-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BMYyrZmG/Ocd1XNFq0YQatLjRZujdBDdKa69hR8BNv7J2rG0/n2AcC1dvSoVKa/W RsUkAN3j0RngjtwSR4u+tw== 0001047469-98-035700.txt : 19980929 0001047469-98-035700.hdr.sgml : 19980929 ACCESSION NUMBER: 0001047469-98-035700 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 13 CONFORMED PERIOD OF REPORT: 19980630 FILED AS OF DATE: 19980928 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: SYMIX SYSTEMS INC CENTRAL INDEX KEY: 0000872443 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-PREPACKAGED SOFTWARE [7372] IRS NUMBER: 311083175 STATE OF INCORPORATION: OH FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-19024 FILM NUMBER: 98716273 BUSINESS ADDRESS: STREET 1: 2800 CORPORATE EXCHANGE DR CITY: COLUMBUS STATE: OH ZIP: 43231 BUSINESS PHONE: 6145237000 MAIL ADDRESS: STREET 1: 2800 CORPORATE EXCHANGE DR CITY: COLUMBUS STATE: OH ZIP: 43231 10-K 1 FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 1998. 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 ------- Symix Systems, Inc. ------------------------------------------------------------ (Exact name of registrant as specified in its charter) OHIO 31-1083175 - ---------------------------------------- ------------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 2800 Corporate Exchange Drive Columbus, Ohio 43231 - ---------------------------------------- ------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (614) 523-7000 -------------- Securities registered pursuant to section 12(b) of the Act: NONE ---- Securities registered pursuant to Section 12(g) of the Act: Common Shares No-Par Value -------------------------- Title of Class 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 --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant at September 22, 1998 was $75,335,545. The number of common shares outstanding at September 22, 1998 was 6,507,054. Documents Incorporated by Reference: (1) The Registrant's Definitive Proxy Statement for its Annual Meeting of Shareholders to be held on November 11, 1998 is incorporated by reference into Part III of this Annual Report on Form 10-K. PART I ITEM 1. BUSINESS GENERAL Symix Systems, Inc. ("Symix" or the "Company") designs, develops, markets and supports a fully integrated manufacturing, planning and financial software solution that addresses the Enterprise Resource Planning ("ERP") requirements of mid-market discrete manufacturers and individual manufacturing sites of larger manufacturers. Historically, manufacturers have implemented ERP systems to achieve improvements in manufacturing operations and related cost reductions. Today, manufacturers increasingly face global competition, the challenges of managing multinational and multi-site operations and more demanding customer service requirements. In response to this complex business environment, manufacturers have begun to focus on customer interaction, which requires further integrating customer requirements into the overall fulfillment cycle. Business software solutions not only must deliver the operational improvements of traditional ERP, but also must provide capabilities to enhance customer interaction and improve revenue performance. Mid-market manufacturers generally are constrained by limited financial and technological resources; nevertheless, they require ERP solutions that offer a high degree of flexibility and functionality and can integrate customers with business processes. Through its Customer Synchronized Resource Planning ("CSRP") approach, the Company delivers to mid-market manufacturers a cost-effective ERP solution that facilitates a shift in focus from manufacturing-centric planning to customer-centric planning. Traditional ERP Systems enable the collection, management and integration of data concerning component procurement, inventory management, manufacturing control, distribution, financial and other functions to improve manufacturing efficiency. CSRP incorporates and extends traditional ERP functionality to integrate customer requirements into manufacturers' core business processes. The Company's primary ERP product, SyteLine, improves manufacturers' performance with respect to customer service, planning and materials management, production management and enterprise administration. SyteLine operates across a wide range of hardware platforms using the Windows NT and UNIX operating systems. In addition, Symix offers complementary software capabilities including: configuration, which integrates the customer with the order process to increase the quality of complex product orders; field service, which improves the quality and efficient delivery of field service and support; advanced planning and scheduling, which allows manufacturers to optimize scheduling of production operations to improve customer satisfaction and on-time delivery while reducing the manufacturers' and their customers' inventory carrying costs; electronic commerce and web enabled communication capabilities, which facilitate communication between businesses and their customers and suppliers; on-line analytical processing, which aids in decision-making by providing comprehensive analysis of operational data stored by SyteLine; and enterprise process documentation, which speeds the implementation of ERP systems and facilitates the execution of ISO 9000 quality initiatives. The Company's CSRP approach provides highly integrated, client-focused, software solutions that address the critical business needs of mid-market manufacturers. 2 Symix offers a wide range of services, including project management, implementation, product education, technical consulting, programming services, system integration and maintenance and support. Symix works with consulting firms and third party vendors to deliver integrated CSRP solutions. The Company has focused its products and services on the following vertical markets: industrial equipment, fabricated metals, furniture and fixtures, electronics, containers and packaging, and industrial. The Company has more than 3,300 customer sites, which it services and supports through a worldwide network of 26 offices in 13 countries. Symix was incorporated under the laws of the State of Ohio in 1984. The Company's principal executive offices are located at 2800 Corporate Exchange Drive, Columbus, Ohio 43231, and its telephone number is (614) 523-7000. INDUSTRY BACKGROUND Manufacturers are increasingly subject to global competitive pressures. At the same time, customer requirements are becoming increasingly complex. Manufacturers must manage larger product portfolios, shorten product development and delivery cycles, reduce inventory levels, respond to customers' customization demands and implement complex multinational manufacturing and distribution strategies. In response, manufacturers have turned to business process reengineering and to ERP solutions to improve operational efficiency and to manage resources across the enterprise. According to Advanced Manufacturing Research, the worldwide ERP software marketplace will grow to approximately $14.8 billion in 1998 from an estimated $9.6 billion in 1997. Market growth through the year 2000 is estimated to exceed 30% per year. Traditional ERP systems enable the collection, management and integration of data concerning component procurement, inventory management, manufacturing control, distribution, finance and other functions with the goal of improving the efficiency of manufacturing production. Increasingly, manufacturers look for functionality and flexibility beyond the scope of traditional ERP systems and seek to manage the collection and integration of all information that flows to and from customers, suppliers and business partners. Mid-market manufacturers are impacted by the increasingly dynamic and competitive manufacturing environment and must address their needs for functionality and flexibility with limited staff and technical and financial resources. Such manufacturers require an affordable ERP system that incorporates broad functionality, is easy to install and maintain and can be rapidly deployed. The ERP system is the most important application system for the mid-market manufacturer, but the operational efficiencies gained from a traditional ERP system alone are no longer sufficient to maintain a competitive advantage. Mid-market manufacturers' ability to synchronize individual customer preferences with their production and planning systems will be critical to their success. As mid-market manufacturers expand their focus from the traditional ERP goal of improving operational efficiency to the goal of identifying and assessing customer needs and preferences and incorporating such information into the resource planning decision, the 3 requirements placed on their ERP systems will increase. Mid-market manufacturers must evolve from a manufacturing-centric business model that focuses solely on improving operational efficiency to a customer-centric business model that incorporates customer needs into the order fulfillment process. THE SYMIX SOLUTION Symix designs, develops, markets and supports a fully integrated manufacturing, planning and financial software solution that addresses the ERP requirements of mid-market manufacturers. Symix's CSRP approach creates a competitive advantage for manufacturers by integrating all aspects of their operations to satisfy customers' demands. The CSRP approach enhances and extends ERP and integrates customers into manufacturers' core planning and delivery processes by aligning customer requirements with manufacturers' sales, marketing, engineering, manufacturing and customer service resources. The Company combines its core ERP system, SyteLine, with complementary products to deliver CSRP solutions. Symix delivers a combination of technology, functionality and services to enable manufacturers to implement rapidly a solution that integrates customer needs and requirements into manufacturers' business planning and execution systems. The Company believes its approach results in enhanced customer relationships, increased productivity, improved operating efficiency and lower total cost of ownership. The benefits to manufacturers using the Symix solution include the following: IMPROVED CUSTOMER RELATIONSHIPS. CSRP integrates customer requirements with manufacturers' sales, marketing, engineering, manufacturing and customer service information, resulting in more accurate planning and scheduling decisions, rapid response times, better on-time deliveries, improved order fulfillment and improved field service delivery, thereby providing greater customer satisfaction. REDUCED TOTAL COST OF OWNERSHIP. The Company's solutions are designed to minimize the total cost of implementing, operating and maintaining ERP systems and to maximize operating efficiency. Symix's software runs on standard hardware platforms, providing users with the flexibility to leverage existing technology systems and to optimize system configurations. The modular design of the Company's software allows manufacturers to implement systems quickly and easily and provides the flexibility to add additional functionality or change business process models as customer needs and business requirements change. REDUCED TIME TO BENEFIT. The Company believes its ability to implement its software solution rapidly and reduce manufacturers' time to benefit is a key competitive advantage. The Company reduces implementation time in three ways. First, Symix employs a structured implementation methodology that separates the solution implementation process into distinct and manageable phases, ensuring coordination throughout the implementation process. Second, the Company's proprietary business process modeling tool enables customers to map the appropriate systems and procedures necessary to increase the speed of the deployment process. Third, Symix maintains strategic relationships with numerous business partners, which enable the Company to provide a 4 solution that addresses manufacturers' software, hardware and MIS needs in an integrated fashion with minimal customer disruption. STRATEGY The Company's objective is to be a leading provider of CSRP solutions to mid-market discrete manufacturers. The key components of the Company's strategy include: EXPAND CSRP SOLUTIONS. The Company believes its CSRP approach affords manufacturers unique competitive advantages by enabling them to drive business processes with real-time customer information. Implementing a CSRP solution increases product accuracy, decreases delivery times and improves operational efficiency. More importantly, CSRP provides the infrastructure to create customized solutions that improve customer satisfaction. The Company is committed to continuing its CSRP approach. STRENGTHEN MID-MARKET LEADERSHIP POSITION. The Company believes that it is a leading provider of ERP solutions to mid-market manufacturers and that its CSRP solutions strengthen its market position. The Company has more than 3,300 customer sites, which it services and supports through a worldwide network of 26 offices in 13 countries. The Company intends to leverage its technology and customer base to enhance its leadership position in its targeted vertical markets and to pursue new vertical markets in which it has expertise. EMBRACE SIMPLE AND EASY TO USE TECHNOLOGY. The Company's CSRP approach emphasizes the commitment to a simple but powerful technology solution through Microsoft and Progress Software. The use of technology tools from Microsoft and Progress standardizes and simplifies integration efforts and avoids the costly maintenance of internally supported proprietary development tools. The Company will continue to concentrate its development resources on these technology platforms. PURSUE STRATEGIC PARTNERSHIPS. The Company will continue to provide the tools, techniques, methodologies and other elements required to simplify the task of implementing and supporting software solutions. Symix intends to pursue this strategy through alliances with industry leading partners and/or acquisitions of new technology. EXPAND MARKET PENETRATION THROUGH CONSULTING PARTNERS. The development of existing and new partnerships with major regional accounting and consulting firms is an important tool in the generation of sales leads for the Company. Symix has formed alliances with consulting partners, including Arthur Andersen LLP, Deloitte & Touche LLP and Grant Thornton LLP, to promote the Company's products. The Company believes that these and other new alliances will continue to provide access to key decision makers in the Company's target markets. PRODUCTS Symix's core ERP product is SyteLine. SyteLine is the Company's client/server-based product that was rearchitected and developed from earlier versions of Symix ERP solutions. SyteLine encompasses all of the functionality of earlier versions of Symix ERP solutions, but also 5 provides full client/server and graphical user interface ("GUI") features, multi-site capabilities and enhanced international financial reporting. SyteLine targets make-to-order, high configuration manufacturing of industrial products in five key vertical markets; industrial equipment, fabricated metals, furniture and fixtures, containers and packaging, and industrial electronics. The preferred operating system environment for SyteLine is Windows NT, although it is compatible with UNIX. The Company's development efforts are focused on developing products for the Windows NT environment. As a result, the Company's future success depends upon the adoption of Windows NT as an operating system environment and SQL Server as the reference database by mid-size discrete manufacturers for mission critical applications. Delays in the widespread adoption of Windows NT by the Company's target customers may adversely affect the Company's business, operating results or financial condition. In addition to SyteLine, the Company offers complementary software products, including SyteAPS, an advanced planning and scheduling product allowing optimization of production scheduling and on-time delivery; SyteSelect, a rules-based order configurator that enhances the speed and accuracy of complex order fulfillment; SytePower, a data analysis tool that provides the capability to distill business intelligence from data warehouses; SyteGuide, a business process modeling and flow charting tool that enables quality systems implementation and ISO 9000 compliance; SyteEDI and SyteWeb, electronic commerce software applications designed to deliver customer and supplier-focused business-to-business communications solutions; and SyteService, a field service management software product that is integrated with SyteLine. SyteService is based on Symix's stand-alone FieldPro product. FieldPro enables field service organizations to schedule and dispatch field service technicians, maintain warranty and service history and update purchasing and inventory records. FieldPro is specifically targeted at high technology and office equipment service organizations. The complementary software products such as SyteService, SyteSelect and SyteAPS are written in C++ programming language, operate in a Microsoft Windows NT operating environment, and use SQL Server as a database. The core ERP product SyteLine is written in PROGRESS, a proprietary fourth-generation programming language licensed from Progress Software Corporation ("PSC"). PROGRESS provides manufacturers with reporting and development tools that have significant flexibility. The Company receives revenues from the resale of PROGRESS and pays royalties to PSC. Symix also offers other PSC products, including PROGRESS 4GL tools and Relational Database Management System ("RDBMS"). The Company depends on the availability of PROGRESS for license to its customer base and the acceptance of PROGRESS by its customers. The Company has entered into a non-exclusive application partnership agreement with PSC pursuant to which the Company is authorized to market and distribute PROGRESS in connection with sales of the Company's products. Under the terms of the agreement, the Company bears primary responsibility for assisting customers in developing applications with PROGRESS and agrees to provide appropriate support to PROGRESS customers. The current agreement between the Company and PSC may be terminated by either party upon ninety (90) days' written notice of its intention 6 to terminate to the other party. In addition, the agreement may be terminated immediately by either party if a material breach of the agreement by the other party continues after thirty (30) days' written notice. The Company has in the past and may in the future experience product release delays because of delays in the release of PROGRESS products or product enhancements. Any such delays could have a material adverse effect on the Company's business, operating results and financial condition. The failure of PSC to continue its relationship with the Company or to develop, support or enhance PROGRESS in a manner competitive with enhancements of other present or future programming languages, the unavailability of PROGRESS licenses, the loss of market acceptance of PROGRESS and its associated relational database management system among mid-range discrete manufacturers, or the Company's inability to migrate its software to other languages on a timely basis if PROGRESS were no longer to be available could have a material adverse effect on the Company's business, operating results and financial condition. SYTELINE. SyteLine supports manufacturers' core business processes. The functional components of the application package include the following: CUSTOMER SERVICE. Customer service applications enable manufacturers to estimate, configure and accept orders accurately and rapidly. The estimating capabilities help manufacturers standardize all customer quoting activity, access such information on-line and generate reports for analysis and customer reporting. Customer service applications enable manufacturers to perform extensive pricing and sales analysis and to handle on-line most customer inquiries such as product availability, order status, receivable status or discounts. PLANNING AND MATERIALS MANAGEMENT. Planning and materials management applications enable manufacturers to plan capacity and material availability for each manufacturing site, including conversion of customer orders into bills of material and job routings, management of plant capacity to meet anticipated demand while minimizing expedited orders, timely incorporation of changes from customers and product engineers and inventory management to reduce carrying costs while managing material availability for scheduled productions. PRODUCTION MANAGEMENT. Production management applications enable manufacturers to select three manufacturing production control methods to match the level of control and diversity desired: work orders, production scheduling and just-in-time production management. These three production environments can be maintained simultaneously, providing a manufacturer with flexibility to mix and match different production methods. For example, a manufacturer may select production scheduling as the production method for the final assembly and just-in-time production management for the subassemblies. ENTERPRISE ADMINISTRATION. The enterprise administration financial management tools are tightly integrated with production operations and capture the required transactions in a form that supports flexible analysis across all business locations. The system provides various costing alternatives, including work order costing and period-based costing, and allows for actual and 7 standard cost analysis. Through enhanced multi-currency capabilities, the financial tools provide flexible consolidation modeling and analysis for multinational manufacturers. Substantially all of the Company's net revenues are derived from the sale of its core ERP product SyteLine and complementary products and services. As a result, the Company's success depends upon continued market acceptance of SyteLine by mid-range discrete manufacturers as well as the Company's ability to develop new versions of SyteLine and to develop or acquire complementary products or product lines to meet the needs of new and existing customers. COMPLEMENTARY PRODUCTS. The Company sells complementary products that expand the breadth of functionality of the Symix ERP products. These products have been developed by Symix internally and in coordination with third party software vendors. SYTEAPS. SyteAPS is an advanced planning and scheduling system that develops realistic and synchronized productions plans and schedules that simultaneously consider the multiple constraints and limitations of the production environment. The fully integrated version of SyteAPS with SyteLine is scheduled to be available by the end of the calendar year 1998. SYTESELECT. SyteSelect is an interactive product configuration software application that was specially designed for and integrated with SyteLine. SyteSelect was developed in conjunction with Trilogy Development Group, a provider of client/server sales and marketing software. SyteSelect provides manufacturers with the ability to configure, estimate, order and price complex products and services. Once the order and product are configured, the data is sent to production where bills of material and job routing instructions are automatically generated. SyteSelect is written in the C++ programming language and operates in a Windows NT operating environment. SyteSelect was released in September 1997. SYTEPOWER. SytePower is a data analysis product utilizing Online Analytical Processing tools from Cognos Corporation, an industry leader in business intelligence software tools. SytePower is an interactive, graphical data access and analysis solution that provides manufacturers a flexible, multi-dimensional view of business and operating data stored in SyteLine. SytePower was released in December 1996. SYTEGUIDE. SyteGuide is an internally developed business process modeling tool that provides custom enterprise modeling to speed ERP deployment and to provide a base for business process improvement initiatives such as ISO 9000. SyteGuide, which is comprised of a comprehensive set of implementation focused programs, resources and tools, was released in June 1997. SYTEEDI. SyteEDI is an electronic commerce software application product that delivers customer and supplier focused business-to-business communication solutions for SyteLine customers. SyteEDI was developed in conjunction with Sterling Commerce, Inc., an industry leader in electronic commerce solutions. SyteEDI is integrated with SyteLine and was released in September 1997. SYTESERVICE. SyteService is a service management application software that supports manufacturers' service businesses more efficiently and profitably through manpower scheduling, 8 contract management, remote field service communications and inventory and purchasing tracking. SyteService is based on the Company's stand-alone FieldPro product, which is scheduled to be fully integrated with SyteLine by the end of calendar year 1998. SyteService is written in the C++ programming language and operates in a Windows NT operating environment. FIELDPRO. FieldPro is a service management application software product that supports the manufacturer's service business more efficiently and profitably through manpower scheduling, contract management, remote field service communications and inventory and purchasing tracking. FieldPro is written in the C++ programming language, operates in a Windows NT environment and utilizes the Microsoft SQL Server database. FieldPro was acquired by Symix as a result of its acquisition of Visual Applications Software, Inc. in January 1997. FieldPro is marketed and sold under a separate and stand-alone business unit within Symix, the CIT Division. The CIT Division focuses on selling FieldPro to high technology and office equipment service operations. As of June 30, 1998, there were 32 employees in the CIT Division. FACTOR. FACTOR is a finite capacity scheduling system designed to interface with ERP and shop floor data collection systems. SIMULATION. Simulation software allows managers and engineers to predict the effects of recommended changes to manufacturing and other systems before they are implemented. The Company's simulation products include FACTOR/AIM, a manufacturing-oriented simulation system, and AweSim, a general purpose simulation system. OTHER PRODUCTS. Other products include Automated Data Collection and the Computer Aided Design Interface, which interface with SyteLine. The Automated Data Collection interface incorporates bar code technology to record movement of items from the plant floor, track receipt or shipment of items, perform cycle counting and generate physical inventories. To assist manufacturers using computer aided design, the Company offers its Computer Aided Design Interface, which provides bi-directional import and export capabilities. ECC INITIATIVE. In July, 1998, the Company announced its planned early 1999 launch of a new ERP product line serving repetitive manufacturing of consumer products. Currently in the beta process, this new initiative, which is referred to as "ECC", will target three new vertical markets: (i) electronics, (ii) consumer durable and packaged goods, and (iii) computers and related peripherals. This new suite of products is being developed separately from SyteLine and is not a replacement for SyteLine. The ECC initiative will support repetitive manufacturers' core business processes including customer service, planning and materials management, production management and financial management. The new ECC products are written in the C++ programming language, operate in a Windows NT operating environment, and use only Microsoft tools and SQL Server data base. The new ECC products will be integrated with the complementary CSRP products to SyteLine, including advanced planning and scheduling, configuration and field services. The planned launch of the new ECC products in early 1999 will be limited to North America with international distribution anticipated in the second half of calendar year 1999. The 9 ECC initiative utilizes the same complementary CSRP products supporting SyteLine. Therefore, development efforts are not duplicated for these CSRP products in order to support two primary product lines. The Company is committed to continue to develop and support both SyteLine and the new ECC products. However, the release of the new ECC products may trigger customer concerns about the Company's future commitment to SyteLine. No assurance can be given that the release of the new ECC products will not adversely affect the sales or sales cycles for SyteLine and/or the other CSRP complementary products to SyteLine. SERVICES AND SUPPORT The Company offers a full range of services that allow its customers to maximize the benefits of the Company's software products, including project management, implementation, product education, technical consulting, programming services, system integration and maintenance and support. The Company's services are priced separately, and fees for its services generally are not included in the price for its software product. Fees for maintenance and support services generally are billed 12 months in advance while all remaining consulting, education and programming services generally are billed as incurred. The Company considers its ability to implement its software solution rapidly a key competitive factor. The Company's professional services organization, which employs approximately 80 consultants and managers, uses a structured implementation methodology known as "RAPID FOCUS," which divides a customer's implementation into distinct phases: planning and installation, education and business system simulations, development of operating procedures, conversion planning, end-user training and cutover and post implementation evaluation. The Company offers both on-site and classroom training. Classroom training is available in nine different Company facilities throughout the world. In addition to the consultants employed directly by the Company, customers can receive consulting services from the Company's approximately 50 business partners. The Company also has actively established relationships with consulting firms to provide additional support in project management, implementation and system integration services for customers. The Company views these relationships as an important source of future leads for prospective customers. Although the Company attempts to minimize customization of its software products, the Company does provide professional programming services to modify its software products to address specific customer requirements. These modifications may include designing and programming complete applications or integrating the Company's software products with legacy systems. Maintenance and support services are available to all customers using an active release of the Company's software products. Maintenance and support services include product enhancements and updates, free upgrades to new versions, telephone support during extended business hours, full-time emergency support and access to the Company's customer support module on the Company's home page on the Internet. The price for maintenance and support 10 services is based on a percentage of the list price of the Company's software product at the time the license is purchased. Fees for maintenance and support services are billed 12 months in advance, and revenue is deferred and recognized ratably over the term of the maintenance and support agreement. SALES AND DISTRIBUTION The Company currently licenses SyteLine based on a license fee for each concurrent session or concurrent execution of its software products. The Company receives additional license fee revenue whenever a customer increases the number of concurrent sessions, usually as a result of the growth of the customer's business or expansion to other sites. SyteLine uses an encrypted key that allows the customer to use only the number of concurrent sessions for which the customer has received a license. The Company principally sells and supports its products and services through a direct sales and marketing force. The Company has made significant expenditures in recent years to expand its direct sales and marketing force, primarily outside the United States, and plans to continue such expansion. The Company's future success will depend in part upon the effectiveness of its direct sales and marketing force and the ability of the Company to continue to attract, integrate, train, motivate and retain new sales and marketing personnel. Competition for sales and marketing personnel in the software industry is intense. In addition, there can be no assurance that the Company's direct sales and marketing organization will be able to compete successfully against the sales and marketing operations of many of the Company's current and potential competitors. If the Company is unable to develop and manage its direct sales and marketing force effectively, the Company's business, operating results and financial condition could be materially and adversely affected. Sales leads are generated through a combination of in-house telemarketing, leads from consulting partners, advertising, trade shows and direct calls by sales staff. The Company sells its products and services through both a direct sales force and approximately 50 business partners worldwide. The Company currently maintains 26 sales and support offices worldwide: twelve in North America, nine in Asia Pacific and five in Europe. Symix's business partners in North America target the lower end of the mid-market manufacturing sector while its business partners in Asia Pacific and Europe primarily sell independently to companies within a geographic region or country. The operations of two former business partners in Australia and the Netherlands were acquired by the Company in 1996 and converted to sales and distribution subsidiaries. The Company also completed the acquisition of a French company in 1996, which now is a sales and distribution subsidiary of the Company. The French subsidiary currently has existing customers who use a French localized version of a manufacturing software product that is no longer being enhanced by the software vendor. The French subsidiary is targeting existing and new customers with a localized version of SyteLine. The Company will need to maintain and expand its relationships with its existing business partners and enter into relationships with additional business partners in order to expand the 11 distribution of its products. There can be no assurance that current or future business partners will provide the level of expertise and quality of service required to license the Company's products successfully, that the Company will be able to maintain effective, long-term relationships with such business partners or that selected business partners will continue to meet the Company's sales needs. Further, there can be no assurance that these business partners will not market software products in competition with the Company in the future or will not otherwise reduce or discontinue their relationships with, or support of, the Company and its products. If the Company fails to maintain successfully its existing business partner relationships or to establish new relationships in the future, or if any such business partner exclusively adopts a product other than the Company's products, materially reduces its sales efforts relating to the Company's products or materially increases its support for competitive products, the Company's business, operating results and financial condition could be materially and adversely affected. In addition to business partners and third party consultants, hardware vendors continue to be an important source of sales leads. The Company has entered into cooperative marketing programs with International Business Machines Corporation and Data General Corporation and has informal marketing relationships with other hardware vendors such as Hewlett-Packard Company. The Company has responsibility for providing support for its software to its customers under each agreement, and the various hardware vendors are responsible for their products. In June, 1998, Mitsui & Co., Ltd. ("Mitsui"), the distributor of Symix products in Japan, acquired 13.3% of the ownership interest in the Company's Asia distribution operations for $2.0 million through the purchase of shares of Symix Computer Systems (Singapore) Pte. Ltd. ("Symix Singapore"). In connection with and prior to such investment, all of the outstanding shares of the Symix subsidiaries in Australia, New Zealand, Thailand, Hong Kong and Malaysia were transferred to Symix Singapore. Consequently, Mitsui currently owns 13.3% of the outstanding shares of Symix Singapore, with Symix owning the remaining 86.7%. Management believes that Mitsui's investment in Symix's Asia distribution operations along with Mitsui's increased sales support to Japanese companies throughout Asia will further legitimize Symix as a leading ERP vendor in the Asia Pacific region. The Company believes that its international sales in years prior to fiscal 1997 were not significant. With new subsidiaries in France, Australia and the Netherlands, and with continued growth in key areas such as Japan, China and Singapore, the Company believes international sales will account for an increasing percentage of its total sales over the next several years. The Company derived approximately 21% of its fiscal 1998, and approximately 25% of its fiscal 1997, net revenues from sales outside of North America. The amount of net revenue, operating income and identifiable assets attributable to each of the Company's geographic areas for fiscal 1998 and fiscal 1997 were as follows:
NORTH ASIA/PACIFIC EUROPE AMERICA ----------- ------ ------- (IN THOUSANDS) 1998 Net revenue............... $77,225 $8,665 $11,707 Operating income.......... 8,773* (694) 442 Identifiable assets....... 47,778 9,392 9,212 1997 Net revenue............... $49,388 $8,259 $8,124 Operating income.......... 4,035 410 627 Identifiable assets....... 32,531 5,766 5,955
*Exclusive of $6.5 million acquisition research and development write-off. The Company expects to continue to expand its existing international operations and to enter additional international markets, which will require significant management attention and financial resources. Historically, the Company's international operations have been characterized by lower operating margins during the period in which marketing and distribution channels were being developed. Costs associated with international expansion include the establishment of additional foreign offices, the hiring of additional personnel, the localization and marketing of its products for particular foreign markets and the development of relationships with international service providers. If international revenue is not adequate to offset the expense of expanding foreign operations, the Company's business, operating results or financial condition could be materially adversely affected. A significant portion of the Company's international revenue is received in currencies other than U. S. dollars and, in the past, the Company has not engaged in hedging activities. As a result, the Company is subject to risks associated with foreign exchange rate fluctuations. Due to the substantial volatility of foreign exchange rates, there can be no assurance that foreign exchange rate fluctuations will not have a material adverse effect on the Company's business, operating results or financial condition. The Company's international operations are subject to other risks inherent in international business activities, such as the impact of recessionary environment in economies outside the United States, cultural and language difficulties associated with servicing customers, localization and translation of products for foreign countries, difficulties in staffing and managing international operations, difficulties in collecting accounts receivable and longer collection periods, reduced protection for intellectual property rights in some countries, exchange controls, restrictions on the repatriation of foreign earnings, political instability, trade restrictions, tariff changes and the impact of local economic conditions and practices. The Company's success in expanding its international business will be dependent, in part, on its ability to anticipate and effectively manage these and other risks. There can be no assurance that these and other factors will not have a material adverse effect on the Company's business, operating results or financial condition. 13 PRODUCT DEVELOPMENT Symix devotes a significant percentage of its resources to identifying manufacturers' needs, developing new features and enhancements to existing products and designing and developing new products. New products, updates and enhancements are developed by the Company's internal development staff. The Company's practice is to release updates and major enhancements on a regular basis. Symix works closely with manufacturers and business partners to improve and enhance its products. The market for the Company's products is characterized by rapid technological change, evolving industry standards in computer hardware and software technology, changes in customer requirements and frequent new product introductions and enhancements. The introduction of products embodying new technologies and the emergence of new industry standards can cause customers to delay their purchasing decisions and render existing products obsolete and unmarketable. The life cycles of the Company's software products are difficult to estimate. As a result, the Company's future success will depend, in part, upon its ability to continue to enhance existing products and to develop and introduce in a timely manner new products with technological developments that satisfy customer requirements and achieve market acceptance. There can be no assurance that the Company will successfully identify new product opportunities and develop and bring new products to market in a timely and cost-effective manner or that products, capabilities or technologies developed by others will not render the Company's products or technologies obsolete or noncompetitive or shorten the life cycles of the Company's products. See "Business--Competition." If the Company is unable to develop on a timely and cost-effective basis new software products or enhancements to existing products, or if such new products or enhancements do not achieve market acceptance, the Company's business, operating results and financial condition may be materially adversely affected. As a result of the complexities inherent in software development, and in particular development for multi-platform environments, and the broad functionality and performance demanded by customers for ERP products, major new product enhancements and new products can require long development and testing periods before they are commercially released. The Company has on occasion experienced delays in the scheduled introduction of new and enhanced products, and future delays could have a material adverse effect on the Company's business, operating results and financial condition. Research and product development expenses, including amounts capitalized were $12,200,000, $8,759,000 and $5,963,000 for the fiscal years ended June 30, 1998, 1997 and 1996, respectively. Capitalized software expenditures were $3,600,000, $3,100,000, and $2,290,000 for the same respective periods and were capitalized in accordance with the Statement of Financial Accounting Standards No. 86. Amortization of capitalized software costs is included in cost of revenue. The Company generally retains the right to remarket specific modifications developed by its programming services group in or with future product releases. As of June 30, 1998, capitalized software expenditures relating to the ECC initiative were $4.3 million. Amortization of these expenditures will begin upon the launch of the new ECC products, currently planned for early, 1999. 14 COMPETITION The market for ERP software is intensely competitive, rapidly changing and significantly affected by new product offerings and other market activities. The Company has a large number of competitors that vary in size, computing environments and overall product scope. Within its market, the primary competition comes from independent software vendors in two distinct groups: (i) large system developers who are moving into the Company's market, including Baan Company, N.V., J.D. Edwards & Company, Oracle Corporation and SAP Aktiengellschaft, and (ii) traditional mid-market competitors, including DataWorks Corporation, Effective Management Systems, Inc., Fourth Shift Corporation and QAD, Inc. A number of companies offer products which are similar to the Company's products and are directed at the market for ERP systems for mid-market manufacturers. Many of the Company's existing competitors, as well as a number of potential new competitors, have more established and larger marketing and sales organizations, significantly greater financial, technical and other resources and a larger installed base of customers than the Company. Other competitors leverage vertical market expertise, reputation and price as competitive advantages. There can be no assurance that competitors will not offer or develop products that are superior to the Company's products or that achieve greater market acceptance. Several large companies which develop management information software applications for large multinational manufacturers are beginning to market to mid-market manufacturers targeted by the Company or otherwise develop applications that compete in the Company's markets. As the market for ERP software solutions expands, other companies may enter the Company's market or increase their market presence by acquiring or entering into alliances with competitors of the Company. As a result of all these factors, competition is likely to increase substantially, which may result in price competition, loss of market share or delayed purchasing decisions. There can be no assurance that the Company will be able to compete successfully against its competitors or that the competitive pressures faced by the Company will not adversely affect its financial performance. The Company believes that the most important considerations for potential customers for its software products are product functionality, open systems and client/server technology, ease of use and graphical interface, rapid installations, competitive pricing, corporate reputation, reliability and quality of technical support, documentation and education and size of installed user base. The Company further believes that it competes favorably in these areas. PROPRIETARY TECHNOLOGY The Company's ability to compete is dependent in part upon its internally developed, proprietary intellectual property. The Company regards its products as proprietary trade secrets and confidential information. The Company relies largely upon its license agreements with customers; distribution agreements with distributors; and its own security systems, confidentiality procedures and employee agreements to maintain the trade secrecy of its products. The Company seeks to protect its programs, documentation and other written materials under copyright law. In 15 addition, SYMIX, SyteLine, SytePower and Pritsker are registered trademarks and SyteAPS, SyteSelect, SyteService, SyteGuide, FieldPro, SyteWeb and SyteEDI are trademarks of the Company. None of the Company's products is patented. There can be no assurance that the Company's means of protecting its proprietary rights in the United States or abroad will be adequate or that competitors will not independently develop similar technology. In addition, the laws of some foreign countries do not protect the Company's proprietary rights as fully as do the laws of the United States. Preventing or detecting unauthorized use of the Company's products is difficult. The Company also relies on certain other technology which it licenses from third parties, including software that is integrated with internally developed software and used in the Company's products to perform key functions. No assurance can be given that the steps taken by the Company will prevent misappropriation of its technology or that its license agreements will be enforceable. In addition, litigation may be necessary in the future to enforce the Company's intellectual property rights, to protect the Company's trade secrets, to determine the validity and scope of the proprietary rights of others or to defend against claims of infringement or invalidity. Any such litigation could result in substantial costs and diversion of resources and could have a material adverse effect on the Company's business, operating results or financial condition. Although the Company does not believe that its products infringe the proprietary rights of third parties, there can be no assurance that infringement or invalidity claims (or claims for indemnification resulting from infringement claims) will not be asserted or prosecuted against the Company or that any such assertions or prosecutions will not materially adversely affect the Company's business, operating results or financial condition. Regardless of the validity or the successful assertion of such claims, defending against such claims could result in significant costs and diversion of resources with respect to the defense thereof, which could have a material adverse effect on the Company's business, operating results or financial condition. In addition, the assertion of such infringement claims could result in injunctions preventing the Company from distributing certain products, which would have a material adverse effect on the Company's business, operating results and financial condition. If any claims or actions are asserted against the Company, the Company may seek to obtain a license to such intellectual property rights. There can be no assurance, however, that such a license would be available on reasonable terms or at all. The Company has in the past and may in the future resell certain software that it licenses from third parties and jointly develop software in which it will have co-ownership or cross-licensing rights. See "Business-Products." EMPLOYEES As of June 30, 1998, the Company employed 623 persons, including 171 in North American sales and service operations, 211 in development and support, 162 in international operations outside of North America and 79 in marketing and administration. None of the Company's employees is represented by a labor union. The Company has never experienced a work stoppage and believes that its employee relations are good. 16 The Company's success depends to a significant extent upon senior management and other key employees. The loss of one or more key employees could have a material adverse effect on the Company. The Company does not have employment agreements with its executive officers, except Stephen A. Sasser, President and Chief Operating Officer, and does not maintain key man life insurance on its executive officers. In addition, the Company believes that its future success will depend in part on its ability to attract and retain highly skilled technical, managerial, sales, marketing, service and support personnel. Competition for such personnel in the computer software industry is intense. There can be no assurance that the Company will be successful in attracting and retaining such personnel, and the failure to do so could have a material adverse effect on the Company's business, operating results or financial condition. YEAR 2000 COMPLIANCE The Company faces "Year 2000 compliance" issues similar to those faced by other companies in the information technology industry. Year 2000 compliance issues typically arise with respect to computer software systems and programs that use only two digits, rather than four digits, to represent a particular year. Consequently, these systems and programs may not process dates beyond the year 1999 and may result in miscalculations or system failures. Year 2000 compliance problems also may arise in embedded systems, such as environmental system controls, elevators and other products that use microprocessors or computer chips. The Company's current product and service offerings, including those products developed and supported by third party software vendors, have been designed to be Year 2000 compliant. New products also are being designed by the Company to be Year 2000 compliant. The Company's existing contracts with active customers (e.g., customers with effective maintenance and support agreements with the Company) cover recent software products that are Year 2000 compliant or for which a Year 2000 ready upgrade is available, or do not expressly obligate the Company to furnish an updated release that is Year 2000 compliant. The Company has communicated with its customers regarding Year 2000 compliance, notifying them of the availability of upgraded or new releases of the Company's products which are Year 2000 compliant for certain older software products released by the Company which may still be in use by them. In certain cases, the Company has warranted that the Company's current software product offerings are Year 2000 ready when specifically requested by the customer. Although the software products currently offered by the Company have been tested for Year 2000 readiness, any failure of the Company's software products to perform, including the failure to process dates beyond the year 2000, could have a material adverse effect on the Company's business, financial condition and results of operations. The Company is in the process of assessing the Year 2000 readiness of selected third parties, including key suppliers, subcontractors, business partners and customers. To the extent that the Company uses third party products or technology in its computer software products, the Company has obtained confirmation of Year 2000 compliance from such third party providers. A failure of one or more of such suppliers, subcontractors, business partners or customers to sufficiently address their Year 2000 compliance issues could adversely affect the Company's business, financial condition and results of operations. 17 The Company also is in the process of reviewing its internal computer information system and non-computer systems, such as telecommunications equipment, building elevators, etc., which contain embedded computer technology, to determine whether such systems are Year 2000 compliant. Most of the embedded systems on which the Company relies in its daily operations are owned and managed by the lessors of the facilities in which the Company's operations are located, or by agents of such lessors. Although the Company's review of its internal computer information system and non-computer systems is not expected to be completed until March, 1999, the Company presently believes that such systems are Year 2000 compliant. The Company is less certain of the Year 2000 readiness of third parties who provide external services, such as public utilities, which could adversely impact the Company's operations. For example, the failure or interruption of electrical services would disrupt the Company's ability to communicate with its customers, suppliers, business partners and others. The Company does not anticipate any material costs associated with Year 2000 compliance relating to its internal computer information system or non-computer systems. All costs related to Year 2000 issues are being expensed by the Company. The Company does not expect that the total costs of evaluation and compliance with the Company's Year 2000 issues will be material. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 IN ADDITION TO HISTORICAL INFORMATION, THIS ANNUAL REPORT ON FORM 10-K 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; THE COMPANY'S ABILITY TO SUCCESSFULLY RESOLVE ANY YEAR 2000 ISSUES; PRODUCT PRICING AND OTHER FACTORS DETAILED IN THIS ANNUAL REPORT ON FORM 10-K AND IN OTHER FILINGS MADE BY THE COMPANY WITH THE SECURITIES AND EXCHANGE COMMISSION. 18 EXECUTIVE OFFICERS OF THE REGISTRANT The Company's executive officers are as follows:
NAME AGE POSITIONS WITH THE COMPANY - ---- --- -------------------------- Lawrence J. Fox............... 42 Chairman of the Board and Chief Executive Officer Stephen A. Sasser............. 49 President, Chief Operating Officer and a Director Stephen A. Yount.............. 43 Vice President of America's Field Operations Lawrence W. DeLeon............ 43 Vice President, Chief Financial Officer and Secretary Otto E. Offereins............. 52 Vice President, General Manager of APS and ECC Division Daryll Wartluft............... 57 Vice President, General Manager of SyteLine Division Robert D. Williams............ 43 Vice President of Human Resources Catherine K. DeRosa........... 37 Vice President of Marketing Jorge L. Lopez................ 43 Vice President of Corporate Development/Strategic Planning
LAWRENCE J. FOX founded Symix in 1979 as a sole proprietorship. He has held his present offices since Symix was incorporated in 1984. STEPHEN A. SASSER joined the Company in July 1995 as President and Chief Operating Officer. He has served as a director of the Company since July 1995. From October 1994 to June 1995, Mr. Sasser served as Vice President of International Operations for Trilogy Development Group, a provider of sales and marketing software. From August 1992 to October 1994, Mr. Sasser was Group Vice President of the Systems Management Division and Pacific Rim Operations of Legent Corporation, a provider of systems management software products and services ("Legent"). From April 1987 through its acquisition by Legent in 1992, Mr. Sasser served as President of the Data Center Management Division of Goal Systems International, Inc. ("Goal Systems"), which designed, developed, and marketed systems management software products. STEPHEN A. YOUNT joined the Company in May 1996 as Vice President of America's Sales and Services. In August, 1998 he was elected as Vice President of America's Field Operations. From 1995 to May 1996, he was Vice President of Sales at Tyecin Systems, a provider of client-server manufacturing software for the semi-contractor market. From 1993 to 1995, Mr. Yount served as Vice President of Sales and Services at Neuron Data, a client-server application development software company. From 1987 to 1993, he served in various senior sales positions at Legent, including Regional Vice President of Sales, Vice President of Sales and Director of Sales, Western Region. LAWRENCE W. DELEON joined Symix in August 1995 as Vice President, Chief Financial Officer and Secretary. From 1991 to August 1995, Mr. DeLeon served in various capacities at Legent, including Treasurer for Goal Systems, Europe Vice President-Finance and Administration 19 and Vice President-Central Europe. From 1988 to 1991, Mr. DeLeon was Chief Financial Officer for Thunderbird Products Corporation, a boat manufacturer. OTTO E. OFFEREINS joined the Company in September 1995 as Vice President of Development and Support. In April, 1998 Mr. Offereins assumed the new role of Vice President, General Manager APS and ECC Division. He was Vice President and General Manager of Client Product Server Division of Legent from July 1994 to August 1995. From July 1992 to July 1994, Mr. Offereins served as Vice President of Support and Development for the Systems Management Division of Legent. From March 1991 to July 1992, he served as Vice President of Development and Support-Research and Development Division of Legent. Prior to March 1991, he was Executive Vice President of Operations for Syntelligence Corporation, a software company specializing in financial risk assessment. DARYLL WARTLUFT joined the Company in May, 1998 as Vice President, General Manager SyteLine Division. From August 1995 to April 1998, he was President and Chief Executive Officer and a director of Pivotpoint Inc., an ERP software and services provider. From April 1994 to August 1995, he served as Group Vice President of Applications Management Division of Legent. Prior to that time, he held various management positions with Group Bull Worldwide Information Systems, a provider of systems management software products and services, and International Business Machines Corporation. ROBERT D. WILLIAMS joined the Company in September, 1995 as Vice President of Human Resources. Prior to that time, he served as Director, Human Resources/Associate Relations of Legent from August 1992 to August 1995. From March 1990 to August 1992 he was Executive Director of Human Resources and Administrative Services of Goal Systems. CATHERINE K. DEROSA joined the Company as Director of Product Marketing in August 1994. She has served the Company in the position of Vice President of Marketing since January 1996. Prior to joining Symix and from 1992 to August 1994, Ms. DeRosa served as an independent consultant to several major technology companies in the Silicon Valley. From 1989 to 1992, Ms. DeRosa served as a Senior Consultant with Price Waterhouse, a major accounting and consulting firm. She also has held a variety of positions with Micro Card Technologies, Inc., an electronic components manufacturer and Texas Instruments Inc., a leader in semi-conductors and electronics. Ms. DeRosa is a Certified Public Accountant and received a masters in business administration degree from the Harvard Business School. JORGE L. LOPEZ joined the Company in November 1996 as Vice President of Corporate Development/Strategic Planning. From 1995 to November 1996, Mr. Lopez served as Vice President of Marketing for Salesoft Inc., a provider of automated sales and marketing software. From 1989 to 1995, Mr. Lopez served as Vice President of Strategic Alliances for Avalon Software, Inc. an enterprise resource planning software and services company. Prior to that time, Mr. Lopez held various marketing and technical positions with International Business Machines Corporation. 20 The executive officers of the Company are appointed by and serve at the pleasure of the Symix Board of Directors. There are no arrangements or understandings between any officer and any other person pursuant to which the officer was so appointed. ITEM 2. PROPERTIES The Company's corporate headquarters and principal administrative, product development, and sales and marketing operations are located in approximately 75,000 square feet of leased office space in Columbus, Ohio. The lease agreement commenced in July 1991 and will expire on June 30, 2001. The lease agreement provides for an annual base rent of approximately $1.2 million. Additionally, the Company has 25 leased sales and support offices throughout the United States and elsewhere. ITEM 3. 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 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None 21 PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's Common Shares are traded in the over-the-counter market and are quoted on the Nasdaq National Market under the symbol "SYMX." The following table sets forth the high and low sale prices for the Common Shares for fiscal 1997 and 1998, as reported by the Nasdaq National Market.
HIGH LOW ---- --- Fiscal year ended June 30, 1998 First Quarter...................................................... $21.00 $10.75 Second Quarter..................................................... 19.00 14.00 Third Quarter...................................................... 19.38 14.00 Fourth Quarter..................................................... 22.88 18.13 Fiscal year ended June 30, 1997 First Quarter...................................................... $ 8.50 $ 7.25 Second Quarter..................................................... 8.63 7.38 Third Quarter...................................................... 10.88 7.88 Fourth Quarter..................................................... 12.38 8.00
The closing price on June 30, 1998 was $20.63. As of June 30, 1998, there were approximately 128 holders of record of the Common Shares, and the Company believes that there are more than 2,000 beneficial shareholders. The Company has never paid cash dividends on its Common Shares. The Company expects that all future earnings will be retained to finance the Company's operations and for the growth and development of its business. Accordingly, the Company does not currently anticipate paying cash dividends on its Common Shares in the foreseeable future. The payment of any future dividends will be subject to the discretion of the Board of Directors of the Company and will depend on the Company's results of operations, financial position and capital requirements, general business conditions, restrictions imposed by financing arrangements, if any, legal restrictions on the payment of dividends and other factors the Board of Directors deems relevant. 22 ITEM 6. SELECTED FINANCIAL DATA. The following table summarizes certain consolidated financial data for each of the five years presented. The selected financial data presented below has been derived from, and should be read in conjunction with, the Company's audited financial statements, and the notes thereto.
YEAR ENDED JUNE 30, 1998 1997 1996 1995 1994 ------------------- ---- ---- ---- ---- ---- (IN THOUSANDS, EXCEPT PER SHARE DATA) OPERATING STATEMENT DATA: Net revenue.......................... $97,597 $65,772 $45,759 $42,828 $35,486 Cost of revenue...................... 35,701 23,690 16,496 15,672 12,917 -------- ------- ------- ------- ------- Gross margin...................... 61,896 42,082 29,263 27,156 22,569 Operating expenses Selling, general, and administrative.................. 45,474 31,351 21,593 24,774 19,188 Research and product development.. 7,901 5,659 3,673 3,744 2,589 Restructuring and other unusual charges......................... -- -- 506 -- -- Acquired research and development write-off....................... 6,503 -- -- -- -- -------- ------- ------- ------- ------- Total operating expenses.......... 59,878 37,010 25,772 28,518 21,777 -------- ------- ------- ------- ------- Operating income (loss).............. 2,018 5,072 3,491 (1,362) 792 Other income (expense), net.......... (178) 107 221 314 122 -------- ------- ------- ------- ------- Income (loss) before income taxes.... 1,840 5,179 3,712 (1,048) 914 Provision (benefit) for income taxes. 3,196 1,916 1,404 (410) 330 -------- ------- ------- ------- ------- Net income (loss)................. ($1,356) $3,263 $2,308 $(638) $584 -------- ------- ------- ------- ------- -------- ------- ------- ------- ------- Earnings (loss) per share(1)......... ($0.21) $0.54 $0.41 $(0.12) $0.10 Weighted average common and common share equivalents outstanding..... 6,317 6,079 5,582 5,424 5,585 BALANCE SHEET DATA: Working capital...................... $13,575 $7,897 $7,538 $6,363 $9,466 Total assets......................... 66,382 44,252 30,463 26,069 24,473 Total long-term debt and lease obligations....................... 2,305 530 -- 138 335 Total shareholders' equity........... 31,301 23,361 17,102 14,508 15,641
- -------------------------------------------------------------------------------- (1) Where appropriate, all share data and references in this report have been adjusted for the 2-for-1 share split, effected in the form of a share distribution of one share for each share outstanding to shareholders of record on September 10, 1996. In addition, share data has been restated to conform with the provisions of FASB Statement 128 for all years presented. 23 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. OVERVIEW Symix is a global provider of open, client/server manufacturing software for mid-range discrete manufacturers. Symix designs, develops, markets and supports a fully integrated manufacturing, planning and financial software system that addresses the ERP requirements of manufacturers. Following the fiscal 1995 year-end in which the Company incurred its first loss since becoming publicly traded in 1991, the Company hired a new president, Stephen A. Sasser, who implemented several changes in order to restore the Company to profitability. The new president reorganized the executive management staff by hiring several key executives and promoting certain employees into executive positions. Recognizing the strong foundation of the Company's core products and large customer base, the new management team refocused the Company's investments in development, marketing and promotional activities into supporting its traditional vertical markets within the mid-range discrete manufacturing market. The Company also restructured its sales channels by hiring new sales management in North America and Europe, revising sales compensation programs and reorganizing the services organization to align more directly with the sales organization. The Company also focused its efforts on building the international distribution channels through acquisitions and converting independent distributors to direct sales and services operations. The Company converted distributors in Australia, New Zealand and the Netherlands to subsidiary operations, and the Company acquired a French sales and distribution operation. During the fourth quarter of fiscal 1998, the Company opened a new office in Italy and acquired a minority interest in an independent distributor based in China. Revenue from foreign operations accounted for approximately 21% of total revenue in fiscal 1998, compared to 25% in fiscal 1997 and 13% in fiscal 1996. The decline in the percentage of revenue from foreign operations from fiscal 1997 to fiscal 1998 was the result of a general slowdown in the Asian economies combined with a strong performance in North America. The significant increase in revenue from foreign operations from fiscal 1996 to fiscal 1997 resulted primarily from the conversion of distributor operations and acquisitions. Prior thereto, the Company sold its products to its international distributors at a discount from U.S. list prices. Since conversion, Symix has been able to increase its international revenues by recognizing the full sale price on products sold internationally and by providing services and support directly to customers. During the fourth quarter of fiscal 1996, Symix introduced SyteLine, a client/server version of its core ERP product with a graphical user interface. SyteLine represents a large majority of new product sales to customers. In addition to SyteLine, the Company released and sold complementary products for data analysis (SytePower), product configuration (SyteSelect) and product implementation (SyteGuide) during the second half of fiscal 1997 that provided expanded features and functionality and enhanced sales of SyteLine. The Company also purchased a Canadian company, Visual Applications Software, Inc. ("VAS"), in January, 1997 that develops and distributes an application software product, FieldPro, which provides field service and warranty tracking capabilities for manufacturers and service organizations of computer and office equipment distributors. FieldPro is being marketed and distributed as a stand-alone product under 24 a newly established business operating unit within Symix, the Customer Integrated Technologies Division ("CIT Division"). In November, 1997, Symix continued its expansion of product offerings by acquiring Pritsker Corporation, which markets advanced planning and scheduling and simulation software to mid-market manufacturers. The Company incurred a nonrecurring charge of approximately $6.5 million in the quarter ending December 31, 1997, relating to the write-off of acquired in-process technology of Pritsker. Also during fiscal 1998, Symix introduced two new complementary products to SyteLine: electronic commerce (SyteEDI) and internet tools (SyteWeb). In fiscal 1998 the Company generated record revenues of $97.6 million and net income of $5.1 million, exclusive of a non-recurring charge related to the Pritsker acquisition. NET REVENUE The Company'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 91-1 on Software Revenue Recognition. Net revenue increased 48% to $97.6 million in fiscal 1998, compared to increases of 44% and 7% for the years ended June 30, 1997 and 1996, respectively. The strong growth in fiscal 1998 and fiscal 1997 net revenue compared to previous years was the result of new software product offerings and the reorganized international distribution channel. Both software license fee revenue and service, maintenance and support revenue contributed significantly to the net revenue increase in fiscals 1998 and 1997. The revenue mix since 1996 is shown in the table below: Revenue Mix
Year ended June 30 ----------------------------------------------- 1998 1997 1996 ---- ---- ---- (IN THOUSANDS, EXCEPT PERCENTAGES) License fees.......................... $58,498 60% $36,477 55% $24,682 54% Service, maintenance and support...... 39,099 40% 29,295 45% 21,077 46% ------- --- ------- --- ------- --- Total................................. $97,597 100% $65,772 100% $45,759 100%
Software license fee revenue increased 60% in fiscal 1998 compared to a 48% software license fee revenue growth in fiscal 1997. The increase in software revenue in fiscal 1998 was primarily the result of (1) the expanding number of products that complement the Company's core ERP software product, SyteLine, and (2) the acquisition of Pritsker in November, 1997, which contributed approximately $3.4 million in software license fee revenue in fiscal 1998. The increase in software license fee revenue in fiscal 1997 was primarily the result of (1) revenue 25 from the Company's new client server ERP software product, SyteLine, which was released in March 1996, and (2) a reorganized international distribution channel. Service, maintenance and support revenue is derived from installation, implementation, training, consulting, systems integration and software product maintenance and support services. Service, maintenance and support revenue increased 33% in fiscal 1998 to $39.1 million from $29.3 million in fiscal 1997 and $21.1 million in fiscal 1996. The continued increase in service, maintenance and support revenue is attributable to growth in licensed Symix installations worldwide and the reorganization of Symix's service organization through the conversion of the international distributors and internal expansion. Services revenue made up 40% of total revenue in fiscal 1998, compared to 45% and 46% in fiscal 1997 and fiscal 1996, respectively. Services revenue as a percentage of total revenue declined from fiscal 1997 to fiscal 1998 due to the accelerating software license fee revenue growth and the Company's planned increase in outsourcing certain services to support new installations. Generally, maintenance and support contracts are billed annually and revenue is recognized ratably over the contract period, which is typically twelve months. Deferred revenue on the Company's balance sheet relating primarily to maintenance and support contracts increased from $9.7 million at June 30, 1997 to $13.2 million at June 30, 1998. COST OF REVENUE Total cost of net revenue as a percentage of net revenue was 37% for the year ended June 30, 1998 compared to 36% for each of the years ended June 30, 1997 and 1996. Cost of software license fees include royalties, amortization of capitalized software development costs and software delivery expenses. Cost of software license fees decreased to 25% of software license fee revenue in fiscal 1998 from 27% in fiscal 1997 and 28% in fiscal 1996. The decrease is the result of the increased volume of software license fee sales. Partially offsetting the improved software license fee margins was an increase in third-party royalties relating to the new complementary products for SyteLine released during the year. 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 was 54% of service and support revenue in fiscal 1998 compared to 48% in fiscal 1997 and 46% in fiscal 1996. The increase in cost of services in fiscal 1998 was a combination of higher than expected mix of consulting services as a percent to total services revenue and the continued expansion of using subcontractors to supplement the work performed by Company employees. In general, the use of subcontractors results in lower margins than employees but provides the Company increased flexibility in meeting customer demands. The small increase in cost of service, maintenance and support as a percentage of related revenue in fiscal 1997 compared to the prior fiscal year was the result of increased costs relating to the hiring of experienced service personnel to support new system installations. In addition, lower margins in the developing international distribution channels also contributed to the increase in the cost percentage. Partially offsetting these lower margins was the increase in installations and corresponding service renewals, from which the Company was able to realize improved margins. 26 SELLING, GENERAL AND ADMINISTRATIVE EXPENSES Selling, general and administrative expenses consist of personnel and related overhead costs, including commissions, for the sales, marketing, general and administrative activities of the Company, together with advertising and promotional costs. Selling, general and administrative expenses increased 45% in both fiscal 1998 and 1997. Selling, general and administrative expenses as a percent of net revenue were 47%, 48% and 47% for the years ended June 30, 1998, 1997 and 1996, respectively. The increase in expenses as a percent of revenue in fiscal 1997 was the result of significant increases in marketing and promotional activities and expanding international sales. This increase was partially offset by improved productivity of the North American sales channel. RESEARCH AND PRODUCT DEVELOPMENT Research and development expenses include personnel and related overhead costs for product development, enhancement, upgrades, quality assurance and testing. Total research and product development expenses, including amounts capitalized, were $12.2 million or 13% of net revenue for the year ended June 30, 1998, compared to $8.8 million or 13% of net revenue in fiscal 1997 and $6.0 million or 13% of net revenue in fiscal 1996. The Company capitalized research and development costs of $4.3 million, $3.1 million and $2.3 million for the years ended June 30, 1998, 1997 and 1996, respectively. Software development costs capitalized in a given period are dependent upon the nature and state of the development process and are recorded in accordance with Statement of Financial Accounting Standards No. 86. Upon general release of a product, related capitalized costs are amortized over three years and recorded as license fee cost of revenue. In addition to the $2.3 million of software development costs capitalized in fiscal 1996, the Company capitalized $1.0 million relating to the purchase of existing technology. The Company incurred a nonrecurring charge of approximately $6.5 million relating to the write-off of acquired in-process technology in conjunction with the Pristker acquisition. The increase in overall research and product development expense is due to staff expansion relating to the Company's development of future releases of SyteLine, increased development focus on interfacing with third-party software products and research involving new technologies and products. PROVISION FOR INCOME TAXES The effective tax rates for the years ended June 30, 1998, 1997 and 1996 were 174%, 37% and 38%, respectively. The increased effective tax rate in fiscal 1998 was primarily due to the $6.5 million acquisition research and development write-off which was not deductible for income tax purposes. The reduced effective tax rate in fiscal 1997 compared to the previous year was primarily due to the amount of foreign taxable earnings in countries with considerably lower effective rates, thereby reducing the Company's overall tax rate. 27 QUARTERLY RESULTS The following table sets forth certain unaudited operating results for each of the eight quarters in the two year period ended June 30, 1998. This information has been prepared by the Company on the same basis as its audited, consolidated financial statements, and includes all adjustments (consisting only of normal recurring adjustments) necessary to present fairly this information when read in conjunction with the Company's audited, consolidated financial statements and the notes thereto. The Company's results of operations have fluctuated on a quarterly basis. The Company's expenses, with the principal exception of sales commissions and certain components of cost of revenue, are generally fixed and do not vary with revenue. As a result, because the Company's plans and commitments of resources are in advance of its planned revenue level, any shortfall of actual revenue in a given quarter would adversely affect net earnings for that quarter by a significant portion of the shortfall.
THREE MONTHS ENDED ------------------ JUNE 30, MAR. 31, DEC. 31, SEPT. 30, JUNE 30, MAR. 31, DEC. 31, SEPT. 30, 1998 1998 1997 1997 1997 1997 1996 1996 -------- -------- -------- --------- -------- -------- -------- --------- (In thousands, except per share date) Net revenue........... $31,692 $24,322 $24,017 $17,565 $21,187 $15,358 $16,537 $12,690 Cost of revenue....... 11,122 9,151 8,537 6,891 7,097 5,405 6,050 5,138 ------- ------- ------- ------- ------- ------- ------- ------- Gross margin....... 20,570 15,171 15,480 10,674 14,090 9,953 10,487 7,552 Operating expenses Selling, general, and administrative... 14,395 12,204 11,133 7,741 9,953 7,994 7,444 5,960 Research and product development...... 2,287 1,870 1,709 2,034 1,705 1,501 1,353 1,100 Acquired research and development write-off........ 6,503 ------- ------- ------- ------- ------- ------- ------- ------- Total operating expenses......... 16,682 14,074 19,345 9,775 11,658 9,495 8,797 7,060 ------- ------- ------- ------- ------- ------- ------- ------- Operating income (loss).... 3,888 1,097 (3,865) 899 2,432 458 1,690 492 Other income (expense), net..... (46) (67) (16) (50) (16) 18 33 72 ------- ------- ------- ------- ------- ------- ------- ------- 28 THREE MONTHS ENDED ------------------ JUNE 30, MAR. 31, DEC. 31, SEPT. 30, JUNE 30, MAR. 31, DEC. 31, SEPT. 30, 1998 1998 1997 1997 1997 1997 1996 1996 -------- -------- -------- --------- -------- -------- -------- --------- (In thousands, except per share date) Income (loss) before income taxes....... 3,842 1,030 (3,881) 849 2,416 476 1,723 564 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Provision for income taxes....... 1,486 389 1,004 317 865 183 651 217 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Net income (loss)..... $2,356 $641 $(4,885) $532 $1,551 $293 $1,072 $347 Basic earnings (loss) per share $0.36 $0.10 $(0.79) $0.09 $0.26 $0.05 $0.19 $0.06 ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- ------- Diluted earnings (loss) per share... $0.33 $0.09 $(0.79) $0.08 $0.24 $0.05 $0.18 $0.06 Diluted earnings per share exclusive of acquired R&D write-off.......... $0.33 $0.09 $0.24 $0.08 $0.24 $0.05 $0.18 $0.06 Weighted average number of common shares outstanding. 6,586 6,519 6,179 5,982 5,976 5,930 5,582 5,525 Weighted average number of common shares outstanding assuming dilution.. 7,222 7,115 6,179 6,567 6,332 6,345 5,858 5,780 Weighted average number of common shares outstanding assuming dilution and exclusive of acquired R&D write-off......... 7,222 7,115 6,783 6,567 6,332 6,345 5,858 5,780
- ----------------------- Note: Share data has been restated to conform with the provisions of FASB Statement 128. 29 LIQUIDITY AND CAPITAL RESOURCES Cash provided by operations increased to $8.8 million in fiscal 1998 from $2.5 million in fiscal 1997 and $6.9 million in fiscal 1996. Cash provided by an increase in earnings in fiscal 1998, excluding the acquired research and development write-off, was offset by an increase in trade accounts receivable. Trade accounts receivable days sales outstanding were 97 days at June 30, 1998 in comparison to 95 days and 76 days at June 30, 1997 and 1996, respectively. For all three years presented, cash provided by operations was used primarily to fund software development costs and to purchase computer equipment. In 1997 and 1996, cash provided by operations also was used in connection with the Company's acquisition activities. In fiscal 1998, the Company received $2.0 million cash from Mitsui & Co., Ltd. in exchange for a 13.3% minority equity interest in Symix Singapore, the Company's Asia distribution operation. Cash at June 30, 1998 increased to $6.1 million from $2.3 million at June 30, 1997 and $6.8 million at June 30, 1996. Working capital was $13.6 million at June 30, 1998 compared to $7.9 million at June 30, 1997. The increase in working capital in fiscal 1998 and 1997 is primarily attributable to the increase in trade accounts receivable resulting from revenue growth and increase in days sales outstanding. For both fiscal 1998 and fiscal 1997, the increase in current assets was partially offset by the increase in deferred revenue due to the expanded Symix customer base and renewed service contracts. In addition to its present working capital, the Company has a $15.0 million unsecured revolving bank line of credit that expires in fiscal 2001. As of June 30, 1998, $2.0 million was drawn under the line of credit to fund the Company's working capital needs. The Company anticipates that the cash on hand, cash flow from operations and the bank line of credit will be sufficient to satisfy the Company's expected cash needs for the next 12 months. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK. Not applicable. 30 ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULES
Page Report of Independent Auditors..................................... 34 Consolidated Statements of Operations - Years ended June 30, 1998, 1997, and 1996...................................... 35 Consolidated Balance Sheets - June 30, 1998 and 1997............... 36 Consolidated Statements of Cash Flows - Years ended June 30, 1998, 1997, and 1996...................................... 38 Consolidated Statements of Shareholders' Equity - Years ended June 30, 1998, 1997, and 1996................................ 40 Notes to Consolidated Financial Statements - June 30, 1998...................................................... 41 Financial statement schedule: Schedule II - Valuation and Qualifying Accounts.................... 52
All other schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. None. PART III In accordance with general instruction G(3), the information required by Items 10, 11, 12 and 13 is hereby incorporated herein by reference from the Company's definitive proxy statement for its annual meeting of shareholders to be held on November 11, 1998, which is expected to be filed with the Securities and Exchange Commission pursuant to Regulation 14A of the Securities Exchange Act of 1934 within 120 days after the end of the Company's fiscal year covered by this report, except that certain information required by Item 10 with respect to executive officers of the Company is set forth in Part I hereof under "Item 1. Business--Executive Officers of the Registrant". 31 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) Documents Filed as Part of This Report: 1 Financial Statements See Item 8.--Index to Financial Statements and Financial Statement Schedules 2 Financial Statement Schedules See Item 8.--Index to Financial Statements and Financial Statement Schedules 3 Exhibits: See Exhibit Index of this Report. (b) REPORTS ON FORM 8-K: None.
32 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) 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, on the 28th day of September, 1998. SYMIX SYSTEMS, INC. By /s/ Lawrence W. DeLeon ---------------------------------------- Lawrence W. DeLeon Vice President, Chief Financial Officer and Secretary Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated, on the 28th day of September, 1998.
Signature Title --------- ----- /s/ Lawrence J. Fox* Chairman of the Board, Chief Executive - ----------------------------- Officer and Director Lawrence J. Fox /s/ Stephen A. Sasser* President and Chief Operating Officer - ----------------------------- and Director Stephen A. Sasser /s/ Lawrence W. DeLeon Vice President, Chief Financial Officer - ----------------------------- and Secretary Lawrence W. DeLeon /s/ John T. Tait* Director - ----------------------------- John T. Tait /s/ Duke W. Thomas* Director - ----------------------------- Duke W. Thomas /s/ Larry L. Liebert* Director - ----------------------------- Larry L. Liebert /s/ James A. Rutherford * Director - ----------------------------- James A. Rutherford - ----------------------------- * By Power of Attorney /s/ Lawrence W. DeLeon - ----------------------------- Lawrence W. DeLeon (Attorney-in-Fact)
33 REPORT OF INDEPENDENT AUDITORS Board of Directors Symix Systems, Inc. We have audited the accompanying consolidated balance sheets of Symix Systems, Inc. and Subsidiaries as of June 30, 1998 and 1997, and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended June 30, 1998. Our audits also included the financial statement schedule listed in the Index at Item 8. These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Symix Systems, Inc. and Subsidiaries at June 30, 1998 and 1997, and the consolidated results of their operations and their cash flows for each of the three years in the period ended June 30, 1998, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Columbus, Ohio July 21, 1998 34 CONSOLIDATED STATEMENTS OF OPERATIONS
Year Ended June 30, ----------------------------------- 1998 1997 1996 ---- ---- ---- (In thousands, except per share data) License fees $58,498 $36,477 $24,682 Service, maintenance and support 39,099 29,295 21,077 - ----------------------------------------------------------------------------------------------------- Net revenue 97,597 65,772 45,759 License fees 14,746 9,721 6,840 Service, maintenance and support 20,955 13,969 9,656 - ----------------------------------------------------------------------------------------------------- Cost of revenue 35,701 23,690 16,496 - ----------------------------------------------------------------------------------------------------- Gross margin 61,896 42,082 29,263 Selling, general, and administrative 45,474 31,351 21,593 Research and product development 7,901 5,659 3,673 Acquisition research and development write-off 6,503 -- -- Restructuring and other unusual charges - Note G -- -- 506 - ----------------------------------------------------------------------------------------------------- Total operating expenses 59,878 37,010 25,772 - ----------------------------------------------------------------------------------------------------- Operating income 2,018 5,072 3,491 Other income (expense), net (178) 107 221 - ----------------------------------------------------------------------------------------------------- Income before income taxes 1,840 5,179 3,712 Provision for income taxes - Note F 3,196 1,916 1,404 - ----------------------------------------------------------------------------------------------------- Net Income (loss) ($1,356) $3,263 $2,308 - ----------------------------------------------------------------------------------------------------- Basic EPS: Net income (loss) per share ($0.21) $0.57 $0.42 - ----------------------------------------------------------------------------------------------------- Diluted EPS: Net income (loss) per share ($0.21) $0.54 $0.41 - ----------------------------------------------------------------------------------------------------- Weighted average number of common shares outstanding 6,317 5,753 5,477 - ----------------------------------------------------------------------------------------------------- Weighted average number of common shares outstanding assuming dilution 6,317 6,079 5,582 - -----------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 35
CONSOLIDATED BALANCE SHEETS June 30, June 30, 1998 1997 -------- -------- (In thousands) Assets Current assets: Cash and cash equivalents $6,115 $2,332 Trade accounts receivable, less allowance for doubtful accounts of $1,063 in 1998 and $702 in 1997 32,925 21,689 Inventories 489 356 Prepaid expenses 1,346 1,162 Other receivables 427 300 Deferred income taxes - Note F 573 311 - ------------------------------------------------------------------------------------------ Total current assets 41,875 26,150 - ------------------------------------------------------------------------------------------ Other assets: Capitalized software, net of accumulated amortization of $8,164 in 1998 and $6,106 in 1997 11,012 6,551 Deferred income taxes - Note F 180 171 Intangibles, net 5,091 4,779 Deposits and other assets 1,725 877 - ------------------------------------------------------------------------------------------ 18,008 12,378 - ------------------------------------------------------------------------------------------ Equipment and improvements: Furniture and fixtures 2,880 2,436 Computer and other equipment 11,573 10,423 Leasehold improvements 1,262 1,288 -------- -------- 15,715 14,147 Less allowance for depreciation and amortization 9,216 8,423 - ------------------------------------------------------------------------------------------ 6,499 5,724 - ------------------------------------------------------------------------------------------ Total assets $66,382 $44,252 - ------------------------------------------------------------------------------------------
36 CONSOLIDATED BALANCE SHEETS, CONTINUED
June 30, June 30, 1998 1997 -------- -------- (In thousands except per share data) Liabilities and Shareholders' Equity Current liabilities: Accounts payable and accrued expenses - Note H $13,276 $7,423 Customer deposits 288 307 Deferred revenue 13,155 9,685 Income tax payable 1,304 63 Current portion of long-term obligations - Note J 277 775 - --------------------------------------------------------------------------------------- Total current liabilities 28,300 18,253 Long-term obligations - Note J 305 530 Bank credit agreement - Note E 2,000 -- Deferred income taxes - Note F 2,476 2,108 Minority Interest - Note L 2,000 Shareholders' equity - Note C Common stock, authorized 20,000 shares; issued 6,778 shares at June 30, 1998, and 6,160 shares at June 30, 1997, at stated capital amounts of $.01 per share 68 62 Preferred stock, authorized 1,000 shares; none issued and outstanding -- -- Convertible preferred stock of subsidiary - Note I 1,031 1,031 Capital in excess of stated value 23,937 13,291 Retained earnings 9,497 10,853 Cumulative translation adjustment (1,912) (556) - --------------------------------------------------------------------------------------- 32,621 24,681 Less: Common stock in treasury: 304 shares in 1998 and 1997, at cost 1,320 1,320 - --------------------------------------------------------------------------------------- Total shareholders' equity 31,301 23,361 - --------------------------------------------------------------------------------------- Total liabilities and shareholders' equity $66,382 $44,252 - ---------------------------------------------------------------------------------------
See notes to consolidated financial statements. 37 CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended June 30, ----------------------------------- 1998 1997 1996 ---- ---- ---- (in thousands) Increase (decrease) in cash Operating Activities Net income (loss) ($1,356) $3,263 $2,308 Adjustments to reconcile net income (loss) to net cash provided by operating activities: Acquisition research and development write-off 6,503 -- -- Depreciation and amortization 6,220 4,593 3,064 Provision for losses (recoveries) on accounts receivable 353 261 (100) Provision for deferred income taxes 572 1,417 433 Changes in operating assets and liabilities: Trade accounts receivable (11,942) (9,151) (467) Prepaid expenses and other receivables (181) (474) (190) Inventories (133) (45) (40) Deposits and other assets (1,084) (611) 80 Accounts payable and accrued expenses 5,285 157 1,255 Customer deposits (14) 57 (428) Deferred revenues 2,831 3,216 215 Income taxes payable/refundable 1,721 (165) 755 - ------------------------------------------------------------------------------------------------ Net cash provided by operating activities 8,775 2,518 6,885 - ------------------------------------------------------------------------------------------------ Investing Activities Net purchases of equipment and improvements (3,273) (2,649) (1,463) Additions to purchased and capitalized software (4,667) (3,637) (3,290) Purchase of subsidiaries, net of cash acquired (699) (1,191) -- - ------------------------------------------------------------------------------------------------ Net cash used by investing activities (8,639) (7,477) (4,753) - ------------------------------------------------------------------------------------------------ Financing Activities Proceeds from issuance of shares on exercise of stock options 815 806 371 Additions to long-term obligations, net of payments 1,152 (151) (197) Additions to paid in capital 2,000 -- -- - ------------------------------------------------------------------------------------------------ Net cash provided by financing activities 3,967 655 174 - ------------------------------------------------------------------------------------------------ Effect of exchange rate changes on cash (320) (138) (30) Net increase (decrease) in cash 3,783 (4,442) 2,276 Cash and cash equivalents at beginning of period 2,332 6,774 4,498 - ------------------------------------------------------------------------------------------------ Cash and cash equivalents at end of period $6,115 $2,332 $6,774 - ------------------------------------------------------------------------------------------------ 38 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $374 $8 $49 Income taxes (net of refunds) 78 639 189 - ------------------------------------------------------------------------------------------------
See notes to consolidated financial statements. 39 CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
Convertible Capital in Common Stock Preferred Stock Excess of Cumulative ------------ --------------- Stated Retained Translation Treasury Shares Amount Shares Amount Value Earnings Adjustment Stock ------ ------ ------ ------ ----- -------- ----------- -------- (In thousands) Balances at June 30, 1995 5,750 $58 $10,614 $5,282 ($126) ($1,320) Issuance of shares on exercise of stock options 76 306 Tax benefit on stock options exercised 65 Equity adjustment from foreign currency translation (85) Net income 2,308 - ------------------------------------------------------------------------------------------------------------------ Balances at June 30, 1996 5,826 58 10,985 7,590 (211) (1,320) Issuance of shares on exercise of stock options 182 2 662 Tax benefit on stock options exercised 322 Equity adjustment from foreign currency translation (345) Issuance of convertible preferred shares of subsidiary 250 $2,062 Exercise of convertible preferred shares 125 1 (125) (1,031) 1,030 Issuance of shares for employee stock purchase plan 27 1 142 Compensatory portion of stock options granted 150 Net income 3,263 - ------------------------------------------------------------------------------------------------------------------ Balances at June 30, 1997 6,160 62 125 1,031 13,291 10,853 (556) (1,320) Issuance of shares on exercise of stock options 97 1 617 Tax benefit on stock options exercised 459 Equity adjustment from foreign currency translation (1,356) Issuance of shares for employee stock purchase plan 36 257 Compensatory portion of stock options granted 150 Issuance of shares and options related to acquisition 485 5 9,163 Net loss (1,356) - ------------------------------------------------------------------------------------------------------------------ Balances at June 30, 1998 6,778 $68 125 $1,031 $23,937 $9,497 ($1,912) ($1,320)
See notes to consolidated financial statements. 40 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOTE A - SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION: The accompanying financial statements include the accounts of Symix Systems, Inc., and its majority owned subsidiaries after elimination of intercompany accounts and transactions. ORGANIZATION: Symix Systems, Inc. designs, develops, markets and supports a fully integrated manufacturing, planning and financial software system. The software was developed for make-to-order and mixed-mode production manufacturers. Among the key industries which use the Symix applications are industrial equipment, fabricated metals, electronics, furniture/fixtures and container packaging. Founded in 1979, Symix is headquartered in Columbus, Ohio, employing more than 623 people, with direct sales and support offices in the Americas, Europe, and Asia Pacific. USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. REVENUE RECOGNITION: Revenue for all periods presented is accounted for in accordance with AICPA Statement of Position 91-1, "Software Revenue Recognition." Revenue is derived principally from the sale of internally produced software products and short-term maintenance and support agreements from software sales. Revenue from software license fees is generally recognized upon shipment of product to the customer. Revenue from maintenance and support agreements is billed periodically, deferred, and recognized ratably over the life of the agreements. Revenue from consulting, education, and other services is recognized as the services are provided. On October 27, 1998 the Accounting Standards Executive Committee issued Statement of Position 97-2 "Software Revenue Recognition"(SOP 97-2). SOP 97-2 is effective for transactions entered into in fiscal years beginning after December 15, 1997. Accordingly the Company will adopt SOP 97-2 beginning in fiscal 1999. The Company is studying the provisions of SOP 97-2, but does not anticipate that it will have a material impact on its operating results. The Company establishes allowances to provide for uncollectible trade receivables and anticipated adjustments to amounts previously billed. CAPITALIZED SOFTWARE: Capitalized software is stated at the lower of cost or net realizable value. The Company capitalizes the cost of purchased software and the qualifying internal cost of developing its software products in accordance with Statement of Financial Accounting Standards No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed." Capitalized software costs are amortized by the straight-line method using estimated useful lives of three to five years. Amortization expense was $2,115,000, $1,795,000, and $1,161,000 for the years ended June 30, 1998, 1997 and 1996, respectively. 41 INVENTORIES: Inventories consist primarily of software-related products that are held for resale. The Company values inventory at the lower of cost or market. Cost is determined using the specific identification method. EQUIPMENT AND IMPROVEMENTS: Equipment and improvements are stated on the basis of cost. Provisions for depreciation and amortization are computed by the straight-line method over the estimated lives of the related assets. Depreciation expense was $2,434,000, $1,952,000, and $1,895,000 for the years ended June 30, 1998, 1997 and 1996, respectively. FOREIGN OPERATIONS: The Company's international operations constitute 21%, 25%, and 13% of consolidated net revenue for the years ended June 30, 1998, 1997, and 1996 respectively. International operations accounted for 28% (Europe 14% and Asia Pacific 14%) and 26% (Europe 13% and Asia Pacific 13%), of consolidated identifiable assets as of June 30, 1998 and 1997, respectively. FOREIGN CURRENCY TRANSLATION: Assets and liabilities of foreign subsidiaries are translated into U.S. dollars at year-end rates of exchange. Revenues and expenses are translated at the average exchange rates for the periods and capital accounts have been translated using historic rates. The resulting translation adjustments are recorded as an adjustment to shareholders' equity. INCOME TAXES: The Company accounts for income taxes under the liability method pursuant to Statement of Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). Under the liability method, deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. EARNINGS PER SHARE: In 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, "Earnings Per Share." Statement 128 replaced the previously reported primary and fully diluted earnings per share with basic and diluted earnings per share. Unlike primary earnings per share, basic earnings per share excludes any dilutive effects of options. Diluted earnings per share is very similar to the previously reported fully diluted earnings per share. All earnings per share amounts for all periods have been presented, and where necessary, restated to conform to the Statement 128 requirements. STOCK-BASED COMPENSATION: The Company accounts for stock compensation arrangements in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees." The pro forma information regarding net income and earnings per share as required by Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" (SFAS No. 123) is disclosed in "Note C - Common Stock and Stock Options". PREFERRED STOCK: The Company's Articles of Incorporation authorize 1,000,000 shares of preferred stock at no par value. The Board of Directors will determine the rights and preferences of these shares. Presently, no preferred shares are issued and outstanding. CASH AND CASH EQUIVALENTS: The Company considers all demand deposits and highly liquid investments with a maturity of three months or less as cash equivalents. 42 INTANGIBLE ASSETS: Intangible assets consist principally of goodwill and other intangible assets resulting from acquisitions accounted for using the purchase method of accounting. The intangible assets are amortized using the straight-line method over five years. The accumulated amortization of intangible assets relating to acquired businesses was $1,479,000 and $608,000 at June 30, 1998 and 1997, respectively. RECLASSIFICATION: Certain reclassifications have been made to conform to the 1998 presentation. NOTE B - LEASES The Company has entered into certain operating lease agreements for the rental of office facilities and computer equipment. The facility leases provide for annual rentals which are subject to escalation for increased operating costs. Amounts expensed under all operating lease agreements were: $3,727,000, $2,702,000, and $1,884,000 for the years ended June 30, 1998, 1997 and 1996, respectively. The following is a schedule of future minimum lease payments required under the operating leases that have initial or remaining noncancelable lease terms in excess of one year as of June 30, 1998: Fiscal Year ----------- (In thousands) 1999 $3,160 2000 2,543 2001 1,955 2002 404 2003 and thereafter 321 ------ Total minimum payments $8,383 ------ NOTE C - COMMON STOCK AND STOCK OPTIONS On July 8, 1996, shareholder approval was obtained to amend the Company's Amended Articles of Incorporation to increase its authorized shares from 6,000,000 to 21,000,000, of which 20,000,000 are common shares and 1,000,000 are preferred shares. The Company has a non-qualified stock option plan ("the Plan") that provides for the granting of options to officers and other key employees for shares of common stock at purchase prices of not less than the fair market value on the date of the grant as determined by the Board of Directors. The maximum number of common shares which may be optioned under the Plan was 2,653,070 as of June 30, 1998. Options under the Plan generally vest over periods of up to four years and must be exercised within ten years of the date of grant. The Company also has a non-qualified stock option plan for Key Executives ("Key Executives Plan"). A total of 400,000 shares of common stock are designated for issuance under the Key Executives Plan. The Compensation Committee of the Board of Directors is authorized to set the price and terms and conditions of the options granted under the Key Executives Plan. Options under the Key Executives Plan must be exercised within ten years of the date of the grant. 43 The Company also has a Stock Option Plan for Outside Directors ("Outside Directors Plan"). The Outside Directors Plan provides for the issuance of options for 20,000 shares of stock to each Outside Director upon his/her election to the Board of Directors. A total of 200,000 shares of common stock may be issued under the Outside Directors Plan. Options under the Outside Directors Plan vest immediately and must be exercised within ten years of the date of grant. Pro forma information regarding net income and earnings per share is required by SFAS No. 123, which also requires that the information be determined as if the Company has accounted for its employee stock options granted subsequent to December 31, 1994 under the fair value method of that Statement. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model with the following weighted-average assumptions for 1997 and 1998: risk-free interest rate of 6.50%; no dividend yield; volatility factor of the Company's common stock of 0.4; and a weighted-average expected life of each option of 6 years. If the Company had elected to recognize compensation cost based on the fair value of options at the grant date (which includes shares issuable under the Employee Stock Purchase Plan--see Note D) as prescribed by SFAS No. 123, the following displays what reported net income and per share amounts would have been: 44
Pro Forma Year Ended June 30, 1998 1997 - ---------------------------------------------------------------------- (In thousands, except per share data) Net income (loss)...................... ($2,047) $2,848 Net income (loss) per share............ ($.32) $0.47
The pro forma financial effects of applying SFAS No. 123 may not be representative of the pro forma effects on reported results of operations for future years. Information with respect to options granted under the three Plans is as follows:
Weighted- Average Number of Price Shares Per Share --------- --------- Outstanding at June 30, 1995 758,988 $4.92 Granted 813,000 4.82 Canceled (176,438) 4.79 Exercised (77,648) 6.18 Outstanding at June 30, 1996 1,317,902 4.72 Granted 361,750 7.89 Canceled (20,000) 5.42 Exercised (181,902) 3.44 Outstanding at June 30, 1997 1,477,750 5.61 Granted 256,630 15.29 Canceled (18,638) 8.04 Exercised (96,207) 6.42 Outstanding at June 30, 1998 1,619,535 $7.17
The weighted-average fair value of options granted during the year ended June 30, 1998 and 1997 was $4.63 and $2.78, respectively. The weighted-average remaining contractual life of those options is 8 years. At June 30, 1998, options for 736,061 shares were exercisable, and 424,254 shares remained available for grant. NOTE D - EMPLOYEE BENEFIT PLANS The Company has a 401(k) plan that covers substantially all employees over 21 years of age. The Company contributes to the plan based upon employee contributions and may make additional contributions at the discretion of the Board of Directors. The Company made contributions to this plan of approximately $496,000, $287,000, and $196,000 for the years ended June 30, 1998, 1997 and 1996, respectively. The Company has an employee stock purchase plan that is in accordance with Section 423 of the Internal Revenue Code whereby participants are eligible to purchase common shares of the Company during the plan year. The purchase price for a common share is determined by the Compensation 45 Committee prior to the effective date. The purchase price may not be less than 90% of the per share fair market value of the Company's common shares on either the effective date or the option date for the offering, whichever is the lesser. Substantially, all employees are eligible to participate. NOTE E - LINE OF CREDIT In June, 1998 the Company negotiated with a bank a $15.0 million unsecured revolving line of credit that expires in fiscal year 2001, convertible to a five year term loan at any time on or before March 31, 2001. As of June 30, 1998, there were $2,000,000 in borrowings on the line of credit. NOTE F - INCOME TAXES SFAS 109 requires recognition of deferred tax liabilities and assets for the expected future consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. For the years ended June 30, 1998, 1997 and 1996, domestic operations contributed approximately $2.3 million, $525,000, and $4.0 million to pre-tax earnings, respectively, while foreign affiliates generated income (losses) of ($424,000), $4.6 million, and ($348,000) for the same periods. Income taxes are summarized as follows:
Year ended June 30, 1998 1997 1996 - -------------------------------------------------------------------------------- (In thousands) Current: Federal $1,949 $ (336) $ 772 State and local 406 (80) 149 Foreign 356 1,919 242 ------ ------ ------ 2,711 1,503 1,163 Deferred: Federal 412 444 473 State and local 73 68 73 Foreign 0 (99) (305) ------ ------ ------ 485 413 241 ------ ------ ------ $3,196 $1,916 $1,404 ------ ------ ------
During the years ended June 30, 1998, 1997 and 1996, the Company recorded a tax benefit of approximately $459,000, $322,000, and $65,000, respectively, in connection with the exercise of stock options. The benefit, which was due to the difference in the fair market value and the exercise price of the options at the date of exercise, was recorded as an increase in capital in excess of stated value. 46 The sources of significant timing differences which give rise to deferred taxes are as follows:
Year Ended June 30, 1998 1997 1996 - --------------------------------------------------------------------------------- (In thousands) Depreciation/amortization $794 $539 $338 Allowance for doubtful accounts (144) (21) 39 Adjustments for accruals (28) (21) 74 Customer Deposits (51) 54 77 Losses related to investment in foreign affiliates 0 (99) (305) Other, net (86) (39) 18 ------ ------ ------ $485 $413 $241 ----- ----- -----
Significant components of the Company's deferred tax assets and liabilities as of June 30, 1998 and 1997 are as follows:
Year ended June 30, 1998 1997 - --------------------------------------------------------- -------------- ----------- (In thousands) Current deferred tax assets: Allowance for doubtful accounts $424 $198 Customer deposits 51 -- Accrued liabilities 98 113 ---- ---- Total current deferred tax assets $573 $311 ---- ---- Long-term deferred tax assets: Foreign losses $180 $171 ------ ---- Total long-term deferred tax assets $180 $171 ------ ---- Long-term deferred tax liabilities: Capitalized software $3,697 $1,935 Capitalized leases -- 425 ------ ------ Total long-term deferred tax liabilities $3,697 $2,360 Long-term deferred tax assets: Book over tax depreciation $353 $252 Domestic Losses 700 -- Other 168 -- ------ ------ Total long-term deferred tax assets $1,221 $ 252 ------ ------ Net long-term deferred tax liabilities $2,476 $2,108 ------ ------
The long-term deferred tax assets pertaining to foreign losses are net operating loss carryforwards for certain foreign subsidiaries which the Company believes will be utilized in future tax periods. 47 The Company's effective tax rate differs from the statutory U.S. federal income tax rate as follows:
Year Ended June 30, 1998 1997 1996 - -------------------------------------------------------- --------- --------- -------- Federal income tax statutory rate 34% 34% 34% State and local income taxes net of federal tax benefit 3 0 4 Foreign operations taxed at rates different from U.S. federal statutory rate 13 5 1 Other - (2) (1) Non-deductible acquisition research and development write-off 134 - - General business credits (14) - - Non-deductible permanent differences 4 - - -- ----- - ----- - 174% 37% 38%
The Company has net operating loss carryforwards for tax purposes of $779,000, $347,000, $37,000 and $752,000 which expire in fiscal years 2008, 2010, 2012 and 2013, respectively. NOTE G - RESTRUCTURING AND OTHER UNUSUAL CHARGES During the first quarter of fiscal 1996, the Company incurred restructuring and other non-recurring charges of $506,000 consisting primarily of severance payments related to operational changes and costs associated with reorganizing the European sales channel. NOTE H - ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses are summarized as follows:
June 30, 1998 1997 - ------------------------------------------------------- ------------ --------------- (In thousands) Accounts payable $3,699 $2,437 Accrued commissions & bonus 2,635 1,416 Third party royalties 3,752 1,395 Other 3,190 2,175 ------- ------- $13,276 $7,423
NOTE I - ACQUISITIONS On July 1, 1996 the Company acquired the net assets of Synchrony Manufacturing Systems, Pty. Limited (Synchrony), its former distributor in Australia, for approximately $220,000 which was payable in twenty-four equal installments over two years and was paid in full as of June 30,1998. The acquisition was accounted for using purchase accounting with results included since the date of acquisition. Acquisition costs exceeded the fair value of the net assets acquired by approximately $451,000 which is being amortized over five years. 48 On August 8, 1996 the Company acquired all of the outstanding stock of RDD, the parent company of GSI Industrie ("GSI"), a French manufacturing software specialist, from its shareholders for approximately $1.8 million, of which $944,000 was paid in cash at closing. The remaining balance is payable in three equal annual installments beginning August 1997. In addition, if GSI's cumulative financial results for the first three years are profitable, a payment is to be made equal to a percentage of cumulative software sales, not to exceed approximately $1.4 million. The contingent payment is due October 15, 1999 and will be recorded at the end of fiscal 1999 once it has been determined if the conditions have been met. The acquisition was accounted for using purchase accounting with results included since the date of acquisition. Acquisition costs exceeded the fair value of the net assets acquired by approximately $1.9 million which is being amortized over five years. On January 9, 1997 the Company acquired an Ontario, Canada corporation called Visual Applications Software, Inc. ("VAS") for $1.0 million (Canadian) in cash, and 250,000 Class A Preference Shares (the "Class A Shares") and 500,000 redeemable Class B Preference Shares (the "Class B Shares") of a subsidiary of the Company. The Class B Shares were redeemed by the holders for $1.00 (Canadian) per share in January, 1998. In connection with the acquisition, the Company also entered into a Share Exchange Agreement with the former stockholders of VAS which provides for a one for one exchange of the Class A Shares for common shares of the Company. VAS designs and markets a field service software product. The acquisition was accounted for using purchase accounting with results included since the date of acquisition. Acquisition costs exceeded the fair value of the net assets acquired by approximately $3.4 million which is being amortized over five years. On November 24, 1997, the Company acquired Pritsker Corporation ("Pritsker"), for $737,000 in cash and 485,000 common shares of the Company. Pritsker markets advanced planning and scheduling and simulation software to mid-market manufacturers. Pursuant to the acquisition agreement, (i) Pritsker was merged with and into a wholly-owned subsidiary of the Company incorporated in Ohio, (ii) each share of Pritsker common stock was converted into the right to receive 0.170108 common shares of the Company and (iii) each share of Pritsker preferred stock was converted into the right to receive $5.23 in cash plus accrued and unpaid dividends. Each unexercised employee stock option and outstanding warrant for Pritsker common stock was assumed by Symix and converted into the right to acquire that number of common shares of the Company to which the holder would have been entitled if such holder exercised the option or warrant immediately prior to the merger. The transaction was accounted for as a purchase and resulted in a one-time, non-recurring charge of approximately $6.5 million relating to the write off of acquired in-process technology of Pritsker. The following proforma information shows revenue and net income assuming the Company and Pritsker had been combined at the beginning of the period indicated. The one time, non-recurring charge of approximately $6.5 million is excluded from proforma net income.
Twelve MonthsEnded June 30, --------------------------- 1998 1997 ---- ---- (In thousands) Revenue $98,761 $69,527 Net Income $ 4,558 $ 3,281
49 NOTE J - LONG-TERM OBLIGATIONS Long-term obligations consist of the following:
June 30, 1998 1997 - --------------------------------------------------------- --------------- -------------- (In thousands) GSI acquisition note payable $582 $835 Synchrony acquisition note payable - 113 Redeemable Class B Preference shares - 357 ------- ----- 582 1,305 Less current portion 277 775 ------- ----- Long-term obligations $305 $530 ------- -----
The GSI acquisition note is secured by a letter of credit. The long-term portion of the GSI acquisition note payable at June 30, 1998 is due on August 9, 1999. K - EARNINGS PER SHARE The Company adopted the provisions of Statement No. 128, "Earnings Per Share" (SFAS 128) during the fiscal year 1998. In accordance with the provisions, earnings per share for 1997 and 1996 have been restated. The following table sets forth the computation of basic and diluted earnings per share (in $000's except per share data):
Year ended June 30, 1998 1997 1996 - ------------------------------------------------------------------------------ Numerator: Net income (loss) for both basic and diluted earnings (loss) per share ($1,356) $3,263 $2,308 Denominator: Weighted-average shares outstanding 6,192 5,682 5,477 Contingently issuable shares (VAS) 125 71 Denominator for basic earnings (loss) per share 6,317 5,753 5,477 Effect of dilutive securities: employee stock options n/a 326 105 Denominator for diluted earnings (loss) per share 6,317 6,079 5,582 50
Basic earnings (loss) per share ($0.21) $0.57 $0.42 Diluted earnings (loss) per share ($0.21) $0.54 $0.41 NOTE L - MINORITY INTEREST In June, 1998, a wholly-owned subsidiary of the Company sold previously unissued shares of common stock (representing a 13.3% interest in that subsidiary) for $2 million. No gain or loss was recognized on the sale of the subsidiary stock. The proceeds from the sale are recorded on the accompanying balance sheet as minority interest. The Company and the minority interest investors also entered into a put option agreement which provides that during a six month period commencing September 1, 2001, the minority interest investors have the right to put their shares in the subsidiary to the Company at a formula price as provided in the put agreement. The minority interest in the subsidiary will be adjusted to its expected redemption value each year as a credit or charge to income until the put is exercised or the redemption period expires. SCHEDULE II VALUATION AND QUALIFYING ACCOUNTS
Balance at Charged to Charged to Beginning of Costs and Other Balance at Period Expenses Accounts Deductions End of Period ------------ ---------- --------- ---------- ------------- Year ended June 30, 1998 Deducted from asset accounts: Allowance for doubtful accounts $702,000 $918,000 $ 0 $557,000 $1,063,000 -------- -------- --------- -------- ---------- Year ended June 30, 1997 Deducted from asset accounts: Allowance for doubtful accounts $450,400 $560,500 $ 0 $308,900 $702,000 -------- -------- --------- -------- -------- Year ended June 30, 1996 Deducted from asset accounts: Allowance for doubtful accounts $550,000 $475,000 $ 0 $574,600 $450,400 -------- -------- --------- -------- --------
52 INDEX TO EXHIBITS
Exhibit No. Description Page - ----------- ----------- ----- 3(a)(1) Amended Articles of Incorporated by reference to Incorporation of Symix Exhibit 3(a)(1) to Registrant's Systems, Inc. (as filed on Annual Report on Form 10-K for February 8, 1991) the fiscal year ended June 30, 1997 3(a)(2) Certificate of Amendment to Incorporated by reference to the Amended Articles of Exhibit 3(a)(2) to Registrant's Incorporation of Symix Annual Report on Form 10-K for Systems, Inc. (as filed on the fiscal year ended June 30, July 16, 1996) 1997 3(a)(3) Amended Articles of Incorporated herein by reference Incorporation of Symix to Exhibit 3(a)(3) to Systems, Inc. (reflecting Registrant's Annual Report on amendments through July 16, Form 10-K for the fiscal year 1996, for purposes of SEC ended June 30, 1997 reporting compliance only) 3(b) Amended Regulations of Symix Incorporated herein by reference Systems, Inc. to Exhibit 3(b) to the Registration Statement on Form S-1 of Registrant, filed February 12, 1991 (Registration No. 33-38878) 4(a)(1) Amended Articles of Incorporated herein by reference Incorporation of Symix to Exhibit 3(a) (1)of this Annual Systems, Inc. (as filed on Report on Form 10-K February 8, 1991) 4(a)(2) Certificate of Amendment to Incorporated herein by reference the Amended Articles of to Exhibit 3(a)(2) of this Annual Incorporation Report on Form 10-K of Symix Systems, Inc. (as filed on July 16, 1996) 53 4(a)(3) Amended Articles of Incorporated herein by reference Incorporation of Symix to Exhibit 3(a)(3) of this Annual Systems, Inc. (reflecting Report on Form 10-K amendments through July 16, 1996, for purposes of SEC reporting compliance only) 4(b) Amended Regulations of Symix Incorporated herein by reference Systems, Inc. to Exhibit 3(b) of this Annual Report on Form 10-K 4(c) Share Exchange Agreement Incorporated herein by reference dated January 9, 1997 to Exhibit 99 to Registrant's Current Report on Form 8-K dated January 9, 1997 10(a) Lease Agreement dated April 3, Incorporated herein by reference 1991 for office located at to Exhibit 10(c) to Registrant's 2800 Corporate Exchange Annual Report on Form 10-K for Drive, Columbus, Ohio the fiscal year ended June 30, 1991 10(b) Lease Amendment to office Filed herein located at 2800 Corporate Exchange Drive, Columbus, Ohio 10(c) Second Lease Amendment to Filed herein office located at 2800 Corporate Exchange Drive, Columbus, Ohio 10(d) Third Lease Amendment to Incorporated herein by reference office located at 2800 to Exhibit 10(c) to Registrant's Corporate Exchange Drive, Annual Report on Form 10-K for Columbus, Ohio the fiscal year ended June 30, 1994 10(e) Fourth Lease Amendment to Filed herein office located at 2800 Corporate Exchange Drive, Columbus, Ohio 10(f) Fifth Lease Amendment to Filed herein office located at 2800 Corporate Exchange Drive, Columbus, Ohio 54 10(g) Progress Software Application Incorporated herein by reference Partner Agreement dated to Exhibit 10(e) to Registrant's February 8, 1995 Quarterly Report on Form 10-Q for fiscal quarter ended March 31, 1995 10(h) Amendment to Progress Software Filed herein Application Partner Agreement dated July 1, 1997 10(i) Second Amendment to Progress Filed herein Software Application Partner Agreement dated July 1, 1998 10(j)* Summary of Bonus Plan Filed herein 10(k)* Symix Systems, Inc. Stock Incorporated herein by reference Option Plan for Outside to Exhibit 10(i) of Registrant's Directors Annual Report on Form 10-K for fiscal year ended June 30, 1993 10(l)* Symix Systems, Inc. Incorporated herein by reference Non-Qualified Stock Option to Exhibit 10(a) to Registrant's Plan for Key Executives Quarterly Report on Form 10-Q for fiscal quarter ended March 31, 1996 10(m)* Symix Systems, Inc. Incorporated herein by reference Non-Qualified Stock Option to Exhibit 10(a) to Registrant's Plan for Key Employees, as Annual Report on Form 10-K for amended the fiscal year ended June 30, 1993 Incorporated herein by reference to Exhibit 10(a) to Registrant's 10(n)* Symix Systems, Inc. Quarterly Report on Form 10-Q for Non-Qualified Stock Option the fiscal quarter ended March Plan for Key Executives 31, 1996 Incorporated herein by reference 10(o)* Symix Systems, Inc. Stock to Exhibit 10(i) to Registrant's Option Plan for Outside Annual Report on Form 10-K for Directors fiscal year ended June 30, 1993 10(p)* Sasser Employment Agreement Incorporated herein by reference to Exhibit 10(b) to Registrant's 55 Quarterly Report on Form 10-Q for fiscal quarter ended March 31, 1996 10(q)* Stock Option Agreement between Incorporated herein by reference the Company and Stephen A. to Exhibit 10(c) to Registrant's Sasser dated January 17, 1996 Quarterly Report on Form 10-Q for fiscal quarter ended March 31, 1996 10(r) Loan Agreement among Symix Incorporated herein by reference Systems, Inc., Symix Computer to Exhibit 10(a)(1) to Systems, Inc. and Bank One, Registrant's Form 10-Q for fiscal Columbus, N.A. dated May 20, quarter ended September 30, 1997 1996 10(s) First Amendment to Loan Incorporated herein by reference Agreement among Symix Systems, to Exhibit 10(b) to Registrant's Inc., Symix Computer Systems, Form 10-Q for fiscal quarter Inc. and Bank One, Columbus, ended September 30, 1997 N.A. 10(t) Second Amendment to Loan Incorporated herein by reference Agreement Among Symix to Exhibit 10(b) to Registrant's Systems, Inc., Symix Form 10-Q for fiscal quarter Computer Systems, Inc. and ended March 31, 1998 Bank One, NA 10(u) Third Amendment to Loan Filed herein Agreement Among Symix Systems, Inc., Symix Computer Systems, Inc. and Bank One, NA 21 Subsidiaries of the Registrant Filed herein 23 Consent of Independent Auditors Filed herein 24 Powers of Attorney Filed herein 27 Financial Data Schedule Filed herein
*Indicates management contracts or compensatory plans or arrangements that are required to be filed as an exhibit to this Annual Report on Form 10-K for the fiscal year ended June 30, 1998. 56 EX-10.(B) 2 EXHIBIT 10(B) EXHIBIT 10(b)TO SYMIX SYSTEMS, INC. 1998 FORM 10-K LEASE AMENDMENT This Lease Amendment is made and entered into as of the latest date on which it is executed by either of the parties hereto ("Amendment Date"), by and between Corporate Exchange Buildings IV and V Limited Partnership, an Ohio limited partnership, 383 South Third Street, Columbus, Ohio 43215 (the "Landlord") and Symix Computer Systems, Inc., an Ohio corporation, whose address is 2800 Corporate Exchange Drive, Columbus, Ohio 43231 (the "Tenant"). RECITALS A. 2600 Realty Corp. V, Landlord's predecessor in interest, and Tenant entered into a lease agreement dated April 3, 1991 (the "Lease") and a Start Date Agreement dated October 15, 1992, pursuant to which Landlord leased to Tenant, and Tenant leased from Landlord, certain premises containing approximately 60,238 rentable square feet of office space (the "Original Premises") located on the third and fourth floors of Corporate Exchange Building V, 2800 Corporate Exchange Drive, Columbus, Franklin County, Ohio (the "Building"). B. Tenant desires to lease additional office space in the Building and to amend the Lease. NOW, THEREFORE, for valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties agree as follows: 1. Tenant hereby leases an additional one thousand eight hundred eighty (1,880) rentable square feet of office space (the "Expansion Space") located on the second floor of the Building as shown on the floor plan attached hereto as Exhibit A. 2. The term of the lease for the Expansion Space shall commence on December 1, 1993, shall be concurrent with the Term of the Lease, and shall expire on June 30, 1996 unless sooner terminated as provided in the Lease. 3. Commencing on December 1, 1993, (a) the Premises shall be deemed to include the Expansion Space, and (b) the Premises, including the Original Premises and the Expansion Space, will contain an aggregate of 62,118 rentable square feet. 4. Tenant shall pay Landlord Base Rent for the Premises in the amount of Fifty Thousand Two Hundred Sixteen and 33/100 Dollars ($50,216.33) per month, payable in advance on the first day of each calendar month, without set off or demand, beginning on December 1, 1993, and continuing each calendar month until the expiration of the Lease Term. 57 5. Commencing on December 1, 1993, Tenant's pro rata share shall be increased to 51.7%. 6. Landlord shall, at its expense, install a partition wall to demise the Premises as shown in Exhibit B attached hereto. Except for the Landlord's Work set forth in this Section 6, Tenant accepts the Premises in "AS IS" condition. 7. Within five (5) days after December 1, 1993, Tenant shall execute and deliver an acceptance letter in the form of Exhibit C attached hereto (the "Acceptance Letter"). By executing the Acceptance Letter, Tenant shall be deemed conclusively to have accepted the Premises and to have acknowledged that the Premises are in the condition required by the Lease and this Amendment. 8. Except as set forth in this Lease Amendment, all provisions of the Lease shall remain unchanged and in full force and effect and shall apply to this Lease Amendment. All terms and conditions of the Lease not specifically amended by this Lease Amendment shall apply as if fully rewritten herein, and the rights and obligations of Tenant shall be governed and controlled by the terms and conditions of the Lease as amended hereby. 9. Tenant hereby certifies that no real estate broker has or will represent it in this transaction and that no finder's fees have been earned by any third party other than Pizzuti Realty, Inc. and Joseph Skilken Realty, Inc. and Tenant shall indemnify and hold Landlord harmless from any liability or expense that may arise from such claims, including reasonable attorney's fees. Landlord will pay Pizzuti Realty, Inc. and Joseph Skilken Realty, Inc. fees in accordance with separate written agreements between Landlord and Pizzuti Realty, Inc. and Joseph Skilken Realty, Inc. IN WITNESS WHEREOF, Landlord has executed this Lease Amendment on the ____ day of December, 1993 and Tenant has executed this Lease Amendment on the ____ day of December, 1993. LANDLORD: CORPORATE EXCHANGE BUILDINGS IV AND V LIMITED PARTNERSHIP WITNESSES: By Joseph Skilken & Co., General partner ___________________________ By:______________________________ Steve Skilken, President Print Name:________________ Date:____________________________ ___________________________ Print Name:________________ 58 TENANT: SYMIX COMPUTER SYSTEMS,INC. ___________________________ By:_______________________________ Larry J. Fox Print Name:________________ Chief Executive Officer Date:_____________________________ ___________________________ Print Name:________________ ___________________________ By:_______________________________ Bradford W. Payne Print Name:________________ Chief Financial Officer Date:______________________________ __________________________ Print Name:________________ 59 NOTARIZATION FOR LANDLORD STATE OF OHIO COUNTY OF FRANKLIN On this ___ day of December, 1993, before me, a notary public in and for said County and State, personally appeared Steve Skilken, President of Joseph Skilken & Co., an Ohio Corporation and the General Partner of CORPORATE EXCHANGE BUILDINGS IV and V LIMITED PARTNERSHIP, an Ohio limited partnership, on behalf of the limited partnership who acknowledged for and on behalf of the corporation and limited partnership that he did sign the foregoing instrument on behalf of the corporation and limited partnership. ________________________________ Notary Public My Commission Expires:__________ NOTARIZATION FOR CORPORATE TENANT STATE OF OHIO COUNTY OF FRANKLIN On this ___ day of December, 1993, before me, a notary public in and for said County and State, personally appeared Larry J. Fox, Chief Executive Officer, and Bradford W. Payne, Chief Financial Officer, of SYMIX COMPUTER SYSTEMS, INC., an Ohio corporation, who represented that they are duly authorized to sign and did sign the foregoing lease on behalf of the corporation. _________________________________ Notary Public My Commission Expires:___________ 60 CERTIFICATE OF INCUMBENCY AND RESOLUTION OF SYMIX COMPUTER SYSTEMS, INC. I, ______________, duly elected Secretary of Symix Computer Systems, Inc., an Ohio corporation (the "Company"), do hereby certify that Larry J. Fox, is the duly elected and qualified Chief Executive Officer and Bradford W. Payne is the duly elected and qualified Chief Financial Officer of Symix Computer Systems, Inc. as of the date set forth below, and the signatures set forth opposite their respective names are the true and genuine signatures of both:
NAME SIGNATURE Larry J. Fox _______________________________ Bradford W. Payne _______________________________
I, ______________, further certify that the following is a true and correct copy of the resolution duly adopted by unanimous written consent of the Board of Directors of Symix Computer Systems, Inc. on ____________________, 1993 and that there are no modifications, additions or rescissions thereto: RESOLVED, that the Chief Executive Officer and Chief Financial Officer be and hereby are authorized and empowered to execute in the name of and to deliver on behalf of the Company any and all documents relating to real estate transactions including, but not limited to, leases, subleases, and purchase and sale documents, and amendments and supplements thereto, and specifically that they are authorized and empowered to enter into a lease amendment with Corporate Exchange Buildings IV and V Limited Partnership for additional office space at Corporate Exchange Building V. IN WITNESS WHEREOF, the undersigned has hereunto set (her) (his) hand and affixed the seal of the Company on this ___ day of __________, 1993. SYMIX COMPUTER SYSTEMS, INC. (CORPORATE SEAL) By:___________________________ 61 EXHIBITS A and B [VISUAL VIEW OF FLOOR PLAN] (Omitted) EXHIBIT C TENANT ACCEPTANCE LETTER [Letterhead of Tenant] [Date] Corporate Exchange Buildings IV and V Limited Partnership 383 South Third Street Columbus, Ohio 43215 Attention: Steve Skilken Re: Lease Dated April 3, 1991 and Lease Amendment Dated December 1, 1993 for Suite ___, Corporate Exchange Building V, 2800 Corporate Exchange Drive, Columbus, Ohio 43231 Gentlemen: The undersigned, as Tenant, hereby confirms the following as of December 1, 1993: 1. Tenant has accepted possession of and is currently occupying the entire Premises. 2. The commencement date for the Lease Amendment is December 1, 1993. 3. All alterations and improvements required to be performed by Landlord pursuant to the terms of the Lease and the Lease Amendment to prepare the entire Premises for Tenant's occupancy have been satisfactorily completed. 4. As of the date hereof, Landlord, has fulfilled all its obligations under the Lease. 5. The Lease is in full force and effect and has not been modified, altered, or amended except pursuant to the instruments described above. 6. There are no offsets or credits against Rent or any other charge payable by Tenant under the Lease, nor has any Rent or any other charge payable by Tenant been prepaid. 62 7. Tenant has no notice of any prior assignment, hypothecation, or pledge of the Lease or any Rent due under the Lease. Sincerely, SYMIX COMPUTER SYSTEMS, INC. By:____________________________ Name:__________________________ Title:_________________________ Exhibit A Floor Plan (omitted) 63 EX-10.(C) 3 EXHIBIT 10(C) EXHIBIT 10(c) TO SYMIX SYSTEMS, INC. 1998 FORM 10-K SECOND LEASE AMENDMENT This Second Lease Amendment is made and entered into as of the latest date on which it is executed by either of the parties hereto ("Amendment Date"), by and between Corporate Exchange Buildings IV and V Limited Partnership, an Ohio limited partnership, 383 South Third Street, Columbus, Ohio 43215 (the "Landlord") and Symix Computer Systems, Inc., an Ohio corporation, whose address is 2800 Corporate Exchange Drive, Columbus, Ohio 43231 (the "Tenant"). RECITALS A. 2600 Realty Corp. V, Landlord's predecessor in interest, and Tenant entered into a lease agreement dated April 3, 1991, a Start Date Agreement dated October 15, 1992, a Second Lease Amendment dated December 1, 1993, and a Tenant Acceptance Letter dated December 1, 1993 (collectively, the "Lease"), pursuant to which Tenant leased certain premises containing approximately 62,118 rentable square feet of office space (the "Original Premises") located on the second, third and fourth floors of Corporate Exchange Building V, 2800 Corporate Exchange Drive, Columbus, Franklin County, Ohio (the "Building"). B. Tenant desires to lease additional office space in the Building and to amend the Lease. IT IS, THEREFORE, agreed as follows: 1. Tenant hereby leases an additional five thousand six hundred sixty six (5,666) usable square feet of office space (the "Expansion Space") located on the lower level of the Building as shown on the floor plan attached hereto as Exhibit A. 2. The term of the lease for the Expansion Space shall commence on April 1, 1994, shall be concurrent with the Term of the Lease, and shall expire on June 30, 1996 unless sooner terminated as provided in the Lease. 3. Commencing April 1, 1994, the Premises shall be deemed to include the Expansion Space; and the Premises, including the Original Premises and the Expansion Space, will contain an aggregate of approximately 67,784 rentable square feet. 4. Tenant shall pay Landlord Base Rent for the Premises in the amount of Fifty One Thousand Six Hundred Thirty 64 Two and 83/100 Dollars ($51,632.83) per month, payable in advance on the first day of each calendar month, without set off or demand, beginning on April 1, 1994, and continuing each calendar month until the expiration of the Lease Term. 5. Tenant's share of the Operating Expenses for the Expansion Space shall be calculated by multiplying the total Operating Expenses (as defined in the Lease) by a fraction, the numerator of which shall be the number of square feet in the Expansion Space and the denominator of which shall be 130,005. Tenant's Pro Rata Share of all Taxes and Operating Expenses for the Expansion Space shall be 4.36%. Tenant's share of the Operating Expenses for the Expansion Space shall be payable as Additional Rent in the manner, and at such times, as is required by the terms of the Lease. Operating Expense charges for all occupied office space in the lower level of the Building will be deducted from the total Operating Expenses (the "Adjusted Total Operating Expenses"). Operating Expense charges for the Original Premises will be calculated in accordance with provisions in the Lease, as amended, by multiplying the Adjusted Total Operating Expense by Tenant's Pro Rata Share. Tenant's Pro Rata Share for the Original Premises is 51.7%. 6. Tenant accepts the Premises in their current condition as far as tenant finish and improvements, except for Landlord's obligations to repair as set forth in Section 12 of the Lease, and except that Landlord shall, at its expense, install panic hardware on the south side of the door (the "Emergency Door") separating the Expansion Space from the adjacent space as indicated on Exhibit A hereto. Landlord shall not be required to make additional tenant improvements to the Premises. Landlord has obtained consent from Digital Equipment Corporation ("DEC") for Tenant to use the Emergency Door for emergency egress. Tenant has reviewed and approved the DEC consent. If Tenant, after good faith efforts, is unable to obtain the necessary approval of the appropriate government authority that the installation of the Emergency Door meets building code requirements, Landlord, at its option, may (a) obtain the governmental approval or (b) terminate this Second Lease Amendment by written notice to Tenant. By occupying the Expansion Space, Tenant shall be deemed conclusively to have accepted the Premises, including the Expansion Space, and to have acknowledged that the Premises are in the condition required by the Lease and this Second Lease Amendment. Tenant shall execute and deliver to Landlord an acceptance letter in the form attached as Exhibit B hereto no later than April 14, 1994. 65 Tenant shall indemnify and hold harmless Landlord from and against any and all costs, expenses, liabilities, losses, damages, suits, penalties, actions, fines, claims, judgements or demands of any kind asserted by or on behalf of any person or governmental authority arising out of or in any way connected with the use of the Emergency Door pursuant to the terms of Section 6 of the Lease. 7. Except as set forth in this Lease Amendment, all provisions of the Lease shall remain unchanged and in full force and effect and shall apply to this Lease Amendment. All terms and conditions of the Lease not specifically amended by this Lease Amendment shall apply as if fully rewritten herein, and the rights and obligations of Tenant shall be governed and controlled by the terms and conditions of the Lease as amended hereby. 8. Tenant hereby certifies that no real estate broker has or will represent it with regard to the Expansion Space and that no finder's fees have been or will be earned by any third party and Tenant shall indemnify and hold Landlord harmless from any liability or expense that may arise from such claims, including reasonable attorney's fees. 9. This Second Lease Amendment shall be construed, governed and enforced in accordance with the laws of the State of Ohio. 10. This Agreement and the instruments and documents contemplated hereby, and the execution and delivery hereof by Tenant, and the consummation of the transactions herein provided, have been duly authorized and approved by Tenant's Board of Directors and do not violate any provision of the constitution or bylaws of Tenant, or any agreement to which Tenant is a party or by which Tenant is bound, and constitutes valid and binding obligations of Tenant enforceable against it in accordance with their respective terms. No consent or governmental approval is required in connection with the consummation of the transactions contemplated hereby. Tenant represents and warrants to Landlord that it has full right, power and authority to enter into the transactions provided for in this Second Lease Amendment. IN WITNESS WHEREOF, Landlord has executed this Lease Amendment on the 1st day of April, 1994, and Tenant has executed this Lease Amendment on the 1st day of April, 1994. 66 LANDLORD: CORPORATE EXCHANGE BUILDINGS IV AND V LIMITED PARTNERSHIP WITNESSES By: Joseph Skilken & Co., General Partner /s/ Thomas W. Ramag By: /s/ Steve Skilken ----------------------------- --------------------------- Steve Skilken, President Print Name: Thomas W. Ramag --------------- /s/ Julia B. Bolton Date: 4-1-94 ----------------------------- ----------------------- Print Name: Julia B. Bolton ----------------- TENANT: SYMIX COMPUTER SYSTEMS, INC. /s/ Michael C. Wyatt By: /s/ Larry J. Fox ------------------------------ ---------------------------- Larry J. Fox Print Name: Michael C. Wyatt Chairman of the Board and ------------------- Chief Executive Officer /s/ Mary E. Burmeister ------------------------------ Print Name: Mary E. Burmeister Date: April 1, 1994 ------------------- ------------------------ /s/ Michael C. Wyatt By: /s/ Bradford W. Payne -------------------------------- ---------------------------- Bradford W. Payne Print Name: Michael C. Wyatt Senior Vice President of --------------------- Finance and Administration and Chief Financial Officer /s/ Mary E. Burmeister -------------------------------- Print Name: Mary E. Burmeister Date: April 1, 1994 --------------------- ------------------------- 67 NOTARIZATION FOR LANDLORD STATE OF OHIO COUNTY OF FRANKLIN On this 1st day of April, 1994, before me, a notary public in and for said County and State, personally appeared Steve Skilken, President of Joseph Skilken & Co., an Ohio Corporation and the General Partner of CORPORATE EXCHANGE BUILDINGS IV and V LIMITED PARTNERSHIP, an Ohio limited partnership, on behalf of the limited partnership who acknowledged for and on behalf of the corporation and limited partnership, that he did sign the foregoing instrument on behalf of the corporation and limited partnership. /s/ Teresa B. Johnson -------------------------------- Notary Public My Commission Expires: 11-1-97 ------- NOTARIZATION FOR CORPORATE TENANT STATE OF OHIO COUNTY OF FRANKLIN On this 1st day of April, 1994, before me, a notary public in and for said County and State, personally appeared Larry J. Fox, Chairman of the Board and Chief Executive Officer, and Bradford W. Payne, Senior Vice President of Finance and Administration and Chief Financial Officer, of SYMIX COMPUTER SYSTEMS, INC., an Ohio corporation, who represented that they are duly authorized to sign and did sign the foregoing lease on behalf of the corporation. /s/ Michael C. Wyatt ---------------------------------- Notary Public My Commission Expires: None ----------- 68 CERTIFICATE OF INCUMBENCY AND RESOLUTION OF SYMIX COMPUTER SYSTEMS, INC. I, Michael C. Wyatt, duly elected Secretary of Symix Computer Systems, Inc., an Ohio corporation (the "Company"), do hereby certify that Larry J. Fox, is the duly elected and qualified Chairman of the Board and Chief Executive Officer and Bradford W. Payne is the duly elected and qualified Senior Vice President of Finance and Administration and Chief Financial Officer of Symix Computer Systems, Inc. as of the date set forth below, and the signatures set forth opposite their respective names are the true and genuine signatures of both:
NAME SIGNATURE Larry J. Fox /s/ Larry J. Fox ------------------------ Bradford W. Payne /s/ Bradford W. Payne ------------------------
I, Michael C. Wyatt, further certify that the following is a true and correct copy of the resolution duly adopted by unanimous written consent of the Board of Directors of Symix Computer Systems, Inc. on November 30, 1993 and that there are no modifications, additions or rescissions thereto: RESOLVED, that the Chairman of the Board and Chief Executive Officer and Senior Vice President of Finance and Administration and Chief Financial Officer be and hereby are authorized and empowered to execute in the name of and to deliver on behalf of the Company any and all documents relating to real estate transactions including, but not limited to, leases, subleases, and purchase and sale documents, and amendments and supplements thereto, and specifically that they are authorized and empowered to enter into a lease amendment with Corporate Exchange Buildings IV and V Limited Partnership for additional office space at Corporate Exchange Building V. 69 IN WITNESS WHEREOF, the undersigned has hereunto set (his) hand and affixed the seal of the Company on this 1st day of March, 1994. SYMIX COMPUTER SYSTEMS, INC. (CORPORATE SEAL) By: /s/ Michael C. Wyatt, Secretary --------------------------------- 70 EXHIBIT B TENANT ACCEPTANCE LETTER [Letterhead of Tenant] [Date] Corporate Exchange Buildings IV and V Limited Partnership 383 South Third Street Columbus, Ohio 43215 Attention: Steve Skilken Re: Lease Dated April 3, 1991, First Lease Amendment Dated December 1, 1993, and Second Lease Amendment Dated April 1, 1994, at Corporate Exchange Building V, 2800 Corporate Exchange Drive, Columbus, Ohio 43231 The undersigned, as Tenant, hereby confirms the following as of April 1, 1994: 1. Tenant has accepted possession of and is currently occupying the entire Premises. 2. The commencement date for the Second Lease Amendment is April 1, 1994. 3. All alterations and improvements required to be performed by Landlord pursuant to the terms of the Lease, the First Lease Amendment, and the Second Lease Amendment to prepare the Premises for Tenant's occupancy have been satisfactorily completed. 4. As of the date hereof, Landlord has fulfilled all its obligations under the Lease. 5. The Lease is in full force and effect and has not been modified, altered, or amended except pursuant to the instruments described above. 6. There are no offsets or credits against Rent or any other charge payable by Tenant under the Lease, nor has any Rent or any other charge payable by Tenant been prepaid. 7. Tenant has no notice of any prior assignment, hypothecation, or pledge of the Lease or any Rent due under the Lease. Sincerely, SYMIX COMPUTER SYSTEMS, INC. By: /s/ Larry J. Fox ------------------------------ Larry J. Fox Chairman of the Board and Chief Executive Officer 1 EX-10.(E) 4 EXHIBIT 10(E) EXHIBIT 10(e) TO SYMIX SYSTEMS, INC. 1998 FORM 10-K FOURTH LEASE AMENDMENT This Fourth Lease Amendment is made and entered into as of the latest date on which it is executed by either of the parties hereto (the "Amendment Date"), by and between Corporate Exchange Buildings IV and V Limited Partnership, an Ohio limited partnership, 383 South Third Street, Columbus, Ohio 43215 (the "Landlord") and Symix Computer Systems, Inc., an Ohio corporation, whose address is 2800 Corporate Exchange Drive, Columbus, Ohio 43231 (the "Tenant") RECITALS A. 2600 Realty Corp. V, Landlord's predecessor in interest, and Tenant entered into a lease agreement dated April 3, 1991, a Start Date Agreement dated October 15, 1992, and a Lease For Storage Space dated March 16, 1992, and Landlord and Tenant entered into a First Lease Amendment dated December 1, 1993, a Start Date Agreement dated December 1, 1993, a Second Lease Amendment dated April 1, 1994, a Start Date Agreement dated April 1, 1994, a Third Lease Amendment dated July 12, 1994, and a Start Date Agreement dated July 12, 1994 (collectively these documents are referred to herein as the "Lease"), by which Landlord leased to Tenant, and Tenant leased from Landlord, certain premises containing approximately 68,684 rentable square feet (the "Premises") as shown on the floor plans attached hereto as Exhibit A, located on the lower level, second, third, and fourth floors of Corporate Exchange Building V, 2800 Corporate Exchange Drive, Columbus, Franklin County, Ohio (the "Building"). B. Tenant desires to lease additional office space in the Building and to amend the Lease. IT IS, THEREFORE, agreed as follows: 1. Tenant hereby leases an additional one thousand three hundred eighty (1,380) rentable square feet of office space (the "Additional Expansion Space") located on the second floor of the Building as shown on the floor plan attached hereto as Exhibit B. 2. The Term of the lease for the Additional Expansion Space shall commence on November 1, 1994, shall be concurrent with the Term of the Lease, and shall expire on June 30, 2001, unless sooner terminated as provided in the Lease. 3. Commencing on November 1, 1994, the Premises shall be deemed to include the Additional Expansion Space and will 2 contain an aggregate of approximately 70,064 rentable square feet. 4. Tenant shall pay Landlord Base Rent for the Premises in advance on the first day of each calendar month, without set off or demand, beginning on November 1, 1994 and continuing each calendar month until the expiration of the Term as follows: November 1, 1994, through June 30, 1997: Fifty One Thousand Three Hundred Seventy and 73/100 Dollars ($51,370.73) per month. July 1, 1996, through June 30, 1997: Fifty Two Thousand Two Hundred Forty and 06/100 Dollars ($52,240.06) per month. July 1, 1997, through June 30, 1999: Fifty Four Thousand Eight Hundred Ninety Six and 16/100 Dollars ($54,896.16) per month. July 1, 1999, through June 30, 2001: Fifty Seven Thousand Five Hundred Fifty Two and 26/100 Dollars ($57,552.26) per month. 5. Tenant accepts the Additional Expansion Space in "AS IS" condition. By occupying the Additional Expansion Space (including occupancy for Tenant's construction of its alterations and improvements), Tenant shall be deemed conclusively to have accepted the Additional Expansion Space and to have acknowledged that the Additional Expansion Space is in the condition required by the Lease and this Amendment. Tenant shall execute and deliver to Landlord an acceptance letter in the form attached as Exhibit C hereto no later than November 1, 1994. Tenant shall make no alterations, additions or improvements to the Premises without the prior written consent of Landlord. Tenant shall submit a statement of planned alterations, together with detailed architectural plans, specifications, and description of materials for Landlord's approval. Tenant shall not commence any work without first (a) obtaining Landlord's written approval of Tenant's plans, specifications, and description of materials, and (b) delivering to Landlord copies of Tenant's comprehensive general liability insurance certificates naming Landlord as an additional insured. Tenant shall perform all work in strict accordance with Tenant's approved plans and specifications and with all applicable laws, orders, regulations and requirements, in compliance with such rules and regulations as Landlord may make, and shall obtain approval by all appropriate governmental or quasi-governmental agencies. Tenant shall obtain all applicable permits and 3 authorizations before commencing work. All changes and alterations shall be made at the sole cost of Tenant, shall be performed in a good and workmanlike manner, shall not affect any structural parts of the Building, and shall not interfere with the quiet enjoyment of other tenants. Tenant at its cost shall repair any damage to the Building and/or Land caused by Tenant's alterations and shall restore them to the condition in which they were prior to the damage. Tenant shall promptly remove from the Premises and the Building all trash resulting from its work. All materials placed in the Premises or in the Building by Tenant, its contractors, agents, representatives, employees, concessionaires, licenses, or invitees, and all Tenant's work at any time, shall be at Tenant's sole risk. Tenant shall indemnify Landlord, Landlord's managing agent, and anyone claiming through them from all costs and expense incurred in connection with Tenant's performance of Tenant's alterations. Tenant shall keep the Premises, the Building, and the Land free and clear of all mechanics' and/or materialman's liens resulting from work done by or for Tenant. If any mechanics' or materialman's liens are filed against the Premises or the Building as a result of or purporting to be the result of any work for or act of Tenant, Tenant shall discharge the lien within thirty (30) days by payment, or by notice and bond meeting the requirements of the Ohio Revised Code. If Tenant does not discharge the lien, Landlord may pay the lien for the account of Tenant without inquiring into its validity and treat the amount of such payment as additional rent immediately due from Tenant; and/or treat Tenant's failure to discharge the lien as a default. Tenant shall indemnify and save harmless Landlord against and from all costs, liabilities, suits, penalties, claims and demands, including reasonable attorneys' fees resulting therefrom. Nothing in this Lease shall be construed as constituting the express or implied consent or request of Landlord to any contractor, subcontractor, laborer or materialman for the performance of any labor or the furnishing of any materials, fuel, machinery or supplies or any specific improvements, alterations of or repair to the Building or the Premises or any improvement thereto, nor as giving Tenant any right, power or authority to act as agent of Landlord to contract for, or to permit the performance or furnishing of any labor, materials, fuel, machinery or supplies on any basis which would entitle any person to assert and/or perfect a mechanic's lien or other claim encumbering the Building, the Premises or Landlord's interests in the Premises. Tenant shall post and maintain at the Premises any notices appropriate for the protection of the Premises from efforts by others to perfect or assert mechanic's liens or other claims in respect of the Premises. 4 Landlord will provide Tenant with an allowance for tenant improvements to the Additional Expansion Space (the "Allowance") in the amount of Eleven Thousand Forty and 00/000 Dollars ($11,040.00). Tenant shall pay all costs for tenant improvements to the Additional Expansion Space in excess of the allowance. Landlord shall remit the Allowance to Tenant within thirty (30) days of receipt of Tenant's written notification that the improvements to the Additional Expansion Space are complete, together with originals of a Certificate of Occupancy, if necessary, from the applicable governmental building authority. 6. Except as provided below, Tenant's combined payments for Operating Expenses and Real Property Taxes shall not exceed Thirty Three Thousand Five Hundred Seventy Two and 33/100 Dollars ($33,572.33) per month during calendar year 1994, Thirty Four Thousand Six Hundred Twenty Three and 29/100 Dollars ($34,623.29) per month during calendar year 1995, and Thirty Five Thousand Six Hundred Seventy Four and 25/100 Dollars (35,674.25) per month during calendar year 1996. If, however, in Landlord's judgement, specific events outside of Landlord's control cause Tenant's share of Operating Expenses or Real Estate Taxes to exceed the preceding maximum expense levels for the corresponding calendar year, Tenant shall pay the excess amount. Landlord shall use reasonable efforts to notify Tenant as soon as possible when such special events occur. 7. Except as set forth in this Fourth Lease Amendment, all provisions of the Lease shall remain unchanged and in full force and effect and shall apply to this Lease Amendment. All terms and conditions of the Lease not specifically amended by this Fourth Lease Amendment shall apply as if fully rewritten herein, and the rights and obligations of Tenant shall be governed and controlled by the terms and conditions of the Lease as amended hereby. Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the Lease. 8. Tenant hereby certifies that no real estate broker has or will represent it concerning this Fourth Lease Amendment and that no finder's fees have or will be earned by any third party. Tenant shall indemnify and hold Landlord harmless from any liability or expense that may arise from such claims, including reasonable attorney's fees. 9. This Fourth Lease Amendment shall be construed, governed and enforced in accordance with the laws of the State of Ohio. 10. This Agreement and the instruments and documents contemplated hereby, and the execution and delivery hereof by Tenant, and the consummation of the transactions herein provided, 5 have been duly authorized and approved by Tenant's Board of Directors and do not violate any provision of the constitution or bylaws of Tenant, or any agreement to which Tenant is a party or by which Tenant is bound, and constitute valid and binding obligations of Tenant enforceable against it in accordance with their respective terms. No consent or governmental approval is required in connection with the consummation of the transactions contemplated hereby. Tenant represents and warrants to Landlord that it has full right, power and authority to enter into the transactions provided for in this Lease Amendment; and that it has not, at any time, subleased, pledged, hypothecated, assigned or encumbered the Lease or in any other manner encumbered the Premises and will not do so. IN WITNESS WHEREOF, Landlord has executed this Fourth Lease Amendment on the 11th day of November, 1994, and Tenant has executed this Fourth Lease Amendment on the 4th day of November, 1994. LANDLORD: CORPORATE EXCHANGE BUILDINGS IV AND V LIMITED PARTNERSHIP By: Joseph Skilken & Co., General Partner WITNESSES: /s/ Thomas W. Ramag By: /s/ Steve Skilken - -------------------------------- ----------------------------- Steve Skilken Print Name: Thomas W. Ramag President ------------------ /s/ Terri Johnson Date: 11/11/94 - -------------------------------- ----------------------- Print Name: Terri Johnson ------------------- 6 TENANT: SYMIX COMPUTER SYSTEMS, INC. /s/ Michael C. Wyatt By: /s/ Larry J. Fox - ------------------------------- ---------------------------- Larry J. Fox Print Name: Michael C. Wyatt Chairman of the Board and ------------------- Chief Executive Officer Date: 11/4/94 ---------------------------- /s/ Kim Hollis By: /s/ O. Kent LaRoque - ------------------------------- ---------------------------- Print Name: Kim Hollis ------------------- Date: 11/4/94 --------------------------- /s/ Michael C. Wyatt - ------------------------------- Print Name: Michael C. Wyatt ------------------- /s/ Kim Hollis - ------------------------------- Print Name: Kim Hollis ------------------- 7 NOTARIZATION FOR LANDLORD STATE OF OHIO COUNTY OF FRANKLIN On this 11th day of November, 1994, before me, a notary public in and for said County and State, personally appeared Steve Skilken, President of Joseph Skilken & Co., an Ohio Corporation and the General Partner of CORPORATE EXCHANGE BUILDINGS IV and V LIMITED PARTNERSHIP, an Ohio limited partnership, on behalf of the limited partnership, who acknowledged for and on behalf of the corporation and limited partnership that he did sign the foregoing instrument on behalf of the corporation and limited partnership. /s/ Teresa R. Johnson -------------------------------- Notary Public My Commission Expires: 11-1-97 --------- NOTARIZATION FOR CORPORATE TENANT STATE OF OHIO COUNTY OF FRANKLIN On this 4th day of November, 1994, before me, a notary public in and for said County and State, personally appeared Larry J. Fox, Chairman of the Board and Chief Executive Officer and O. Kent LaRoque, President, of Symix Computer Systems, Inc., an Ohio corporation, who represented that they are duly authorized to sign and did sign the foregoing lease amendment on behalf of the corporation. /s/ Michael C. Wyatt -------------------------------- Notary Public My Commission Expires: None --------- 8 CERTIFICATE OF INCUMBENCY AND RESOLUTION OF SYMIX COMPUTER SYSTEMS, INC. I, Michael C. Wyatt, duly elected Secretary of Symix Computer Systems, Inc., an Ohio corporation (the "Company"), do hereby certify that Larry J. Fox, is the duly elected and qualified Chairman of the Board and Chief Executive Officer, and O. Kent LaRoque, is the duly elected and qualified President of Symix Computer Systems, Inc., as of the date set forth below, and the signatures set forth opposite their respective names are the true and genuine signatures of both: Name Signature ---- --------- Larry J. Fox /s/ Larry J. Fox --------------------------------- O. Kent LaRoque /s/ O. Kent LaRoque --------------------------------- I, Michael C. Wyatt, further certify that the following is a true and correct copy of the resolution duly adopted by unanimous written consent of the Board of Directors of Symix Computer Systems, Inc., on July 12, 1994 and that there are no modifications, additions or rescissions thereto: RESOLVED, that the Chairman of the Board and Chief Executive Officer and President be and hereby are authorized and empowered to execute in the name of and to deliver on behalf of the Company any and all documents relating to real estate transactions including, but not limited to, leases, subleases, and purchase and sale documents, and amendments and supplements thereto, and specifically that they are authorized and empowered to enter into a lease amendment with Corporate Exchange Buildings IV and V Limited Partnership for the lease amendment at Corporate Exchange Building V. IN WITNESS WHEREOF, the undersigned has hereunto set (her) (his) hand and affixed the seal of the Company on this 4th day of November, 1994. SYMIX COMPUTER SYSTEMS, INC. (CORPORATE SEAL) By: /s/ Michael C. Wyatt ------------------------------- EXHIBITS A AND B 9 [VISUAL VIEW OF FLOOR PLAN] (OMITTED) 10 EXHIBIT C TENANT ACCEPTANCE LETTER [Letterhead of Tenant) [Date] Corporate Exchange Buildings IV and V Limited Partnership 383 South Third Street Columbus, Ohio 43215 Attention: Steve Skilken Re: Lease dated April 3, 1991, a Lease For Storage Space dated March 16, 1992, a First Lease Amendment dated December 1, 1993, a Second Lease Amendment dated April 1, 1994, Third Lease Amendment dated July 12, 1994, and Fourth Lease Amendment at Corporate Exchange Building V, 2800 Corporate Exchange Drive, Columbus, Ohio 43231 The undersigned, as Tenant, hereby confirms the following as of November 4,1994: 1. Tenant has accepted possession of and is currently occupying the entire Premises. 2. The commencement date for the Fourth Lease Amendment is November 1, 1994. 3. Tenant accepts the Premises in "AS IS" condition and acknowledges that the Premises are in the condition required by the Lease and all amendments thereto. 4. As of the date hereof, Landlord has fulfilled all its obligations under the Lease. 5. The Lease is in full force and effect and has not been modified, altered, or amended except pursuant to the instruments described above. 6. There are no offsets or credits against Rent or any other charge payable by Tenant under the Lease, nor has any Rent or any other charge payable by Tenant been prepaid. 11 7. Tenant has no notice of any prior assignment, hypothecation, or pledge of the Lease or any Rent due under the Lease. Sincerely, SYMIX COMPUTER SYSTEMS, INC. By: /s/ Larry J. Fox ------------------------------ Larry J. Fox Chairman of the Board and Chief Executive Officer 12 EX-10.(F) 5 EXHIBIT 10(F) FIFTH LEASE AMENDMENT This Fifth Lease Amendment is made and entered into as of the latest date on which it is executed by either of the parties hereto (the "Amendment Date"), by and between Corporate Exchange Buildings IV and V Limited Partnership, an Ohio limited partnership, 383 South Third Street, Columbus, Ohio 43215 (the "Landlord") and Symix Computer Systems, Inc., an Ohio corporation, whose address is 2800 Corporate Exchange Drive, Columbus, Ohio 43231 (the "Tenant"). RECITALS A. 2600 Realty Corp. V, Landlord's predecessor in interest, and Tenant entered into a lease agreement dated April 3, 1991, a Start Date Agreement dated October 15, 1992, and a Lease For Storage Space dated March 16, 1992, and Landlord and Tenant entered into a First Lease Amendment dated December 1, 1993, a Start Date Agreement dated December 1, 1993, a Second Lease Amendment dated April 1, 1994, a Start Date Agreement dated April 1, 1994, a Third Lease Amendment dated July 12, 1994, a Start Date Agreement dated July 12, 1994, and a Fourth Lease Amendment dated November 11, 1994, (collectively these documents are referred to herein as the "Lease"), by which Landlord leased to Tenant, and Tenant leased from Landlord, certain premises containing approximately 70,064 rentable square feet (the "Premises") as shown on the floor plans attached hereto as Exhibit A, located on the lower level, second, third, and fourth floors of Corporate Exchange Building V, 2800 Corporate Exchange Drive, Columbus, Franklin County, Ohio (the "Building") B. Tenant desires to lease additional office space in the Building and to amend the Lease. IT IS, THEREFORE, agreed as follows: 1. Tenant hereby leases an additional four thousand five hundred seventy eight (4,578) rentable square feet of office space (the "New Additional Expansion Space") located on the first floor of the Building as shown on the floor plan attached hereto as Exhibit B. 2. The Term of the lease for the New Additional Expansion Space shall commence on July 1, 1998, shall be concurrent with the Term of the Lease, and shall expire on June 30, 2001, unless sooner terminated as provided in the Lease. Landlord's estimated occupancy date is projected to be May 31, 1998. Tenant may occupy the Premises after Landlord's notice that the New Additional Expansion Space is Ready for Occupancy provided all other terms of the Lease and this amendment are in full force and effect except the payment of Base Rent, Operating Expenses and Real Property Taxes pertaining to the New Additional Expansion Space ONLY shall not begin until the New Additional Expansion Space Commencement Date. Notwithstanding other provisions of this Amendment, the Commencement Date shall be extended one day for each day after July 1, 1998 that Landlord notifies Tenant the New Additional Expansion Space is Ready for Occupancy, unless such delay is caused by the act or omission of Tenant. 3. Commencing on July 1, 1998 (the "New Additional Expansion Space Commencement Date"), the Premises shall be deemed to include the New Additional Expansion Space and will contain an aggregate of approximately 74,642 rentable square feet. Tenant's prorata share of Operating Expenses and Real Property Taxes shall be computed based upon the ratio of the number of rentable square feet contained in the Premises in relation to the total number of rentable square feet of office space contained in the Building. 4. Tenant shall pay Landlord Base Rent for the Premises in advance on the first day of each calendar month, without set off or demand, as set forth in the Lease until June 30, 1998, and beginning on July 1, 1998 and continuing each calendar month until the expiration of the Term as follows: July 1, 1998, through June 30, 1999: Fifty Nine Thousand Seven Hundred Three and 06/100 Dollars ($59,703.06) per month. July 1, 1999, through June 30, 2001: Sixty Two Thousand Five Hundred Eighty Four and 25/100 Dollars ($62,584.25) per month. 5. Upon completion of Landlord's Work to be performed in accordance with the plans and specifications as indicated on Exhibit C, attached hereto, and in accordance with the Corporate Exchange Tenant Standard attached hereto as Exhibit D, Tenant accepts the New Additional Expansion Space in "AS IS" condition. By occupying the New Additional Expansion Space (including occupancy for Tenant's construction of its alterations and improvements), Tenant shall be deemed conclusively to have accepted the New Additional Expansion Space and to have acknowledged that the New Additional Expansion Space is in the condition required by the Lease and this Amendment. Tenant shall execute and deliver to Landlord an acceptance letter in the form attached as Exhibit E hereto no later than September 1, 1998. 6. Except as set forth in this Fifth Lease Amendment, all provisions of the Lease shall remain unchanged and in full force and effect and shall apply to this Fifth Lease Amendment. All 2 terms and conditions of the Lease not specifically amended by this Fifth Lease Amendment shall apply as if fully rewritten herein, and the rights and obligations of Tenant shall be governed and controlled by the terms and conditions of the Lease as amended hereby. Capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed thereto in the Lease. 7. Tenant hereby certifies that no real estate broker has or will represent it concerning this Fifth Lease Amendment and that no finder's fees have or will be earned by any third party. Tenant shall indemnify and hold Landlord harmless from any liability or expense that may arise from such claims, including reasonable attorney's fees. 8. This Fifth Lease Amendment shall be construed, governed and enforced in accordance with the laws of the State of Ohio. 9. This Agreement and the instruments and documents contemplated hereby, and the execution and delivery hereof by Tenant, and the consummation of the transactions herein provided, have been duly authorized and approved by Tenant's Board of Directors and do not violate any provision of the constitution or bylaws of Tenant, or any agreement to which Tenant is a party or by which Tenant is bound, and constitute valid and binding obligations of Tenant enforceable against it in accordance with their respective terms. No consent or governmental approval is required in connection with the consummation of the transactions contemplated hereby. Tenant represents and warrants to Landlord that it has full right, power and authority to enter into the transactions provided for in this Fifth Lease Amendment; and that it has not, at any time, subleased, pledged, hypothecated, assigned or encumbered the Lease or in any other manner encumbered the Premises and will not do so. 3 IN WITNESS WHEREOF, Landlord has executed this Fifth Lease Amendment on the 28th day of May, 1998, and Tenant has executed this Fifth Lease Amendment on the 18th day of May, 1998. LANDLORD: CORPORATE EXCHANGE BUILDINGS IV AND V LIMITED PARTNERSHIP WITNESSES: By: Joseph Skilken & Co., General Partner /s/ Thomas W. Ramag By:/s/ Steve Skilken - --------------------------- ------------------------------- Steve Skilken Print Name: Thomas W. Ramag President --------------- Date: 5/28/98 /s/ Regina R. Watson ----------------------------- - ---------------------------- Print Name: Regina R. Watson TENANT: SYMIX COMPUTER SYSTEMS, INC. By: /s/ Larry J. Fox -------------------------------- Larry J. Fox /s/ Ivery D. Foreman Chairman of the Board and - ---------------------------- Chief Executive Officer Print Name: Ivery D. Foreman ----------------- Date: 5/18/98 ------------------------------ - ---------------------------- Print Name: ----------------- /s/ Ivery D. Foreman By: /s/ Stephen A. Sasser - ----------------------------- ------------------------------- Print Name: Ivery D. Foreman Stephen A. Sasser ----------------- President Date: 5/18/98 ------------------------------ - ----------------------------- Print Name: ------------------ 4 NOTARIZATION FOR LANDLORD STATE OF OHIO COUNTY OF FRANKLIN On this 28th day of May, 1998, before me, a notary public in and for said County and State, personally appeared Steve Skilken, President of Joseph Skilken & Co., an Ohio Corporation and the General Partner of CORPORATE EXCHANGE BUILDINGS IV and V LIMITED PARTNERSHIP, an Ohio limited partnership, on behalf of the limited partnership, who acknowledged for and on behalf of the corporation and limited partnership that he did sign the foregoing instrument on behalf of the corporation and limited partnership. /s/ Teresa R. Johnson --------------------------------- Notary Public My Commission Expires: 11/5/02 ----------- 5 NOTARIZATION FOR CORPORATE TENANT STATE OF OHIO COUNTY OF FRANKLIN On this 18th day of May, 1998, before me, a notary public in and for said County and State, personally appeared Larry J. Fox, Chairman of the Board and Chief Executive Officer and Steve Sasser, President, of Symix Computer Systems, Inc., an Ohio corporation, who represented that they are duly authorized to sign and did sign the foregoing lease amendment on behalf of the corporation. /s/ Ivery D. Foreman --------------------------------- Notary Public My Commission Expires: None ----------- 6 CERTIFICATE OF INCUMBENCY AND RESOLUTION OF SYMIX COMPUTER SYSTEMS, INC. I, Lawrence Deleon, duly elected Secretary of Symix Computer Systems, Inc., an Ohio corporation (the "Company"), do hereby certify that Larry J. Fox, is the duly elected and qualified Chairman of the Board and Chief Executive Officer, and Stephen A. Sasser, is the duly elected and qualified President of Symix Computer Systems, Inc., as of the date set forth below, and the signatures set forth opposite their respective names are the true and genuine signatures of both:
NAME SIGNATURE ---- --------- Larry J. Fox /s/ Larry J. Fox ----------------------------- Stephen A. Sasser /s/ Stephen A. Sasser -----------------------------
I, Lawrence Deleon, further certify that the following is a true and correct copy of the resolution duly adopted by unanimous written consent of the Board of Directors of Symix Computer Systems, Inc., on May 17, 1998 and that there are no modifi-cations, additions or rescissions thereto: RESOLVED, that the Chairman of the Board and Chief Executive Officer and President be and hereby are authorized and empowered to execute in the name of and to deliver on behalf of the Company any and all documents relating to real estate transactions including, but not limited to, leases, subleases, and purchase and sale documents, and amendments and supplements thereto, and specifically that they are authorized and empowered to enter into a lease amendment with Corporate Exchange Buildings IV and V Limited partnership for the lease amendment at Corporate Exchange Building V. 7 IN WITNESS WHEREOF, the undersigned has hereunto set (her) (his) hand and affixed the seal of the Company on this 18th day of May, 1998. SYMIX COMPUTER SYSTEMS, INC. (CORPORATE SEAL) By: /s/ Lawrence Deleon ------------------------------- 8 EXHIBIT E TENANT ACCEPTANCE LETTER [Letterhead of Tenant] [Date] Corporate Exchange Buildings IV and V Limited Partnership 383 South Third Street Columbus, Ohio 43215 Attention: Steve Skilken Re: Lease dated April 3, 1991, a Lease For Storage Space dated March 16, 1992, a First Lease Amendment dated December 1 1993, a Second Lease Amendment dated April 1, 1994, Third Lease Amendment dated July 12, 1994, Fourth Lease Amendment dated November 11, 1994, and a Fifth Lease Amendment at Corporate Exchange Building V, 2800 Corporate Exchange Drive, Columbus, Ohio 43231. The undersigned, as Tenant, hereby confirms the following as of May 18, 1998: 1. Tenant has accepted possession of and is currently occupying the entire Premises. 2. The commencement date for the Fifth Lease Amendment is July 1, 1998. 3. Tenant accepts the Premises and acknowledges that the Premises are in the condition required by the Lease and all amendments thereto. 4. As of the date hereof, Landlord has fulfilled all its obligations under the Lease. 5. The Lease is in full force and effect and has not been modified, altered, or amended except pursuant to the instruments described above. 6. There are no offsets or credits against Rent or any other charge payable by Tenant under the Lease, nor has any Rent or any other charge payable by Tenant been prepaid. 7. Tenant has no notice of any prior assignment, hypothecation, or pledge of the Lease or any Rent due under the Lease. Sincerely, SYMIX COMPUTER SYSTEMS, INC. By: /s/ Larry J. Fox ------------------------------ Larry J. Fox Chairman of the Board and Chief Executive Officer EXHIBIT A [VISUAL VIEW OF FLOOR PLAN OMITTED] EXHIBIT B Unattached and referred hereto by reference. The architectural plans comprising Exhibit B are enclosed hereto and signed and dated by Tenant. EX-10.(H) 6 EXHIBIT 10(H) EXHIBIT 10(h) TO SYMIX SYSTEMS, INC. 1998 FORM 10-K AMENDMENT TO THE PROGRESS SOFTWARE APPLICATION PARTNER AGREEMENT This AMENDMENT to the PROGRESS SOFTWARE APPLICATION PARTNER AGREEMENT is entered into as of July 1, 1997 (the "Effective Date"), by and between PROGRESS SOFTWARE CORPORATION, a Massachusetts corporation with its principal place of business at 14 Oak Park, Bedford, Massachusetts 01730 ("PSC"), and SYMIX COMPUTER SYSTEMS, INC., an Ohio corporation with its principal place of business at 2800 Corporate Exchange Drive, Columbus, Ohio 43231 ("AP" or "Symix"). WHEREAS, PSC and AP entered into a Progress Software Application Partner Agreement effective as of February 8, 1995 (the "Agreement"); WHEREAS, PSC and AP desire to amend the terms and conditions of the Agreement to provide for special pricing for certain PSC products to be distributed in conjunction with certain AP PROGRESS-Registered Trademark--based applications; and WHEREAS, PSC is willing to provide AP with such special pricing subject to the terms and conditions of this Amendment; NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: 1. Capitalized terms used but not defined in this Amendment shall have the same meaning as in the Agreement. 2. The following terms as used herein shall have the following meanings: a) "NET LICENSE FEE" shall mean the then-current total license fee charged by AP to each customer for the Symix portion of the AP Covered Applications bundled with the Selected PSC Products in accordance with Section 6 below, net of any and all discounts, sales tax and shipping fees. The term "Net License Fee" shall not include revenue obtained by AP for hardware, implementation, training, customization, data conversion services, 1st year Annual License Fee ("Annual License Fee" is the name used by AP to refer to its maintenance and support services fee), or support services. For illustration purposes only, see EXHIBIT C for example order and calculations. b) "SELECTED PSC PRODUCTS" shall mean the PSC Versions 7 and 8 deployment products listed in EXHIBIT A. c) "COVERED APPLICATIONS" shall mean the PROGRESS-Registered Trademark--based AP application software modules listed in EXHIBIT B to this Amendment. 13 3. PSC PRODUCT LICENSES DISTRIBUTED BY AP PRIOR TO THE EFFECTIVE DATE OF THIS AMENDMENT. Except as otherwise set forth in Sections 8, 9 and 10 of this Amendment, the terms and conditions set forth in this Amendment shall not apply to PSC product licenses distributed by AP to its existing installed base prior to the Effective Date of this Amendment. Such PSC product licenses shall be subject to PSC's standard end-user license agreement which accompanied the PSC product and PSC's then-current standard maintenance and upgrade policies and price list. Notwithstanding the foregoing, in the event AP licenses additional Covered Applications to an existing AP customer such additional licenses (with or without additional Selected PSC Products) shall be subject to the terms and conditions set forth in this Amendment including but not limited to the PSC Product and Maintenance Royalty requirements specified herein. 4. AP'S DISTRIBUTION OF SELECTED PSC PRODUCTS DURING THE TERM OF THIS AMENDMENT. Notwithstanding anything to the contrary contained in the Agreement, the following terms and conditions shall apply to the distribution by AP of the Selected PSC Products in connection with the Covered Applications during the term of this Amendment: a) TERRITORY. AP shall have the right to distribute the Selected PSC products solely in conjunction with the deployment of the Covered Applications in North America subject to the terms and conditions of the Agreement and this Amendment. b) AP PRICING. AP will, in its sole discretion, establish and maintain a product price schedule setting forth the license fees for the Covered Applications. A copy of the current price schedule is attached hereto as EXHIBIT B. AP shall provide PSC with written notice of any updates to the above-mentioned price schedule in a timely fashion. Notwithstanding the foregoing, the special pricing terms and conditions set forth in this Amendment are based upon AP's pricing model set forth in EXHIBIT B. In the event AP makes substantial changes to its pricing model from the one set forth in EXHIBIT B, AP's license royalty fee and maintenance fee for the Selected PSC Product(s) deployed under such new pricing model shall be subject to change in PSC's sole discretion provided, however, that in no event shall such formulas be significantly different from the formulas set forth herein. c) AP'S AGREEMENT WITH ITS CUSTOMERS. The use of the Selected PSC Products by AP's customers shall be subject to the terms and conditions set forth in PSC's End-User Product License Agreement (a copy of which is attached hereto as EXHIBIT D). d) PSC LICENSE ROYALTIES. AP shall pay PSC a royalty equal to seventeen percent (17%)(the "Product Royalty") of the total sales price for the Symix portion of the Covered Application(s) licensed to its customers on or after the Effective Date of this Amendment, less any applicable customer discount. The 17% royalty described in the foregoing sentence is based upon the following royalties: 14 (1) 14.5% of the total sales price for the Symix portion of the Covered Application as payment for the initial product license, and (2) 2.5% of the total sales price for the Symix portion of the Covered Application as payment for an initial 12 month term of generally available PSC maintenance. In the event AP pays royalties to PSC for initial license, initial maintenance and upgrade fees in excess of $1,920,000 in any one year period beginning on July 1st of each year and ending on June 30th of the following year, the royalty rate on such license and upgrade fees will drop from 17% to 16% during the remainder of such one year period. Except as otherwise set forth herein, PSC's license fees for any additional PSC Products ordered but not listed in EXHIBIT A will be calculated by using PSC's then-current price list less applicable Symix discount. e) PSC MAINTENANCE ROYALTIES. i) INITIAL MAINTENANCE TERM. In connection with AP's initial distribution of Selected PSC Products in conjunction with each AP license of Covered Application(s) to an AP customer, PSC maintenance coverage for such Selected PSC Products during the initial maintenance term shall be subject to royalties specified in Section 4(d) above. The above-mentioned fee is based upon a twelve (12) month initial maintenance term. ii) RENEWAL MAINTENANCE TERM. For each AP Covered Application license, upon expiration of an initial term of maintenance as described in paragraph (i) of this Section 4(e) or a renewal term of maintenance as described in this paragraph (ii) of this Section 4(e), PSC's maintenance coverage for a twelve (12) month renewal term shall be subject to royalty equal to two and one-half percent (2.5%) of the original sales price charged by AP for the Symix portion of such Covered Applications. If AP increases the maintenance fee for any Covered Application after such Covered Application has been purchased by the customer, the annual maintenance royalty for such Covered Application described in this paragraph (ii) of this Section 4(e) will automatically be increased by the same percentage; provided, however, that in no event shall (a) the amount of any such maintenance royalty for the second maintenance term be less than the maintenance royalty for the initial maintenance term, and (b) the amount of any such annual maintenance royalty for the third maintenance term and any subsequent maintenance term be less than the royalty paid by AP for the previous maintenance term. The maintenance fee for renewal maintenance for AP customers who have allowed their maintenance to lapse is subject to the terms and conditions of PSC's then-current standard maintenance renewal policy and then-current pricing. 15 f) UPDATES/UPGRADES OF THE COVERED APPLICATIONS. For each Selected PSC Product license purchased for an AP customer pursuant to Section 4(d) above, PSC shall be entitled to payment from AP when additional application and/or maintenance revenue is generated from such AP customer in connection with (i) the sale or license of additional Covered Applications or (ii) any applicable upgrade or update to the Covered Applications and/or the Selected PSC Products (including but not limited to revenue relating to the license of additional Covered Application modules, upgrades or updates to existing modules and increase in user count. PSC's portion of such revenue shall be based upon the then-current product royalty and maintenance royalty formulas in effect at the time of the applicable update, upgrade or license of additional Covered Applications. AP shall include information about any such PSC product and/or maintenance royalties in accordance with the reporting requirements of Section 7 herein. 5. The special pricing provisions set forth in this Amendment apply only to the Selected PSC Products distributed solely in conjunction with AP's Covered Applications for installation in North America, in accordance with the terms and conditions of this Amendment and the Agreement. In the event a new AP customer or existing AP customer desires to purchase a new PSC product license or upgrade an existing PSC product license for a PSC product not included in the definition of Selected PSC Products listed above or covered in Sections 8, 9 or 10 hereof, the PSC license and maintenance fees for such new PSC product license or upgrade shall be subject to PSC's then-current price list, terms, and conditions. 6. If AP elects to separate the fees charged by AP for PSC Products from the fees charged for the Symix portion of the Covered Applications when submitting proposals or invoicing AP's customers, AP (i) must show only the suggested list price for the application-specific versions of the PSC Products as calculated in accordance with the formula set forth on EXHIBIT E hereto, and (ii) must not discount the PSC Products more than the discount given by AP on the Symix portion of the Covered Applications. PSC may amend the suggested list prices for the application-specific version of the PSC Products from time to time by providing prior written notice to AP. The special pricing terms and conditions set forth in this Amendment shall not apply if AP discounts the bundled application software, together with the Selected PSC Products, at a percentage higher than the average discount applied to the total sale to its customers on any particular order. Under such circumstances, the PSC product licenses shall be subject to PSC's then-current price list. 7. ORDERING AND PAYMENT PROCEDURES. a) On a monthly basis, AP shall provide the following reports to PSC: i) COVERED APPLICATION(S) DEPLOYMENT REPORT. For each Covered Application(s) license granted by AP to an AP customer under the terms and conditions of this Amendment during the report period, AP shall provide PSC with the following information: the customer name, address, 16 number of users, PSC serial number, AP's Net License Fee, PSC's Product Royalty calculated in accordance with Section 4(e) above. ii) INITIAL TWELVE (12) MONTH MAINTENANCE REPORT. For each Covered Application(s) license including Selected PSC Products to be covered under a twelve (12) month initial PSC maintenance term (provided such maintenance is made generally available by PSC to its customer base), AP shall provide the following information: the customer name, address, PSC serial number, AP's Net License Fee, maintenance start and end date, and PSC's Maintenance Royalty calculated in accordance with Section 4(0(i) above. iii) RENEWAL MAINTENANCE REPORT. For each Covered Application(s) license including Selected PSC Products to be covered under a twelve (12) month annual PSC renewal maintenance term (provided such maintenance is made generally available by PSC to its customer base), AP shall provide the following information: the customer name, address, PSC serial number, maintenance start and end date, and PSC's Maintenance Royalty calculated in accordance with Section 4(f)(ii) above. iv) UPGRADES/UPDATES. On a monthly basis, AP shall provide a report to PSC of any and all add-on modules, updates or upgrades occurring during the report period to AP customer licenses for Covered Applications and/or Selected PSC Products resulting in additional license and/or maintenance revenue to AP in accordance with the provisions of Section 4(f) above and shall include the following information with respect to each such update, add-on and/or upgrade: customer name; address; PSC serial number(s); description of the update, upgrade or add-on; PSC Product Royalty (if additional license revenue is generated from the update, add-on or upgrade); and PSC Maintenance Royalty (if additional maintenance revenue is generated from the update, add-on or upgrade). v) The required reports referenced in paragraphs (i), (ii), (iii), and (iv) above shall be received by PSC no later than the fifteenth (15) day of the month following the month in which the Covered Application(s) license is granted by AP or one of its authorized distributors. Payment in full for all of PSC's Product Royalties, Maintenance Royalties (initial and renewal), and update/upgrades owed to PSC for the prior month are due with these reports. Interest shall accrue on any delinquent amounts owed by AP for PSC products at the lesser of eighteen percent (18%) per annum or the maximum rate permitted by applicable usury law. 8. AP's existing customers who have purchased PROGRESS-Registered Trademark--based Symix applications which incorporate PROGRESS-Registered Trademark-Version 6 or an earlier PROGRESS-Registered Trademark- version ("Earlier PROGRESS-Registered Trademark- Versions") prior to the Effective Date of this Amendment, may upgrade from such applications to the Covered Applications if (i) AP pays to PSC for each such 17 existing customer a one-time fee equal to One Hundred and Fifty Dollars ($150.00) per user based upon a user count that is equal to the total number of such customer's Symix users, (ii) AP pays to PSC an annual maintenance royalty for each such application equal to the greater of (a) two and one-half percent (2.5%) of the total current sales price charged by AP for such application, or (b) the current maintenance fee charged by PSC for such application, (iii) such existing Symix customer has paid all required maintenance fees on such products due prior to the date of such upgrade, and (iv) each such existing customer forfeits their rights under the machine-based license or unlimited license granted to such customer for the Earlier PROGRESS-Registered Trademark- Versions and the license to use such products shall be based upon number of users. If such Symix customers require any other PSC products other than those included with the Covered Applications, such products must be purchased at PSC's then current list price less Symix's standard AP discount. 9. AP's existing customers who have purchased PROGRESS-Registered Trademark--based Symix applications which incorporate PROGRESS-Registered Trademark-Version 7 or 8 will be covered under the percentage of application arrangement described in this Amendment and such customers will not be charged PSC's standard platform and upgrade fees for platform changes to such applications. 10. AP's customers who have purchased the Covered Applications will receive free of charge Updates (as such term is hereinafter defined) to the PSC Products included with Covered Applications provided that (a) the user count for such Covered Applications has not been increased, and (b) the customer has purchased maintenance services for the Covered Applications. For purposes of this Section 10, "Updates" shall mean new releases of PSC Products containing modifications or additions to the software that fixes bugs or provides minor functionality enhancements and does not change overall utility, functional capability or application of software. 11. Notwithstanding anything to the contrary set forth in Section 10.1 of the Agreement, (a) the term of the Agreement shall be extended so that the Agreement terminates on July 1, 1998 unless extended in writing by AP and PSC, and (b) the initial term of this Amendment shall commence on July 1, 1997 and shall continue for a period of one year from such date. Thereafter, the provisions of this Amendment shall continue in force subject to termination (a) automatically upon termination of the Agreement pursuant to Article 10 of the Agreement or (b) thirty (30) days after written notice of termination by either party. If in excess of ninety percent (90%) of the outstanding common stock of PSC is acquired by a third party software vendor during the initial term of this Amendment or any renewal term hereof, the term of this pricing arrangement shall be automatically extended for an additional two-year period from the next anniversary date hereof. In the event PSC terminates this Amendment in accordance with part (b) above, AP's distribution of all PSC products, including the Selected PSC Products described herein shall be subject to the standard terms and conditions of the Agreement (prior to this Amendment) and PSC's then-current pricing policies. Nothing in this Section 11 shall alter or modify PSC's right, pursuant to Section 10.2 of the Agreement, to terminate the Agreement and this Amendment at any time if AP fails to cure a material breach of its obligations within thirty (30) days of receipt of written notice from PSC. 18 12. Notwithstanding anything to the contrary set forth in Section 11.1 of the Agreement and except as set forth in Section 10 of this Amendment, the special pricing and distribution terms and conditions set forth in this Amendment may not be assigned by AP without the prior written consent of PSC, which shall not be unreasonably withheld. 13. It is the expectation of Symix and PSC that Symix will pay royalties to PSC for initial license, initial maintenance and upgrade fees of at least $1,920,000 in each one year period during the term of this Amendment beginning on July 1st of each year and ending on June 30th of the following year. 14. Except as modified herein, all provisions of the Agreement are hereby confirmed and in all respects this Amendment (including Exhibits A through E hereto) and the Agreement shall be read and construed together as if the provisions of this Amendment had been part of the Agreement. This Amendment completely supersedes any earlier Agreements between the parties. No other modifications or additions are made to the Agreement. Except as may be modified or amended by this Amendment, the terms and conditions of the Agreement shall remain in effect until termination of the Agreement. In the event of conflict between the terms and conditions of the Agreement and this Amendment, the terms and conditions of this Amendment shall govern. IN WITNESS WHEREOF, this Amendment has been executed under seal for and on behalf of each of the parties hereto by their duly authorized representative as of the date first set forth above. PROGRESS SOFTWARE CORPORATION SYMIX COMPUTER SYSTEMS, INC. By: /s/ Paul Maddaluno By: /s/ Lawrence DeLeon --------------------------- ---------------------------- Name: Paul Maddaluno Name: Lawrence DeLeon ------------------------- -------------------------- Title: Director, N.A. Sales Title: CFO ----------------------- ------------------------ 19 EXHIBIT A SELECTED PSC PRODUCTS PROGRESS-Registered Trademark- 4GL PROGRESS-Registered Trademark- Enterprise Database Server Query/Results Client/Networking PROGRESS-Registered Trademark- AppServer 20 EXHIBIT B COVERED APPLICATIONS/PRICE SCHEDULE SyteLine Data Collection Symix 4.0 The Covered Applications will only include a single user 4GL license for each database server and a user count equal to the number of Symix SyteLine and Symix Data Collection sessions for Enterprise Database, Client Networking, PROGRESS-Registered Trademark- AppServer and Query/Results. [Attach Current AP Price Schedule] (Attachment omitted) 21 EXHIBIT C EXAMPLE ORDER AND CALCULATIONS If AP sells customer ABC company $130,000 in Covered Applications of which the sales price for the Symix portion of such Covered Applications is $100,000, AP would pay to PSC a royalty of $17,000 calculated as follows: a. 14.5% of the total sales price for the Symix portion of the Covered Applications for the initial product license $14,500 b. 2.5% of the total sales price for PSC maintenance during the Initial Maintenance Term 2,500 ------- TOTAL ROYALTY DUE PSC $17,000
22 EXHIBIT D [This page will be replaced by a copy of PSC's End-User Product License Agreement] 23 EXHIBIT E FORMULA FOR CALCULATING SUGGESTED LIST PRICE The suggested list price of the PSC Products included with any Covered Application shall be calculated as follows: $1,200 per user for the Enterprise Database Server, Client Networking, Query/RESULTS and PROGRESS-Registered Trademark- App Server and one 4GL Development System. 24 EX-10.(I) 7 EXHIBIT 10(I) EXHIBIT 10(i) TO SYMIX SYSTEMS, INC. 1998 FORM 10-K SECOND AMENDMENT TO PROGRESS SOFTWARE APPLICATION PARTNER AGREEMENT SECOND AMENDMENT to the Progress Software Corporation Application Partner Agreement is effective as of the 1st day of July, 1998 ("Effective Date"), by and between Progress Software Corporation, a Massachusetts corporation with its principal place of business at 14 Oak Park, Bedford, Massachusetts 01730 ("PSC") and Symix Computer Systems, Inc., an Ohio corporation with its principal place of business at 2800 Corporate Exchange Drive, Columbus, Ohio 43231 ("AP" or "Symix"). WHEREAS, PSC and AP entered into a Progress Software Application Partner Agreement effective as of February 8, 1995 (the "Agreement"); and WHEREAS, PSC and AP previously amended the Agreement by entering into an Amendment to the Agreement as of July 1, 1997 specifying special pricing for designated PSC products distributed by AP in conjunction with certain AP PROGRESS-based applications (the "Amendment"); WHEREAS, AP desires to expand the geographic scope of the special pricing terms and conditions in the Amendment to apply on a worldwide basis, to specify additional terms and conditions pursuant to which AP will have the right to copy and distribute an evaluation version of certain PSC products in combination with an evaluation version of AP's PROGRESS-based application(s), and to obtain the right to distribute the WebSpeed transaction server product in conjunction with AP's SyteWeb application; WHEREAS, PSC is willing to agree, subject to the terms and conditions contained herein, to such expansion in the geographic territory of the special pricing terms and conditions in the Amendment, to grant AP the above-mentioned rights to copy and distribute the evaluation version of the designated PSC products, and to allow AP to distribute the WebSpeed transaction server product in conjunction with AP's SyteWeb application; NOW, THEREFORE, for good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows: 1. Capitalized terms used but not defined in this Second Amendment shall have the same meaning as in the Agreement or the Amendment. 2. The terms and conditions of the Amendment shall continue in force during the term of this Second Amendment subject to the following: a. Section 4(a) of the Amendment limits the territory for the special pricing terms and conditions specified therein to North America. The parties agree that, as of the Effective Date of this Second Amendment, the territory will be expanded to apply on a worldwide basis. 25 b. Section 4(b) of the Amendment specifies that: (i) AP has sole discretion to establish and maintain a price schedule for the Covered Application, (ii) AP is required to provide PSC with a copy of the price schedule and written notice of any updates thereto, and (iii) PSC has the right to modify AP's license and maintenance royalty formulas in the event AP substantially alters its pricing model, provided that such adjusted royalty formulas are not significantly different from the formulas set forth in the Amendment. In addition to the requirements already established under Section 4(b), in the event AP has different price schedules for installation locations outside the United States, AP shall provide PSC with a copy of each price schedule and written notice of any updates thereto. c. Section 4(c) of the Amendment states that the use of the Selected PSC Products by AP's customers shall be subject to the terms and conditions of PSC's End-User Product License Agreement. Such End-User Product License Agreement accompanies each Selected PSC Product. A copy of such End-User Product License Agreement was to be attached to the Amendment as Exhibit D; however, said Exhibit D was inadvertently omitted from the list of Exhibits attached to the Amendment. A copy of PSC's current End-User Product License Agreement for the Selected PSC Products is attached hereto. Such End-User Product License Agreement is subject to change by PSC from time to time without notice to AP. In accordance with the terms and conditions of Section 3.3 of the Agreement, AP shall deliver each PSC Product to its customers unopened with the above-mentioned End-User Product License Agreement in tact. d. Sections 4(d), 4(e), and 4(f) specify the license royalty, maintenance royalty, and upgrade royalty arrangements respectively. The terms and conditions set forth in Sections 4(d), 4(e), and 4(f) shall remain the same, except that: (i) The annual revenue goal specified in the last paragraph of Section 4(d) shall be increased from US$1,920,000 to US$2,500,000. In the event AP pays royalties to PSC for initial license, initial maintenance and upgrade fees in excess of US$2,500,000 in any one year period beginning on July 1st of each year and ending on June 30th of the following year, the royalty rate on such license and upgrade fees will drop from 17% to 16% for orders processed during the remainder of such one year period. Any royalties paid by AP to PSC or a PSC subsidiary for initial license, initial maintenance and upgrade fees on Selected PSC products ordered by AP for installation at an AP customer location outside of North America shall be applied to the above-mentioned goal (except for orders placed by AP through a PSC distributor). AP's performance in relation to the above-mentioned annual revenue goal will be monitored by PSC's Bedford, Massachusetts headquarters. AP shall be responsible for promptly reporting to PSC's Bedford, Massachusetts headquarters any royalties paid by AP to a PSC subsidiary which, pursuant to the provisions above, should be counted toward the annual revenue goal. 26 (ii) For each Covered Application license installed at an AP customer location outside of the United States, the royalty formulas specified in Sections 4(d), 4(e) and 4(t) shall be applied to the total local sales price for the Symix portion of the Covered Application (if different from AP's U.S. sales price). e. Section 5 of the Amendment states, in the first sentence, that the terms and conditions of the Amendment shall only apply to AP's distribution of the Selected PSC Products in conjunction with the Covered Applications solely in North America. The territory limitation shall no longer apply. The requirement that the Selected PSC Products be distributed in conjunction with the Covered Applications will continue in full force and effect. The remaining provisions of Section 5 of the Amendment concerning the purchase of licenses of PSC products not covered under the definition of "Selected PSC Products" shall remain in effect. f. Section 7 of the Amendment specifies the ordering, payment and reporting procedures for the Selected PSC products ordered and deployed by AP in conjunction with each Covered Application(s) license. As of the Effective Date of this Second Amendment, the ordering, payment and reporting procedures specified in Section 7 of the Amendment will be replaced with the following procedures: INSTALLATIONS IN NORTH AMERICA: SELECTED PSC PRODUCT ORDERS: For each AP customer location in North America requiring Selected PSC Products in conjunction with the Covered Applications(s), AP shall order such Selected PSC Products from PSC's United States headquarters in Bedford, Massachusetts ("PSC Headquarters"). With each order, AP shall provide PSC with the following information: the customer name, address, number of users, AP's Net License Fee, PSC's Product Royalty calculated in accordance with Section 4(d) of the Amendment. PSC shall invoice AP for the Product Royalty owed to PSC under each order. ORDERS FOR RENEWAL MAINTENANCE: For each Covered Application(s) license installation in North America requiring a renewal PSC maintenance term pursuant to Section 4(e)(ii) of the Amendment (provided that such maintenance is generally offered by PSC to its customers), AP shall submit an order to PSC Headquarters within thirty (30) days prior to the expiration of the current maintenance term. In each such order, AP shall provide PSC with the following information: the customer name, location, number of users, PSC product serial number(s), the original Net License Fee of the Covered Application(s) licensed to the AP customer, and PSC's Maintenance Royalty calculated in accordance with Section 4(e)(ii) of the 27 Amendment. PSC shall invoice AP for the Maintenance Royalty owed to PSC under each order. ORDERS FOR UPGRADES TO THE SELECTED PSC PRODUCT(S): For each Covered Application(s) installation in North America requiring an increase in the user count of the Selected PSC Product(s) or a generally available update to the Selected PSC Product(s), AP shall submit an order to PSC Headquarters. Such order shall include: the customer name, location, PSC product serial number(s), current number of users, number of users after the increase (if applicable), the version of the Selected PSC Products ordered (if ordering an update), PSC Product Royalty and PSC Maintenance Royalty in accordance with Sections 4(d) and 4(e)(ii) of the Amendment (if additional license and/or maintenance revenue is generated by AP from the user count increase or the update). PSC shall invoice AP for the Product and/or Maintenance Royalties owed to PSC under each order. REPORTING OF UPGRADES TO THE COVERED APPLICATION(S): In accordance with Section 4(f) of the Amendment, PSC is entitied to a Product Royalty payment on any license and maintenance revenue obtained by AP from upgrades to the Covered Applications, even if such upgrades do not involve upgrades to the Selected PSC Products. If AP performs an upgrade to a Covered Application(s) license which does not require an order for an upgrade to the Selected PSC Products, and license and/or maintenance revenue is generated from such upgrade, AP shall immediately report to PSC the following information regarding the upgrade to the Covered Application(s) license: customer name, location, PSC serial number(s), PSC Product Royalty and Maintenance Royalty in accordance with Sections 4(d) and 4(e)(ii) of the Amendment (if additional license and/or maintenance revenue is generated by AP from the upgrade). Upon receipt of the report from AP, PSC shall invoice AP for the Product and/or Maintenance Royalties owed to PSC in connection with each reported upgrade. PAYMENT OF INVOICES: AP shall pay all invoices within thirty (30) days of the invoice date provided AP meets PSC's credit requirements. Otherwise, payment shall be made in advance or on a C.O.D. basis. Interest shall accrue on any delinquent amounts owed by AP for PSC products at the lesser of eighteen percent (18%) per annum or the maximum rate permitted by applicable usury law. INSTALLATIONS IN PSC SUBSIDIARY COUNTRIES: The ordering, payment and reporting obligations shall be the same as those set forth above, except that all orders for Selected PSC Products to be installed in a local PSC subsidiary country shall be placed with the local 28 PSC subsidiary, all upgrade reports delivered to the local PSC subsidiary, and all invoices generated by the local PSC subsidiary. AP shall make all payments to the local PSC subsidiary in the currency specified in the invoice. INSTALLATIONS OUTSIDE OF NORTH AMERICA AND OUTSIDE OF A PSC SUBSIDIARY COUNTRY: For AP customer installation locations outside of North America and outside a PSC subsidiary location, AP shall have the option of: (a) ordering Selected PSC Products from PSC under the special royalty arrangements set forth in the Amendment and this Second Amendment by following the ordering, payment and reporting obligations described above for installations in North America, or (b) ordering the Selected PSC Products from a local PSC distributor. If AP elects to order the Selected PSC Products through a PSC distributor, then such order shall be subject to the PSC distributor's then-current pricing and shall not be subject to the special terms and conditions set forth in the Amendment and this Second Amendment. g. Section 8 of the Amendment specifies the conversion options available for AP's existing customers who have purchased PROGRESS-based Symix applications which incorporate PROGRESS Version 6 or an earlier PROGRESS version and who desire to upgrade to the Covered Applications including the Selected PSC Products. The terms and conditions set forth in Section 8 shall remain the same, except that, for purpose of clarification, the one hundred and fifty dollars ($150.00) per user conversion fee referenced in Section 8 of the Amendment shall be calculated in U.S. dollars regardless of the installation location. h. Section 11 of the Amendment specifies the term of the Agreement and the Amendment. The Agreement is scheduled to terminate as of July 1, 1998, and pursuant to the terms and conditions of Section 11 of the Amendment, the Amendment would automatically terminate upon termination of the Agreement. The term of the Agreement shall be extended on an indefinite basis subject to termination pursuant to Article 10 of the Agreement. Except as otherwise specified in this paragraph 2(h), the terms and conditions of Section 11 of the Amendment shall continue in full force and effect. i. Exhibit A of the Amendment was supposed to list the PSC products included in the definition of Selected PSC Products; however, at the time the Amendment was mutually-executed, the list of Selected PSC Products was included in Exhibit B rather than Exhibit A. Thus, all references Selected PSC Products in the Amendment and this Second Amendment shall mean the PSC products listed in Exhibit B to the Amendment. 29 3. AP agrees that all Selected PSC Product licenses delivered by AP to AP customers shall be in compliance with all applicable laws concerning the exporting, importing and re-exporting of products as referenced in the attachment hereto entitied "Restricted Country Groups". 4. PSC shall provide AP with a master copy of generally available evaluation versions of the Selected PSC products on all available operating platforms, and shall grant AP a license to copy and distribute such evaluation versions of the Selected PSC products to AP customers in combination with an evaluation version of the Covered Applications subject to the following terms and conditions: a. AP must display an evaluation agreement in a prominent location in the packaging and/or the installation routines, said evaluation agreement including terms and conditions substantially similar to those set forth in PSC's standard form of evaluation license agreement attached hereto. Such evaluation agreement between AP and AP's customer shall in any event contain the following terms and conditions: (i) warranty and liability limitations, confidentiality obligations and limitations on copying, modifying, reverse engineering, or altering the evaluation software, which are no less restrictive than those set forth in PSC standard evaluation agreement attached hereto, with all such terms and conditions applying with the same force and effect for the benefit of AP's suppliers; (ii) an express provision notifying the AP customer that the evaluation software may contain a disabling function triggered automatically upon expiration of the evaluation license period; (iii) a provision specifying that the evaluation software should not be used in connection with AP customer's regular data processing activities; and (iv) a provision stating that title to software products of AP's supplier, including patents, copyrights and property rights applicable thereto, shall at all times remain solely and exclusively with such supplier; b. AP shall maintain sole control over all copies of the master media and shall not release any such copies to any other party, including, but not limited to, AP's authorized distributors and replication companies; c. AP shall indemnify, defend and hold PSC, and its officers, directors, employees and agents harmless from and against any costs, damages, and expenses, including but not limited to reasonable attorney's fees, resulting from any demand, claim, or cause of action against PSC arising out of AP's distribution of the evaluation version of the Selected PSC Products to AP customers; and 30 d. Following the termination of this Second Amendment, AP shall immediately return to PSC all master copies of the evaluation software for the Selected PSC Products. 5. Exhibit B to the Amendment shall be deemed to be updated to include AP's SyteWeb module which is an add-on module to AP's SyteLine application (the SyteLine application is already listed in Exhibit B and included in the definition of Covered Application). For new Covered Application licenses including the SiteWeb application or existing Covered Application licenses where the Site Web application is provided as an add-on module, AP may include a WebSpeed transaction server license for 5 concurrent agents, subject to payment of license and maintenance royalties on the total sales price for SiteWeb application in accordance with the terms and conditions of the Amendment and this Second Amendment. Any increases to the concurrent agent count for the WebSpeed transaction server licenses shall be subject to PSC's then-current standard license and maintenance fees, less then applicable AP discounts. 6. The term of this Second Amendment shall commence as of the Effective Date defined above, and shall continue in force until the termination of the Amendment pursuant to Section 11 of the Amendment (as modified by Section 2(h) above). 7. Except as may be modified or amended by this Second Amendment, the terms and conditions of the Agreement (as previously amended by the Amendment) shall remain in effect until the termination of the Agreement. No other modifications or additions are made to the Agreement. The Agreement, Amendment, and this Second Amendment constitute the entire agreement between the parties with respect to the subject matter hereof. In the event of conflict among the terms and conditions of the Agreement, the Amendment, or this Second Amendment, the order of precedence shall be: first, this Second Amendment, second, the Amendment, and third and finally, the Agreement. IN WITNESS WHEREOF, this Second Amendment has been executed under seal for and on behalf of each of the parties hereto by their duly authorized representative as of the date first set forth above. PROGRESS SOFTWARE CORPORATION SYMIX COMPUTER SYSTEMS, INC. By: /s/ David Vesty By: /s/ Lawrence DeLeon ---------------------------- ------------------------------- Name: David Vesty Name: Lawrence DeLeon ---------------------------- ------------------------------- Title: Vice President Title: CFO ---------------------------- ------------------------------- 31 EX-10.(J) 8 EXHIBIT 10(J) EXHIBIT 10(j) TO SYMIX SYSTEMS, INC. 1998 FORM 10-K SUMMARY OF BONUS PLAN The executive officers named in the Symix Systems, Inc. ("Symix" or the "Company") Annual Report on Form 10-K for its fiscal year ended June 30, 1998 and other management employees of Symix ("Participants") participate in compensation plans based upon the performance of Symix. Annual target bonuses are established by the Symix Compensation Committee for executive officers and by executive officers for all other Participants. Total targeted compensation is determined based on average compensation (base compensation plus bonus) levels for the industry. Under the Company's fiscal year 1999 plan (the "Plan"), a Participant can earn a bonus based upon the performance of Symix as reflected by Symix's earnings per share and revenue achievements in relation to its targeted performance. Bonuses for revenue achievement are paid quarterly based upon year-to-date performance. Quarterly eligible components are pro -rated against targeted annual objectives. Bonuses are based on formulas which provide larger bonuses for higher earnings per share and/or revenue achievement. The revenues for a quarter and the annual earnings per share must be at least ninety percent (90%) of target before any bonuses are earned. Variable components of the compensation plan are self-correcting to reflect over or under achievement on a quarterly bonus. A maximum of 200% of the targeted bonus based on earnings per share and revenue objectives is payable under the compensation plans in the event actual performance of the Company exceeds 150% of targeted performance. In addition, individual bonus plans may contain other variable components related to management objectives, operating margins, and market or geographic revenue targets. The Company's Chief Executive Officer is not a participant in the Plan. 32 EX-10.(U) 9 EXHIBIT 10(U) EXHIBIT 10(u) TO SYMIX SYSTEMS, INC. 1998 FORM 10-K THIRD AMENDMENT TO LOAN AGREEMENT AMONG SYMIX SYSTEMS, INC. and SYMIX COMPUTER SYSTEMS, INC. AND BANK ONE, NA DATED AS OF MAY 20, 1996 THIS THIRD AMENDMENT ("Third Amendment") is dated as of June 1, 1998, between SYMIX SYSTEMS, INC., an Ohio corporation ("SSI") and SYMIX COMPUTER SYSTEMS, INC., an Ohio corporation ("SCSI" and, collectively with SSI, the "Companies") and BANK ONE, NA, a national association ("Bank One"). WITNESSETH: WHEREAS, the Companies and Bank One, parties to that certain Loan Agreement dated as of May 20, 1996, amended by First Amendment dated as of August 13, 1997 and further amended by Second Amendment dated as of March 4, 1998 (the "Agreement"), have agreed to amend the Agreement on the terms and conditions hereinafter set forth. Terms not otherwise defined herein are used as defined in the Agreement as amended hereby. NOW, THEREFORE, the Companies and Bank One hereby agree as follows: SECTION 1. AMENDMENT OF THE AGREEMENT. The Agreement is, effective the date hereof, hereby amended as follows: 1.1. Section 1.1.1 shall be amended and restated in its entirety as follows: 1.1.1. AMOUNT. Bank One hereby agrees to lend the Borrowers the maximum aggregate amount of Fifteen Million Dollars ($15,000,000) in the form of revolving credit loans under the Revolving Credit Notes in the maximum collective amount of Fifteen Million Dollars ($15,000,000), minus the drawn or undrawn principal amount of any letter of credit or other independent undertaking issued by Bank One for the account of the Borrowers (the "Credit Commitment"). 1.2. Section 1.1.2 shall be amended and restated in its entirety as follows: 1.1.2. DISBURSEMENTS. The Companies shall execute and deliver to Bank One the amended and restated revolving credit note in the form of Exhibit A-4 attached hereto (the "$13,000,000 Revolving Credit Note") and the Borrowers shall execute and deliver to Bank One the revolving credit note in the form of Exhibit A-5 attached hereto (the "$2,000,000 Revolving Credit Note" and, collectively with the $13,000,000 Revolving Credit Note, the "Revolving Credit Notes"). Bank One may make disbursements to the Borrowers 33 from time to time in principal amounts at any one time outstanding up to an amount that equals the lesser of (a) the Credit Commitment or (b) the Borrowing Base. Subject to the terms and conditions of the Agreement, the Borrowers may borrow, repay and reborrow loans under the Revolving Credit Notes from Bank One at any time or from time to time, without penalty, from the date of the Agreement until the earlier of (a) March 31, 2001 or (b) the date amounts owing hereunder or under the Revolving Credit Notes become due and payable, whether through acceleration or any other cause. 1.3. In Section 1.1.4(a) and (b) and in Section 1.2.4(a) and (b), the word "month" shall be deleted and the word "quarter" shall be inserted in its place each time it is used. In addition, throughout Section 1.1.4, the words "October 31, 1999" shall be deleted and the words "March 31, 2001" shall be inserted in their place. 1.4. In Section 1.1.4(b), the words "two hundred (200) basis points" shall be deleted and the words "one hundred seventy-five (175) basis points" shall be inserted in their place. 1.5. Section 1.1.4(c) shall be amended and restated in its entirety as follows: LEVERAGE BASED PRICING. If, at the end of any calendar quarter, the Leverage Ratio is less than or equal to 1.5 to 1.0 and greater than 1.0 to 1.0, the interest rate for the succeeding calendar quarter shall be adjusted to, as appropriate, either the Prime Rate minus one-eighth of one percent (0.125%) or one hundred fifty (150) basis points in excess of the Benchmark Rate. If, at the end of any calendar quarter, the Leverage Ratio is less than or equal to 1.0 to 1.0, the interest rate for the succeeding calendar quarter shall be adjusted to, as appropriate, either the Prime Rate minus one-fourth of one percent (0.250%) or one hundred twenty-five (125) basis points in excess of the Benchmark Rate. 1.6. In Section 1.1.5, the fraction "three-eighths percent (3/8%)" shall be deleted and replaced with "one-fourth percent (1/4%)" and the words "payable quarterly commencing on June 29, 1996" shall be deleted and the words "payable monthly commencing on June 30, 1998" shall be inserted in their place. In addition, the following shall be added at the end of the first sentence of Section 1.1.5: "; PROVIDED, HOWEVER, THAT THE facility fee rate shall be reduced from one-quarter percent (1/4%) to one-eighth percent (1/8%) if the Companies usage of the Revolving Credit Note averages more than $7,500,000 for each day during the month." 1.7. Section 1.2 shall be deleted in its entirety. 1.8. In Section 4.1, the words "Audited Consolidated Financial Statements" shall be deleted and the words "Audited Consolidated and Consolidating Financial Statements" shall be inserted in their place. 34 1.9. In Section 4.2, the words "Consolidated Financial Statements" shall be deleted and the words "Consolidated and Consolidating Financial Statements" shall be inserted in their place. 1.10. The following shall be added to the end of Section 4.3: The Chief Financial Officer of SSI shall deliver the Covenant Compliance Certificate to Bank One (in the form attached hereto as Exhibit 4.3) within 30 days of the end of each fiscal quarter. 1.11. A new Section 4.18 shall be added to the Agreement as follows: 4.18. ACCOUNTS RECEIVABLE REPORTING. SCSI will furnish to Bank One as soon as practicable after the end of each calendar month, and in any event within 10 days thereafter, a summary Accounts aging report in a format acceptable to Bank One and a Borrowing Base Certificate for such month. From time to time, SCSI shall be required to deliver detailed aging schedules, trial balances, test verifications of Accounts and other reports reasonably requested by Bank One. 1.12. A new Section 4.19 shall be added to the Agreement as follows: 4.19. RETENTION OF CERTAIN OFFICERS. The Companies shall retain the services of Stephen A. Sasser and Lawrence W. DeLeon, or persons of similar experience and reputation to serve in such office. 1.13. A new Section 4.20 shall be added to the Agreement as follows: 4.20. PLEDGE OF INTERCOMPANY NOTE. The Companies shall cause all the Non-Obligor Subsidiaries to execute an intercompany promissory note that evidences all borrowings the Non-Obligor Subsidiaries make from the Companies of funds borrowed under the $13,000,000 Revolving Credit Note, and the Companies shall deliver such intercompany promissory note to Bank One as security for the amounts due hereunder and under the Revolving Credit Notes. 1.14. Section 5.1 shall be amended and restated in its entirety as follows: 5.1. ENCUMBERING ASSETS. Companies and Subsidiaries shall not create, incur, assume or permit to continue any mortgage, pledge, encumbrance, lien or charge of any kind upon or security interest in any of their or any Subsidiary's property or assets, whether now owned or hereafter acquired, except (i) the Pledge Agreement contemplated hereby (as set forth in Section 6.4 of the Third Amendment to Loan Agreement dated June 1, 1998), 35 (ii) purchase money liens for fixed assets not to exceed an aggregate amount of Three Million Dollars ($3,000,000), and (ii) Permitted Liens as defined herein. Companies and Subsidiaries shall not grant a "negative pledge" of assets, exemplified by the preceding sentence, to any Person other than Bank One. 1.15. Section 5.2 shall be amended and restated in its entirety as follows: 5.2. INCURRING OTHER DEBT. Companies and Subsidiaries shall not create, incur, assume or suffer to exist any Funded Debt or Current Debt except: (1) debt represented by the Notes; (2) other indebtedness to Bank One; (3) purchase money debt for fixed assets or Seller financing of acquisitions which shall not exceed an aggregate amount of Three Million Dollars ($3,000,000); and (4) unsecured indebtedness to trade creditors arising out of the ordinary course of Companies' and Subsidiaries' business. 1.16. Section 5.9 shall be amended and restated in its entirety as follows: 5.9. AMOUNT OF CONSOLIDATED TANGIBLE NET WORTH. Companies shall not permit Consolidated Tangible Net Worth to be less than: (a) $11,500,000 from the date of the Third Amendment until June 29, 1998; (b) $13,500,000 from June 30, 1998 until June 29, 1999; (c) $17,500,000 from June 30, 1999 until June 29, 2000; and (d) $20,000,000 from and after June 30, 2000. 1.17. Section 5.10 shall be amended and restated in its entirety as follows: 5.10. LEVERAGE RATIO. Companies shall not permit the Consolidated Leverage Ratio to exceed the ratio of: (a) 3.00 to 1.00 from the date of the Third Amendment to June 29, 1998; (b) 2.50 to 1.00 from June 30, 1998 until June 29, 1999; and (c) 2.00 to 1.00 from June 30, 1999 and thereafter. 1.18. Section 5.12 shall be amended and restated in its entirety as follows: 5.12. CURRENT RATIO. Companies shall not permit the Consolidated Current Ratio to be less than: 36 (a) 1.25 to 1.00 from the date of the Third Amendment until December 31, 1998; and (b) 1.50 to 1.00 thereafter. 1.19 A new Section 5.13 shall be added to the Agreement as follows: 5.13. FUNDING. The Companies shall not use the proceeds of the Revolving Credit Notes to fund any Non-Obligor Subsidiary acquisitions or non-operational purposes or obligations other than operating cash flow of such Non-Obligor Subsidiary. 1.20. A new Section 5.14 shall be added to the Agreement as follows: 5.14. ROYALTY AGREEMENTS. The form of royalty agreement in place between the Companies and each of the Subsidiaries is attached hereto as Exhibit 5.14. The Companies shall not materially change, amend or modify this royalty agreement or any term thereof without the prior written consent of Bank One. After the occurrence of an Event of Default hereunder, the Companies shall enforce each royalty agreement to require payment to be made by each Subsidiary, as long as the Subsidiary has positive net worth, calculated without intercompany liabilities. 1.21. In Section 8, the definition of "Current Assets," "Current Liabilities", "Debt Service Coverage Ratio", "Guarantors" and "Revolving Credit Note" shall be amended and restated in its entirety as follows: "Current Assets" and "Current Liabilities" shall mean the current assets and current liabilities of the companies, all determined in accordance with generally accepted accounting principles applied on a consistent basis; PROVIDED, HOWEVER, that "Current Assets" shall exclude all prepaid items and "Current Liabilities" shall include all deferred revenue and the current portion of deferred taxes. "Debt Service Coverage Ratio" shall mean the ratio of (a) net income after tax plus depreciation and amortization plus interest expense minus capitalized software minus capital expenditures to (b) current maturities of long term debt plus interest expense, all determined in accordance with generally accepted accounting principles applied on a consistent basis. The current maturities of long term debt under the Revolving Credit Note shall be determined on a pro forma basis assuming that the then-current principal balance of the Revolving Credit Note would be amortized, on a straight line basis, over 60 months. 37 "Guarantors" shall mean Pritsker Corporation, Symix Computer Systems (Canada), Inc., Symix (UK) Ltd., Symix Computer Systems (UK) Ltd., Symix Systems B.V. and Symix Computer Systems (Mexico) S. De R.L. De C.V. "Revolving Credit Notes" is defined in Section 1.1.2. 1.22. The following definitions shall be added to Section 8: "Account" means and includes all accounts (whether or not earned by performance), contract rights, chattel paper, instruments, documents, general intangibles (including, without limitation, tax refunds and tax refund claims) and all other forms of obligations owing to either of the Companies, whether secured or unsecured, whether now existing or hereafter created, by account debtors whose principal place of business is the United States of America, and all guaranties and other security therefor, all merchandise returned to or repossessed by either of the Companies, and all rights of stoppage in transit and all other rights and remedies of an unpaid vendor, lienor or secured party. "Borrowers" means the Companies, Symix Systems Ontario, Inc., an Ontario corporation and Visual Applications Software, Inc., an Ontario corporation. "Borrowing Base" means the Net Value of Eligible Accounts. "Borrowing Base Certificate" means a certificate, in the form required by Bank One, signed by a duly authorized officer of the Companies, that computes the Borrowing Base, together with any memo of returns and credits, remittance report, schedule of Accounts and such other supporting documents and materials which Bank One, in its sole discretion, may require to be delivered with such certificate. "Eligible Account" means each Account of SCSI which, at the time of determination, meets all the following qualifications: (a) SCSI has lawful and absolute title to such Account, and such Account is not subject to any lien charge or encumbrance ("Lien") whatsoever; (b) SCSI has the full unqualified right to grant a Lien in such Account to Bank One; (c) the Account is evidenced by an invoice issued to the proper account debtor (a "Customer") and is not evidenced by any instrument or chattel paper; (d) the Account arose from the sale of goods or services by SCSI in the ordinary course of business, which goods or services have been shipped or delivered to the Customer under such Account; and such sale was an absolute sale and not on consignment, approval or a sale-and-return basis; 38 (e) no notice of the bankruptcy, receivership, reorganization or insolvency of the Customer has been received by SCSI; (f) the Account is a valid, legally enforceable obligation of the Customer, and is not subject to any dispute, offset, counterclaim, or other defense on the part of such Customer; (g) the terms of the Account require payment no more than 120 days from the date an invoice is issued and the Account is less than 121 days past due; (h) the Customer on the Account is not (1) the United States of America or any foreign government, or any department, agency or instrumentality thereof (unless SCSI and Bank One shall have fully complied with the Assignment of Claims Act of 1940, as amended, or any other applicable law governing government Accounts, with respect to such Account), (2) SCSI, or any affiliated company or Subsidiary, (3) located outside the United States, or (4) indebted to SCSI in an amount, which when added to all other amounts then owed to SCSI by any affiliate of such Customer, exceeds 50% of the amount of all then outstanding Eligible Accounts; (i) SCSI is not indebted to the Customer on the Account (or any affiliate of such Customer) for any goods provided or services rendered to SCSI; (j) the Account is not owing by any Customer with 50% or more of the value of its outstanding Accounts not qualifying as Eligible Accounts; (k) the Account is an Account representing all or part of the sales price of merchandise, insurance and service within the meaning of Section 3(c)(5) of the Investment Company Act of 1940, as amended; (l) a purchase of the Account would constitute a "current transaction" within the meaning of Section 3(a)(3) of the Securities Act of 1933, as amended; and (m) the Account is denominated and payable only in United States dollars in the United States. "Net Value of Eligible Accounts" means (a) 85% of the lower of the book value or collectible value of Eligible Accounts, as reflected in the Borrower's books in accordance with GAAP, net of all credits, discounts and allowances (including all unissued credits in the form of a competitive allowance or otherwise). "Non-Obligor Subsidiary" means Symix Asia Company Ltd., Symix Computer Systems (Hong Kong) Ltd., Symix Computer Systems (Singapore) Pte. Ltd., Symix Computer Systems (Australia) Pty. Ltd., Symix Computer Systems (Malaysia) Sdn Bhd., Symix New Zealand, Ltd., Symix Italia, S.p.A. and any other Subsidiary created after January 31, 1998 that does not have a tangible net worth in excess of $250,000. 39 SECTION 2. GOVERNING LAW. This Third Amendment shall be governed by and construed in accordance with the laws of the State of Ohio. SECTION 3. COSTS AND EXPENSES. All fees, costs or expenses, including reasonable fees and expenses of outside legal counsel, incurred by Bank One in connection with either the preparation, administration, amendment, modification or enforcement of this Third Amendment shall be paid by the Companies on request, PROVIDED, HOWEVER, that Bank One and its outside legal counsel will provide the Companies good faith estimates of the cost of legal services in connection with the amendment or modification of this Third Amendment. SECTION 4. COUNTERPARTS. This Third Amendment may be executed in any number of counterparts and by different parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which when taken together shall constitute one and the same agreement. SECTION 5. CONFESSION OF JUDGMENT. Each Company hereby authorizes any attorney at law to appear for the Company, in an action on this Third Amendment, at any time after the same becomes due, as herein provided, in any court of record in or of the State of Ohio, or elsewhere, to waive the issuing and service of process against the Company and to confess judgment in favor of the holder of this Third Amendment or the party entitled to the benefits of this Third Amendment against the Company for the amount that may be due, with interest at the rate herein mentioned and costs of suit, and to waive and release all errors in said proceedings and judgment, and all petitions in error, and right of appeal from the judgment rendered. No judgment against one Company shall preclude Bank One from taking a confessed judgment against the other Company. SECTION 6. CONDITIONS PRECEDENT. Simultaneously with the execution hereof, Bank One shall receive all of the following, each dated the date hereof, in form and substance satisfactory to Bank One: 6.1. Certified copies of (a) the resolutions of the board of directors of each Company evidencing authorization of the execution, delivery, and performance of this Third Amendment, the Revolving Credit Note, the other documents set forth in this Section 6 and such other instruments and agreements contemplated thereby; and (b) all documents evidencing other necessary corporate action and governmental approvals, if any, with respect to this Third Amendment or the transactions contemplated hereby. 6.2. The $13,000,000 Revolving Credit Note, and the $2,000,000 Revolving Credit Note, each dated as of the date hereof, issued by the Companies and the Borrowers, respectively. 6.3. Consents of each of the Guarantors accompanied by (a) certified copies of the resolutions of each Guarantor's board of directors evidencing the authorization of the execution, delivery and performance of such consent and (b) an incumbency certificate of such Guarantor. 40 6.4. The Pledge Agreement between the Companies and Bank One, dated as of the date hereof. 6.5. The Assignment of Intercompany Note, dated as of the date hereof. 6.6. A closing fee in the amount of $37,500. 6.7. Such other documents as Bank One may, in its reasonable discretion, so require. SECTION 7. BANK ONE CONSENT. Bank One hereby consents to the Companies entering into the Agreement with Mitsui dated June 5, 1998. SECTION 8. REAFFIRMATION OF REPRESENTATIONS AND WARRANTIES; NO DEFAULTS. The Companies hereby expressly acknowledge and confirm that the representations and warranties of the Company set forth in Section 3 of the Agreement are true and accurate on this date with the same effect as if made on and as of this date; that no financial condition or circumstance exists which would inevitably result in the occurrence of an Event of Default under Section 6 of the Agreement; and that no event has occurred or no condition exists which constitutes, or with the running of time or the giving of notice would constitute an Event of Default under Section 6 of the Agreement. SECTION 9. REAFFIRMATION OF DOCUMENTS. Except as herein expressly modified, the parties hereto ratify and confirm all of the terms, conditions, warranties and covenants of the Agreement, and all security agreements, pledge agreements, mortgage deeds, assignments, subordination agreements, or other instruments or documents executed in connection with the Agreement, including provisions for the payment of the Notes pursuant to the terms of the Agreement. This Third Amendment does not constitute the extinguishment of any obligation or indebtedness previously incurred, nor does it in any manner affect or impair any security interest granted to Bank One, all of such security interests to be continued in full force and effect until the indebtedness described herein is fully satisfied. The Companies have executed this Third Amendment as of the date first above written. SYMIX SYSTEMS, INC. SYMIX COMPUTER SYSTEMS, INC. By /s/ Lawrence W. DeLeon By: /s/ Lawrence W. DeLeon ---------------------------------- ------------------------------------ Name: Lawrence W. DeLeon Name: Lawrence W. DeLeon Its: Vice President, Chief Financial Its: Vice President, Chief Officer and Secretary Financial Officer and Secretary - ------------------------------------------------------------------------------- WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE - ------------------------------------------------------------------------------- 41 - ------------------------------------------------------------------------------- AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. - ------------------------------------------------------------------------------- BANK ONE, NA By: /s/ Kimberley C. Currie -------------------------------------- Name: Kimberley C. Currie Its: Vice President 42 Exhibit A-4 AMENDED AND RESTATED REVOLVING CREDIT NOTE - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- $13,000,000 Columbus, Ohio June 1, 1998 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- On or before March 31, 2001, for value received, the undersigned, SYMIX SYSTEMS, INC., an Ohio corporation and SYMIX COMPUTER SYSTEMS, INC., an Ohio corporation (individually, a "Company" and, collectively, the "Companies") hereby jointly and severally promise to pay to the order of Bank One, NA, a national association (the "Bank") or its assigns, as further provided herein, the principal amount of Thirteen Million Dollars ($13,000,000) or, if such principal is less, the aggregate unpaid principal amount of all loans made by the Bank to the Companies pursuant to the Credit Commitment under the Agreement referred to in Section 1 hereof, together with interest on the unpaid principal balance from time to time outstanding hereunder until paid in full at the rates determined in accordance with the provisions of Section 1.1.4 of the Agreement, payable as set forth in the Agreement. Both principal and interest are payable in federal funds or other immediately available money of the United States of America at the Main Office of the Bank, 100 East Broad Street, Columbus, Ohio 43271-0170. This Amended and Restated Revolving Credit Note amends and restates in its entirety the Amended and Restated Revolving Credit Note issued to the Bank by the Companies dated March 4, 1998, the Amended and Restated Revolving Credit Note issued to the Bank by the Companies dated August 13, 1997 and the Revolving Credit Note issued to the Bank by the Companies dated May 20, 1996. SECTION 1. LOAN AGREEMENT. This Amended and Restated Revolving Credit Note is the $13,000,000 Revolving Credit Note referred to in the Loan Agreement dated as of May 20, 1996 as amended by First Amendment dated August 13, 1997, Second Amendment dated March 4, 1998 and Third Amendment dated as of the date hereof (the "Agreement") between the Companies and the Bank, as the same may be amended, modified or supplemented from time to time, which Agreement, as amended, is incorporated by reference herein. All capitalized terms used herein shall have the same meanings as are assigned to such terms in the Agreement. This Amended and Restated Revolving Credit Note is entitled to the benefits of and is subject to the terms, conditions and provisions of the Agreement. The Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, and also for repayments and reborrowings on account of the principal hereof prior to maturity upon the terms, conditions and provisions specified. SECTION 2. WAIVER OF PRESENTMENT. The Companies hereby waive presentment, demand, notice, protest, notice of protest, notice of dishonor and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note. SECTION 3. CONFESSION OF JUDGMENT. The Companies hereby authorize any attorney at law to appear for the Companies, in an action on this Note, at any time after the same becomes 43 due, as herein provided, in any court of record in or of the State of Ohio, or elsewhere, to waive the issuing and service of process against the Companies and to confess judgment in favor of the holder of this Note against the Companies for the amount that may be due, with interest at the rate herein mentioned and costs of suit, and to waive and release all errors in said proceedings and judgment, and all petitions in error, and right of appeal from the judgment rendered. No judgment against one Company shall impair the Bank's right to receive a confession of judgment against the remaining Company. SECTION 4. WAIVER OF JURY TRIAL. THE BANK AND THE COMPANIES HEREBY VOLUNTARILY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE BANK AND THE COMPANIES ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANIES AND THE BANK IN CONNECTION WITH ANY LOAN DOCUMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR THE TRANSACTIONS RELATED HERETO OR THERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO ENTER INTO THE FINANCING TRANSACTIONS WITH COMPANIES. IT SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY THE BANK'S ABILITY TO PURSUE ITS REMEDIES INCLUDING, BUT NOT LIMITED TO, ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN OR IN ANY OTHER DOCUMENT RELATED HERETO. SECTION 5. NATURE OF OBLIGATIONS. The obligations of the Companies hereunder (the "Obligations") are joint and several and a separate action or actions may be brought and prosecuted against either Company regardless of whether any action is brought against the other Company or whether the other Company is joined in any such action(s). The Companies may be sued together or either of them may be sued separately without first, contemporaneously or subsequently, suing the other. The Bank may compromise with either of the Companies for less than all of the amounts owing hereunder and under the Loan Documents and release either of the Companies from all further liability to the Bank for the amounts owing hereunder and under the Agreement all without impairing the rights of the Bank to demand and collect the balance of the amounts owing hereunder and under the Agreement from the other Company not so sued or released. There shall be no duty or obligation of the Bank to exhaust any remedy in law or in equity against either Company before bringing suit or instituting proceedings of any kind against the other Company. The Companies and all sureties, endorsers and guarantors of this Amended and Restated Revolving Credit Note (a) waive demand, presentment for payment, notice of nonpayment, protest, notice of protest and all other notices, filing of suit and diligence in collecting this Amended and Restated Revolving Credit Note, (b) agree to any release of any party primarily or secondarily liable thereon, and (c) consent to any extension or postponement of time of payment of this Amended and Restated Revolving Credit Note and to any other indulgence with respect hereto without notice thereof to any of them. The Obligations hereunder are irrevocable and may only be discharged by the full and timely payment of the amounts owing by the Companies hereunder and thereunder and will not be discharged, released, altered or modified by any other action or omission of any Person, on any 44 one or more occasions, including, without limitation (a) the amendment, modification or waiver of the Agreement or any performance due hereunder or thereunder, (b) the impairment, grant, exchange, release, surrender or disposal of any collateral, (c) the release or discharge of a Company's Obligations, (d) the existence or assertion by either Company of any personal defense to its obligations including, without limitation, bankruptcy, (e) the exercise, pursuit or waiver of any right or remedy that the Bank may have at any time, (f) the Bank's failure to give notice to either Company of the occurrence of any default in the Company's performance hereunder or under the Agreement, (g) the taking or omission to take any action hereunder or under the Agreement, (h) the Bank's release or discharge of any guaranty or accommodation with respect to the Obligations, (i) the impossibility or illegality of performance by the Companies or (j) any change in the corporate organization of the Bank. If either Company at any time shall pay any sums on account of any Obligation or take any other action in performance of any Obligation, such Company shall be subrogated to the rights, powers, privileges and remedies of the Bank in respect of such Obligation; PROVIDED that all such rights of subrogation and all claims and indebtedness arising therefrom shall be, and the Company hereby agrees that the same are, and shall be at all times, in all respects subordinate and junior to the Banks claims for all the Obligations, and PROVIDED, FURTHER, that the Company hereby agrees that it shall not seek to exercise any such rights of subrogation, reimbursement, exoneration, or indemnity whatsoever or any rights of recourse to any security for any of the Obligations unless or until all the Obligations shall have been indefeasibly paid in full. The waivers, representations, warranties, covenants and agreements contained in this paragraph are for the benefit of and may be enforced by the Bank and such Company and their respective successors and assigns, including without limitation any trustee in bankruptcy of such Company. 45 - ------------------------------------------------------------------------------- WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. - -------------------------------------------------------------------------------
SYMIX SYSTEMS, INC. SYMIX COMPUTER SYSTEMS, INC. By /s/ Lawrence W. DeLeon By: /s/ Lawrence W. DeLeon ------------------------------------- ---------------------------------- Name: Lawrence W. DeLeon Name: Lawrence W. DeLeon Its: Vice President, Chief Financial Its: Vice President, Chief Officer and Secretary Financial Officer and Secretary
46 EXHIBIT A-5 REVOLVING CREDIT NOTE - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- $2,000,000 Columbus, Ohio June 1, 1998 - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- On or before March 31, 2001, for value received, the undersigned, SYMIX SYSTEMS, INC., an Ohio corporation ("SSI"), SYMIX COMPUTER SYSTEMS, INC., an Ohio corporation ("SCSI"), SYMIX SYSTEMS ONTARIO, INC., an Ontario corporation ("SSO") and VISUAL APPLICATIONS SOFTWARE, INC., an Ontario corporation ("VAS") (individually, a "Borrower" and, collectively, the "Borrowers") hereby promise to pay to the order of Bank One, NA, a national association (the "Bank") or its assigns, as further provided herein, the principal amount of Two Million Dollars ($2,000,000) or, if such principal is less, the aggregate unpaid principal amount of all loans made by the Bank to the Borrowers pursuant to the Credit Commitment less any amounts loaned to SSI and SCSI (the "Companies") under the $13,000,000 Amended and Restated Revolving Credit Note dated as of the date hereof under the Agreement referred to in Section 1 hereof, together with interest on the unpaid principal balance from time to time outstanding hereunder until paid in full at the rates determined in accordance with the provisions of Section 1.1.4 of the Agreement, payable as set forth in the Agreement. Both principal and interest are payable in federal funds or other immediately available money of the United States of America at the Main Office of the Bank, 100 East Broad Street, Columbus, Ohio 43271-0170. Proceeds from borrowings under this Note are to be used solely to fund the operations of SS0 and VAS, whether borrowed by VAS, SSO or the Companies. SECTION 1. LOAN AGREEMENT. This Revolving Credit Note is the $2,000,000 Revolving Credit Note referred to in the Loan Agreement dated as of May 20, 1996 as amended by First Amendment dated August 13, 1997, Second Amendment dated March 4, 1998 and Third Amendment dated as of the date hereof (the "Agreement") between the Companies and the Bank, as the same may be amended, modified or supplemented from time to time, which Agreement, as amended, is incorporated by reference herein. All capitalized terms used herein shall have the same meanings as are assigned to such terms in the Agreement. This Revolving Credit Note is entitled to the benefits of and is subject to the terms, conditions and provisions of the Agreement. The Agreement, among other things, contains provisions for acceleration of the maturity hereof upon the happening of certain stated events, and also for repayments and reborrowings on account of the principal hereof prior to maturity upon the terms, conditions and provisions specified. SECTION 2. WAIVER OF PRESENTMENT. The Borrowers hereby waive presentment, demand, notice, protest, notice of protest, notice of dishonor and all other demands and notices in connection with the delivery, acceptance, performance and enforcement of this Note. SECTION 3. CONFESSION OF JUDGMENT. The Borrowers hereby authorize any attorney at law to appear for the Borrowers, in an action on this Note, at any time after the same becomes due, as herein provided, in any court of record in or of the State of Ohio, or elsewhere, to waive 47 the issuing and service of process against the Borrowers and to confess judgment in favor of the holder of this Note against the Borrowers for the amount that may be due, with interest at the rate herein mentioned and costs of suit, and to waive and release all errors in said proceedings and judgment, and all petitions in error, and right of appeal from the judgment rendered. No judgment against one Borrower shall impair the Bank's right to receive a confession of judgment against any of the remaining Borrowers. SECTION 4. WAIVER OF JURY TRIAL. THE BANK AND THE COMPANIES HEREBY VOLUNTARILY, IRREVOCABLY AND UNCONDITIONALLY WAIVE ANY RIGHT TO HAVE A JURY PARTICIPATE IN RESOLVING ANY DISPUTE, WHETHER SOUNDING IN CONTRACT, TORT, OR OTHERWISE, BETWEEN THE BANK AND THE COMPANIES ARISING OUT OF, IN CONNECTION WITH, RELATED TO, OR INCIDENTAL TO THE RELATIONSHIP ESTABLISHED BETWEEN THE COMPANIES AND THE BANK IN CONNECTION WITH ANY LOAN DOCUMENT EXECUTED OR DELIVERED IN CONNECTION HEREWITH OR THEREWITH OR THE TRANSACTIONS RELATED HERETO OR THERETO. THIS PROVISION IS A MATERIAL INDUCEMENT TO THE BANK TO ENTER INTO THE FINANCING TRANSACTIONS WITH COMPANIES. IT SHALL NOT IN ANY WAY AFFECT, WAIVE, LIMIT, AMEND OR MODIFY THE BANK'S ABILITY TO PURSUE ITS REMEDIES INCLUDING, BUT NOT LIMITED TO, ANY CONFESSION OF JUDGMENT OR COGNOVIT PROVISION CONTAINED HEREIN OR IN ANY OTHER DOCUMENT RELATED HERETO. SECTION 5. NATURE OF OBLIGATIONS. The obligations of the Borrowers hereunder (the "Obligations") are joint and several and a separate action or actions may be brought and prosecuted against any Borrower regardless of whether any action is brought against any other Borrower or whether the other Borrower is joined in any such action(s). The Borrowers may be sued together or either of them may be sued separately without first, contemporaneously or subsequently, suing the other. The Bank may compromise with any of the Borrowers for less than all of the amounts owing hereunder and under the Loan Documents and release any of the Borrowers from all further liability to the Bank for the amounts owing hereunder and under the Agreement all without impairing the rights of the Bank to demand and collect the balance of the amounts owing hereunder and under the Agreement from any other Borrower not so sued or released. There shall be no duty or obligation of the Bank to exhaust any remedy in law or in equity against any Borrower before bringing suit or instituting proceedings of any kind against any other Borrower. The Borrowers and all sureties, endorsers and guarantors of this Revolving Credit Note (a) waive demand, presentment for payment, notice of nonpayment, protest, notice of protest and all other notices, filing of suit and diligence in collecting this Revolving Credit Note, (b) agree to any release of any party primarily or secondarily liable thereon, and (c) consent to any extension or postponement of time of payment of this Revolving Credit Note and to any other indulgence with respect hereto without notice thereof to any of them. The Obligations hereunder are irrevocable and may only be discharged by the full and timely payment of the amounts owing by the Borrowers hereunder and thereunder and will not be discharged, released, altered or modified by any other action or omission of any Person, on any one or more occasions, including, without limitation (a) the amendment, modification or waiver of the Agreement or any performance due hereunder or thereunder, (b) the impairment, grant, 48 exchange, release, surrender or disposal of any collateral, (c) the release or discharge of a Borrower's Obligations, (d) the existence or assertion by any Borrower of any personal defense to its obligations including, without limitation, bankruptcy, (e) the exercise, pursuit or waiver of any right or remedy that the Bank may have at any time, (f) the Bank's failure to give notice to any Borrower of the occurrence of any default in any Borrower's performance hereunder or under the Agreement, (g) the taking or omission to take any action hereunder or under the Agreement, (h) the Bank's release or discharge of any guaranty or accommodation with respect to the Obligations, (i) the impossibility or illegality of performance by the Borrowers or (j) any change in the corporate organization of the Bank. If any Borrower at any time shall pay any sums on account of any Obligation or take any other action in performance of any Obligation, such Borrower shall be subrogated to the rights, powers, privileges and remedies of the Bank in respect of such Obligation; PROVIDED that all such rights of subrogation and all claims and indebtedness arising therefrom shall be, and the Borrower hereby agrees that the same are, and shall be at all times, in all respects subordinate and junior to the Banks claims for all the Obligations, and PROVIDED, FURTHER, that the Borrower hereby agrees that it shall not seek to exercise any such rights of subrogation, reimbursement, exoneration, or indemnity whatsoever or any rights of recourse to any security for any of the Obligations unless or until all the Obligations shall have been indefeasibly paid in full. The waivers, representations, warranties, covenants and agreements contained in this paragraph are for the benefit of and may be enforced by the Bank and such Borrower and their respective successors and assigns, including without limitation any trustee in bankruptcy of such Borrower. 49 The undersigned executed this Revolving Credit Note as of the day and year first set forth above.
SYMIX SYSTEMS ONTARIO, INC. VISUAL APPLICATIONS SOFTWARE, INC. By By: ------------------------------- ------------------------------ Name: Lawrence W. DeLeon Name: Lawrence W. DeLeon Its: Vice President, Chief Financial Its: Vice President, Chief Financial Officer and Secretary Officer and Secretary
- ------------------------------------------------------------------------------- WARNING - BY SIGNING THIS PAPER YOU GIVE UP YOUR RIGHT TO NOTICE AND COURT TRIAL. IF YOU DO NOT PAY ON TIME A COURT JUDGMENT MAY BE TAKEN AGAINST YOU WITHOUT YOUR PRIOR KNOWLEDGE AND THE POWERS OF A COURT CAN BE USED TO COLLECT FROM YOU REGARDLESS OF ANY CLAIMS YOU MAY HAVE AGAINST THE CREDITOR WHETHER FOR RETURNED GOODS, FAULTY GOODS, FAILURE ON HIS PART TO COMPLY WITH THE AGREEMENT, OR ANY OTHER CAUSE. - -------------------------------------------------------------------------------
SYMIX SYSTEMS, INC. SYMIX COMPUTER SYSTEMS, INC. By By: ------------------------------- ------------------------------ Name: Lawrence W. DeLeon Name: Lawrence W. DeLeon Its: Vice President, Chief Financial Its: Vice President, Chief Financial Officer and Secretary Officer and Secretary
50 Exhibit 4.3 [Compliance Certificate TO FOLLOW] 51 Exhibit 5.14 [Form of Royalty Agreement TO FOLLOW] 52 EX-21 10 EXHIBIT 21 EXHIBIT 21 TO SYMIX SYSTEMS, INC. 1998 FORM 10-K SUBSIDIARIES OF REGISTRANT SUBSIDIARIES OF REGISTRANT
NAME JURISDICTION % OWNERSHIP Symix Computer Systems, Inc. Ohio 100 Symix Systems, B.V. The Netherlands 100 Symix France, SA France 100 SUBSIDIARIES OF SYMIX COMPUTER SYSTEMS, INC. Symix Systems (Ontario) Inc. Canada 100 Symix Computer Systems Canada 100 (Canada) Inc. Symix Computer Systems (UK) The United Kingdom 100 Ltd. Symix Computer Systems Singapore 86.7 (Singapore) Pte. Ltd. Symix Computer Systems Mexico 100 (Mexico) S. De R.L. De C.V. 53 SUBSIDIARIES OF SYMIX SYSTEMS, B.V. Symix (U.K.) Ltd. The United Kingdom 100 Symix Systems GmbH Germany 100 Symix Italia S.r.l. Italy 95* - ------------- *Remaining 5% owned by Symix Systems, Inc. SUBSIDIARIES OF SYMIX SYSTEMS (ONTARIO) INC. Visual Applications Software, Canada 100 Inc. SUBSIDIARIES OF SYMIX SYSTEMS (SINGAPORE) PTE. LTD. Symix Asia Company Ltd. Thailand 100 Symix Computer Systems (Hong Hong Kong 100 Kong) Ltd. Symix Computer Systems Australia 100 (Australia) Pty. Ltd. Symix New Zealand Ltd. New Zealand 100 Symix Computer Systems Malaysia 100 (Malaysia) Sdn Bhd. 54
EX-23 11 EXHIBIT 23 EXHIBIT 23 TO SYMIX SYSTEMS, INC. 1998 FORM 10-K CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statements (Forms S-8 No. 33-40546, No. 33-45416, No. 33-73014, No. 33-73016, No. 333-660, No. 333-10631 and No. 333-10633 and Form S-3 No. 333-23385) of Symix Systems, Inc. dated June 25, 1991, January 30, 1992, December 16, 1993, December 16, 1993, January 29, 1996, August 22, 1996, August 22, 1996 and March 26, 1997, respectively, of our report dated July 21, 1998, with respect to the consolidated financial statements and the financial statement schedule included in this Annual Report (Form 10-K) of Symix Systems, Inc. Ernst & Young LLP Columbus, Ohio September 28, 1998 56 EX-24 12 EXHIBIT 24 EXHIBIT 24 TO SYMIX SYSTEMS, INC. 1998 FORM 10-K POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Symix Systems, Inc., an Ohio corporation which is about to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended June 30, 1998, hereby constitutes and appoints Stephen A. Sasser and Lawrence W. DeLeon, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign such Annual Report on Form 10-K, and to file the same with all exhibits and financial statements and schedules thereto, and other documents in connection therewith, including any amendment thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunder set his hand this 28th day of September, 1998. /s/ Lawrence J. Fox ---------------------------------------- Lawrence J. Fox Chairman of the Board, Chief Executive Officer and Director 56 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Symix Systems, Inc., an Ohio corporation which is about to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended June 30, 1998, hereby constitutes and appoints Lawrence J. Fox and Lawrence W. DeLeon, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign such Annual Report on Form 10-K, and to file the same with all exhibits and financial statements and schedules thereto, and other documents in connection therewith, including any amendment thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunder set his hand this 20th day of September, 1998. /s/ Stephen A. Sasser ----------------------------------- Stephen A. Sasser President, Chief Operating Officer and Director 57 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Symix Systems, Inc., an Ohio corporation which is about to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended June 30, 1998, hereby constitutes and appoints Lawrence J. Fox, Stephen A. Sasser and Lawrence W. DeLeon, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign such Annual Report on Form 10-K, and to file the same with all exhibits and financial statements and schedules thereto, and other documents in connection therewith, including any amendment thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunder set his hand this 18th day of September, 1998. /s/ John T. Tait ---------------------------------- John T. Tait Director 58 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Symix Systems, Inc., an Ohio corporation which is about to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended June 30, 1998, hereby constitutes and appoints Lawrence J. Fox, Stephen A. Sasser and Lawrence W. DeLeon, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign such Annual Report on Form 10-K, and to file the same with all exhibits and financial statements and schedules thereto, and other documents in connection therewith, including any amendment thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunder set his hand this 18th day of September, 1998. /s/ Duke W. Thomas ---------------------------------- Duke W. Thomas Director 59 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Symix Systems, Inc., an Ohio corporation which is about to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended June 30, 1998, hereby constitutes and appoints Lawrence J. Fox, Stephen A. Sasser and Lawrence W. DeLeon, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign such Annual Report on Form 10-K, and to file the same with all exhibits and financial statements and schedules thereto, and other documents in connection therewith, including any amendment thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunder set his hand this 28th day of September, 1998. /s/ Larry L. Liebert ---------------------------------- Larry L. Liebert Director 60 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer and/or director of Symix Systems, Inc., an Ohio corporation which is about to file with the Securities and Exchange Commission, under the provisions of the Securities Exchange Act of 1934, as amended, an Annual Report on Form 10-K for the fiscal year ended June 30, 1998, hereby constitutes and appoints Lawrence J. Fox, Stephen A. Sasser and Lawrence W. DeLeon, and each of them, his true and lawful attorneys-in-fact and agents with full power of substitution and resubstitution, for him and in his name, place and stead in any and all capacities, to sign such Annual Report on Form 10-K, and to file the same with all exhibits and financial statements and schedules thereto, and other documents in connection therewith, including any amendment thereto, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done in and about the premises, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agents or any of them or their or his substitute or substitutes may lawfully do or cause to be done by virtue hereof. IN WITNESS WHEREOF, the undersigned has hereunder set his hand this 17th day of September, 1998. /s/ James A. Rutherford ---------------------------------- James A. Rutherford Director 61 EX-27 13 EXHIBIT 27
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF OPERATIONS IN THE ANNUAL REPORT ON FORM 10-K FOR THE YEAR ENDED JUNE 30, 1998 FOR SYMIX SYSTEMS, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 YEAR JUN-30-1998 JUL-01-1997 JUN-30-1998 6,115 0 33,988 1,063 489 41,875 15,715 9,216 66,382 28,300 0 0 1,031 68 30,202 66,382 58,498 97,597 14,746 35,701 59,878 353 374 1,840 3,196 (1,356) 0 0 0 (1,356) (0.21) (0.21)
-----END PRIVACY-ENHANCED MESSAGE-----