative to the
foregoing.
"Amendment" means the amendment to the Amended Articles of Incorporation
of the Company, as amended, which designate and set forth the preferences and
rights of the holders of the Series A Preferred Shares, substantially in the
form attached hereto as Exhibit A.
"Beneficial Ownership" and "beneficially own" shall be determined in
accordance with Rule 13d-3 under the 1934 Act.
"Benefit Arrangement" means any employment, severance or similar contract,
arrangement or policy, or any plan or arrangement providing for severance
benefits, insurance coverage (including any self-insured arrangements),
workers' compensation, disability benefits, supplemental unemployment benefits,
<PAGE>
vacation benefits, retirement benefits, deferred compensation, profit-sharing,
bonuses, stock options, stock appreciation rights or other forms of incentive
compensation or post-retirement insurance, compensation or benefits that (i) is
not an Employee Plan or Company Stock Plan or made pursuant to an Employee Plan
or Company Stock Plan, (ii) is entered into or maintained, as the case may be,
by the Company or any of its ERISA Affiliates, (iii) covers any employee or
former employee of the Company or any Subsidiary and (iv) involves an
obligation of the Company and/or the Subsidiaries to pay an aggregate amount in
excess of $200,000.
"Closing Date" means the date of the Closing.
"Code" means the Internal Revenue Code of 1986, as amended.
"Commission" means the United States Securities and Exchange Commission.
"Common Shares" means the common shares, no par value, of the Company.
"Company Stock Plans" means any present or future Employee Plan,
employment agreement, restricted stock, stock option, stock purchase or
dividend reinvestment plan or other similar type of plan of the Company which
provides for the issuance of equity securities or options or rights to purchase
equity securities of the Company.
"Enforceability Exception" means the limitations which may be placed on
enforceability by bankruptcy, insolvency, reorganization, moratorium,
fraudulent conveyance and other laws of general applicability relating to or
affecting creditors' rights and by general principles of equity.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended.
"ERISA Affiliate" of any entity means any other entity which, together
with such entity, would be treated as a single employer under Section 414 of
the Code.
"Investor Rights Agreement" means the Investors Rights Agreement dated as
of the Closing Date among the Company, the Investors and Lawrence J. Fox,
substantially in the form of Exhibit B hereto.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset.
2
<PAGE>
"Material Adverse Change" means a material adverse change in the business,
assets, financial condition or results of operations of the Company and the
Subsidiaries, taken as a whole.
"Material Adverse Effect" means a material adverse effect on the business,
assets, financial condition or results of operations of the Company and the
Subsidiaries, taken as a whole.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
3(37) of ERISA.
"1933 Act" means the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder.
"1934 Act" means the Securities Exchange Act of 1934, as amended, and the
rules and regulations promulgated thereunder.
"PBGC" means the Pension Benefit Guaranty Corporation.
"Person" means an individual, a corporation, a partnership, limited
liability company, an association, a trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
"Securities" means the Shares and Warrants.
"Series A Preferred Shares" means the Series A Convertible Participating
Preferred Shares, no par value, of the Company.
"Shares" means 566,933 Series A Preferred Shares.
"Subsidiary" means any entity of which securities or other ownership
interests having ordinary voting power to elect a majority of the board of
directors or other persons performing similar functions are owned directly or
indirectly by the Company.
"Tax" (and, with correlative meaning, "Taxes") shall include (i) any net
income, alternative or add-on minimum tax, gross income, gross receipts, sales,
use, ad valorem, value added, transfer, franchise, profits, license,
withholding on amounts paid to or by the Company or any Subsidiary, payroll,
employment, excise, severance, stamp, occupation, premium, property,
environmental or windfall profit tax, custom, duty or other tax, governmental
fee or other like assessment or charge of any kind whatsoever, together with
any interest or any penalty, addition to tax or additional amount due from, or
in respect of the Company or any subsidiary, as the case may be, imposed by any
federal, state,
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local or foreign governmental authority (a "Taxing Authority") responsible for
the imposition of any such tax (domestic or foreign), (ii) any liability of the
Company or any Subsidiary for the payment of any amounts of the type described
in (i) as a result of being a member of an affiliated, consolidated, combined
or unitary group for any period and (iii) any liability of the Company or any
Subsidiary for the payment of any amount as a result of being a party to any
tax sharing agreement or with respect to the payment of any amount of the type
described in (i) as a result of any existing express or implied agreement or
arrangement (including, but not limited to, an indemnification agreement or
arrangement).
"Title IV Plan" means an employee benefit plan, other than any
Multiemployer Plan, subject to Title IV of ERISA.
"Transaction Agreements" means this Agreement and the Investor Rights
Agreement.
"Warrants" means the warrants to purchase 453,546 Common Shares,
substantially in the form of Exhibit C hereto.
(b) Each of the following terms is defined in the Section set forth
opposite such term:
Term Section
---- -------
Balance Sheet 3.07
Balance Sheet Date 3.07
Closing 2.02
Company SEC Documents 3.06
Company 10-K 3.06
Company Securities 3.05
Employee Plans 3.11
GAAP 3.07
Returns 3.12
ARTICLE II
PURCHASE AND SALE
SECTION 2.01. Purchase and Sale. Upon the terms and subject to the
conditions of this Agreement, the Company agrees to sell to each Investor, and
each Investor severally agrees to purchase from the Company, the number of
Shares and Warrants at the aggregate prices set forth opposite the names of
such
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Investor on Schedule I hereto. The aggregate purchase price payable by the
Investors for all the Securities is $13,606,392 in cash.
SECTION 2.02. Closing. The closing (the "Closing") of the purchase and
sale of the Securities hereunder shall take place at the offices of Davis Polk
& Wardwell in New York City as soon as possible, but in no event later than
five business days, after satisfaction of the conditions set forth in Article
VIII, or at such other time or place as the Investors and the Company may
agree. At the Closing,
(a) each Investor shall transfer to the Company the applicable purchase
price payable by it in immediately available funds by wire transfer to an
account of the Company designated by the Company, by notice to the Investors,
no later than two business days prior to the Closing Date; and
(b) the Company shall deliver to each Investor certificates for the
Securities being purchased by such Investor registered in the name of such
Investor.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to each Investor that:
SECTION 3.01. Corporate Existence and Power. (a) The Company is a
corporation duly incorporated, validly existing and in good standing under the
laws of its jurisdiction of incorporation, and has all corporate powers and all
material governmental licenses, authorizations, consents and approvals required
to carry on its business as now conducted, except where the failure to have
such governmental licenses, authorizations, consents and approvals would not,
individually or in the aggregate, have a Material Adverse Effect. The Company
is duly qualified to do business as a foreign corporation and is in good
standing 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 failure to be so qualified would not,
individually or in the aggregate, have a Material Adverse Effect. The Company
has heretofore delivered to the Investors or their counsel true and complete
copies of the articles of incorporation and regulations of the Company as
currently in effect.
(b) Each of the Company's Subsidiaries which would qualify as a
"Significant Subsidiary" pursuant to Regulation S-X under the 1933 Act, all of
which are listed in the Company 10-K, is a business corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction of its
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incorporation, and has the corporate power and authority to own or lease its
properties and assets and to carry on its business as it is now being
conducted, except where the failure to have such governmental licenses,
authorizations, consents and approvals would not, individually or in the
aggregate, reasonably be expected to result in a Material Adverse Effect.
SECTION 3.02. Corporate Authorization. (a) The execution, delivery and
performance by the Company of the Transaction Agreements and the Warrants and
the consummation by the Company of the transactions contemplated thereby are
within the Company's corporate powers and, except for corporate authorizations
and actions contemplated by this Agreement to occur subsequent to the date
hereof and prior to Closing, have been duly authorized by all necessary
corporate action on the part of the Company. This Agreement constitutes, and,
when executed by the parties thereto, the Investor Rights Agreement will
constitute, a valid and binding agreement of the Company, enforceable in
accordance with their respective terms, except as the indemnification
obligation of the Company under the Investor Rights Agreement may be limited by
applicable law and except for the Enforceability Exceptions.
(b) The Warrants, when executed and delivered in accordance with the terms
of this Agreement, will constitute valid and binding obligations of the
Company.
(c) The Shares, when issued and delivered to and paid for by each Investor
pursuant to this Agreement, will be validly issued, fully paid and
non-assessable, and such Shares are free of preemptive or similar rights except
as set forth in this Agreement. The Common Shares to be reserved for issuance
upon exercise of the Warrants or conversion of the Shares, as the case may be,
have been, or prior to the Closing will be, duly authorized by the Company and
reserved for issuance upon such exercise or conversion and, when issued upon
such exercise or conversion in accordance with the terms of the Warrants or the
Shares, as the case may be, will have been validly issued, fully paid and
non-assessable, and such Common Shares will be free of preemptive or similar
rights except as set forth in the Investor Rights Agreement.
SECTION 3.03. Governmental Authorization; Consents. (a) The execution,
delivery and performance by the Company of the Transaction Agreements and the
Warrants require no action by or in respect of, or filing with, any
governmental body, agency, official or authority other than compliance with any
applicable requirements of the 1933 Act and applicable state securities laws.
(b) No consent, approval, waiver or other action by any Person under any
contract, agreement, indenture, lease, instrument or other document to which
the Company or any Subsidiary is a party or by which any of them is bound is
required or necessary for the execution, delivery and performance of the
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Transaction Agreements and the Warrants by the Company or the consummation by
the Company of the transactions contemplated thereby.
SECTION 3.04. Non-contravention. The execution, delivery and performance
by the Company of the Transaction Agreements do not and will not (i) contravene
or conflict with the Amended Articles of Incorporation, as amended, or the
Amended Regulations, as amended, of the Company; (ii) assuming compliance with
the matters referred to in Section 3.03(a), contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to the Company or any
Subsidiary; (iii) constitute a material default under or give rise to any right
of termination, cancellation or acceleration of any material right or
obligation of the Company or any Subsidiary or to a loss of any material
benefit to which the Company or any Subsidiary is entitled under any provision
of any material agreement, contract or other instrument binding upon the
Company or any Subsidiary or any license, franchise, permit or other similar
authorization held by the Company or any Subsidiary; or (iv) result in the
creation or imposition of any Lien on any asset of the Company or any
Subsidiary, except, in the case of those items specified in (ii) or (iv) above
which would not, individually or in the aggregate, result in a Material Adverse
Effect.
SECTION 3.05. Capitalization. The authorized capital stock of the Company
consists of 20,000,000 Common Shares and 1,000,000 preferred shares, no par
value. As of April 28, 2000, there were outstanding 7,503,657 Common Shares, no
preferred shares and employee stock options to purchase an aggregate of
1,925,547 Common Shares (of which, options to purchase an aggregate of
1,209,279 Common Shares were exercisable). All outstanding Common Shares have
been duly authorized and validly issued and are fully paid. Except (1) as set
forth in this Section 3.05, (2) for changes since April 28, 2000 resulting from
the exercise of employee stock options outstanding on such date and (3) for any
Company Stock Plans or securities issued pursuant thereto, there are no
outstanding (i) shares of capital stock or other voting securities of the
Company, (ii) securities of the Company convertible into or exchangeable for
shares of capital stock or voting securities of the Company or (iii) options or
other rights to acquire from the Company, and there is no obligation of the
Company to issue (other than any obligation that may arise under the Investor
Rights Agreement), 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"). Except as contemplated by the
Transaction Documents and the Company Stock Plans, there are no outstanding
obligations of the Company or any Subsidiary to issue or deliver or to
repurchase, redeem or otherwise acquire any Company securities.
SECTION 3.06. SEC Filings. (a) The Company has delivered to each Investor
or its counsel (i) the Company's annual report on Form 10-K for its fiscal
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year ended June 30, 1999 (the "Company 10-K"), (ii) its quarterly reports on
Form 10-Q for its fiscal quarters ended September 30, 1999 and December 31,
1999, respectively, (iii) its proxy or information statements relating to
meetings of, or actions taken without a meeting by, the shareholders of the
Company held since June 30, 1999, and (iv) all of its other reports,
statements, schedules and registration statements filed with the SEC since June
30, 1999 (the documents referred to in this Section 3.06(a), collectively, the
"Company SEC Documents").
(b) As of its filing date, each Company SEC Document complied as to form
in all material respects with the applicable requirements of the 1933 Act and
the 1934 Act, as the case may be.
(c) As of its filing date (or, if amended or superceded by a filing prior
to the date hereof, on the date of such filing), each Company SEC Document
filed pursuant to the 1934 Act did not, and each such Company SEC Document
filed subsequent to the date hereof will not, contain any untrue statement of a
material fact or omit to state any material fact necessary in order to make the
statements made therein, in the light of the circumstances under which they
were made, not misleading.
(d) Each Company SEC Document that is a registration statement, as amended
or supplemented, if applicable, filed pursuant to the 1933 Act, as of the date
such registration statement or amendment became effective, did not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading.
(e) Since July 1, 1999, the Company and its Subsidiaries, as applicable,
have filed all reports, registrations and statements, together with any
amendments required to be made with respect thereto, that were required to be
filed with the Commission.
SECTION 3.07. Financial Statements. (a) The audited consolidated financial
statements and unaudited consolidated interim financial statements of the
Company included in the Company SEC Documents fairly present, in conformity
with generally accepted accounting principles ("GAAP") applied on a consistent
basis (except as may be indicated in the notes thereto), the consolidated
financial position of the Company and its consolidated Subsidiaries as of the
dates thereof and their consolidated results of operations and cash flows for
the periods then ended (subject to normal year-end adjustments in the case of
any unaudited interim financial statements). For purposes of this Agreement,
"Balance Sheet" means the consolidated statements of condition of the Company
(and consolidated Subsidiaries) as of June 30, 1999 set forth in the Company
10-K and "Balance Sheet Date" means June 30, 1999.
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(b) Absence of Undisclosed Liabilities. Other than liabilities disclosed,
or provided for, in the Company SEC Documents, (i) there are no liabilities of
the Company or the Subsidiaries of any kind whatsoever, whether accrued,
contingent, absolute, determined, determinable or otherwise, and (ii) there is
no existing condition, situation or set of circumstances which would result in
such a liability, except in the case of each of clauses (i) and (ii) for
liabilities that, individually or in the aggregate, have not had and would not
reasonably be expected to have a Material Adverse Effect.
SECTION 3.08. Absence of Certain Changes. Since the Balance Sheet Date,
other than as disclosed, or provided for, in the Company SEC Documents, the
Company and the Subsidiaries have conducted their businesses in the ordinary
course and there has not been:
(a) any Material Adverse Change or any event, occurrence, development or
state of circumstances or facts which would reasonably be expected to result in
a Material Adverse Change, other than those relating to the economy generally
and regulatory changes;
(b) (i) any declaration, setting aside or payment of any dividend or other
distribution with respect to any shares of capital stock of the Company, or
(ii) any repurchase, redemption or other acquisition by the Company or any
Subsidiary of any outstanding shares of capital stock or other securities of,
or other ownership interests in, the Company or any Subsidiary except in
connection with (x) the internal corporate reorganization of the Company and
the Subsidiaries initiated in October 1999, (y) the acquisition of all
outstanding capital stock of Frontstep, Inc. (f/k/a Profit Solutions,
Incorporated) by the Company in January, 2000 and (z) the acquisition of
brightwhite solutions, inc. capital stock by Frontstep, Inc. in February, 2000;
(c) any amendment of any material term of any outstanding equity security
of the Company;
(d) any (i) grant of any material severance or termination pay to (or
amendment to any existing arrangement with) any director, officer or employee
of the Company or any of its Subsidiaries, (ii) material increase in benefits
payable under any existing severance or termination pay policies or employment
agreements, (iii) entering into any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, officer or employee of the Company or any of the Subsidiaries, except
employment agreements entered into in connection with the acquisition of Profit
Solutions, Incorporated (n/k/a Frontstep, Inc.) in January, 2000 and the
acquisition of the assets of Infomentum, Ltd. in February, 2000, other than in
the ordinary course of business consistent with past practice; (iv)
establishment, adoption or amendment (except as required by applicable law) of
any collective bargaining,
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bonus, profit-sharing, thrift, pension, retirement, deferred compensation,
compensation, stock option, restricted stock or other benefit plan or
arrangement covering any director, officer or employee of the Company or any of
its Subsidiaries, other than in the ordinary course of business consistent with
past practice, or (v) increase in compensation, bonus or other benefits payable
to any director, officer or employee of the Company or any of its Subsidiaries,
other than in the ordinary course of business consistent with past practice;
(e) any damage, destruction or other casualty loss (whether or not covered
by insurance) affecting the business or assets of the Company or any Subsidiary
which, individually or in the aggregate, has had or would reasonably be
expected to have a Material Adverse Effect after giving effect to insurance; or
(f) any loss of a customer, client or business partner that, individually
or in aggregate, would be material to the business or financial condition of
the Company and its Subsidiaries, taken as a whole; or
(g) any change in any method of accounting or accounting practice by the
Company or any Subsidiary, except for any such change after the date hereof
required by reason of a concurrent change in or application of generally
accepted accounting principles.
SECTION 3.09. Litigation. Except as set forth in the Company SEC Documents
filed prior to the date hereof, there is no action, suit, investigation or
proceeding (or any basis therefor) pending against, or, to the knowledge of the
Company, threatened against or affecting, the Company, any of the Subsidiaries,
any present or former officer, director or employee of the Company or any of
the Subsidiaries or any Person for whom the Company or any Subsidiary may be
liable or any of their respective properties before any court or arbitrator or
before or by any governmental body, agency or official, domestic, foreign or
supranational, that, if determined or resolved adversely in accordance with the
plaintiff's demands, would reasonably be expected to have, individually or in
the aggregate, a Material Adverse Effect or that in any manner challenges or
seeks to prevent, enjoin, alter or materially delay any of the transactions
contemplated hereby.
SECTION 3.10. Compliance with Contracts. Neither the Company nor any
Subsidiary is in default under, and no condition exists that with notice or
lapse of time or both would constitute a default under, (i) any mortgage, loan
agreement, indenture or evidence of indebtedness for borrowed money to which
the Company or any Subsidiary is a party or by which the Company or any
Subsidiary or any material amount of their assets is bound or (ii) any
judgment, order or injunction of any court, arbitrator or governmental body,
agency, official or authority which defaults or potential defaults under either
clauses (i) or (ii), individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect.
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SECTION 3.11. Erisa Representations. (a) Schedule 3.11 sets forth each
"employee benefit plan", as defined in Section 3(3) of ERISA, that (i) is
subject to any provision of ERISA, (ii) is maintained, administered or
contributed to by the Company or any of its ERISA Affiliates and (iii) covers
any employee or former employee of the Company or any Subsidiary. Such plans
are hereinafter referred to as the "Employee Plans". The Company has furnished
or made available to the Investors or their counsel copies of such plans (and,
if applicable, related trust agreements) and all amendments thereto and written
interpretations thereof together with the most recent annual report prepared in
connection with any such plan (Form 5500 including, if applicable, Schedule B
thereto). No Employee Plan is and neither the Company nor any of its ERISA
Affiliates maintains, sponsors, or is obligated to contributed to, or has at
any time maintained, sponsored or been obligated to contribute to, a
Multiemployer Plan, a Title IV Plan or an employee benefit plan or arrangement
maintained in connection with any trust described in Section 501(c)(9) of the
Code.
(b) No "prohibited transaction", as defined in Section 406 of ERISA or
Section 4975 of the Code, has occurred with respect to any Employee Plan
excluding transactions effected pursuant to a statutory or administrative
exemption, which, assuming the taxable period of such transaction expired as of
the date hereof, when considered individually or in the aggregate with any
other such prohibited transaction, could subject the Company or any of its
Subsidiaries to a penalty or tax imposed by either Section 502(i) of ERISA or
Section 4975 of the Code in an amount which would be material.
(c) Each Employee Plan that is intended to be qualified under Section
401(a) of the Code is so qualified and has been so qualified during the period
from its adoption to date, and each trust created under any such Employee Plan
is exempt from tax under Section 501(a) of the Code and has been so exempt
during the period from creation to date. The Company has provided the Investors
or their counsel with the most recent determination letters of the Internal
Revenue Service relating to each such Employee Plan. Each Employee Plan has
been maintained in substantial compliance with its terms and with the
requirements prescribed by any and all applicable statutes, orders, rules and
regulations, including but not limited to ERISA and the Code.
(d) Schedule 3.11 sets forth each Benefit Arrangement. The Company has
furnished or made available to the Investors or their counsel copies or
descriptions of each Benefit Arrangement. Each Benefit Arrangement has been
maintained in substantial compliance with its terms and with the requirements
prescribed by any and all applicable statutes, orders, rules and regulations.
(e) Neither the Company nor any of its ERISA Affiliates has any current or
projected liability in respect of post-employment or post-retirement welfare
benefits for retired or former employees of the Company and any Subsidiary,
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except as required to avoid excise tax under Section 4980B of the Code or as
previously disclosed by the Company in writing to the Investors.
(f) Except as disclosed in writing to the Investors prior to the date
hereof, there has been no amendment to, written interpretation of or
announcement (whether or not written) by the Company or any of its ERISA
Affiliates relating to, or change in employee participation or coverage under,
any Employee Plan or Benefit Arrangement that would increase materially the
expense of maintaining such Employee Plan or Benefit Arrangement above the
level of the expense incurred in respect thereof for the fiscal year ended
prior to the date hereof.
(g) Except as set forth in Schedule 3.11, there is no contract, agreement,
plan or arrangement covering any employee or former employee of the Company or
any of its subsidiaries that, individually or collectively, could give rise to
the payment of any amount that would not be deductible pursuant to the terms of
Section 280G of the Code, except as previously disclosed by the Company in
writing to the Investors.
(h) No material tax under Section 4980B of the Code has been incurred in
respect of any Employee Plan that is a group health plan, as defined in Section
5000(b)(1) of the Code.
(i) No employee or former employee of the Company or any of its ERISA
Affiliates will become entitled to any bonus, retirement, severance, job
security or similar benefit or enhancement of such a benefit solely as a result
of the transactions contemplated by this Agreement.
SECTION 3.12. Tax Representations. Except for liabilities and penalties
which would not, individually or in the aggregate, reasonably be expected to
result in a Material Adverse Effect, (i) all Tax returns, statements, reports
and forms (including estimated tax returns and reports) required to be filed
with any Taxing Authority by or on behalf of the Company or any Subsidiary
(collectively, the "Returns"), have been or will be filed when due (taking into
account any extension of a required filing date) in accordance with all
applicable laws except where failure so to file would not subject the Company
or any Subsidiary to liabilities or penalties; (ii) as of the time of filing,
the Returns correctly reflected (and, as to any Returns not filed as of the
date hereof, will correctly reflect) the facts regarding the income, business,
assets, operations, activities and status of the Company, the Subsidiaries and
any other information required to be shown therein and complete in all material
respects; (iii) the Company and the Subsidiaries have timely paid, withheld or
made provision for all Taxes shown as due and payable on the Returns that have
been filed; (iv) the Company and the Subsidiaries have made or will on or
before the Closing Date make provision for all Taxes payable by the Company and
the Subsidiaries for any Tax period (or
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portion thereof) ending on or before the Closing Date for which no Return has
yet been filed; (v) the charges, accruals and reserves for Taxes with respect
to the Company and its Subsidiaries for any Tax period (or portion thereof)
ending on or before the Closing Date (excluding any provision for deferred
income taxes) reflected on the books of the Company and the Subsidiaries are
adequate to cover such Taxes; (vi) all consolidated federal income tax Returns
filed with respect to taxable years of the Company and the Subsidiaries through
the taxable year ended June 30, 1996 have been examined and closed or are
Returns with respect to which the applicable period for assessment under
applicable law, after giving effect to extensions or waivers, has expired;
(vii) neither the Company nor any Subsidiary is delinquent in the payment of
any Tax; (viii) neither the Company nor any Subsidiary (or any member of any
affiliated or combined group of which the Company or any Subsidiary is or has
been a member) has granted any extension or waiver of the limitation period
applicable to any Returns; (ix) there is no claim, audit, action, suit,
proceeding or investigation now pending or threatened against or with respect
to the Company or any Subsidiary of which the Company is aware in respect of
any Tax or assessment; (x) there are no liens for Taxes upon the assets of the
Company or any Subsidiary except liens for current Taxes not yet due; (xi)
neither the Company nor any of its Subsidiaries has any obligation under any
Tax sharing agreement, Tax allocation agreement or Tax indemnity agreement or
any other agreement or arrangement in respect of any Tax with any Person other
than the Company or its Subsidiaries; (xii) neither the Company nor any of its
Subsidiaries has been a member of an affiliated, consolidated, combined or
unitary group other than one of which the Company was the common parent;;
(xiii) proper and adequate amounts have been withheld by the Company and its
Subsidiaries from their respective employees and other Persons for all periods
in compliance in all material respects with the Tax, social security and
unemployment, excise and other withholding provisions of all federal, state,
local and foreign laws; and (xiv) the Company is not now and has not been
within the past five years, a "United States Real Property Holding Corporation"
as defined in the Code and applicable Treasury regulations thereunder.
SECTION 3.13. Insurance Coverage. The Company has insurance policies and
fidelity bonds covering its assets, business, equipment, properties,
operations, employees, officers and directors of the type and in amounts
customarily carried by Persons conducting businesses similar to those of the
Company and the Subsidiaries. All premiums due and payable under all such
policies and bonds have been paid, and the Company and the Subsidiaries are
otherwise in full compliance with the terms and conditions of all such policies
and bonds, except where the failure to have made payment or to be in full
compliance would not reasonably be expected to result in a Material Adverse
Effect.
SECTION 3.14. Compliance with Laws. Neither the Company nor any of the
Subsidiaries is in violation of, or has since the Balance Sheet Date violated,
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any applicable provisions of any laws, statutes, ordinances, regulations,
administrative interpretations, orders, judgments, policies or decrees of any
court or governmental or administrative authority that are applicable to the
Company, any of the Subsidiaries or their respective properties, other than
violations which do not have and would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect. The Company and
the Subsidiaries have all permits, licenses, certificates of authority, orders
and approvals of, and have made all filings, applications and registrations
with federal, state, local or foreign governmental or regulatory bodies that
are required in order to permit them to carry on their business substantially
as presently conducted, except for such permits, licenses, certificates of
authority, orders, appraisals, filings, applications or registrations the
failure so to have or to make would not reasonably be expected to have a
Material Adverse Effect. All such permits, licenses, certificates of authority,
orders and approvals are in full force and effect, and, to the knowledge of the
Company, no suspension or cancellation of any of them is threatened, and all
such filings, applications and registrations are current in all material
respects, except for such filings, applications and registrations which the
failure to have would not, individually or in the aggregate, reasonably be
expected to result in a Material Adverse Effect.
SECTION 3.15. Transactions with Affiliates. Except as set forth on
Schedule 3.15, no director or officer of the Company, or member of the family
of any such person, or any corporation, partnership, trust or other entity in
which any such person, or any member of the family of any such person, has a
substantial interest or is an officer, director, trustee, partner or holder of
more than 5% of the outstanding capital stock thereof, is a party to any
transaction with the Company or any Subsidiary, including any contract,
agreement or other arrangement providing for the employment of, furnishing of
services by, rental of real or personal property from or otherwise requiring
payments to any such person or firm, other than employment-at-will arrangements
or stock option agreements entered into in the ordinary course of business.
SECTION 3.16. Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
behalf of the Company or any Subsidiary who might be entitled to any fee or
commission from the Investors, the Company or any of their respective
Affiliates upon consummation of the transactions contemplated by this
Agreement.
SECTION 3.17. Antitakeover Statutes. The Company has taken all action
necessary to exempt the Transaction Agreements and the purchase of the
Securities or the transactions contemplated thereby from Section 1701.831 of
the Ohio Revised Code, and, accordingly, neither such Section nor any other
antitakeover or similar statute or regulation applies or purports to apply to
any such transactions. No other "control share acquisition," "fair price,"
"moratorium" or other antitakeover laws or regulations enacted under U.S. state
or
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federal laws apply to the Transaction Agreements and the purchase of the
Securities or any of the transactions contemplated thereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each Investor hereby represents and warrants to the Company that:
SECTION 4.01. Organization and Existence. Investor is a limited
partnership duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation and has all powers and all material
governmental licenses, authorizations, consents and approvals required to carry
on its business as now conducted.
SECTION 4.02. Authorization. The execution, delivery and performance by
Investor of the Transaction Agreements and the consummation by Investor of the
transactions contemplated thereby are within the powers of Investor and have
been duly authorized by all necessary action on the part of Investor. This
Agreement constitutes, and as of Closing the Investor Rights Agreement will
constitute, a valid and binding agreement of Investor, enforceable against
Investor in accordance with their respective terms, except for the
Enforceability Exceptions.
SECTION 4.03. Governmental Authorization. The execution, delivery and
performance by Investor of the Transaction Agreements require no action by or
in respect of, or filing with, any governmental body, agency, official or
authority other than compliance with any applicable requirements of the 1933
Act and applicable state securities laws.
SECTION 4.04. Non-contravention. The execution, delivery and performance
by Investor of the Transaction Agreements do not and will not (i) contravene or
conflict with its agreement of limited partnership (ii) assuming compliance
with the matters referred to in Section 4.03, contravene or conflict with or
constitute a violation of any provision of any law, regulation, judgment,
injunction, order or decree binding upon or applicable to Investor or (iii)
contravene any agreement, contract or other instrument of Investor, except, in
the case of those items specified in (ii) or (iii) above which would not,
individually or in the aggregate, either result in a material adverse effect on
the assets or financial condition of Investor and its subsidiaries, taken as a
whole, or entitle any party to challenge or hinder the transactions
contemplated hereby.
SECTION 4.05. Finders' Fees. There is no investment banker, broker, finder
or other intermediary which has been retained by or is authorized to act on
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behalf of Investor who might be entitled to any fee or commission from
Investor, the Company or any of their respective Affiliates upon consummation
of the transactions contemplated by this Agreement.
SECTION 4.06. Financing. Investor will have at Closing sufficient funds
available to purchase the Securities allocated to it.
SECTION 4.07. Purchase for Investment. (a) Investor is an "accredited
investor" within the meaning of Rule 501 under the 1933 Act and Investor was
not organized for the specific purpose of acquiring the Securities;
(b) Investor has sufficient knowledge and experience in investing in
companies similar to the Company so as to be able to evaluate the risks and
merits of its investment in the Company and Investor is able financially to
bear the risks thereof;
(c) Investor has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management and to obtain
whatever information concerning the Company and the Shares as has been
requested by Investor in order to make its investment decision with respect to
the Shares;
(d) the Securities being purchased by Investor are being acquired for its
own account for the purpose of investment and not with a view to or for sale in
connection with any distribution thereof;
(e) Investor understands that (i) the Securities have not been registered
under the 1933 Act and are being sold and issued to Investor in reliance upon
an exemption from the registration requirements of the 1933 Act pursuant to
Section 4(2) thereof or Rule 506 promulgated under the 1933 Act and under
applicable state securities laws, (ii) the Securities must be held indefinitely
unless a subsequent disposition thereof is registered under the 1933 Act and
under applicable state securities laws or is exempt from such registration,
(iii) the Securities will bear a legend to such effect, and (iv) the Company
will make a notation on its transfer books to such effect.
ARTICLE V
COVENANTS OF THE COMPANY
The Company agrees that:
SECTION 5.01. Access to Information. From the date hereof until the
Closing Date, the Company (a) will give, and will cause each Subsidiary to
give,
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<PAGE>
the Investors, their counsel, financial advisors, auditors and other authorized
representatives reasonable access to the offices, properties, books and records
of the Company and the Subsidiaries, (b) will furnish, and will cause each
Subsidiary to furnish, to the Investors, their counsel, financial advisors,
auditors and other authorized representatives such financial and operating data
and other information relating to the Company and the Subsidiaries as such
Persons may reasonably request and (c) will instruct the employees, counsel and
financial advisors of the Company and the Subsidiaries to cooperate in all
reasonable respects with the Investors in their investigation of the Company
and the Subsidiaries; provided that no investigation pursuant to this Section
shall affect any representation or warranty given by the Company hereunder.
Notwithstanding the foregoing, the Investors shall not have access to personnel
records of the Company or any Subsidiary relating to individual performance or
evaluation records, medical histories or other information which in the
Company's good faith opinion is sensitive or the disclosure of which could
subject the Company to risk of liability.
SECTION 5.02. Notices of Certain Events. The Company shall promptly notify
Investors of:
(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to the Company's knowledge, threatened against, relating to
or involving or otherwise affecting the Company or any Subsidiary that, if
pending on the date of this Agreement, would have been required to have
been disclosed pursuant to Sections 3.09 or 3.12 or that relate to the
consummation of the transactions contemplated by this Agreement.
SECTION 5.03. Use of Proceeds. The Company shall use the proceeds from the
sale of the Securities solely for (i) working capital (including, without
limitation, acquisitions of other businesses and/or technologies), (ii) the
Company's Frontstep initiative, and (iii) general business purposes.
SECTION 5.04. Corporate Governing Documents. The Company shall at all
times maintain provisions in its code of regulations and/or articles of
incorporation indemnifying all directors and officers against liability and
absolving all directors and officers from liability to the Company and its
shareholders to the maximum extent permitted under the laws of the State of
Ohio.
17
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SECTION 5.05. Restrictive Agreements Prohibited. The Company shall not
become a party to any agreement which by its terms restricts the Company's
performance of any of the Transaction Agreements, the Warrants or the Company's
Amended Articles of Incorporation, as amended.
SECTION 5.06. Voting Power. The Company shall use its reasonable best
efforts to amend its Amended Articles of Incorporation, as amended, at the next
annual meeting of the Company's shareholders and to take such other action in
accordance with Ohio law as required to allow the shares of any series of
preferred shares currently outstanding or designated in the future by action of
the Board of Directors to have the right to more than one vote per share,
including amending the Company's Amended Articles of Incorporation, as amended,
relating to the Series A Preferred Shares.
SECTION 5.07. Additional Warrants. If the Company, by dividend to holders
of the Common Shares, transfers ownership of all or a part of any Subsidiary to
shareholders of the Company, then promptly after the effective date of such
dividend the Company shall issue to the holders of any Warrants then
outstanding subsequent to such dividend additional warrants to purchase common
shares in such Subsidiary having substantially the same terms and conditions as
the Warrants except as provided in this Section 5.07. The number of common
shares of such Subsidiary covered by the additional warrants issued to each
such holder shall be sufficient to give the holder the same percentage
ownership in the outstanding common shares (calculated on a fully diluted
basis) of the Subsidiary that such holder has in the outstanding Common Shares
(calculated on a fully diluted basis) under the Warrants as of the effective
date of the dividend. The exercise price of each such additional warrant shall
be a dollar amount determined by dividing (1) the product of the Exercise Price
of a Warrant immediately prior to the public announcement multiplied by the
Daily Price per common share of the Subsidiary immediately after such dividend
by (2) the Current Market Price per Common Share immediately prior to the
public announcement of such dividend. For purposes hereof, the terms Exercise
Price, Daily Price and Current Market Price per Common Share shall be as such
terms are defined in the Warrant.
ARTICLE VI
COVENANTS OF INVESTORS
Each Investor agrees that:
SECTION 6.01. Notices of Certain Events. Investor shall promptly notify
the Company of:
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(i) any notice or other communication from any Person alleging that
the consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions
contemplated by this Agreement; and
(iii) any actions, suits, claims, investigations or proceedings
commenced or, to its knowledge threatened against, relating to or
involving or otherwise affecting Investor that relate to the consummation
of the transactions contemplated by this Agreement.
SECTION 6.02. Confidentiality. Investors shall keep confidential any
information (unless readily ascertainable from public information sources,
otherwise required by law to be disclosed or necessary in connection with any
litigation among the parties hereto) obtained from the Company and/or the
Subsidiaries in connection with the transactions contemplated by the
Transaction Agreements. The confidentiality obligations of Investors shall not
be construed to prevent an Investor from disclosing information concerning the
Company and the Subsidiaries, the Transaction Agreements or the Shares to its
respective employees, officers, directors, partners (general and limited),
counsel, accountants, professional advisors and regulatory authorities if the
Investor making such disclosure takes reasonable measures to ensure that such
confidential information is not misused by the recipients thereof and the
recipients otherwise abide by the restrictions on disclosure imposed on the
Investor hereunder as if such restrictions were imposed directly on the
recipients.
ARTICLE VII
COVENANTS OF ALL PARTIES
The parties hereto agree that:
SECTION 7.01. Best Efforts. Subject to the terms and conditions of this
Agreement, each party will use its reasonable best efforts to take, or cause to
be taken, all actions and to do, or cause to be done, all things necessary or
desirable under applicable laws and regulations to satisfy all conditions to
Closing set forth in Article VIII of this Agreement applicable to such party
and to consummate the transactions contemplated by this Agreement. The Company
and each Investor agree to execute and deliver such other documents,
certificates, agreements and other writings and to take such other actions as
may be necessary or desirable in order to consummate or implement expeditiously
the transactions contemplated by this Agreement.
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SECTION 7.02. Certain Filings; NASDAQ listing. The Company and the
Investors shall cooperate with one another (a) in determining whether any
actions, consents, approvals or waivers are required to be obtained from
parties to any material contracts, in connection with the consummation of the
transactions contemplated by this Agreement, (b) in taking such actions or
making any such filings, furnishing information required in connection
therewith and seeking timely to obtain any such actions, consents, approvals or
waivers, and (c) in causing the Common Shares underlying the Securities to be
listed on the NASDAQ Stock Market in accordance with the rules and regulations
of the NASDAQ Stock Market.
SECTION 7.03. Public Announcements. The parties agree to consult with each
other before issuing any press release or making any public statement with
respect to this Agreement or the transactions contemplated hereby and, except
as may be required by applicable law or any listing agreement with any national
securities exchange, will not issue any such press release or make any such
public statement prior to such consultation.
SECTION 7.04. Tax Consistency. The Company and the Investors confirm that
the Series A Preferred Shares are intended to be "common stock" for purposes of
the Code and agree not to take voluntarily any action inconsistent with such
intention.
ARTICLE VIII
CONDITIONS TO CLOSING
SECTION 8.01. Conditions to the Obligations of Each Party. The several
obligations of the Investors and the Company to consummate the Closing are
subject to the satisfaction of the following conditions:
(a) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the Closing; and
(b) No proceeding challenging this Agreement or the transactions
contemplated hereby or seeking to prohibit, alter, prevent or materially delay
the Closing shall have been instituted by any governmental body, agency,
official or authority before any court, arbitrator or governmental body, agency
or official and be pending.
SECTION 8.02. Conditions to Obligation of Investors. The obligations of
the Investors to consummate the Closing are subject to the satisfaction of the
following further conditions:
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(a) (i) the Company shall have performed in all material respects all of
its obligations hereunder required to be performed by it on or prior to the
Closing Date, (ii) the representations and warranties of the Company contained
in this Agreement and in any certificate or other writing delivered by the
Company pursuant hereto shall be true in all material respects at and as of the
Closing Date, as if made at and as of such date (except for such that refer to
an earlier date) and (iii) Investors shall have received a certificate signed
by an executive officer of the Company to the foregoing effect;
(b) The Investors Rights Agreement shall have been executed and delivered
by the Company, the Investors and Lawrence J. Fox;
(c) The Amendment shall have been filed with the Secretary of State of the
State of Ohio and shall read in its entirety as set forth in Exhibit A;
(d) The number of directors constituting the entire Board of Directors
shall have been fixed at no greater than nine (9) and the following persons
shall have been elected as directors and shall hold such position as of the
Closing Date: Guy de Chazal and Barry Goldsmith.
(e) Investor shall have received an opinion of Vorys, Sater, Seymour and
Pease LLP, counsel to the Company, dated the Closing Date in reasonable and
customary form. In rendering such opinions, counsel may rely upon certificates
of public officials, and as to matters of fact, upon certificates of officers
of the Company and the Subsidiaries;
(f) Investors shall have received all documents it may reasonably request
relating to the existence of the Company and the Subsidiaries and the authority
of the Company to execute and perform this Agreement, all in form and substance
reasonably satisfactory to the Investors.
SECTION 8.03. Conditions to Obligation of the Company. The obligation of
the Company to consummate the Closing is subject to the satisfaction of the
following further conditions:
(a) (i) Investors shall have performed in all material respects all of its
obligations hereunder required to be performed by them at or prior to the
Closing Date, and (ii) the representations and warranties of the Investors
contained in this Agreement and in any certificate or other writing delivered
by Investors pursuant hereto shall be true in all material respects at and as
of the Closing Date, as if made at and as of such date (except for such that
refer to an earlier date);
(b) Each Investor shall have signed the Investor Rights Agreement.
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(c) The Amendment and the Transaction Agreements (and the transactions
contemplated thereby) shall have been approved by the Board of Directors of the
Company.
ARTICLE IX
SURVIVAL
SECTION 9.01. Survival. The covenants, agreements, representations and
warranties of the parties hereto contained in this Agreement or in any
certificate or other writing delivered pursuant hereto or in connection
herewith shall survive the Closing. The representations and warranties of the
parties hereto contained in this Agreement shall be deemed made only as of the
date hereof and as of the Closing Date, in each case unless a different date is
specified in the representation and warranty.
ARTICLE X
TERMINATION
SECTION 10.01. Grounds for Termination. This Agreement shall terminate
upon either party giving notice of the termination of this Agreement as a
result of the occurrence of any of the following:
(a) by mutual written agreement of the Company and Investors having 75% or
more of the total commitment to purchase the Securities;
(b) if the Closing shall not have been consummated on or before May 31,
2000; or
(c) prior to Closing if after the date hereof there shall be any law or
regulation enacted or promulgated that makes consummation of the transactions
contemplated hereby illegal or otherwise prohibited or if consummation of the
transactions contemplated hereby would violate any nonappealable final order,
decree or judgment of any court or governmental body having competent
jurisdiction;
The party desiring to terminate this Agreement pursuant to this Section
10.01 shall give notice of such termination to the other party.
SECTION 10.02. Effect of Termination. If this Agreement is terminated as
permitted by Section 10.01, such termination shall be without liability of
either party (or any shareholder, director, officer, employee, agent,
consultant or representative of such party) to the other party to this
Agreement; provided that if such termination shall result from the willful
failure of either party to fulfill a
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condition to the performance of the obligations of the other party or to
perform a covenant of this Agreement or from a willful breach by either party
to this Agreement, such party shall be fully liable for any and all damages
incurred or suffered by the other party as a result of such failure or breach.
The provisions of Sections 6.02, 7.03, 10.02, 11.03 and 11.05 shall survive any
termination hereof pursuant to Section 10.01.
ARTICLE XI
MISCELLANEOUS
SECTION 11.01. Notices. All notices, requests and other communications to
either party hereunder shall be in writing (including telecopy or similar
writing) and shall be given,
if to the Company, to:
Symix Systems, Inc.
2800 Corporate Exchange Drive
Columbus, Ohio 43231
Attention: Corporate Counsel
Telecopy: (614) 895-2972
with a copy to:
Ivery D. Foreman, Esq.
Vorys, Sater, Seymour and Pease LLP
52 East Gay Street
Columbus, Ohio 43216-1008
Telecopy: (614) 464-6350
if to an Investor, to its address set forth on the signature pages hereto:
with copies to:
John A. Bick, Esq.
Davis Polk & Wardwell
450 Lexington Ave.
New York, New York 10017
Telecopy: (212) 450-4800
SECTION 11.02. Amendments; No Waivers. (a) Any provision of this Agreement
may be amended or waived if, and only if, such amendment or waiver is in
writing and signed, in the case of an amendment, by each Investor and the
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Company, or in the case of a waiver, by the party against whom the waiver is to
be effective.
(b) No failure or delay by either party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
SECTION 11.03. Expenses. All costs and expenses incurred in connection
with this Agreement shall be paid by the party incurring such cost or expense;
provided that the Company shall reimburse the Investors for their out-of-pocket
fees and expenses, including the fees and expenses of Davis Polk & Wardwell, up
to an aggregate amount not to exceed $150,000.
SECTION 11.04. Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and permitted assigns; provided that no party may assign,
delegate or otherwise transfer any of its rights or obligations under this
Agreement without the consent of the other parties hereto.
SECTION 11.05. Governing Law. This Agreement shall be construed in
accordance with and governed by the internal laws of the State of Ohio.
SECTION 11.06. Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
SECTION 11.07. Entire Agreement. The Transaction Agreements and the
Warrants constitute the entire agreement between the parties with respect to
the subject matter hereof (other than a writing which specifically states that
it shall not be subject to this Section 11.07) and supersede all prior
agreements, understandings and negotiations, both written and oral, between the
parties with respect to the subject matter of the Transaction Agreements and
the Warrants (other than a writing which specifically states that it shall not
be subject to this Section 11.07). No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made or
relied upon by any party hereto. Neither this Agreement nor any provision
hereof is intended to confer upon any Person other than the parties hereto any
rights or remedies hereunder.
SECTION 11.08. Specific Performance. Each of the parties hereto agrees
that any breach by it of any provision of this Agreement would irreparably
injure the other party and that money damages would be an inadequate remedy
therefor. Accordingly, each of the parties hereto agrees that the other party
shall be entitled
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to one or more injunctions enjoining any such breach or requiring specific
performance of this Agreement and consents to the entry thereof, this being in
addition to any other remedy to which the non-breaching party is entitled at
law or in equity.
SECTION 11.09. Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or interpretation
hereof.
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IN WITNESS WHEREOF, the parties hereto here caused this Agreement to be
duly executed by their respective authorized officers as of the day and year
first above written.
SYMIX SYSTEMS, INC.
By /s/ Stephen A. Sasser
---------------------------------------
Stephen A. Sasser
President and Chief Executive Officer
Investors:
MORGAN STANLEY DEAN WITTER VENTURE PARTNERS IV, L.P.
MORGAN STANLEY DEAN WITTER VENTURE INVESTORS IV, L.P.
MORGAN STANLEY DEAN WITTER VENTURE OFFSHORE
INVESTORS IV, L.P.
By: MSDW Venture Partners IV, L.L.C.
as General Partner of the above limited partnerships
By: MSDW Venture Capital IV, Inc.,
as Member
By: /s/ Guy de Chazal
--------------------------------------
Name: Guy de Chazal
Title: Managing Director
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: 212-762-8424
MORGAN STANLEY DEAN WITTER
EQUITY FUNDING, INC.
By: /s/ Thomas Clayton
--------------------------------------
Name: Thomas Clayton
Title: Vice President
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: 212-762-8424
Attention: Controller
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FALLEN ANGEL EQUITY FUND, L.P.
By: Fallen Angel Capital, L.L.C.
as its General Partner
By: Barry Goldsmith,
as Member
By: /s/ Barry Goldsmith
--------------------------------------
Name: Barry Goldsmith
Title: Member
Address: 960 Holmdel Road
Holmdel, New Jersey 07733
Fax: 732-946-0519
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SCHEDULE I
Investors
<TABLE>
Number of Aggregate
Preferred Number of Purchase Price
Shares Warrants for All
Name and Address of Investor to be Purchased to be Purchased Securities
- ---------------------------- --------------- --------------- --------------
<S> <C> <C> <C>
(a) Morgan Stanley Dean Witter Venture 271,650 217,320 $6,585,456
Partners IV, L.P.
(b) Morgan Stanley Dean Witter Venture 31,516 25,212 $764,016
Investors IV, L.P.
(c) Morgan Stanley Dean Witter Venture 10,598 8,478 $256,920
Offshore Investors, L.P.
(d) Morgan Stanley Dean Witter Equity 86,502 69,202 $1,999,992
Funding, Inc.
(d) Fallen Angel Equity Fund, L.P. 166,667 133,334 $4,000,008
Totals 566,933 453,546 $13,606,392
</TABLE>
