<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(MARK ONE)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ____________________
Commission File Number 0-19024
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Symix Systems, Inc.
---------------------------------------
(Exact name of registrant as specified in its charter)
Ohio 31-1083175
---- ----------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)
2800 Corporate Exchange Drive
Columbus, Ohio 43231
--------------------
(Address of principal executive offices)
(Zip Code)
(614) 523-7000
--------------
(Registrant's telephone number, including area code)
N/A
---
(Former name, former address and former fiscal year,
if changed since last report)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
YES X NO
--- ---
The number of common shares, without par value, of the registrant
outstanding as of May 8, 2000 was 7,503,657.
<PAGE> 2
INDEX
PAGE NO.
PART I. FINANCIAL INFORMATION 3
Item 1. Financial Statements 3
Consolidated Balance Sheets
March 31, 2000 (unaudited)
June 30, 1999 3
Consolidated Statements of Operations (unaudited)
Three Months and Nine Months
Ended March 31, 2000 and 1999 5
Consolidated Statements of Cash Flows (unaudited)
Nine Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Financial Statements (unaudited) 8
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 13
Item 3. Quantitative and Qualitative Disclosures About Market Risk 17
PART II. OTHER INFORMATION 18
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults Upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 20
EXHIBIT INDEX 21
2
<PAGE> 3
PART I -- FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS.
SYMIX SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
----------------- ----------------
(unaudited)
<S> <C> <C>
ASSETS
CURRENT ASSETS
Cash and cash equivalents $4,187 $5,236
Trade accounts receivable, less allowance for
doubtful accounts of $1,595 at March 31, 2000
and $1,500 at June 30, 1999 45,205 46,251
Inventories 857 767
Prepaid expenses 2,686 2,518
Other receivables 1,480 1,346
Income tax benefit 2,150 -
Deferred income taxes 833 811
----------------- ----------------
TOTAL CURRENT ASSETS 57,398 56,929
OTHER ASSETS
Purchased and developed software, net of accumulated
amortization of $13,300 at March 31, 2000
and $10,833 at June 30, 1999 18,780 16,250
Deferred income taxes 1 -
Intangibles, net 11,890 7,191
Deposits and other assets 2,310 2,033
----------------- ----------------
32,981 25,474
EQUIPMENT AND IMPROVEMENTS
Furniture and fixtures 3,693 3,101
Computer and other equipment 17,444 15,767
Leasehold improvements 1,533 1,472
----------------- ----------------
22,670 20,340
Less allowance for depreciation and amortization 14,812 12,143
----------------- ----------------
7,858 8,197
----------------- ----------------
TOTAL ASSETS $98,237 $90,600
================= ================
See notes to consolidated financial statements
</TABLE>
3
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SYMIX SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS (Continued)
(In thousands)
<TABLE>
<CAPTION>
March 31, June 30,
2000 1999
----------------- ----------------
(unaudited)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $11,079 $16,052
Customer deposits 34 148
Deferred revenue 17,050 17,209
Deferred tax liability 57 -
Income taxes payable - 470
Current portion of long term obligations 5,352 1,124
----------------- ----------------
TOTAL CURRENT LIABILITIES 33,572 35,003
LONG-TERM OBLIGATIONS 151 392
BANK CREDIT AGREEMENT 12,256 5,367
DEFERRED INCOME TAXES 6,317 5,417
MINORITY INTEREST 2,125 2,020
SHAREHOLDERS' EQUITY
Common stock, authorized 20,000 shares; issued 7,806 shares
at March 31, 2000, and 7,654 at June 30, 1999; at stated
capital amounts of $.01 per share 78 76
Capital in excess of stated value 34,845 32,363
Retained earnings 12,826 13,496
Cumulative translation adjustment (2,613) (2,214)
----------------- ----------------
45,136 43,721
Less: Cost of common shares in treasury,
304 shares at March 31, 2000
and June 30, 1999, at cost (1,320) (1,320)
----------------- ----------------
TOTAL SHAREHOLDERS' EQUITY 43,816 42,401
----------------- ----------------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $98,237 $90,600
================= ================
</TABLE>
See notes to consolidated financial statements
4
<PAGE> 5
SYMIX SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share data)
(unaudited)
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
--------------------------------- ------------------------------
2000 1999 2000 1999
--------------- ---------------- ------------ -------------
<S> <C> <C> <C> <C>
License fees $14,043 $14,137 $42,973 $47,635
Service, maintenance and support 17,425 17,188 54,946 43,682
--------------- ---------------- ------------ -------------
Net revenue 31,468 31,325 97,919 91,317
License fees 4,644 4,274 13,673 12,828
Service, maintenance and support 9,484 8,975 30,477 23,337
--------------- ---------------- ------------ -------------
Cost of revenue 14,128 13,249 44,150 36,165
--------------- ---------------- ------------ -------------
Gross Margin 17,340 18,076 53,769 55,152
--------------- ---------------- ------------ -------------
Selling, general and administrative 14,203 13,647 39,061 40,027
Research and product development 3,944 2,617 11,581 7,063
Amortization of intangibles from acquisitions 934 533 2,462 1,576
Acquisition research and development write-off 638 - 638 -
--------------- ---------------- ------------ -------------
Total operating expenses 19,719 16,797 53,742 48,666
--------------- ---------------- ------------ -------------
Operating income (loss) (2,379) 1,279 27 6,486
Interest and other income (expense), net (252) 26 (719) 117
--------------- ---------------- ------------ -------------
Income (loss) before income taxes (2,631) 1,305 (692) 6,603
Provision (benefit) for income taxes (777) 522 (21) 2,634
--------------- ---------------- ------------ -------------
Net income (loss) ($1,854) $783 ($671) $3,969
=============== ================ ============ =============
Basic EPS:
Net income (loss) per share ($0.25) $0.12 ($0.09) $0.60
=============== ================ ============ =============
Diluted EPS:
Net income (loss) per share ($0.25) $0.11 ($0.09) $0.54
=============== ================ ============ =============
Weighted average number of common
shares outstanding 7,428 6,700 7,380 6,657
=============== ================ ============ =============
Weighted average number of common
shares outstanding assuming dilution 7,428 7,309 7,380 7,283
=============== ================ ============ =============
</TABLE>
See notes to consolidated financial statements
5
<PAGE> 6
SYMIX SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
---------------------------------
2000 1999
-------------- --------------
Increase (decrease) in cash
<S> <C> <C>
OPERATING ACTIVITIES
Net income (loss) ($671) $3,969
Adjustments to reconcile net income (loss)
to net cash provided by operating activities:
Acquisition research and development write-off 638 --
Depreciation and amortization 8,550 5,722
Provision for losses on accounts receivable 95 164
Provision for deferred income taxes (1,120) 193
Changes in operating assets and liabilities:
Trade accounts receivable 683 (6,880)
Prepaid expenses and other receivables (130) (1,282)
Inventory (91) (228)
Deposits (299) (220)
Accounts payable and accrued expenses (5,766) (2,192)
Customer deposits (101) (171)
Deferred revenue (236) 2,652
Income taxes payable/refundable (725) (196)
-------------- --------------
NET CASH PROVIDED BY
OPERATING ACTIVITIES 827 1,531
</TABLE>
See notes to consolidated financial statements
6
<PAGE> 7
SYMIX SYSTEMS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS (continued)
(In thousands)
(unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
---------------------------------
2000 1999
-------------- --------------
Increase (decrease) in cash
<S> <C> <C>
INVESTING ACTIVITIES
Purchase of equipment and improvements (2,463) (2,516)
Additions to purchased and developed software (4,639) (3,490)
Purchase of subsidiaries, net of cash acquired (2,116) (638)
-------------- --------------
NET CASH USED BY
INVESTING ACTIVITIES (9,218) (6,644)
FINANCING ACTIVITIES
Proceeds from issuance of common
stock and exercise of stock options 1,357 1,118
Additions to long-term obligations, net of 5,982 926
payments
-------------- --------------
NET CASH PROVIDED
BY FINANCING ACTIVITIES 7,339 2,044
Effect of exchange rate changes on cash 3 215
-------------- --------------
Net change in cash (1,049) (2,854)
Cash at beginning of period 5,236 6,115
-------------- --------------
CASH AT END OF PERIOD $4,187 $3,261
============== ==============
</TABLE>
See notes to consolidated financial statements
7
<PAGE> 8
SYMIX SYSTEMS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Note A - Accounting Policies and Presentation
The accompanying consolidated financial statements are unaudited;
however, the information contained herein reflects all adjustments which are, in
the opinion of management, necessary for a fair statement of the results of
operations for the interim periods. All adjustments made were of a normal
recurring nature. These interim results of operations are not necessarily
indicative of the results to be expected for a full year.
The notes to the consolidated financial statements contained in the
Symix Systems, Inc. and Subsidiaries' (the "Company") June 30, 1999 Annual
Report to Shareholders should be read in conjunction with these financial
statements. Certain reclassifications have been made to conform prior quarter
amounts to the current quarter presentation.
In the first quarter of fiscal 1999, the Company adopted Statement of
Position ("SOP") 97-2, "Software Revenue Recognition," as amended by SOP 98-4,
which provides guidance on applying generally accepted accounting principles in
recognizing revenue on software transactions. The adoption of the SOPs, in
certain circumstances, has resulted and may in the future result in the deferral
of software license revenues that would have been recognized upon delivery of
the related software under the preceding accounting standard, SOP 91-1.
In December 1998, SOP 98-9 was issued which modified SOP 97-2 with
respect to certain transactions. The Company adopted SOP 98-9 in the first
quarter of fiscal 2000.
Note B - Acquisitions
On February 9, 2000, the Company acquired Profit Solutions, Inc.
("PSI"), a Minnesota corporation and provider of Web-centric customer
relationship management applications with sales, marketing, service and business
intelligence functionality, for approximately $2.1 million in cash paid at
closing and $5.0 million in unsecured, subordinated promissory notes to be paid
off by January 2, 2001. The transaction was accounted for as a purchase and
resulted in a one-time, non-recurring charge of $638,000 relating to the
write-off of acquired in-process technology of PSI.
On June 10 1999, the Company acquired Distribution Architects
International, Inc. ("DAI") for 619,000 common shares of the Company and
$813,000 in cash. Pursuant to the acquisition agreement, DAI was merged with and
into a wholly-owned subsidiary of the Company incorporated in Ohio, and each
share of DAI common stock was converted into the right to receive .1313 common
shares of the Company. Each DAI option outstanding immediately prior to the
merger was canceled and terminated. The holder of each option was entitled to
receive that number of Symix shares equal to $2.17 (the per share value of DAI
stock
8
<PAGE> 9
as agreed to by DAI and Symix) less $1.242 (the stock option exercise price),
multiplied by the number of shares of DAI covered by the option, and divided by
$18.50. DAI is a provider of supply chain management applications for
distribution organizations. The transaction was accounted for as a purchase and
resulted in a one-time, non-recurring charge of $835,000 relating to the
write-off of acquired in-process technology of DAI.
The following proforma information shows revenue and net income
assuming the Company, DAI, and PSI had been combined at the beginning of the
period indicated. The one time, non-recurring charge of approximately $835,000
related to the DAI acquisition, and the one time, non-recurring charge of
$638,000 related to the PSI acquisition, are excluded from proforma net income.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
2000 1999 2000 1999
------------------- --------------- -------------- --------------
(In thousands, except per share data)
<S> <C> <C> <C> <C>
Revenue $31,500 $33,722 $98,344 $100,453
Net income (loss) ($1,562) $561 ($1,354) $4,000
Earnings (loss) per share ($0.21) $0.07 ($0.18) $0.51
</TABLE>
Note C - Business Segment and Geographic Information
The Company has adopted the provisions of Statement of Financial
Accounting Standards No. 131, "Disclosures about Segments of an Enterprise and
Related Information" ("SFAS No. 131"). SFAS No. 131 establishes standards for
the way that companies report information about operating segments, geographic
areas, and major customers.
The Company designs, develops, markets and supports integrated
manufacturing, supply chain management, financial and e-commerce software
solutions that address the enterprise requirements of mid-size manufacturing and
distribution companies and business units of larger companies. The Company
manages its operations targeting manufacturing and distribution as a single
business unit and, therefore, only reports one primary segment.
9
<PAGE> 10
The amount of net revenue, operating income (loss), and identifiable
assets attributable to each of the Company's geographic areas for the quarter
and nine months ended March 31, 2000 and 1999, respectively, was as follows:
<TABLE>
<CAPTION>
North Asia
America Pacific Europe
------------- ------------ -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
QUARTER ENDED MARCH 31, 2000
Net Revenue $24,778 79% $2,993 10% $3,697 11%
Operating income (loss) ($1,412) 59% ($453) 19% ($514) 22%
Identifiable assets $78,818 80% $9,096 9% $10,323 11%
QUARTER ENDED MARCH 31, 1999
Net Revenue $25,310 81% $2,542 8% $3,473 11%
Operating income (loss) $2,829 221% ($99) (8%) ($1,451) (113%)
Identifiable assets $53,863 73% $7,689 10% $11,794 17%
</TABLE>
<TABLE>
<CAPTION>
North Asia
America Pacific Europe
------------- ------------ -------------
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
NINE MONTHS ENDED MARCH 31, 2000
Net Revenue $77,551 79% $9,377 10% $10,991 11%
Operating income (loss) $2,435 9019% ($383) (1419%) ($2,025) (7500%)
Identifiable assets $78,818 80% $9,096 9% $10,323 11%
NINE MONTHS ENDED MARCH 31, 1999
Net Revenue $70,677 76% $8,335 9% $12,305 13%
Operating income (loss) $6,843 106% $597 9% ($954) (15%)
Identifiable assets $53,863 73% $7,689 10% $11,794 17%
</TABLE>
10
<PAGE> 11
Note D - Earnings per Share
The following table sets forth the computation of basic and diluted
earnings per share (in thousands except per share data):
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
---------------------------- ----------------------------
2000 1999 2000 1999
------------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
NUMERATOR:
Net income (loss) for both basic and diluted
earnings (loss) per share ($1,854) $783 ($671) $3,969
============= ============ ============ ============
DENOMINATOR:
Weighted-average shares outstanding 7,428 6,696 7,380 6,581
Contingently issuable shares - 4 - 76
------------- ------------ ------------ ------------
Denominator for basic earnings (loss)
per share 7,428 6,700 7,380 6,657
Effect of dilutive securities:
Employee stock options - 609 - 626
------------- ------------ ------------ ------------
Denominator for diluted earnings (loss)
per share 7,428 7,309 7,380 7,283
============= ============ ============ ============
Basic earnings (loss) per share ($0.25) $0.12 ($0.09) $0.60
============= ============ ============ ============
Diluted earnings (loss) per share ($0.25) $0.11 ($0.09) $0.54
============= ============ ============ ============
</TABLE>
11
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Note E - Comprehensive Income
The Company adopted SFAS No. 130, "Reporting Comprehensive Income"
("SFAS No. 130"), as of July 1, 1998. SFAS No. 130 requires disclosure of total
non-stockholder changes in equity in interim periods and additional disclosures
of the components of non-stockholder changes in equity on an annual basis. Total
non-stockholder changes in equity include all changes in equity during the
period except those resulting from investments by and distributions to
stockholders.
<TABLE>
<CAPTION>
Three Months Nine Months
Ended March 31, Ended March 31,
--------------------------------- ------------------------------
2000 1999 2000 1999
------------------ ------------- -------------- --------------
(In thousands)
<S> <C> <C> <C> <C>
Net income (loss) ($1,854) $783 ($671) $3,969
Foreign currency translation adjustments (483) (193) (401) 30
------------------ ------------ -------------- --------------
Total comprehensive income (loss) ($2,337) $590 ($1,072) $3,999
================== ============ ============== ==============
</TABLE>
Note F - Loan Covenants
The Company has an unsecured revolving line of credit with Bank One, NA
(the "Bank") in the amount of $15 million, of which $12.3 million had been
borrowed by the Company at the end of the last fiscal quarter. At March 31,
2000, the Company was in default of certain financial covenants in the existing
loan agreement with the Bank relating to the credit facility. The default did
not relate to any payment due under the credit facility. On May 10, 2000, the
Bank delivered to the Company a written waiver of the default, which is subject
to revocation by the Bank if the parties do not execute a revised loan agreement
with respect to the line of credit by May 18, 2000. The Company and the Bank
have negotiated the provisions of a revised loan agreement. The Company expects
to have the revised agreement executed by May 18, 2000. It is expected that the
Bank will be granted a first lien on the Company's accounts receivable with
advances under the revised loan agreement limited to 75% of eligible accounts
receivable (as defined).
Note G - Subsequent Events
On May 10, 2000, the Company sold 566,933 Series A Convertible
Participating Preferred Shares, each without par value (the "Series A Preferred
Shares"), to a group of unaffliliated accredited investors for $24.00 per share,
or an aggregate of approximately $13.6 million in cash. The Series A Preferred
Shares were not registered under the Securities Act of 1933, as amended (the
"Act") in reliance upon an exemption from registration under Section 4(2) of the
Act and Rule 506 promulgated by the Securities and Exchange Commission under the
Act.
Each Series A Preferred Share is convertible by the holder, in whole or
in part, at any time into two (2) common shares, no par value, of the Company
(the "Common Shares"), subject to certain adjustments, at the conversion price
of $12.00 per share, subject to adjustments. Each holder of the Series A
Preferred Shares is entitled to one (1) vote per share held on all matters
submitted to shareholders for their vote, provided that the Company has agreed
to use its reasonable best efforts to cause its articles of incorporation to be
amended to allow each holder of the Series A Preferred Shares to exercise two
(2) votes for each share held. The Series A Preferred Shares rank prior to the
Common Shares with respect to dividend and liquidation rights.
In connection with the sale of the Series A Preferred Shares, the
Company issued to the accredited investors on May 10, 2000 warrants to purchase
453,546 Common Shares at an exercise price of $15.00 per share (the "Warrants").
The Warrants were issued in reliance upon an exemption from registration under
Section 4(2) of the Act and Rule 506 promulgated by the Securities and Exchange
Commission under the Act. The Warrants expire on May 10, 2005 and are
exercisable at any time prior to their expiration.
12
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
OVERVIEW
Symix Systems, Inc. ("Symix" or the "Company") designs, develops,
markets and supports integrated manufacturing, supply chain management,
financial and e-commerce software solutions that address the enterprise
requirements of mid-size manufacturing and distribution companies and business
units of larger companies.
REVENUE
Symix's net revenue is derived primarily from (1) licensing Symix
software and providing custom programming services; (2) providing installation,
implementation, training, consulting and systems integration services; and (3)
providing maintenance and support on a subscription basis. Revenue for all
periods presented is accounted for in accordance with AICPA Statement of
Position 97-2 on Software Revenue Recognition.
Net revenue was $31.5 million for the three months ended March 31,
2000, compared to $31.3 million for the third quarter of fiscal 1999. A slight
increase in service, maintenance and support revenue was offset by a minimal
decrease in license fee revenue. For the nine months ended March 31, 2000, net
revenue was $97.9 million, an increase of 7% from the same period of the
previous year. The increase is attributable to the growth of service,
maintenance and support revenue to $54.9 million for the nine months ended March
31, 2000, an increase of 26% from the same period last year, which growth was
offset by a 10% decline in license fee revenue.
Symix continues to be impacted by the industry-wide trend of delays in
new business system purchases due to the Year 2000 market dynamics. As a result
of this trend, license fee revenue declined 1% from $14.1 million at March 31,
1999 to $14.0 million at March 31, 2000. The trend is more pronounced for the
nine month comparison. License fee revenue declined 10% from $47.6 million at
March 31, 1999 to $43.0 million at March 31, 2000. The Company believes that the
interest in traditional business system purchases is increasing, however, the
Company is also seeing a market shift in the level of interest in Internet
applications and services.
Service, maintenance and support revenue increased to $17.4 million for
the quarter ended March 31, 2000, a 1% increase from the same quarter last year,
and to $54.9 million for the nine months ended March 31, 2000, a 26% increase
from the same period last year. As a result of the slowdown in license fee
revenue due to Year 2000 issues over the past couple of quarters, service,
maintenance and support revenue increased only nominally for the three month
period ended March 31, 2000. The increase, although slowed for the nine month
period, in the service, maintenance and support revenue, is the result of
expansion of the services infrastructure to meet the increase in new software
license customers which occurred during quarters prior to this fiscal year, as
well as the expanding product line of Symix. Additionally, the acquisition of
13
<PAGE> 14
Distribution Architects International, Inc. ("DAI"), which occurred late in the
fourth quarter of last year, contributed to the increase in service, maintenance
and support revenue for the current year.
COST OF REVENUE
Total cost of revenue as a percentage of net revenue was 45% for the
quarter ended March 31, 2000, compared to 42% for the quarter ended March 31,
1999. The nine month comparison was similar to the three month comparison, with
cost of revenue as a percentage of net revenue of 45% at March 31, 2000,
compared to 40% at March 31, 1999. For the quarterly comparison, the increase is
primarily due to the rate of amortization on capitalized software development.
For the nine month comparison, the increase is primarily due to the mix of
license fee, versus service, maintenance and support revenue, wherein higher
costs are associated with producing service, maintenance and support revenue
than license fee revenue.
Cost of license fees includes royalties, amortization of capitalized
software development costs and software delivery expenses. Cost of license fees
increased to 33% of license fee revenue for the quarter ended March 31, 2000
from 30% for the same period last year. The percentage increase is attributable
to the increase in the rate of amortization on capitalized software expenses
relative to license fee revenue. Symix began amortizing capitalized software
costs related to the new product initiative, SyteCentre, during the end of the
1999 fiscal year. The nine month comparisons are consistent with the quarter
ended March 31 results.
Cost of service, maintenance and support includes the personnel and
related overhead costs for implementation, training, and customer support
services, together with fees paid to third parties for subcontracted services.
Cost of service, maintenance and support increased to 54% of service,
maintenance and support revenue for the quarter from 52% for the same period
last year. The increase in costs during the quarter ended March 31, 2000,
compared to the same quarter last year, is due to the increase in the use of
subcontractors to supplement the work performed by Symix employees. In general,
the use of subcontractors results in lower margins than the use of employees but
provides to Symix increased flexibility in meeting customer demands. The nine
month comparisons are consistent with the quarter ended March 31 results.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Selling, general and administrative expense consists of personnel and
related overhead costs, including commissions, for the sales, marketing, general
and administrative activities of Symix, together with advertising and
promotional costs. Selling, general and administrative expense increased 4% for
the quarter ended March 31, 2000 from the same quarter of 1999 and, as a
percentage of revenue, increased from 44% at March 31, 1999 to 45% at March 31,
2000. The increase this quarter is attributable to the Company's investment in
its eBusiness operations, an Internet suite of applications and deployment
services. For the nine month period ended March 31, 2000, selling, general and
administrative expense actually declined from the comparable period last year,
from $40.0 million to $39.1 million, a 2% decrease. The decline in selling,
general and administrative expense is related to the reduction of expenses in
the sales distribution channels in response to difficult market conditions.
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<PAGE> 15
RESEARCH AND DEVELOPMENT
Research and product development expense includes personnel and related
overhead costs for product development, enhancement, upgrades, quality assurance
and testing. Research and product development expense, including amounts
capitalized for the three months ended March 31, 2000, was $5.1 million compared
to $3.7 million for the same period last year. For the nine months ended March
31, 2000, research and product development expense, including amounts
capitalized, was $14.8 million compared to $10.3 million for the same period
last year. Capitalization of software development costs was $1.1 million for the
quarter ended March 31, 2000, compared to $1.0 million for the comparable period
last year. For the nine month period ended March 31, 2000, $3.3 million was
capitalized compared to $3.2 million for the same period last year. As a
percentage of revenue, net of software capitalized, research and product
development expense increased to 13% for the quarter ended March 31, 2000, from
8% for the quarter ended March 31, 1999. In terms of actual dollars, research
and product development expense for the quarter ended March 31, 2000, net of
software capitalized, increased 51% from the same quarter last year. For the
nine month comparison, as a percentage of net revenue, net of software
capitalized, research and product development expense increased to 12% for the
period ending March 31, 2000 from 8% for the period ended March 31, 1999. In
terms of actual dollars, research and product development expense for the nine
months ended March 31, 2000, net of software capitalized, increased 64% from the
same period of last year. The increase in research and product development
expense is the result of investments in the expanding product offerings of
Symix, including Symix's accelerating eBusiness and supply chain management
solutions.
PROVISION FOR INCOME TAXES
The effective tax rate for the quarter as well as the nine months ended
March 31, 2000, excluding this quarter's non-recurring charge, was 39%, whereas,
for the quarter as well as the nine months ended March 31, 1999, the rate was
40%. Historically, the increase in the effective tax rate has been due to the
amount of foreign taxable earnings in countries with higher effective rates and
the non-deductibility of the amortization of intangibles, thereby increasing
Symix's overall tax rate. Symix recently has implemented a tax restructuring
plan to lower state income tax rates which is expected to slightly lower the
overall effective tax rate.
LIQUIDITY AND CAPITAL RESOURCES
Symix's operating activities provided cash of $827,000 during the nine
month period ended March 31, 2000, compared to $1.5 million in cash during the
same period in 1999. In both periods, cash provided by operating activities was
due principally to earnings after adjustments for non-cash charges, offset by
the decrease in trade and tax payables related to year end. The accounts
receivable days sales outstanding was 106 days at March 31, 1999, compared to
118
15
<PAGE> 16
days at March 31, 2000. An increase in installment payments on software license
fees from new customers (particularly on large deals) has contributed to the
increase in days sales outstanding. For the nine months ended March 31, 2000,
cash was used for the acquisition of Profit Solutions, Inc. For both periods
presented, cash provided by financing activities was used to fund software
development costs and to purchase computer equipment.
As of March 31, 2000, the Company had $23.8 million in working capital,
including $4.2 million in cash and cash equivalents. The Company had accessed
its $15.0 million unsecured revolving line of credit for $12.3 million as of
March 31, 2000. On May 10, 2000, the Company completed the sale of 566,933
Series A Convertible Participating Preferred Shares in a private placement to
unaffiliated accredited investors for an aggregate of approximately $13.6
million in cash. The proceeds from the sale will be used for working capital and
general business purposes, including the Company's e-business initiatives. It is
expected that the continued expansion of the Company's operations and product
line will result in additional requirements for cash in the future, which will
be met during the next 12 months through cash from operations, the existing line
of credit and the proceeds from the recent private placement.
The Company and Bank One, N.A. (the "Bank") have negotiated the
provisions of a revised loan agreement. The Company expects to have the revised
agreement executed by May 18, 2000. It is expected that the Bank will be granted
a first lien on the Company's accounts receivable with advances under the
revised loan agreement limited to 75% of eligible accounts receivable (as
defined).
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
IN ADDITION TO HISTORICAL INFORMATION, THIS QUARTERLY REPORT ON FORM
10-Q CONTAINS "FORWARD-LOOKING STATEMENTS", INCLUDING INFORMATION REGARDING
FUTURE ECONOMIC PERFORMANCE AND PLANS AND OBJECTIVES OF MANAGEMENT, WHICH ARE
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES THAT COULD CAUSE ACTUAL RESULTS TO
DIFFER MATERIALLY FROM THOSE REFLECTED IN THE FORWARD-LOOKING STATEMENTS. IN
SOME CASES, INFORMATION REGARDING CERTAIN IMPORTANT FACTORS THAT COULD CAUSE
ACTUAL RESULTS TO DIFFER MATERIALLY FROM A FORWARD-LOOKING STATEMENT APPEAR
TOGETHER WITH SUCH STATEMENT. OTHER UNCERTAINTIES AND RISKS INCLUDE, BUT ARE NOT
LIMITED TO, DEMAND FOR AND MARKET ACCEPTANCE OF THE COMPANY'S PRODUCTS; THE
IMPACT OF COMPETITIVE PRODUCTS; THE COMPANY'S ABILITY TO MAINTAIN EFFICIENT
MARKETING AND DISTRIBUTION OPERATIONS DOMESTICALLY AND INTERNATIONALLY; FUTURE
WORLDWIDE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS; THE COMPANY'S ABILITY TO
ATTRACT AND RETAIN HIGHLY SKILLED TECHNICAL, MANAGERIAL, SALES, MARKETING,
SERVICE AND SUPPORT STAFF AND TO RETAIN KEY TECHNICAL AND MANAGEMENT PERSONNEL;
TIMING OF PRODUCT DEVELOPMENT AND GENERAL RELEASE; PRODUCT PRICING AND OTHER
FACTORS DETAILED IN THIS QUARTERLY REPORT ON FORM 10-Q AND IN OTHER FILINGS MADE
BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION. THE COMPANY IS NOT
OBLIGATED TO UPDATE OR REVISE THESE FORWARD-LOOKING STATEMENTS TO REFLECT NEW
EVENTS OR CIRCUMSTANCES.
16
<PAGE> 17
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
A discussion and analysis of foreign exchange risks relating to the
Company is set forth in Item 7A--Quantitative and Qualitative Disclosures About
Market Risk in the Company's Annual Report on Form 10-K for the fiscal year
ended June 30, 1999 under the caption "Foreign Exchange". No material changes in
the information provided under that item have occurred.
17
<PAGE> 18
PART II -- OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is subject to legal proceedings and claims which arise in
the normal course of business. While the outcome of these matters cannot be
predicted with certainty, management does not believe the outcome of any of
these legal matters will have a material adverse effect on the Company's
business, financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS.
(a) Not applicable.
(b) and (c) Please see the discussion below under "Item 5--Other
Information" regarding the recent sale of equity securities by the Company.
(d) Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
The Company has an unsecured revolving line of credit with Bank One, NA
(the "Bank") in the amount of $15 million, of which $12.3 million had been
borrowed by the Company at the end of the last fiscal quarter. At March 31,
2000, the Company was in default of certain financial covenants in the existing
loan agreement with the Bank relating to the credit facility. The default did
not relate to any payment due under the credit facility. On May 10, 2000, the
Bank delivered to the Company a written waiver of the default, which is subject
to revocation by the Bank if the parties do not execute a revised loan agreement
with respect to the line of credit by May 18, 2000. The Company and the Bank
have negotiated the provisions of a revised loan agreement. The Company expects
to have the revised agreement executed by May 18, 2000. It is expected that the
Bank will be granted a first lien on the Company's accounts receivable with
advances under the revised loan agreement limited to 75% of eligible accounts
receivable (as defined).
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
ITEM 5. OTHER INFORMATION.
On May 10, 2000, the Company sold 566,933 Series A Convertible
Participating Preferred Shares, each without par value (the "Series A Preferred
Shares"), to a group of unaffiliated accredited investors for $24.00 per share,
or an aggregate of approximately $13.6 million in cash. The Series A Preferred
Shares were not registered under the Securities Act of 1933, as amended (the
"Act") in reliance upon an exemption from registration under Section 4(2) of the
Act and Rule 506 promulgated by the Securities and Exchange Commission under the
Act.
Each Series A Preferred Share is convertible by the holder, in whole
or in part, at any time into two (2) common shares, no par value, of the Company
(the "Common Shares"), subject
18
<PAGE> 19
to certain adjustments, at the conversion price of $12.00 per share, subject to
adjustments. Each holder of the Series A Preferred Shares is entitled to one (1)
vote per share held on all matters submitted to shareholders for their vote,
provided that the Company has agreed to use its reasonable best efforts to cause
its articles of incorporation to be amended to allow each holder of the Series A
Preferred Shares to exercise two (2) votes for each share held. The Series A
Preferred Shares rank prior to the Common Shares with respect to dividend and
liquidation rights.
In connection with the sale of the Series A Preferred Shares, the
Company issued to the accredited investors on May 10, 2000 warrants to purchase
453,546 Common Shares at an exercise price of $15.00 per share (the "Warrants").
The Warrants were issued in reliance upon an exemption from registration under
Section 4(2) of the Act and Rule 506 promulgated by the Securities and Exchange
Commission under the Act. The Warrants expire on May 10, 2005 and are
exercisable at any time prior to their expiration.
Also, in connection with the private placement, the number of directors
of the Company was increased from 6 to 9 and 3 new directors were appointed to
the Symix Board of Directors effective May 10, 2000. The new directors are Guy
de Chazal, Managing Director of MSDW Venture Partners IV, L.L.C.; Barry
Goldsmith, Partner, Updata Venture Partners; and Roger D. Blackwell, Professor
of Marketing, Fisher College of Business, The Ohio State University.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
a) See Index to Exhibits filed with this Quarterly Report on Form
10-Q following the Signature Page.
b) Reports on Form 8-K: None.
19
<PAGE> 20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf by
the undersigned thereunto duly authorized.
SYMIX SYSTEMS, INC.
Date: May 15, 2000 /S/ Lawrence W. DeLeon
----------------------
Lawrence W. DeLeon
(Duly Authorized Officer and
Principal Financial Officer)
20
<PAGE> 21
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
<S> <C> <C>
3(a)(1) Amended Articles of Incorporation of Incorporated herein by reference to
Symix Systems, Inc. (as filed with the Exhibit 3(a)(1) to the Annual Report on
Ohio Secretary of State on February 8, Form 10-K for the fiscal year ended June
1991) 30, 1997
3(a)(2) Certificate of Amendment to the Amended Incorporated herein by reference to
Articles of Incorporation of Symix Exhibit 3(a)(2) to the Annual Report on
Systems, Inc. (as filed with the Ohio Form 10-K for the fiscal year ended June
Secretary of State on July 16, 1996) 30, 1997
3(a)(3) Certificate of Amendment to the Amended Filed Herein
Articles of Incorporation of Symix
Systems, Inc., as amended (as filed with
the Ohio Secretary of State on May 10,
2000)
3(a)(4) Amended Articles of Incorporation of Filed Herein
Symix Systems, Inc., as amended
(reflecting amendments through May 10,
2000 for purposes of SEC reporting
compliance only)
3(b) Amended Regulations of Symix Systems, Inc. Incorporated herein by reference to
Exhibit 3(b) to the Registration Statement
on Form S-1 of Registrant filed on
February 12, 1991 (Registration No.
33-38878)
4(a)(1) Amended Articles of Incorporation of Incorporated herein by reference to
Symix Systems, Inc. (as filed with the Exhibit 3(a)(1) to the Annual Report on
Ohio Secretary of State on February 8, Form 10-K for the fiscal year ended June
1991) 30, 1997
</TABLE>
21
<PAGE> 22
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
<S> <C> <C>
4(a)(2) Certificate of Amendment to the Amended Incorporated herein by reference to
Articles of Incorporation of Symix Exhibit 3(a)(2) to the Annual Report on
Systems, Inc. (as filed with the Ohio Form 10-K for the fiscal year ended June
Secretary of State on July 16, 1996) 30, 1997
4(a)(3) Certificate of Amendment to the Amended Filed Herein at Exhibit 3(a)(3)
Articles of Incorporation of Symix
Systems, Inc., as amended (as filed with
the Ohio Secretary of State on May 10,
2000)
4(a)(4) Amended Articles of Incorporation of Filed Herein at Exhibit 3(a)(4)
Symix Systems, Inc., as amended
(reflecting amendments through May 10,
2000 for purposes of SEC reporting
compliance only)
4(b) Amended Regulations of Symix Systems, Inc. Incorporated herein by reference to
Exhibit 3(b) to the Registration Statement
on Form S-1 of Registrant filed on
February 12, 1991 (Registration No.
33-38878)
4(c) Investor Rights Agreement, dated as of Filed Herein
May 10, 2000, among Symix Systems, Inc.,
the Investors identified therein and
Lawrence J. Fox
4(d) Warrant for the Purchase of Shares of Filed Herein
Common Stock of Symix Systems, Inc. issued
to Morgan Stanley Dean Witter Venture
Partners IV, L.P., and Exhibit A,
identifying other identical warrants
issued to the Investors identified on
Exhibit A, for the number of common shares
identified on Exhibit A
</TABLE>
22
<PAGE> 23
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
<S> <C> <C>
10(a) Securities Purchase Agreement, dated as Filed Herein
of May 10, 2000, between Symix Systems,
Inc. and the Investors identified therein
10(b) Investor Rights Agreement, dated as of Filed Herein at Exhibit 4(c)
May 10, 2000, among Symix Systems, Inc.,
the Investors identified therein and
Lawrence J. Fox
10(c) Warrant for the Purchase of Shares of Filed Herein at Exhibit 4(d)
Common Stock of Symix Systems, Inc.
issued to Morgan Stanley Dean Witter
Venture Partners IV, L.P. and Exhibit
A identifying other identical warrants
issued to the Investors identified
on Exhibit A, for the number of common
shares identified on Exhibit A
27 Financial Data Schedule Filed herein
</TABLE>
23
<PAGE> 1
EXHIBIT 3(a)(3)
<PAGE> 2
Expedite this form
[X] Yes
[SEAL] PRESCRIBED BY J. KENNETH BLACKWELL
Please obtain fee amount and mailing instructions from the Forms
Inventory List (using the 3 digit form # located at the bottom of this
form). To obtain the Forms Inventory List or for assistance, please
call Customer Service:
Central Ohio: (614)-466-3910 Toll Free: 1-877-SOS-FILE (1-877-767-3453)
CERTIFICATE OF AMENDMENT
BY DIRECTORS OF
SYMIX SYSTEMS, INC.
- -------------------------------------------------------------------------------
(Name of Corporation)
626239
------------------
(charter number)
Lawrence W. DeLeon , who is the Secretary
- ------------------------- -------------------
of the above named Ohio corporation organized for profit, does hereby certify
that:(P1:
[ ] a meeting of the shareholders was duly called and held on
---------
(date)
[X] in a writing signed by all the Directors pursuant to Section 1701.54 of
the Ohio Revised Code, the following resolution was adopted pursuant to
Section 1701.70(B)(1) of the Ohio Revised Code:
<TABLE>
<S> <C>
RESOLVED, that pursuant to the authority vested in the Board of Directors of the Corporation under
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Article FOURTH of the Amended Articles of Incorporation of the Corporation, as amended, Article
------------------------------------------------------------------------------------------------------------
FOURTH of said Amended Articles of Incorporation be, and the same hereby is, amended to designate
------------------------------------------------------------------------------------------------------------
authorized and unissued preferred shares, each without par value, of the Corporation as "Series A
------------------------------------------------------------------------------------------------------------
Convertible Participating Preferred Shares" and to fix the terms of such preferred shares, said
------------------------------------------------------------------------------------------------------------
Article FOURTH, as so amended, to read in its entirety as set forth in Exhibit A attached hereto and
------------------------------------------------------------------------------------------------------------
made a part hereof (the "Amendment").
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------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------------
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</TABLE>
IN WITNESS WHEREOF, the above named officer, acting for and on behalf of the
corporation, has hereunto subscribed his name on May 10, 2000
--- ------------
(gender)
By: /s/Lawrence W. DeLeon
-------------------------------
Title: Secretary
-------------------------------
Page 1 of 1
<PAGE> 3
EXHIBIT A
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> 4
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 be entitled as provided in this Section 4, the remaining
Property of the corporation
2
<PAGE> 5
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
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
3
<PAGE> 6
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.
(a) PREFERENCE AMOUNT AND PAYMENT. The Series A Preferred
Shares shall be redeemed by paying for each share an amount in cash equal to
4
<PAGE> 7
$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.
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
5
<PAGE> 8
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"), 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
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<PAGE> 9
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 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
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<PAGE> 10
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, 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
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<PAGE> 11
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 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
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<PAGE> 12
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.
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
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<PAGE> 13
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 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
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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 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:
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"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 10, 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.
"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.
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<PAGE> 16
"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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<PAGE> 1
EXHIBIT 3(a)(4)
<PAGE> 2
AMENDED ARTICLES OF INCORPORATION
OF
SYMIX SYSTEMS, INC.
FIRST: The name of the corporation shall be Symix Systems, Inc.
SECOND: The place in Ohio where the principal office of the corporation
is to be located is in the City of Columbus, County of Franklin.
THIRD: The purpose for which the corporation is formed is to engage in
any lawful act or activity for which corporations may be formed under Sections
1701.01 to 1701.98 of the Ohio Revised Code.
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
<PAGE> 3
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 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 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
<PAGE> 4
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 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
<PAGE> 5
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.
(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
<PAGE> 6
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 .
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
<PAGE> 7
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"), 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
<PAGE> 8
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 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, 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
<PAGE> 9
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 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
<PAGE> 10
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.
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.
<PAGE> 11
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 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:
<PAGE> 12
(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 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 10, 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.
<PAGE> 13
"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.
"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.
FIFTH: The directors of the corporation shall have the power to cause
the corporation from time to time and at any time to purchase, hold, sell,
transfer or otherwise deal with (A) shares of any class or series issued by
it, (B) any security or other obligation of the corporation which may confer
upon the holder thereof the right to convert the same into shares of any class
<PAGE> 14
or series authorized by the articles of incorporation, and (C) any security or
other obligation which may confer upon the holder thereof the right to
purchase shares of any class or series authorized by the articles of
incorporation. The corporation shall have the right to repurchase, if and when
any shareholder desires to sell, or on the happening of any event is required
to sell, shares of any class or series issued by the corporation. The
authority granted in this Article Fifth of these articles shall not limit the
plenary authority of the directors to purchase, hold, sell, transfer or
otherwise deal with shares of any class or series, securities, or other
obligations issued by the corporation or authorized by its articles.
SIXTH: A director or officer of the corporation shall not be
disqualified by his office from dealing or contracting with the corporation as
vendor, purchaser, employee, agent or otherwise. No contract or transaction
shall be void or voidable with respect to the corporation for the reason that
it is between the corporation and one or more of its directors or officers, or
between the corporation and any other person in which one or more of its
directors or officers are directors, trustees or officers, or have a financial
or personal interest, or for the reason that one or more interested directors
or officers participated in or voted at the meeting of the directors or a
committee thereof which authorized such contract or transaction, if in any
such case (A) the material facts as to the relationship or interest of such
director, officer or other person and as to the contract or transaction are
disclosed or are known to the directors or the committee, or such members
thereof as shall be present at any meeting at which action upon any such
contract or transaction shall be taken, and the directors or committee, in
good faith reasonably justified by such facts, authorized the contract or
transaction by the affirmative vote of a majority of the disinterested
directors, even though the disinterested directors constitute less than a
quorum; or (B) the material facts as to the relationship or interest of such
director, officer or other person and as to the contract or transaction are
disclosed or known to the shareholders entitled to vote thereon and the
contract or transaction is specifically approved at a meeting of the
shareholders held for such purpose by the affirmative vote of the holders of
shares entitling them to exercise a majority of the voting power of the
corporation held by persons not interested in the contract or transaction; or
(C) the contract or transaction is fair as to the corporation as of the time
it is authorized or approved by the directors, a committee thereof, or the
shareholders. Common or interested directors may be counted in determining the
presence of a quorum at any meeting of the directors, or of a committee
thereof, which authorizes the contract or transaction.
SEVENTH: No shareholder of the corporation shall have, as a matter or
right, the pre-emptive right to purchase or subscribe for shares of any class,
now or hereafter authorized, or to purchase or subscribe for securities or
other obligations convertible into or exchangeable for such shares or which by
warrants or otherwise entitle the holders thereof to subscribe for or purchase
any such share.
EIGHTH: Section 1701.831 of the Ohio Revised Code does not apply to
control share acquisitions of the corporation.
<PAGE> 15
NINTH: Chapter 1704. of the Ohio Revised Code does not apply to the
corporation.
TENTH: These Amended Articles supersede the Second Amended Articles of
Micro Manufacturing Systems, Inc. existing at the effective date of these
Amended Articles.
<PAGE> 1
EXHIBIT 4(c)
2
<PAGE> 2
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> 3
TABLE OF CONTENTS
----------------------
<TABLE>
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<S> <C>
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
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C>
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
</TABLE>
SCHEDULE I Investors
ii
<PAGE> 5
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.
<PAGE> 6
"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.
2
<PAGE> 7
"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.
3
<PAGE> 8
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.
4
<PAGE> 9
(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
5
<PAGE> 10
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;
6
<PAGE> 11
(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,
7
<PAGE> 12
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
8
<PAGE> 13
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.
9
<PAGE> 14
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
10
<PAGE> 15
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
12
<PAGE> 17
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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<PAGE> 18
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> 19
(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> 20
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> 21
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> 22
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> 23
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
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<PAGE> 24
(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> 25
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> 26
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> 27
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
/s/Lawrence J. Fox
------------------------------------------
Address: 2800 Corporate Exchange Drive
--------------------------------
Columbus, Ohio 43231
--------------------------------
23
<PAGE> 28
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: /s/Thomas Clayton
Title: Vice President
Address: 1221 Avenue of the Americas
New York, New York 10020
Fax: 212-762-8424
Attention: Controller
24
<PAGE> 29
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> 30
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:
<TABLE>
<CAPTION>
NUMBER OF
INVESTOR PREFERRED SHARES NUMBER OF WARRANTS %
- -------------------------------- ---------------- ------------------ ------------
<S> <C> <C> <C>
Morgan Stanley Dean Witter 271,650 217,320 48.40
Venture Partners IV, L.P.
Morgan Stanley Dean Witter 31,516 25,212 5.62
Venture Investors IV, L.P.
Morgan Stanley Dean Witter 10,598 8,478 1.89
Venture Offshore
Investors IV, L.P.
Morgan Stanley Dean Witter 86,502 69,202 14.70
Equity Funding, Inc.
Fallen Angel Equity 166,667 133,334 29.40
Fund, L.P.
Total: 566,933 453,546 100.00
</TABLE>
26
s
<PAGE> 1
EXHIBIT 4(d)
<PAGE> 2
SYMIX SYSTEMS, INC.
WARRANT FOR THE PURCHASE OF SHARES OF
COMMON STOCK OF SYMIX SYSTEMS, INC.
NO. 1-A WARRANT TO PURCHASE
217,320 SHARES
THIS WARRANT AND THE SECURITIES TO BE ACQUIRED UPON EXERCISE OF THIS
WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED, ASSIGNED OR OTHERWISE DISPOSED OF
EXCEPT IN COMPLIANCE THEREWITH. THIS WARRANT AND THE SECURITIES TO BE
ACQUIRED UPON EXERCISE OF THIS WARRANT ALSO ARE SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER, VOTING AND OTHER MATTERS AS SET FORTH IN THE
INVESTOR RIGHTS AGREEMENT (AS HEREIN DEFINED), COPIES OF WHICH MAY BE
OBTAINED UPON WRITTEN REQUEST FROM THE COMPANY.
FOR VALUE RECEIVED, SYMIX SYSTEMS, INC., an Ohio corporation (the
"COMPANY"), hereby certifies that MORGAN STANLEY DEAN WITTER VENTURE PARTNERS
IV, L.P., its successor or permitted assigns (the "HOLDER"), is entitled,
subject to the provisions of this Warrant (the "WARRANT"), to purchase from the
Company, at the times specified herein, up to an aggregate of 217,320 fully paid
and non-assessable Common Shares (as hereinafter defined), at a purchase price
per share equal to the Exercise Price (as hereinafter defined). The number of
Common Shares to be received upon the exercise of this Warrant and the price to
be paid for a Common Share are subject to adjustment from time to time as
hereinafter set forth. This Warrant and the Warrant Shares (as hereinafter
defined) may be assigned, transferred, sold, offered for sale or exercised by
the Holder only upon compliance with the terms and conditions hereof.
<PAGE> 3
1. Definitions. (a) The following terms, as used herein, have the
following meanings:
"AFFILIATE" shall have the meaning given to such term in Rule 12b-2
promulgated under the Securities and Exchange Act of 1934, as amended.
"BUSINESS DAY" means any day except a Saturday, Sunday or other day on
which commercial banks in the City of New York are authorized by law to close.
"COMMON SHARES" means the common shares, no par value, of the Company.
"DULY ENDORSED" means duly endorsed in blank by the Person or Persons
in whose name a stock certificate is registered or accompanied by a duly
executed stock assignment separate from the certificate with the signature(s)
thereon guaranteed by a commercial bank or trust company or a member of a
national securities exchange or of the National Association of Securities
Dealers, Inc.
"EXERCISE PRICE" means $15.00 per Warrant Share, such Exercise Price to
be adjusted from time to time as provided herein.
"EXPIRATION DATE" means 5:00 p.m. New York City time on the fifth
anniversary of the date hereof.
"INVESTOR RIGHTS AGREEMENT" means the Investor Rights Agreement dated
as of the date hereof among the Company and the shareholders listed on the
signature pages thereto.
"PERSON" means an individual, partnership, limited liability company,
corporation, trust, joint stock company, association, joint venture, or any
other entity or organization, including a government or political subdivision or
an agency or instrumentality thereof.
"HOLDERS" means the original Holders of the Warrants issued pursuant to
the Securities Purchase Agreement, or if any such original Holder so elects, any
transferee of all or any portion of this Warrant whom such original Holder shall
have designated by written notice to the Company. Any successor Holder
designated pursuant to the immediately preceding sentence shall also have the
right upon any subsequent transfer to designate a successor Holder in the manner
described above.
"SECURITIES PURCHASE AGREEMENT" means the Securities Purchase Agreement
dated as of May 10, 2000 among the Company and the Investors listed
2
<PAGE> 4
on the signature pages thereto, providing for the purchase and issuance of the
Series A Convertible Participating Preferred Stock and the Warrants.
"WARRANT SHARES" means the shares of Common Stock deliverable upon
exercise of this Warrant, as adjusted from time to time.
(b) Capitalized terms used but not defined herein shall have the
meanings assigned to such terms in the Investor Rights Agreement.
2. Exercise of Warrant.
(a) Any sale, transfer, assignment or hypothecation of this Warrant,
whether in whole or in part, must be in compliance with Paragraph 12 of this
Warrant. Subject to the other terms and conditions of this Warrant, the Holder
is entitled to exercise this Warrant in whole or in part at any time, or from
time to time, until the Expiration Date or, if such day is not a Business Day,
then on the next succeeding day that shall be a Business Day. To exercise this
Warrant, the Holder shall execute and deliver to the Company a Warrant Exercise
Notice substantially in the form annexed hereto. Subject to paragraph 2(e)
below, no earlier than ten days after delivery of the Warrant Exercise Notice,
the Holder shall deliver to the Company this Warrant, including the Warrant
Exercise Subscription Form forming a part hereof duly executed by the Holder,
together with payment of the applicable Exercise Price. Upon such delivery and
payment, the Holder shall be deemed to be the holder of record of the Warrant
Shares subject to such exercise, notwithstanding that the stock transfer books
of the Company shall then be closed or that certificates representing such
Warrant Shares shall not then be actually delivered to the Holder.
(b) The Exercise Price may be paid by wire transfer or by certified or
official bank check or bank cashier's check payable to the order of the Company
or by any combination of such cash or check.
(c) If the Holder exercises this Warrant in part, this Warrant shall
be surrendered by the Holder to the Company and a new Warrant of the same tenor
and for the unexercised number of Warrant Shares shall be executed by the
Company. The Company shall register the new Warrant in the name of the Holder or
in such name or names of its transferee pursuant to paragraph 6 hereof as may be
directed in writing by the Holder and deliver the new Warrant to the Person or
Persons entitled to receive the same.
(d) Upon exercise or partial exercise and surrender of this Warrant in
conformity with the foregoing provisions, the Company shall transfer to the
Holder of this Warrant appropriate evidence of ownership of the Common Shares
or other securities or property (including any money) to which the Holder is
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<PAGE> 5
entitled, registered or otherwise placed in, or payable to the order of, the
name or names of the Holder or such transferee as may be directed in writing by
the Holder, and shall deliver such evidence of ownership and any other
securities or property (including any money) to the Person or Persons entitled
to receive the same, together with an amount in cash in lieu of any fraction of
a share as provided in paragraph 5 below.
(e) In lieu of exercising the Warrant pursuant to paragraph 2(a), the
Holder may elect in accordance with the procedures set forth in this paragraph 2
to exchange this Warrant for shares of Common Stock, in which event the Company
will issue to the Holder the number of shares of Common Stock equal to the
result obtained by (a) subtracting B from A, (b) multiplying the difference by
C, and (c) dividing the product by A as set forth in the following equation:
X = (A - B) x C where:
A
X = the number of shares of Common Stock
issuable upon exchange pursuant to this
paragraph 2(e).
A = the Daily Price (as defined below) on the
day immediately preceding the date on which
the Holder delivers written notice to the
Company pursuant to paragraph 2(a).
B = the Exercise Price.
C = the number of shares of Common Stock as to
which this Warrant being exchanged would
other be exercisable for pursuant to
paragraph 2(a).
If the foregoing calculation results in a negative number, then no
shares of Common Stock shall be issued pursuant to this paragraph 2(e).
(f) Mandatory Exercise. (i) If at any time after the second anniversary
of the date of issuance of this Warrant the Daily Price for a Common Share for
each and every day of any period of 40 consecutive trading days exceeds $24,
then this Warrant shall be automatically exercised on a net issuance basis in
accordance with paragraph (e) above at the Exercise Price, as adjusted, then in
effect as of the close of business on the last trading day of the 40 trading day
period (a "MANDATORY EXERCISE EVENT") into Common Shares (or other securities or
property into which this Warrant is then convertible). This Warrant as so
exercised shall be treated as having been surrendered by the Holder thereof for
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<PAGE> 6
exercise pursuant to Section 2 as of the close of business on the last trading
day of the 40 trading day period.
(ii) If the Company shall at any time after the date of issuance of
this Warrant 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 clause (i) above 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 that were outstanding immediately prior to such
event and of which the denominator is the number of Common Shares outstanding
immediately after such event; provided, however, that if thereafter, and before
such dividend is paid or such subdivision or combination is effected, the
Company legally abandons its plan to pay such dividend or to effect such
subdivision or combination, then any adjustment made to such share price by
reason of such public announcement shall be reversed, and any subsequent
adjustments, based thereon, shall be recomputed.
3. Restrictive Legend. Certificates representing Common Shares issued
pursuant to this Warrant shall bear a legend substantially in the form of the
legend set forth on the first page of this Warrant to the extent that and for so
long as such legend is required pursuant to the Investor Rights Agreement or
applicable law.
4. Reservation of Shares. The Company hereby agrees that at all times
prior to the expiration hereof there shall be reserved for issuance and delivery
upon exercise or exchange of this Warrant such number of its authorized but
unissued Common Shares or other securities of the Company from time to time
issuable upon the full exercise of the then unexercised portion of this Warrant.
All such shares shall be duly authorized and, when issued upon such exercise or
exchange, shall be validly issued, fully paid and non-assessable, free and clear
of all liens, security interests, charges and other encumbrances or restrictions
on sale and free and clear of all preemptive rights, except to the extent set
forth in the Investor Rights Agreement and as may be required under applicable
law.
5. Fractional Shares. No fractional shares or scrip representing
fractional shares shall be issued upon the exercise or exchange of this Warrant
and in lieu of delivery of any such fractional share upon any exercise hereof,
the Company shall pay to the Holder an amount in cash equal to such fraction
multiplied by the Current Market Price Per Common Share (as defined in paragraph
8(g)) at the date of such exercise or exchange.
6. Transfer or Assignment of Warrant.
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<PAGE> 7
(a) This Warrant and all rights hereunder are not transferable by the
registered Holder hereof except to any Person who, prior to such transfer,
agrees in writing, in form and substance reasonably satisfactory to the Company,
to be bound by the terms of this Warrant and the Investor Rights Agreement in
accordance with the provisions hereof and thereof. Each Holder of this Warrant
by taking or holding the same, consents and agrees that the registered Holder
hereof may be treated by the Company and all other persons dealing with this
Warrant as the absolute owner hereof for any purpose and as the person entitled
to exercise the rights represented hereby.
(b) Subject to compliance with the terms of this Warrant and the
Investor Rights Agreement, the Holder of this Warrant shall be entitled, without
obtaining the consent of the Company to assign and transfer this Warrant, at any
time in whole or from time to time in part, to any Person or Persons. Subject to
the preceding sentence, upon surrender of this Warrant to the Company, together
with the attached Warrant Assignment Form duly executed, the Company shall,
without charge, execute and deliver a new Warrant for the Common Shares assigned
in the Warrant Form Assignment in the name of the assignee or assignees named in
such instrument of assignment and, if the Holder's entire interest is not being
assigned, a new Warrant for the balance of the Common Shares for which this
Warrant is then exercisable which are not so assigned in the name of the Holder
and this Warrant shall promptly be canceled.
7. Loss or Destruction of Warrant. Upon receipt by the Company of
evidence satisfactory to it (in the exercise of its reasonable discretion) of
the loss, theft, destruction or mutilation of this Warrant, and (in the case of
loss, theft or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Warrant, if mutilated, the Company shall
execute and deliver to the Holder a new Warrant of like tenor and date.
8. Anti-dilution Provisions.
(a) In case the Company shall at any time after the date hereof (i)
declare a dividend or make a distribution on Common Shares payable in Common
Shares, (ii) subdivide or split the outstanding Common Shares, (iii) combine or
reclassify the outstanding Common Shares into a smaller number of shares, or
(iv) issue any shares of its capital stock in a reclassification of Common
Shares (including any such reclassification in connection with a consolidation
or merger in which the Company is the continuing corporation), the Exercise
Price in effect at the time of the record date for such dividend or distribution
or of the effective date of such subdivision, split, combination or
reclassification shall be proportionately adjusted so that, giving effect to
paragraph 8(i), the exercise of this Warrant after such time shall entitle the
Holder to receive the aggregate number of Common Shares or other securities of
the Company (or shares of any
6
<PAGE> 8
security into which such Common Shares have been reclassified pursuant to clause
8(a)(iii) or 8(a)(iv) above) which, if this Warrant had been exercised
immediately prior to such time, the Holder would have owned upon such exercise
and been entitled to receive by virtue of such dividend, distribution,
subdivision, split, combination or reclassification. Such adjustment shall be
made successively whenever any event listed above shall occur.
(b) In case the Company shall issue or sell any Common Shares (other
than Common Shares issued (i) upon exercise of the Warrants or conversion of the
Series A Convertible Participating Preferred Shares of the Company (the
"PREFERRED SHARES"), (ii) pursuant to the Company's stock option plans or
pursuant to any similar Common Share related employee compensation plan of the
Company approved by the Company's Board of Directors or (iii) upon exercise or
conversion of any security the issuance of which caused an adjustment under
paragraphs 8(c) or 8(d) hereof) without consideration or for a consideration per
share less than the Exercise Price (the "ISSUE PRICE"), the Exercise Price to be
in effect after such issuance or sale shall be determined by multiplying the
Exercise 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 Company 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 Exercise Price. In case any
portion of the consideration to be received by the Company 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 of the Company; provided that if the
Holders of 75% of the outstanding Warrants 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. The Holder shall be notified promptly of any consideration other
than cash to be received by the Company and furnished with a description of the
consideration and the fair market value thereof, as determined by the Board of
Directors.
(c) In case the Company shall fix a record date for the issuance of
rights, options or warrants to the holders of its 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 Exercise 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
7
<PAGE> 9
date and the Exercise Price shall be adjusted pursuant to paragraph 8(b) 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
paragraph 8(b) 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 paragraph 8), the Exercise Price shall again be adjusted
to be the Exercise Price which would then be in effect if such record date had
not been fixed, in the former event, or the Exercise Price which would then be
in effect if such holder had initially been entitled to such changed number of
Common Shares, in the latter event.
(d) In case the Company shall issue rights, options (other than options
issued pursuant to a plan described in clause 8(b)(i)) or warrants entitling the
holders thereof to subscribe for or purchase Common Shares (or securities
convertible into Common Shares) or shall issue convertible securities (other
than the Preferred Shares), 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
Exercise 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 Exercise Price shall be adjusted pursuant to
paragraph 8(b) hereof as though such maximum number of Common Shares had been so
issued for an aggregate consideration equal to 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 paragraph 8(b)
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 paragraph
8), the Exercise Price shall again be adjusted to be the Exercise 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 Exercise 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
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<PAGE> 10
the Exercise Price shall be made pursuant to this paragraph 8(d) to the extent
that the Exercise Price shall have been adjusted pursuant to paragraph 8(c) 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.
(e) In case the Company 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
Company is the continuing corporation) of evidences of indebtedness, cash,
assets or other property (other than regular periodic dividends payable in cash
or Common Shares or rights, options or warrants referred to in, and for which an
adjustment is made pursuant to, paragraph 8(c) hereof), the Exercise Price to be
in effect after such record date shall be determined by multiplying the Exercise
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 paragraph
8(b) hereof) of the portion of the 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 Exercise
Price shall again be adjusted to be the Exercise Price which would then be in
effect if such record date had not been fixed.
(f) 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 $15.00
then the Exercise Price then in effect shall be reduced to the greater of (i)
the Average Weighted Price and (ii) 75% of the Exercise Price.
(g) For the purpose of any computation under paragraph 5 or paragraph
8(b), 8(c), 8(d), 8(e) or 8(f) 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 share of the
applicable class of Common Shares for the 20 consecutive trading days
immediately prior to such date. "DAILY PRICE" means (A) if such 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; (B) if the shares of such class of Common Shares then are not
listed and traded on the NYSE, the closing price per share on such day as
reported
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<PAGE> 11
by the principal national securities exchange on which the shares are listed and
traded; (C) if such 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 Stock Market; or (D) if such 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 such Common Shares are not quoted by any such organization, the Current
Market Price Per Common Share shall be the fair market value of such shares on
such determination date as determined by the Board of Directors of the Company.
If the Holders of 75% of the outstanding Warrants shall object to any
determination by the Board of Directors of the Company of the Current Market
Price Per Common Share, the Current Market Price Per Common Share shall be the
fair market value per share of the Common Shares as determined by an independent
appraiser retained by the Company at its expense and reasonably acceptable to
such Holders. For purposes of any computation under this paragraph 8, the number
of shares of Common Shares outstanding at any given time shall not include
shares owned or held by or for the account of the Company.
(h) All calculations under this paragraph 8 shall be made to the
nearest one tenth of a cent or to the nearest hundredth of a share, as the case
may be.
(i) In the event that, at any time as a result of the provisions of
this paragraph 8, the holder of this Warrant upon subsequent exercise or
exchange shall become entitled to receive any shares of capital stock of the
Company other than Common Shares, the number of such other shares so receivable
upon exercise or exchange of this Warrant 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.
(j) Upon each adjustment of the Exercise Price as a result of the
calculations made in paragraphs 8(a), 8(b), 8(c), 8(d) or 8(e) hereof, the
number of shares for which this Warrant is exercisable immediately prior to the
making of such adjustment shall thereafter evidence the right to purchase, at
the adjusted Exercise Price, that number of Common Shares obtained by (i)
multiplying the number of shares covered by this Warrant immediately prior to
this adjustment of the number of shares by the Exercise Price in effect
immediately prior to such adjustment of the Exercise Price and (ii) dividing the
product so obtained by the Exercise Price in effect immediately after such
adjustment of the Exercise Price.
(k) If the Company shall fix a record date relating to the payment of
a dividend or other distribution or the issuance of rights, options or warrants
as contemplated under this paragraph 8 (which results in an adjustment to the
Exercise Price under the terms of this Warrant) and shall thereafter, and before
such dividend or distribution is paid or delivered or before such issuance,
legally
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<PAGE> 12
abandon its plan to pay or deliver such dividend or distribution or to make such
issuance, then any adjustment made to the Exercise Price and number of Common
Shares purchasable upon exercise of this Warrant by reason of the fixing of such
record date shall be reversed, and any subsequent adjustments, based thereon,
shall be recomputed.
9. Consolidation, Merger, or Sale of Assets. In case of any
consolidation of the Company with, or merger of the Company into, any other
Person, any merger of another Person into the Company (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 Company or of the Person formed by such consolidation or
resulting from such merger or which acquires such assets, as the case may be,
the Holder shall have the right thereafter to exercise or exchange this Warrant
for 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 for which this Warrant may have been exercised or exchanged immediately
prior to such consolidation, merger, sale or transfer, assuming (i) such holder
of Common Shares is not a Person with which the Company consolidated or into
which the Company merged or which merged into the Company 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 such rights of
election, as to the kind or amount of securities, cash 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 paragraph 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 or sale of
assets shall be as nearly equivalent as may be practicable to the adjustments
provided for in this Warrant. 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 Holder shall thereafter continue to be applicable; and any such
resulting or surviving corporation shall expressly assume the obligation to
deliver, upon exercise or exchange, such shares of stock, other securities, cash
and property.
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<PAGE> 13
The provisions of this paragraph 9 shall similarly apply to successive
consolidations, mergers, sales or transfers. For purposes of this paragraph 9,
"Person" shall not include 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.
10. Notices. Any notice, request, demand or delivery authorized by
this Warrant shall be in writing and shall be given to the Holder or the
Company, as the case may be, at its address (or telecopier number) set forth
below, or such other address (or telecopier number) as shall have been furnished
to the party giving or making such notice, demand or delivery in accordance
herewith:
If to the Company:
Symix Systems, Inc.
2800 Corporate Exchange Drive
Columbus, Ohio 43231
Telecopy: (614) 895-2972
Attention: Corporate Counsel
If to the Holder:
MSDW Venture Partners
1221 Avenue of the Americas
New York, New York 10020
Telecopy: 212-762-8424
Attention: Controller
Each such notice, request, demand or delivery shall be effective (i) if given by
telecopy, when such telecopy is transmitted to the telecopy number specified
herein and the intended recipient confirms the receipt of such telecopy or (ii)
if given by any other means, when received at the address specified herein.
11. Rights of the Holder. Prior to the exercise or exchange of any
Warrant, the Holder shall not, by virtue hereof, be entitled to any rights of a
shareholder of the Company, including, without limitation, the right to vote, to
receive dividends or other distributions, to exercise any preemptive right or to
receive any notice of meetings of shareholders or any notice of any proceedings
of the Company except as may be specifically provided for herein.
12. Transferee Representations. Prior to effecting any transfer of this
Warrant or any part hereof, each prospective transferee shall represent in
writing to the Company that:
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<PAGE> 14
(a) Such transferee is an "accredited investor" within the meaning of
Rule 501 under the 1933 Act and such transferee was not organized for
the specific purpose of acquiring this Warrant or the Common Shares
issuable upon exercise of this Warrant;
(b) such transferee 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 such transferee's investment in the
Company and is able financially to bear the risks thereof;
(c) such transferee has had an opportunity to obtain whatever
information concerning the Company and the Common Shares as has been
requested from the Company by such transferee in order to make such
transferee's investment decision with respect to this Warrant and the
Common Shares;
(d) this Warrant is being acquired by such transferee for such
transferee's own account for the purpose of investment and not with a
view to or for sale in connection with any distribution thereof; and
(e) such transferee understands that (i) this Warrant and the Common
Shares issuable upon exercise of this Warrant have not been registered
under the Securities Act of 1933, as amended, in reliance upon an
exemption from the registration requirements of such act pursuant to
Section 4(2) thereof or Rule 506 promulgated under such act and under
applicable state securities laws, (ii) this Warrant and the Common
Shares issuable upon exercise of this Warrant must be held indefinitely
unless a subsequent disposition thereof is registered under such act
and under applicable state securities laws or is exempt from such
registration, (iii) this Warrant and the Common Shares issuable upon
exercise of this Warrant will bear a legend to such effect, and (iv)
the Company will make a notation on its transfer books to such effect.
13. GOVERNING LAW. THIS WARRANT AND ALL RIGHTS ARISING HEREUNDER SHALL
BE CONSTRUED AND DETERMINED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF
OHIO, AND THE PERFORMANCE THEREOF SHALL BE GOVERNED AND ENFORCED IN ACCORDANCE
WITH SUCH LAWS.
14. Amendments; Waivers. Any provision of this Warrant 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 the Holder and the Company, or in the
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<PAGE> 15
case of a waiver, by the party against whom the waiver is to be effective. 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.
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<PAGE> 16
IN WITNESS WHEREOF, the Company has duly caused this Warrant
Certificate to be signed by its duly authorized officer and to be dated as of
May 10, 2000.
SYMIX SYSTEMS, INC.
By:/s/ Lawrence DeLeon
---------------------------------
Name: Lawrence DeLeon
Title: CFO
Acknowledged and Agreed:
MORGAN STANLEY DEAN WITTER VENTURE PARTNERS IV, L.P.
By: MSDW Venture Partners IV, LLC,
as general partner
By: MSDW Venture Partners IV, Inc.,
as member
By: /s/Guy de Chazal
----------------------------
Name: Guy de Chazal
Title: Managing Director
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<PAGE> 17
WARRANT EXERCISE NOTICE
(To be delivered prior to exercise of the Warrant
by execution of the Warrant Exercise Subscription Form)
To: Symix Systems, Inc.
[ ] [The undersigned hereby notifies you of its intention to exercise
the warrant to purchase common shares, no par value, of Symix Systems, Inc. held
by the undersigned (the "WARRANT"). The undersigned intends to exercise the
Warrant to purchase ___________ common shares (the "SHARES") at $______ per
Share (the Exercise Price currently in effect pursuant to the Warrant). The
undersigned intends to pay the aggregate Exercise Price for the Shares, by wire
transfer, or certified or official bank or bank cashier's check (or a
combination of cash and check) as indicated below.]
[The undersigned hereby notifies you of its intention to exchange the
Warrant on a cashless basis pursuant to Section 2(e) of the Warrant to purchase
Common Shares, no par value, of Symix Systems, Inc. Based on an exercise price
of $_______ per Share (the Exercise Price currently in effect pursuant to the
Warrant) and a Daily Price of $______, the undersigned intends to exchange the
Warrant for _________ Common Shares.]
Date:
----------------
----------------------------------------------
(Signature of Holder)
This signature must conform in all respects
to the name of the Holder as specified on the
Warrant
----------------------------------------------
(Street Address)
----------------------------------------------
(City) (State)
Payment: $ wire transfer
------------------
$ check
------------------
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<PAGE> 18
WARRANT EXERCISE SUBSCRIPTION FORM
(To be executed only upon exercise of the Warrant
after delivery of Warrant Exercise Notice)
To: [Issuer]
The undersigned irrevocably exercises this Warrant for the purchase of
___________ common shares, no par value (the "SHARES"), of Symix Systems, Inc.
(the "COMPANY") at $_____ per Share (the Exercise Price currently in effect
pursuant to the Warrant) and herewith makes payment of $___________ (such
payment being made by wire transfer or by certified or official bank or bank
cashier's check payable to the order of the Company or by any permitted
combination of such wire transfer or check), all on the terms and conditions
specified in the within Warrant, surrenders this Warrant and all right, title
and interest therein to the Company and directs that the Shares deliverable upon
the exercise of this Warrant be registered or placed in the name and at the
address specified below and delivered thereto.
Date:
------------------
-----------------------------------------------
(Signature of Holder)
This signature must conform in all respects
to the name of the Holder as specified on the
Warrant
-----------------------------------------------
(Street Address)
-----------------------------------------------
(City) (State) (Zip Code)
<PAGE> 19
Securities and/or check to be issued to:
----------------------------------------
Please insert social security or identifying number:
----------------------------
Name:
---------------------------------------------------------------------------
Street Address:
-----------------------------------------------------------------
City, State and Zip Code:
-------------------------------------------------------
Any unexercised portion of the Warrant evidenced by the within Warrant
Certificate to be issued to:
Please insert social security or identifying number:
----------------------------
Name:
---------------------------------------------------------------------------
Street Address:
-----------------------------------------------------------------
City, State and Zip Code:
-------------------------------------------------------
2
<PAGE> 20
WARRANT ASSIGNMENT FORM
Dated _____________, 200__
FOR VALUE RECEIVED, _______________________ hereby
irrevocably sells, assigns and transfers
unto_____________________________(the "ASSIGNEE"),
(please type or print in block letters)
________________________________________________________________________________
(insert address)
its right to purchase up to ___________ common shares, without par value, of
Symix Systems, Inc. (the "COMPANY") represented by this Warrant and does hereby
irrevocably constitute and appoint _______________________ Attorney, to transfer
the same on the books of the Company, with full power of substitution in the
premises.
Signature:
-----------------------------------
(Signature of Holder)
This signature must conform in all
respects to the name of the Holder as
specified on the Warrant
<PAGE> 21
SCHEDULE A
TO WARRANT
The following investors entered into warrants for the purchase of the
number of common shares, no par value, of Symix Systems, Inc., set forth next to
their respective names. The warrants are identical to the warrant of Morgan
Stanley Dean Witter Venture Partners IV, L.P., set forth in Exhibit 4(d) of
this Quarterly Report on Form 10-Q, except with respect to the number of common
shares, no par value, of Symix Systems, Inc. covered by the respective warrants.
Investor Number of Shares
- -------- ----------------
Morgan Stanley Dean Witter Venture Investors IV, L.P. 25,212
Morgan Stanley Dean Witter Venture Offshore Investors IV, L.P. 8,478
Morgan Stanley Dean Witter Equity Funding, Inc. 69,202
Fallen Angel Equity Fund, L.P. 133,334
<PAGE> 1
EXHIBIT 10(a)
<PAGE> 2
SECURITIES PURCHASE AGREEMENT
dated as of May 10, 2000
between
SYMIX SYSTEMS, INC.
and
THE INVESTORS NAMED HEREIN
<PAGE> 3
TABLE OF CONTENTS
----------------------
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
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
</TABLE>
<PAGE> 4
<TABLE>
<CAPTION>
PAGE
<S> <C>
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
</TABLE>
ii
<PAGE> 5
<TABLE>
<CAPTION>
<S> <C>
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
</TABLE>
Exhibit A Amendment to Amended Articles of Incorporation
Exhibit B Investor Rights Agreement
Exhibit C Warrant
iii
<PAGE> 6
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> 7
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> 8
"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,
3
<PAGE> 9
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
4
<PAGE> 10
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
5
<PAGE> 11
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
6
<PAGE> 12
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
7
<PAGE> 13
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.
8
<PAGE> 14
(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,
9
<PAGE> 15
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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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.
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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
24
<PAGE> 30
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.
25
<PAGE> 31
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
26
<PAGE> 32
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
27
<PAGE> 33
SCHEDULE I
----------
INVESTORS
---------
<TABLE>
<CAPTION>
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>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS IN THE
QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 2000 FOR SYMIX
SYSTEMS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> MAR-31-2000
<CASH> 4,187
<SECURITIES> 0
<RECEIVABLES> 46,800
<ALLOWANCES> 1,595
<INVENTORY> 857
<CURRENT-ASSETS> 57,398
<PP&E> 22,670
<DEPRECIATION> 14,812
<TOTAL-ASSETS> 98,237
<CURRENT-LIABILITIES> 33,572
<BONDS> 0
0
0
<COMMON> 78
<OTHER-SE> 43,738
<TOTAL-LIABILITY-AND-EQUITY> 98,237
<SALES> 42,973
<TOTAL-REVENUES> 97,919
<CGS> 13,673
<TOTAL-COSTS> 44,150
<OTHER-EXPENSES> 53,742
<LOSS-PROVISION> 95
<INTEREST-EXPENSE> 475
<INCOME-PRETAX> (692)
<INCOME-TAX> (21)
<INCOME-CONTINUING> (671)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (671)
<EPS-BASIC> (.09)
<EPS-DILUTED> (.09)
</TABLE>
