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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
CARNEGIE GROUP, INC.
(Name of Subject Company)
CARNEGIE GROUP, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
143497 10 5
(Cusip Number of Class of Securities)
DENNIS YABLONSKY PRESIDENT AND CHIEF EXECUTIVE OFFICER CARNEGIE GROUP, INC.
FIVE PPG PLACE PITTSBURGH, PENNSYLVANIA 15222 (412) 642-6900
(Name and Address and Telephone Number of Person Authorized to Receive Notice
and Communications on Behalf of the Person(s) Filing Statement)
WITH A COPY TO:
MARLEE S. MYERS, ESQ.
ERIC D. KLINE, ESQ.
MORGAN, LEWIS & BOCKIUS LLP
ONE OXFORD CENTRE, 32ND FLOOR
PITTSBURGH, PENNSYLVANIA 15219 (412) 560-3300
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Carnegie Group, Inc., a Delaware
corporation (the "Company"), and the address of the principal executive
offices of the Company is Five PPG Place, Pittsburgh, Pennsylvania 15222. The
title of the class of equity securities to which this statement relates is the
common stock, par value $.01 per share, of the Company (the "Shares").
ITEM 2. TENDER OFFER OF THE PURCHASER.
This statement relates to a tender offer by Logica, Inc., a Delaware
corporation ("Parent"), and Logica Acquisition Corp., a Delaware corporation
and wholly-owned subsidiary of Parent (the "Purchaser"), disclosed in a Tender
Offer Statement on Schedule 14D-1, dated October 7, 1998 (the "Schedule 14D-
1"), to purchase all outstanding Shares at $5.00 per Share, net to the seller
in cash, less applicable withholding taxes, if any, upon the terms and subject
to the conditions set forth in the Offer to Purchase, dated October 7, 1998
(the "Offer to Purchase"), and the related Letter of Transmittal (which
together constitute the "Offer").
Parent has formed the Purchaser in connection with the Offer and the Merger
Agreement (as such term is hereinafter defined). Parent is a wholly-owned
subsidiary of Logica plc, a public limited company organized under the laws of
England ("Logica plc" and, together with its subsidiaries, "Logica").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 30, 1998 (the "Merger Agreement"), among Parent, the Purchaser
and the Company. The Merger Agreement provides, among other things, that as
soon as practicable after the consummation of the Offer and satisfaction or
waiver of certain conditions, the Purchaser will be merged with and into the
Company (the "Merger"), with the Company as the surviving corporation (the
"Surviving Corporation"). A copy of the Merger Agreement is attached hereto as
Exhibit (c)(1) and incorporated herein by reference.
Based on the information in the Schedule 14D-1, the principal executive
offices of each of Parent and the Purchaser are located at 32 Hartwell Avenue,
Lexington, Massachusetts 02173.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) Each material contract, agreement, arrangement and understanding between
the Company or its affiliates and its executive officers, directors or
affiliates is described below.
The Purpose of the Offer. The purpose of the Offer and the Merger is for
Parent to acquire control of, and the entire equity interest in, the Company.
The Offer and the Merger Agreement are intended to increase the likelihood
that the Merger will be effected as promptly as practicable. The purpose of
the Merger is to acquire all outstanding Shares not tendered and purchased
pursuant to the Offer.
The Merger Agreement. The Merger Agreement provides for the commencement of
the Offer as promptly as practicable after the date of the Merger Agreement,
but in any event not later than five business days following the public
announcement of the Offer. The obligation of Parent to cause the Purchaser to
commence the Offer and to accept for payment any Shares tendered pursuant to
the Offer is subject to the satisfaction of certain conditions, which are
described below.
The Merger. The Merger Agreement provides that, as soon as practicable
following fulfillment or waiver of the conditions described below under
"Conditions to the Merger," the Purchaser will be merged with and into the
Company, which will be the Surviving Corporation, and each then-outstanding
Share not owned by Parent, the Purchaser or any other direct or indirect
subsidiary of Parent (other than those Shares held in the treasury of the
Company and Shares held by holders who perfect any appraisal rights that they
may have under the Delaware General Corporation Law (the "DGCL")) will be
canceled and retired and be converted into a right to receive the Merger
Consideration.
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Vote Required to Approve Merger. Under the DGCL, the Merger requires the
approval of the holders of at least a majority of outstanding Shares. If the
Minimum Share Condition (as hereinafter defined) is satisfied, the Purchaser
will own a majority of the Shares and accordingly will have sufficient voting
power to effect the approval of the Merger by holders of Shares without the
affirmative vote of any other such holder.
The Company has agreed in the Merger Agreement to take all action necessary
in accordance with applicable law and its Restated Certificate of
Incorporation and Amended and Restated By-Laws to convene a meeting of its
stockholders promptly after the purchase of Shares pursuant to the Offer to
consider and vote upon the approval of the Merger, if such stockholder
approval is required by applicable law. Parent and the Purchaser have agreed
in the Merger Agreement that, at any such meeting, all of the Shares then
beneficially owned by Parent, the Purchaser or any other direct or indirect
subsidiary of Parent will be voted in favor of the Merger. Under the Merger
Agreement, subject to the applicable fiduciary duties of the Board of
Directors of the Company (the "Company Board"), the Company will recommend
that the Company's stockholders approve the Merger if such stockholder
approval is required.
Conditions to the Merger. The Merger Agreement provides that the obligations
of the Company, Parent and the Purchaser to consummate the Merger are subject
to the satisfaction of the following conditions: (i) the stockholders of the
Company will have duly approved the Merger and adopted the Merger Agreement,
if and as required by applicable law; (ii) the Purchaser will have accepted
for payment and purchased all Shares validly tendered and not withdrawn
pursuant to the Offer, and such Shares will satisfy the Minimum Share
Condition (the Minimum Share Condition being satisfied upon there being
validly tendered and not withdrawn prior to the expiration of the Offer that
number of Shares which would represent at least a majority of all outstanding
Shares on a fully diluted basis); (iii) all necessary approvals,
authorizations and consents of any governmental or regulatory entity required
to consummate the Merger will have been obtained and remain in full force and
effect, and all waiting periods relating to such approvals, authorizations and
consents will have expired or been terminated; (iv) the consummation of the
Merger will not be precluded by any preliminary or permanent injunction or
other order, decree or ruling issued by a court of competent jurisdiction or
by a governmental, regulatory or administrative agency or commission or any
statute, rule, regulation or executive order promulgated or enacted by any
governmental authority which would make the consummation of the Merger illegal
or otherwise prevent the consummation of the Merger; and (v) any applicable
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended, and the rules and regulations promulgated thereunder
(collectively, the "HSR Act") will have expired or been terminated.
Termination of the Merger Agreement. The Merger Agreement may be terminated
and the Merger may be abandoned, notwithstanding any prior approval of the
Merger Agreement or of the Merger by the stockholders of the Company, (i) by
the mutual consent of Parent or the Purchaser and the Company; (ii) by Parent
and the Purchaser, on the one hand, or the Company, on the other hand, if the
Offer is terminated, withdrawn or expires pursuant to its terms without any
Shares having been purchased thereunder, provided, however, that the right to
terminate the Merger Agreement pursuant to this clause will not be available
(a) to any party if such party materially breaches the Merger Agreement, or
(b) if an order, decree or ruling or any action (which order, decree, ruling
or other action the Company, Parent and the Purchaser will use their best
efforts to lift) by any Governmental Entity (as such term is defined in the
Merger Agreement) permanently restrains, enjoins or otherwise prohibits the
acceptance for payment of, or payment for, Shares pursuant to the Offer or the
Merger, (iii) by the Company, (a) if (I) Parent or the Purchaser fails to
commence the Offer on or prior to five business days following the date of the
initial public announcement of the Offer, (II) Parent or the Purchaser will
not have purchased Shares pursuant to the Offer by December 31, 1998, or (III)
the Offer will have been terminated without Parent or the Purchaser having
purchased any Shares in the Offer, (b) in connection with the Company entering
into a definitive agreement to effect a Superior Proposal (as such term is
hereinafter defined), provided, however, that written notice will have been
provided by the Company to Parent not later than 12:00 noon two business days
in advance of any date the Company intends to exercise its termination rights
and enter into such agreement (which notice will specify proposed terms of
such agreement and the identity of the persons making such proposal), and
provided further, however, that the Company, prior to any such termination,
will have made payment to Parent of the Termination Fee and Parent Expenses
(as such terms are hereinafter defined), or (c) if
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Parent or the Purchaser breaches in any material respect any of their
respective representations, warranties, covenants or other agreements
contained in the Merger Agreement, which breach cannot be or has not been
cured within 15 days after the giving of written notice to Parent or the
Purchaser, except, in any case, for breaches which are not reasonably likely
to affect adversely Parent's or the Purchaser's ability to consummate the
Offer or the Merger, provided, however, that no cure period will be applicable
under any circumstances to (iii)(a) above; (iv) by Parent and the Purchaser,
if (a) prior to the commencement of the Offer, due to an occurrence that if
occurring after the commencement of the Offer would result in a failure to
satisfy any of the offer conditions set forth in the Merger Agreement, under
circumstances in which such failure could not reasonably be expected to be
cured within 15 days after the giving of written notice by Parent or the
Purchaser, Parent or the Purchaser fails to commence the Offer on or prior to
five business days following the date of the initial public announcement of
the Offer, (b) prior to the purchase of Shares pursuant to the Offer, the
Company breaches any representation, warranty, covenant or other agreement
contained in the Merger Agreement which breach (I) cannot be or has not been
cured within 15 days after the giving of written notice to the Company, and
(II) would give rise to the failure of an offer condition set forth in
paragraph (c) or (e) of Annex A of the Merger Agreement; or (c) prior to the
purchase of Shares pursuant to the Offer, Parent or the Purchaser is entitled
to terminate the Offer as a result of (I) an occurrence that would result in a
failure to satisfy any of the offer conditions set forth in the Merger
Agreement, or (II) in the case of the offer conditions set forth in paragraphs
(c) and (e) of Annex A of the Merger Agreement, the failure of any such
condition under circumstances in which such failure could not reasonably be
expected to be cured within 15 days after the giving of written notice to the
Company.
Other Offers. The Company has agreed in the Merger Agreement that except as
explicitly permitted under the Merger Agreement, the Company will not (and
will cause each of its subsidiaries not to), directly or indirectly, and will
not authorize or permit any of the respective officers, directors, employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing non-public information), or take any
other action to facilitate, any inquiries or the making of any proposal or
offer that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal (as such term is hereinafter defined), or participate in
any discussions or negotiations regarding an Acquisition Proposal.
Notwithstanding anything contained in the Merger Agreement, the Company will
not be prohibited by the Merger Agreement from (i) furnishing non-public
information to, or entering into discussions or negotiations with, any person
or entity that makes an unsolicited written Acquisition Proposal that would
reasonably likely lead to a Superior Proposal if, and only to the extent that,
(a) the Company Board, after consultation with and based upon the advice of
independent legal counsel, determines in good faith that the failure to take
such action could reasonably be expected to be a breach of the Company Board's
fiduciary duties under applicable law and (b) prior to furnishing such non-
public information to, or entering into discussions or negotiations with, such
person or entity, the Company receives from such person or entity an executed
confidentiality agreement in reasonably customary form on terms not more
favorable to such person or entity than the terms contained in the
Confidentiality Agreement (as hereinafter defined); (ii) complying with Rule
14e-2 promulgated under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), with regard to a tender or exchange offer; (iii) making such
disclosure to the Company's stockholders, as in the good faith judgment of the
Company Board, after consultation with and based upon the advice of
independent legal counsel is required by applicable law; or (iv) withdrawing
or modifying its recommendations, consents or approvals with respect to the
Offer, the Merger Agreement and the Merger, approving or recommending an
Acquisition Proposal to its stockholders or causing the Company to enter into
any letter of intent, agreement in principle, acquisition agreement or other
agreement with respect to an Acquisition Proposal (except for the
Confidentiality Agreement) if there is a Superior Proposal outstanding, and
the Company Board, after consultation with and based upon the advice of
independent legal counsel, determines in good faith that the failure to take
such action could reasonably be expected to be a breach of the Company Board's
fiduciary duties under applicable law. The Company has agreed in the Merger
Agreement that it will promptly (but in any event within one day) advise
Parent orally and in writing of any Acquisition Proposal (including amendments
or proposed amendments) or any inquiry regarding
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the making of an Acquisition Proposal including any request for information,
the material terms and conditions of such request, Acquisition Proposal or
inquiry. In addition, the Company has agreed that it will promptly (but in any
event within one day) keep Parent fully informed of the status and details
(including amendments or proposed amendments) of any such request, Acquisition
Proposal or inquiry.
For purposes of the Merger Agreement, the term "Acquisition Proposal" shall
mean any proposed or actual (i) merger, consolidation or similar transaction
involving the Company, (ii) sale, lease or other disposition, directly or
indirectly, by merger, consolidation, share exchange or otherwise, of any
assets of the Company or any of its subsidiaries representing 15% or more of
the consolidated assets of the Company and its subsidiaries, (iii) issue, sale
or other disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities (or options, rights or
warrants to purchase, or securities convertible into, such securities)
representing 15% or more of the votes associated with the outstanding
securities of the Company, (iv) transaction in which any person shall acquire
beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange
Act), or the right to acquire beneficial ownership, or any "group" (as such
term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15% or
more of the outstanding Shares, (v) recapitalization, restructuring,
liquidation, dissolution, or other similar type of transaction with respect to
the Company or any of the Company's subsidiaries, or (vi) transaction which is
similar in form, substance or purpose to any of the transactions contemplated
by the Offer and the Merger Agreement; provided, however, that the term
"Acquisition Proposal" shall not include the Offer, the Merger Agreement and
the transactions contemplated thereby.
For purposes of the Merger Agreement, the term "Superior Proposal" means any
bona fide Acquisition Proposal, which is not subject to the receipt of any
necessary financing and which the Company Board determines in its good faith
judgment, based on the advice from an independent financial advisor, is
superior to the Company's stockholders from a financial point of view to the
Offer and the Merger.
Fees and Expenses. Except as otherwise provided in the Merger Agreement,
whether or not the Offer or the Merger is consummated, all fees, costs and
expenses incurred in connection with the Offer, the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
cost or expense. Notwithstanding the foregoing, upon consummation of the
Merger, Parent may be reimbursed by the Company for all costs and expenses
incurred by Parent and the Purchaser in connection with the Offer, the Merger
Agreement and the transactions contemplated thereby. If the Merger Agreement
is terminated as a result of (i) a willful breach by the Company of any
representation, warranty, covenant or other agreement contained in the Merger
Agreement prior to the purchase of Shares pursuant to the Offer, which breach
(a) cannot be or has not been cured within 15 days after giving written notice
to the Company, or (b) would give rise to the failure of an offer condition
set forth in paragraph (c) or (e) of Annex A to the Merger Agreement; or (ii)
the Company entering into a definitive agreement to effect a Superior
Proposal, provided, however, that written notice will have been provided by
the Company to Parent no later than 12:00 noon two business days in advance of
any date that it intends to exercise its termination rights and enter into
such agreement (which notice shall specify proposed terms of such agreement
and the identity of the persons making such proposal), and provided further,
however, that the Company, prior to any such termination, will make a cash
payment to Parent of $2,000,000 (the "Termination Fee") plus Parent's out-of-
pocket costs and expenses, including without limitation, fees and
disbursements of its outside legal counsel, investment bankers, accountants
and other consultants retained by or on behalf of Parent together with the
other out-of-pocket costs incurred by it in connection with analyzing,
structuring, participating in the negotiations of the terms and conditions,
arranging financing, conducting due diligence, and other activities related to
the Offer and the Merger and the transactions contemplated thereby, including,
without limitation, commitment fees paid to potential lenders (collectively,
the "Parent Expenses") provided, however, that the aggregate amount of all
Parent Expenses to be reimbursed by the Company shall not exceed $1,000,000.
Any Termination Fee or Parent Expenses will be payable by the Company to
Parent (by wire transfer of immediately available funds to an account
designated by Parent) within two business days after demand by Parent.
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Conduct of the Company's Business Until the Effective Time. The Merger
Agreement provides that during the period from the date of the Merger
Agreement until the time at which the Merger is effective (the "Effective
Time"), except as otherwise provided in the Merger Agreement, the Company
will, and will cause each of its subsidiaries to, conduct their respective
businesses in the regular and ordinary course, consistent with past practice,
use their best efforts to preserve intact the present business organization of
the Company and each of its subsidiaries, to keep available the services of
each of their present advisors, managers, officers and employees, and to
preserve the goodwill of those having business relationships with the Company
or its subsidiaries. The Merger Agreement further provides that, from the date
of the Merger Agreement until the Effective Time, except as consented in
writing to by Parent, or as expressly provided in the Merger Agreement, the
Company will not, and will not permit any of its subsidiaries to, (i)(a)
declare, set aside or pay any dividend or other distribution (whether in cash,
stock, or property or any combination thereof) in respect of any of its
capital stock, (b) split, combine or reclassify any of its capital stock, or
(c) repurchase, redeem or otherwise acquire any of its securities, except, in
the case of clause (c), for the acquisition of Shares from holders of Options
(as hereinafter defined) in full or partial payment of the exercise price
payable by such holders upon exercise of Options outstanding on the date of
the Merger Agreement; (ii) authorize for issuance, issue, sell, deliver or
agree or commit to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to purchase
or otherwise) any stock of any class or any other securities (including
indebtedness having the right to vote) or equity equivalents (including,
without limitation, stock appreciation rights) (other than the issuance of
Shares upon the exercise of Options outstanding on the date of the Merger
Agreement in accordance with their present terms); (iii) acquire, sell, lease,
encumber, transfer or dispose of any assets outside the ordinary course of
business which are material to the Company or any of its subsidiaries (whether
by asset acquisition, stock acquisition or otherwise), except pursuant to
obligations in effect on the date of the Merger Agreement which have been
disclosed in writing to Parent and the Purchaser prior to the date of the
Merger Agreement; (iv)(a) incur any amount of indebtedness for borrowed money,
guarantee any indebtedness, issue or sell debt securities or warrants or
rights to acquire any debt securities, guarantee (or become liable for) any
debt of others, make any loans, advances or capital contributions, mortgage,
pledge or otherwise encumber any material assets, create or suffer any
material lien thereupon other than in the ordinary course of business
consistent with prior practice, or (b) incur any short-term indebtedness for
borrowed money, except, in each such case, pursuant to credit facilities in
existence on the date of the Merger Agreement which have been disclosed in
writing to Parent and the Purchaser prior to the date of the Merger Agreement
and set forth in the Company disclosure schedules to the Merger Agreement, and
as necessary to carry on the Company's business in the usual, regular and
ordinary course, consistent with past practice; (v) pay, discharge or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than any payment, discharge or
satisfaction (a) in the ordinary course of business consistent with past
practice, or (b) in connection with the Offer, the Merger Agreement and the
transactions contemplated thereby; (vi) change any of the accounting
principles or practices used by it (except as required by generally accepted
accounting principles, in which case written notice shall be provided to
Parent and Purchaser prior to any such change); (vii) except as required by
law, (a) enter into, adopt, amend or terminate any Company Benefit Plan (as
such term is defined in the Merger Agreement), (b) enter into, adopt, amend or
terminate any agreement, arrangement, plan or policy between the Company or
any of its subsidiaries and one or more of their directors or officers, or (c)
except for normal increases in the ordinary course of business consistent with
past practice, increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any
Company Benefit Plan or arrangement as in effect as of the date hereof; (viii)
adopt any amendments to the Restated Certificate of Incorporation of the
Company and the Amended and Restated Bylaws of the Company, except as
expressly provided by the terms of this Agreement; (ix) enter into a new
agreement or amend any existing agreement which could reasonably be expected
to have a Company Material Adverse Effect (as such term is hereinafter
defined); (x) adopt a plan of complete or partial liquidation or resolutions
providing for or authorizing such a liquidation or a dissolution, merger,
consolidation, restructuring, recapitalization or reorganization; (xi) enter
into or amend, extend or otherwise alter any collective bargaining agreement;
(xii) settle or compromise any litigation (whether or not commenced prior to
the date of the Merger Agreement) other than settlements or compromises or
litigation where the amount paid (after giving effect to insurance proceeds
actually received) in settlement or compromise does not exceed $10,000; (xiii)
grant any new or modified severance or termination arrangement or increase or
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accelerate any benefits payable under its severance or termination pay
policies in effect on the date hereof, except as required under the present
terms of any employment agreement or severance agreement in effect on the date
of the Merger Agreement; (xiv) enter into any transaction, contract or
arrangement with any affiliate, except as required under the present terms of
any contract or arrangement with any such affiliate in effect on the date of
the Merger Agreement; (xv) enter into any other material agreement outside the
ordinary course of business; (xvi) enter into an agreement to take any of the
actions stated in clauses (i) through (xv) above; or (xvii) authorize any of,
or commit or agree to take any of, or take any corporate action in furtherance
of, any of the actions stated in clauses (i) through (xv) above.
Board Representation. The Merger Agreement provides that, promptly upon the
purchase of Shares pursuant to the Offer, Parent will be entitled to designate
such number of directors, rounded up to the next whole number, on the
Company's Board as is equal to the product of (i) the total number of
directors on the Company Board (after giving effect to the directors
designated by Parent pursuant to this sentence) and (ii) the percentage that
the total votes represented by such number of Shares in the election of
directors of the Company so purchased bears to the total votes represented by
the number of Shares outstanding. In furtherance thereof, the Company will,
upon request by Parent, promptly increase the size of the Company Board and/or
exercise its best efforts to secure the resignations of such number of its
directors as is necessary to enable Parent's designees to be elected to the
Company Board and will take all actions to cause Parent's designees to be so
elected to the Company Board. At such time, the Company will also cause
persons designated by Parent to constitute at least the same percentage
(rounded up to the next whole number) as is on the Company Board of (a) each
committee of the Company Board, (b) each board of directors (or similar body)
of each of the Company's subsidiaries, and (c) each committee (or similar
body) of each such board. The Company will take, at its expense, all action
required pursuant to Section 14(f) and Rule 14f-1 of the Exchange Act in order
to fulfill its obligations and will include in the Schedule 14D-9 to its
stockholders such information with respect to the Company and its officers and
directors as is required by such Section 14(f) and Rule 14f-1. Parent will
supply to the Company in writing and be solely responsible for any information
with respect to itself and its nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1. The foregoing provisions are in
addition to and do not limit any rights which the Purchaser, Parent or any of
their affiliates may have as a holder or beneficial owner of Shares as a
matter of law with respect to the election of directors or otherwise. In the
event that Parent's designees are elected to the Company Board, until the
Effective Time, the Company Board will have at least three directors who are
directors on the date hereof (the "Independent Directors"), provided that, in
such event, if the number of Independent Directors will be reduced below three
for any reason whatsoever, any remaining Independent Directors (or Independent
Director, if there be only one remaining) will be entitled to designate
persons to fill such vacancies who will be deemed to be Independent Directors
for purposes of this Agreement or, if no Independent Director then remains,
the other directors will designate three persons to fill such vacancies who
will not be stockholders, affiliates or associates of Parent or Purchaser and
such persons will be deemed to be Independent Directors for purposes of the
Merger Agreement. Notwithstanding anything in the Merger Agreement to the
contrary, in the event that Parent's designees are elected to the Company
Board, after the acceptance for payment of Shares pursuant to the Offer and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors will be required to (i) amend or terminate the Merger
Agreement by the Company, (ii) exercise or waive any of the Company's rights,
benefits or remedies hereunder, or (iii) extend the time for performance of
Parent's and the Purchaser's respective obligations hereunder.
Options. The Merger Agreement provides that each option (collectively, the
"Options") granted under the Company's 1989 Stock Option Plan (the "1989
Plan"), 1995 Stock Option Plan (the "1995 Plan") and Long-Term Incentive Stock
Option Plan (the "Long-Term Plan" and, together with the 1989 Plan and the
1995 Plan, the "Stock Option Plans") which is outstanding (whether or not
currently exercisable), as of immediately prior to the Effective Time and
which has not been exercised or canceled prior thereto will at the Effective
Time, be canceled and upon the surrender and cancellation of the option
agreement presenting such Option and delivery of an Option Termination (as
such term is defined in the Merger Agreement), Parent shall pay to the holder
thereof cash in an amount equal to the product of (i) the number of Shares
provided for in such Option and (ii) the excess, if any, of the Merger
Consideration over the exercise price per Share provided for in such Option,
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which cash payment will be treated as compensation and will be net of any
applicable federal or state withholding tax (the "Option Consideration"). The
Company will take all actions necessary to ensure that (i) all Options, to the
extent not exercised prior to the Effective Time, will terminate and be
canceled as of the Effective Time and thereafter be of no further force or
effect, (ii) no Options are granted after the date of the Merger Agreement,
and (iii) at the Effective Time, the Stock Option Plans and all Options issued
thereunder will terminate.
The Merger Agreement further provides that except as may be otherwise agreed
to by Parent or the Purchaser and the Company, the Stock Option Plans and the
Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan") will
terminate as of the Effective Time, the provisions in any other plan, program
or arrangement providing for the issuance or grant of any other interest in
respect of the capital stock of the Company or any of its subsidiaries will be
deleted as of the Effective Time, and no holder of Options or any participant
in any Stock Option Plan or the Purchase Plan or any other plans, programs or
arrangements will have any right thereunder to acquire any equity securities
of the Company, the Surviving Corporation or any subsidiary thereof. In
connection with the foregoing, Parent, the Purchaser and the Company agreed
that participants in the Purchase Plan will not be entitled to purchase any
shares under the Purchase Plan for the period beginning October 1, 1998 and
ending on the Effective Time, and after the Effective Time, any amounts which
have been withheld from participants under the Purchase Plan will be returned
without interest to such participants.
Employee Benefits. The Merger Agreement provides that except as may
otherwise be agreed to by the parties to the Merger Agreement, after the
closing of the Merger, Parent will cause the Purchaser or the Company to honor
all obligations under the existing terms of the employment and severance
agreements to which the Company or any of its subsidiaries is currently a
party. For a period of up to twelve months following the Effective Time as
determined by Parent in its sole discretion (the "Transition Period"),
employees of the Company will continue to participate in the employee benefit
plans of the Company on substantially similar terms to those currently in
effect. Following the Transition Period, the Company's employees will be
permitted to participate in the employee benefit plans of Parent as in effect
on the date thereof on terms substantially similar to those provided to
employees of Parent. The Merger Agreement further provides that if any
employee of the Company or of any of the Company's subsidiaries becomes a
participant in any employee benefit plan, practice or policy of Parent, any of
its affiliates or the Surviving Corporation, such employee will be given
credit under such plan for all service prior to the Effective Time with the
Company and the Company's subsidiaries and prior to the time such employee
becomes such a participant, for purposes of eligibility (including, without
limitation, waiting periods) and vesting but not for any other purposes for
which such service is either taken into account or recognized (including,
without limitation, benefit accrual); provided, however, that such employee
will be given credit for such service for purposes of any vacation policy. In
addition, if any employees of the Company or any of the Company's subsidiaries
employed as of the closing date of the Merger become covered by a medical plan
of Parent, any of its affiliates or the Surviving Corporation, such medical
plan will not impose any exclusion on coverage for preexisting medical
conditions with respect to these employees.
Indemnification. The Merger Agreement provides that all rights to
indemnification existing in favor of, and all limitations on the personal
liability of the directors, officers, employees and agents of the Company and
its subsidiaries provided for in the Restated Certificate of Incorporation of
the Company and the Amended and Restated Bylaws of the Company as in effect as
of the date of the Merger Agreement with respect to matters occurring prior to
the Effective Time, and including the Offer and the Merger will continue in
full force and effect for a period of not less than six years from the
Effective Time; provided however, that all rights to indemnification in
respect of any claims (a "Claim") asserted or made within such period will
continue until the disposition of such Claim. The Merger Agreement further
provides that at or prior to the Effective Time, Parent will purchase
directors' and officers' liability insurance coverage for the Company's
directors and officers which will provide such directors and officers with
coverage for six years following the Effective Time of not less than the
existing coverage under, and have other terms not materially less favorable to
the insured persons than the directors' and officers' liability insurance
coverage presently maintained by the Company; provided, however, that in any
event the total aggregate cost of such policy shall not exceed $250,000 (the
"Maximum Amount");
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and provided, further, that if such coverage cannot be obtained for such cost,
the Company will maintain, for such six-year period, the maximum amount of
comparable coverage as will be available for the Maximum Amount on such terms.
Representations and Warranties. In the Merger Agreement, the Company made
customary representations and warranties to Parent and the Purchaser with
respect to, among other things, its organization and qualification, its
capitalization, its authority relative to the Merger Agreement, filings made
by the Company with the
Commission, the absence of certain changes or events, litigation, payment of
taxes, maintenance of its books and records, title to properties, intellectual
property, environmental matters, labor matters, employee benefit plans,
related party matters, Year 2000 compliance, suppliers and customers and
insurance.
Also in the Merger Agreement, Parent made representations and warranties to
the Company with respect to, among other things, its organization and
qualification, its authority relative to the Merger Agreement, necessary
consents and approvals and the availability of funds to consummate the Offer
and the Merger.
The Tender Agreements. Concurrently with the execution of the Merger
Agreement, Parent, the Purchaser and the executive officers and directors of
the Company who beneficially own Shares (collectively referred to as the
"Stockholder Parties" and each a "Stockholder Party") entered into Tender
Agreements (the "Tender Agreements"). The following is a summary of certain
provisions of the Tender Agreements.
Pursuant to the Tender Agreements, the Stockholder Parties agreed to, not
later than the fifth business day after commencement of the Offer, validly
tender (or cause the record owner of such shares to validly tender) pursuant
to the Offer and not withdraw an aggregate of 1,200,976 Shares owned by the
Stockholder Parties (together with any Shares acquired by the Stockholder
Parties after the date of the Tender Agreements and prior to the termination
thereof, whether upon the exercise of Options, or by means of purchase,
dividend, distribution or otherwise), representing approximately 18.3% of the
total Shares outstanding.
Each Stockholder Party agreed pursuant to the Tender Agreements that it
would, during the term of the Tender Agreements, vote the Shares owned by it
at any meeting of the stockholders of the Company, however called, or in
connection with any written consent (i) in favor of the Merger and any actions
in furtherance thereof, and (ii) against any Acquisition Proposal and against
any action or agreement that would impede, frustrate, prevent or nullify the
Tender Agreements, or result in a breach in any respect of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or which would result in any of the offer
conditions set forth in Annex A to the Merger Agreement or set forth in
Article VIII of the Merger Agreement not being fulfilled. Each Stockholder
Party covenanted and agreed that, except as contemplated by the Tender
Agreements and the Merger Agreement, it shall not (i) transfer (which term
includes, without limitation, any sale, gift, pledge or other disposition), or
consent to any transfer of, any or all of such Stockholder Party's Shares,
Options or any interest therein, (ii) enter into any contract, option or other
agreement or understanding with respect to any transfer of any or all of such
Shares, Options or any interest therein, (iii) grant any proxy, power-of-
attorney or other authorization in or with respect to such Shares or Options,
(iv) deposit such Shares or Options into a voting trust or enter into a voting
agreement or arrangement with respect to such Shares or Options, or (v) take
any other action that would in any way restrict, limit or interfere with the
performance of its obligations under the Tender Agreements or the transactions
contemplated by the Tender Agreements or the Merger Agreement.
The Tender Agreements further provide that in order to induce Parent and the
Purchaser to enter into the Merger Agreement, each Stockholder Party shall
grant to Parent an irrevocable option (a "Stock Option") to purchase such
Stockholder Party's Shares (the "Option Shares") at an amount (the "Purchase
Price") equal to $5.00 per share. If (i) the Offer is terminated, abandoned or
withdrawn by Parent or the Purchaser (due to the failure of the offer
conditions set forth in paragraph (g) or (h) of Annex A to the Merger
Agreement), or (ii) the Merger Agreement is terminated by the Company pursuant
to Section 9.1(c)(ii) of the Merger Agreement, each Stock Option shall, in any
such case, become exercisable, in whole or in part, upon the first to occur of
any such event and remain exercisable in whole or in part until the date which
is 60 days after the date of the
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occurrence of such event (the "60 Day Period"), so long as: (i) all waiting
periods under the HSR Act required for the purchase of the Option Shares upon
such exercise will have expired or been waived, and (ii) there will not be in
effect any preliminary or final injunction or other order issued by any
Governmental Entity prohibiting the exercise of the Stock Options pursuant to
the Merger Agreement; provided, however, that if all HSR Act waiting periods
have not expired or been waived or there is in effect any such injunction or
order, in each case on the expiration of the 60 Day Period, the 60 Day Period
will be extended until five (5) business days after the later of (a) the date
of expiration or waiver of all HSR Act waiting periods or (b) the date of
removal or lifting of such injunction or order. In the event that Parent
wishes to exercise a Stock Option, Parent will send a written notice (the
"Notice") to the Stockholder Parties identifying the place and date (not less
than two nor more than five (5) business days from the date of the Notice) for
the closing of such purchase.
Each Stockholder Party agreed, in the capacity as a Stockholder Party or
otherwise, that neither such Stockholder Party nor any of its subsidiaries or
affiliates shall (and such Stockholder Party shall use its best efforts to
cause its officers, directors, employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than Parent,
any of its affiliates or representatives) concerning any Acquisition Proposal
or take any other action prohibited by Section 7.4 of the Merger Agreement.
Each Stockholder Party will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal and will immediately communicate to Parent the
terms of any proposal, discussion, negotiation or inquiry (and will disclose
any written materials received by such Stockholder Party in connection with
such proposal, discussion, negotiation or inquiry) and the identity of the
party making such proposal or inquiry which it may receive in respect of any
such transaction.
Under the Tender Agreements, each Stockholder Party irrevocably granted to
and appointed Parent, Corey Torrence and Douglas Webb, or either of them, in
their respective capacities as officers of Parent, and any individual who
shall succeed to any such office of Parent, and each of them individually,
such Management Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Management
Stockholder, to vote such Stockholder Party's Shares, or grant a consent or
approval in respect of the Shares in favor of any or all of the transactions
contemplated by the Merger Agreement and Tender Agreements and against any
Acquisition Proposal. Each Stockholder Party waived any rights of appraisal or
rights to dissent from the Merger.
The Tender Agreements contain certain representations and warranties of the
parties. Each Stockholder Party severally represented that it is the record
and Beneficial Owner (as such term is defined in the Tender Agreements) of the
Shares and has sole voting and dispositive powers with respect to the
Stockholder Party Shares. In addition, Parent, the Purchaser and the
Stockholder Parties made representations regarding their organization and
qualification, authority relative to the Tender Agreements and absence of
conflicts.
Employment Agreement with Dennis Yablonsky. In connection with the Offer and
the Merger, Parent and Dennis Yablonsky have entered into an at will
employment agreement (the "Yablonsky Employment Agreement") which is
conditioned and becomes effective only upon the consummation of the Merger.
Under the Yablonsky Employment Agreement, Mr. Yablonsky agreed to serve as the
Executive Vice President of the Carnegie Group division of Parent. The
Yablonsky Employment Agreement provides that Mr. Yablonsky will receive,
subject to certain conditions, an initial annual salary of $240,000, and Mr.
Yablonsky will be eligible for performance bonuses to be determined annually
by Parent. In addition to the performance bonuses to be determined annually by
Parent, Mr. Yablonsky will be entitled, for the fiscal year ending December
31, 1998, to receive a bonus to which he would otherwise have been entitled
under the Company's current bonus plan. Pursuant to the Merger Agreement, Mr.
Yablonsky will receive cash in exchange for his Options which have an exercise
price less than the Offer Price (i.e., $5.00 per Share). With respect to each
Option held by Mr. Yablonsky having an exercise price greater than or equal to
the Offer Price, Mr. Yablonsky will receive an option (a "Logica Option") to
acquire ordinary shares of Logica plc ("Ordinary Shares") in an amount equal
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to (i) the product of the number of Shares represented by the Option and the
exercise price of such Option, divided by (ii) the exchange rate in U.S.
Dollars per British pounds, (iii) such result divided by the market price of
an Ordinary Share as of the Effective Time (such calculation, the "Option
Formula"). Under the Yablonsky Employment Agreement, in the event
Mr. Yablonsky terminates his employment with Parent with an effective date
that is before or after the Anniversary Date (as such term is defined in the
Yablonsky Employment Agreement), Mr. Yablonsky will not be entitled to receive
any compensation or other payments from Parent. However, in the event Mr.
Yablonsky terminates his employment with Parent with an effective date on the
date which is the Anniversary Date (as such term is defined in the Yablonsky
Employment Agreement), Parent will continue to pay Mr. Yablonsky's salary at
the rate in effect as of the closing date of the Merger (the "Closing Date")
and benefits for a period of twelve (12) months from the termination date. The
Yablonsky Employment Agreement further provides that in the event Parent
terminates Mr. Yablonsky's employment with an effective date that is (i) on or
before the Anniversary Date, Parent will continue to pay Mr. Yablonsky's
salary at the rate in effect as of the Closing Date until the second
anniversary of the Closing Date and benefits for a period of twelve (12)
months after the termination date, (ii) after the Anniversary Date and before
the date which is eighteen (18) months after the Closing Date, Parent will
continue to pay Mr. Yablonsky's salary at the rate in effect as of the Closing
Date and benefits until the second anniversary of Closing Date, or (iii) after
the date which is eighteen (18) months after the Closing Date, Parent will
continue to pay Mr. Yablonsky's salary at the rate in effect as of the Closing
Date and benefits for a period of six (6) months after the termination date.
Employment Agreement with John Manzetti. In connection with the Offer and
the Merger, Parent and John Manzetti have entered into an at will employment
agreement (the "Manzetti Employment Agreement") which is conditioned and
becomes effective only upon the consummation of the Merger. Under the Manzetti
Employment Agreement, Mr. Manzetti agreed to serve as the Senior Vice
President--Finance and Government Operations of the Carnegie Group division of
Parent. The Manzetti Employment Agreement provides that Mr. Manzetti will
receive, subject to certain conditions, an initial annual salary of $200,004,
and Mr. Manzetti will be eligible for performance bonuses to be determined
annually by Parent. In addition to the performance bonuses to be determined
annually by Parent, Mr. Manzetti will be entitled, for the fiscal year ending
December 31, 1998, to receive a bonus to which he would otherwise have been
entitled under the Company's current bonus plan. Pursuant to the Merger
Agreement, Mr. Manzetti will receive cash in exchange for his Options which
have an exercise price less than the Offer Price. With respect to each Option
held by Mr. Manzetti having an exercise price greater than or equal to the
Offer Price, Mr. Manzetti will be entitled to receive Logica Options
determined pursuant to the Option Formula. Under the Manzetti Employment
Agreement, in the event Mr. Manzetti terminates his employment with Parent
with an effective date that is before or after the Nine-Month Anniversary Date
(as such term is defined in the Manzetti Employment Agreement), Mr. Manzetti
will not be entitled to receive any compensation or other payments from
Parent. However, in the event Mr. Manzetti terminates his employment with
Parent with an effective date on the date which is the Nine-Month Anniversary
Date, Parent will continue to pay Mr. Manzetti's salary at the rate in effect
as of the Closing Date and benefits for a period of nine (9) months from the
termination date. The Manzetti Employment Agreement further provides that in
the event Parent terminates Mr. Manzetti's employment with an effective date
that is (i) on or before the Nine-Month Anniversary Date, Parent will continue
to pay Mr. Manzetti's salary at the rate in effect as of the Closing Date
until the date that is eighteen (18) months after the Closing Date and
benefits for a period of nine (9) months after the termination date, or (ii)
after the Nine-Month Anniversary Date, Parent will continue to pay Mr.
Manzetti's salary at the rate in effect as of the Closing Date and benefits
for a period of six (6) months after the termination date.
Employment Agreement with Bruce Russell. In connection with the Offer and
the Merger, Parent and Bruce Russell have entered into an at will employment
agreement (the "Russell Employment Agreement") which is conditioned and
becomes effective only upon the consummation of the Merger. Under the Russell
Employment Agreement, Dr. Russell agreed to serve as the Senior Vice
President--Engineering of the Carnegie Group division of Parent. The Russell
Employment Agreement provides that Dr. Russell will receive, subject to
conditions, an initial annual salary of $200,004, and Dr. Russell will be
eligible for performance bonuses to be determined annually by Parent. In
addition to the performance bonuses to be determined annually by Parent,
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Dr. Russell will be entitled, for the fiscal year ending December 31, 1998, to
receive a bonus to which he would otherwise have been entitled under the
Company's current bonus plan. Pursuant to the Merger Agreement, Dr. Russell
will receive cash in exchange for his Options which have an exercise price
less than the Offer Price. With respect to each Option held by Dr. Russell
having an exercise price greater than or equal to the Offer Price, Dr. Russell
will be entitled to receive Logica Options determined pursuant to the Option
Formula. Under the Russell Employment Agreement, in the event Dr. Russell
terminates his employment with Parent with an effective date that is before or
after the Nine-Month Anniversary Date (as such term is defined in the Russell
Employment Agreement), Dr. Russell will not be entitled to receive any
compensation or other payments from Parent. However, in the event Dr. Russell
terminates his employment with Parent with an effective date on the date which
is the Nine-Month Anniversary Date, Parent will continue to pay Dr. Russell's
salary at the rate in effect as of the Closing Date and benefits for a period
of nine (9) months from the termination date. The Russell Employment Agreement
further provides that in the event Parent terminates Dr. Russell's employment
with an effective date that is (i) on or before the Nine-Month Anniversary
Date, Parent will continue to pay Dr. Russell's salary at the rate in effect
as of the Closing Date until the date that is eighteen (18) months after the
Closing Date and benefits for a period of nine (9) months after the
termination date, or (ii) after the Nine-Month Anniversary Date, Parent will
continue to pay Dr. Russell's salary at the rate in effect as of the Closing
Date and benefits for a period of six (6) months after the termination date.
Employment Agreement with Raymond Kalustyan. In connection with the Offer
and the Merger, Parent and Raymond Kalustyan have entered into an at will
employment agreement (the "Kalustyan Employment Agreement") which is
conditioned and becomes effective only upon the consummation of the Merger.
Under the Kalustyan Employment Agreement, Mr. Kalustyan agreed to serve as the
Vice President of the Carnegie Group division of Parent. The Kalustyan
Employment Agreement provides that Mr. Kalustyan will receive, subject to
certain conditions, an initial annual salary of $150,000, and Mr. Kalustyan
will be eligible for performance bonuses to be determined annually by Parent.
In addition to the performance bonuses to be determined annually by Parent,
Mr. Kalustyan will be entitled to receive, (i) for the fiscal year ending
December 31, 1998, a bonus to which he would otherwise have been entitled
under the Company's current bonus plan, and (ii) at the Effective Time, a one-
time bonus of $50,000 payable in one lump sum. Pursuant to the Merger
Agreement, Mr. Kalustyan will receive cash in exchange for his Options which
have an exercise price less than the Offer Price. Under the Kalustyan
Employment Agreement, in the event Mr. Kalustyan terminates his employment
with Parent with an effective date that is before or after the Seventh-Month
Anniversary Date (as such term is defined in the Kalustyan Employment
Agreement), Mr. Kalustyan will not be entitled to receive any compensation or
other payments from Parent. However, in the event Mr. Kalustyan terminates his
employment with Parent with an effective date on the date which is the
Seventh-Month Anniversary Date, Parent will continue to pay Mr. Kalustyan's
salary at the rate in effect as of the Closing Date and benefits for a period
of six (6) months from the termination date. The Kalustyan Employment
Agreement further provides that in the event Parent terminates Mr. Kalustyan's
employment with an effective date that is (i) on or before the Seventh-Month
Anniversary Date, Parent will continue to pay Mr. Kalustyan's salary at the
rate in effect as of the Closing Date until the date that is thirteen (13)
months after the Closing Date and benefits for a period of six (6) months
after the termination date, or (ii) after the Seventh-Month Anniversary Date,
Parent will continue to pay Mr. Kalustyan's salary at the rate in effect as of
the Closing Date and benefits for a period of six (6) months after the
termination date.
Each of the Merger Agreement, the Tender Agreements, the Yablonsky
Employment Agreement, the Manzetti Employment Agreement, the Russell
Employment Agreement and the Kalustyan Employment Agreement (such employment
agreements, the "Employment Agreements") contains other terms and conditions.
The foregoing description of certain terms and provisions of such agreements
is qualified in its entirety by reference to the text of such agreements,
which are filed as exhibits to this Schedule 14D-9, which may be examined at,
and copies thereof may be obtained from, the offices of the Securities and
Exchange Commission (the "Commission") at 450 Fifth Street, N.W., Washington,
D.C. 20549, and are available via the Commission's Electronic Data Gathering,
Analysis and Retrieval ("EDGAR") system, which may be accessed at
http:www.sec.gov.
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Miscellaneous. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company may
have certain rights under Delaware law to demand appraisal of, and seek the
payment in cash of the fair value of, their Shares. Such rights, if the
statutory procedures are complied with, could lead to a judicial determination
of the fair value (which, under Delaware law, excludes any element of value
arising from the accomplishment or expectation of the Merger) required to be
paid in cash to such dissenting holders for their Shares. Any such judicial
determination of the fair value of Shares could be based upon considerations
other than or in addition to the price paid in the Offer and the market value
of the Shares. The value so determined could be more or less than the purchase
price per Share pursuant to the Offer or the consideration per Share to be
paid in the Merger. The foregoing summary of the rights of dissenting
stockholders does not purport to be a complete statement of the procedures to
be followed by stockholders desiring to exercise their dissenters' rights. The
preservation and exercise of appraisal rights are conditioned on strict
adherence to the applicable provisions of Delaware law. A more complete
description of appraisal rights under Delaware law will be sent to
stockholders if a proxy solicitation is required to effect the Merger.
The Merger will have to comply with any federal law applicable at the time.
In the event that the Merger is consummated more than one year after
termination of the Offer and the Purchaser has become an affiliate of the
Company as a result of the Offer, or the Merger provides for the payment of
consideration less than that paid pursuant to the Offer, and in certain other
circumstances, the Purchaser may be required to comply with Rule 13e-3 under
the Exchange Act. If applicable, Rule 13e-3 would require, among other things,
that certain financial information concerning the Company and certain
information relating to the fairness of such transaction and the consideration
offered to minority stockholders be filed with the Commission and distributed
to minority stockholders prior to the consummation of such transaction. The
Purchaser does not believe that Rule 13e-3 will be applicable to the Merger.
Upon the completion of the Offer, Logica intends to conduct a detailed
review of the Company and its assets, corporate structure, dividend policy,
capitalization, operations, properties, policies, management, and personnel
and consider, subject to the terms of the Merger Agreement, what, if any,
changes would be desirable in light of the circumstances which then exist and
reserves the right to effect such actions or changes could include changes in
the Company's business, corporate structure, Certificate of Incorporation,
By-Laws, capitalization, Company Board, management or dividend policy,
although Logica has no current plans with respect to any of such matters,
except as disclosed in the Offer to Purchase. Upon consummation of the Offer,
Logica intends to elect its representatives to the Company Board as provided
for in the Merger Agreement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) Recommendation of the Board of Directors. The Company Board has
determined that the Offer and the Merger are fair to and in the best interests
of the Company and its stockholders, has unanimously approved the Merger
Agreement and the transactions contemplated thereby and unanimously recommends
that all holders of Shares tender their Shares pursuant to the Offer.
(b) Background; Reasons for the Recommendation. On May 26, 1998, Thomas
Miranda, the Vice President--Customer Contact Solutions of the Communications
Division of Parent, Mike Maloney, the Executive Vice President of the
Communications Division of Parent, and Dennis Yablonsky, the President and
Chief Executive Officer of the Company, met to discuss a possible working
partnership between Logica and the Company that would enhance the ability of
both companies to better serve their clients. In the course of such
discussions, Logica became more informed about the Company and its management,
facilities and technical abilities and became interested in a more formal
partnership arrangement with the Company. As a result of the May 26 meeting,
Logica believed that exploring a potential business combination with the
Company would be attractive to both Logica and the Company.
On July 1, 1998, Mario Anid, the Corporate Development Director and a member
of the Executive Committee of Logica plc, Corey Torrence, the President and
Chief Executive Officer of Parent, and Mr. Maloney met with Mr. Yablonsky,
John Manzetti, the Executive Vice President and Chief Financial Officer of the
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Company, and a representative of the Company's financial advisors, to discuss
the potential benefits of a business combination between Logica and the
Company. During July and August of 1998, similar discussions continued between
representatives of Logica and the Company for the purpose of further exploring
a possible strategic transaction. These discussions focused primarily on
topics relating to business integration, ongoing business strategy and
financial matters.
At a meeting held on August 19, 1998, Messrs. Anid, Torrence, Yablonsky and
Manzetti discussed possible structures for a transaction. At that meeting,
Logica indicated that it was willing to proceed by means of a cash tender
offer for all of the outstanding Shares. Logica also indicated that its
preliminary evaluation of an offer price was in the range of $5.50 to $5.75
per Share.
On August 25, 1998, Mr. Manzetti telephoned Mr. Anid and indicated that a
third party had expressed an interest in a potential stock transaction with
the Company at a value of $6.00 per Share. Mr. Manzetti informed Mr. Anid of
his view that the Company Board would look more favorably on a cash offer of
$6.00 per Share than on any potential stock transaction at that price. The
Company Board met later on August 25 to discuss the status of the discussions
between Logica and the Company. At that meeting, representatives of Updata
Capital, Inc. ("Updata") and Parker/Hunter Incorporated ("Parker/Hunter")
commented upon the negotiations with Logica and also discussed the indication
of interest in a potential stock transaction from such third party. The
Company Board, with the advice of Updata and Parker/Hunter, determined that
such other indication of interest would be less advantageous from a financial
point of view to the Company's stockholders than a cash offer from Parent.
After discussion and advice from the Company's financial and legal advisors,
the Company Board authorized Company management to pursue discussions with
Parent if Parent indicated it would be willing, subject to its diligence
investigation, to consider a price of $6.00 per Share. Mr. Manzetti telephoned
Mr. Anid on August 25, 1998 to convey the sense of the Company Board, and Mr.
Anid responded shortly thereafter that Parent would consider a price of $6.00
per Share.
On August 27, 1998, Parent and the Company entered into a confidentiality
agreement (the "Confidentiality Agreement"), which provides generally that
each of the parties and their respective representatives will keep
confidential any non-public information furnished to them in connection with
the mutual consideration of a potential transaction involving the acquisition
of the Company by Parent. In addition, the Confidentiality Agreement
prohibited, with certain exceptions, the Company or any of its representatives
from participating in negotiations with any party other than Parent with
respect to a merger, consolidation, business combination, sale of all or
substantially all assets, tender offer or other similar transaction involving
the Company, until September 22, 1998 (the "Exclusivity Period"). The
Confidentiality Agreement also provided that, with certain exceptions, until
the date that is the earlier of six months from the date of the
Confidentiality Agreement or the date on which the Company and Parent entered
into a definitive agreement concerning a transaction between the companies,
neither Parent nor any of its representatives would, among other things,
acquire any securities of the Company or seek to effect a tender offer, merger
or other business combination transaction involving the Company.
Thereafter, business representatives from Parent began to review the
Company's contracts and held discussions with the Company's management about
its present business and future prospects. Subsequently, the Parent's legal
advisors conducted a similar review.
On September 15, 1998, Mr. Anid met with Messrs. Yablonsky and Manzetti and
informed them that, based on its review of the Company's business operations
and prospects, Parent would be prepared to go forward at a price of $5.00 per
Share, but would not be willing to pay a price of $6.00 per Share. During this
period, Logica also negotiated with Messrs. Yablonsky, Manzetti and Kalustyan,
and Dr. Russell concerning their willingness to forego certain severance
benefits to which they otherwise would be contractually entitled following the
execution of the Merger Agreement. In exchange for foregoing such amounts,
Logica proposed that these individuals would enter into at will employment
agreements pursuant to which these individuals would (i) initially maintain
their existing salaries, (ii) be entitled to bonus payments if certain
performance criteria were achieved, (iii) receive Logica Options and (iv)
receive certain severance benefits (which were less than those to
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which they were entitled under their existing severance agreements) if their
employment was terminated during certain periods. The Company Board met on
September 17, 1998 with its financial and legal advisors to consider the
revised price. After discussion of both the price and the terms of the
proposed transaction, the Company Board authorized Company management to
continue discussions with Parent at the lower price, provided that the terms
of the transaction were acceptable.
On September 17, following the Company Board meeting, Mr. Yablonsky
telephoned Mr. Anid and indicated that, following numerous discussions with
the Company's legal and financial advisors, the Company was willing to agree
to a price of $5.00 per Share if the parties could agree on the other
unresolved terms of the Merger Agreement and related documentation.
On September 22, 1998, Parent and the Company executed an amendment to the
Confidentiality Agreement, the purpose of which was to extend the Exclusivity
Period until September 30, 1998.
The Company Board held additional meetings with the Company's financial and
legal advisors on September 28 and September 29 to discuss the price and the
terms of the transaction. At the meeting on September 29, representatives of
Updata and Parker/Hunter gave separate presentations analyzing the proposed
transaction, and each delivered its oral opinion (which oral opinions were
subsequently confirmed in writing) that the consideration to be received by
the stockholders of the Company was fair to such stockholders from a financial
point of view. At the same meeting, the Company's legal counsel described the
terms of the proposed transaction and the legal ramifications to the Company.
The Company Board, after considering such legal aspects and after discussing
and considering the opinions of the financial advisors, determined that the
Offer and the Merger are fair to and in the best interests of the Company and
its stockholders, approved the Merger Agreement and recommended that all
stockholders tender their Shares pursuant to the Offer.
On the evening of September 30, immediately prior to executing the Merger
Agreement, the Chairman of the Company Board received an electronic mail
message from an individual who indicated an interest in discussing a possible
acquisition proposal at a price of $6.00 per Share. Such individual had, on
September 23, telephoned another Company Board member with a similar
suggestion and alluded to the possibility of obtaining financing for his
proposal. The terms mentioned in the telephone call and the electronic mail
message were both highly conditional and preliminary, and it appeared from
both communications that any proposal, unlike that of Parent, would be
conditioned on such individual's ability to obtain financing and on a
diligence investigation by such individual and by any possible financing
source. In addition, discussions with such individual would have violated the
Company's obligations under the Confidentiality Agreement, and the Company
Board did not believe that the highly conditional nature of the communications
warranted further discussions with this individual.
The Merger Agreement, the Tender Agreements and the Employment Agreements
were executed and delivered by all parties on the evening of September 30,
1998, and the Company and Parent publicly announced the transaction before the
commencement of trading on October 1, 1998.
On October 7, 1998, Parent commenced the Offer. In recommending that all
holders of Shares tender such Shares pursuant to the Offer, and in approving
the Merger Agreement and the transactions contemplated thereby, the Company
Board considered the following factors:
(a) presentations by management of the Company regarding the Company's
business, financial condition, results of operations and prospects;
(b) concerns expressed by Company management over the relatively high
turnover in technical personnel in 1998 as compared with prior years, and the
difficulties attracting and retaining qualified technical personnel in a
competitive marketplace;
(c) increasing competition in the information technology services
marketplace from larger, better financed companies able to offer clients "one
stop shopping" for their information technology services needs;
14
<PAGE>
(d) the decline of the Share price in 1998 from a high of approximately
$4.47 to a recent low of $1.50 and the fact that the Shares were trading at a
substantial discount from the price of the Company's initial public offering
in 1995;
(e) the opinions of Updata and Parker/Hunter to the effect that, as of the
date of such opinions, the Offer Price is fair to the holders of the Shares
from a financial point of view;
(f) the fact that the Offer and the Merger are not conditioned on the
ability of Parent to obtain financing;
(g) the fact that while the Merger Agreement contains constraints that may
hinder a third party from making an alternative acquisition proposal, the
Merger Agreement permits the Company Board, in the exercise of its fiduciary
duties, to negotiate with a third party whom it believes, upon the advice of
its financial advisors, is reasonably likely to make a proposal that is
superior to the Company's stockholders from a financial point of view and is
not subject to a financing condition, and to accept such a proposal (subject
only to the payment to Parent of the Termination Fee and the Parent Expenses);
and
(h) the requirement under the Merger Agreement that Parent, after accepting
Shares in the Offer, will commence a proxy solicitation (if required under
applicable Delaware law) to acquire all remaining Shares at a price of $5.00
per Share.
The Company Board did not assign relative weights to the factors set forth
above, nor did it determine that any one factor was of particular importance.
Rather, the Company Board reached its determination based on the totality of
the circumstances and the advice presented to and considered by the Company
Board.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company entered into a letter agreement with Updata, dated May 15, 1997
(the "Updata Agreement"), pursuant to which the Company engaged Updata as a
financial advisor. Pursuant to terms of the Updata Agreement, Updata agreed to
review and analyze proposed transactions, and, if fair, to render a written
fairness opinion to the Company in connection with a potential sale or merger
of the Company. The Company agreed to pay Updata a retainer fee of $25,000,
plus a transaction fee of $250,000 (against which fee the retainer fee is
applied), payable upon the closing of the Merger. The Company also agreed,
whether or not the transaction is completed, (i) to reimburse Updata for its
reasonable out-of-pocket expenses, subject to the Company's review, and (ii)
to indemnify Updata against certain liabilities, with respect to which the
parties entered into an indemnification agreement dated May 15, 1997. Expenses
incurred to date are approximately $9,000.
The Company entered into a letter agreement with Parker/Hunter, dated June
3, 1997 (the "Parker/Hunter Agreement"), pursuant to which the Company engaged
Parker/Hunter as a financial advisor. Pursuant to the terms of the
Parker/Hunter Agreement, Parker/Hunter agreed to review and analyze proposed
transactions, and, if fair, to render a written fairness opinion to the
Company in connection with a potential sale or merger of the Company. The
Company agreed to pay Parker/Hunter a retainer fee of $25,000, plus an opinion
fee equal to $250,000 (against which fee the retainer fee is applied), payable
upon the delivery of the written fairness opinion. The Company also agreed,
whether or not the transaction is completed, (i) to reimburse Parker/Hunter
for its reasonable out-of-pocket expenses, including the reasonable fees and
expenses of Parker/Hunter's legal counsel, which legal fees will not exceed
$7,500, and (ii) to indemnify Parker/Hunter against certain liabilities.
Expenses incurred to date are approximately $10,000. In addition,
Parker/Hunter in the past has provided investment banking services to the
Company and has received customary fees for such services. Further, in the
ordinary course of its business, Parker/Hunter may actively trade the Shares
for its own account and for the accounts of its customers and accordingly may
at any time hold a long or short position in such Shares.
Except as disclosed herein, neither the Company nor any person acting on its
behalf currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to holders of Shares on the Company's
behalf concerning the Offer or the Merger.
15
<PAGE>
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) No transaction in the Shares has been effected during the past 60 days
by the Company, or to the best of the Company's knowledge, by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, each executive officer, director
and affiliate of the Company currently intends to tender all Shares over which
he or she has dispositive power to the Purchaser.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in Items 3(b) or 4(b) above, the Company is not
engaged in any negotiation in response to the Offer that relates to or would
result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or
any subsidiary of the Company; (iii) a tender offer for or other acquisition
of securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as set forth in Items 3(b) or 4(b) above, there are no
transactions, Board resolutions, agreements in principle or signed contracts
in response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
(a) Section 203 of the DGCL. Section 203 of the DGCL, in general,
prohibits a Delaware corporation such as the Company from engaging in a
"Business Combination" (defined as a variety of transactions, including
mergers) with an "Interested Stockholder" (defined generally as a person
that is the beneficial owner of 15% or more of a corporation's outstanding
voting stock) for a period of three years following the date that such
person became an Interested Stockholder unless (a) prior to the date such
person became an Interested Stockholder, the board of directors of the
corporation approved either the Business Combination or the transaction
that resulted in the stockholder becoming an Interested Stockholder, (b)
upon consummation of the transaction that resulted in the stockholder
becoming an Interested Stockholder, the Interested Stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding stock held by directors who are also
officers of the corporation and employee stock ownership plans that do not
provide employees with the right to determine confidentially whether shares
held subject to the plan will be tendered in a tender or exchange offer or
(c) on or subsequent to the date such person became an Interested
Stockholder, the Business Combination is approved by the board of directors
of the corporation and authorized at a meeting of stockholders, and not by
written consent, by the affirmative vote of the holders of at least 66 2/3%
of the outstanding voting stock of the corporation not owned by the
Interested Stockholder.
The provisions of Section 203 of the DGCL are not applicable to any of
the transactions contemplated by the Merger Agreement or the Tender
Agreements because the Merger Agreement and the transactions contemplated
thereby have been approved by the Company Board, and the Tender Agreements
have, for purposes of Section 203 of the DGCL, been approved by the Company
Board.
The summary of Section 203 of the DGCL contained herein does not purport
to be exhaustive and is qualified in its entirety by reference to the
actual text of Section 203 of the DGCL.
(b) Certain Regulatory Matters. Consummation of the Merger is conditioned
upon certain matters relating to the Exon-Florio Act, which grants to the
President of the United States the authority to review any business
combination that could result in foreign control over persons engaged in
interstate commerce
16
<PAGE>
in the United States. The Exon-Florio Act is administered by the Committee
on Foreign Investment in the United States ("CFIUS"), which has the
authority to review whether a proposed acquisition by a foreign investor
poses a threat to national security and to recommend to the President
whether such a proposed acquisition should be blocked.
The Purchaser and the Company have not yet determined whether CFIUS has
jurisdiction and therefore whether a filing is appropriate with regard to
the transactions contemplated by the Merger Agreement. Although the
Purchaser believes that the transactions contemplated by the Merger
Agreement should not raise any national security concerns, there can be no
assurance that CFIUS will not determine to conduct an investigation of the
proposed transaction and, if an investigation is commenced, there can be no
assurance regarding the outcome of such investigation. If the results of
such investigation are adverse to the Purchaser, the Purchaser may not be
obligated to accept for payment or pay for any Shares tendered pursuant to
the Offer.
The Offer and Merger are subject to the HSR Act, which provides that
certain acquisition transactions may not be consummated unless certain
information has been furnished to the Federal Trade Commission ("FTC") and
the Antitrust Division of the Department of Justice ("Antitrust Division")
and certain waiting period requirements have been satisfied. Each of Logica
and the Company intends to file a Notification and Report Form under the
HSR Act with respect to the Offer on or about October 8, 1998.
Under the provisions of the HSR Act applicable to the Offer, the purchase
of Shares pursuant to the Offer may not be consummated until the expiration
of a 15-calendar day waiting period following the filing by Logica and the
Company. Accordingly, assuming the filing is in substantial compliance with
the HSR Act, the waiting period will expire at 11:59 p.m., New York City
time, on October 23, 1998 (assuming an October 8, 1998 filing date), unless
earlier terminated by the FTC and the Antitrust Division. However, if
either the FTC or the Antitrust Division requests additional information or
documents from Logica or the Company within such initial waiting period,
the initial waiting period would be extended for an additional ten days
from the date of substantial compliance by Logica or the Company, as the
case may be with such request. Thereafter, the waiting period may be
extended only by a court order or with the consent of Logica or the
Company, as the case may be. Each of the parties has requested that the FTC
and the Antitrust Division grant early termination of the applicable
waiting period, but there can be no assurance that such request will be
granted.
The FTC and the Antitrust Division frequently scrutinize the legality
under the antitrust laws of transactions such as the Purchaser's
acquisition of Shares pursuant to the Offer. At any time before or after
the Purchaser's acceptance for payment of Shares, the FTC or the Antitrust
Division could take such action under the antitrust laws as it deems
necessary or desirable in the public interest, including seeking to enjoin
the acquisition of Shares pursuant to the Offer or otherwise or seeking
divestiture of Shares acquired by Purchaser or divestiture of substantial
assets of Purchaser or its subsidiaries. Private parties and state attorney
generals may also bring legal action under the antitrust laws under certain
circumstances. Based upon the Purchaser's discussions with the Company and
its examination of publicly available information with respect to the
Company, Purchaser believes that the acquisition by Purchaser of the Shares
will not violate the antitrust laws. Nevertheless, there can be no
assurance that a challenge to the Offer on antitrust grounds will not be
made, or, if such a challenge is made, of the result.
(c) Information Statement. The Information Statement attached as Schedule
I hereto is being furnished in connection with the possible designation by
the Purchaser, pursuant to the Merger Agreement, of certain persons to be
appointed to the Company Board other than at a meeting of the Company's
stockholders.
17
<PAGE>
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<C> <S>
Exhibit (a)(1) Offer to Purchase dated October 7, 1998/1/*
Exhibit (a)(2) Letter of Transmittal/1/*
Exhibit (a)(3) Letter to Stockholders of Carnegie Group, Inc. dated October
7, 1998 from Dennis Yablonsky, President and Chief Executive
Officer of Carnegie Group, Inc.
Exhibit (a)(4) Opinion of Updata Capital, Inc., dated September 30, 1998/1/*
Exhibit (a)(5) Opinion of Parker/Hunter Incorporated, dated September 30,
1998/1/*
Exhibit (a)(6) Press Release issued by Carnegie Group, Inc., dated October 1,
1998/2/
Exhibit (c)(1) Agreement and Plan of Merger dated as of September 30, 1998 by
and among Logica Inc., Logica Acquisition Corp. and Carnegie
Group, Inc./2/
Exhibit (c)(2) Tender Agreement dated as of September 30, 1998 by and among
Logica Inc., Logica Acquisition Corp., Carnegie Group, Inc.
and Raj Reddy, Anuradha Reddy, Anuradha Reddy as Trustee of
the Geetha Reddy Trust and Anuradha Reddy as Trustee of the
Shyamala Reddy Trust/2/
Exhibit (c)(3) Tender Agreement dated as of September 30, 1998 by and among
Logica Inc., Logica Acquisition Corp., Carnegie Group, Inc.
and Jaime Carbonell, Jaime Carbonell as Custodian for Diana
Carbonell, Jaime Carbonell as Custodian for Isabelle
Carbonell, Jaime Carbonell as Custodian for Ruben Carbonell,
Jaime Carbonell as Custodian for Rachel Carbonell, Jaime
Carbonell in Trust for Diana Carbonell, Jaime Carbonell in
Trust for Isabelle Carbonell, Jaime Carbonell in Trust for
Ruben Carbonell and Jaime Carbonell in Trust for Rachel
Carbonell/2/
Exhibit (c)(4) Tender Agreement dated as of September 30, 1998 by and among
Logica Inc., Logica Acquisition Corp., Carnegie Group, Inc.
and Mark S. Fox, Tressa S. Fox and Tressa S. Fox in Trust for
Jacob Fox/2/
Exhibit (c)(5) Tender Agreement dated as of September 30, 1998 by and among
Logica Inc., Logica Acquisition Corp., Carnegie Group, Inc.
and Dennis Yablonsky and Veronica Yablonsky/2/
Exhibit(c)(6) Tender Agreement dated as of September 30, 1998 by and among
Logica Inc., Logica Acquisition Corp., Carnegie Group, Inc.
and John W. Manzetti/2/
Exhibit (c)(7) Employment Agreement dated as of September 30, 1998 between
Logica Inc. and Dennis Yablonsky1
Exhibit (c)(8) Employment Agreement dated as of September 30, 1998 between
Logica Inc. and John Manzetti1
Exhibit (c)(9) Employment Agreement dated as of September 30, 1998 between
Logica Inc. and Bruce Russell1
Exhibit (c)(10) Employment Agreement dated as of September 30, 1998 between
Logica Inc. and Raymond Kalustyan1
Exhibit (c)(11) Mutual Confidential Non-Disclosure Agreement dated August 27,
1998 between Carnegie Group, Inc. and Logica Inc., as amended
by letter dated September 22, 19981
Exhibit (c)(12) Severance Termination Agreement dated as of September 30, 1998
between Carnegie Group, Inc. and Dennis Yablonsky1
Exhibit (c)(13) Severance Termination Agreement dated as of September 30, 1998
between Carnegie Group, Inc. and John Manzetti1
Exhibit (c)(14) Severance Termination Agreement dated as of September 30, 1998
between Carnegie Group, Inc. and Bruce Russell1
Exhibit (c)(15) Severance Termination Agreement dated as of September 30, 1998
between Carnegie Group, Inc. and Raymond Kalustyan1
Exhibit (c)(16) Loan Termination Agreement dated as of September 30, 1998
between Carnegie Group, Inc. and Dennis Yablonsky1
</TABLE>
- --------
*Included in copies mailed to stockholders by Carnegie Group, Inc., Logica
Inc. or Logica Acquisition Corp.
/1/Filed herewith.
/2/Previously filed as an exhibit to the Form 8-K filed with the Securities
and Exchange Commission by Carnegie Group, Inc. on October 6, 1998.
18
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: October 7, 1998 Carnegie Group, Inc.
By: /s/ John W. Manzetti
----------------------------------
JOHN W. MANZETTI
CHIEF FINANCIAL OFFICER
19
<PAGE>
SCHEDULE I
CARNEGIE GROUP, INC.
FIVE PPG PLACE
PITTSBURGH, PENNSYLVANIA 15222
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
----------------
This Information Statement is being mailed on or about October 7, 1998 as
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Carnegie Group, Inc., a Delaware corporation (the
"Company"), to the holders of shares of common stock, par value $.01 per
share, of the Company (the "Shares"). You are receiving this Information
Statement in connection with the possible election of the Purchaser Designees
(as hereinafter defined) to all of the seats on the Board of Directors of the
Company (the "Company Board").
The Company, Logica Inc., a Delaware corporation ("Parent"), and Logica
Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of
Parent (the "Purchaser"), entered into an Agreement and Plan of Merger dated
as of September 30, 1998 (the "Merger Agreement"), pursuant to which (i)
Parent has caused the Purchaser to commence a tender offer (the "Offer") for
all outstanding Shares at the price of $5.00 per Share, net to the seller in
cash, without interest, and (ii) the Purchaser will be merged with and into
the Company (the "Merger"). As a result of the Offer and the Merger, the
Company will become a wholly-owned subsidiary of Parent.
The Merger Agreement requires the Company to take such action to cause the
Purchaser Designees to be elected to the Company Board under the circumstances
described therein. See "Right to Designate Directors; Purchaser Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
Wednesday, October 7, 1998. The Offer is scheduled to expire at 12:00
midnight, New York City time, on Wednesday, November 4, 1998, unless the Offer
is extended.
The information contained in this Information Statement concerning Parent,
the Purchaser and the Purchaser Designees has been furnished to the Company by
Parent, and the Company assumes no responsibility for the accuracy or
completeness of such information.
RIGHT TO DESIGNATE DIRECTORS; PURCHASER DESIGNEES
Promptly upon the purchase of Shares pursuant to the Offer, Parent shall be
entitled to designate such number of directors, rounded up to the next whole
number, on the Company Board as is equal to the product of (a) the total
number of directors on the Company Board (after giving effect to the directors
designated by Parent pursuant to this sentence) and (b) the percentage that
the total votes represented by such number of Shares in the election of
directors of the Company so purchased bears to the total votes represented by
the number of Shares outstanding. In furtherance thereof, the Company shall,
upon request by Parent, promptly increase the size of the Company Board and/or
exercise its best efforts to secure the resignations of such number of its
directors as is necessary to enable Parent's designees to be elected to the
Company Board and shall take all actions to cause Parent's designees to be so
elected to the Company Board. At such time, the Company shall also cause
persons designated by Parent to constitute at least the same percentage
(rounded up to the next whole number) as is on the Company Board of (i) each
committee of the Company Board, (ii) each board of directors (or similar body)
S-1
<PAGE>
of each subsidiary of the Company and (iii) each committee (or similar body)
of each such board. Each Purchaser Designee will serve as a director until
such director's successor is elected and qualified or until such director's
earlier resignation or removal.
As of the date of this Information Statement, the Purchaser has not
determined who will be the Purchaser Designees. However, Purchaser Designees
will be selected from among the directors and executive officers of Logica
plc, Parent and the Purchaser. Certain information regarding the candidates as
Purchaser Designees is contained in Annex I and Annex II annexed hereto.
None of the Purchaser Designees (i) is currently a director of, or holds any
position with, the Company, (ii) has a familial relationship with any
directors or executive officers of the Company or (iii) to the best knowledge
of Parent, beneficially owns any securities (or rights to acquire such
securities) of the Company. The Company has been advised by Parent that, to
the best of Parent's knowledge, none of the Purchaser Designees has been
involved in any transactions with the Company or any of its directors,
executive officers or affiliates which are required to be disclosed pursuant
to the rules and regulations of the Securities and Exchange Commission (the
"Commission"), except as may be disclosed herein or in the Schedule 14D-9.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by the Purchaser of such number of shares which
satisfies the Minimum Share Condition (as defined in the Merger Agreement),
which purchase cannot be earlier than November 4, 1998, and that, upon
assuming office, the Purchaser Designees will thereafter constitute at least a
majority of the Company Board.
DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY
The Shares are the only class of voting securities of the Company
outstanding. Each Share is entitled to one vote per Share on each matter
properly brought before an annual or special meeting of stockholders of the
Company. As of October 1, 1998, there were 6,556,424 Shares outstanding.
DIRECTORS OF THE COMPANY
The Restated Certificate of Incorporation and the Amended and Restated By-
Laws of the Company provide that the number of directors (which is to be not
less than three) is to be determined from time to time by resolution of the
Company Board. The total number of directors constituting the Company Board is
currently six persons.
Pursuant to the Company's Restated Certificate of Incorporation, the members
of the Company Board are divided into three classes, designated Class I, Class
II and Class III directors. Each class is to consist, as nearly as may be
possible, of one-third of the total number of directors constituting the
entire Company Board.
There are no family relationships among any of the directors or executive
officers of the Company. As indicated above, certain of the current directors
will resign effective immediately following the purchase of at least a
majority of the then-outstanding Shares by the Purchaser pursuant to the Offer
and will be replaced by the Purchaser Designees.
EXECUTIVE OFFICERS OF THE COMPANY
The names of the current executive officers of the Company, their ages as of
October 1, 1998 and certain other information about them are set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Dennis Yablonsky........ 45 President, Chief Executive Officer and Director
John W. Manzetti........ 50 Executive Vice President, Chief Financial Officer, Treasurer
Secretary and Director
Bruce D. Russell........ 52 Senior Vice President
Raymond B. Kalustyan.... 42 Vice President
</TABLE>
S-2
<PAGE>
Mr. Yablonsky has served as President and Chief Executive Officer and as a
director of the Company since August 1987. Before joining the Company, Mr.
Yablonsky was President and Chief Operating Officer of Cincom Systems of
Cincinnati, Ohio, a privately-held company that markets software products to
the manufacturing, government and academic markets.
Mr. Manzetti has served as Executive Vice President, Chief Financial Officer
and Treasurer and as a director of the Company since February 1995. Prior to
becoming an Executive Vice President, Mr. Manzetti served as Vice President,
Finance and Administrative Services and Chief Financial Officer from October
1988 to February 1993, and as Vice President and Division Manager and Chief
Financial Officer from February 1993 to February 1995. Mr. Manzetti has been
Secretary since February 1989.
Dr. Russell has served as Senior Vice President, Software Delivery since
December 1997. Prior to becoming Senior Vice President, he served as Executive
Vice President, Chief Operating Officer and as a director of the Company since
February 1995. Prior to becoming an Executive Vice President, Dr. Russell
served as Vice President and Division Manager from January 1989 through
January 1995.
Mr. Kalustyan has served as Vice President, Business Development since June
1998. Before joining the Company, Mr. Kalustyan was National Director, Capital
Markets Practice for Unisys Corporation ("Unisys") prior to which he was
National Director, Sales and Marketing for Insurance and Diversified Financial
Services for Unisys. Before joining Unisys, he was a director of business
development for Arthur Andersen LLP.
BOARD OF DIRECTORS AND COMMITTEES
The Company Board met seven times during the year ended December 31, 1997.
The Company Board has an Audit Committee and a Compensation Committee. The
Company Board does not have a standing Nominating Committee.
The Audit Committee is responsible for nominating the Company's independent
auditors for approval by the Company Board, reviewing the scope, results and
costs of the audit with the Company's independent auditors and reviewing the
financial statements and accounting practices of the Company. The members of
the Audit Committee are Dr. Reddy and Mr. Chatfield. The Audit Committee met
once during 1997.
The Compensation Committee is responsible for administering the Company's
1989 Stock Option Plan, its Long-Term Incentive Plan, its 1995 Stock Option
Plan and its 1995 Employee Stock Purchase Plan and for recommending other
compensation decisions to the Company Board. The members of the Compensation
Committee are Dr. Reddy and Mr. Chatfield. The Compensation Committee met
twice during 1997.
No director attended fewer than 75% of the total number of meetings of the
Company Board and the meetings of any committee of the Company Board on which
he or she served during the fiscal year ended December 31, 1997, other than
James G. Carbonell, who attended 71% of such meetings.
Parent has informed the Company that the Purchaser Designees have not yet
determined whether, or if, any committees of the Company Board will continue
after the present Company Board members are replaced. Board meetings will be
held consistent with the past practice of Parent with respect to its
subsidiaries.
S-3
<PAGE>
EXECUTIVE COMPENSATION
COMPENSATION SUMMARY
The following table sets forth information regarding compensation of certain
executive officers (the "Named Executive Officers") of the Company for the
years ended December 31, 1997, 1996 and 1995.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
ANNUAL AWARDS
COMPENSATION OTHER SECURITIES
---------------- ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS COMPENSATION OPTIONS
- --------------------------- ---- -------- ------- ------------ ------------
<S> <C> <C> <C> <C> <C>
Dennis Yablonsky.............. 1997 $225,255 $12,000 $234,232(1) 10,000
President and Chief Executive 1996 217,506 30,000 -- --
Officer
1995 207,501 72,996 -- 65,000
John W. Manzetti.............. 1997 177,501 9,000 -- 10,000
Executive Vice President, 1996 167,505 25,000 -- --
Chief
Financial Officer, Treasurer 1995 157,506 49,496 -- 45,000
and Secretary
Bruce D. Russell.............. 1997 188,508 9,000 -- 10,000
Senior Vice President 1996 181,758 25,000 -- --
1995 171,756 49,496 -- 45,000
</TABLE>
- --------
(1) Amount reimbursed for the payment of taxes incurred in connection with the
exercise of options.
STOCK OPTIONS
The Company currently maintains three stock option plans under which stock
option awards have been made and, in the case of the 1995 Stock Option Plan,
may be made, to eligible employees of the Company: the 1989 Stock Option Plan,
the Long-Term Incentive Plan and the 1995 Stock Option Plan. The number of
Shares authorized to be issued under the 1995 Stock Option Plan, and the terms
of outstanding stock options under the 1989 Stock Option Plan, the Long-Term
Incentive Plan and the 1995 Stock Option Plan, may be adjusted to prevent
dilution or enlargement of rights in the event of any stock dividend,
reorganization, reclassification, recapitalization, stock split, combination,
merger, consolidation or other relevant capitalization change. On September 8,
1995, the Board terminated the 1989 Stock Option Plan and the Long-Term
Incentive Plan and directed that Options which expire or terminate unexercised
under these plans shall become available for award under the 1995 Stock Option
Plan. As of October 1, 1998, the numbers of options granted and outstanding
under the 1989 Stock Option Plan, the Long-Term Incentive Plan and the 1995
Stock Option Plan were 522,001, 340,000 and 696,875, respectively.
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
NUMBER OF % OF TOTAL ANNUAL RATE OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM(4)
OPTIONS EMPLOYEES BASE PRICE EXPIRATION ----------------------
NAME GRANTED(#)(1) IN FY(2) ($/SH)(3) DATE 5%($) 10%($)
- ---- ------------- ---------- ----------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C>
Dennis Yablonsky........ 10,000 6.5% $6.38 02/10/07 $40,123 $101,681
John W. Manzetti........ 10,000 6.5% 6.38 02/10/07 40,123 101,681
Bruce D. Russell........ 10,000 6.5% 6.38 02/10/07 40,123 101,681
</TABLE>
- --------
(1) The options granted are incentive stock options that become exercisable in
increments of 25% per year beginning on the first anniversary of the date
of grant or immediately in the event of a Change in Control (as
hereinafter defined).
S-4
<PAGE>
(2) Based on an aggregate of 154,000 shares subject to options granted to
employees during 1997.
(3) The exercise price per share equaled the fair market value of the Shares
on the date of grant, based on the closing price of the Shares on The
Nasdaq National Market as of such date.
(4) Amounts represent hypothetical gains that could be achieved for the
respective options if exercised at the end of the option term. These gains
are based on assumed rates of appreciation of 5% and 10% compounded
annually from the date the respective options were granted to their
expiration date. The 5% and 10% rates of appreciation are specified by the
rules of the Securities and Exchange Commission and are not presented to
forecast possible future appreciation, if any, in the price of the Shares.
The actual gains, if any, on the stock option exercise will depend on the
future performance of the Shares, the optionee's continued employment
through vesting periods and the date on which the options are exercised.
The following table sets forth certain information with respect to the
exercise of options by the Named Executive Officers in the last fiscal year
and the value of options held by the Named Executive Officers on December 31,
1997.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS HELD AT FISCAL IN-THE-MONEY OPTIONS AT
SHARES VALUE YEAR-END(#) FISCAL YEAR-END($)(2)
ACQUIRED ON REALIZED ------------------------- -------------------------
NAME EXERCISE(#) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Dennis Yablonsky........ 108,000 $726,300 289,316 77,684 $210,627 $59,373
John W. Manzetti........ 40,000 170,000 117,316 67,684 109,377 59,373
Bruce D. Russell........ -- -- 207,316 67,684 176,877 59,373
</TABLE>
- --------
(1) Represents the difference between the closing price per Share on date of
exercise as reported on The Nasdaq National Market and the exercise price
of the options, multiplied by the number of Shares issued upon exercise of
the options. The value realized was determined without considering any
taxes which may have been owed.
(2) Represents the difference between the closing price per Share as reported
on The Nasdaq National Market on December 31, 1997 ($2.94) and the
exercise price of the options, multiplied by the number of Shares issuable
upon exercise of the options.
ARRANGEMENTS REGARDING TERMINATION OF EMPLOYMENT
Each of Mr. Yablonsky, Mr. Manzetti, Dr. Russell and Mr. Kalustyan have
entered into Employment Agreements with Parent. See "Agreements with Parent
and the Purchaser--Employment Agreement with Dennis Yablonsky," "--Employment
Agreement with John Manzetti," "--Employment Agreement with Bruce Russell" and
"--Employment Agreement with Raymond Kalustyan" in Item 3 of the Schedule 14D-
9. In addition, each of such employees previously had entered into a Severance
Agreement with the Company, which agreement provided for severance pay and the
immediate vesting and exercisability of all options in the event of a "Change
of Control," the definition of which includes the commencement of the Offer.
The Severance Agreements have been terminated in connection with the Offer,
although the exercisability of the options remains in force.
COMPENSATION OF DIRECTORS
Directors do not receive compensation for serving as members of the Company
Board or committees thereof or reimbursement of travel or other expenses
relating to attendance at meetings of the Company Board or committees thereof.
S-5
<PAGE>
Upon his appointment to the Company Board in May 1992, Mr. Chatfield was
granted options to purchase 4,000 Shares at an exercise price of $1.65 per
Share, and in March 1995, Mr. Chatfield was granted options to purchase 2,000
Shares at an exercise price of $4.65 per Share. All of these stock options are
subject to a vesting schedule, and unexercised options terminate 90 days after
Mr. Chatfield ceases to be a director.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
From January 1, 1997 through December 31, 1997, the Compensation Committee
of the Company Board consisted of Dr. Reddy, Mr. Chatfield and Tracie Muesing,
who resigned her position on the Company Board, effective as of May 11, 1998.
The Compensation Committee is empowered to recommend to the Company Board
compensation decisions for the Company's executive officers.
CERTAIN TRANSACTIONS
During 1997, the Company derived revenue of approximately $3.4 million from
the provision of software services to US WEST Communications, Inc. ("US
WEST"). The Company is a party to certain existing agreements pursuant to
which it will provide software services to US WEST in 1999. US WEST is a
subsidiary of US WEST, Inc., which, based on information publicly filed by US
WEST and described in the Company's Proxy Statement for 1998, is a beneficial
owner of more than 5% of the Shares. In addition, Tracie Muesing, an officer
of US WEST, had served on the Company Board since August 1995 until her
resignation from the Company Board, effective May 11, 1998.
Mr. Yablonsky is party to a loan agreement with the Company dated September
11, 1997 pursuant to which the Company loaned Mr. Yablonsky the principal sum
of $325,000 in connection with the payment of liabilities for income and
employment taxes incurred upon the exercise of a signing bonus stock option
granted to Mr. Yablonsky in 1987. As of August 31, 1998, the outstanding
balance due under the loan agreement, including accrued interest, was
$347,608.77. Under the terms of the loan agreement, in the event of a "Change
in Control," all remaining principal sum as of the date of such Change in
Control, together with all accrued and unpaid interest, will be deemed to have
been paid in full, as was the case upon the commencement of the Offer. Mr.
Yablonsky and the Company entered into a Loan Termination Agreement dated as
of September 30, 1998 to set forth the terms of the loan forgiveness and to
thereafter terminate the loan agreement.
On December 15, 1997, the Company and John Manzetti, a director and
executive officer of the Company, entered into a loan agreement pursuant to
which the Company loaned Mr. Manzetti the principal sum of $250,000, bearing
interest at a rate of 6.39%. As of August 31, 1998, the outstanding balance
due under the loan agreement, including accrued interest, was $263,312.50. The
terms of the loan agreement require repayment on December 30, 1999. The
Employment Agreement dated September 30, 1998 between Parent and Mr. Manzetti,
however, amends the loan agreement as follows: (i) the principal sum, together
with interest, is now required to be repaid in a single installment on the
third anniversary of the Closing Date (as defined therein); (ii) one-half of
the Net Portion of any bonus amount otherwise payable under Mr. Manzetti's
Employment Agreement (a "Bonus Amount") shall, in lieu of being paid to Mr.
Manzetti, be credited against the principal sum due under the loan agreement
("Net Portion" referring to that portion of any Bonus Amount that remains
after Parent has withheld all federal, state and local taxes required to be
withheld from such Bonus Amount); and (iii) in the event of any termination of
Mr. Manzetti's employment, any salary otherwise payable as severance pay
shall, in lieu of being paid to Mr. Manzetti, be credited against the
principal sum then outstanding, plus any accrued interest due thereon.
The Company and Carnegie Mellon University ("CMU"), through its Center for
Machine Translation (the "Center"), are parties to a License and Affiliate
Agreement dated January 31, 1991 (as amended, the "License Agreement") and a
Subcontract Agreement dated February 1, 1991 (as amended, the "Subcontract
Agreement"). The Center is headed by Dr. Jaime Carbonell, a director and
stockholder of the Company. Under the License Agreement, CMU granted to the
Company several perpetual, non-exclusive, worldwide licenses, some of which
are royalty-bearing, to use and distribute certain base software. Also,
pursuant to the License
S-6
<PAGE>
Agreement, the Company became an "affiliate" of the Center, entitled to
certain "affiliate benefits," which include access to Center personnel and
computational resources, copies of technical reports, manuals and other
publications produced by the Center, and copies of any improvements,
modifications, enhancements, revisions, translations, extensions, corrections
and adaptions to such base software. The term of the License Agreement and the
Subcontract agreement continued through December 31, 1997. Pursuant to the
Subcontract Agreement, the Company engages CMU, through the Center, to perform
certain software development services and to furnish certain deliverable
items. All of the deliverables developed under the Subcontract Agreement
belong exclusively to the Company. Expenses incurred under the Subcontract
Agreement and the License Agreement were approximately $400,000 during 1997.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information regarding the beneficial
ownership of the Shares as of October 1, 1998 held by each person who is known
by the Company to have been the beneficial owner of more than five percent of
the Shares on such date, by each director and Named Executive Officer of the
Company and by all directors and executive officers of the Company as a group
(based on 6,556,424 Shares outstanding as of such date). This information does
not reflect the effects, if any, on beneficial ownership as a result of the
obligations of the Stockholder Parties pursuant to the Tender Agreements to
tender and vote their Shares in connection with the Offer and the Merger, nor
does it reflect the effect of accelerated vesting of options as a result of
the Offer. See "Agreements with Parent and the Purchaser--Tender Agreements"
in Item 3 of the Schedule 14D-9 and "Arrangements Regarding Termination of
Employment."
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------------------ ------- -------
<S> <C> <C>
US WEST, Inc................................................. 400,000(1) 6.1%
7800 East Orchard Road
Englewood, CO 80111
Quaker Capital Partners I, L.P. 384,200(2) 5.9%
The Arrott Building
401 Wood Street, Suite 1300
Pittsburgh, PA 15222
Raj Reddy.................................................... 413,000(3) 6.3%
c/o School of Computer Science
Carnegie Mellon University
Pittsburgh, PA 15213
Jaime G. Carbonell........................................... 387,200(4) 5.9%
c/o School of Computer Science
Carnegie Mellon University
Pittsburgh, PA 15213
Mark S. Fox.................................................. 372,776(5) 5.7%
c/o Department of Industrial Engineering
University of Toronto
4 Taddle Creek Road
Toronto, Ontario, Canada
Dennis Yablonsky............................................. 434,394(6) 6.6%
c/o Carnegie Group, Inc.
Five PPG Place
Pittsburgh, PA 15222
</TABLE>
S-7
<PAGE>
<TABLE>
<CAPTION>
SHARES OWNED
BENEFICIALLY
--------------------
NAME AND ADDRESS OF BENEFICIAL OWNER NUMBER PERCENT
- ------------------------------------ --------- -------
<S> <C> <C>
Bruce D. Russell....................................... 239,394(7) 3.7%
John W. Manzetti....................................... 189,394(8) 2.9%
Glen F. Chatfield...................................... 5,000(7) *
All directors and executive officers as a group (8
persons).............................................. 2,041,158(9) 31.1%
</TABLE>
- --------
* Less than 1%
(1) Based on information contained in a Schedule 13G filed by US WEST, Inc.
with the Securities and Exchange Commission on February 14, 1996. As US
WEST, Inc.'s representative in its dealings as a stockholder of the
Company, Tracie Muesing has shared voting power with respect to such
shares. Ms. Muesing has resigned from the Company Board effective May 11,
1998.
(2) Based on information contained in a Schedule 13D filed by Quaker Capital
Partners I, L.P. with the Securities and Exchange Commission on August 12,
1998.
(3) Includes 40,000 Shares issuable upon the exercise of options. Also
includes 100,000 Shares owned by Dr. Reddy's spouse and 200,000 Shares
held by Dr. Reddy's spouse as trustee for trusts for the benefit of Dr.
Reddy's children. Dr. Reddy disclaims beneficial ownership of all 300,000
such Shares.
(4) Includes 40,000 Shares issuable upon the exercise of options. Also
includes 24,000 Shares held by Dr. Carbonell as custodian for his children
under the Pennsylvania Uniform Gifts to Minors Act. Dr. Carbonell
disclaims beneficial ownership of all 24,000 such Shares.
(5) Includes 40,000 Shares issuable upon the exercise of options. Also
includes 1,100 Shares owned by Dr. Fox's spouse and 1,100 Shares held by
Dr. Fox's spouse as custodian for his child under the Pennsylvania Uniform
Gifts to Minors Act. Dr. Fox disclaims beneficial ownership of all 2,200
such Shares.
(6) Includes 326,394 Shares issuable upon the exercise of options.
(7) Consists of Shares issuable upon the exercise of options.
(8) Includes 149,394 Shares issuable upon the exercise of options.
(9) Includes 840,182 Shares issuable upon the exercise of options.
REPORT OF THE COMPENSATION COMMITTEE
The Compensation Committee determines compensation for the Named Executive
Officers.
GENERAL COMPENSATION PHILOSOPHY
The Company's compensation philosophy is that a significant portion of an
executive's income should be based upon financial performance of the Company.
In addition, compensation should reflect not only short-term performance but
should also provide long-term incentives designed to tie the executive's
economic return to the return of the Company's stockholders. Finally, the
Committee believes that as a technology-based company, the Company must
encourage and reward development of new technologies that contribute to the
Company's growth.
S-8
<PAGE>
COMPONENTS OF COMPENSATION
The components of compensation for the Company's executive officers, which
are designed to reflect the compensation philosophy, are addressed below:
(a) Salary. The Company's salary policy is designed to provide salaries to
its executives that have a modest competitive edge over the "market" for
similar technology-based companies. Consideration is given to both general
industry and computer services/software or high technology industry surveys to
determine the appropriate level of salary increases. In addition, the
Committee considers salary and other compensation provided by a group of
comparable companies. For 1997, the Compensation Committee set salaries for
the principal executive officers that represented increases ranging from 3.6%
to 6.0% over their respective 1997 salaries.
(b) Short-Term Incentive Compensation/Bonus Pool. The Company's senior
management executive compensation program is designed to provide short term
incentive bonuses for the achievement of specified performance goals. For
1997, the Compensation Committee approved the allocation of a specified dollar
amount for each executive as an "A Pool" and a "B Pool." The amounts payable
from each pool are based on the following performance criteria: corporate
profit growth (50% of each pool), corporate revenue growth (25%), backlog
(15%) and the creation of new technologies coupled with achievement of a
specified level of revenue from continuing technology (10%). The A Pool is
payable based on the extent to which target goals are achieved, while the B
Pool is payable only if Company performance exceeds one or more of the target
goals. To the extent an A Pool target is not met with respect to one
performance criterion, a pro rata portion of the A Pool allocated to that
criterion may be paid, but only if a minimum threshold is exceeded. In 1997,
the profit growth and revenue growth levels and backlog were below the
threshold and target amounts and the technology growth/revenues from
continuing technology target was met. As a result, each of the principal
executives received 20% of his total A Pool and 0% of his total B Pool.
(c) Profit Sharing. All employees of the Company participate in the
Company's profit sharing plan and receive an equal amount, regardless of their
capacity with the Company. The amount distributed is based on a fixed formula
related to pre-tax profits.
(d) Long-Term Incentive Plan. In 1991, options were granted to all executive
officers under the Carnegie Group, Inc. Long-Term Incentive Plan. The purpose
of this stock option plan was to provide an incentive for the Company's key
management employees to increase their ownership interest in the Company and
to achieve long-term corporate objectives by exerting their efforts to
accelerate the growth of revenue, profit and technology creation. To achieve
this purpose, options were granted with vesting provisions that would not
permit exercise for an extended period of time (nine to ten years), but with
the opportunity to accelerate vesting based on the achievement of profit
growth, revenue growth and technology creation coupled with specified revenue
growth from continuing technology.
Under the plan, an "Annual Available Pool" equal to one-fifth of the
executive's options granted under the plan is used as a base amount for
determining the number of shares underlying the option as to which vesting may
be accelerated in a particular year. The base amount is multiplied by a
percentage (the "Applicable Percentage") allocated to each of the profit
growth, revenue growth and technology creation/revenues from continuing
technology components. The Applicable Percentage ranges from zero to 150% and
is based on a predetermined formula applied to the Company's performance in
these areas. The product of the base amount and the Applicable Percentage is
multiplied by a factor (the "Applicable Factor") of 50% in the case of the
profit growth component, 30% in the case of the revenue growth component and
20% in the case of the technology creation/revenues from continuing technology
component. The profit growth, revenue growth and technology creation/revenue
from continuing technology components as adjusted by their respective
Applicable Factors are added to determine the percentage of the "Annual
Available Pool" subject to accelerated vesting. For 1997, based on the
achievement of the technology/revenues from continuing technology goal,
vesting equal to 20% of the pool was obtained. Accordingly, a number of shares
equal to 20% of the shares in the "Annual Available Pool" qualified for
accelerated vesting and become exercisable in equal increments over the
following
S-9
<PAGE>
three year period. For example, in the case of Messrs. Yablonsky, Russell and
Manzetti, each of whom had 24,000 shares in the "Annual Available Pool" (one
fifth of the 360,000 shares underlying options initially granted to them under
the plan), accelerated vesting was earned with respect to 4,800 shares, with
1,600 shares vesting in each of 1998, 1999 and 2000.
(e) 1995 Stock Option Plan. As is the case with the Long-Term Incentive
Plan, the 1995 Stock Option Plan is designed to provide incentive for the
enhancement of stockholder value, since the full benefit of stock option
grants typically is not realized unless there has been appreciation in per
share values over several years. In connection with grants last year pursuant
to the plan, the determination of the number of options to be granted was not
based on any specific criteria. However, the committee determined that the
grant of options in 1997 was appropriate in recognition of the contribution of
the executive officers over the past several years and as an incentive to
their continued contribution to the Company's success in future years.
COMPENSATION FOR THE CHIEF EXECUTIVE OFFICER
Reference is made to the discussion above with respect to objective criteria
applicable to compensation for executive officers, including Dennis Yablonsky,
the Company's President and Chief Executive Officer.
The Committee believes, based on the information discussed above under
"Salary," that Mr. Yablonsky's salary in 1997, which reflected an increase of
3.6% over his 1996 salary, is consistent with the Committee's policy to
provide a modest competitive edge over the "market" for similar technology-
based companies.
With regard to the senior management incentive compensation program, the
percentage of the A Pool and B Pool paid to Mr. Yablonsky were the same as the
percentages paid to the other principal executive officers. The dollar amount
of Mr. Yablonsky's aggregate bonus pool was higher than the other principal
executive officers, because Mr. Yablonsky's bonus pool reflects the level of
his responsibilities as the Company's principal executive officer.
Mr. Yablonsky's profit sharing payment and accelerated exercisable options
under the Long-Term Incentive Plan were based upon the same factors applicable
to the respective participants in those plans.
INTERNAL REVENUE CODE SECTION 162(M)
The Committee reviewed the potential consequences of Section 162(m) of the
Internal Revenue Code with respect to executive compensation. Section 162(m)
imposes a limit on tax deductions for annual compensation in excess of
$1,000,000 paid to any of the five most highly compensated executive officers.
The Company does not anticipate that Section 162(m) will have an adverse
effect on the Company in the short-term. In this regard, base salary and bonus
levels are expected to remain well below the $1,000,000 limitation in the
foreseeable future. In addition, the 1995 Stock Option Plan has been designed
to qualify potential benefits under that plan as "performance based"
compensation which may be excluded from the compensation used to determine the
$1,000,000 limitation. Over the longer term, the Committee will continue to
examine the effects of this tax provision and will monitor the level of
compensation paid to the executive officers in order to ameliorate, to the
extent possible, the potential adverse effects of Section 162(m).
DR. RAJ REDDYGLEN F. CHATFIELD
S-10
<PAGE>
COMPARISON OF CUMULATIVE TOTAL RETURN SINCE NOVEMBER 29, 1995
The following graph shows the cumulative total stockholder return on the
Shares from November 29, 1995 (the first day of trading of the Shares upon the
Company's initial public offering) through December 31, 1997, as compared to
the returns of The Nasdaq National Market Composite Index and the Nasdaq
Computer and Data Processing Services Stock Index. The graph assumes that $100
was invested in the Shares on November 29, 1995 and in The Nasdaq National
Market Composite Index and the Nasdaq Computer and Data Processing Services
Stock Index and assumes reinvestment of dividends.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
NOVEMBER 29, 1995 DECEMBER 31, 1995 DECEMBER 31, 1996 DECEMBER 31, 1997
----------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C>
Carnegie Group, Inc. ..................... 100 103 74 31
Nasdaq National Market Composite Index.... 100 100 123 150
Nasdaq Computer and Data Processing
Services Stock Index.................... 100 98 121 149
</TABLE>
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Under Section 16(a) of the Securities Exchange Act of 1934, as amended, the
Company's directors, officers and persons who are directly or indirectly the
beneficial owners of more than 10% of the Shares are required to file with the
Commission, within specified monthly and annual due dates, a statement of
their initial beneficial ownership and all subsequent changes in ownership of
Shares. Rules of the Commission require such persons to furnish the Company
with copies of all Section 16(a) forms they file. Based solely upon a review
of such forms, the Company believes that, during the year ended December 31,
1997, all such persons complied with all applicable filing requirements, other
than Dennis Yablonsky, the Company's President and Chief Executive Officer,
who filed late one report with respect to the exercise of an option to
purchase 108,000 Shares.
S-11
<PAGE>
ANNEX I
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER AND PARENT
The following tables set forth the name, age, current business address and
present principal occupation and citizenship or employment, and material
occupations, positions, offices or employment for the past five years of each
director and executive officer of the Purchaser and Parent. The current
business address of each such person is 32 Hartwell Avenue, Lexington,
Massachusetts 02421, except the current business address for each of Mr. Given
and Dr. Read is Stephenson House, 75 Hampstead Road, London NW1 2PL, United
Kingdom. Each such person is a citizen of the United States except for Messrs.
Webb and Given, Dr. Read and Ms. Horsfall who are citizens of the United
Kingdom.
DIRECTORS AND EXECUTIVE OFFICERS OF THE PURCHASER
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE PURCHASER
- ---- --- ---------------------------
<S> <C> <C>
Corey Torrence.................................. 40 President and Director
Douglas Webb.................................... 37 Vice President and Director
</TABLE>
COREY TORRENCE. Mr. Torrence became the President and a Director of the
Purchaser in connection with its formation in September 1998. Mr. Torrence
joined Parent as President, Chief Executive Officer and a Director in October
1997 and has been an Executive Committee Member of Logica plc since October
1997. He was previously employed by AT&T Solutions, where he was Managing
Partner of the company's Supply Chain Management Consulting Practice from 1995
until 1997. Mr. Torrence served as Vice President and General Manager for the
U.S. Atlantic Region of SHL Systemhouse Inc. from 1993 until 1995.
DOUGLAS WEBB. Mr. Webb became the Vice President and a Director of the
Purchaser in connection with its formation in September 1998. Mr. Webb has
held the position of Chief Financial Officer of Parent since 1997 and has also
served as a Director of Parent since January 1996. From April 1997 to December
1997, Mr. Webb served as the Executive Vice President of the Communications
Division of Parent. From 1996 to 1997, he held the position of Chief Operating
Officer of Parent. From 1995 to 1996, he held the position of Chief Financial
Officer of Parent. He was also Group Financial Controller of Logica plc from
1994 to 1995. He was previously employed by Price Waterhouse, where he was
employed as a Senior Manager from 1990 to 1994.
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PARENT
- ---- --- --------------------
<S> <C> <C>
Corey Torrence....... 40 President, Chief Executive Officer and Director
Douglas Webb......... 37 Chief Financial Officer and Director
Karen Roche.......... 47 Executive Vice President--Financial Services Division
Mike Maloney......... 42 Executive Vice President--Communications Division
Pauline Horsfall..... 39 Vice President--Human Resources
Jim Cypert........... 62 Vice President--Asset and Resource Management and
Acting Vice President--Energy and Utilities Division
Dr. Martin Read...... 48 Director
Andrew Given......... 50 Director
</TABLE>
<PAGE>
COREY TORRENCE. Mr. Torrence joined Parent as President, Chief Executive
Officer and a Director in October 1997 and has been an Executive Committee
Member of Logica plc since October 1997. He was previously employed by AT&T
Solutions, where he was Managing Partner of the company's Supply Chain
Management Consulting Practice from 1995 until 1997. Mr. Torrence served as
Vice President and General Manager for the U.S. Atlantic Region of SHL
Systemhouse Inc. from 1993 until 1995.
DOUGLAS WEBB. Mr. Webb has held the position of Chief Financial Officer of
Parent since 1997 and has also served as a Director of Parent since January
1996. From April 1997 to December 1997, Mr. Webb served as the Executive Vice
President of the Communications Division of Parent. From 1996 to 1997, he held
the position of Chief Operating Officer of Parent. From 1995 to 1996, he held
the position of Chief Financial Officer of Parent. He was also Group Financial
Controller of Logica plc from 1994 to 1995. He was previously employed by
Price Waterhouse, where he was employed as a Senior Manager from 1990 to 1994.
KAREN ROCHE. Ms. Roche was appointed Executive Vice President--Financial
Services Division of Parent in 1997. She was previously employed as Vice
President--Financial Products Group of Parent from 1996 to 1997 and Vice
President--Wholesale Banking Division of Parent from 1993 to 1995.
MIKE MALONEY. Mr. Maloney joined Parent as Executive Vice President--
Communications Division in 1997. He was previously employed by Ameritech,
where he served in various capacities from 1995 to 1997, including: General
Manager--Managed Services, Acting Vice President--Alliance Business Sales, and
General Manager--Alliance Business Planning. Mr. Maloney served as Managing
Director--Networked Systems Management Business Development for SHL
Systemhouse from 1993 to 1995.
PAULINE HORSFALL. Ms. Horsfall joined Parent as Vice President--Human
Resources in 1997. She was previously employed by Logica plc, where she was
Management Development and Training Manager from 1995 to 1997. Ms. Horsfall
served as Director of Human Resources, Sensors Group for Thorn EMI Electronics
from 1993 to 1995.
JIM CYPERT. Mr. Cypert has served as Vice President--Asset and Resource
Management and Acting Vice President--Energy and Utilities Division of Logica
Inc. since 1998. At Parent, Mr. Cypert was also employed as Vice President--
Marketing for the Energy and Utilities Division from 1996-1998. From 1993 to
1996, Mr. Cypert was Vice President of Integration Services for the Synercom
Division at Parent.
DR. MARTIN READ. Dr. Read has been a Director of Parent since October 1993.
Since 1993, he has also been Managing Director and the Chief Executive of
Logica plc. From 1990 to 1993, Dr. Read served as Managing Director of GEC
Marconi Radar and Control Systems Limited and Associated Companies.
ANDREW GIVEN. Mr. Given has been a Director of Parent since April 1994. Mr.
Given has also been on the board of Logica plc as Group Finance Director since
April 1990 and has served as Company Secretary for Logica plc since June 1993.
<PAGE>
ANNEX II
DIRECTORS AND EXECUTIVE OFFICERS OF LOGICA PLC
The following table sets forth the name, age, current business address and
present principal occupation or employment, and material occupations,
positions, offices or employment for the past five years of each director and
executive of Logica plc. The current business address of each such person is
Stephenson House, 75 Hampstead Road, London NW1 2PL, United Kingdom, except
the current business address for each of Messrs. Craig and De Meyere is
Wijnhaven 69, 3011 WJ Rotterdam, The Netherlands, and for Mr. Torrence is
32 Hartwell Avenue, Lexington, Massachusetts 02421. Each such person is a
citizen of the United Kingdom, except Mr. De Meyere, who is a citizen of the
Kingdom of Belgium, Mr. Mamsch, who is a citizen of Germany, Mr. Torrence, who
is a citizen of the United States of America and Mr. Vinken, who is a citizen
of The Netherlands.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Sir Frank Barlow........ 68 Non-Executive Chairman, Board Member, Executive Committee
Member and Non-Executive Director
Dr. Martin Read......... 48 Managing Director and Chief Executive, Board Member and
Executive Committee Member
Mario Anid.............. 40 Executive Committee Member and Corporate Development Director
Duncan Craig............ 49 Board Member, Executive Committee Member and Regional Director for
Continental European Operations
Wilfried De Meyere...... 45 Executive Committee Member and Regional Director
for Continental European Operations
Elizabeth Filkin........ 57 Non-Executive Director
Andrew Given............ 50 Board Member, Executive Committee Member, Group Finance
Director and Company Secretary
Royston Hoggarth........ 36 Executive Committee Member and Director of International
Lines of Business
Laurence Julien......... 52 Executive Committee Member and Supervisory Managing Director
of Logica UK Limited
Jim McKenna............. 43 Board Member, Executive Committee Member, Group Personnel
Director and Regional Director for Asia Pacific Region
Helmut Mamsch........... 53 Non-Executive Director
Sam Sassoon............. 53 Executive Committee Member and Supervisory
Managing Director of Logica UK Limited
Corey Torrence.......... 40 Executive Committee Member and President and Chief Executive
Officer of Logica Inc.
Dr. Pierre Vinken....... 70 Non-Executive Director
Richard Wakeling........ 51 Non-Executive Director
</TABLE>
SIR FRANK BARLOW. Sir Frank joined the board as a Non-Executive Director in
January 1995 and became Chairman in November 1995. Among the many companies of
which Sir Frank serves as Director, he has served as a Director of the
Economist Newspaper Ltd since 1984 and served as Managing Director of Pearson
plc from 1986 until his retirement at the end of 1996. Sir Frank was knighted
in the Queen's New Year's Honours List 1998 for services to the newspaper
industry.
<PAGE>
DR. MARTIN READ. Dr. Read joined the board as Managing Director and Chief
Executive in July 1993. He has also served as a Director of Parent since
October 1993. From 1990 to 1993, Dr. Read served as Managing Director of GEC
Marconi Radar and Control Systems Limited and associated companies.
MARIO ANID. Mr. Anid joined the Executive Committee in 1995 as Corporate
Development Director. He was previously Corporate Development Director at Sema
Group plc from 1993 until 1995.
DUNCAN CRAIG. Mr. Craig joined the board in 1991 and is Regional Director
for Continental European Operations. He joined Logica plc in 1971 and has been
based in The Netherlands since 1974.
WILFRIED DE MEYERE. Mr. De Meyere joined the Executive Committee in July
1998 as Regional Director for Continental European Operations. From 1994 to
1998, he was Managing Director of Logica BV. From 1992 to 1996, Mr. De Meyere
was the Chief Executive of Logica SA/NV.
ELIZABETH FILKIN. Ms. Filkin joined the board as a Non-Executive Director in
January 1995. Ms. Filkin has also been the Adjudicator for the Inland Revenue,
Customs and Excise, Contributions Agency and Contributions Unit Northern
Ireland since June 1993. She has also served as a Non-Executive Director at
the Britannia Building Society since 1992.
ANDREW GIVEN. Mr. Given joined the board as Group Finance Director in April
1990 and has served as the Company Secretary since June 1993. Mr. Given has
also served as a Director of Parent since April 1994.
ROYSTON HOGGARTH. Mr. Hoggarth joined the Executive Committee in December
1997, as Director of International Lines of Business, responsible for Finance,
Telecoms and Energy and Utilities. From 1993 to 1997, Mr. Hoggarth served as
General Manager at IBM, where he was responsible for the group's retail brands
worldwide.
LAURENCE JULIEN. Mr. Julien joined the Executive Committee in 1996 as
Supervisory Managing Director of Logica UK Limited. He joined Logica in 1980
and has held line management positions since 1984.
JIM MCKENNA. Mr. McKenna joined the Executive Committee in 1993 as Group
Personnel Director and was appointed to the board in February 1998. Since 1996
he has also been the Regional Director for the Asia Pacific Region. From 1985
to 1993, Mr. McKenna served as Personnel Director of GEC Marconi Radar and
Control Systems Limited and associated companies.
HELMUT MAMSCH. Mr. Mamsch joined the board as a Non-Executive Director in
September 1997. He has also served as Director of VEBA AG since January 1998
and a Director of MEMEC Inc. (USA) since May 1998. From 1989 until 1996, Mr.
Mamsch served as Director of Raab Karcher U.K., Ltd.
SAM SASSOON. Mr. Sassoon joined the Executive Committee in November 1996 as
a Supervisory Managing Director of Logica UK Limited. From January 1993 until
June 1996, Mr. Sassoon served as Vice President and General Manager of the
European outsourcing group of Unisys.
COREY TORRENCE. Mr. Torrence joined the Executive Committee in October 1997
as President and Chief Executive of Parent. He has also served as a Director
of Parent since October 1997. From 1995 until 1997, Mr. Torrence served as
Managing Partner of the Supply Chain Management Consulting Practice for AT&T
Solutions. From 1993 until 1995, Mr. Torrence served as Vice President and
General Manager for the U.S. Atlantic Region of SHL Systemhouse Inc.
PIERRE VINKEN. Mr. Vinken joined the board in April 1990 and is a Non-
Executive Director, having previously served on the board of directors for
Logica BV since 1985. He was formerly chairman of Reed Elsevier plc until his
retirement in 1995. He was also a director of Pearson plc and The Economist
Group.
RICHARD WAKELING. Mr. Wakeling joined the board as a Non-Executive Director
in January 1995. He is a Non-Executive Director of Staveley Industries, Oxford
Instruments, and Henderson Geared Income & Growth Trust. He is also Chairman
of Henderson Technology Trust.
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
Exhibit (a)(1) Offer to Purchase dated October 7, 1998/1/*
Exhibit (a)(2) Letter of Transmittal/1/*
Exhibit (a)(3) Letter to Stockholders of Carnegie Group, Inc. dated October
7, 1998 from Dennis Yablonsky, President and Chief Executive
Officer of Carnegie Group, Inc./1/*
Exhibit (a)(4) Opinion of Updata Capital, Inc., dated September 30, 1998/1/*
Exhibit (a)(5) Opinion of Parker/Hunter Incorporated, dated September 30,
1998/1/*
Exhibit (a)(6) Press Release issued by Carnegie Group, Inc., dated October 1,
1998/2/
Exhibit (c)(1) Agreement and Plan of Merger dated as of September 30, 1998 by
and among Logica Inc., Logica Acquisition Corp. and Carnegie
Group, Inc./2/
Exhibit (c)(2) Tender Agreement dated as of September 30, 1998 by and among
Logica Inc., Logica Acquisition Corp., Carnegie Group, Inc.
and Raj Reddy, Anuradha Reddy, Anuradha Reddy as Trustee of
the Geetha Reddy Trust and Anuradha Reddy as Trustee of the
Shyamala Reddy Trust/2/
Exhibit (c)(3) Tender Agreement dated as of September 30, 1998 by and among
Logica Inc., Logica Acquisition Corp., Carnegie Group, Inc.
and Jaime Carbonell, Jaime Carbonell as Custodian for Diana
Carbonell, Jaime Carbonell as Custodian for Isabelle
Carbonell, Jaime Carbonell as Custodian for Ruben Carbonell,
Jaime Carbonell as Custodian for Rachel Carbonell, Jaime
Carbonell in Trust for Diana Carbonell, Jaime Carbonell in
Trust for Isabelle Carbonell, Jaime Carbonell in Trust for
Ruben Carbonell and Jaime Carbonell in Trust for Rachel
Carbonell/2/
Exhibit (c)(4) Tender Agreement dated as of September 30, 1998 by and among
Logica Inc., Logica Acquisition Corp., Carnegie Group, Inc.
and Mark S. Fox, Tressa S. Fox and Tressa S. Fox in Trust for
Jacob Fox/2/
Exhibit (c)(5) Tender Agreement dated as of September 30, 1998 by and among
Logica Inc., Logica Acquisition Corp., Carnegie Group, Inc.
and Dennis Yablonsky and Veronica Yablonsky/2/
Exhibit(c)(6) Tender Agreement dated as of September 30, 1998 by and among
Logica Inc., Logica Acquisition Corp., Carnegie Group, Inc.
and John W. Manzetti/2/
Exhibit (c)(7) Employment Agreement dated as of September 30, 1998 between
Logica Inc. and Dennis Yablonsky1
Exhibit (c)(8) Employment Agreement dated as of September 30, 1998 between
Logica Inc. and John Manzetti1
Exhibit (c)(9) Employment Agreement dated as of September 30, 1998 between
Logica Inc. and Bruce Russell1
Exhibit (c)(10) Employment Agreement dated as of September 30, 1998 between
Logica Inc. and Raymond Kalustyan1
Exhibit (c)(11) Mutual Confidential Non-Disclosure Agreement dated August 27,
1998 between Carnegie Group, Inc. and Logica Inc., as amended
by letter dated September 22, 19981
Exhibit (c)(12) Severance Termination Agreement dated as of September 30, 1998
between Carnegie Group, Inc. and Dennis Yablonsky1
Exhibit (c)(13) Severance Termination Agreement dated as of September 30, 1998
between Carnegie Group, Inc. and John Manzetti1
Exhibit (c)(14) Severance Termination Agreement dated as of September 30, 1998
between Carnegie Group, Inc. and Bruce Russell1
Exhibit (c)(15) Severance Termination Agreement dated as of September 30, 1998
between Carnegie Group, Inc. and Raymond Kalustyan1
Exhibit (c)(16) Loan Termination Agreement dated as of September 30, 1998
between Carnegie Group, Inc. and Dennis Yablonsky1
</TABLE>
- --------
*Included in copies mailed to stockholders by Carnegie Group, Inc., Logica
Inc. or Logica Acquisition Corp.
/1/Filed herewith.
/2/Previously filed as an exhibit to the Form 8-K filed with the Securities
and Exchange Commission by Carnegie Group, Inc. on October 6, 1998.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
CARNEGIE GROUP, INC.
BY
LOGICA ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY
OF
LOGICA INC.,
A WHOLLY OWNED SUBSIDIARY
OF
LOGICA PLC
AT
$5.00 PER SHARE NET
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON WEDNESDAY, NOVEMBER 4, 1998, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which would represent at least a majority of all issued and outstanding
Shares on a fully diluted basis. See Introduction and Section 13.
THE BOARD OF DIRECTORS OF CARNEGIE GROUP, INC., BY THE UNANIMOUS VOTE OF ALL
DIRECTORS, HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF CARNEGIE GROUP, INC. AND ITS STOCKHOLDERS, HAS APPROVED THE
OFFER, THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT THE HOLDERS OF
SHARES OF CARNEGIE GROUP, INC. ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
---------------
IMPORTANT
Any holder of Shares desiring to tender all or any portion of such Shares
should either (i) complete and sign the enclosed Letter of Transmittal (or
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificates representing
tendered Shares, and any other required documents, to the Depositary or tender
such Shares pursuant to the procedures for book-entry transfer set forth in
Section 3 or (ii) request such holder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for such holder. Any holder
whose Shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee if such holder desires to tender such
Shares.
A holder who desires to tender Shares and whose certificates representing
such Shares are not immediately available, or who cannot comply with the
procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, may tender such Shares by following the procedures for
guaranteed delivery set forth in Section 3.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other tender offer materials may be
directed to the Dealer Manager or to the Information Agent at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase. Holders of Shares may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
October 7, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
INTRODUCTION............................................................. 1
1. Terms of the Offer................................................. 2
2. Acceptance for Payment and Payment for Shares...................... 4
3. Procedure for Accepting the Offer and Tendering Shares............. 5
4. Withdrawal Rights.................................................. 8
5. Certain Federal Income Tax Consequences............................ 8
6. Price Range of the Shares; Dividends............................... 9
7. Effect of the Offer on the Market for the Shares; Stock Quotation;
Exchange Act Registration; Margin Regulations..................... 10
8. Certain Information Concerning the Company......................... 11
9. Certain Information Concerning Purchaser, Parent and Logica plc.... 13
10. Background of the Offer; Contacts with the Company................. 17
Purpose of the Offer and Merger; The Merger Agreement and the
11. Tender Agreements.................................................. 19
12. Source and Amount of Funds......................................... 31
13. Certain Conditions of the Offer.................................... 31
14. Dividends and Distributions........................................ 33
15. Certain Legal Matters.............................................. 33
16. Fees and Expenses.................................................. 35
17. Miscellaneous...................................................... 35
Annex I--Information with Respect to Directors
and Executive Officers of Purchaser and Parent.................... I-1
Annex II--Information with Respect to Directors
and Executive Officers of Logica plc.............................. II-1
</TABLE>
i
<PAGE>
To the Holders of Common Stock of Carnegie Group, Inc.:
INTRODUCTION
Logica Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of Logica Inc., a Delaware corporation ("Parent"), hereby
offers to purchase all outstanding shares of common stock, par value $.01 per
share (the "Shares"), of Carnegie Group, Inc., a Delaware corporation (the
"Company"), at a purchase price of not less than $5.00 per Share, net to the
seller in cash without interest (the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which together constitute the "Offer").
Parent has formed Purchaser in connection with the Offer and the Merger
Agreement (as such term is hereinafter defined). Parent is a wholly owned
subsidiary of Logica plc, a public limited company organized under the laws of
England ("Logica plc" and, together with its subsidiaries, "Logica"). For
information concerning Purchaser, Parent and Logica plc, see Section 9.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 30, 1998 (the "Merger Agreement"), by and among the Company,
Parent and Purchaser. Pursuant to the Merger Agreement, and subject to the
terms and conditions thereof, Purchaser will be merged with and into the
Company (the "Merger"). At the effective time of the Merger (the "Effective
Time"), (i) each Share not beneficially owned by Parent, Purchaser or any
other direct or indirect subsidiary of Parent immediately prior thereto (other
than those Shares held in the treasury of the Company and Shares held by
holders who perfect any appraisal rights that they may have under Delaware
law) will be canceled and retired and be converted into the right to receive
in cash an amount per Share equal to the highest price per Share paid by
Purchaser pursuant to the Offer, without interest thereon (the "Merger
Consideration"), and (ii) the Company will become a wholly owned subsidiary of
Parent. For a discussion of the terms of the Merger Agreement, see Section 11.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD"), BY THE
UNANIMOUS VOTE OF ALL DIRECTORS, HAS DETERMINED THAT THE OFFER AND THE MERGER
ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS
APPROVED THE OFFER, THE MERGER AGREEMENT AND THE MERGER, AND RECOMMENDS THAT
THE COMPANY'S HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
THE COMPANY BOARD HAS RECEIVED THE OPINIONS OF UPDATA CAPITAL, INC.
("UPDATA") AND PARKER/HUNTER INCORPORATED ("PARKER/HUNTER"), THE COMPANY'S
FINANCIAL ADVISORS, THAT THE CASH CONSIDERATION TO BE RECEIVED BY THE
STOCKHOLDERS OF THE COMPANY PURSUANT TO THE OFFER AND THE MERGER IS FAIR TO
SUCH STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW. COPIES OF THE OPINIONS OF
UPDATA AND PARKER/HUNTER ARE CONTAINED IN THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-
9"), WHICH IS BEING MAILED TO HOLDERS OF SHARES CONTEMPORANEOUSLY HEREWITH,
AND HOLDERS OF SHARES ARE URGED TO READ THE OPINIONS IN THEIR ENTIRETY FOR A
DESCRIPTION OF THE ASSUMPTIONS MADE, FACTORS CONSIDERED AND PROCEDURES
FOLLOWED BY UPDATA AND PARKER/HUNTER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON
A FULLY DILUTED BASIS (THE "MINIMUM SHARE CONDITION"). SEE SECTION 13 FOR
OTHER CONDITIONS OF THE OFFER. THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON WEDNESDAY, NOVEMBER 4, 1998, UNLESS THE OFFER IS EXTENDED.
The Company has represented to Parent and Purchaser that (i) as of October
1, 1998, there were 6,556,424 Shares issued and outstanding, and, since
October 1, 1998, no additional Shares have been issued other than pursuant to
the exercise of Options outstanding on October 1, 1998, and (ii) as of the
date hereof, there are 1,563,876 Shares issuable upon the exercise of
outstanding stock options granted pursuant to the Company's employee stock
option plans (the "Options").
1
<PAGE>
Pursuant to the Merger Agreement, immediately prior to the Effective Time,
the Company will take all necessary actions so that each Option which is
outstanding (whether or not exercisable) and which has not been exercised or
canceled prior thereto will be surrendered to Parent and will be forthwith
canceled. Upon cancellation, the holder of an Option will be entitled to
receive in settlement thereof a payment from the Company equal to the product
of (i) the total number of Shares subject to such Option and (ii) the excess,
if any, of the Merger Consideration over the exercise price per Share subject
to such Option. See Section 11.
Based on the foregoing, Purchaser believes that approximately 4,060,151
Shares must be validly tendered and not withdrawn prior to the expiration of
the Offer in order for the Minimum Share Condition to be satisfied.
Promptly after the purchase of Shares pursuant to the Offer and if required
by Delaware law, the Company has agreed to convene a meeting of its
stockholders to consider and vote upon the approval of the Merger. At such
meeting, Purchaser and Parent have agreed that all of the Shares then
beneficially owned by Parent, Purchaser or any other direct or indirect
subsidiary of Parent will be voted in favor of the Merger. Under the Delaware
General Corporation Law (the "DGCL"), the affirmative vote of the holders of a
majority of the Shares is required to approve the Merger. If the Minimum Share
Condition is satisfied, Purchaser will own a majority of the Shares and,
accordingly, will have sufficient voting power to effect the approval of the
Merger by holders of Shares without the affirmative vote of any other such
holder.
At the Company's request, Purchaser is forwarding with the Offer the
Company's letter to holders of Shares (the "Letter to Holders") and its
Schedule 14D-9 filed by the Company pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), each of which includes information
concerning the position of the Company Board with respect to the Offer and the
Merger. The Schedule 14D-9 also contains certain information pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder (the "Rule 14f-1
Information"), which is being furnished in connection with the possible
designation by Parent, in accordance with the Merger Agreement, of persons to
be elected or appointed to the Company Board. Neither Parent nor Purchaser
assumes any responsibility for the accuracy or completeness of the Letter to
Holders, the Schedule 14D-9 or the Rule 14f-1 Information (other than
information provided by Parent or Purchaser). See Section 11.
Tendering holders will not be obligated to pay brokerage commissions or,
except as set forth in Instruction 7 of the Letter of Transmittal, transfer
taxes on the purchase of Shares by Purchaser pursuant to the Offer. However,
certain tendering holders or other payees who fail to complete and sign the
Substitute Form W-9 that is included in the Letter of Transmittal may be
subject to a required backup federal income tax withholding of 31% of the
gross proceeds payable to such holders or other payees pursuant to the Offer.
See Section 3. Purchaser will pay all charges and expenses of ChaseMellon
Shareholder Services, L.L.C. (the "Depositary"), Donaldson, Lufkin & Jenrette
Securities Corporation, as Dealer Manager (in such capacity, the "Dealer
Manager"), and D.F. King & Co., Inc. (the "Information Agent") incurred in
connection with the Offer. See Section 16.
The directors and executive officers of the Company who beneficially own
Shares have agreed pursuant to Tender Agreements dated September 30, 1998 to
tender all such Shares pursuant to the Offer. As of the date hereof, such
directors and executive officers beneficially owned an aggregate of 1,200,976
Shares, representing approximately 18.3% of the outstanding Shares.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH HOLDERS OF SHARES ARE URGED TO READ CAREFULLY
BEFORE MAKING ANY DECISION WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and
conditions of any extension or amendment), Purchaser will accept for payment
and thereby purchase, all Shares validly tendered prior to the Expiration Date
and not properly withdrawn as permitted by Section 4. The term "Expiration
Date" shall mean 12:00 midnight, New York City
2
<PAGE>
time, on Wednesday, November 4, 1998, unless and until Purchaser, in its sole
discretion (but subject to the terms of the Merger Agreement), shall have
extended the period of time for which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by Purchaser, shall expire. For purposes of this Offer, the
term "business day" shall have the meaning set forth in Rule 14d-1(c)(6)
promulgated under the Exchange Act.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM SHARE CONDITION
AND THE SATISFACTION OF THE OTHER CONDITIONS SET FORTH IN SECTION 13.
Purchaser expressly reserves the right, in its sole discretion, at any time
or from time to time, to modify the terms and conditions of the Offer in
accordance with the terms of the Merger Agreement by giving oral or written
notice of such modification to the Depositary. If the conditions of the Offer
are not satisfied prior to the Expiration Date, Purchaser, subject to the
terms of the Merger Agreement, may (i) decline to accept for payment, or
purchase or pay for, any of the Shares tendered and terminate the Offer, (ii)
extend the Offer and retain the Shares (subject to withdrawal rights as set
forth in Section 4) which have been tendered during the period for which the
Offer is extended, or (iii) waive any one or more of the conditions of or
otherwise amend the Offer. There can be no assurance that Purchaser will
exercise its right to extend the Offer or waive any of the conditions of the
Offer.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), Purchaser also expressly reserves the right, in
its sole discretion (but subject to the terms and conditions of the Merger
Agreement), at any time or from time to time, to (i) delay acceptance for
payment of or, regardless of whether such Shares were theretofore accepted for
payment, payment for any Shares pending receipt of any regulatory or
governmental approvals specified in Section 15 or in order to comply, in whole
or in part, with any applicable law, (ii) terminate the Offer and not accept
for payment or pay for any Shares, upon the occurrence of any of the
conditions specified in Section 13, and (iii) waive any condition or otherwise
amend the Offer in any respect, in each case by giving oral or written notice
of such delay, termination, waiver or amendment to the Depositary. As set
forth in the Merger Agreement, Purchaser has agreed that it will not amend the
Offer to decrease the Offer Price, to change the consideration offered to
holders of Shares into a form other than cash, to change (other than to waive)
the Minimum Share Condition or the other conditions set forth in the Merger
Agreement, or to reduce the maximum number of Shares to be purchased in the
Offer. See Section 13.
Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act
requires Purchaser to pay the consideration offered or return the Shares
tendered promptly after the termination or withdrawal of the Offer, and (ii)
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (i) of the preceding paragraph), any Shares upon the
occurrence of any of the conditions specified in Section 13 without extending
the period of time during which the Offer is open.
Purchaser expressly reserves the right, at any time or from time to time, in
its sole discretion (but subject to the terms and conditions of the Merger
Agreement) to extend for any reason the period during which the Offer is open,
including by reason of the occurrence of any of the conditions specified in
Section 13, by giving oral or written notice of such extension to the
Depositary. During any extension of the Offer, all Shares previously tendered
and not withdrawn will remain subject to the Offer and subject to the right of
the tendering holder to withdraw such holder's Shares. See Section 4.
Any extension, delay in acceptance for payment or payment, termination,
waiver or amendment will be followed as promptly as practicable by public
announcement thereof, and such announcement in the case of an extension will
be issued no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date. Without limiting the
manner in which Purchaser may choose to make any public announcement, subject
to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange
Act, which require that material changes be promptly disseminated to holders
of Shares), Purchaser will have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to the Dow Jones News Service.
3
<PAGE>
Subject to the terms and conditions of the Merger Agreement, if Purchaser
makes a material change in the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer,
Purchaser will extend the Offer and disseminate additional tender offer
materials to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the Offer, other than a change in
price or a change in percentage of securities sought (other than increases of
not more than two percent of the outstanding Shares), will depend upon the
facts and circumstances, including the materiality of the changes. With
respect to a change in price or, subject to certain limitations, a change in
the percentage of securities sought, a minimum period of ten business days
from the date of such change is generally required to allow for adequate
dissemination to securityholders. Accordingly, subject to the terms and
conditions of the Merger Agreement, if, prior to the Expiration Date,
Purchaser increases (other than increases of not more than two percent of the
outstanding Shares) or decreases the number of Shares being sought, or
increases or decreases the consideration offered pursuant to the Offer, and,
if, at the time notice of any such increase or decrease in the number of
Shares being sought or such increase or decrease in the consideration being
offered is first published, sent or given to holders of such Shares, the Offer
is scheduled to expire at any time earlier than the period ending on the tenth
business day from and including the date that such notice is first so
published, sent or given, the Offer will be extended at least until the
expiration of such ten business-day period.
Pursuant to the Merger Agreement, the Company has agreed to furnish promptly
to Purchaser a list of names and addresses of all record holders of Shares and
a security position listing of Shares held in stock depositories, each as of a
recent date, and to promptly furnish Purchaser with such additional
information, including updated lists of shareholders, mailing labels and
security position listings, and such other assistance as Purchaser or its
agents may reasonably request. This Offer to Purchase and the related Letter
of Transmittal will be mailed by Purchaser to record holders of Shares and
will be furnished to brokers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company's
stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment),
Purchaser will accept for payment and thereby purchase, and will pay for,
Shares validly tendered prior to the Expiration Date (and not withdrawn
pursuant to Section 4) as soon as practicable after the latest of (i) the
Expiration Date, and (ii) subject to compliance with Rule 14e-1(c) under the
Exchange Act, the satisfaction or waiver of all conditions to the Offer. See
Sections 13 and 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates for such
Shares, or timely confirmation (a "Book-Entry Confirmation") of the book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company, (the "Book-Entry Transfer Facility"), pursuant to the procedures set
forth in Section 3, (ii) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees, or
an Agent's Message (as such term is hereinafter defined), and (iii) any other
documents required by the Letter of Transmittal. Accordingly, payment may be
made to tendering holders at different times if delivery of Shares and other
required documents occur at different times. UNDER NO CIRCUMSTANCES WILL
INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID, REGARDLESS OF ANY DELAY IN
MAKING SUCH PAYMENT.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered prior to the
Expiration Date and not withdrawn pursuant to Section 4 if, as and when
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms
and subject to the conditions of the Offer, payment for Shares accepted
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for the tendering holders of
Shares for purposes of receiving payments from Purchaser and transmitting such
payments to the tendering holders whose Shares have been accepted for payment.
4
<PAGE>
If Purchaser is delayed in its acceptance for payment or payment for Shares
or is unable to accept for payment or pay for Shares tendered pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may, subject to Rule 14e-1(c) promulgated under the
Exchange Act, retain tendered Shares on behalf of Purchaser, and such Shares
may not be withdrawn except to the extent tendering holders of Shares are
entitled to withdrawal rights as set forth in Section 4. Purchaser will pay
any stock transfer taxes incident to the transfer and sale to it or its order
of Shares pursuant to the Offer, except as otherwise provided in Instruction 7
to the Letter of Transmittal, as well as charges and expenses of the
Depositary.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates representing
more Shares than are tendered are submitted to the Depositary, certificates
for such unpurchased or untendered Shares will be returned, without expense to
the tendering holder (or, in the case of Shares tendered by book-entry
transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facility pursuant to the procedures set forth in Section 3, such
Shares will be credited to an account maintained within such Book-Entry
Transfer Facility), as soon as practicable following the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration
offered to holders of Shares pursuant to the Offer, such increased
consideration will be paid to all holders whose Shares are purchased pursuant
to the Offer whether or not such Shares have been tendered prior to such
increase in consideration.
Purchaser reserves the right, in its sole discretion, to transfer or assign
to one or more of its affiliates, in whole or in part, the right to purchase
Shares tendered pursuant to the Offer. Any such transfer or assignment will
not relieve Purchaser of its obligations under the Offer and will in no way
prejudice the rights of tendering holders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR ACCEPTING THE OFFER AND TENDERING SHARES.
Valid Tender of Shares. For Shares to be validly tendered pursuant to the
Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or, in the case of
a book-entry transfer, an Agent's Message, and any other required documents,
must be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase and either (i) certificates for such
Shares must be received by the Depositary, together with the Letter of
Transmittal (or facsimile thereof), at such address, or such Shares must be
tendered pursuant to the procedures for book-entry transfer set forth below
and a Book-Entry Confirmation received by the Depositary, in each case prior
to the Expiration Date, or (ii) the guaranteed delivery procedure set forth
below must be complied with.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing such Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
in accordance with such Book-Entry Transfer Facility's procedure for such
transfer. Although delivery of Shares may be effected through book-entry
transfer at the Book-Entry Transfer Facility, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message, and any other required documents,
must, in any case, be transmitted to, and received by, the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Date, or the guaranteed delivery procedure, as described
below, must be complied with. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer
5
<PAGE>
Facility tendering the Shares that such participant has received and agrees to
be bound by the terms of the Letter of Transmittal and that Purchaser may
enforce such agreement against the participant.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc. (the "NASD") or a commercial bank or trust company having an
office or correspondent in the United States (each of the foregoing being
referred to as an "Eligible Institution") which is a participant in an
approved Signature Guarantee Medallion Program, unless the Shares tendered
thereby are tendered (i) by a registered holder of such Shares who has not
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal, or (ii)
for the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If a certificate for Shares is registered in the name of a person other than
the signatory of the Letter of Transmittal, or if payment is to be made, or a
certificate for Shares not accepted for payment or not tendered is to be
returned, to a person other than the registered holder, then such certificate
for Shares must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holder or
holders appear on such certificate for Shares, with the signatures on such
certificate or stock powers guaranteed by an Eligible Institution which is a
participant in an approved Signature Guarantee Medallion Program, as provided
in the Letter of Transmittal. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a holder of Shares desires to tender such Shares
pursuant to the Offer and such holder's certificates evidencing such Shares
are not immediately available, or if the procedure for book-entry transfer
cannot be completed on a timely basis, or such holder cannot deliver the
certificates and all other required documents to the Depositary prior to the
Expiration Date, such Shares may nevertheless be tendered if all of the
following guaranteed delivery procedures are complied with:
(i) such tender is made by or through an Eligible Institution; and
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by Purchaser herewith, is received
by the Depositary, as provided below, prior to the Expiration Date;
and
(iii) the certificates for all physically delivered Shares in proper form
for transfer, or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at the Book-Entry Transfer
Facility, as described above, together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), any
required signature guarantees, or an Agent's Message, and any other
required documents are received by the Depositary within three
National Association of Securities Dealers, Inc. Automated Quotation
System (the "Nasdaq Stock Market") trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a signature guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares or of a Book-Entry Confirmation relating to such
Shares, (ii) either a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, or
an Agent's Message, and (iii) any other required documents.
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL
AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER OF
SHARES, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
6
<PAGE>
REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Appointment as Proxy. BY EXECUTING A LETTER OF TRANSMITTAL OR BY CAUSING THE
TRANSMISSION OF AN AGENT'S MESSAGE AS SET FORTH ABOVE, A TENDERING HOLDER OF
SHARES IRREVOCABLY APPOINTS DESIGNEES OF PURCHASER AS HIS PROXIES, WITH FULL
POWER OF SUBSTITUTION IN THE MANNER SET FORTH IN THE LETTER OF TRANSMITTAL, TO
THE FULL EXTENT OF SUCH HOLDER'S RIGHTS WITH RESPECT TO THE SHARES TENDERED BY
SUCH HOLDER AND ACCEPTED FOR PAYMENT BY PURCHASER AND WITH RESPECT TO ANY AND
ALL OTHER SHARES OR OTHER SECURITIES ISSUED OR ISSUABLE IN RESPECT OF SUCH
SHARES ON OR AFTER THE DATE OF THE MERGER AGREEMENT. All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, Purchaser accepts such
Shares for payment. Upon such appointment, all prior proxies given by such
holder (with respect to such Shares and such other Shares and securities) will
be revoked, without further action, and no subsequent proxies may be given nor
any subsequent written consent executed by such holder (and, if given or
executed, will not be deemed effective). Purchaser's designees will, with
respect to the Shares for which the appointment is effective, be empowered to
exercise all voting and other rights of such holder as they in their sole
discretion may deem proper at any annual or special meeting of holders of
Shares or any adjournment or postponement thereof, by written consent in lieu
of such meeting or otherwise. Purchaser reserves the right to require that, in
order for Shares to be validly tendered, immediately upon the acceptance for
payment of such Shares, Purchaser must be able to exercise full voting rights
with respect to such Shares.
Determination of Validity. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by Purchaser, in its sole
discretion, which determination shall be final and binding on all parties.
Purchaser reserves the absolute right to reject any and all tenders determined
by it not to be in proper form or the acceptance for payment of which may, in
the opinion of the Purchaser's counsel, be unlawful. Purchaser also reserves
the absolute right to waive or amend any of the conditions of the Offer
(subject to the terms and conditions of the Merger Agreement) or any defect or
irregularity in the tender of any Shares of any holder, whether or not similar
defects or irregularities are waived in the case of other holders of Shares.
No tender of Shares will be deemed to have been validly made until all defects
and irregularities have been cured or waived. None of Parent, Purchaser,
Logica plc, the Depositary, the Information Agent, the Dealer Manager or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or shall incur any liability for failure to give any
such notification. Purchaser's interpretation of the terms and conditions of
the Offer (including the Letter of Transmittal and instructions thereto) will
be final and binding.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering holder's acceptance of the terms and conditions
of the Offer, as well as the tendering holder's representation and warranty
that (i) such holder owns the Shares being tendered within the meaning of Rule
14e-4 promulgated under the Exchange Act, and (ii) the tender of such Shares
complies with Rule 14e-4.
The acceptance for payment of Shares by Purchaser pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering holder and Purchaser upon the terms and subject to the conditions of
the Offer.
Backup Federal Tax Withholding. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING ON PAYMENTS OF CASH PURSUANT TO THE OFFER, A TENDERING HOLDER OF
SHARES MUST PROVIDE THE DEPOSITARY WITH SUCH HOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER ("TIN") AND CERTIFY THAT SUCH HOLDER IS NOT SUBJECT TO
BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED AS PART OF THE LETTER OF TRANSMITTAL. IF A HOLDER OF SHARES DOES NOT
PROVIDE SUCH HOLDER'S CORRECT TIN OR FAILS TO PROVIDE THE CERTIFICATIONS
DESCRIBED ABOVE, THE INTERNAL REVENUE SERVICE (THE "IRS") MAY IMPOSE A PENALTY
ON SUCH HOLDER AND THE PAYMENT OF CASH TO SUCH HOLDER PURSUANT TO THE OFFER
MAY BE SUBJECT TO BACKUP WITHHOLDING OF 31%. ALL HOLDERS SURRENDERING SHARES
PURSUANT TO THE OFFER SHOULD COMPLETE AND SIGN THE MAIN SIGNATURE FORM AND THE
SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE LETTER OF TRANSMITTAL TO PROVIDE
THE INFORMATION AND CERTIFICATION NECESSARY TO AVOID BACKUP WITHHOLDING
(UNLESS AN APPLICABLE EXEMPTION
7
<PAGE>
EXISTS AND IS PROVED IN A MANNER SATISFACTORY TO PURCHASER AND THE
DEPOSITARY). CERTAIN HOLDERS OF SHARES (INCLUDING, AMONG OTHERS, ALL
CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS AND ENTITIES) ARE NOT SUBJECT TO
BACKUP WITHHOLDING. SEE SECTION 5 AND INSTRUCTION 9 OF THE LETTER OF
TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Except as otherwise stated in this Section 4, tenders
of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant
to the Offer may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer,
may also be withdrawn at any time after December 5, 1998. If Purchaser extends
the Offer, is delayed in its acceptance for payment of Shares or is unable to
accept Shares for payment pursuant to the Offer for any reason, then, without
prejudice to the Purchaser's rights under the Offer, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that tendering holders are entitled
to, and duly exercise, withdrawal rights as described in this Section 4. Any
such delay will be by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the names
in which the certificates evidencing the Shares to be withdrawn are
registered, if different from that of the person who tendered such Shares. If
certificates for Shares have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the
tendering holder must also submit the serial numbers shown on the particular
certificates representing the Shares to be withdrawn and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution which
is a participant in an approved Signature Guarantee Medallion Program, except
in the case of Shares tendered for the account of the Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer
set forth in Section 3, any notice of withdrawal must also specify the name
and number of the account at the appropriate Book-Entry Transfer Facility to
be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
which determination will be final and binding on all parties. None of Parent,
Purchaser, Logica plc, the Depositary, the Information Agent, the Dealer
Manager or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability
for failure to give such notification.
Any Shares properly withdrawn will be deemed not to have been validly
tendered for purposes of the Offer, but may be retendered at any subsequent
time prior to the Expiration Date by again following one of the procedures
described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer (or pursuant to the Merger) will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign and other tax laws. In
general, for federal income tax purposes, a holder of Shares will recognize
gain or loss upon such exchange equal to the difference between such holder's
adjusted tax basis in the Shares sold in the Offer and the amount of cash
received in exchange therefor. Such gain or loss generally will be capital
gain or loss for federal income tax purposes if the Shares were held as
capital assets.
Under the Internal Revenue Code of 1986, as amended (the "Code"), the
maximum marginal federal income tax rate applicable to net capital gain (the
excess of net long-term capital gain over net short-term capital loss)
recognized by individuals is 20%; for corporate taxpayers, the maximum
marginal federal income tax rate applicable to net capital gain is 35%. Excess
short-term and long-term capital losses may be deducted by a noncorporate
taxpayer against ordinary income only in an amount not to exceed $3,000 in any
year; capital losses are deductible by corporations only against capital
gains.
8
<PAGE>
The foregoing discussion may not apply to Shares acquired by a holder
pursuant to an employee stock plan or otherwise as compensation, to holders
who are not citizens or residents of the United States or to other categories
of holders subject to special treatment under federal income tax laws, such as
dealers in securities, banks, insurance companies and tax-exempt entities.
A holder of Shares (other than certain exempt holders) who tenders Shares
may be subject to 31% backup federal income tax withholding unless the holder
provides such holder's TIN and certifies that such TIN is correct or properly
certifies that such holder is awaiting a TIN. A holder of Shares who does not
furnish such holder's TIN may be subject to a penalty imposed by the IRS. Each
holder should complete and sign the Substitute Form W-9 included as part of
the Letter of Transmittal to provide the information and certification
necessary to avoid backup withholding. See Section 3.
If backup withholding applies, the payor is required to withhold 31% from
payments. This is not an additional tax; the amount of the backup withholding
can be credited against the tax liability of the person subject to the backup
withholding. If backup withholding results in an overpayment of tax, a refund
can be obtained upon filing an income tax return.
THE FOREGOING SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
OFFER IS INCLUDED FOR GENERAL INFORMATION ONLY. DUE TO THE INDIVIDUAL NATURE
OF TAX CONSEQUENCES, HOLDERS OF SHARES ARE STRONGLY URGED TO CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECTS OF APPLICABLE
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND OF CHANGES IN THE TAX LAWS UNDER
THE CODE.
6. PRICE RANGE OF THE SHARES; DIVIDENDS. The Shares are traded and are
reported in the Nasdaq National Market under the symbol "CGIX". The following
table sets forth, for the periods indicated, the high and low sales quotations
per Share for which such quotations were reported by the Nasdaq National
Market.
<TABLE>
<CAPTION>
PRICE
---------------
HIGH LOW
------- -------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
First Quarter................................................ $10 1/4 $ 6 5/8
Second Quarter............................................... 10 3/4 8 1/4
Third Quarter................................................ 8 3/4 5
Fourth Quarter............................................... 8 1/2 5 1/4
YEAR ENDED DECEMBER 31, 1997
First Quarter................................................ $ 7 3/4 $ 5 3/8
Second Quarter............................................... 7 3/4 5
Third Quarter................................................ 8 6 1/2
Fourth Quarter............................................... 8 2 13/16
YEAR ENDED DECEMBER 31, 1998
First Quarter................................................ $ 4 $ 2 3/4
Second Quarter............................................... 4 15/32 3 1/8
Third Quarter................................................ 3 3/4 1 1/2
Fourth Quarter (through October 5, 1998)..................... 4 11/16 4 1/16
</TABLE>
On September 30, 1998, the last full trading day prior to the date of the
first public announcement of the Purchaser's intention to commence the Offer
and the last full trading day prior to the commencement of the Offer, the last
reported high and low sales quotations per Share on the Nasdaq National Market
were $2 3/4 and $2 9/16, respectively. Holders of Shares are urged to obtain a
current market quotation for the Shares.
According to the Company's Annual Report on Form 10-K filed for the fiscal
year ended December 31, 1997 (the "1997 10-K"), the Company has never declared
or paid cash dividends and has no intention to pay any cash dividends in the
foreseeable future.
9
<PAGE>
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION;
EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS. Purchaser currently anticipates
that, as a result of the purchase of Shares pursuant to the Offer, the number
of Shares that might otherwise trade publicly, and the number of holders of
those Shares, will be substantially reduced. This could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Stock Quotation. Depending upon the subsequent aggregate market value and
price per Share of any Shares not purchased pursuant to the Offer and the
aggregate number of outstanding Shares following consummation of the Offer,
the Shares may no longer qualify for inclusion on the Nasdaq National Market.
According to guidelines published by the NASD, the NASD requires that, to
continue to be designated for inclusion in the Nasdaq National Market, an
issuer must comply with all of the requirements under one of two maintenance
standards. Under the first maintenance standard, an issuer must have (i) at
least 750,000 publicly held shares with a market value of at least $5,000,000,
held by at least 400 shareholders of round lots, (ii) net tangible assets of
at least $4,000,000, (iii) shares with a minimum bid price of $1.00, and (iv)
at least two registered and active market makers. Under the second maintenance
standard, an issuer must have (i) at least 1,100,000 publicly held shares with
a market value of at least $15,000,000, held by at least 400 shareholders of
round lots, (ii) a market capitalization of at least $50 million or total
assets and total revenue of at least $50 million each for the most recently
completed fiscal year or two of the last three most recently completed fiscal
years, (iii) shares with a minimum bid price of $5.00, and (iv) at least four
registered and active market makers.
If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, price and other quotations regarding the shares are no longer
reported by the Nasdaq National Market, the market for the Shares could be
adversely affected. The extent of the public market for the Shares and the
availability of such quotations would, however, depend upon the number of
holders of Shares and/or the aggregate market value of the Shares remaining at
such time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act as described below, and other factors. Neither Parent,
Purchaser nor Logica plc can predict whether the reduction in the number of
Shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for or the marketability of the Shares or whether
it would cause future market prices to be greater or less, on a per share
basis, than the Merger Consideration.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the Commission at any time at which the Shares are not listed on a
national securities exchange or there are fewer than 300 holders of record of
the Shares. The termination of the registration of the Shares under the
Exchange Act would substantially reduce the information required to be
furnished by the Company to holders of Shares and to the Commission and would
make certain provisions of the Exchange Act, such as the requirement of
furnishing a proxy statement in connection with meetings of holders of Shares,
the short-swing profit recovery provisions of Section 16(b) and the
requirements of Rule 13e-3 with respect to "going private" transactions, no
longer applicable with respect to the Shares or the Company, as the case may
be. Furthermore, the ability of "affiliates" of the Company and persons
holding "restricted securities" of the Company to dispose of such securities
pursuant to Rule 144 or Rule 144A promulgated under the Securities Act of
1933, as amended (the "Securities Act"), may be impaired or even eliminated.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be eligible for reporting on the Nasdaq Stock Market or
for continued inclusion on the Federal Reserve Board's (as such term is
hereinafter defined) list of margin securities. Parent, Purchaser and Logica
plc intend to seek to cause the Company to terminate registration of the
Shares under the Exchange Act as soon after consummation of the Offer as the
requirements for such termination of registration are met.
Margin Regulations. The Shares are currently "margin securities," as such
term is defined under the rules of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), which has the effect, among
other things, of allowing brokers to extend credit on the collateral of such
Shares. Depending upon factors similar to those described above regarding
market quotations, it is possible that the Shares might no longer constitute
"margin securities" for purposes of the Federal Reserve Board's margin
regulations and, therefore,
10
<PAGE>
might become ineligible as collateral for margin loans made by brokers. In
addition, if registration of the Shares under the Exchange Act were
terminated, the Shares would no longer constitute "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth
herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been taken from or based upon
publicly available documents and records on file with the Commission and other
publicly available information and is qualified in its entirety by reference
thereto. Although neither Parent, Purchaser nor Logica plc has any knowledge
that would indicate that any statements contained herein based on such
documents and records are untrue, each of Parent, Purchaser and Logica plc
disclaims any and all responsibility for the accuracy or completeness of such
information or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information
but which are unknown to Parent, Purchaser or Logica plc as of the date of
this Offer to Purchase.
The Company is a Delaware corporation with its principal executive offices
located at Five PPG Place, Pittsburgh, PA 15222. According to the Company's
1997 10-K, the Company provides business and technical consulting,
client/server and Internet-based custom software development, third-party
package implementation and systems integration services with a focus on two
business areas in the information technology professional services
marketplace: customer interaction and logistics, planning and scheduling.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Certain information as of particular dates concerning the Company's directors
and officers, their compensation, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons
in transactions with the Company is required to be disclosed in proxy
statements distributed to holders of Shares and filed with the Commission.
Such reports, proxy statements and other information should be available for
inspection at the Public Reference Facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available
for inspection at the Commission's regional offices located at 500 West
Madison Street, Suite 1400, Chicago, IL 60661 and 7 World Trade Center, 13th
Floor, New York, NY 10048. Copies of such materials should be obtainable by
mail, upon payment of the Commission's customary charges, by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other materials that are filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
This Web site can be accessed at http://www.sec.gov. Such materials should
also be available for inspection at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
Selected Summary Financial Information. Set forth below is certain selected
historical consolidated financial information relating to the Company and its
subsidiaries, which has been excerpted or derived from information contained
in the 1997 10-K and the Company's Quarterly Reports on Form 10-Q for the six
month periods ended June 30, 1998 and June 30, 1997, as filed by the Company
with the Commission. More comprehensive financial information is included in
such reports and other documents filed by the Company with the Commission. The
financial information set forth below is qualified in its entirety by
reference to such reports and other documents and all the financial statements
and related notes contained therein.
11
<PAGE>
CARNEGIE GROUP, INC. AND SUBSIDIARIES
SELECTED SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEAR
ENDED JUNE 30, ENDED DECEMBER 31,
------------------------ -----------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
INFORMATION
Total Revenues........ $16,160,150 $14,989,925 $29,406,261 $28,409,048 $25,650,308
Total Costs and
Expenses............. 18,229,987 13,818,288 29,954,868 26,108,632 22,803,188
Income (loss) before
income taxes......... (1,786,901) 1,510,058 181,959 2,927,943 2,849,103
Net income (loss)..... (2,060,379) 909,756 109,592 3,360,156 4,676,029
Basic earnings (loss)
per share............ (0.32) 0.14 0.02 0.54 0.99
BALANCE SHEET (AT END OF
PERIOD)
Working Capital....... $13,711,567 $20,690,884 $18,794,981 $19,793,418 $16,139,276
Total Assets.......... 27,411,668 30,438,785 29,590,804 28,489,255 24,988,635
Total Liabilities..... 5,455,313 5,732,135 5,520,724 4,850,887 5,259,444
Stockholders' Equity.. 21,956,355 24,706,650 24,070,080 23,638,368 19,729,191
</TABLE>
Financial Projections. In the course of the discussions between Logica and
the Company that led to the execution of the Merger Agreement, the Company
provided Logica with certain information which Logica believes is not publicly
available. Such information included projections of the Company's fiscal 1998
and fiscal 1999 operating performance. The Company does not as a matter of
course make public either estimates of its annual results prior to the
completion of its audit or projections as to future performance or earnings,
and such estimated and projected information set forth below are included in
this Offer to Purchase only because the information was provided to Logica.
CARNEGIE GROUP, INC. AND SUBSIDIARIES
SELECTED SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDING
-----------------------------------
DECEMBER 31, 1998 DECEMBER 31, 1999
----------------- -----------------
(ESTIMATED) (ESTIMATED)
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Total Revenues.............................. $33,560 $40,000
Total Costs and Expenses.................... 32,110 35,850
Income (loss) before income taxes........... (452) 4,710
Net income (loss)........................... (1,304) 2,738
Basic earnings (loss) per share............. (0.19) 0.37
</TABLE>
The Company's 1998 and 1999 projections referred to in the table above (the
"1998 Projections" and "1999 Projections," respectively) were developed by the
Company's management and were predicated on management's assumptions with
respect to certain macroeconomic conditions and operating expenses for fiscal
1998 and fiscal 1999, without giving effect to the Offer, the Merger or to any
action to be taken by Logica or the Company, as the surviving corporation of
the Merger, after the Effective Time. For purposes of calculating earnings per
Share shown in the table above for fiscal 1998 and fiscal 1999, the Company
assumed that there were outstanding 6,909,000 and 7,400,000 Shares,
respectively.
The 1998 Projections and 1999 Projections were prepared by the Company's
management in the ordinary course of the Company's quarterly forecasting
process. The Company informed Logica that the 1998 Projections take into
account revenue backlog at June 30, 1998 and assume a normal rate of
conversion of the Company's current pipeline opportunities to deliver revenue
for the balance of the year. The 1998 Projections also assume the continuation
of the Company's business with existing key customers at similar levels.
12
<PAGE>
The Company informed Logica that the 1999 Projections assume: (i) a revenue
growth rate of 20% over fiscal 1998 based on the continued expansion of
business with existing customers, the acquisition by the Company of accounts
with new customers, an increase in business from the Company's strategic
alliance program and inflationary increases in billing rates, (ii) unchanged
overhead costs, with the exception of sales and marketing costs, which were
assumed to generally rise in line with the increase in revenue, (iii) no
significant changes in the level of research and development or capital
expenditures, and (iv) the surplus facilities in Pittsburgh would be subleased
by the end of fiscal 1998.
The foregoing information was not prepared with a view toward complying with
published guidelines of the Commission regarding projections or forecasts or
with the American Institute of Certified Public Accountants Guide for
Prospective Financial Statements. While presented with numerical specificity,
the projections necessarily reflect numerous assumptions (not all of which
were stated in the projections and not all of which were provided to Parent),
including assumptions with respect to industry performance, general business
and economic conditions and the availability and cost of capital, many of
which are inherently uncertain and/or beyond the Company's control.
Accordingly, the foregoing projections are not necessarily indicative of
future performance of the Company, which may be significantly more favorable
or less favorable than as set forth above. Although the projections were one
of many factors considered, they were not material to the decision of Logica
plc, Parent and Purchaser to proceed with the Offer. The inclusion of this
information should not be regarded as an indication that Logica plc, Parent,
Purchaser, Donaldson, Lufkin & Jenrette Securities Corporation, the financial
advisor to Parent (in such capacity, "DLJ"), or anyone who received the
information considered it a reliable predictor of future events, and this
information should not be relied on as such. Because the foregoing projections
are inherently subject to uncertainty, none of Parent, Purchaser, Logica plc,
DLJ, the Company or anyone to whom the information was provided assumes any
responsibility for the validity, reasonableness, accuracy or reliability of
such information, and the Company has made no representations to Parent,
Purchaser or Logica plc regarding any such information.
9. CERTAIN INFORMATION CONCERNING PURCHASER, PARENT AND LOGICA PLC. Founded
in the United Kingdom in 1969, Logica plc is a leading international computer
consultancy, systems integration and software company. The mission of Logica
plc and its subsidiaries, including Parent, is to help leading organizations
worldwide achieve their business objectives through the use of information
technology by providing an all-embracing service from consultancy through
systems development, design and integration to applications management,
support and end user training. Logica plc provides information technology
services concentrating on (a) the marketing, design, production, integration
and maintenance of custom built software and associated hardware systems; (b)
consultancy, applications management and project management in the field of
information technology; and (c) the design, development, implementation and
marketing of software products and the re-usable elements of applications
software called systems kernels. Logica's customers are global organizations
who view information technology as a mission-critical element of their own
business and key to their success and market differentiation. With a workforce
of approximately 6,500 employees from offices in 23 countries worldwide,
Logica's customer base covers a wide range of market sectors including
finance, telecommunications, energy and utilities, industry, civil government,
defense, transport and space.
None of Logica plc, Parent or Purchaser is subject to the information filing
requirements of the Exchange Act, and, accordingly, none of Logica plc, Parent
or Purchaser files reports or other information with the Commission relating
to its business, financial condition or other matters. Set forth below is
certain selected consolidated financial information relating to Logica for the
fiscal years ended June 30, 1998, 1997 and 1996. The selected consolidated
financial information is denominated in pounds sterling and prepared in
accordance with generally accepted accounting principles in the United Kingdom
("UK GAAP"). UK GAAP differs in certain significant respects from generally
accepted accounting principles in the United States ("US GAAP"). Immediately
following the summary consolidated financial information of Logica plc and its
subsidiaries set forth below is a brief summary of certain differences between
UK GAAP and US GAAP. Logica has not examined whether adjustments necessary to
conform its Financial Statements to US GAAP would be material.
13
<PAGE>
The financial statements of Logica for the fiscal years ended June 30, 1998,
1997 and 1996 (the "Financial Statements") have been filed with the Commission
as Exhibit (a)(9) to the Schedule 14D-1 and are incorporated herein by
reference. The Financial Statements may be inspected at the Commission's
public reference facilities in Washington, D.C., and copies thereof may be
obtained from such facilities upon payment of the Commission's customary
charges, in the manner set forth in Section 8 above, under "Available
Information" (although they will not be available at the regional offices of
the Commission). Set forth below is certain summary financial information
excerpted or derived from the Financial Statements of Logica. Such summary
information is qualified in its entirety by reference to the Financial
Statements and all the financial information and related notes contained
therein.
LOGICA PLC AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF POUNDS STERLING(1), EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
--------------------------------------
1998 1997 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Amounts in accordance with UK GAAP
Turnover.............................. 472,957 338,465 284,810
Operating Profit...................... 39,643 27,669 23,638
Profit on ordinary activities before
interest............................. 40,358 28,182 24,162
Profit on ordinary activities before
Taxation............................. 41,825 28,148 24,710
Profit attributable to shareholders... 29,971 19,333 16,580
PER SHARE DATA
Amounts in accordance with UK GAAP
Earnings per ordinary share -
pence(2)............................ 42.3 31.0 27.1
BALANCE SHEET DATA (AT END OF PERIOD)
Amounts in accordance with UK GAAP
Net current assets.................... 49,543 42,226 41,139
Total assets.......................... 236,363 154,903 127,989
Total liabilities..................... (153,488) (91,666) (57,649)
Shareholders' funds................... 82,875 63,237 70,340
</TABLE>
- --------
(1) Logica plc publishes its consolidated financial statements in Pounds
Sterling. The United States Dollar exchange rate based on the London
closing mid-rates for Pounds Sterling to Dollars, expressed in $1 per
(Pounds)1, for the fiscal dates indicated, are as follows and are based on
published financial sources:
<TABLE>
<CAPTION>
YEAR
END YEAR YEAR YEAR
RATE HIGH LOW AVERAGE
------ ------ ------ -------
<S> <C> <C> <C> <C>
Fiscal Year ended 6/30/96....................... 1.5537 1.6074 1.4965 1.5470
Fiscal Year ended 6/30/97....................... 1.6641 1.7114 1.5375 1.6147
Fiscal Year ended 6/30/98....................... 1.6686 1.7064 1.5782 1.6466
</TABLE>
(2) The weighted average number of shares outstanding during the fiscal years
ended June 30, 1996, 1997 and 1998 were 61,263,881, 63,844,408 and
70,829,354, respectively.
Certain Differences Between UK GAAP and US GAAP. UK GAAP differs in certain
significant respects from US GAAP. The principal differences, which management
of Logica plc believes may have a material impact on Logica, are summarized
below. Given the inherent differences between UK GAAP and US GAAP, the
financial statements presented under UK GAAP are not presented fairly, in all
material respects, under US
14
<PAGE>
GAAP. Logica has not quantified these differences, nor prepared consolidated
financial statements under US GAAP, nor undertaken a reconciliation of UK GAAP
and US GAAP financial statements. Had Logica undertaken any such
quantification or preparation or reconciliation, other potentially significant
accounting and disclosure differences might have come to their attention,
which are not identified below. Accordingly, Logica can provide no assurance
that the identified differences in the summary below represent all the
principal differences relating to Logica. Further, no attempt has been made to
identify future differences between UK GAAP and US GAAP as the result of
prescribed changes in accounting standards. Regulatory bodies that promulgate
UK GAAP and US GAAP have significant ongoing projects that could affect future
comparisons such as this one. Finally, no attempt has been made to identify
all future differences between UK GAAP and US GAAP that may affect the
financial statements as a result of transactions or events that may occur in
the future. Although UK GAAP differs in certain significant respects from US
GAAP, Logica believes that the differences are not material to a decision by a
holder of Shares whether to sell, tender or hold any Shares because the Offer
is for cash and any such difference would not affect the ability of Logica to
pay for the Shares to be acquired pursuant to the Offer. In this regard, as
set forth in the Financial Statements, Logica has sufficient funds in its
working capital accounts and existing lines of credit to pay for the Shares to
be acquired pursuant to the Offer and the Merger.
Software Revenue Recognition. It is the policy of Logica to recognize
revenue on the sale of software products to customers on a milestone basis as
follows: 40% on receipt of order from the customer; 40% on delivery to the
customer; and 20% on final customer acceptance. Under US GAAP, if the sale of
software requires significant production, modification or customization then
the entire arrangement must be accounted for under contract accounting. Under
contract accounting, four criteria must be satisfied before revenue can be
recognized: (i) persuasive evidence that an arrangement exists; (ii) delivery
has occurred; (iii) the vendor's fee is fixed or determinable; and (iv)
collectibility is probable.
Software Development Costs. It is the policy of Logica to write off software
development costs in the year in which they are incurred unless they are to be
reimbursed by third parties. Under US GAAP, costs associated with the
development of software products to be sold or otherwise marketed should be
capitalized subsequent to the establishment of technological feasibility up
until the product's general release. These costs should then be amortized over
the estimated economic life of the software product.
Goodwill and US Purchase Accounting. Under US GAAP and UK GAAP, purchase
consideration in respect of subsidiaries acquired is allocated on the basis of
appraised values to the various net assets of the subsidiaries at the dates of
acquisition and any net balance is treated as goodwill. However, US GAAP also
requires value to be assigned to any separately identifiable intangible
assets--which would be amortized over their estimated useful lives not to
exceed 40 years--and to acquired in-process research and development which
would be written off to the profit and loss account in the period of the
acquisition. If part of the purchase consideration is contingent on a future
event, then under UK GAAP an estimate of the amount is included as part of the
cost at the date of acquisition. This estimate is revised each year until the
eventual outcome is certain. Under US GAAP, this cost is not recognized until
the contingency is resolved or the amount is determinable. US GAAP requires
goodwill to be recognized as an asset and amortized over its estimated useful
life not to exceed 40 years. Under UK GAAP, for the years ended through June
30, 1998, goodwill may be written off directly against reserves. For the year
ending June 30, 1999 onwards, UK GAAP requires goodwill and any separately
unidentifiable intangible assets to be recognized as an asset and amortized
over its estimated useful life. There is a rebuttable presumption this does
not exceed 20 years. This presumption can be rebutted and a useful life can be
regarded as infinite, but only in certain rare circumstances. Under
transitional arrangements, goodwill previously eliminated against reserves may
be reinstated as a prior year adjustment, or remain eliminated against
reserves.
Deferred Taxation. Under UK GAAP, no provision is made for deferred taxation
if there is reasonable evidence that such deferred taxation will not be
payable in the foreseeable future. Deferred tax assets are generally not
recognized under UK GAAP unless they are expected to be recovered in the
foreseeable future or, if relating to losses, where recovery can be assumed
beyond reasonable doubt (usually one year from the balance
15
<PAGE>
sheet date). Under US GAAP, deferred tax assets and liabilities are recognized
in full and any net deferred tax assets are then assessed for probable
recoverability. As long as it is more likely than not that sufficient future
taxable income will be available to utilize the deferred tax assets, no
valuation allowance is provided.
Other Post-retirement Benefits. In respect of other post-retirement benefit
obligations, US GAAP applies the principles of accounting for pensions which
requires the present value of the benefit obligation to be determined using a
current market discount rate and the plan assets to be valued on a market or
market-related basis. UK GAAP permits the benefit obligation to be discounted
at a long-term risk-adjusted rate and the plan assets to be valued on an
actuarial basis.
In addition to the difference in discount rates, the amortization procedure
under US GAAP applies a corridor approach for recognizing gains and losses in
the determination of periodic pension expense. Under UK GAAP, actuarial gains
and losses are amortized normally over the expected remaining service lives
without such corridor approach. Additionally, for UK funding and accounting
purposes, it is satisfactory to carry out actuarial valuation on a three-year
interval, whereas annual valuations are required under US GAAP.
Cash Flow Statements. The definition of "cash flow" differs between UK and
US GAAP. Cash flow under UK GAAP represents increases or decreases in "cash,"
which is comprised of cash in hand and repayable on demand and overdrafts.
Under US GAAP, cash flow represents increases or decreases in "cash and cash
equivalents," which include short term highly liquid investments with original
maturities of less than 90 days, and exclude overdrafts.
There are also certain differences in classification of items within the
cash flow statement between UK and US GAAP. Under UK GAAP, cash flows are
presented in the following categories: (i) operating activities; (ii) returns
on investments and servicing of finance; (iii) taxation; (iv) capital
expenditure and financial investment; (v) acquisitions and disposals; (vi)
equity dividends paid; (vii) management of liquid resources; and (viii)
financing. Under US GAAP, cash flows are segregated into operating, investing
and financing activities.
Cash flows from taxation, returns on investments and servicing of finance
would be, with the exception of any interest paid but capitalized, included as
operating activities under US GAAP. The payment of any dividends would be
included under financing activities and any capitalized interest would be
included under investing activities for US GAAP purposes. Additionally, under
US GAAP cash flows from the purchase and sale of tangible fixed assets and the
sale of debt and equity investments would be shown within investing
activities.
Earnings Per Share. Under UK GAAP, earnings per share is determined based
upon the weighted average number of shares of ordinary stock in issue during
the respective periods, and a fully diluted calculation is provided only if
materially different from the undiluted amount. In addition, the average
number of shares issued in prior years is restated to reflect the bonus
element of any rights issue of shares in the current year. Under US GAAP, the
calculation of net income per share includes the dilutive effect of the
assumed exercise of certain outstanding share options.
Current Assets and Liabilities. Current assets under UK GAAP include amounts
which fall due after more than one year. Under US GAAP such assets would be
reclassified as non-current assets. Provisions for liabilities and charges
under UK GAAP include amounts due within one year, which would be reclassified
to current liabilities under US GAAP.
Classification of Leases. Differences can arise upon the determination of
whether a lease is a finance lease or an operating lease. Under UK GAAP, a
lease is classified as a finance lease when the lessee has substantially all
the risks and rewards associated with the ownership of the asset, other than
the legal title. Under US GAAP, one of the following four criteria must be met
to classify a lease as a capital lease; (i) the lease transfers ownership of
the property to the lessee by the end of the lease term, (ii) the lease
contains a bargain purchase option, (iii) the lease term is equal to 75% or
more of the estimated economic life of the leased property or (iv) the present
value at the beginning of the lease term of the minimum lease payments equals
or exceeds 90% of the fair value of the leased property.
16
<PAGE>
Ordinary Dividends. Under UK GAAP, final ordinary dividends are provided for
in the fiscal year in respect of which they are recommended by the board of
directors for approval by the shareholders. Under US GAAP, such dividends are
not provided for until declared by the board of directors.
Accounting for Associates. Under US and UK GAAP, the equity method of
accounting is used to account for associates. However, under US GAAP, the
investor presents its share of the associate's profits and losses at a post-
tax level whereas under UK GAAP the investor's share of the associate's
profits and losses are presented pre-tax with its share of the associate's tax
shown separately.
Employee Stock Compensation. Under US GAAP, entities have a choice of
methods for determining the costs of benefits arising from employee stock
compensation plans, being either the "intrinsic value" method or a fair value
method. Under the "intrinsic value" method, compensation cost is the
difference between the market price of the stock at the measurement date and
the price to be contributed by the employee. Under the fair value method,
compensation cost is based on the estimated fair value of the option at date
of grant using an option pricing model which considers: the stock price at
grant date, the exercise price and expected life of the option, expected price
volatility, expected dividend yield and a risk-free interest rate. Under UK
GAAP, except for options issued under Inland Revenue approved employee save as
you earn (SAYE) schemes, compensation cost is the difference between the
market value of the shares at the date of grant of the conditional award less
any contribution that the employee is required to make.
Employee Share Option Plans (ESOPs). Under US GAAP, shares purchased by, and
held within an ESOP are shown at cost as a debit balance within equity and
described as "unearned ESOP shares." For ESOP shares which are committed to be
released to compensate employees, the sponsoring company recognizes a
compensation cost equal to the fair value of the shares. Under UK GAAP, where,
generally, the ESOP shares are held for the continuing benefit of the
sponsoring company's business, they are classified as "own shares" within
fixed assets; otherwise they are classified as "own shares" within current
assets. Cost is written down to residual amount (the option proceeds) over the
employee's service period.
Holiday Pay. US GAAP requires that provision for employee's future absences
(i.e. holiday pay) shall be made on an accrual basis if (i) the employee's
right to receive compensation for future absence is due to past service, (ii)
the obligation accumulates, (iii) the payment is probable and (iv) the amount
can be reasonably estimated. There are no formal rules under UK GAAP and
either the accrual or cash method is used in practice.
Except as set forth in this Offer to Purchase, none of Purchaser, Parent,
Logica plc or, to the best knowledge of Purchaser, Parent and Logica plc, any
of the persons listed on Annexes I and II, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss, or
the giving or withholding of proxies. Except as set forth in this Offer to
Purchase, none of Purchaser, Parent, Logica plc or, to the best knowledge of
Purchaser, Parent, and Logica plc, any of the persons listed on Annexes I and
II, has had, since September 30, 1995, any business relationships or
transactions with the Company or any of its executive officers, directors or
affiliates that would require reporting under the rules of the Commission.
Except as set forth in this Offer to Purchase since September 30, 1995, there
have been no contacts, negotiations or transactions between Purchaser, Parent,
Logica plc, or their subsidiaries or, to the best knowledge of Purchaser,
Parent and Logica plc, any of the persons listed on Annexes I and II, and the
Company or its affiliates, concerning a merger, consolidation or acquisition,
tender offer or other acquisition of securities, election of directors or a
sale or other transfer of a material amount of assets. Except as set forth in
this Offer to Purchase, none of Purchaser, Parent, Logica plc, or, to the best
knowledge of Purchaser, Parent, or Logica plc, any of the persons listed on
Annexes I and II, beneficially owns any shares or has effected any
transactions in the Shares in the past 60 days.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. On May 26, 1998,
Thomas Miranda, the Vice President--Customer Contact Solutions of the
Communications Division of Parent, Mike Maloney, the
17
<PAGE>
Executive Vice President of the Communications Division of Parent, and Dennis
Yablonsky, the President and Chief Executive Officer of the Company, met to
discuss a possible working partnership between Logica and the Company that
would enhance the ability of both companies to better serve their clients. In
the course of such discussions, Logica became more informed about the Company
and its management, facilities and technical abilities and became interested
in a more formal partnership arrangement with the Company. As a result of the
May 26 meeting, Logica believed that exploring a potential business
combination with the Company would be attractive to both Logica and the
Company.
On July 1, 1998, Mario Anid, the Corporate Development Director and a member
of the Executive Committee of Logica plc, Corey Torrence, the President and
Chief Executive Officer of Parent, and Mr. Maloney met with Mr. Yablonsky,
John Manzetti, the Executive Vice President and Chief Financial Officer of the
Company, and a representative of the Company's financial advisors, to discuss
the potential benefits of a business combination between Logica and the
Company. During July and August of 1998, similar discussions continued between
representatives of Logica and the Company for the purpose of further exploring
a possible strategic transaction. These discussions focused primarily on
topics relating to business integration, ongoing business strategy and
financial matters.
At a meeting held on August 19, 1998, Messrs. Anid, Torrence, Yablonsky and
Manzetti discussed possible structures for a transaction. At that meeting,
Logica indicated that it was willing to proceed by means of a cash tender
offer for all of the outstanding Shares. Logica also indicated that its
preliminary evaluation of an offer price was in the range of $5.50 to $5.75
per Share.
On August 25, 1998, Mr. Manzetti telephoned Mr. Anid and indicated that a
third party had expressed an interest in a potential stock transaction with
the Company at a value of $6.00 per Share. Mr. Manzetti informed Mr. Anid of
his view that the Company Board would look more favorably on a cash offer of
$6.00 per Share than on any potential stock transaction at that price. The
Company Board met later on August 25 to discuss the status of the discussions
between Logica and the Company. Mr. Manzetti telephoned Mr. Anid after the
Board meeting and indicated that the Company Board was interested in
continuing discussions with Logica if Logica would consider a $6.00 per Share
cash price. Shortly thereafter, Mr. Anid informed the Company that, subject to
negotiation of acceptable documentation and the completion of satisfactory due
diligence, Logica was prepared to agree to a price of $6.00 per Share.
On August 27, 1998, Logica and the Company entered into a confidentiality
agreement (the "Confidentiality Agreement"), which provides generally that
each of the parties and their respective representatives will keep
confidential any non-public information furnished to them in connection with
the mutual consideration of a potential transaction involving the acquisition
of the Company by Parent. In addition, the Confidentiality Agreement
prohibited, with certain exceptions, the Company or any of its representatives
from participating in negotiations with any party other than Parent with
respect to a merger, consolidation, business combination, sale of all or
substantially all assets, tender offer or other similar transaction involving
the Company, until September 22, 1998 (the "Exclusivity Period"). The
Confidentiality Agreement also provided that, with certain exceptions, until
the date that is the earlier of six months from the date of the
Confidentiality Agreement or the date on which the Company and Parent entered
into a definitive agreement concerning a transaction between the companies,
neither Parent nor any of its representatives would, among other things,
acquire any securities of the Company or seek to effect a tender offer, merger
or other business combination transaction involving the Company.
On September 1, 1998, Logica plc entered into an agreement regarding the
engagement of DLJ as exclusive financial advisor to Logica plc in connection
with the evaluation of a potential strategic transaction with the Company.
On September 1, 1998, representatives of Logica, together with its legal and
financial advisors, met in Pittsburgh, Pennsylvania to commence a more
detailed investigation of the business, operations and facilities of the
Company. Thereafter, the Company provided Logica with certain nonpublic
information about the Company's business, operations and prospects, including
fiscal 1998 and 1999 financial projections prepared by
18
<PAGE>
the Company's management. Legal counsel for Logica also commenced preparation
of the Merger Agreement and a draft was circulated among the parties. During
the remainder of September 1998, the parties, with the assistance of their
respective legal counsel and financial advisors, conducted extensive
negotiations with respect to the terms of the Merger Agreement, the Tender
Agreements and related documentation.
On September 15, 1998, Mr. Anid met with Messrs. Yablonsky and Manzetti to
discuss certain matters relating to the proposed transaction. In these
discussions, Mr. Anid indicated that, as a result of Logica's due diligence
review and recent adverse market conditions, Logica was reducing its offer
price from $6.00 per Share to $5.00 per Share. At the meeting, Messrs. Anid,
Yablonsky and Manzetti also discussed the willingness of Messrs. Yablonsky and
Manzetti to forego certain severance benefits to which they were contractually
entitled in exchange for entering into employment agreements with the Parent
following the Merger.
Following the September 15 meeting, Logica and the Company, with the
assistance of their respective legal counsel and financial advisors, continued
negotiations of the terms of the Merger Agreement and related documentation.
During this period, Logica also negotiated with Messrs. Yablonsky, Manzetti,
Bruce Russell, the Senior Vice President of the Company, and Raymond
Kalustyan, the Vice President--Business Development of the Company, concerning
their willingness to forego certain severance benefits to which they otherwise
would be contractually entitled following the execution of the Merger
Agreement. In exchange for foregoing such amounts, Logica proposed that these
individuals would enter into at will employment agreements (the "Employment
Agreements") pursuant to which these individuals would (i) initially maintain
their existing salaries, (ii) be entitled to bonus payments if certain
performance criteria were achieved, (iii) receive options to acquire ordinary
shares of Logica plc and (iv) receive certain severance benefits (which were
less than those to which they were entitled under their existing severance
agreements) if their employment was terminated during certain periods.
On September 17, 1998, Mr. Yablonsky telephoned Mr. Anid and indicated that,
following numerous discussions with the Company's legal and financial
advisors, the Company was willing to agree to a price of $5.00 per Share if
the parties could agree on the other unresolved terms of the Merger Agreement
and related documentation.
On September 22, 1998, Logica and the Company entered into an amendment to
the Confidentiality Agreement to extend the Exclusivity Period to September
30, 1998.
On September 25, 1998, the Board of Directors of Logica plc met to discuss,
among other things, the terms of the proposed acquisition of the Company.
After considering and discussing such terms at length, the Board of Directors
of Logica plc approved the Merger and the Offer and the execution of the
related documentation, including the Merger Agreement.
Thereafter, the parties continued negotiating the final terms of the Merger
Agreement and related documentation. At a meeting held on September 28, 1998,
the Company Board met to consider the status of the negotiations and at a
meeting held on September 29, 1998, the Company Board approved the Merger and
the Offer and the execution of the related documentation, including the Merger
Agreement. On the evening of September 30, 1998, the Merger Agreement was
executed by the parties thereto, the Tender Agreements were executed by the
Management Stockholders (as hereinafter defined) and the Employment Agreements
were executed by Messrs. Yablonsky, Manzetti, Russell and Kalustyan.
11. PURPOSE OF THE OFFER AND MERGER; THE MERGER AGREEMENT AND THE TENDER
AGREEMENTS.
The Purpose of the Offer. The purpose of the Offer and the Merger is for
Parent to acquire control of, and the entire equity interest in, the Company.
The Offer and the Merger Agreement are intended to increase the likelihood
that the Merger will be effected as promptly as practicable. The purpose of
the Merger is to acquire all outstanding Shares not tendered and purchased
pursuant to the Offer.
The Merger Agreement. The Merger Agreement provides for the commencement of
the Offer as promptly as practicable after the date of the Merger Agreement,
but in any event not later than five business days following
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the public announcement of the Offer. The obligation of Parent to cause
Purchaser to commence the Offer and to accept for payment any Shares tendered
pursuant to the Offer is subject to the satisfaction of certain conditions,
which are described in Section 13.
The Merger. The Merger Agreement provides that, as soon as practicable
following fulfillment or waiver of the conditions described below under
"Conditions to the Merger," Purchaser will be merged with and into the
Company, which will be the surviving corporation in the Merger (the "Surviving
Corporation") and each then-outstanding Share not owned by Parent, Purchaser
or any other direct or indirect subsidiary of Parent (other than those Shares
held in the treasury of the Company and Shares held by holders who perfect any
appraisal rights that they may have under the DGCL) will be canceled and
retired and be converted into a right to receive the Merger Consideration.
Vote Required to Approve Merger. Under the DGCL, the Merger requires the
approval of the holders of at least a majority of outstanding Shares. If the
Minimum Share Condition is satisfied, Purchaser will own a majority of the
Shares and, accordingly, will have sufficient voting power to effect the
approval of the Merger by holders of Shares without the affirmative vote of
any other such holder.
The Company has agreed in the Merger Agreement to take all action necessary
in accordance with applicable law and its Restated Certificate of
Incorporation and Amended and Restated By-Laws to convene a meeting of its
stockholders promptly after the purchase of Shares pursuant to the Offer to
consider and vote upon the approval of the Merger, if such stockholder
approval is required by applicable law. Parent and Purchaser have agreed in
the Merger Agreement that, at any such meeting, all of the Shares then
beneficially owned by Parent, Purchaser or any other direct or indirect
subsidiary of Parent will be voted in favor of the Merger. Under the Merger
Agreement, subject to the applicable fiduciary duties of the Company Board,
the Company will recommend that the Company's stockholders approve the Merger
if such stockholder approval is required.
Conditions to the Merger. The Merger Agreement provides that the obligations
of the Company, Parent and Purchaser to consummate the Merger are subject to
the satisfaction of the following conditions: (i) the stockholders of the
Company will have duly approved the Merger and adopted the Merger Agreement,
if and as required by applicable law; (ii) Purchaser will have accepted for
payment and purchased all Shares validly tendered and not withdrawn pursuant
to the Offer and such Shares will satisfy the Minimum Share Condition; (iii)
all necessary approvals, authorizations and consents of any governmental or
regulatory entity required to consummate the Merger will have been obtained
and remain in full force and effect, and all waiting periods relating to such
approvals, authorizations and consents will have expired or been terminated;
(iv) the consummation of the Merger will not be precluded by any preliminary
or permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission or any statute, rule, regulation or executive order
promulgated or enacted, by any governmental authority which would make the
consummation of the Merger illegal or otherwise prevent the consummation of
the Merger; and (v) any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (collectively, the "HSR Act") will have expired or been
terminated.
Termination of the Merger Agreement. The Merger Agreement may be terminated
and the Merger may be abandoned, notwithstanding any prior approval of the
Merger Agreement or of the Merger by the stockholders of the Company, (i) by
the mutual consent of the Parent or Purchaser and the Company; (ii) by Parent
and Purchaser, on the one hand, or the Company, on the other hand, if the
Offer is terminated, withdrawn or expires pursuant to its terms without any
Shares having been purchased thereunder, provided, however, that the right to
terminate the Merger Agreement pursuant to this clause will not be available
(a) to any party if such party materially breaches the Merger Agreement, or
(b) if an order, decree or ruling or any action (which order, decree, ruling
or other action the Company, Parent and Purchaser will use their best efforts
to lift) by any Governmental Entity (as such term is defined in the Merger
Agreement) permanently restrains, enjoins or otherwise prohibits the
acceptance for payment of, or payment for, Shares pursuant to the Offer or the
Merger; (iii) by the Company, (a) if (I) Parent or Purchaser fails to commence
the Offer on or prior to five business days following the date of
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the initial public announcement of the Offer, or (II) Parent or Purchaser will
not have purchased Shares pursuant to the Offer by December 31, 1998, or (III)
the Offer will have been terminated without Parent or Purchaser having
purchased any Shares in the Offer, (b) in connection with the Company entering
into a definitive agreement to effect a Superior Proposal (as such term is
hereinafter defined), provided, however, that written notice will have been
provided by the Company to Parent not later than 12:00 noon two business days
in advance of any date the Company intends to exercise its termination rights
and enter into such agreement (which notice will specify proposed terms of
such agreement and the identity of the persons making such proposal), and
provided further, however, that the Company, prior to any such termination,
will have made payment to Parent of all Termination Fee and Parent Expenses
(as such terms are hereinafter defined), or (c) if Parent or Purchaser
breaches in any material respect any of their respective representations,
warranties, covenants or other agreements contained in the Merger Agreement,
which breach cannot be or has not been cured within 15 days after the giving
of written notice to Parent or Purchaser, except, in any case, for breaches
which are not reasonably likely to affect adversely Parent's or Purchaser's
ability to consummate the Offer or the Merger, provided, however, that no cure
period will be applicable under any circumstances to (iii)(a) above; (iv) by
Parent and Purchaser, if (a) prior to the commencement of the Offer, due to an
occurrence that if occurring after the commencement of the Offer would result
in a failure to satisfy any of the offer conditions set forth in the Merger
Agreement, under circumstances in which such failure could not reasonably be
expected to be cured within 15 days after the giving of written notice by
Parent or Purchaser, Parent or Purchaser fails to commence the Offer on or
prior to five business days following the date of the initial public
announcement of the Offer, (b) prior to the purchase of Shares pursuant to the
Offer, the Company breaches any representation, warranty, covenant or other
agreement contained in the Merger Agreement which breach (I) cannot be or has
not been cured within 15 days after the giving of written notice to the
Company, and (II) would give rise to the failure of an offer condition set
forth in paragraph (c) or (e) of Annex A of the Merger Agreement; or (c) prior
to the purchase of Shares pursuant to the Offer, Parent or Purchaser is
entitled to terminate the Offer as a result of (I) an occurrence that would
result in a failure to satisfy any of the offer conditions set forth in the
Merger Agreement, or (II) in the case of the offer conditions set forth in
paragraphs (c) and (e) of Annex A of the Merger Agreement, the failure of any
such condition under circumstances in which such failure could not reasonably
be expected to be cured within 15 days after the giving of written notice to
the Company.
Other Offers. The Company has agreed in the Merger Agreement that except as
explicitly permitted under the Merger Agreement, the Company will not (and
will cause each of its subsidiaries not to), directly or indirectly, and will
not authorize or permit any of the respective officers, directors, employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing non-public information), or take any
other action to facilitate, any inquiries or the making of any proposal or
offer that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal (as such term is hereinafter defined), or participate in
any discussions or negotiations regarding an Acquisition Proposal.
Notwithstanding anything contained in the Merger Agreement, the Company will
not be prohibited by the Merger Agreement from (i) furnishing non-public
information to, or entering into discussions or negotiations with, any person
or entity that makes an unsolicited written Acquisition Proposal that would
reasonably likely lead to a Superior Proposal if, and only to the extent that,
(a) the Company Board, after consultation with and based upon the advice of
independent legal counsel, determines in good faith that the failure to take
such action could reasonably be expected to be a breach of the Company Board's
fiduciary duties under applicable law and (b) prior to furnishing such non-
public information to, or entering into discussions or negotiations with, such
person or entity, the Company receives from such person or entity an executed
confidentiality agreement in reasonably customary form on terms not more
favorable to such person or entity than the terms contained in the
Confidentiality Agreement; (ii) complying with Rule 14e-2 promulgated under
the Exchange Act with regard to a tender or exchange offer; (iii) making such
disclosure to the Company's stockholders, as in the good faith judgment of the
Company Board, after consultation with and based upon the advice of
independent legal counsel is required by applicable law; or (iv) withdrawing
or modifying its recommendations, consents or approvals with respect to the
Offer, the Merger Agreement and the Merger, approving or recommending an
Acquisition Proposal
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to its stockholders or causing the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other agreement with respect
to an Acquisition Proposal (except for the Confidentiality Agreement) if there
is a Superior Proposal outstanding and the Company Board, after consultation
with and based upon the advice of independent legal counsel, determines in
good faith that the failure to take such action could reasonably be expected
to be a breach of the Company Board's fiduciary duties under applicable law.
The Company has agreed in the Merger Agreement that it will promptly (but in
any event within one day) advise Parent orally and in writing of any
Acquisition Proposal (including amendments or proposed amendments) or any
inquiry regarding the making of an Acquisition Proposal including any request
for information, the material terms and conditions of such request,
Acquisition Proposal or inquiry. In addition, the Company has agreed that it
will promptly (but in any event within one day) keep Parent fully informed of
the status and details (including amendments or proposed amendments) of any
such request, Acquisition Proposal or inquiry.
For purposes of the Merger Agreement, the term "Acquisition Proposal" shall
mean any proposed or actual (i) merger, consolidation or similar transaction
involving the Company, (ii) sale, lease or other disposition, directly or
indirectly, by merger, consolidation, share exchange or otherwise, of any
assets of the Company or any of its subsidiaries representing 15% or more of
the consolidated assets of the Company and its subsidiaries, (iii) issue, sale
or other disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities (or options, rights or
warrants to purchase, or securities convertible into, such securities)
representing 15% or more of the votes associated with the outstanding
securities of the Company, (iv) transaction in which any person shall acquire
beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange
Act), or the right to acquire beneficial ownership, or any "group" (as such
term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15% or
more of the outstanding Shares, (v) recapitalization, restructuring,
liquidation, dissolution, or other similar type of transaction with respect to
the Company or any of the Company's subsidiaries, or (vi) transaction which is
similar in form, substance or purpose to any of the transactions contemplated
by the Offer and the Merger Agreement; provided, however, that the term
"Acquisition Proposal" shall not include the Offer, the Merger Agreement and
the transactions contemplated thereby.
For purposes of the Merger Agreement, the term "Superior Proposal" means any
bona fide Acquisition Proposal, which is not subject to the receipt of any
necessary financing and which the Company Board determines in its good faith
judgment, based on the advice from an independent financial advisor, is
superior to the Company's stockholders from a financial point of view to the
Offer and the Merger.
Fees and Expenses. Except as otherwise provided in the Merger Agreement,
whether or not the Offer or the Merger is consummated, all fees, costs and
expenses incurred in connection with the Offer, the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
cost or expense. Notwithstanding the foregoing, upon consummation of the
Merger, Parent may be reimbursed by the Company for all costs and expenses
incurred by Parent and Purchaser in connection with the Offer, the Merger
Agreement and the transactions contemplated thereby. If the Merger Agreement
is terminated as a result of (i) a willful breach by the Company of any
representation, warranty, covenant or other agreement contained in the Merger
Agreement prior to the purchase of Shares pursuant to the Offer, which breach
(a) cannot be or has not been cured within 15 days after giving written notice
to the Company, or (b) would give rise to the failure of an offer condition
set forth in paragraph (c) or (e) of Annex A to the Merger Agreement; or (ii)
the Company entering into a definitive agreement to effect a Superior
Proposal, provided, however, that written notice will have been provided by
the Company to Parent no later than 12:00 noon two business days in advance of
any date that it intends to exercise its termination rights and enter into
such agreement (which notice shall specify proposed terms of such agreement
and the identity of the persons making such proposal), and provided further,
however that the Company, prior to any such termination, will have made
payment to Parent of all Termination Fee and Parent Expenses (as such terms
are hereinafter defined), the Company will make a cash payment to Parent of
$2,000,000 (the "Termination Fee") plus Parent's out-of-pocket costs and
expenses, including without limitation, fees and disbursements of its outside
legal counsel, investment bankers, accountants and other consultants retained
by or on behalf of Parent together with the other out-of-pocket costs incurred
by it in
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connection with analyzing, structuring, participating in the negotiations of
the terms and conditions, arranging financing, conducting due diligence, and
other activities related to the Offer and the Merger and the transactions
contemplated thereby, including, without limitation, commitment fees paid to
potential lenders (collectively, the "Parent Expenses") provided, however,
that the aggregate amount of all Parent Expenses to be reimbursed by the
Company shall not exceed $1,000,000. Any Termination Fee or Parent Expenses
will be payable by the Company to Parent (by wire transfer of immediately
available funds to an account designated by Parent) within two business days
after demand by Parent.
Conduct of the Company's Business Until the Effective Time. The Merger
Agreement provides that during the period from the date of the Merger
Agreement until the Effective Time, except as otherwise provided in the Merger
Agreement, the Company will, and will cause each of its subsidiaries to,
conduct their respective businesses in the regular and ordinary course,
consistent with past practice, use their best efforts to preserve intact the
present business organization of the Company and each of its subsidiaries, to
keep available the services of each of their present advisors, managers,
officers and employees, and to preserve the goodwill of those having business
relationships with the Company or its subsidiaries. The Merger Agreement
further provides that, from the date of the Merger Agreement until the
Effective Time, except as consented in writing to by Parent, or as expressly
provided in the Merger Agreement, the Company will not, and will not permit
any of its subsidiaries to, (i)(a) declare, set aside or pay any dividend or
other distribution (whether in cash, stock, or property or any combination
thereof) in respect of any of its capital stock, (b) split, combine or
reclassify any of its capital stock, or (c) repurchase, redeem or otherwise
acquire any of its securities, except, in the case of clause (c), for the
acquisition of Shares from holders of Options in full or partial payment of
the exercise price payable by such holders upon exercise of Options
outstanding on the date of the Merger Agreement; (ii) authorize for issuance,
issue, sell, deliver or agree or commit to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities (including indebtedness having the right to vote) or equity
equivalents (including, without limitation, stock appreciation rights) (other
than the issuance of Shares upon the exercise of Options outstanding on the
date of the Merger Agreement in accordance with their present terms); (iii)
acquire, sell, lease, encumber, transfer or dispose of any assets outside the
ordinary course of business which are material to the Company or any of its
subsidiaries (whether by asset acquisition, stock acquisition or otherwise),
except pursuant to obligations in effect on the date of the Merger Agreement
which have been disclosed in writing to Parent and Purchaser prior to the date
of the Merger Agreement; (iv)(a) incur any amount of indebtedness for borrowed
money, guarantee any indebtedness, issue or sell debt securities or warrants
or rights to acquire any debt securities, guarantee (or become liable for) any
debt of others, make any loans, advances or capital contributions, mortgage,
pledge or otherwise encumber any material assets, create or suffer any
material lien thereupon other than in the ordinary course of business
consistent with prior practice, or (b) incur any short-term indebtedness for
borrowed money, except, in each such case, pursuant to credit facilities in
existence on the date of the Merger Agreement which have been disclosed in
writing to Parent and Purchaser prior to the date of the Merger Agreement and
set forth in the Company disclosure schedules to the Merger Agreement, and as
necessary to carry on the Company's business in the usual, regular and
ordinary course, consistent with past practice; (v) pay, discharge or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than any payment, discharge or
satisfaction (a) in the ordinary course of business consistent with past
practice, or (b) in connection with the Offer, the Merger Agreement and the
transactions contemplated thereby; (vi) change any of the accounting
principles or practices used by it (except as required by generally accepted
accounting principles, in which case written notice shall be provided to
Parent and Purchaser prior to any such change); (vii) except as required by
law, (a) enter into, adopt, amend or terminate any Company Benefit Plan (as
such term is defined in the Merger Agreement), (b) enter into, adopt, amend or
terminate any agreement, arrangement, plan or policy between the Company or
any of its subsidiaries and one or more of their directors or officers, or (c)
except for normal increases in the ordinary course of business consistent with
past practice, increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any
Company Benefit Plan or arrangement as in effect as of the date hereof; (viii)
adopt any amendments to the Restated Certificate of Incorporation of the
Company and the Amended and Restated Bylaws of the Company, except as
expressly provided by the terms of this Agreement; (ix) enter into a new
agreement
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or amend any existing agreement which could reasonably be expected to have a
Company Material Adverse Effect (as such term is hereinafter defined); (x)
adopt a plan of complete or partial liquidation or resolutions providing for
or authorizing such a liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or reorganization; (xi) enter into or amend,
extend or otherwise alter any collective bargaining agreement; (xii) settle or
compromise any litigation (whether or not commenced prior to the date of the
Merger Agreement) other than settlements or compromises or litigation where
the amount paid (after giving effect to insurance proceeds actually received)
in settlement or compromise does not exceed $10,000; (xiii) grant any new or
modified severance or termination arrangement or increase or accelerate any
benefits payable under its severance or termination pay policies in effect on
the date hereof, except as required under the present terms of any employment
agreement or severance agreement in effect on the date of the Merger
Agreement; (xiv) enter into any transaction, contract or arrangement with any
affiliate, except as required under the present terms of any contract or
arrangement with any such affiliate in effect on the date of the Merger
Agreement; (xv) enter into any other material agreement outside the ordinary
course of business; (xvi) enter into an agreement to take any of the actions
stated in clauses (i) through (xv) above; or (xvii) authorize any of, or
commit or agree to take any of, or take any corporate action in furtherance
of, any of the actions stated in clauses (i) through (xv) above.
Board Representation. The Merger Agreement provides that, promptly upon the
purchase of Shares pursuant to the Offer, Parent will be entitled to designate
such number of directors, rounded up to the next whole number, on the
Company's Board as is equal to the product of (i) the total number of
directors on the Company Board (after giving effect to the directors
designated by Parent pursuant to this sentence) and (ii) the percentage that
the total votes represented by such number of Shares in the election of
directors of the Company so purchased bears to the total votes represented by
the number of Shares outstanding. In furtherance thereof, the Company will,
upon request by Parent, promptly increase the size of the Company Board and/or
exercise its best efforts to secure the resignations of such number of its
directors as is necessary to enable Parent's designees to be elected to the
Company Board and will take all actions to cause Parent's designees to be so
elected to the Company Board. At such time, the Company will also cause
persons designated by Parent to constitute at least the same percentage
(rounded up to the next whole number) as is on the Company Board of (a) each
committee of the Company Board, (b) each board of directors (or similar body)
of each of the Company's subsidiaries, and (c) each committee (or similar
body) of each such board. The Company will take, at its expense, all action
required pursuant to Section 14(f) and Rule 14f-1 of the Exchange Act in order
to fulfill its obligations and will include in the Schedule 14D-9 to its
stockholders such information with respect to the Company and its officers and
directors as is required by such Section 14(f) and Rule 14f-1. Parent will
supply to the Company in writing and be solely responsible for any information
with respect to itself and its nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1. The foregoing provisions are in
addition to and do not limit any rights which Purchaser, Parent or any of
their affiliates may have as a holder or beneficial owner of Shares as a
matter of law with respect to the election of directors or otherwise. In the
event that Parent's designees are elected to the Company Board, until the
Effective Time, the Company Board will have at least three directors who are
directors on the date hereof (the "Independent Directors"), provided that, in
such event, if the number of Independent Directors will be reduced below three
for any reason whatsoever, any remaining Independent Directors (or Independent
Director, if there be only one remaining) will be entitled to designate
persons to fill such vacancies who will be deemed to be Independent Directors
for purposes of this Agreement or, if no Independent Director then remains,
the other directors will designate three persons to fill such vacancies who
will not be stockholders, affiliates or associates of Parent or Purchaser and
such persons will be deemed to be Independent Directors for purposes of the
Merger Agreement. Notwithstanding anything in the Merger Agreement to the
contrary, in the event that Parent's designees are elected to the Company
Board, after the acceptance for payment of Shares pursuant to the Offer and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors will be required to (i) amend or terminate the Merger
Agreement by the Company, (ii) exercise or waive any of the Company's rights,
benefits or remedies hereunder, or (iii) extend the time for performance of
Parent's and Purchaser's respective obligations hereunder.
Options. The Merger Agreement provides that each option (collectively, the
"Options") granted under the Company's 1989 Stock Option Plan (the "1989
Plan"), 1995 Stock Option Plan (the "1995 Plan") and
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Long-Term Incentive Stock Option Plan (the "Long-Term Plan" and, together with
the 1989 Plan and the 1995 Plan, the "Stock Option Plans") which is
outstanding (whether or not currently exercisable), as of immediately prior to
the Effective Time and which has not been exercised or cancelled prior thereto
will at the Effective Time, be cancelled and upon the surrender and
cancellation of the option agreement presenting such Option and delivery of an
Option Termination (as such term is defined in the Merger Agreement), Parent
shall pay to the holder thereof cash in an amount equal to the product of (i)
the number of Shares provided for in such Option and (ii) the excess, if any,
of the Merger Consideration over the exercise price per Share provided for in
such Option, which cash payment will be treated as compensation and will be
net of any applicable federal or state withholding tax (the "Option
Consideration"). The Company will take all actions necessary to ensure that
(i) all Options, to the extent not exercised prior to the Effective Time, will
terminate and be cancelled as of the Effective Time and thereafter be of no
further force or effect, (ii) no Options are granted after the date of this
Agreement, and (iii) at the Effective Time, the Stock Option Plans and all
Options issued thereunder will terminate.
The Merger Agreement further provides that except as may be otherwise agreed
to by Parent or Purchaser and the Company, the Stock Option Plans and the
Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan") will
terminate as of the Effective Time and the provisions in any other plan,
program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any of its
subsidiaries will be deleted as of the Effective Time and no holder of Options
or any participant in any Stock Option Plan or the Purchase Plan or any other
plans, programs or arrangements will have any right thereunder to acquire any
equity securities of the Company, the surviving corporation or any subsidiary
thereof. In connection with the foregoing, Parent, Purchaser and the Company
agree that participants in the Purchase Plan will not be entitled to purchase
any shares under the Purchase Plan for the period beginning October 1, 1998
and ending on the Effective Time, and after the Effective Time, any amounts
which have been withheld from participants under the Purchase Plan will be
returned without interest to such participants.
Employee Benefits. The Merger Agreement provides that except as may
otherwise be agreed to by the parties to the Merger Agreement, after the
closing of the Merger, Parent will cause Purchaser or the Company to honor all
obligations under the existing terms of the employment and severance
agreements to which the Company or any of its subsidiaries is currently a
party. For a period of up to twelve months following the Effective Time as
determined by Parent in its sole discretion (the "Transition Period"),
employees of the Company will continue to participate in the employee benefit
plans of the Company on substantially similar terms to those currently in
effect. Following the Transition Period, the Company's employees will be
permitted to participate in the employee benefit plans of Parent as in effect
on the date thereof on terms substantially similar to those provided to
employees of Parent. The Merger Agreement further provides that if any
employee of the Company or of any of the Company's subsidiaries becomes a
participant in any employee benefit plan, practice or policy of Parent, any of
its affiliates or the surviving corporation of the Merger, such employee will
be given credit under such plan for all service prior to the Effective Time
with the Company and the Company's subsidiaries and prior to the time such
employee becomes such a participant, for purposes of eligibility (including,
without limitation, waiting periods) and vesting but not for any other
purposes for which such service is either taken into account or recognized
(including, without limitation, benefit accrual); provided, however, that such
employees will be given credit for such service for purposes of any vacation
policy. In addition, if any employees of the Company or any of the Company's
subsidiaries employed as of the closing date of the Merger become covered by a
medical plan of Parent, any of its affiliates or the surviving corporation of
the Merger, such medical plan will not impose any exclusion on coverage for
preexisting medical conditions with respect to these employees.
Indemnification. The Merger Agreement provides that all rights to
indemnification existing in favor of, and all limitations on the personal
liability of the directors, officers, employees and agents of the Company and
its subsidiaries provided for in the Restated Certificate of Incorporation of
the Company and the Amended and Restated Bylaws of the Company as in effect as
of the date of the Merger Agreement with respect to matters occurring prior to
the Effective Time, and including the Offer and the Merger will continue in
full force and
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effect for a period of not less than six years from the Effective Time;
provided however, that all rights to indemnification in respect of any claims
(a "Claim") asserted or made within such period will continue until the
disposition of such Claim. The Merger Agreement further provides that at or
prior to the Effective Time, Parent will purchase directors' and officers'
liability insurance coverage for the Company's directors and officers which
will provide such directors and officers with coverage for six years following
the Effective Time of not less than the existing coverage under, and have
other terms not materially less favorable to the insured persons than the
directors' and officers' liability insurance coverage presently maintained by
the Company; provided, however, that in any event the total aggregate cost of
such policy shall not exceed $250,000 (the "Maximum Amount"); and provided,
further, that if such coverage cannot be obtained for such cost, the Company
will maintain, for such six-year period, the maximum amount of comparable
coverage as will be available for the Maximum Amount on such terms.
Representations and Warranties. In the Merger Agreement, the Company made
customary representations and warranties to Parent and the Purchaser with
respect to, among other things, its organization and qualification, its
capitalization, its authority relative to the Merger Agreement, filings made
by the Company with the Commission, the absence of certain changes or events,
litigation, payment of taxes, maintenance of its books and records, title to
properties, intellectual property, environmental matters, labor matters,
employee benefit plans, related party matters, Year 2000 compliance, suppliers
and customers and insurance.
Also in the Merger Agreement, Parent made representations and warranties to
the Company with respect to, among other things, its organization and
qualification, its authority relative to the Merger Agreement, necessary
consents and approvals and the availability of funds to consummate the Offer
and the Merger.
The Tender Agreements. Concurrently with the execution of the Merger
Agreement, Parent, Purchaser and the executive officers and directors of the
Company who beneficially own Shares (collectively referred to as the
"Management Stockholders" and each a "Management Stockholder") entered into
Tender Agreements (the "Tender Agreements"). The following is a summary of
certain provisions of the Tender Agreements.
Pursuant to the Tender Agreements, the Management Stockholders agreed to,
not later than the fifth business day after commencement of the Offer, validly
tender (or cause the record owner of such shares to validly tender) pursuant
to the Offer and not withdraw an aggregate of 1,200,976 Shares owned by the
Management Stockholders (together with any Shares acquired by the Management
Stockholders after the date of the Tender Agreements and prior to the
termination thereof, whether upon the exercise of Options, or by means of
purchase, dividend, distribution or otherwise), representing approximately
18.3% of the total Shares outstanding.
Each Management Stockholder agreed pursuant to the Tender Agreements that it
would during the term of the Tender Agreements, vote the Management
Stockholder's Shares owned by it at any meeting of the stockholders of the
Company, however called, or in connection with any written consent (i) in
favor of the Merger and any actions in furtherance thereof, and (ii) against
any Acquisition Proposal and against any action or agreement that would
impede, frustrate, prevent or nullify the Tender Agreements, or result in a
breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or which
would result in any of the offer conditions set forth in Annex A to the Merger
Agreement or set forth in Article VIII of the Merger Agreement not being
fulfilled. Each Management Stockholder covenanted and agreed that, except as
contemplated by the Tender Agreements and the Merger Agreement, it shall not
(i) transfer (which term includes, without limitation, any sale, gift, pledge
or other disposition), or consent to any transfer of, any or all of such
Management Stockholder's Shares, Options or any interest therein, (ii) enter
into any contract, option or other agreement or understanding with respect to
any transfer of any or all of such Shares, Options or any interest therein,
(iii) grant any proxy, power-of-attorney or other authorization in or with
respect to such Shares or Options, (iv) deposit such Shares or Options into a
voting trust or enter into a voting agreement or arrangement with respect to
such Shares or Options, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of its obligations under the
Tender Agreements or the transactions contemplated by the Tender Agreements or
the Merger Agreement.
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The Tender Agreements further provide that in order to induce Parent and
Purchaser to enter into the Merger Agreement, each Management Stockholder
shall grant to Parent an irrevocable option (a "Stock Option") to purchase
such Management Stockholder's Shares (the "Option Shares") at an amount (the
"Purchase Price") equal to the Offer Price. If (i) the Offer is terminated,
abandoned or withdrawn by Parent or Purchaser (due to the failure of the offer
conditions set forth in paragraph (g) or (h) of Annex A to the Merger
Agreement), or (ii) the Merger Agreement is terminated by the Company pursuant
to Section 9.1(c)(ii) of the Merger Agreement, each Stock Option shall, in any
such case, become exercisable, in whole or in part, upon the first to occur of
any such event and remain exercisable in whole or in part until the date which
is 60 days after the date of the occurrence of such event (the "60 Day
Period"), so long as: (i) all waiting periods under the HSR Act required for
the purchase of the Option Shares upon such exercise will have expired or been
waived, and (ii) there will not be in effect any preliminary or final
injunction or other order issued by any Governmental Entity prohibiting the
exercise of the Stock Options pursuant to this Agreement; provided, however,
that if all HSR Act waiting periods have not expired or been waived or there
is in effect any such injunction or order, in each case on the expiration of
the 60 Day Period, the 60 Day Period will be extended until five (5) business
days after the later of (a) the date of expiration or waiver of all HSR Act
waiting periods or (b) the date of removal or lifting of such injunction or
order. In the event that Parent wishes to exercise a Stock Option, Parent will
send a written notice (the "Notice") to the Management Stockholders
identifying the place and date (not less than two nor more than five (5)
business days from the date of the Notice) for the closing of such purchase.
Each Management Stockholder agreed, in the capacity as a Management
Stockholder or otherwise, that neither such Management Stockholder nor any of
its subsidiaries or affiliates shall (and such Management Stockholder shall
use its best efforts to cause its officers, directors, employees,
representatives and agents, including, but not limited to, investment bankers,
attorneys and accountants, not to), directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with, or
provide any information to, any corporation, partnership, person or other
entity or group (other than Parent, any of its affiliates or representatives)
concerning any Acquisition Proposal or take any other action prohibited by
Section 7.4 of the Merger Agreement. Each Management Stockholder will
immediately cease any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal and
will immediately communicate to Parent the terms of any proposal, discussion,
negotiation or inquiry (and will disclose any written materials received by
such Management Stockholder in connection with such proposal, discussion,
negotiation or inquiry) and the identity of the party making such proposal or
inquiry which it may receive in respect of any such transaction.
Under the Tender Agreements, each Management Stockholder irrevocably granted
to and appointed Parent, Corey Torrence and Douglas Webb, or either of them,
in their respective capacities as officers of Parent, and any individual who
shall succeed to any such office of Parent, and each of them individually,
such Management Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Management
Stockholder, to vote such Management Stockholder's Shares, or grant a consent
or approval in respect of the Shares in favor of any or all of the
transactions contemplated by the Merger Agreement and Tender Agreements and
against any Acquisition Proposal. Each Management Stockholder waived any
rights of appraisal or rights to dissent from the Merger.
The Tender Agreements contain certain representations and warranties of the
parties. Each Management Stockholder severally represented that it is the
record and Beneficial Owner (as such term is defined in the Tender Agreements)
of the Shares and has sole voting and dispositive powers with respect to the
Management Stockholder Shares. In addition, Parent, Purchaser and the
Management Stockholders made representations regarding their organization and
qualification, authority relative to the Tender Agreements, and absence of
conflicts.
Employment Agreement with Dennis Yablonsky. In connection with the Offer and
the Merger, Parent and Dennis Yablonsky have entered into an at will
employment agreement (the "Yablonsky Employment Agreement") which is
conditioned and becomes effective only upon the consummation of the Merger.
Under the Yablonsky Employment Agreement, Mr. Yablonsky agreed to serve as the
Executive Vice President of the Carnegie Group division of Parent. The
Yablonsky Employment Agreement provides that Mr. Yablonsky will
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receive, subject to certain conditions, an initial annual salary of $240,000
and Mr. Yablonsky will be eligible for performance bonuses to be determined
annually by Parent. In addition to the performance bonuses to be determined
annually by Parent, Mr. Yablonsky will be entitled, for the fiscal year ending
December 31, 1998, to receive a bonus to which he would otherwise have been
entitled under the Company's current bonus plan. Pursuant to the Merger
Agreement, Mr. Yablonsky will receive cash in exchange for his Options which
have an exercise price less than the Offer Price. See Section 11. With respect
to each Option held by Mr. Yablonsky having an exercise price greater than or
equal to the Offer Price, Mr. Yablonsky will receive a Logica Option to
acquire such number of ordinary shares of Logica plc ("Ordinary Shares") equal
to (i) the product of the number of Shares represented by the Option and the
exercise price of such Option, divided by (ii) the exchange rate in U.S.
Dollars per British Pounds, (iii) such result divided by the market price of
an Ordinary Share as of the Effective Time (the "Option Formula"). Under the
Yablonsky Employment Agreement, in the event Mr. Yablonsky terminates his
employment with Parent with an effective date that is before or after the
Anniversary Date (as such term is defined in the Yablonsky Employment
Agreement), Mr. Yablonsky will not be entitled to receive any compensation or
other payments from Parent. However, in the event Mr. Yablonsky terminates his
employment with Parent with an effective date on the date which is the
Anniversary Date, Parent will continue to pay Mr. Yablonsky's salary at the
rate in effect as of the closing date of the Merger (the "Closing Date") and
Mr. Yablonsky's benefits for a period of twelve (12) months from the
termination date. The Yablonsky Employment Agreement further provides that in
the event Parent terminates Mr. Yablonsky's employment with an effective date
that is (i) on or before the Anniversary Date, Parent will continue to pay Mr.
Yablonsky's salary at the rate in effect as of the Closing Date until the
second anniversary of the Closing Date and Mr. Yablonsky's benefits for a
period of twelve (12) months after the termination date, (ii) after the
Anniversary Date and before the date which is eighteen (18) months after the
Closing Date, Parent will continue to pay Mr. Yablonsky's salary at the rate
in effect as of the Closing Date and Mr. Yablonsky's benefits until the second
anniversary of the Closing Date, or (iii) after the date which is eighteen
(18) months after the Closing Date, Parent will continue to pay Mr.
Yablonsky's salary at the rate in effect as of the Closing Date and Mr.
Yablonsky's benefits for a period of six (6) months after the termination
date.
Employment Agreement with John Manzetti. In connection with the Offer and
the Merger, Parent and John Manzetti have entered into an at will employment
agreement (the "Manzetti Employment Agreement") which is conditioned and
becomes effective only upon the consummation of the Merger. Under the Manzetti
Employment Agreement, Mr. Manzetti agreed to serve as the Senior Vice
President--Finance and Government Operations of the Carnegie Group division of
Parent. The Manzetti Employment Agreement provides that Mr. Manzetti will
receive, subject to certain conditions, an initial annual salary of $200,004
and Mr. Manzetti will be eligible for performance bonuses to be determined
annually by Parent. In addition to the performance bonuses to be determined
annually by Parent, Mr. Manzetti will be entitled, for the fiscal year ending
December 31, 1998, to receive a bonus to which he would otherwise have been
entitled under the Company's current bonus plan. Pursuant to the Merger
Agreement, Mr. Manzetti will receive cash in exchange for his Options which
have an exercise price less than the Offer Price. See Section 11. With respect
to each Option held by Mr. Manzetti having an exercise price greater than or
equal to the Offer Price, Mr. Manzetti will be entitled to receive Logica
Options determined pursuant to the Option Formula. Under the Manzetti
Employment Agreement, in the event Mr. Manzetti terminates his employment with
Parent with an effective date that is before or after the Nine-Month
Anniversary Date (as such term is defined in the Manzetti Employment
Agreement), Mr. Manzetti will not be entitled to receive any compensation or
other payments from Parent. However, in the event Mr. Manzetti terminates his
employment with Parent with an effective date on the date which is the Nine-
Month Anniversary Date, Parent will continue to pay Mr. Manzetti's salary at
the rate in effect as of the Closing Date and Mr. Manzetti's benefits for a
period of nine (9) months from the termination date. The Manzetti Employment
Agreement further provides that in the event Parent terminates Mr. Manzetti's
employment with an effective date that is (i) on or before the Nine-Month
Anniversary Date, Parent will continue to pay Mr. Manzetti's salary at the
rate in effect as of the Closing Date until the date that is eighteen (18)
months after the Closing Date and Mr. Manzetti's benefits for a period of nine
(9) months after the termination date, or (ii) after the Nine-Month
Anniversary Date, Parent will continue to pay Mr. Manzetti's salary at the
rate in effect as of the Closing Date and Mr. Manzetti's benefits for a period
of six (6) months after the termination date.
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Employment Agreement with Bruce Russell. In connection with the Offer and
the Merger, Parent and Bruce Russell have entered into an at will employment
agreement (the "Russell Employment Agreement") which is conditioned and
becomes effective only upon the consummation of the Merger. Under the Russell
Employment Agreement, Mr. Russell agreed to serve as the Senior Vice
President--Engineering of the Carnegie Group division of Parent. The Russell
Employment Agreement provides that Mr. Russell will receive, subject to
certain conditions, an initial annual salary of $200,004 and Mr. Russell will
be eligible for performance bonuses to be determined annually by Parent. In
addition to the performance bonuses to be determined annually by Parent, Mr.
Russell will be entitled, for the fiscal year ending December 31, 1998, to
receive a bonus to which he would otherwise have been entitled under the
Company's current bonus plan. Pursuant to the Merger Agreement, Mr. Russell
will receive cash in exchange for his Options which have an exercise price
less than the Offer Price. See Section 11. With respect to each Option held by
Mr. Russell having an exercise price greater than or equal to the Offer Price,
Mr. Russell will be entitled to receive Logica Options determined pursuant to
the Option Formula. Under the Russell Employment Agreement, in the event Mr.
Russell terminates his employment with Parent with an effective date that is
before or after the Nine-Month Anniversary Date (as such term is defined in
the Russell Employment Agreement), Mr. Russell will not be entitled to receive
any compensation or other payments from Parent. However, in the event Mr.
Russell terminates his employment with Parent with an effective date on the
date which is the Nine-Month Anniversary Date, Parent will continue to pay Mr.
Russell's salary at the rate in effect as of the Closing Date and Mr.
Russell's benefits for a period of nine (9) months from the termination date.
The Russell Employment Agreement further provides that in the event Parent
terminates Mr. Russell's employment with an effective date that is (i) on or
before the Nine-Month Anniversary Date, Parent will continue to pay Mr.
Russell's salary at the rate in effect as of the Closing Date until the date
that is eighteen (18) months after the Closing Date and Mr. Russell's benefits
for a period of nine (9) months after the termination date, or (ii) after the
Nine-Month Anniversary Date, Parent will continue to pay Mr. Russell's salary
at the rate in effect as of the Closing Date and Mr. Russell's benefits for a
period of six (6) months after the termination date.
Employment Agreement with Raymond Kalustyan. In connection with the Offer
and the Merger, Parent and Raymond Kalustyan have entered into an at will
employment agreement (the "Kalustyan Employment Agreement") which is
conditioned and becomes effective only upon the consummation of the Merger.
Under the Kalustyan Employment Agreement, Mr. Kalustyan agreed to serve as the
Vice President of the Carnegie Group division of Parent. The Kalustyan
Employment Agreement provides that Mr. Kalustyan will receive, subject to
certain conditions, an initial annual salary of $150,000 and Mr. Kalustyan
will be eligible for performance bonuses to be determined annually by Parent.
In addition to the performance bonuses to be determined annually by Parent,
Mr. Kalustyan will be entitled to receive, (i) for the fiscal year ending
December 31, 1998, a bonus to which he would otherwise have been entitled
under the Company's current bonus plan, and (ii) at the Effective Time, a one-
time bonus of $50,000 payable in one lump sum. Pursuant to the Merger
Agreement, Mr. Kalustyan will receive cash in exchange for his Options which
have an exercise price less than the Offer Price. See Section 11. Under the
Kalustyan Employment Agreement, in the event Mr. Kalustyan terminates his
employment with Parent with an effective date that is before or after the
Seventh-Month Anniversary Date (as such term is defined in the Kalustyan
Employment Agreement), Mr. Kalustyan will not be entitled to receive any
compensation or other payments from Parent. However, in the event Mr.
Kalustyan terminates his employment with Parent with an effective date on the
date which is the Seventh-Month Anniversary Date, Parent will continue to pay
Mr. Kalustyan's salary at the rate in effect as of the Closing Date and Mr.
Kalustyan's benefits for a period of six (6) months from the termination date.
The Kalustyan Employment Agreement further provides that in the event Parent
terminates Mr. Kalustyan's employment with an effective date that is (i) on or
before the Seventh-Month Anniversary Date, Parent will continue to pay Mr.
Kalustyan's salary at the rate in effect as of the Closing Date until the date
that is thirteen (13) months after the Closing Date and Mr. Kalustyan's
benefits for a period of six (6) months after the termination date, or (ii)
after the Seventh-Month Anniversary Date, Parent will continue to pay Mr.
Kalustyan's salary at the rate in effect as of the Closing Date and Mr.
Kalustyan's benefits for a period of six (6) months after the termination
date.
Each of the Merger Agreement, the Tender Agreements, the Yablonsky
Employment Agreement, the Manzetti Employment Agreement, the Russell
Employment Agreement and the Kalustyan Employment
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Agreement contains other terms and conditions. The foregoing description of
certain terms and provisions of such agreements is qualified in its entirety
by reference to the text of such agreements, which are filed as exhibits to
the Schedule 14D-1, which may be examined at, and copies thereof may be
obtained from, the offices of the Commission in the manner set forth in
Section 8 (except that copies are not available at the regional offices of the
Commission), and are available via EDGAR at the Commission's website.
Miscellaneous. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company may
have certain rights under Delaware law to demand appraisal of, and seek the
payment in cash of the fair value of, their Shares. Such rights, if the
statutory procedures are strictly complied with, could lead to a judicial
determination of the fair value (which, under Delaware law, excludes any
element of value arising from the accomplishment or expectation of the Merger)
required to be paid in cash to such dissenting holders for their Shares. Any
such judicial determination of the fair value of Shares could be based upon
considerations other than or in addition to the price paid in the Offer and
the market value of the Shares. The value so determined could be more or less
than the purchase price per Share paid pursuant to the Offer or the
consideration per Share to be paid in the Merger. The foregoing summary of the
rights of dissenting shareholders does not purport to be a complete statement
of the procedures to be followed by stockholders desiring to exercise their
appraisal rights. The preservation and exercise of appraisal rights are
conditioned on strict adherence to the applicable provisions of Delaware law.
A more complete description of appraisal rights under Delaware law will be
sent to stockholders of the Company if the merger is or is to be consummated.
The Merger will have to comply with any federal law applicable at the time.
In the event that the Merger is consummated more than one year after
termination of the Offer and Purchaser has become an affiliate of the Company
as a result of the Offer, or the Merger provides for the payment of
consideration less than that paid pursuant to the Offer, and in certain other
circumstances, Purchaser may be required to comply with Rule 13e-3 under the
Exchange Act. If applicable, Rule 13e-3 would require, among other things,
that certain financial information concerning the Company and certain
information relating to the fairness of such transaction and the consideration
offered to minority stockholders be filed with the Commission and distributed
to minority stockholders prior to the consummation of such transaction.
Purchaser does not believe that Rule 13e-3 will be applicable to the Merger.
Upon the completion of the Offer, Logica intends to conduct a detailed
review of the Company and its assets, corporate structure, dividend policy,
capitalization, operations, properties, policies, management, and personnel
and consider, subject to the terms of the Merger Agreement, what, if any,
changes would be desirable in light of the circumstances which then exist and
reserves the right to effect such actions or changes. Such changes could
include changes in the Company's business, corporate structure, Certificate of
Incorporation, By-Laws, capitalization, Company Board, management or dividend
policy, although Logica has no current plans with respect to any of such
matters, except as disclosed in this Offer to Purchase. Upon consummation of
the Offer, Logica intends to elect its representatives to the Company Board as
provided for in the Merger Agreement.
Except as noted in this Offer to Purchase, Logica has no present plans or
proposals that would result in an extraordinary corporate transaction, such as
a merger, reorganization, liquidation, or sale or transfer of assets,
involving the Company or any of its subsidiaries, or any material changes in
the Company's corporate structure, business or composition of its management
or personnel.
Whether or not Purchaser purchases Shares pursuant to the Offer, subject to
the terms of the Merger Agreement, Logica expressly reserves the right to
acquire, following consummation or termination of the Offer, and may
thereafter acquire, subject to the availability of Shares at favorable prices
and the availability of financing, additional Shares through open market
purchases, privately negotiated transactions, another tender offer or
otherwise. Any such purchases of additional Shares might be on terms which are
the same as, or more or less favorable than, those of this Offer. In any
event, Logica is under no obligation to effect any such purchases. Logica also
reserves the right to dispose of any or all Shares acquired by it.
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12. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by Logica
to purchase all of the Shares pursuant to the Offer and to pay related fees
and expenses is estimated to be approximately $38 million (the "Total Funds
Amount"). Purchaser plans to obtain all funds needed for the Offer and the
Merger and to pay related fees and expenses through capital contributions and
advances that will be made by Logica plc and Parent. Logica plc plans to
obtain funds for such capital contributions and advances from cash accounts
and available lines of credit or credit facilities to be established by Logica
plc prior to the acceptance of and payment for Shares in the Offer. Logica plc
has not conditioned the Offer on obtaining financing and Logica plc has
available in its cash accounts and under existing lines of credit amounts in
excess of the Total Funds Amount.
Logica anticipates that any indebtedness incurred to fund the Offer and the
Merger will be repaid from a variety of sources, which may include, but may
not be limited to, funds generated internally by Logica and its affiliates,
bank refinancing, and the public or private sale of debt securities. Decisions
concerning the method of repayment will be made based on Logica's review from
time to time of the feasibility of particular actions and on prevailing
interest rates and market conditions.
13. CERTAIN CONDITIONS OF THE OFFER. The Merger Agreement provides that
Purchaser shall not be required to accept for payment, or to purchase or to
pay for, any tendered Shares, and Purchaser may terminate or amend the Offer
and may postpone the purchase of, and payment for, the Shares if: (i) there
shall not have been validly tendered and not withdrawn immediately prior to
the expiration of the Offer, at least that number of Shares that, when taken
as a whole with all the other Shares owned or acquired by Purchaser (whether
pursuant to the Offer or otherwise), constitutes at least the Minimum Share
Condition; (ii) prior to the time of payment for any such Shares, any waiting
period (and any extension thereof) applicable to the Offer under the HSR Act,
shall not have expired or otherwise been terminated; or (iii) at any time on
or after the date of the Merger Agreement and prior to the time of payment for
any such Shares, any of the following events shall have occurred:
(a) there shall be in effect a preliminary or permanent injunction or other
order, decree or ruling by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or a statute,
rule, regulation or executive order shall have been promulgated or enacted by
a governmental authority (or, in the case of an action or proceeding before or
by any governmental, regulatory or administrative agency or commission or
governmental authority, any of the foregoing shall be threatened or pending)
which (1) restrains or prohibits the making of the Offer or the consummation
of the Offer, (2) prohibits or restricts the ownership or operation by
Purchaser (or any of its subsidiaries) of any portion of the Company's or
Company subsidiaries' business, properties or assets which is material to the
Company as a whole, (3) imposes any material limitation on the ability of
Purchaser or Parent effectively to acquire or to hold or to exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote the Shares purchased by Purchaser or Parent on all matters presented to
the shareholders of the Company, (4) imposes any limitations on the ability of
Parent or any of its subsidiaries to control in any material respect the
business, properties and operations of the Company, or (5) which otherwise
results in a Company Material Adverse Effect. A "Company Material Adverse
Effect" shall mean a material adverse effect on the current business, results
of operations or financial condition of the Company and its subsidiaries taken
as a whole, other than any actions, omissions, changes, events or effects that
(1) are primarily related to a general drop in stock prices in the United
States or the United Kingdom that are primarily due to political or economic
turmoil, or (2) are primarily related to or result from the announcement or
pendency of the Offer and/or the Merger, including disruptions to the
Company's business or the business of its subsidiaries, and their respective
employees, customers and suppliers; provided, however, that fully diluted
earnings per share (calculated in accordance with US GAAP consistently
applied) of the Company for the fiscal quarter ended September 30, 1998 of
$0.00 or more shall not be deemed to have a Company Material Adverse Effect;
(b) any of the representations and warranties of the Company contained in
the Merger Agreement (1) specifically concerning the Customer Contracts (as
such term is defined in the Merger Agreement), or (2) that are qualified as to
Company Material Adverse Effect shall not have been, or shall cease to be,
true and correct in all material respects (whether because of circumstances or
events occurring in whole or in part prior to, on or after the date of the
Merger Agreement), or any of the representations and warranties of the Company
set forth in the Merger
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Agreement that are not so qualified shall not have been, or cease to be, true
and correct (whether because of circumstances or events occurring in whole or
in part prior to, on or after the date of the Merger Agreement) under
circumstances in which such failure to be true and correct results in a
Company Material Adverse Effect;
(c) there shall have occurred (1) any general suspension of, or limitation
on prices for, or trading in, securities on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq Stock Market which shall continue for
more than 24 hours, (2) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or the United
Kingdom (whether or not mandatory), (3) a commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States or the United Kingdom which has a material adverse
effect on Logica plc's ability to borrow sufficient funds under its bank
facilities to purchase and pay for the Shares pursuant to the Offer and the
Merger in accordance with the terms of the Merger Agreement, or (4) any
limitation (whether or not mandatory) by any United States or United Kingdom
governmental authority or agency on the extension of credit by banks or other
financial institutions, which has a material adverse effect on Logica plc's
ability to borrow sufficient funds under its bank facilities to purchase and
pay for the Shares pursuant to the Offer and the Merger in accordance with the
terms of the Merger Agreement;
(d) a tender or exchange offer for some portion of or all the Shares shall
have been publicly proposed to be made or shall have been made by another
person with respect to the Shares;
(e) the Merger Agreement shall have been terminated in accordance with its
terms;
(f) since the date of the Merger Agreement, there has occurred any change
that, when taken together with all other such changes, has a Company Material
Adverse Effect;
(g) the Company shall not have performed all obligations required to be
performed by it under the Merger Agreement, including, without limitation, the
covenants contained in Article 2, 6 or 7 thereof, except where any failure to
perform (1) would, individually or in the aggregate, not materially impair or
significantly delay the ability of Purchaser to consummate the Offer; (2) has
been caused by or results from a material breach of the Merger Agreement by
Parent or Purchaser; or (3) does not have a Company Material Adverse Effect
(provided, however, that the foregoing exceptions shall not apply to the
covenants contained in Article 2 of the Merger Agreement);
(h) Parent shall have learned that any person, entity or "group" (within the
meaning of Section 13(d) of the Exchange Act) shall have acquired beneficial
ownership of more than 5% of the Shares, through the acquisition of Shares,
the formation of a group or otherwise, or shall have been granted any right,
option or warrant, conditional or otherwise, to acquire ownership of more than
5% of the Shares; provided, however, that the acquisition of beneficial
ownership of more than 5% of the Shares but less than 15% of the Shares by any
such person, entity or "group" as contemplated by the foregoing shall not be
deemed a failure of this condition provided that such Shares were acquired and
are held by such person, entity or "group" solely as a passive investment and
not (1) with a purpose or effect of changing or influencing control of the
Company, or (2) in connection with or as a participant in any transaction
having that purpose or effect, in each case other than the Offer;
(i) any consent, authorization, order or approval of (or filing or
registration with) any governmental commission, board, other regulatory body
or other third party required to be made or obtained by the Company or any of
its subsidiaries or affiliates in connection with the execution, delivery and
performance of this Agreement shall not have been obtained or made, except
where the failure to have obtained or made any such consent, authorization,
order, approval, filing or registration, would not have a Company Material
Adverse Effect;
(j) any principal stockholder who has executed a Tender Agreement shall have
failed to tender his or her Shares or the option set forth in Paragraph 3 of
any of the Tender Agreements shall not be in full force and effect in
accordance with the terms thereof, or any United States federal or state court
of competent jurisdiction shall have issued an injunction or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
enforcement of any of the terms of any Tender Agreement; or
32
<PAGE>
(k) the Company is unable to obtain waivers (on terms reasonably
satisfactory to Parent and Purchaser) with respect to any default,
termination, acceleration of payment or performance or modification clause
contained in any contract, agreement, commitment, or lease, to which the
Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries, or their respective properties or assets is bound, except
where the failure to have so obtained such waiver or waivers does not have a
Company Material Adverse Effect.
Pursuant to the Merger Agreement, the foregoing conditions (i) may be
asserted by Purchaser or Parent regardless of the circumstances (including any
action or inaction by Purchaser or any of its affiliates other than a material
breach of the Merger Agreement), and (ii) are for the sole benefit of
Purchaser, Parent and their respective affiliates. The foregoing conditions
may be waived by Parent in whole or in part at any time and from time to time
in the sole discretion of Parent. The conditions may be considered to be
material to the Offer. The failure by Purchaser or Parent at any time to
exercise any of the foregoing rights will not be deemed a waiver of any other
rights and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
See Section 11 for a description of certain representations, warranties,
covenants and agreements of the Company under the Merger Agreement, the breach
or failure to satisfy of which may constitute a failure to satisfy certain of
the conditions to the Offer.
14. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of the Merger
Agreement, the Company should (i) split, combine or otherwise change the
Shares or its capitalization, (ii) issue or sell any additional securities of
the Company or otherwise cause an increase in the number of outstanding
securities of the Company (except for Shares issuable upon the exercise of
Options outstanding on the date of the Merger Agreement), or (iii) acquire
currently outstanding Shares or otherwise cause a reduction in the number of
outstanding Shares, then, without prejudice to the Purchaser's rights
described under Sections 1 and 13, Purchaser, in its sole discretion, may make
such adjustments as it deems appropriate in the purchase price and other terms
of the Offer and the Merger, including, without limitation, the amount and
type of securities offered to be purchased.
15. CERTAIN LEGAL MATTERS.
General. Except as described below, based upon discussions between Purchaser
and the Company and the examination by Purchaser of available information
filed by the Company with the Commission and other publicly available
information concerning the Company, Purchaser is not aware of any license or
regulatory permit that appears to be material to the business of the Company
and the Company's subsidiaries, taken as a whole, that might be adversely
affected by the acquisition of Shares by Purchaser pursuant to the Offer or,
except as set forth below, of any approval or any other action by any domestic
(federal or state) or foreign governmental, administrative or regulatory
authority that would be required for the acquisition or ownership of Shares by
Purchaser pursuant to the Offer. Should any such approval or other action be
required, it is presently contemplated that such approval or action would be
sought. Although Purchaser does not presently intend to delay acceptance for
payment of Shares tendered pursuant to the Offer pending the receipt of any
such approval or the outcome of any such actions, there can be no assurance
that any such approval or other action, if needed, would be obtained, or would
be obtained without substantial conditions, or that adverse consequences might
not result to the Company's business or that certain parts of the Company's
business might not have to be disposed of in the event that such approvals
were not obtained or such other actions were not taken in order to obtain any
such approval or other action. If certain types of adverse actions are taken
with respect to the matters discussed below, Purchaser could decline to accept
for payment any Shares tendered. Purchaser's obligation under the Offer to
accept the Shares for payment is subject to certain conditions, including
conditions relating to the legal matters discussed in this Section 15. See
Section 13.
Antitrust. The Offer and Merger are subject to the HSR Act, which provides
that certain acquisition transactions may not be consummated unless certain
information has been furnished to the Federal Trade Commission ("FTC") and the
Antitrust Division of the Department of Justice and certain waiting period
requirements have been satisfied. Each of Logica and the Company intends to
file a Notification and Report Form under the HSR Act with respect to the
Offer on or about October 8, 1998.
33
<PAGE>
Under the provisions of the HSR Act applicable to the Offer, the purchase of
Shares pursuant to the Offer may not be consummated until the expiration of a
15-calendar day waiting period following the filing by Logica and the Company.
Accordingly, assuming the filing is in substantial compliance with the HSR
Act, the waiting period will expire at 11:59 p.m., New York City time, on
October 23, 1998 (assuming an October 8, 1998 filing date), unless earlier
terminated by the FTC and the Antitrust Division. However, if either the FTC
or the Antitrust Division requests additional information or documents from
Logica or the Company within such initial waiting period, the initial waiting
period would be extended for an additional ten days from the date of
substantial compliance by Logica or the Company, as the case may be with such
request. Thereafter, the waiting period may be extended only by a court order
or with the consent of Logica or the Company, as the case may be. Each of the
parties has requested that the FTC and the Antitrust Division grant early
termination of the applicable waiting period, but there can be no assurance
that such request will be granted.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of
Shares pursuant to the Offer. At any time before or after the Purchaser's
acceptance for payment of Shares, the FTC or the Antitrust Division could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or otherwise or seeking divestiture of Shares acquired
by Purchaser or divestiture of substantial assets of Purchaser or its
subsidiaries. Private parties and state attorney generals may also bring legal
action under the antitrust laws under certain circumstances. Based upon the
Purchaser's discussions with the Company and its examination of publicly
available information with respect to the Company, Purchaser believes that the
acquisition by Purchaser of the Shares will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made, or, if such a challenge is made, of the
result.
State Takeover Laws. The Company is incorporated under the laws of the State
of Delaware. Section 203 of the DGCL limits the ability of a Delaware
corporation to engage in business combinations with "interested stockholders"
(defined as any beneficial owner of 15% or more of the outstanding voting
stock of the corporation) unless, among other things, the corporation's board
of directors has given its prior approval to either the business combination
or the transaction which resulted in the stockholder becoming an "interested
stockholder." The Company has represented in the Merger Agreement that it
properly elected that Section 203 of the DGCL be inapplicable to the offer,
the Merger and the transactions contemplated in the Merger Agreement. At a
meeting on September 29, 1998, the Company Board approved the Merger
Agreement, the Merger, the Offer and the Purchaser's purchase of Shares
pursuant to the Offer. Accordingly, the provisions of Section 203 of the DGCL
have been satisfied with respect to the offer and the Merger and such
provisions will not delay the consummation of the Merger.
A number of states have adopted laws and regulations applicable to offers to
acquire securities of corporations which are incorporated in such states
and/or which have substantial assets, stockholders, principal executive
offices or principal places of business therein. In Edgar v. MITE Corporation,
the Supreme Court of the United States held that the Illinois Business
Takeover Statute, which made the takeover of certain corporations more
difficult, imposed a substantial burden on interstate commerce and was
therefore unconstitutional. In CTS Corporation v. Dynamics Corporation of
America, however, the Supreme Court of the United States held that as a matter
of corporate law, and in particular, those laws concerning corporate
governance, a state may constitutionally disqualify an acquiror of "control
shares" (i.e., shares representing ownership in excess of certain voting power
thresholds) of a corporation incorporated in such state and meeting certain
other judicial requirements from exercising voting power with respect to those
shares without the approval of a majority of the disinterested stockholders.
Subsequently, a number of Federal courts ruled that various state takeover
statutes were unconstitutional insofar as they apply to corporations
incorporated outside the state of enactment.
Purchaser does not believe that any of the takeover laws adopted by any
other states in which the Company conducts business applies by its terms to
the Offer or the Merger Agreement, and Purchaser has not taken steps
34
<PAGE>
to comply with any such takeover law. Should any person seek to apply any
state takeover law, Purchaser will take such action as then appears desirable,
which may include challenging the validity or applicability of any such
statute in appropriate court proceedings. In the event it is asserted that one
or more state takeover laws is applicable to the Offer, the Merger or the
Merger Agreement and an appropriate court does not determine that such law is
inapplicable or invalid as applied to the Offer, the Merger or the Merger
Agreement, Purchaser may be required to file certain information with, or
receive approvals from, the relevant state authorities. In addition, if
enjoined, Purchaser may be unable to accept for payment any Shares tendered
pursuant to the Offer or be delayed in continuing or consummating the Offer
and the Merger. In such case, Purchaser may not be obligated to accept for
payment any Shares tendered. See Section 13.
16. FEES AND EXPENSES. DLJ is acting as financial advisor to Logica plc,
Parent and Purchaser in connection with the Merger Agreement and is also
acting as Dealer Manager in connection with the Offer. In connection with the
transaction, Parent has agreed to pay DLJ a financial advisory fee of
$800,000, $200,000 of which is payable upon the commencement of the Offer and
the remainder is payable upon consummation of the Merger. Parent has also
agreed to reimburse DLJ for its reasonable out-of-pocket expenses (including
reasonable fees and expenses of its legal counsel) and to indemnify DLJ
against certain liabilities and expenses in connection with its services as
Dealer Manager and financial advisor, including certain liabilities under the
federal securities laws.
Parent has retained D.F. King & Co., Inc. to act as the Information Agent
and ChaseMellon Shareholder Services, L.L.C. to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, facsimile, telephone, telex, telegraph or in person and may request
brokers, dealers or other nominee holders to forward the Offer materials to
beneficial owners of Shares. The Information Agent and the Depositary each
will receive reasonable and customary compensation for such services, plus
reimbursement for certain out-of-pocket expenses. Parent has also agreed to
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection with the Offer, including certain liabilities under
the federal securities laws. Neither the Information Agent nor the Depositary
has been retained to make solicitations or recommendations in connection with
the Offer.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Dealer Manager) in connection with the
solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers,
banks and trust companies will be reimbursed by Purchaser upon request for
customary mailing and handling expenses incurred by them in forwarding
material to their customers.
17. MISCELLANEOUS. The Offer is being made to all holders of Shares.
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid
state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, Purchaser will make a good faith effort to comply with any such state
statute. If, after such good faith effort, Purchaser cannot comply with any
such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of Purchaser by the Dealer Manager or by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER, PARENT, LOGICA PLC OR THE COMPANY NOT
CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED.
35
<PAGE>
Pursuant to Rule 14d-3 promulgated under the Exchange Act, Purchaser, Parent
and Logica plc have filed with the Commission the Schedule 14D-1 (including
exhibits), furnishing certain additional information with respect to the
Offer. The Schedule 14D-1 and any amendments thereto, including exhibits, may
be inspected at, and copies may be obtained from, the same places and in the
same manner as set forth in Section 8 (except that they will not be available
at the regional offices of the Commission).
LOGICA PLC
LOGICA INC.
LOGICA ACQUISITION CORP.
October 7, 1998
36
<PAGE>
ANNEX I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER AND PARENT
The following tables set forth the name, age, current business address and
present principal occupation and citizenship or employment, and material
occupations, positions, offices or employment for the past five years of each
director and executive officer of Purchaser and Parent. The current business
address of each such person is 32 Hartwell Avenue, Lexington, Massachusetts
02421, except the current business address for each of Mr. Given and Dr. Read
is Stephenson House, 75 Hampstead Road, London NW1 2PL, United Kingdom. Each
such person is a citizen of the United States except for Messrs. Webb and
Given, Dr. Read and Ms. Horsfall who are citizens of the United Kingdom.
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PURCHASER
- ---- --- -----------------------
<S> <C> <C>
Corey Torrence.................................. 40 President and Director
Douglas Webb.................................... 37 Vice President and Director
</TABLE>
COREY TORRENCE. Mr. Torrence became the President and a Director of Logica
Acquisition Corp. in connection with its formation in September 1998. Mr.
Torrence joined Logica Inc. as President, Chief Executive Officer and a
Director in October 1997 and has been an Executive Committee Member of Logica
plc since October 1997. He was previously employed by AT&T Solutions, where he
was Managing Partner of the company's Supply Chain Management Consulting
Practice from 1995 until 1997. Mr. Torrence served as Vice President and
General Manager for the U.S. Atlantic Region of SHL Systemhouse Inc. from 1993
until 1995.
DOUGLAS WEBB. Mr. Webb became the Vice President and a Director of Logica
Acquisition Corp. in connection with its formation in September 1998. Mr. Webb
has held the position of Chief Financial Officer of Logica Inc. since 1997 and
has also served as a Director of Logica Inc. since January 1996. From April
1997 to December 1997, Mr. Webb served as the Executive Vice President of the
Communications Division of Logica Inc. From 1996 to 1997, he held the position
of Chief Operating Officer of Logica Inc. From 1995 to 1996, he held the
position of Chief Financial Officer of Logica Inc. He was also Group Financial
Controller of Logica plc from 1994 to 1995. He was previously employed by
Price Waterhouse, where he was employed as a Senior Manager from 1990 to 1994.
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PARENT
- ---- --- --------------------
<S> <C> <C>
Corey Torrence.......... 40 President, Chief Executive Officer and Director
Douglas Webb............ 37 Chief Financial Officer and Director
Karen Roche............. 47 Executive Vice President--Financial Services Division
Mike Maloney............ 42 Executive Vice President--Communications Division
Pauline Horsfall........ 39 Vice President--Human Resources
Jim Cypert.............. 62 Vice President--Asset and Resource Management and
Acting Vice President--Energy and Utilities Division
Dr. Martin Read......... 48 Director
Andrew Given............ 50 Director
</TABLE>
COREY TORRENCE. Mr. Torrence joined Logica Inc. as President, Chief
Executive Officer and a Director in October 1997 and has been an Executive
Committee Member of Logica plc since October 1997. He was
I-1
<PAGE>
previously employed by AT&T Solutions, where he was Managing Partner of the
company's Supply Chain Management Consulting Practice from 1995 until 1997.
Mr. Torrence served as Vice President and General Manager for the U.S.
Atlantic Region of SHL Systemhouse Inc. from 1993 until 1995.
DOUGLAS WEBB. Mr. Webb has held the position of Chief Financial Officer of
Logica Inc. since 1997 and has also served as a Director of Logica Inc. since
January 1996. From April 1997 to December 1997, Mr. Webb served as the
Executive Vice President of the Communications Division of Logica Inc. From
1996 to 1997, he held the position of Chief Operating Officer of Logica Inc.
From 1995 to 1996, he held the position of Chief Financial Officer of Logica
Inc. He was also Group Financial Controller of Logica plc from 1994 to 1995.
He was previously employed by Price Waterhouse, where he was employed as a
Senior Manager from 1990 to 1994.
KAREN ROCHE. Ms. Roche was appointed Executive Vice President--Financial
Services Division of Logica Inc. in 1997. She was previously employed as Vice
President--Financial Products Group of Logica Inc. from 1996 to 1997 and Vice
President--Wholesale Banking Division of Logica Inc. from 1993 to 1995.
MIKE MALONEY. Mr. Maloney joined Logica Inc. as Executive Vice President--
Communications Division in 1997. He was previously employed by Ameritech,
where he served in various capacities from 1995 to 1997, including: General
Manager--Managed Services, Acting Vice President--Alliance Business Sales, and
General Manager--Alliance Business Planning. Mr. Maloney served as Managing
Director--Networked Systems Management Business Development for SHL
Systemhouse from 1993 to 1995.
PAULINE HORSFALL. Ms. Horsfall joined Logica Inc. as Vice President--Human
Resources in 1997. She was previously employed by Logica plc, where she was
Management Development and Training Manager from 1995 to 1997. Ms. Horsfall
served as Director of Human Resources, Sensors Group for Thorn EMI Electronics
from 1993 to 1995.
JIM CYPERT. Mr. Cypert has served as Vice President--Asset and Resource
Management and Acting Vice President--Energy and Utilities Division of Logica
Inc. since 1998. At Logica Inc., Mr. Cypert was also employed as Vice
President--Marketing for the Energy and Utilities Division from 1996 to 1998.
From 1993 to 1996, Mr. Cypert was Vice President of Integration Services for
the Synercom Division at Logica Inc.
DR. MARTIN READ. Dr. Read has been a Director of Logica Inc. since October
1993. Since 1993, he has also been Managing Director and the Chief Executive
of Logica plc. From 1990 to 1993, Dr. Read served as Managing Director of GEC
Marconi Radar and Control Systems Limited and associated companies.
ANDREW GIVEN. Mr. Given has been a Director of Logica Inc. since April 1994.
Mr. Given has also been on the board of Logica plc as Group Finance Director
since April 1990 and has served as Company Secretary for Logica plc since June
1993.
I-2
<PAGE>
ANNEX II
DIRECTORS AND EXECUTIVE OFFICERS OF LOGICA PLC
The following table sets forth the name, age, current business address and
present principal occupation or employment, and material occupations,
positions, offices or employment for the past five years of each director and
executive of Logica plc. The current business address of each such person is
Stephenson House, 75 Hampstead Road, London NW1 2PL, United Kingdom, except
the current business address for each of Messrs. Craig and De Meyere is
Wijnhaven 69, 3011 WJ Rotterdam, The Netherlands, and for Mr. Torrence is
32 Hartwell Avenue, Lexington, Massachusetts 02421. Each such person is a
citizen of the United Kingdom, except Mr. De Meyere, who is a citizen of the
Kingdom of Belgium, Mr. Mamsch, who is a citizen of Germany, Mr. Torrence, who
is a citizen of the United States of America and Mr. Vinken, who is a citizen
of The Netherlands.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Sir Frank Barlow........ 68 Non-Executive Chairman, Board Member, Executive Committee
Member and Non-Executive Director
Dr. Martin Read......... 48 Managing Director and Chief Executive, Board Member and
Executive Committee Member
Mario Anid.............. 40 Executive Committee Member and Corporate Development Director
Duncan Craig............ 49 Board Member, Executive Committee Member and Regional Director for
Continental European Operations
Wilfried De Meyere...... 45 Executive Committee Member and Regional Director
for Continental European Operations
Elizabeth Filkin........ 57 Non-Executive Director
Andrew Given............ 50 Board Member, Executive Committee Member, Group Finance
Director and Company Secretary
Royston Hoggarth........ 36 Executive Committee Member and Director of International
Lines of Business
Laurence Julien......... 52 Executive Committee Member and Supervisory Managing Director
of Logica UK Limited
Jim McKenna............. 43 Board Member, Executive Committee Member, Group Personnel
Director and Regional Director for Asia Pacific Region
Helmut Mamsch........... 53 Non-Executive Director
Sam Sassoon............. 53 Executive Committee Member and Supervisory
Managing Director of Logica UK Limited
Corey Torrence.......... 40 Executive Committee Member and President and Chief Executive
Officer of Logica Inc.
Pierre Vinken........... 70 Non-Executive Director
Richard Wakeling........ 51 Non-Executive Director
</TABLE>
SIR FRANK BARLOW. Sir Frank joined the board as a Non-Executive Director in
January 1995 and became Chairman in November 1995. Among the many companies of
which Sir Frank serves as Director, he has served as a Director of the
Economist Newspaper Ltd since 1984 and served as Managing Director of Pearson
plc from 1986 until his retirement at the end of 1996. Sir Frank was knighted
in the Queen's New Year's Honours List 1998 for services to the newspaper
industry.
II-1
<PAGE>
DR. MARTIN READ. Dr. Read joined the board as Managing Director and Chief
Executive in July 1993. He has also served as a Director of Logica Inc. since
October 1993. From 1990 to 1993, Dr. Read served as Managing Director of GEC
Marconi Radar and Control Systems Limited and associated companies.
MARIO ANID. Mr. Anid joined the Executive Committee in 1995 as Corporate
Development Director. He was previously Corporate Development Director at Sema
Group plc from 1993 until 1995.
DUNCAN CRAIG. Mr. Craig joined the board in 1991 and is Regional Director
for Continental European Operations. He joined Logica plc in 1971 and has been
based in The Netherlands since 1974.
WILFRIED DE MEYERE. Mr. De Meyere joined the Executive Committee in July
1998 as Regional Director for Continental European Operations. From 1994 to
1998, he was Managing Director of Logica BV. From 1992 to 1996, Mr. De Meyere
was the Chief Executive of Logica SA/NV.
ELIZABETH FILKIN. Ms. Filkin joined the board as a Non-Executive Director in
January 1995. Ms. Filkin has also been the Adjudicator for the Inland Revenue,
Customs and Excise, Contributions Agency and Contributions Unit Northern
Ireland since June 1993. She has also served as a Non-Executive Director at
the Britannia Building Society since 1992.
ANDREW GIVEN. Mr. Given joined the board as Group Finance Director in April
1990 and has served as the Company Secretary since June 1993. Mr. Given has
also served as a Director of Logica Inc. since April 1994.
ROYSTON HOGGARTH. Mr. Hoggarth joined the Executive Committee in December
1997, as Director of International Lines of Business, responsible for Finance,
Telecoms and Energy and Utilities. From 1993 to 1997, Mr. Hoggarth served as
General Manager at IBM, where he was responsible for the group's retail brands
worldwide.
LAURENCE JULIEN. Mr. Julien joined the Executive Committee in 1996 as
Supervisory Managing Director of Logica UK Limited. He joined Logica in 1980
and has held line management positions since 1984.
JIM MCKENNA. Mr. McKenna joined the Executive Committee in 1993 as Group
Personnel Director and was appointed to the board in February 1998. Since 1996
he has also been the Regional Director for the Asia Pacific Region. From 1985
to 1993 Mr. McKenna served as Personnel Director of GEC Marconi Radar and
Control Systems Limited and associated companies.
HELMUT MAMSCH. Mr. Mamsch joined the board as a Non-Executive Director in
September 1997. He has also served as Director of VEBA AG since January 1998
and a Director of MEMEC Inc. (USA) since May 1998. From 1989 until 1996, Mr.
Mamsch served as Director of Raab Karcher U.K., Ltd.
SAM SASSOON. Mr. Sassoon joined the Executive Committee in November 1996 as
a Supervisory Managing Director of Logica UK Limited. From January 1993 until
June 1996, Mr. Sassoon served as Vice President and General Manager of the
European outsourcing group of Unisys.
COREY TORRENCE. Mr. Torrence joined the Executive Committee in October 1997
as President and Chief Executive of Logica Inc. He has also served as a
Director of Logica Inc. since October 1997. From 1995 until 1997, Mr. Torrence
served as Managing Partner of the Supply Chain Management Consulting Practice
for AT&T Solutions. From 1993 until 1995, Mr. Torrence served as Vice
President and General Manager for the U.S. Atlantic Region of SHL Systemhouse
Inc.
PIERRE VINKEN. Mr. Vinken joined the board in April 1990 and is a Non-
Executive Director, having previously served on the board of directors for
Logica BV since 1985. He was formerly Chairman of Reed Elsevier plc until his
retirement in 1995. He was also a Director of Pearson plc and The Economist
Group.
RICHARD WAKELING. Mr. Wakeling joined the board as a Non-Executive Director
in January 1995. He is a Non-Executive Director of Staveley Industries, Oxford
Instruments, and Henderson Geared Income & Growth Trust. He is also Chairman
of Henderson Technology Trust.
II-2
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates evidencing Shares and any
other required document should be sent or delivered by each holder of Shares
or his broker, dealer, commercial bank, trust company or other nominee to the
Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Mail: By Overnight Delivery: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway
South Hackensack, New Jersey Mail Drop-Reorg 13th Floor
07606 Ridgefield Park, New New York, New York
Jersey 07660 10271
Attention:
Reorganization
Department
Facsimile Transmission:
(201) 329-8936
(For Eligible Institutions Only)
CONFIRM BY TELEPHONE:
(201) 296-4860
----------------
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
and related materials may be directed to the Information Agent or the Dealer
Manager at their respective locations and telephone numbers set forth below.
Holders of Shares may also contact their broker, dealer, commercial banks or
trust companies for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
CALL TOLL FREE:
(800) 714-3312
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
277 Park Avenue
New York, New York 10172
Call Collect: (212) 892-7995
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
CARNEGIE GROUP, INC.,
PURSUANT TO THE OFFER TO PURCHASE DATED OCTOBER 7, 1998
BY
LOGICA ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY
OF
LOGICA INC.,
A WHOLLY OWNED SUBSIDIARY
OF
LOGICA PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, NOVEMBER 4, 1998, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Mail: By Overnight Delivery: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway 13th Floor
South Hackensack, Mail Drop-Reorg New York,
New Jersey 07606 Ridgefield Park, New Jersey 07660 New York 10271
Attention:
Reorganization Department
Facsimile Transmission:
(201) 329-8936 (For Eligible Institutions Only)
CONFIRM BY TELEPHONE:
(201) 296-4860
---------------
Your bank or broker can assist you in completing this Letter of Transmittal.
The instructions enclosed with this Letter of Transmittal must be followed and
should be read carefully. Questions and requests for additional copies of the
Offer to Purchase (as hereinafter defined) and this Letter of Transmittal may
be directed to the Information Agent as indicated in Instruction 10.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
THIS LETTER OF TRANSMITTAL IS TO BE COMPLETED BY HOLDERS OF SHARES EITHER IF
CERTIFICATES ARE TO BE FORWARDED HEREWITH OR IF A TENDER OF SHARES IS TO BE
MADE BY BOOK-ENTRY TRANSFER TO THE ACCOUNT MAINTAINED BY CHASEMELLON
SHAREHOLDER SERVICES, L.L.C. (THE "DEPOSITARY") AT THE DEPOSITORY TRUST
COMPANY ("DTC") (THE "BOOK-ENTRY TRANSFER FACILITY") (PURSUANT TO THE
PROCEDURES SET FORTH IN SECTION 3, "PROCEDURE FOR ACCEPTING THE OFFER AND
TENDERING SHARES," OF THE OFFER TO PURCHASE (AS HEREINAFTER DEFINED)). HOLDERS
OF SHARES WHOSE CERTIFICATES ARE NOT IMMEDIATELY AVAILABLE, OR WHO ARE UNABLE
TO DELIVER THEIR CERTIFICATES OR CONFIRMATION OF THE BOOK-ENTRY TENDER OF
THEIR SHARES INTO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY
(A "BOOK-ENTRY CONFIRMATION") AND ALL OTHER DOCUMENTS REQUIRED BY THIS LETTER
OF TRANSMITTAL TO THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS SUCH
TERM IS DEFINED IN SECTION 1, "TERMS OF THE OFFER," OF THE OFFER TO PURCHASE),
MUST TENDER THEIR SHARES ACCORDING TO THE GUARANTEED DELIVERY PROCEDURE SET
FORTH IN SECTION 3, "PROCEDURE FOR ACCEPTING THE OFFER AND TENDERING SHARES,"
OF THE OFFER TO PURCHASE. SEE INSTRUCTION 2. DELIVERY OF DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) AND SHARE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE EVIDENCED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL SHARES
- ----------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by holders tendering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by any certificate(s) delivered to the Depositary are being tendered.
See Instruction 4.
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
the Shares tendered hereby. The certificates and number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution __________________________________________
Account Number ________________ Transaction Code Number ________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s) _________________________________________
Window Ticket Number (if any) __________________________________________
Date of Execution of Notice of Guaranteed Delivery _____________________
Name of Institution which Guaranteed Delivery __________________________
If Delivered by Book-Entry Transfer, Check Box:
[_] DTC
Account Number ________________ Transaction Code Number ________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Logica Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Logica Inc., a
Delaware corporation (the "Parent") and a wholly owned subsidiary of Logica
plc, a public limited company organized under the laws of England ("Logica
plc"), the above described shares of common stock, par value $.01 per share
(the "Shares"), of Carnegie Group, Inc., a Delaware corporation (the
"Company"), at a purchase price of $5.00 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to
Purchase dated October 7, 1998 (the "Offer to Purchase"), receipt of which is
hereby acknowledged, and in accordance with this Letter of Transmittal (which,
together with the Offer to Purchase, constitute the "Offer").
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions
of the Offer, the undersigned hereby sells, assigns and transfers to or upon
the order of the Purchaser, all right, title and interest in and to all of the
Shares tendered hereby and irrevocably constitutes and appoints the Depositary
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Shares, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
certificates for such Shares or transfer ownership of such Shares on the
account books maintained by the Book-Entry Transfer Facility, together, in
either such case, with all accompanying evidences of transfer and
authenticity, to or upon the order of the Purchaser, upon receipt by the
Depositary, as the undersigned's agent, of the purchase price, (ii) present
such Shares for transfer on the books of the Company, and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares, all in accordance with the terms and subject to the conditions of the
Offer.
The undersigned hereby irrevocably appoints designees of the Purchaser as
the attorneys-in-fact and proxies of the undersigned, each with full power of
substitution, to vote in such manner as each such attorney and proxy or the
substitute for any such attorney and proxy will in the sole discretion of each
such attorney and proxy deem proper, and otherwise act (including pursuant to
written consent) with respect to all the Shares tendered hereby which have
been accepted for payment by the Purchaser prior to the time of such vote or
other action, which the undersigned is entitled to vote at any meeting of
holders of Shares (whether annual or special and whether or not an adjourned
meeting) of the Company, or consent in lieu of any such meeting or otherwise.
This power of attorney and proxy is coupled with an interest in the Company
and in the Shares and is irrevocable and is granted in consideration of, and
is effective upon, the Purchaser's oral or written notice to the Depositary of
its acceptance for payment of such Shares in accordance with the terms of the
Offer. Such acceptance for payment will revoke all prior powers of attorney
and proxies appointed by the undersigned at any time with respect to such
Shares and no subsequent powers of attorney or proxies may be given (and if
given will not be effective) with respect thereto by the undersigned. The
undersigned acknowledges that the Purchaser expressly reserves the right to
require that, in order for Shares to be deemed validly tendered, immediately
upon the acceptance for payment of such Shares, the Purchaser or the
Purchaser's designee is able to exercise full voting and other rights of a
record and beneficial holder, including acting by written consent, with
respect to such Shares.
The undersigned hereby represents and warrants that (i) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby, and (ii) when the same are accepted for payment by the
Purchaser, the Purchaser will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges, claims and
encumbrances, and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any signature guarantee or
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete or confirm the sale, assignment and transfer of the
Shares tendered hereby.
<PAGE>
All authority conferred or agreed to be conferred by this Letter of
Transmittal will not be affected by, and will survive, the death or incapacity
of the undersigned, and any obligations of the undersigned hereunder will be
binding upon the heirs, executors, administrators, trustees in bankruptcy,
personal and legal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable,
provided that Shares tendered pursuant to the Offer may be withdrawn at any
time prior to the Expiration Date.
The undersigned understands that the acceptance for payment of tendered
Shares pursuant to any of the procedures described in Section 3, "Procedure
for Accepting the Offer and Tendering Shares," of the Offer to Purchase and in
the instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions set
forth in the Offer, including the undersigned's representation and warranty
that (i) the undersigned "owns" the Shares being tendered within the meaning
of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended, and (ii) the tender of such Shares complies with Rule 14e-4. The
undersigned recognizes that under certain circumstances set forth in the Offer
to Purchase, the Purchaser may not be required to accept for payment any of
the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificate(s)
for Shares not tendered or not accepted for payment in the names of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
certificates for any Shares not tendered or accepted for payment (and
accompanying documents, as appropriate) to the undersigned at the address
appearing under "Description of Shares Tendered." In the event that both the
Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and/or return any
certificate(s) for Shares not tendered or accepted for payment in the name of,
and deliver said check and/or certificates to, the person or persons so
indicated. Unless otherwise indicated under "Special Payment Instructions," in
the case of a book-entry delivery of Shares, please credit the account
maintained at the Book-Entry Transfer Facility indicated above with any Shares
not accepted for payment. The undersigned recognizes that the Purchaser has no
obligation pursuant to the Special Payment Instructions to transfer any Shares
from the name of the registered holder thereof if the Purchaser does not
accept for payment any of the Shares so tendered.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certif- To be completed ONLY if certif-
icate(s) for Shares not tendered icate(s) for Shares not tendered
or not accepted for payment or not accepted for payment
and/or any check for the pur- and/or any check for the pur-
chase price of Shares accepted chase price of Shares purchased
for payment are to be issued in are to be sent to someone other
the name of someone other than than the undersigned, or to the
the undersigned, or if Shares undersigned at an address other
delivered by book-entry transfer than that shown above.
which are not accepted for pay-
ment are to be returned by
credit to an account maintained
at the Book-Entry Transfer Fa-
cility other than the account
indicated above.
Mail [_] check [_] certificate(s)
to:
Name: ___________________________
---------------------------------
Issue [_] check [_] certificate(s) (PLEASE TYPE OR PRINT)
to:
Address: ________________________
Name: ___________________________
---------------------------------
---------------------------------
(PLEASE TYPE OR PRINT) ---------------------------------
(INCLUDE ZIP CODE)
Name(s): ________________________
Address: ________________________
---------------------------------
---------------------------------
(INCLUDE ZIP CODE)
---------------------------------
(Tax Identification or Social
Security Number)
(Also complete Substitute Form
W-9 below)
[_]Credit unpurchased Shares
delivered by Book-Entry
Transfer Facility account set
forth below:
---------------------------------
(Book-Entry Transfer Facility
Account Number, if applicable)
<PAGE>
IMPORTANT:
HOLDERS OF SHARES SIGN HERE
_____________________________________________________________
_____________________________________________________________
SIGNATURES OF HOLDERS OF SHARES
Dated: , 1998
(Must be signed by registered holder(s) exactly as name(s)
appear(s) on stock certificate(s) or on a security position
listing or by person(s) authorized to become registered
holder(s) by certificates and documents transmitted
herewith. If signature is by an officer of a corporation,
attorney-in-fact, executor, administrator, trustee,
guardian, or other person acting in a fiduciary or
representative capacity, please set forth the full title and
see Instruction 5).
Name(s): ____________________________________________________
(PLEASE TYPE OR PRINT)
Capacity (full title): ______________________________________
Address: ____________________________________________________
_____________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: ________________________________
Tax Identification or Social Security No.: __________________
(Also complete Substitute Form W-9 below)
GUARANTEE OF SIGNATURES
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: _______________________________________
Name: _______________________________________________________
(PLEASE TYPE OR PRINT)
Title: ______________________________________________________
Name of Firm: _______________________________________________
Address: ____________________________________________________
_____________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: ________________________________
Dated: , 1998
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if (i) this Letter of Transmittal is signed by the
registered holders of Shares (which term, for purposes of this document, will
include any participant in the Book-Entry Transfer Facility whose name appears
on a security position listing as the owner of Shares) tendered herewith
unless such holders have completed either the box entitled "Special Delivery
Instructions" or "Special Payment Instructions" on this Letter of Transmittal,
or (ii) such Shares are tendered for the account of a member of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States (each, an "Eligible Institution"). In all
other cases, all signatures on this Letter of Transmittal must be guaranteed
by an Eligible Institution which is a participant in an approved Signature
Guarantee Medallion Program. If the certificate is registered in the name of a
person other than the signer of this Letter of Transmittal, the tendered
certificate must be endorsed or accompanied by appropriate stock powers,
signed exactly as the name or names of the registered owner or owners appear
on the certificate, with the signatures on the certificate or stock powers
guaranteed as aforesaid. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by holders of Shares either if certificates are
to be forwarded herewith or, unless an Agent's Message (as hereinafter
defined) is utilized, if tenders are to be made pursuant to the procedures for
delivery by book-entry transfer set forth in Section 3, "Procedure For
Accepting the Offer and Tendering Shares," of the Offer to Purchase.
Certificates for all physically tendered Shares, or Book-Entry Confirmation,
as the case may be, as well as a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein on or prior to the Expiration Date, or the
tendering holder of Shares must comply with the guaranteed delivery procedures
set forth below.
Holders whose certificates for Shares are not immediately available or who
cannot deliver their certificates and all other required documents to the
Depositary on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Shares
pursuant to the guaranteed delivery procedures set forth in Section 3,
"Procedure for Accepting the Offer and Tendering Shares," of the Offer to
Purchase. Pursuant to such procedures, (i) such tender must be made by or
through an Eligible Institution, (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Purchaser, must be received by the Depositary, either by hand delivery, mail,
telegram or facsimile transmission, on or prior to the Expiration Date, and
(iii) the certificates for all physically tendered Shares, in proper form for
transfer, or Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees, or an Agent's
Message, and any other required documents, must be received by the Depositary
within three National Association of Securities Dealers, Inc. Automated
Quotation System trading days after the date of execution of the Notice of
Guaranteed Delivery.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant tendering the
Shares, that such participant has received and agrees to be bound by the terms
of the Letter of Transmittal and that the Purchaser may enforce such agreement
against the participant.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATES FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE
TENDERING HOLDER OF SHARES AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
<PAGE>
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering holders of Shares, by
execution of this Letter of Transmittal (or facsimile hereof), waive any right
to receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate number and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to holders of Shares who tender by book-
entry transfer). If fewer than all the Shares evidenced by any certificate
submitted are to be tendered, fill in the number of Shares that are to be
tendered in the box entitled "Number of Shares Tendered." In such case, as
soon as practicable after the Expiration Date, new certificates for the
remainder of the Shares that were evidenced by your old certificates will be
sent to you, unless otherwise provided in the appropriate box on this Letter
of Transmittal. All Shares represented by certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered owners of the Shares
tendered hereby, the signatures must correspond with the names as written on
the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more joint
owners, all such owners must sign this Letter of Transmittal (or facsimile
hereof).
If any of the Shares tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof) as there are
different registrations of certificates.
If this Letter of Transmittal (or facsimile hereof) or any certificate or
stock power is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person should so indicate when
signing, and proper evidence satisfactory to Purchaser of such person's
authority so to act must be submitted.
When this Letter of Transmittal (or facsimile hereof) is signed by the
registered owners of the Shares listed and transmitted hereby, no endorsements
of certificates or separate stock powers are required unless payment is to be
made, or certificates for Shares not tendered or purchased are to be issued,
to a person other than the registered owner in which case signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution
which is a participant in an approved Signature Medallion Guarantee Program.
If this Letter of Transmittal (or facsimile hereof) is signed other than by
the registered owner of the certificates listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owners appear on the
certificates and signatures on such certificates or stock powers are required
and must be guaranteed by an Eligible Institution which is a participant in an
approved Signature Medallion Guarantee Program, unless the signature is that
of an Eligible Institution which is a participant in an approved Signature
Medallion Guarantee Program.
6. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or certificates
for unpurchased or untendered Shares are to be issued in the name of a person
other than the signer of this Letter of Transmittal (or facsimile hereof) or
to an address other than that shown above, the appropriate boxes on this
Letter of Transmittal (or facsimile hereof) should be completed. Holders
tendering Shares by book-entry transfer may request that Shares not purchased
be credited to such account maintained at the Book-Entry Transfer Facility as
such holder of Shares may designate hereon. If no such instructions are given,
such Shares not purchased will be returned by crediting the account at the
Book-Entry Transfer Facility.
7. STOCK TRANSFER TAXES. Except as set forth in this Instruction 7, the
Purchaser will pay or cause to be paid all stock transfer taxes applicable to
the purchase of Shares pursuant to the Offer. If payment of the purchase
<PAGE>
price is to be made to, or if certificates for Shares not tendered or
purchased are to be registered in the name of, any persons other than the
registered owners, or if tendered certificates are registered in the name of
any persons other than the persons signing this Letter of Transmittal (or
facsimile hereof), the amount of any stock transfer taxes (whether imposed on
the registered owner or such other person) payable on account of the transfer
to such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
8. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Purchaser, in whole or in part, at any time or from time to time, in the
Purchaser's sole discretion, in the case of any Shares tendered.
9. SUBSTITUTE FORM W-9. Each tendering holder of Shares (or other payee) is
required to provide the Depositary with a correct taxpayer identification
number ("TIN"), generally the holder's social security or federal employer
identification number, and with certain other information, on Substitute Form
W-9, which is provided under "Important Tax Information" below, and to certify
that the holder of Shares (or other payee) is not subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the tendering holder of Shares (or other payee) to 31% federal income
tax withholding on the payment of the purchase price. The box in Part I of the
Substitute Form W-9 may be checked if the tendering holder of Shares (or other
payee) has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part I is checked and the
Depositary is not provided with a TIN by the time of payment, the Depositary
will withhold 31% on all such payments of the purchase price until a TIN is
provided to the Depositary.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance or for additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at the address set forth below or from your
broker, dealer, commercial bank, trust company or other nominee.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER,
AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered Shares are accepted
for payment is required to provide the Depositary with such holder's current
TIN on Substitute Form W-9 below. If such holder is an individual, the TIN is
such holder's social security number. If the Depositary is not provided with
the correct TIN, the holder of Shares or other payee may be subject to a $50
penalty imposed by the Internal Revenue Service (the "IRS"). In addition,
payments that are made to such holder of Shares or other payee with respect to
Shares purchased pursuant to the Offer may be subject to 31% backup
withholding.
Certain holders of Shares (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, such individual must submit a statement to the Depositary,
signed under penalties of perjury, attesting to such individual's exempt
status. Such statements can be obtained from the Depositary. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payment made to the holder of Shares or other payee. Backup withholding is
not an additional tax. Rather, the federal income tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained
from the IRS.
<PAGE>
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made to a holder or other payee
with respect to Shares purchased pursuant to the Offer, the holder of Shares
is required to notify the Depositary of the holder's current TIN (or the TIN
of any other payee) by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the IRS that the holder
is subject to backup withholding as a result of failure to report all interest
or dividends, or (ii) the IRS has notified the holder that the holder is not
longer subject to backup withholding (see Part II of Substitute Form W-9).
WHAT NUMBER TO GIVE THE DEPOSITARY
The holder of Shares is required to give the Depositary the TIN (i.e.,
social security number or employer identification number) of the record owner
of the Shares. If the Shares are registered in more than one name or are not
registered in the name of the actual owner, consult the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9"
for additional guidance on which number to report.
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AS DEPOSITARY AGENT
- -------------------------------------------------------------------------------
PART I--Taxpayer Identification Number (TIN)
SUBSTITUTE
FORM W-9 Please enter your correct number in the appropriate
box below. NOTE: If the account is more than one
name, see the chart on the enclosed form,
Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9, for
guidance on which number to enter.
DEPARTMENT OF THE
TREASURY
INTERNAL REVENUE
SERVICE
PAYER'S REQUEST Social Security Number OR Employer Identification
FOR Number
--------------------- -----------------------
TAXPAYER
IDENTIFICATION If you do not have a TIN, see instructions "How to
NUMBER AND Get a TIN" and check the box below.
CERTIFICATION
TIN Applied for [_]
--------------------------------------------------------
PART II--For Payees Exempt from Backup Withholding
(see Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9)
- -------------------------------------------------------------------------------
PART III--CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup withholding as a
result of a failure to report all interest and dividends, or (c) IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS. You must cross out Item (2) above if you have
been notified by IRS that you are currently subject to backup withholding
because you have failed to report all interest and dividends on your tax
return.
Signature(s) ________________________ Date ____________________________
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and other tender offer materials may be
directed to the Information Agent as set forth below.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Call Toll Free:
(800) 714-3312
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
277 Park Avenue
New York, New York 10172
Call Collect: (212) 892-7995
<PAGE>
EXHIBIT (A)(3)
CARNEGIE GROUP, INC.
FIVE PPG PLACE
PITTSBURGH, PENNSYLVANIA 15222
(412) 642-6900
October 7, 1998
Dear Stockholder:
We are pleased to inform you that on September 30, 1998, Carnegie Group,
Inc. (the "Company") entered into an Agreement and Plan of Merger (the "Merger
Agreement") with Logica Inc. and its wholly-owned subsidiary, Logica
Acquisition Corp. (the "Purchaser"). Pursuant to the Merger Agreement, the
Purchaser has commenced a tender offer (the "Offer") to purchase all of the
outstanding shares of the Company's common stock, par value $.01 per share
(the "Shares"), for a cash price of $5.00 per Share. The Offer is conditioned
upon, among other things, the tender of at least a majority of the outstanding
Shares on a fully diluted basis. The Merger Agreement provides that following
consummation of the Offer, the Purchaser will be merged with and into the
Company (the "Merger"), and those Shares that are not acquired in the Offer
will be converted into the right to receive $5.00 per Share in cash.
The Board of Directors of the Company has unanimously approved the Merger
Agreement, the Offer and the Merger and determined that the terms of the Offer
and the Merger are fair to, and in the best interests of, the Company and its
stockholders and unanimously recommends that the stockholders accept the Offer
and tender their Shares pursuant to the Offer. In arriving at its
recommendation, the Board of Directors considered the factors described in the
accompanying Schedule 14D-9, including the opinions of the Company's financial
advisors, Updata Capital, Inc. ("Updata") and Parker/Hunter Incorporated
("Parker/Hunter"), to the effect that the consideration to be received by the
stockholders is fair from a financial point of view. Copies of Updata's and
Parker/Hunter's written opinions, which set forth the assumptions made,
procedures followed and matters considered in, and the limitations on, the
review by both of them in rendering their respective opinions are attached to
the Schedule 14D-9 as Exhibits (a)(4) and (a)(5).
The accompanying Offer to Purchase sets forth all of the terms of the Offer.
Additionally, the enclosed Schedule 14D-9 sets forth additional information
regarding the Offer and the Merger relevant to making an informed decision. We
urge you to read these materials carefully and in their entirety.
Very truly yours,
/s/ Dennis Yablonsky
Dennis Yablonsky
President and Chief Executive
Officer
<PAGE>
EXHIBIT (A)(4)
September 30, 1998
CONFIDENTIAL
Board of Directors
Carnegie Group, Inc.
Five PPG Place
Pittsburgh, PA 15222
Dear Members of the Board:
We understand that Carnegie Group, Inc. ("Carnegie" or the "Company"),
Logica Inc. and Logica Acquisition Corp. ("Logica"), a wholly-owned subsidiary
of Logica Inc., have entered into an Agreement and Plan of Merger (the
"Agreement") pursuant to which Logica will offer to purchase (the "Offer") all
of the outstanding shares of Carnegie common stock, $.01 par value ("Carnegie
Common Stock"), for $5.00 cash per share (the "Consideration") and
subsequently merge with and into Carnegie (the "Merger"). Pursuant to the
Merger, each issued and outstanding share of Carnegie not acquired in the
Offer will be converted into the right to receive an amount of cash equal to
the Consideration. The terms and conditions of the above described Offer and
Merger (together the "Transaction") are more fully detailed in the Agreement.
You have requested our opinion as to whether the Consideration to be
received by Carnegie shareholders in the Transaction is fair, from a financial
point of view, to Carnegie shareholders.
Updata Capital, Inc. ("Updata") focuses on providing merger and acquisition
advisory services to information technology ("IT") companies. In this
capacity, we are continually engaged in valuing such businesses, and we
maintain an extensive database of IT mergers and acquisitions for comparative
purposes. We are currently acting as financial advisor to Carnegie's Board of
Directors and will receive a fee from Carnegie upon the successful conclusion
of the Transaction.
In rendering our opinion, we have among other things:
1. reviewed the terms of the Agreement dated September 30, 1998 furnished to
us by Morgan, Lewis & Bockius, LLP on September 30, 1998;
2. reviewed Carnegie's annual reports and Forms 10-K for the fiscal years
ended December 31, 1997 and 1996, including the audited financial
statements included therein, and Carnegie's Form 10-Q for the three months
ended June 30, 1998, including the unaudited financial statements included
therein;
3. reviewed certain internal financial and operating information, including
certain projections, relating to Carnegie prepared by Carnegie management;
4. participated in discussions with Carnegie management concerning the
operations, business strategy, financial performance and prospects for
Carnegie;
5. reviewed the recent reported closing prices and trading activity for
Carnegie Common Stock;
6. compared certain aspects of the financial performance of Carnegie with
public companies we deemed comparable;
7. analyzed available information, both public and private, concerning other
mergers and acquisitions we believe to be comparable in whole or in part to
the Transaction;
<PAGE>
Board of Directors Page 2
Carnegie Group, Inc. September 30, 1998
8. reviewed Logica's annual reports for the fiscal years ended June 30, 1997
and 1996, including the audited financial statements included therein, and
Logica's interim report for the six months ended December 31, 1997,
including the unaudited financial statements included therein;
9. reviewed the recent reported closing prices and trading activity for Logica
common stock;
10. discussed with Logica management its view of the strategic rationale for
the Transaction;
11. assisted in negotiations and discussions related to the Transaction among
Carnegie, Logica and their respective legal advisors; and
12. conducted other financial studies, analyses and investigations as we
deemed appropriate for purposes of this opinion.
In rendering our opinion, we have relied, without independent verification,
on the accuracy and completeness of all the financial and other information
(including without limitation the representations and warranties contained in
the Agreement) that was publicly available or furnished to us by Carnegie.
With respect to the financial projections examined by us, we have assumed that
they were reasonably prepared and reflected the best available estimates and
good faith judgments of the management of Carnegie as to the future
performance of Carnegie. We have neither made nor obtained an independent
appraisal or valuation of any of Carnegie's assets.
Based upon and subject to the foregoing, we are of the opinion that the
Consideration to be received by Carnegie shareholders in the Transaction is
fair, from a financial point of view, to Carnegie shareholders.
For purposes of this opinion, we have assumed that Carnegie is not currently
involved in any material transaction other than the Transaction and those
activities undertaken in the ordinary course of conducting its business. Our
opinion is necessarily based upon market, economic, financial and other
conditions as they exist and can be evaluated as of the date of this opinion,
and any change in such conditions may impact this opinion.
This opinion speaks only as of the date hereof. It is understood that this
opinion is for the information of the Board of Directors of Carnegie in
connection with its consideration of the Transaction and does not constitute a
recommendation to any Carnegie shareholder as to whether such shareholder
should tender its shares in the Offer or as to how such shareholder should
vote on the Merger. Updata does not believe that any person other than the
Board of Directors of Carnegie has the legal right under state law to rely on
this opinion, and, in the absence of any governing precedents, we would resist
any assertion otherwise by any such person. This opinion may not be published
or referred to, in whole or part, without our prior written permission, which
shall not be unreasonably withheld. Updata hereby consents to references to
and the inclusion of this opinion in its entirety in the Schedule 14D-9 to be
distributed to Carnegie shareholders in connection with the Transaction.
Sincerely,
/s/ Updata Capital, Inc.
Updata Capital, Inc.
<PAGE>
EXHIBIT (a)(5)
[LETTERHEAD OF PARKER/HUNTER INCORPORATED]
September 30, 1998
The Board of Directors
Carnegie Group, Inc.
5 PPG Place
Pittsburgh, PA 15222
Gentlemen:
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of common stock, par value $.01 per share (the "Common
Stock"), of Carnegie Group, Inc. ("Carnegie" or the "Company") of the
consideration to be received by such holders in connection with the Agreement
and Plan of Merger (the "Agreement") by and among Logica Inc., Logica
Acquisition Corp. and Carnegie. The Agreement provides for the commencement of
a tender offer ("Offer") to purchase all shares of Common Stock of the Company
at a price of $5.00 per share in cash for each share of Common Stock of the
Company.
Parker/Hunter Incorporated, as part of its investment banking business, is
regularly engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, the purchase
and sale of listed and unlisted securities, private placements and valuations
for estate, corporate and other purposes. Further, we have provided investment
banking services to the Company in the past and have received customary fees for
such services.
In connection with our opinion, we have reviewed, among other things, the
following: (i) the Agreement dated as of September 30, 1998; (ii) the Company's
audited financial statements as of December 31, 1997 and for the five prior
fiscal years then ended and its unaudited financial statements as of June 30,
1998 and June 30, 1997 and for the six month periods then ended; (iii) certain
other publicly available and internal information, primarily financial in
nature, including financial projections for the Company prepared by the
management of the Company; (iv) certain publicly available information
concerning the trading of, and the trading markets for, the Common Stock, (v)
the nature and financial terms of certain recent business combinations which we
believe to be relevant; and (vi) certain publicly available information
regarding companies that we believe to be comparable to the Company as well as
trading market information for certain of such other companies' securities. We
have also met with certain senior officers and directors of the Company to
discuss the foregoing as well as the operations, financial condition, history
and prospects of the Company and other matters we believe to be relevant. We
have taken into account our assesment of general economic, market and financial
conditions and our experience in securities valuation generally. We have also
<PAGE>
[LETTERHEAD OF PARKER/HUNTER INCORPORATED]
Carnegie Group, Inc.
September 30, 1998
Page 2
considered such other information, financial studies, analyses, investigations
and financial, economic, market and trading criteria that we deemed relevant. We
have not been requested to and did not solicit third party indications of
interest in acquiring all or any part of the Company.
In rendering this opinion, we relied, without independent verification, on the
accuracy and completeness of all financial and other information that was
publicly available or furnished or otherwise communicated to us by the Company.
We have not made an independent evaluation or appraisal of the assets or
liabilities of the Company, nor have we been furnished with any such evaluations
or appraisals. With respect to the Company's financial projections, we have
assumed that they have been reasonably prepared on bases reflecting the best
currently available estimates and good faith judgments of the Company's
management and we express no opinion with respect to such projections or the
assumptions on which they are based. Our opinion is necessarily based upon the
business, market, monetary, economic, and other conditions as they exist on, and
can be evaluated as of, the date of this letter and does not predict or take
into account any changes which may occur, or information which may become
available, after the date hereof. Further, our opinion does not address the
relative merits of the Offer and any other potential transactions or business
strategies considered by the Board of Directors of the Company, and does not
constitute a recommendation to any holder of the Common Stock of the Company as
to whether such holder should tender its shares in the Offer or as to how such
holder should vote with respect to the merger.
In the ordinary course of our business, we may actively trade the equity
securities of the Company for our own account and for the accounts of our
customers and, accordingly, may at any time hold a long or short position in
such securities.
Based upon and subject to the foregoing, it is our opinion that, as of the date
hereof, the consideration to be received by the holders of Common Stock pursuant
to the Agreement is fair to such holders from a financial point of view.
Very truly yours,
PARKER/HUNTER INCORPORATED
By: /s/ Craig A. Wolfanger
--------------------------
Craig A. Wolfanger
Senior Managing Director
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement (the "Agreement") is made as of September 30, 1998, by and
between Logica Inc., a Delaware corporation with its headquarters located in
Lexington, Massachusetts (the "Employer"), and Dennis Yablonsky (the
"Executive"), but it shall become effective only in accordance with Section 16
below. In consideration of the mutual covenants contained in this Agreement,
the Employer and the Executive agree as follows:
1. Employment. The Employer agrees to employ the Executive and the Executive
agrees to be employed by the Employer on the terms and conditions set forth in
this Agreement.
2. Capacity. The Executive shall initially serve the Employer as the
Executive Vice President of the Carnegie Group division of the Employer (the
"Carnegie Group"). The Executive shall be responsible for overseeing the
operations of the Carnegie Group and shall report to the President and Chief
Executive Officer of the Employer (the "President and Chief Executive
Officer"). From and after July 1, 1999, the Executive shall also serve the
Employer in such other and additional offices as the Executive may be
requested to serve by the President and the Chief Executive Officer. The
Executive acknowledges and agrees that the Executive's employment by the
Employer is at will and nothing contained in this Agreement shall be construed
as creating any term of employment of the Executive with the Employer. Subject
to the provisions of Section 5(c), the Executive agrees that while he is
employed by the Employer, he may be required to perform the Employer's
business in, or relocate for short term or long term to, geographic locations
other than the location to which he is originally assigned.
3. Compensation and Benefits. The regular compensation and benefits payable
to the Executive under this Agreement shall be as follows:
(a) Salary. For all services rendered by the Executive under this
Agreement, the Employer shall pay the Executive a salary (the "Salary") at
the annual rate of Two Hundred Forty Thousand Dollars ($240,000). The
Salary shall be payable twice per month and, initially, shall be payable at
the rate of $10,000 per payment. The Executive's Salary shall be reviewed
annually beginning on July 1, 1999 in accordance with the Employer's normal
compensation review policies. The Executive's Salary shall not be reduced
below $240,000 in the period up to November 1, 1999 and any increase in the
Executive's Salary effected as a result of the July 1, 1999 annual
compensation review shall be implemented retroactively to April 1, 1999.
(b) Bonus. The Executive shall be entitled to receive such bonus to which
the Executive would otherwise have been entitled under the Carnegie Group,
Inc. Short-Term Incentive Compensation/Bonus Pool (the "Carnegie Bonus
Plan") for the fiscal year ending December 31, 1998 had the Merger (as
defined in the Agreement and Plan of Merger, dated September 30, 1998 (the
"Merger Agreement"), among the Employer, Logica Acquisition Corp. and
Carnegie Group, Inc.) not been consummated. The financial objectives of the
Carnegie Bonus Plan applicable to the Executive shall be based upon the
financial objectives previously provided to the Employer in writing;
provided, however, that all legal, accounting and financial advisors fees
and expenses in connection with the negotiation and execution of the Merger
Agreement and the transactions contemplated thereby incurred by Carnegie
Group, Inc. ("Carnegie") and all severance costs incurred by Carnegie as a
result of the transaction contemplated by the Merger Agreement up to and
including December 31, 1998, as determined in accordance with generally
accepted accounting principles consistently applied, shall be excluded from
the determination of whether such financial objectives have been achieved.
In addition, the Executive shall be eligible to receive a transition bonus
contingent upon the Executive achieving certain objectives that are more
fully described on Exhibit A hereto. If Executive shall be employed by
Employer after July 1, 1999, then from and after such date Executive shall
be entitled to participate in the Logica Management Bonus Scheme pursuant
to the terms then in effect. A general description of the terms of the
Logica Management Bonus Scheme is set forth on Exhibit A hereto.
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<PAGE>
(c) Regular Benefits. The Executive shall also be entitled to participate
in employee benefit plans to the extent provided in Section 7.11 of the
Merger Agreement. Such participation shall be subject to the terms of the
applicable plan documents, generally applicable policies of the Employer
and applicable law. Nothing contained in this Agreement shall be construed
to create any obligation on the part of the Employer to establish any such
plan or to maintain the effectiveness of any such plan which may be in
effect from time to time.
(d) Taxation of Payments and Benefits. The Employer shall undertake to
make deductions, withholdings and tax reports with respect to payments and
benefits under this Agreement to the extent that it reasonably and in good
faith believes that it is required to make such deductions, withholdings
and tax reports. Payments under this Agreement shall be in amounts net of
any such deductions or withholdings. Nothing in this Agreement shall be
construed to require the Employer to make any payments to compensate the
Executive for any adverse tax effect associated with any payments or
benefits or for any deduction or withholding from any payment or benefit.
(e) Exclusivity of Salary and Benefits. The Executive shall not be
entitled to any payments or benefits other than those provided under this
Agreement, the Exhibits attached hereto and the Loan Termination Agreement
of even date herewith between the Executive and Carnegie (the "Loan
Termination Agreement").
(f) Stock Options. In exchange for the cancellation of all options to
acquire shares of common stock of Carnegie held by the Executive
immediately prior to the Effective Time (as defined in the Merger
Agreement), the Executive shall be entitled to receive the consideration
set forth on Exhibit B hereto.
4. Extent of Service. During the Executive's employment under this
Agreement, the Executive shall, subject to the direction and supervision of
the President and Chief Executive Officer of the Employer, devote the
Executive's full business time, best efforts and business judgment, skill and
knowledge to the advancement of the Employer's interests and to the discharge
of the Executive's duties and responsibilities under this Agreement. The
Executive shall not engage in any other business activity.
5. Termination and Severance.
(a) Termination by the Executive. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Executive by written notice to the Board of
Directors at least thirty (30) days prior to such termination.
(b) Termination by the Employer. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Employer upon thirty (30) days' written notice to
the Executive.
(c) Constructive Termination. The Executive's employment hereunder shall
be deemed to have been terminated by the Employer if at any time prior to
the Anniversary Date (as hereinafter defined), the Executive resigns due to
(a) a material diminution by the Employer of the Executive's title or
responsibilities, as that title and those responsibilities existed on the
day prior to the date of resignation by the Executive, (b) any diminution
by the Employer in the Executive's salary, except as specified in this
Agreement, (c) any material diminution by the Employer in the Executive's
benefits or incentives or other forms of compensation except as specified
in this Agreement, or (d) any reassignment of the Executive or relocation
of the Executive outside of the greater Pittsburgh area effected without
the Executive's written consent at the time of reassignement.
(d) Severance Pay. Unless otherwise specifically provided in this
Agreement or otherwise required by law, all compensation and benefits
payable to the Executive under this Agreement shall terminate on the date
of termination of the Executive's employment under this Agreement.
Notwithstanding the foregoing, (A) in the event that the Executive
terminates his employment with the Employer in accordance with Section 5(a)
with an effective date, (i) between the Closing Date and the first
anniversary of the Closing Date (the "Anniversary Date"), the Executive
will not be entitled to receive any compensation or other payments from the
Employer, (ii) on the date which is the Anniversary Date, the Employer
shall continue
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to pay the Executive's Salary at the rate in effect as of the Closing Date
and the Executive's Benefits (as hereinafter defined) for a period of
twelve (12) months from the termination date, or (iii) on any date after
the Anniversary Date, the Executive will not be entitled to receive any
compensation or other payments from the Employer, and (B) in the event that
the Employer terminates the Executive's employment in accordance with
Section 5(b) or by virtue of Section 5(c) at any time with an effective
date (i) after the Closing Date but on or prior to the date that is twelve
(12) months after the Closing Date, the Employer shall continue to pay the
Executive's Salary at the rate in effect as of the Closing Date until the
second anniversary of the Closing Date and the Executive's Benefits for a
period of twelve (12) months after the termination date, (ii) after the
date that is twelve (12) months after the Closing Date and before the date
which is eighteen (18) months after the Closing Date, the Employer shall
continue to pay the Executive's Salary at the rate in effect as of the
Closing Date and the Executive's Benefits until the second anniversary of
the Closing Date, or (iii) after the date which is eighteen months after
the Closing Date, the Employer shall continue to pay the Executive's Salary
at the rate in effect as of the Closing Date and the Executive's Benefits
for a period of six (6) months after the termination date. For purposes of
this Section 5(d), "Benefits" shall mean the benefits received by the
Executive by virtue of his participation in the Employer's medical and
dental benefit plans. Notwithstanding anything to the contrary provided
herein, upon any termination of the Executive hereunder, the Executive
shall be entitled to the payment of all salary earned and unpaid, and all
accrued but unpaid vacation pay, as of the termination date, and any
unreimbursed business expenses incurred by the Executive up to the
termination date.
6. Confidential Information, Noncompetition and Cooperation.
(a) Confidential Information. As used in this Agreement, "Confidential
Information" means information belonging to the Employer which is of value
to the Employer in the course of conducting its business and the disclosure
of which could result in a competitive or other disadvantage to the
Employer. Confidential Information includes, without limitation, financial
information, reports, and forecasts; inventions, improvements,
copyrightable materials and other intellectual property; working methods
and operations, methodologies, marketing plans and strategies and sales
reports; trade secrets; know-how and other information used in research,
development, marketing, sales and operational activities; programs;
processes; product ideas, models, techniques, designs and formulae;
software; data; customer lists; and business plans, prospects and
opportunities (such as possible acquisitions or dispositions of businesses
or facilities) which have been discussed or considered by the management of
the Employer. Confidential Information also includes any commercial or
technical information, improvements, or things which may be communicated to
the Executive or of which the Executive may learn by virtue of his
employment by the Employer, or of which the Executive may have gained
knowledge, or discovered, invented, or perfected while employed by the
Employer, including without limitation, any ideas or processes relating to
the development, operation, or improvement of any software or other
program, product, tool, article, or process sold, licensed, distributed or
maintained by the Employer or its customers. Confidential Information also
includes the confidential information of others with which the Employer has
a business relationship. Notwithstanding the foregoing, Confidential
Information does not include information in the public domain, unless due
to breach of the Executive's duties under Section 6(b).
(b) Confidentiality. The Executive understands and agrees that the
Executive's employment creates a relationship of confidence and trust
between the Executive and the Employer with respect to all Confidential
Information. At all times, both during the Executive's employment with the
Employer and after its termination, the Executive will keep in confidence
and trust all such Confidential Information, and will not use or disclose
any such Confidential Information without the written consent of the
Employer, except as may be necessary in the ordinary course of performing
the Executive's duties to the Employer.
(c) Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to
Confidential Information, which are furnished to the Executive by the
Employer or are produced by the Executive in connection with the
Executive's employment will be and remain the sole property of the
Employer. The Executive will return to the Employer all such materials and
property as and when requested by the Employer. In any event, the Executive
will return all such
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<PAGE>
materials and property immediately upon termination of the Executive's
employment for any reason. The Executive will not retain with the Executive
any such material or property or any copies thereof after such termination.
(d) Noncompetition and Nonsolicitation. At any time during the
Executive's employment with the Employer and (A) in the case of any
termination of the Executive's employment hereunder pursuant to Section
5(a), for one (1) year thereafter, and (B) in the case of any termination
of the Executive's employment hereunder pursuant to Section 5(b) or 5(c),
for six (6) months thereafter, the Executive (i) will not, directly or
indirectly, whether as owner, partner, shareholder, consultant, agent,
employee, co-venturer or otherwise, engage, participate, assist or invest
in any Competing Business (as hereinafter defined); (ii) offer to perform
or perform business or services of a kind carried on by the Employer now or
at any time during the Executive's employment by the Employer, or otherwise
solicit employment or business from, consult with or accept employment from
any of the Employer's customers, or any Competing Business; (iii) will
refrain from directly or indirectly employing, attempting to employ,
recruiting or otherwise soliciting, inducing or influencing any person to
leave employment with the Employer (other than terminations of employment
of subordinate employees undertaken in the course of the Executive's
employment with the Employer); and (iv) will refrain from soliciting or
encouraging any customer or supplier to terminate or otherwise modify
adversely its business relationship with the Employer. The Executive
understands that the restrictions set forth in this Section 6(d) are
intended to protect the Employer's interest in its Confidential Information
and established employee, customer and supplier relationships and goodwill,
and agrees that such restrictions are reasonable and appropriate for this
purpose. For purposes of this Agreement, the term "Competing Business"
shall mean (A) from and after July 1, 1999, a business that is competitive
with any business which the Employer or any of its affiliates conducts or
proposes to conduct at any time during the employment of the Executive, and
(B) up to July 1, 1999, a business that is competitive with any business
which Carnegie or any of its subsidiaries conducts or proposes to conduct
at any time during the employment of the Executive. Notwithstanding the
foregoing, the Executive may own up to one percent (1%) of the outstanding
stock of a publicly held corporation which constitutes or is affiliated
with a Competing Business.
(e) Third-Party Agreements and Rights. The Executive hereby confirms that
the Executive is not bound by the terms of any agreement with any previous
employer or other party which restricts in any way the Executive's use or
disclosure of information or the Executive's engagement in any business,
except as set forth on Exhibit C hereto. The Executive represents to the
Employer that the Executive's execution of this Agreement, the Executive's
employment with the Employer and the performance of the Executive's
proposed duties for the Employer will not violate any obligations the
Executive may have to any such previous employer or other party. In the
Executive's work for the Employer, the Executive will not disclose or make
use of any information in violation of any agreements with or rights of any
such previous employer or other party, and the Executive will not bring to
the premises of the Employer any copies or other tangible embodiments of
non-public information belonging to or obtained from any such previous
employment or other party.
(f) The Executive agrees to disclose promptly to the Employer any and all
Developments (as defined below) which are made, invented, developed, or
discovered by the Executive, either singly or jointly with others, in the
course of his employment by the Employer and within six (6) months after
termination of such employment. The Executive also agrees that such
Developments are works made for hire and are or shall become the exclusive
property of the Employer, and that he relinquishes any and all intellectual
property rights and/or other rights in the Developments to the Employer,
including by way of example but without limitation, rights of
identification or authorship and rights of approval with respect to
modifications and limitations on subsequent modifications. In order to
effectuate ownership by the Employer when necessary, the Employee agrees,
without further consideration:
(i) to immediately upon the Employer's request execute all documents
and make all assignments necessary to vest title to such Developments
in the Employer; and
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(ii) to assist the Employer in any reasonable manner to obtain for
the benefit of the Employer any patents or copyrights on such
Developments, in any and all countries; and
(iii) to execute when requested any and all patent and copyright
applications and any other lawful documents deemed necessary by the
Employer to carry out the purposes of this Agreement.
If the Executive is called upon to render the assistance described
above to the Employer after termination of employment, he will be
entitled to a fair and reasonable per diem fee in addition to
reimbursement of expenses incurred at the Employer's request.
"Developments" include, by way of example but without limitation, the
following: any and all inventions, improvements, discoveries,
developments, results of research, or useful ideas, whether or not
patentable, which relate in any manner to any software or other
programs, products, work or other business of the Employer or any
customer of the Employer, or to any process, apparatus, equipment, or
article worked on in connection with the Executive's employment by the
Employer.
(g) Litigation and Regulatory Cooperation. During and after the
Executive's employment, the Executive shall cooperate fully with the
Employer in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Employer which relate to events or occurrences that transpired while the
Executive was employed by the Employer or by Carnegie Group, Inc. The
Executive's full cooperation in connection with such claims or actions
shall include, but not be limited to, being available to meet with counsel
to prepare for discovery or trial and to act as a witness on behalf of the
Employer at mutually convenient times. During and after the Executive's
employment, the Executive also shall cooperate fully with the Employer in
connection with any investigation or review of any federal, state or local
regulatory authority as any such investigation or review relates to events
or occurrences that transpired while the Executive was employed by the
Employer. The Employer shall reimburse the Executive for any reasonable
out-of-pocket expenses incurred in connection with the Executive's
performance of obligations pursuant to this Section 6(g).
(h) Injunction. The Executive agrees that it would be difficult to
measure any damages caused to the Employer which might result from any
breach by the Executive of the promises set forth in this Section 6, and
that in any event money damages would be an inadequate remedy for any such
breach. Accordingly, subject to Section 8 of this Agreement, the Executive
agrees that if the Executive breaches, or proposes to breach, any portion
of this Agreement, the Employer shall be entitled, in addition to all other
remedies that it may have, to an injunction or other appropriate equitable
relief to restrain any such breach without showing or proving any actual
damage to the Employer.
7. Consent to Jurisdiction. The parties hereby consent to the jurisdiction
of the Superior Court of the Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts. Accordingly, with
respect to any such court action, the Executive (a) submits to the personal
jurisdiction of such courts; (b) consents to service of process; and (c)
waives any other requirement (whether imposed by statute, rule of court, or
otherwise) with respect to personal jurisdiction or service of process.
8. Integration. This Agreement, the Exhibits attached hereto and the Loan
Termination Agreement constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior agreements
between the parties with respect to any related subject matter.
9. Assignment; Successors and Assigns, etc. Neither the Employer nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employer may assign its rights under this
Agreement without the consent of the Executive in the event that the Employer
shall effect a reorganization, consolidate with or merge into any other
corporation, partnership, organization or other entity, or transfer all or
substantially all of its properties or assets to any other corporation,
partnership, organization or other entity. This Agreement shall inure to the
benefit of and be binding upon the Employer and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
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10. Enforceability. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of
this Agreement) shall to any extent be declared illegal or unenforceable by a
court of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless made
in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to
the Executive at the last address the Executive has filed in writing with the
Employer or, in the case of the Employer, at its main offices, attention of
the Chief Executive Officer, and shall be effective on the date of delivery in
person or by courier or three (3) days after the date mailed.
13. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Employer.
14. Governing Law. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts, without giving effect to the conflict of laws principles of
such Commonwealth. With respect to any disputes concerning federal law, such
disputes shall be determined in accordance with the law as it would be
interpreted and applied by the United States Court of Appeals for the First
Circuit.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to
be an original; but such counterparts shall together constitute one and the
same document.
16. Effectiveness. This Agreement is conditioned and shall become effective
only upon consummation of the Merger, which shall be deemed to occur only upon
and as of the Closing Date.
In Witness Whereof, this Agreement has been executed as a sealed instrument
by the Employer, by its duly authorized officer, and by the Executive, as of
the Effective Date.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
/s/ Dennis Yablonsky
_____________________________________
Dennis Yablonsky
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EXHIBIT A
I. TRANSITION BONUS
For the transition period between November 1, 1998 through June 30, 1999,
upon achievement of 100% of certain financial objectives by the Carnegie Group
(the "Carnegie Group Objectives"), the Executive will be eligible to receive a
cash bonus of $56,250 (the "Objective Bonus"). The Carnegie Group Objectives
shall be based upon the financial objectives previously provided to the
Employer in writing; provided, however, that the severance costs relating to
the employment of the Dennis Yablonsky, John Manzetti, Bruce Russell and
Raymond Kalustyan (collectively, the "Carnegie Group Executive Team") with
Carnegie, and all legal, accounting and financial advisors fees and expenses
in connection with the negotiation and execution of the Merger Agreement and
the transactions contemplated thereby incurred by Carnegie up, as determined
in accordance with generally accepted accounting principles consistently
applied, shall be excluded from the determination of whether the Carnegie
Group Objectives have been achieved. If the Carnegie Group achieves a
percentage between 70% and 100% of the Carnegie Group Objectives, the
Executive will be eligible to receive a bonus equal to that same percentage of
the Objective Bonus, and at a percentage less than 70% of the Carnegie Group
Objectives no bonus will be paid; provided, however, that if between 70% and
100% of the Carnegie Group Objectives are achieved, the President and Chief
Executive Officer may, in his sole discretion, award a higher percentage of
the Objective Bonus but not greater than 100%. To receive more than 100% of
the Objective Bonus, the Executive must achieve at least 100% of the Carnegie
Group Objectives as well as additional quantitative objectives in the areas of
pull through of revenue for the Employer and net savings and efficiencies
generated by the Carnegie Group Executive Team.
II. LOGICA MANAGEMENT BONUS SCHEME
For the fiscal year between July 1, 1999 and June 30, 2000, the Executive
will be entitled to participate in the Logica Management Bonus Scheme as is
then in effect, a current copy of which is attached hereto.
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EXHIBIT B
STOCK OPTIONS
Each Option (as defined in the Merger Agreement) that is outstanding
(whether or not exercisable) as of immediately prior to the Effective Time (as
defined in the Merger Agreement) and which has not been exercised or canceled
prior thereto, shall, at the Effective Time, be canceled, and upon the
surrender and cancellation of the option agreement representing such Option
and delivery of an Option Termination (as defined in the Merger Agreement),
the Executive shall receive the following consideration therefor:
(i) With respect to each Option having an exercise price less than $5.00
per share, the Option Consideration (as defined in the Merger
Agreement); and
(ii) With respect to each Option having an exercise price greater than or
equal to $5.00 per share, an option to acquire such number of ordinary
shares of 10 pence each of Logica plc ("Ordinary Shares") as is
determined pursuant to the formula set forth below:
[(N X EP) / ER] / PLC Share Price
N=Number of shares of common stock of Carnegie represented by the
Option
EP=Exercise Price of the Option
ER= Exchange Rate ($/(Pounds)) (based on the exchange rate in U.S.
Dollars per British Pounds, as reported in the Financial Times on
the date on which the Effective Time occurs)
PLC Share Price= Middle market quotation from the London Stock Exchange
daily official list for an Ordinary Share as reported
on the date on which the Effective Time occurs
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EXHIBIT C
THIRD-PARTY AGREEMENTS
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EMPLOYMENT AGREEMENT
This Agreement (the "Agreement") is made as of September 30, 1998, by and
between Logica Inc., a Delaware corporation with its headquarters located in
Lexington, Massachusetts (the "Employer"), and John Manzetti (the
"Executive"), but it shall become effective only in accordance with Section 16
below. In consideration of the mutual covenants contained in this Agreement,
the Employer and the Executive agree as follows:
1. Employment. The Employer agrees to employ the Executive and the Executive
agrees to be employed by the Employer on the terms and conditions set forth in
this Agreement.
2. Capacity. The Executive shall initially serve the Employer as the Senior
Vice President--Finance and Government Operations of the Carnegie Group
division of the Employer (the "Carnegie Group"). The Executive shall be
responsible for facilitating the transition of the operations of Carnegie
Group, Inc. to the Employer and overseeing the Carnegie Group's government
operations and shall generally report to the Executive Vice President of the
Carnegie Group and for the purposes of the transition and integration to the
President and the Chief Executive Officer of the Employer (the "President and
Chief Executive Officer"). From and after July 1, 1999, the Executive shall
also serve the Employer in such other and additional offices as the Executive
may be requested to serve by the President and Chief Executive Officer. The
Executive acknowledges and agrees that the Executive's employment by the
Employer is at will and nothing contained in this Agreement shall be construed
as creating any term of employment of the Executive with the Employer. Subject
to the provisions of Section 5(c), the Executive agrees that while he is
employed by the Employer, he may be required to perform the Employer's
business in, or relocate for short term or long term to, geographic locations
other than the location to which he is originally assigned.
3. Compensation and Benefits. The regular compensation and benefits payable
to the Executive under this Agreement shall be as follows:
(a) Salary. For all services rendered by the Executive under this
Agreement, the Employer shall pay the Executive a salary (the "Salary") at
the annual rate of Two Hundred Thousand and Four Dollars ($200,004). The
Salary shall be payable twice per month and, initially, shall be payable at
the rate of $8,333.50 per payment. The Executive's Salary shall be reviewed
annually beginning on July 1, 1999 in accordance with the Employer's normal
compensation review policies. The Executive's Salary shall not be reduced
below $200,004 in the period up to November 1, 1999 and any increases in
the Executive's Salary effected as a result of the July 1, 1999 annual
compensation review shall be implemented retroactively to April 1, 1999.
(b) Bonus. The Executive shall be entitled to receive such bonus to which
the Executive would otherwise have been entitled under the Carnegie Group,
Inc. Short-Term Incentive Compensation/Bonus Pool (the "Carnegie Bonus
Plan") for the fiscal year ending December 31, 1998 had the Merger (as
defined in the Agreement and Plan of Merger, dated September 30, 1998 (the
"Merger Agreement"), among the Employer, Logica Acquisition Corp. and
Carnegie Group, Inc.) not been consummated. The financial objectives of the
Carnegie Bonus Plan applicable to the Executive shall be based upon the
financial objectives previously provided to the Employer in writing;
provided, however, that all legal, accounting and financial advisors fees
and expenses in connection with the negotiation and execution of the Merger
Agreement and the transactions contemplated thereby incurred by Carnegie
Group, Inc. ("Carnegie") and all severance costs incurred by Carnegie as a
result of the transactions contemplated by the Merger Agreement up to and
including December 31, 1998, as determined in accordance with generally
accepted accounting principles consistently applied, shall be excluded from
the determination of whether such financial objectives have been achieved.
In addition, the Executive shall be eligible to receive a transition bonus
contingent upon the Executive achieving certain objectives that are more
fully described on Exhibit A hereto. If Executive shall be employed by
Employer after July 1, 1999, then from and after such date Executive shall
be entitled to participate in the Logica Management Bonus Scheme pursuant
to the terms then in effect. A general description of the terms of the
Logica Management Bonus Scheme is set forth on Exhibit A hereto.
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(c) Regular Benefits. The Executive shall also be entitled to participate
in employee benefit plans to the extent provided in Section 7.11 of the
Merger Agreement. Such participation shall be subject to the terms of the
applicable plan documents, generally applicable policies of the Employer
and applicable law. Nothing contained in this Agreement shall be construed
to create any obligation on the part of the Employer to establish any such
plan or to maintain the effectiveness of any such plan which may be in
effect from time to time.
(d) Taxation of Payments and Benefits. The Employer shall undertake to
make deductions, withholdings and tax reports with respect to payments and
benefits under this Agreement to the extent that it reasonably and in good
faith believes that it is required to make such deductions, withholdings
and tax reports. Payments under this Agreement shall be in amounts net of
any such deductions or withholdings. Nothing in this Agreement shall be
construed to require the Employer to make any payments to compensate the
Executive for any adverse tax effect associated with any payments or
benefits or for any deduction or withholding from any payment or benefit.
(e) Exclusivity of Salary and Benefits. The Executive shall not be
entitled to any payments or benefits other than those provided under this
Agreement and the Exhibits attached hereto.
(f) Stock Options. In exchange for the cancellation of all options to
acquire shares of common stock of Carnegie held by the Executive
immediately prior to the Effective Time (as defined in the Merger
Agreement), the Executive shall be entitled to receive the consideration
set forth on Exhibit B hereto.
4. Extent of Service. During the Executive's employment under this
Agreement, the Executive shall, subject to the direction and supervision of
the President and Chief Executive Officer of the Employer, devote the
Executive's full business time, best efforts and business judgment, skill and
knowledge to the advancement of the Employer's interests and to the discharge
of the Executive's duties and responsibilities under this Agreement. The
Executive shall not engage in any other business activity.
5. Termination and Severance.
(a) Termination by the Executive. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Executive by written notice to the Board of
Directors at least thirty (30) days prior to such termination.
(b) Termination by the Employer. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Employer upon thirty (30) days' written notice to
the Executive.
(c) Constructive Termination. The Executive's employment hereunder shall
be deemed to have been terminated by the Employer if at any time prior to
the Nine-Month Anniversary Date (as hereinafter defined), the Executive
resigns due to (a) a material diminution by the Employer of the Executive's
title or responsibilities, as that title and those responsibilities existed
on the day prior to the date of resignation by the Executive, (b) any
diminution by the Employer in the Executive's salary, except as specified
in this Agreement, (c) any material diminution by the Employer in the
Executive's benefits or incentives or other forms of compensation except as
specified in this Agreement, or (d) any reassignment of the Executive or
relocation of the Executive outside of the greater Pittsburgh area effected
without the Executive's written consent at the time of reassignment.
(d) Severance Pay. Unless otherwise specifically provided in this
Agreement or otherwise required by law, all compensation and benefits
payable to the Executive under this Agreement shall terminate on the date
of termination of the Executive's employment under this Agreement.
Notwithstanding the foregoing and subject to Section 8, (A) in the event
that the Executive terminates his employment with the Employer in
accordance with Section 5(a) with an effective date, (i) between the
Closing Date and the nine months following the Closing Date (the "Nine-
Month Anniversary Date"), the Executive will not be entitled to receive any
compensation or other payments from the Employer, (ii) on the date which is
the Nine-Month Anniversary Date, the Employer shall continue to pay the
Executive's Salary at the rate in effect as of the Closing Date and the
Executive's Benefits (as hereinafter defined) for a period of nine (9)
months from the
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termination date, or (iii) on any date after the Nine-Month Anniversary
Date, the Executive will not be entitled to receive any compensation or
other payments from the Employer, and (B) in the event that the Employer
terminates the Executive's employment in accordance with Section 5(b) or by
virtue of Section 5(c) at any time with an effective date (i) after the
Closing Date but on or prior to the date that is nine (9) months after the
Closing Date, the Employer shall continue to pay the Executive's Salary at
the rate in effect as of the Closing Date until the date that is eighteen
(18) months after the Closing Date and the Executive's Benefits until the
date that is nine (9) months after the termination date, or (ii) after the
date that is nine (9) months after the Closing Date, the Employer shall
continue to pay the Executive's Salary at the rate in effect as of the
Closing Date and the Executive's Benefits for a period of six (6) months
after the termination date. For purposes of this Section 5(d), "Benefits"
shall mean the benefits received by the Executive by virtue of his
participation under the Employer's medical and dental benefit plans.
Notwithstanding anything to the contrary provided herein, upon any
termination of the Executive hereunder, the Executive shall be entitled to
the payment of all salary earned and unpaid, and all accrued but unpaid
vacation pay, as of the termination date, and any unreimbursed business
expenses incurred by the Executive up to the termination date.
6. Confidential Information, Noncompetition and Cooperation.
(a) Confidential Information. As used in this Agreement, "Confidential
Information" means information belonging to the Employer which is of value
to the Employer in the course of conducting its business and the disclosure
of which could result in a competitive or other disadvantage to the
Employer. Confidential Information includes, without limitation, financial
information, reports, and forecasts; inventions, improvements,
copyrightable materials and other intellectual property; working methods
and operations, methodologies, marketing plans and strategies and sales
reports; trade secrets; know-how and other information used in research,
development, marketing, sales and operational activities; programs;
processes; product ideas, models, techniques, designs and formulae;
software; data; customer lists; and business plans, prospects and
opportunities (such as possible acquisitions or dispositions of businesses
or facilities) which have been discussed or considered by the management of
the Employer. Confidential Information also includes any commercial or
technical information, improvements, or things which may be communicated to
the Executive or of which the Executive may learn by virtue of his
employment by the Employer, or of which the Executive may have gained
knowledge, or discovered, invented, or perfected while employed by the
Employer, including without limitation, any ideas or processes relating to
the development, operation, or improvement of any software or other
program, product, tool, article, or process sold, licensed, distributed or
maintained by the Employer or its customers. Confidential Information also
includes the confidential information of others with which the Employer has
a business relationship. Notwithstanding the foregoing, Confidential
Information does not include information in the public domain, unless due
to breach of the Executive's duties under Section 6(b).
(b) Confidentiality. The Executive understands and agrees that the
Executive's employment creates a relationship of confidence and trust
between the Executive and the Employer with respect to all Confidential
Information. At all times, both during the Executive's employment with the
Employer and after its termination, the Executive will keep in confidence
and trust all such Confidential Information, and will not use or disclose
any such Confidential Information without the written consent of the
Employer, except as may be necessary in the ordinary course of performing
the Executive's duties to the Employer.
(c) Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to
Confidential Information, which are furnished to the Executive by the
Employer or are produced by the Executive in connection with the
Executive's employment will be and remain the sole property of the
Employer. The Executive will return to the Employer all such materials and
property as and when requested by the Employer. In any event, the Executive
will return all such materials and property immediately upon termination of
the Executive's employment for any reason. The Executive will not retain
with the Executive any such material or property or any copies thereof
after such termination.
(d) Noncompetition and Nonsolicitation. At any time during the
Executive's employment with the Employer and (A) in the case of any
termination of the Executive's employment hereunder pursuant to
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Section 5(a), for one (1) year thereafter, and (B) in the case of any
termination of the Executive's employment hereunder pursuant to Section
5(b) or 5(c), for six (6) months thereafter, the Executive (i) will not,
directly or indirectly, whether as owner, partner, shareholder, consultant,
agent, employee, co-venturer or otherwise, engage, participate, assist or
invest in any Competing Business (as hereinafter defined); (ii) offer to
perform or perform business or services of a kind carried on by the
Employer now or at any time during the Executive's employment by the
Employer, or otherwise solicit employment or business from, consult with or
accept employment from any of the Employer's customers, or any Competing
Business; (iii) will refrain from directly or indirectly employing,
attempting to employ, recruiting or otherwise soliciting, inducing or
influencing any person to leave employment with the Employer (other than
terminations of employment of subordinate employees undertaken in the
course of the Executive's employment with the Employer); and (iv) will
refrain from soliciting or encouraging any customer or supplier to
terminate or otherwise modify adversely its business relationship with the
Employer. The Executive understands that the restrictions set forth in this
Section 6(d) are intended to protect the Employer's interest in its
Confidential Information and established employee, customer and supplier
relationships and goodwill, and agrees that such restrictions are
reasonable and appropriate for this purpose. For purposes of this
Agreement, the term "Competing Business" shall mean (A) from and after July
1, 1999, a business that is competitive with any business which the
Employer or any of its affiliates conducts or proposes to conduct at any
time during the employment of the Executive, and (B) up to July 1, 1999, a
business that is competitive with any business which Carnegie or any of its
subsidiaries conducts or proposes to conduct at any time during the
employment of the Executive. Notwithstanding the foregoing, the Executive
may own up to one percent (1%) of the outstanding stock of a publicly held
corporation which constitutes or is affiliated with a Competing Business.
(e) Third-Party Agreements and Rights. The Executive hereby confirms that
the Executive is not bound by the terms of any agreement with any previous
employer or other party which restricts in any way the Executive's use or
disclosure of information or the Executive's engagement in any business,
except as set forth on Exhibit C hereto. The Executive represents to the
Employer that the Executive's execution of this Agreement, the Executive's
employment with the Employer and the performance of the Executive's
proposed duties for the Employer will not violate any obligations the
Executive may have to any such previous employer or other party. In the
Executive's work for the Employer, the Executive will not disclose or make
use of any information in violation of any agreements with or rights of any
such previous employer or other party, and the Executive will not bring to
the premises of the Employer any copies or other tangible embodiments of
non-public information belonging to or obtained from any such previous
employment or other party.
(f) The Executive agrees to disclose promptly to the Employer any and all
Developments (as defined below) which are made, invented, developed, or
discovered by the Executive, either singly or jointly with others, in the
course of his employment by the Employer and within six (6) months after
termination of such employment. The Executive also agrees that such
Developments are works made for hire and are or shall become the exclusive
property of the Employer, and that he relinquishes any and all intellectual
property rights and/or other rights in the Developments to the Employer,
including by way of example but without limitation, rights of
identification or authorship and rights of approval with respect to
modifications and limitations on subsequent modifications. In order to
effectuate ownership by the Employer when necessary, the Employee agrees,
without further consideration:
(i) to immediately upon the Employer's request execute all documents
and make all assignments necessary to vest title to such Developments
in the Employer; and
(ii) to assist the Employer in any reasonable manner to obtain for
the benefit of the Employer any patents or copyrights on such
Developments, in any and all countries; and
(iii) to execute when requested any and all patent and copyright
applications and any other lawful documents deemed necessary by the
Employer to carry out the purposes of this Agreement.
If the Executive is called upon to render the assistance described
above to the Employer after termination of employment, he will be
entitled to a fair and reasonable per diem fee in addition to
reimbursement of expenses incurred at the Employer's request.
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"Developments" include, by way of example but without limitation, the
following: any and all inventions, improvements, discoveries,
developments, results of research, or useful ideas, whether or not
patentable, which relate in any manner to any software or other
programs, products, work or other business of the Employer or any
customer of the Employer, or to any process, apparatus, equipment, or
article worked on in connection with the Executive's employment by the
Employer.
(g) Litigation and Regulatory Cooperation. During and after the
Executive's employment, the Executive shall cooperate fully with the
Employer in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Employer which relate to events or occurrences that transpired while the
Executive was employed by the Employer or by Carnegie. The Executive's full
cooperation in connection with such claims or actions shall include, but
not be limited to, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of the Employer at
mutually convenient times. During and after the Executive's employment, the
Executive also shall cooperate fully with the Employer in connection with
any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or
occurrences that transpired while the Executive was employed by the
Employer. The Employer shall reimburse the Executive for any reasonable
out-of-pocket expenses incurred in connection with the Executive's
performance of obligations pursuant to this Section 6(g).
(h) Injunction. The Executive agrees that it would be difficult to
measure any damages caused to the Employer which might result from any
breach by the Executive of the promises set forth in this Section 6, and
that in any event money damages would be an inadequate remedy for any such
breach. Accordingly, subject to Section 8 of this Agreement, the Executive
agrees that if the Executive breaches, or proposes to breach, any portion
of this Agreement, the Employer shall be entitled, in addition to all other
remedies that it may have, to an injunction or other appropriate equitable
relief to restrain any such breach without showing or proving any actual
damage to the Employer.
7. Consent to Jurisdiction. The parties hereby consent to the jurisdiction
of the Superior Court of the Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts. Accordingly, with
respect to any such court action, the Executive (a) submits to the personal
jurisdiction of such courts; (b) consents to service of process; and (c)
waives any other requirement (whether imposed by statute, rule of court, or
otherwise) with respect to personal jurisdiction or service of process.
8. Loan Agreement. Each of the Employer, the Executive and Carnegie agrees
that notwithstanding the provisions of Section 1.1 of the Loan Agreement,
dated December 15, 1997 (the "Loan Agreement"), by and between Carnegie and
the Executive, the Principal Sum (as defined in the Loan Agreement), together
with interest as provided in said Section 1.1, shall be repaid in a single
installment on the third anniversary of the Effective Date. Each of the
Employer, the Executive and Carnegie further agrees that one-half of the Net
Portion (as hereinafter defined) of any bonus amount otherwise payable
pursuant to Section 3 hereunder (a "Bonus Amount") shall, in lieu of being
paid to the Executive, be credited against the Principal Sum and the Principal
Sum shall be deemed to have been reduced accordingly. For purposes hereof, the
term "Net Portion" shall mean that portion of any Bonus Amount that remains
after the Employer has withheld all federal, state and local taxes required to
be withheld from such Bonus Amount. In the event of any termination of the
Executive's employment pursuant to Section 5 hereunder, any Salary otherwise
payable to the Executive pursuant to Section 5(d) hereof shall, in lieu of
being paid to the Executive in accordance with said Section 5(d), be credited
against the Principal Sum, plus any accrued interest thereon as provided in
the Loan Agreement, then outstanding as of the date of such termination. Any
Salary remaining after the repayment in full of the Principal Sum and interest
as provided in the foregoing sentence shall be paid by the Employer to the
Executive in accordance with Section 5(d).
9. Integration. This Agreement, the Exhibits attached hereto and the Loan
Agreement constitute the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior agreements between the
parties with respect to any related subject matter.
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10. Assignment; Successors and Assigns, etc. Neither the Employer nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employer may assign its rights under this
Agreement without the consent of the Executive in the event that the Employer
shall effect a reorganization, consolidate with or merge into any other
corporation, partnership, organization or other entity, or transfer all or
substantially all of its properties or assets to any other corporation,
partnership, organization or other entity. This Agreement shall inure to the
benefit of and be binding upon the Employer and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
11. Enforceability. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of
this Agreement) shall to any extent be declared illegal or unenforceable by a
court of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
12. Waiver. No waiver of any provision hereof shall be effective unless made
in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
13. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to
the Executive at the last address the Executive has filed in writing with the
Employer or, in the case of the Employer, at its main offices, attention of
the Chief Executive Officer, and shall be effective on the date of delivery in
person or by courier or three (3) days after the date mailed.
14. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Employer.
15. Governing Law. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts, without giving effect to the conflict of laws principles of
such Commonwealth. With respect to any disputes concerning federal law, such
disputes shall be determined in accordance with the law as it would be
interpreted and applied by the United States Court of Appeals for the First
Circuit.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to
be an original; but such counterparts shall together constitute one and the
same document.
17. Effectiveness. This Agreement is conditioned and shall become effective
only upon consummation of the Merger, which shall be deemed to occur only upon
and as of the Closing Date.
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In Witness Whereof, this Agreement has been executed as a sealed instrument
by the Employer, by its duly authorized officer, and by the Executive, as of
the Effective Date.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
/s/ John Manzetti
_____________________________________
John Manzetti
Solely With Respect to Section 8:
Carnegie Group, Inc.
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
Title:President and Chief
Executive Officer
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EXHIBIT A
I. TRANSITION BONUS
For the transition period between November 1, 1998 through June 30, 1999,
upon achievement of 100% of certain financial objectives by the Carnegie Group
(the "Carnegie Group Objectives"), the Executive will be eligible to receive a
cash bonus of $37,500 (the "Objective Bonus"). The Carnegie Group Objectives
shall be based upon the financial objectives previously provided to the
Employer in writing; provided, however, that the severance costs relating to
the employment of the Dennis Yablonsky, John Manzetti, Bruce Russell and
Raymond Kalustyan (collectively, the "Carnegie Group Executive Team") with
Carnegie Group, Inc., and all legal, accounting and financial advisors fees
and expenses in connection with the negotiation and execution of the Merger
Agreement and the transactions contemplated thereby incurred by Carnegie, as
determined in accordance with generally accepted accounting principles
consistently applied, shall be excluded from the determination of whether the
Carnegie Group Objectives have been achieved. If the Carnegie Group achieves a
percentage between 70% and 100% of the Carnegie Group Objectives, the
Executive will be eligible to receive a bonus equal to that same percentage of
the Objective Bonus, and at a percentage less than 70% of the Carnegie Group
Objectives no bonus will be paid; provided, however, that if between 70% and
100% of the Carnegie Group Objectives are achieved, the President and Chief
Executive Officer may, in his sole discretion, award a higher percentage of
the Objective Bonus but not greater than 100%. To receive more than 100% of
the Objective Bonus, the Executive must achieve at least 100% of the Carnegie
Group Objectives as well as additional quantitative objectives in the areas of
pull through of revenue for the Employer and net savings and efficiencies
generated by the Carnegie Group Executive Team.
II. LOGICA MANAGEMENT BONUS SCHEME
For the fiscal year between July 1, 1999 and June 30, 2000, the Executive
will be entitled to participate in the Logica Management Bonus Scheme as is
then in effect, a current copy of which is attached hereto.
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EXHIBIT B
STOCK OPTIONS
Each Option (as defined in the Merger Agreement) that is outstanding
(whether or not exercisable) as of immediately prior to the Effective Time (as
defined in the Merger Agreement) and which has not been exercised or canceled
prior thereto, shall, at the Effective Time, be canceled, and upon the
surrender and cancellation of the option agreement representing such Option
and delivery of an Option Termination (as defined in the Merger Agreement),
the Executive shall receive the following consideration therefor:
(i) With respect to each Option having an exercise price less than $5.00
per share, the Option Consideration (as defined in the Merger Agreement);
and
(ii) With respect to each Option having an exercise price greater than or
equal to $5.00 per share, an option to acquire such number of ordinary
shares of 10 pence each of Logica plc ("Ordinary Shares") as is determined
pursuant to the formula set forth below:
[(N X EP) / ER] / PLC Share Price
N=Number of shares of common stock of Carnegie represented by the
Option
EP=Exercise Price of the Option
ER= Exchange Rate ($/(Pounds)) (based on the exchange rate in U.S.
Dollars per British Pounds, as reported in the Financial Times on
the date on which the Effective Time occurs)
PLC Share Price= Middle market quotation from the London Stock Exchange
daily official list for an Ordinary Share as reported
on the date on which the Effective Time occurs
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EXHIBIT C
THIRD-PARTY AGREEMENTS
10
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EMPLOYMENT AGREEMENT
This Agreement (the "Agreement") is made as of September 30, 1998, by and
between Logica Inc., a Delaware corporation with its headquarters located in
Lexington, Massachusetts (the "Employer"), and Bruce Russell (the
"Executive"), but it shall become effective only in accordance with Section 16
below. In consideration of the mutual covenants contained in this Agreement,
the Employer and the Executive agree as follows:
1. Employment. The Employer agrees to employ the Executive and the Executive
agrees to be employed by the Employer on the terms and conditions set forth in
this Agreement.
2. Capacity. The Executive shall initially serve the Employer as the Senior
Vice President--Engineering of the Carnegie Group division of the Employer
(the "Carnegie Group"), and shall be responsible for overseeing the Carnegie
Group's commercial solutions delivery. The Executive initially shall report
to, and be under the supervision of, the Executive Vice President of Carnegie
Group. From and after July 1, 1999, the Executive shall also serve the
Employer in such other and additional offices as the Executive may be
requested to serve by the President and the Chief Executive Officer of the
Employer (the "President and Chief Executive Officer"). The Executive
acknowledges and agrees that the Executive's employment by the Employer is at
will and nothing contained in this Agreement shall be construed as creating
any term of employment of the Executive with the Employer. Subject to the
provisions of Section 5(c), the Executive agrees that while he is employed by
the Employer, he may be required to perform the Employer's business in, or
relocate for short term or long term to, geographic locations other than the
location to which he is originally assigned.
3. Compensation and Benefits. The regular compensation and benefits payable
to the Executive under this Agreement shall be as follows:
(a) Salary. For all services rendered by the Executive under this
Agreement, the Employer shall pay the Executive a salary (the "Salary") at
the annual rate of Two Hundred Thousand and Four Dollars ($200,004). The
Salary shall be payable twice per month and, initially, shall be payable at
the rate of $8,333.50 per payment. The Executive's Salary shall be reviewed
annually beginning on July 1, 1999 in accordance with the Employer's normal
compensation review policies. The Executive's Salary shall not be reduced
below $200,004 in the period up to November 1, 1999 and any increases in
the Executive's Salary effected as a result of the July 1, 1999 annual
compensation review shall be implemented retroactively to April 1, 1999.
(b) Bonus. The Executive shall be entitled to receive such bonus to which
the Executive would otherwise have been entitled under the Carnegie Group,
Inc. Short-Term Incentive Compensation/Bonus Pool (the "Carnegie Bonus
Plan") for the fiscal year ending December 31, 1998 had the Merger (as
defined in the Agreement and Plan of Merger, dated September 30, 1998 (the
"Merger Agreement"), among the Employer, Logica Acquisition Corp. and
Carnegie Group, Inc.) not been consummated. The financial objectives of the
Carnegie Bonus Plan applicable to the Executive shall be based upon the
financial objectives previously provided to the Employer in writing;
provided, however, that all legal, accounting and financial advisors fees
and expenses in connection with the negotiation and execution of the Merger
Agreement and the transactions contemplated thereby incurred by Carnegie
Group, Inc. ("Carnegie") and all severance costs incurred by Carnegie as a
result of the transactions contemplated by the Merger Agreement up to and
including December 31, 1998, as determined in accordance with generally
accepted accounting principles consistently applied, shall be excluded from
the determination of whether such financial objectives have been achieved.
In addition, the Executive shall be eligible to receive a transition bonus
contingent upon the Executive achieving certain objectives that are more
fully described on Exhibit A hereto. If Executive shall be employed by
Employer after July 1, 1999, then from and after such date Executive shall
be entitled to participate in the Logica Management Bonus Scheme pursuant
to the terms then in effect. A general description of the terms of the
Logica Management Bonus Scheme is set forth on Exhibit A hereto.
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(c) Regular Benefits. The Executive shall also be entitled to participate
in employee benefit plans to the extent provided in Section 7.11 of the
Merger Agreement. Such participation shall be subject to the terms of the
applicable plan documents, generally applicable policies of the Employer
and applicable law. Nothing contained in this Agreement shall be construed
to create any obligation on the part of the Employer to establish any such
plan or to maintain the effectiveness of any such plan which may be in
effect from time to time.
(d) Taxation of Payments and Benefits. The Employer shall undertake to
make deductions, withholdings and tax reports with respect to payments and
benefits under this Agreement to the extent that it reasonably and in good
faith believes that it is required to make such deductions, withholdings
and tax reports. Payments under this Agreement shall be in amounts net of
any such deductions or withholdings. Nothing in this Agreement shall be
construed to require the Employer to make any payments to compensate the
Executive for any adverse tax effect associated with any payments or
benefits or for any deduction or withholding from any payment or benefit.
(e) Exclusivity of Salary and Benefits. The Executive shall not be
entitled to any payments or benefits other than those provided under this
Agreement and the Exhibits attached hereto.
(f) Stock Options. In exchange for the cancellation of all options to
acquire shares of common stock of Carnegie held by the Executive
immediately prior to the Effective Time (as defined in the Merger
Agreement), the Executive shall be entitled to receive the consideration
set forth on Exhibit B hereto.
4. Extent of Service. During the Executive's employment under this
Agreement, the Executive shall, subject to the direction and supervision of
the President and Chief Executive Officer of the Employer, devote the
Executive's full business time, best efforts and business judgment, skill and
knowledge to the advancement of the Employer's interests and to the discharge
of the Executive's duties and responsibilities under this Agreement. The
Executive shall not engage in any other business activity.
5. Termination and Severance.
(a) Termination by the Executive. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Executive by written notice to the Board of
Directors at least thirty (30) days prior to such termination.
(b) Termination by the Employer. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Employer upon thirty (30) days' written notice to
the Executive.
(c) Constructive Termination. The Executive's employment hereunder shall
be deemed to have been terminated by the Employer if at any time prior to
the Nine-Month Anniversary Date (as hereinafter defined), the Executive
resigns due to (a) a material diminution by the Employer of the Executive's
title or responsibilities, as that title and those responsibilities existed
on the day prior to the date of resignation by the Executive, (b) any
diminution by the Employer in the Executive's salary, except as specified
in this Agreement, (c) any material diminution by the Employer in the
Executive's benefits or incentives or other forms of compensation except as
specified in this Agreement, or (d) any reassignment of the Executive or
relocation of the Executive outside of the greater Pittsburgh area effected
without the Executive's written consent at the time of reassignment.
(d) Severance Pay. Unless otherwise specifically provided in this
Agreement or otherwise required by law, all compensation and benefits
payable to the Executive under this Agreement shall terminate on the date
of termination of the Executive's employment under this Agreement.
Notwithstanding the foregoing, (A) in the event that the Executive
terminates his employment with the Employer in accordance with Section 5(a)
with an effective date, (i) between the Closing Date and the nine months
following the Closing Date (the "Nine-Month Anniversary Date"), the
Executive will not be entitled to receive any compensation or other
payments from the Employer, (ii) on the date which is the Nine-Month
Anniversary Date, the Employer shall continue to pay the Executive's Salary
at the rate in effect as of the Closing Date and the Executive's Benefits
(as hereinafter defined) for a period of nine (9) months from the
termination date, or
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(iii) on any date after the Nine-Month Anniversary Date, the Executive will
not be entitled to receive any compensation or other payments from the
Employer, and (B) in the event that the Employer terminates the Executive's
employment in accordance with Section 5(b) or by virtue of Section 5(c) at
any time with an effective date (i) after the Closing Date but on or prior
to the date that is nine (9) months after the Closing Date, the Employer
shall continue to pay the Executive's Salary at the rate in effect as of
the Closing Date until the date that is eighteen (18) months after the
Closing Date and the Executive's Benefits until the date that is nine (9)
months after the termination date, or (ii) after the date that is nine (9)
months after the Closing Date, the Employer shall continue to pay the
Executive's Salary at the rate in effect as of the Closing Date and the
Executive's Benefits for a period of six (6) months after the termination
date. For purposes of this Section 5(d), "Benefits" shall mean the benefits
received by the Executive by virtue of his participation under the
Employer's medical and dental benefit plans. Notwithstanding anything to
the contrary provided herein, upon any termination of the Executive
hereunder, the Executive shall be entitled to the payment of all salary
earned and unpaid, and all accrued but unpaid vacation pay, as of the
termination date, and any unreimbursed business expenses incurred by the
Executive up to the termination date.
6. Confidential Information, Noncompetition and Cooperation.
(a) Confidential Information. As used in this Agreement, "Confidential
Information" means information belonging to the Employer which is of value
to the Employer in the course of conducting its business and the disclosure
of which could result in a competitive or other disadvantage to the
Employer. Confidential Information includes, without limitation, financial
information, reports, and forecasts; inventions, improvements,
copyrightable materials and other intellectual property; working methods
and operations, methodologies, marketing plans and strategies and sales
reports; trade secrets; know-how and other information used in research,
development, marketing, sales and operational activities; programs;
processes; product ideas, models, techniques, designs and formulae;
software; data; customer lists; and business plans, prospects and
opportunities (such as possible acquisitions or dispositions of businesses
or facilities) which have been discussed or considered by the management of
the Employer. Confidential Information also includes any commercial or
technical information, improvements, or things which may be communicated to
the Executive or of which the Executive may learn by virtue of his
employment by the Employer, or of which the Executive may have gained
knowledge, or discovered, invented, or perfected while employed by the
Employer, including without limitation, any ideas or processes relating to
the development, operation, or improvement of any software or other
program, product, tool, article, or process sold, licensed, distributed or
maintained by the Employer or its customers. Confidential Information also
includes the confidential information of others with which the Employer has
a business relationship. Notwithstanding the foregoing, Confidential
Information does not include information in the public domain, unless due
to breach of the Executive's duties under Section 6(b).
(b) Confidentiality. The Executive understands and agrees that the
Executive's employment creates a relationship of confidence and trust
between the Executive and the Employer with respect to all Confidential
Information. At all times, both during the Executive's employment with the
Employer and after its termination, the Executive will keep in confidence
and trust all such Confidential Information, and will not use or disclose
any such Confidential Information without the written consent of the
Employer, except as may be necessary in the ordinary course of performing
the Executive's duties to the Employer.
(c) Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to
Confidential Information, which are furnished to the Executive by the
Employer or are produced by the Executive in connection with the
Executive's employment will be and remain the sole property of the
Employer. The Executive will return to the Employer all such materials and
property as and when requested by the Employer. In any event, the Executive
will return all such materials and property immediately upon termination of
the Executive's employment for any reason. The Executive will not retain
with the Executive any such material or property or any copies thereof
after such termination.
(d) Noncompetition and Nonsolicitation. At any time during the
Executive's employment with the Employer and (A) in the case of any
termination of the Executive's employment hereunder pursuant to Section
5(a), for nine (9) months thereafter, and (B) in the case of any
termination of the Executive's
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employment hereunder pursuant to Section 5(b) or 5(c), for six (6) months
thereafter, the Executive (i) will not, directly or indirectly, whether as
owner, partner, shareholder, consultant, agent, employee, co-venturer or
otherwise, engage, participate, assist or invest in any Competing Business
(as hereinafter defined); (ii) offer to perform or perform business or
services of a kind carried on by the Employer now or at any time during the
Executive's employment by the Employer, or otherwise solicit employment or
business from, consult with or accept employment from any of the Employer's
customers, or any Competing Business; (iii) will refrain from directly or
indirectly employing, attempting to employ, recruiting or otherwise
soliciting, inducing or influencing any person to leave employment with the
Employer (other than terminations of employment of subordinate employees
undertaken in the course of the Executive's employment with the Employer);
and (iv) will refrain from soliciting or encouraging any customer or
supplier to terminate or otherwise modify adversely its business
relationship with the Employer. The Executive understands that the
restrictions set forth in this Section 6(d) are intended to protect the
Employer's interest in its Confidential Information and established
employee, customer and supplier relationships and goodwill, and agrees that
such restrictions are reasonable and appropriate for this purpose. For
purposes of this Agreement, the term "Competing Business" shall mean (A)
from and after July 1, 1999, a business that is competitive with any
business which the Employer or any of its affiliates conducts or proposes
to conduct at any time during the employment of the Executive, and (B) up
to July 1, 1999, a business that is competitive with any business which
Carnegie or any of its subsidiaries conducts or proposes to conduct at any
time during the employment of the Executive. Notwithstanding the foregoing,
the Executive may own up to one percent (1%) of the outstanding stock of a
publicly held corporation which constitutes or is affiliated with a
Competing Business.
(e) Third-Party Agreements and Rights. The Executive hereby confirms that
the Executive is not bound by the terms of any agreement with any previous
employer or other party which restricts in any way the Executive's use or
disclosure of information or the Executive's engagement in any business,
except as set forth on Exhibit C hereto. The Executive represents to the
Employer that the Executive's execution of this Agreement, the Executive's
employment with the Employer and the performance of the Executive's
proposed duties for the Employer will not violate any obligations the
Executive may have to any such previous employer or other party. In the
Executive's work for the Employer, the Executive will not disclose or make
use of any information in violation of any agreements with or rights of any
such previous employer or other party, and the Executive will not bring to
the premises of the Employer any copies or other tangible embodiments of
non-public information belonging to or obtained from any such previous
employment or other party.
(f) The Executive agrees to disclose promptly to the Employer any and all
Developments (as defined below) which are made, invented, developed, or
discovered by the Executive, either singly or jointly with others, in the
course of his employment by the Employer and within six (6) months after
termination of such employment. The Executive also agrees that such
Developments are works made for hire and are or shall become the exclusive
property of the Employer, and that he relinquishes any and all intellectual
property rights and/or other rights in the Developments to the Employer,
including by way of example but without limitation, rights of
identification or authorship and rights of approval with respect to
modifications and limitations on subsequent modifications. In order to
effectuate ownership by the Employer when necessary, the Employee agrees,
without further consideration:
(i) to immediately upon the Employer's request execute all documents
and make all assignments necessary to vest title to such Developments
in the Employer; and
(ii) to assist the Employer in any reasonable manner to obtain for
the benefit of the Employer any patents or copyrights on such
Developments, in any and all countries; and
(iii) to execute when requested any and all patent and copyright
applications and any other lawful documents deemed necessary by the
Employer to carry out the purposes of this Agreement.
If the Executive is called upon to render the assistance described
above to the Employer after termination of employment, he will be
entitled to a fair and reasonable per diem fee in addition to
reimbursement of expenses incurred at the Employer's request.
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"Developments" include, by way of example but without limitation, the
following: any and all inventions, improvements, discoveries,
developments, results of research, or useful ideas, whether or not
patentable, which relate in any manner to any software or other
programs, products, work or other business of the Employer or any
customer of the Employer, or to any process, apparatus, equipment, or
article worked on in connection with the Executive's employment by the
Employer.
(g) Litigation and Regulatory Cooperation. During and after the
Executive's employment, the Executive shall cooperate fully with the
Employer in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Employer which relate to events or occurrences that transpired while the
Executive was employed by the Employer or by Carnegie. The Executive's full
cooperation in connection with such claims or actions shall include, but
not be limited to, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of the Employer at
mutually convenient times. During and after the Executive's employment, the
Executive also shall cooperate fully with the Employer in connection with
any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or
occurrences that transpired while the Executive was employed by the
Employer. The Employer shall reimburse the Executive for any reasonable
out-of-pocket expenses incurred in connection with the Executive's
performance of obligations pursuant to this Section 6(g).
(h) Injunction. The Executive agrees that it would be difficult to
measure any damages caused to the Employer which might result from any
breach by the Executive of the promises set forth in this Section 6, and
that in any event money damages would be an inadequate remedy for any such
breach. Accordingly, subject to Section 8 of this Agreement, the Executive
agrees that if the Executive breaches, or proposes to breach, any portion
of this Agreement, the Employer shall be entitled, in addition to all other
remedies that it may have, to an injunction or other appropriate equitable
relief to restrain any such breach without showing or proving any actual
damage to the Employer.
7. Consent to Jurisdiction. The parties hereby consent to the jurisdiction
of the Superior Court of the Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts. Accordingly, with
respect to any such court action, the Executive (a) submits to the personal
jurisdiction of such courts; (b) consents to service of process; and (c)
waives any other requirement (whether imposed by statute, rule of court, or
otherwise) with respect to personal jurisdiction or service of process.
8. Integration. This Agreement and the Exhibits attached hereto constitute
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior agreements between the parties with respect to
any related subject matter.
9. Assignment; Successors and Assigns, etc. Neither the Employer nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employer may assign its rights under this
Agreement without the consent of the Executive in the event that the Employer
shall effect a reorganization, consolidate with or merge into any other
corporation, partnership, organization or other entity, or transfer all or
substantially all of its properties or assets to any other corporation,
partnership, organization or other entity. This Agreement shall inure to the
benefit of and be binding upon the Employer and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
10. Enforceability. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of
this Agreement) shall to any extent be declared illegal or unenforceable by a
court of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless made
in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this
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Agreement, or the waiver by any party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed
a waiver of any subsequent breach.
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to
the Executive at the last address the Executive has filed in writing with the
Employer or, in the case of the Employer, at its main offices, attention of
the Chief Executive Officer, and shall be effective on the date of delivery in
person or by courier or three (3) days after the date mailed.
13. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Employer.
14. Governing Law. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts, without giving effect to the conflict of laws principles of
such Commonwealth. With respect to any disputes concerning federal law, such
disputes shall be determined in accordance with the law as it would be
interpreted and applied by the United States Court of Appeals for the First
Circuit.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to
be an original; but such counterparts shall together constitute one and the
same document.
16. Effectiveness. This Agreement is conditioned and shall become effective
only upon consummation of the Merger, which shall be deemed to occur only upon
and as of the Closing Date.
In Witness Whereof, this Agreement has been executed as a sealed instrument
by the Employer, by its duly authorized officer, and by the Executive, as of
the Effective Date.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
/s/ Bruce Russell
_____________________________________
Bruce Russell
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EXHIBIT A
I. TRANSITION BONUS
For the transition period between November 1, 1998 through June 30, 1999,
upon achievement of 100% of certain financial objectives by the Carnegie Group
(the "Carnegie Group Objectives"), the Executive will be eligible to receive a
cash bonus of $37,500 (the "Objective Bonus"). The Carnegie Group Objectives
shall be based upon the financial objectives previously provided to the
Employer in writing; provided, however, that the severance costs relating to
the employment of the Dennis Yablonsky, John Manzetti, Bruce Russell and
Raymond Kalustyan (collectively, the "Carnegie Group Executive Team") with
Carnegie Group, Inc., and all legal, accounting and financial advisors fees
and expenses in connection with the negotiation and execution of the Merger
Agreement and the transactions contemplated thereby incurred by Carnegie, as
determined in accordance with generally accepted accounting principles
consistently applied, shall be excluded from the determination of whether the
Carnegie Group Objectives have been achieved. If the Carnegie Group achieves a
percentage between 70% and 100% of the Carnegie Group Objectives, the
Executive will be eligible to receive a bonus equal to that same percentage of
the Objective Bonus, and at a percentage less than 70% of the Carnegie Group
Objectives no bonus will be paid; provided, however, that if between 70% and
100% of the Carnegie Group Objectives are achieved, the President and Chief
Executive Officer may, in his sole discretion, award a higher percentage of
the Objective Bonus but not greater than 100%. To receive more than 100% of
the Objective Bonus, the Executive must achieve at least 100% of the Carnegie
Group Objectives as well as additional quantitative objectives in the areas of
pull through of revenue for the Employer and net savings and efficiencies
generated by the Carnegie Group Executive Team.
II. LOGICA MANAGEMENT BONUS SCHEME
For the fiscal year between July 1, 1999 and June 30, 2000, the Executive
will be entitled to participate in the Logica Management Bonus Scheme as is
then in effect, a current copy of which is attached hereto.
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EXHIBIT B
STOCK OPTIONS
Each Option (as defined in the Merger Agreement) that is outstanding
(whether or not exercisable) as of immediately prior to the Effective Time (as
defined in the Merger Agreement) and which has not been exercised or canceled
prior thereto, shall, at the Effective Time, be canceled, and upon the
surrender and cancellation of the option agreement representing such Option
and delivery of an Option Termination (as defined in the Merger Agreement),
the Executive shall receive the following consideration therefor:
(i) With respect to each Option having an exercise price less than $5.00
per share, the Option Consideration (as defined in the Merger Agreement);
and
(ii) With respect to each Option having an exercise price greater than or
equal to $5.00 per share, an option to acquire such number of ordinary
shares of 10 pence each of Logica plc ("Ordinary Shares") as is determined
pursuant to the formula set forth below:
[(N X EP) / ER] / PLC Share Price
N=Number of shares of common stock of Carnegie represented by the
Option
EP=Exercise Price of the Option
ER= Exchange Rate ($/(Pounds)) (based on the exchange rate in U.S.
Dollars per British Pounds, as reported in the Financial Times on
the date on which the Effective Time occurs)
PLC Share Price= Middle market quotation from the London Stock Exchange
daily official list for an Ordinary Share as reported
on the date on which the Effective Time occurs
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EXHIBIT C
THIRD-PARTY AGREEMENTS
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EMPLOYMENT AGREEMENT
This Agreement (the "Agreement") is made as of September 30, 1998, by and
between Logica Inc., a Delaware corporation with its headquarters located in
Lexington, Massachusetts (the "Employer"), and Raymond Kalustyan (the
"Executive"), but it shall become effective only in accordance with Section 16
below. In consideration of the mutual covenants contained in this Agreement,
the Employer and the Executive agree as follows:
1. Employment. The Employer agrees to employ the Executive and the Executive
agrees to be employed by the Employer on the terms and conditions set forth in
this Agreement.
2. Capacity. The Executive shall initially serve the Employer as the Vice
President of the Carnegie Group division of the Employer (the "Carnegie
Group"), and shall be responsible for overseeing commercial business
development of the Carnegie Group. The Executive initially shall report to,
and be supervised by, the Executive Vice President of the Carnegie Group. From
and after July 1, 1999, the Executive shall also serve the Employer in such
other and additional offices as the Executive may be requested to serve by the
President and the Chief Executive Officer of the Employer (the "President and
Chief Executive Officer"). The Executive acknowledges and agrees that the
Executive's employment by the Employer is at will and nothing contained in
this Agreement shall be construed as creating any term of employment of the
Executive with the Employer. Subject to the provisions of Section 5(c), the
Executive agrees that while he is employed by the Employer, he may be required
to perform the Employer's business in, or relocate for short term or long term
to, geographic locations other than the location to which he is originally
assigned.
3. Compensation and Benefits. The regular compensation and benefits payable
to the Executive under this Agreement shall be as follows:
(a) Salary. For all services rendered by the Executive under this
Agreement, the Employer shall pay the Executive a salary (the "Salary") at
the annual rate of One Hundred and Fifty Thousand Dollars ($150,000). The
Salary shall be payable twice per month and, initially, shall be payable at
the rate of $6,250 per payment. The Executive's Salary shall be reviewed
annually beginning on July 1, 1999 in accordance with the Employer's normal
compensation review policies. The Executive's Salary shall not be reduced
below $150,000 in the period up to November 1, 1999 and any increases in
the Executive's Salary effected as a result of the July 1, 1999 annual
compensation review shall be implemented retroactively to April 1, 1999.
(b) Bonus. The Executive shall be entitled to receive such bonus to which
the Executive would otherwise have been entitled under the Carnegie Group,
Inc. Short-Term Incentive Compensation/Bonus Pool (the "Carnegie Bonus
Plan") for the fiscal year ending December 31, 1998 had the Merger (as
defined in the Agreement and Plan of Merger, dated September 30, 1998 (the
"Merger Agreement"), among the Employer, Logica Acquisition Corp. and
Carnegie Group, Inc.) not been consummated. The financial objectives of the
Carnegie Bonus Plan applicable to the Executive shall be based upon the
financial objectives previously provided to the Employer in writing;
provided, however, that all legal, accounting and financial advisors fees
and expenses in connection with the negotiation and execution of the Merger
Agreement and the transactions contemplated thereby incurred by Carnegie
Group, Inc. ("Carnegie") and all severance costs incurred by Carnegie as a
result of the transactions contemplated by the Merger Agreement up to and
including December 31, 1998, as determined in accordance with generally
accepted accounting principles consistently applied, shall be excluded from
the determination of whether such financial objectives have been achieved.
In addition, the Executive shall be eligible to receive a transition bonus
contingent upon the Executive achieving certain objectives that are more
fully described on Exhibit A hereto. If Executive shall be employed by
Employer after July 1, 1999, then from and after such date Executive shall
be entitled to participate in the Logica Management Bonus Scheme pursuant
to the terms then in effect. A general description of the terms of the
Logica Management Bonus Scheme is set forth on Exhibit A hereto. In
addition, at the Effective Time (as defined in the Merger Agreement), the
Executive also shall receive a one-time bonus of $50,000, payable in a lump
sum to the Executive.
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(c) Regular Benefits. The Executive shall also be entitled to participate
in employee benefit plans to the extent provided in Section 7.11 of the
Merger Agreement. Such participation shall be subject to the terms of the
applicable plan documents, generally applicable policies of the Employer
and applicable law. Nothing contained in this Agreement shall be construed
to create any obligation on the part of the Employer to establish any such
plan or to maintain the effectiveness of any such plan which may be in
effect from time to time.
(d) Taxation of Payments and Benefits. The Employer shall undertake to
make deductions, withholdings and tax reports with respect to payments and
benefits under this Agreement to the extent that it reasonably and in good
faith believes that it is required to make such deductions, withholdings
and tax reports. Payments under this Agreement shall be in amounts net of
any such deductions or withholdings. Nothing in this Agreement shall be
construed to require the Employer to make any payments to compensate the
Executive for any adverse tax effect associated with any payments or
benefits or for any deduction or withholding from any payment or benefit.
(e) Exclusivity of Salary and Benefits. The Executive shall not be
entitled to any payments or benefits other than those provided under this
Agreement and the Exhibits attached hereto.
(f) Stock Options. In exchange for the cancellation of all options to
acquire shares of common stock of Carnegie held by the Executive
immediately prior to the Effective Time, the Executive shall be entitled to
receive the consideration set forth on Exhibit B hereto. In addition, the
Executive shall be entitled to receive at the Effective Time an option to
acquire 3,000 ordinary shares of 10 pence each of Logica plc ("Ordinary
Shares") having an exercise price equal to the fair market value of an
Ordinary Share at the Effective Time.
(g) Relocation Expenses. In the event that the Executive's employment
with the Employer is terminated in accordance with Section 5(b) or 5(c)
hereof prior to June 1, 1999, the Employer shall reimburse the Executive
for his reasonable relocation expenses, supported by appropriate
documentation, up to a maximum of $25,000.
4. Extent of Service. During the Executive's employment under this
Agreement, the Executive shall, subject to the direction and supervision of
the President and Chief Executive Officer of the Employer, devote the
Executive's full business time, best efforts and business judgment, skill and
knowledge to the advancement of the Employer's interests and to the discharge
of the Executive's duties and responsibilities under this Agreement. The
Executive shall not engage in any other business activity.
5. Termination and Severance.
(a) Termination by the Executive. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Executive by written notice to the Board of
Directors at least thirty (30) days prior to such termination.
(b) Termination by the Employer. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Employer upon thirty (30) days' written notice to
the Executive.
(c) Constructive Termination. The Executive's employment hereunder shall
be deemed to have been terminated by the Employer if at any time prior to
the Seventh-Month Anniversary Date (as hereinafter defined), the Executive
resigns due to (a) a material diminution by the Employer of the Executive's
title or responsibilities, as that title and those responsibilities existed
on the day prior to the date of resignation by the Executive, (b) any
diminution by the Employer in the Executive's salary, except as specified
in this Agreement, (c) any material diminution by the Employer in the
Executive's benefits or incentives or other forms of compensation except as
specified in this Agreement, or (d) any reassignment of the Executive or
relocation of the Executive outside of the greater Pittsburgh area effected
without the Executive's written consent at the time of reassignment.
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(d) Severance Pay. Unless otherwise specifically provided in this
Agreement or otherwise required by law, all compensation and benefits
payable to the Executive under this Agreement shall terminate on the date
of termination of the Executive's employment under this Agreement.
Notwithstanding the foregoing, (A) in the event that the Executive
terminates his employment with the Employer in accordance with Section 5(a)
with an effective date (i) between the Closing Date and the seven months
following the Closing Date (the "Seventh-Month Anniversary Date"), the
Executive will not be entitled to receive any compensation or other
payments from the Employer, (ii) on the date which is the Seventh-Month
Anniversary Date, the Employer shall continue to pay the Executive's Salary
at the rate in effect as of the Closing Date and the Executive's Benefits
(as hereinafter defined) for a period of six (6) months from the
termination date, or (iii) on any date after the Seventh-Month Anniversary
Date, the Executive will not be entitled to receive any compensation or
other payments from the Employer, and (B) in the event that the Employer
terminates the Executive's employment in accordance with Section 5(b) or by
virtue of Section 5(c) at any time with an effective date (i) after the
Closing Date but on or prior to the date that is seven (7) months after the
Closing Date, the Employer shall continue to pay the Executive's Salary at
the rate in effect as of the Closing Date until the date that is thirteen
(13) months after the Closing Date and the Executive's Benefits until the
date that is six (6) months after the termination date, or (ii) after the
date that is seven (7) months after the Closing Date, the Employer shall
continue to pay the Executive's Salary at the rate in effect as of the
Closing Date and the Executive's Benefits for a period of six (6) months
after the termination date. For purposes of this Section 5(d), "Benefits"
shall mean the benefits received by the Executive by virtue of his
participation in the Employer's medical and dental benefit plans.
Notwithstanding anything to the contrary provided herein, upon any
termination of the Executive hereunder, the Executive shall be entitled to
the payment of all salary earned and unpaid, and all accrued but unpaid
vacation pay, as of the termination date, and any unreimbursed business
expenses incurred by the Executive up to the termination date.
6. Confidential Information, Noncompetition and Cooperation.
(a) Confidential Information. As used in this Agreement, "Confidential
Information" means information belonging to the Employer which is of value
to the Employer in the course of conducting its business and the disclosure
of which could result in a competitive or other disadvantage to the
Employer. Confidential Information includes, without limitation, financial
information, reports, and forecasts; inventions, improvements,
copyrightable materials and other intellectual property; working methods
and operations, methodologies, marketing plans and strategies and sales
reports; trade secrets; know-how and other information used in research,
development, marketing, sales and operational activities; programs;
processes; product ideas, models, techniques, designs and formulae;
software; data; customer lists; and business plans, prospects and
opportunities (such as possible acquisitions or dispositions of businesses
or facilities) which have been discussed or considered by the management of
the Employer. Confidential Information also includes any commercial or
technical information, improvements, or things which may be communicated to
the Executive or of which the Executive may learn by virtue of his
employment by the Employer, or of which the Executive may have gained
knowledge, or discovered, invented, or perfected while employed by the
Employer, including without limitation, any ideas or processes relating to
the development, operation, or improvement of any software or other
program, product, tool, article, or process sold, licensed, distributed or
maintained by the Employer or its customers. Confidential Information also
includes the confidential information of others with which the Employer has
a business relationship. Notwithstanding the foregoing, Confidential
Information does not include information in the public domain, unless due
to breach of the Executive's duties under Section 6(b).
(b) Confidentiality. The Executive understands and agrees that the
Executive's employment creates a relationship of confidence and trust
between the Executive and the Employer with respect to all Confidential
Information. At all times, both during the Executive's employment with the
Employer and after its termination, the Executive will keep in confidence
and trust all such Confidential Information, and will not use or disclose
any such Confidential Information without the written consent of the
Employer, except as may be necessary in the ordinary course of performing
the Executive's duties to the Employer.
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(c) Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to
Confidential Information, which are furnished to the Executive by the
Employer or are produced by the Executive in connection with the
Executive's employment will be and remain the sole property of the
Employer. The Executive will return to the Employer all such materials and
property as and when requested by the Employer. In any event, the Executive
will return all such materials and property immediately upon termination of
the Executive's employment for any reason. The Executive will not retain
with the Executive any such material or property or any copies thereof
after such termination.
(d) Noncompetition and Nonsolicitation. At any time during the
Executive's employment with the Employer and (A) in the case of any
termination of the Executive's employment hereunder pursuant to Section
5(a), for one (1) year thereafter, and (B) in the case of any termination
of the Executive's employment hereunder pursuant to Section 5(b) or 5(c),
for six (6) months thereafter, the Executive (i) will not, directly or
indirectly, whether as owner, partner, shareholder, consultant, agent,
employee, co-venturer or otherwise, engage, participate, assist or invest
in any Competing Business (as hereinafter defined); (ii) offer to perform
or perform business or services of a kind carried on by the Employer now or
at any time during the Executive's employment by the Employer, or otherwise
solicit employment or business from, consult with or accept employment from
any of the Employer's customers, or any Competing Business; (iii) will
refrain from directly or indirectly employing, attempting to employ,
recruiting or otherwise soliciting, inducing or influencing any person to
leave employment with the Employer (other than terminations of employment
of subordinate employees undertaken in the course of the Executive's
employment with the Employer); and (iv) will refrain from soliciting or
encouraging any customer or supplier to terminate or otherwise modify
adversely its business relationship with the Employer. The Executive
understands that the restrictions set forth in this Section 6(d) are
intended to protect the Employer's interest in its Confidential Information
and established employee, customer and supplier relationships and goodwill,
and agrees that such restrictions are reasonable and appropriate for this
purpose. For purposes of this Agreement, the term "Competing Business"
shall mean (A) from and after July 1, 1999, a business that is competitive
with any business which the Employer or any of its affiliates conducts or
proposes to conduct at any time during the employment of the Executive, and
(B) up to July 1, 1999, a business that is competitive with any business
which Carnegie or any of its subsidiaries conducts or proposes to conduct
at any time during the employment of the Executive. Notwithstanding the
foregoing, the Executive may own up to one percent (1%) of the outstanding
stock of a publicly held corporation which constitutes or is affiliated
with a Competing Business.
(e) Third-Party Agreements and Rights. The Executive hereby confirms that
the Executive is not bound by the terms of any agreement with any previous
employer or other party which restricts in any way the Executive's use or
disclosure of information or the Executive's engagement in any business,
except as set forth on Exhibit C hereto. The Executive represents to the
Employer that the Executive's execution of this Agreement, the Executive's
employment with the Employer and the performance of the Executive's
proposed duties for the Employer will not violate any obligations the
Executive may have to any such previous employer or other party. In the
Executive's work for the Employer, the Executive will not disclose or make
use of any information in violation of any agreements with or rights of any
such previous employer or other party, and the Executive will not bring to
the premises of the Employer any copies or other tangible embodiments of
non-public information belonging to or obtained from any such previous
employment or other party.
(f) The Executive agrees to disclose promptly to the Employer any and all
Developments (as defined below) which are made, invented, developed, or
discovered by the Executive, either singly or jointly with others, in the
course of his employment by the Employer and within six (6) months after
termination of such employment. The Executive also agrees that such
Developments are works made for hire and are or shall become the exclusive
property of the Employer, and that he relinquishes any and all intellectual
property rights and/or other rights in the Developments to the Employer,
including by way of example but without limitation, rights of
identification or authorship and rights of approval with respect to
modifications and limitations on subsequent modifications. In order to
effectuate ownership by the Employer when necessary, the Employee agrees,
without further consideration:
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(i) to immediately upon the Employer's request execute all documents
and make all assignments necessary to vest title to such Developments
in the Employer; and
(ii) to assist the Employer in any reasonable manner to obtain for
the benefit of the Employer any patents or copyrights on such
Developments, in any and all countries; and
(iii) to execute when requested any and all patent and copyright
applications and any other lawful documents deemed necessary by the
Employer to carry out the purposes of this Agreement.
If the Executive is called upon to render the assistance described
above to the Employer after termination of employment, he will be
entitled to a fair and reasonable per diem fee in addition to
reimbursement of expenses incurred at the Employer's request.
"Developments" include, by way of example but without limitation, the
following: any and all inventions, improvements, discoveries,
developments, results of research, or useful ideas, whether or not
patentable, which relate in any manner to any software or other
programs, products, work or other business of the Employer or any
customer of the Employer, or to any process, apparatus, equipment, or
article worked on in connection with the Executive's employment by the
Employer.
(g) Litigation and Regulatory Cooperation. During and after the
Executive's employment, the Executive shall cooperate fully with the
Employer in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Employer which relate to events or occurrences that transpired while the
Executive was employed by the Employer or by Carnegie. The Executive's full
cooperation in connection with such claims or actions shall include, but
not be limited to, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of the Employer at
mutually convenient times. During and after the Executive's employment, the
Executive also shall cooperate fully with the Employer in connection with
any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or
occurrences that transpired while the Executive was employed by the
Employer. The Employer shall reimburse the Executive for any reasonable
out-of-pocket expenses incurred in connection with the Executive's
performance of obligations pursuant to this Section 6(g).
(h) Injunction. The Executive agrees that it would be difficult to
measure any damages caused to the Employer which might result from any
breach by the Executive of the promises set forth in this Section 6, and
that in any event money damages would be an inadequate remedy for any such
breach. Accordingly, subject to Section 8 of this Agreement, the Executive
agrees that if the Executive breaches, or proposes to breach, any portion
of this Agreement, the Employer shall be entitled, in addition to all other
remedies that it may have, to an injunction or other appropriate equitable
relief to restrain any such breach without showing or proving any actual
damage to the Employer.
7. Consent to Jurisdiction. The parties hereby consent to the jurisdiction
of the Superior Court of the Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts. Accordingly, with
respect to any such court action, the Executive (a) submits to the personal
jurisdiction of such courts; (b) consents to service of process; and (c)
waives any other requirement (whether imposed by statute, rule of court, or
otherwise) with respect to personal jurisdiction or service of process.
8. Integration. This Agreement and the Exhibits attached hereto constitute
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior agreements between the parties with respect to
any related subject matter.
9. Assignment; Successors and Assigns, etc. Neither the Employer nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employer may assign its rights under this
Agreement without the consent of the Executive in the event that the Employer
shall effect a reorganization, consolidate with or merge into any other
corporation, partnership, organization or other entity, or transfer all or
substantially all of its properties or assets to any other corporation,
partnership, organization or other entity. This Agreement
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shall inure to the benefit of and be binding upon the Employer and the
Executive, their respective successors, executors, administrators, heirs and
permitted assigns.
10. Enforceability. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of
this Agreement) shall to any extent be declared illegal or unenforceable by a
court of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless made
in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to
the Executive at the last address the Executive has filed in writing with the
Employer or, in the case of the Employer, at its main offices, attention of
the Chief Executive Officer, and shall be effective on the date of delivery in
person or by courier or three (3) days after the date mailed.
13. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Employer.
14. Governing Law. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts, without giving effect to the conflict of laws principles of
such Commonwealth. With respect to any disputes concerning federal law, such
disputes shall be determined in accordance with the law as it would be
interpreted and applied by the United States Court of Appeals for the First
Circuit.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to
be an original; but such counterparts shall together constitute one and the
same document.
16. Effectiveness. This Agreement is conditioned and shall become effective
only upon consummation of the Merger, which shall be deemed to occur only upon
and as of the Closing Date.
In Witness Whereof, this Agreement has been executed as a sealed instrument
by the Employer, by its duly authorized officer, and by the Executive, as of
the Effective Date.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
/s/ Raymond Kalustyan
_____________________________________
Raymond Kalustyan
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EXHIBIT A
I. TRANSITION BONUS
For the transition period between November 1, 1998 through June 30, 1999,
upon achievement of 100% of certain financial objectives by the Carnegie Group
(the "Carnegie Group Objectives"), the Executive will be eligible to receive a
cash bonus of $26,250 (the "Objective Bonus"). The Carnegie Group Objectives
shall be based upon the financial objectives previously provided to the
Employer in writing; provided, however, that the severance costs relating to
the employment of the Dennis Yablonsky, John Manzetti, Bruce Russell and
Raymond Kalustyan (collectively, the "Carnegie Group Executive Team") with
Carnegie, and all legal, accounting and financial advisors fees and expenses
in connection with the negotiation and execution of the Merger Agreement and
the transactions contemplated thereby incurred by Carnegie, as determined in
accordance with generally accepted accounting principles consistently applied,
shall be excluded from the determination of whether the Carnegie Group
Objectives have been achieved. If the Carnegie Group achieves a percentage
between 70% and 100% of the Carnegie Group Objectives, the Executive will be
eligible to receive a bonus equal to that same percentage of the Objective
Bonus, and at a percentage less than 70% of the Carnegie Group Objectives no
bonus will be paid; provided, however, that if between 70% and 100% of the
Carnegie Group Objectives are achieved, the President and Chief Executive
Officer may, in his sole discretion, award a higher percentage of the
Objective Bonus but not greater than 100%. To receive more than 100% of the
Objective Bonus, the Executive must achieve at least 100% of the Carnegie
Group Objectives as well as additional quantitative objectives in the areas of
pull through of revenue for the Employer and net savings and efficiencies
generated by the Carnegie Group Executive Team.
In addition, the Executive shall be entitled to receive a bonus (the
"Bookings Bonus") for the period ending on December 31, 1998 if the Executive
achieves certain order bookings objectives under the arrangement in effect
between the Executive and Carnegie Group, Inc. on the date hereof (the
"Bookings Bonus Plan"), which objectives have previously been provided to the
Employer in writing The Executive also shall be entitled to receive a Bookings
Bonus for the period between January 1, 1999 to June 30, 1999 under the
Bookings Bonus Plan if he achieves certain booking objectives agreed to by the
Employer and the Executive.
II. LOGICA MANAGEMENT BONUS SCHEME
For the fiscal year between July 1, 1999 and June 30, 2000, the Executive
will be entitled to participate in the Logica Management Bonus Scheme as is
then in effect, a current copy of which is attached hereto.
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EXHIBIT B
STOCK OPTIONS
Each Option (as defined in the Merger Agreement) that is outstanding
(whether or not exercisable) as of immediately prior to the Effective Time (as
defined in the Merger Agreement) and which has not been exercised or canceled
prior thereto, shall, at the Effective Time, be canceled, and upon the
surrender and cancellation of the option agreement representing such Option
and delivery of an Option Termination (as defined in the Merger Agreement),
the Executive shall receive the Option Consideration (as defined in the Merger
Agreement).
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EXHIBIT C
THIRD-PARTY AGREEMENTS
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LOGICA INC.
32 HARTWELL AVENUE
LEXINGTON, MA 02173-3103
August 27, 1998
Carnegie Group, Inc.
Five PPG Place
Pittsburgh, PA 15222
Ladies and Gentlemen:
In connection with our mutual consideration of a potential transaction (the
"Proposed Transaction") involving the acquisition of Carnegie Group, Inc., a
Delaware corporation ("Seller"), by Logica Inc., a Delaware corporation, or an
affiliate thereof ("Buyer"), Buyer has requested certain information
concerning Seller, and Seller, in turn, has requested certain information
concerning Buyer. This information is confidential and proprietary to the
respective parties and not otherwise available. Each party agrees that, in
consideration of, and as a condition to, furnishing such information, it will
abide by the following:
1. Confidentiality Agreement. Each of Buyer and Seller, as applicable (each,
a "Receiving Party"), hereby agrees to treat all information, whether written
or oral, concerning Seller or Buyer, as applicable (each a "Disclosing
Party"), or any of their respective affiliates, subsidiaries or divisions,
which the Disclosing Party or any directors, officers, employees, partners,
agents or representatives (collectively, the "Representatives") of the
Disclosing Party furnishes, whether before or after the date of this
agreement, to the Receiving Party or its Representatives, together with all
originals or copies of all reports, analyses, compilations, data, studies and
other materials which contain or otherwise reflect or are generated from such
information (collectively, the "Evaluation Material"), confidential and in
accordance with the provisions of this agreement. Notwithstanding the
foregoing, the term "Evaluation Material" shall not for the purposes of this
agreement include any information which (a) at the time of disclosure or
thereafter is generally available to and known by the public other than as a
result of a disclosure by the Receiving Party or its Representatives, (b) was
or becomes available to the Receiving Party on a nonconfidential basis from a
source other than the Disclosing Party or any of its Representatives, provided
that such source is not bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation to, the Disclosing Party, or (c)
has been independently acquired by the Receiving Party without violating any
of the obligations of the Receiving Party or its Representatives under this
agreement or any other confidentiality agreement, or under any other
contractual, legal or fiduciary obligations of the Receiving Party or its
Representatives. The fact that information included in the Evaluation Material
is or becomes otherwise available to the Receiving Party or its
Representatives under clauses (a), (b) or (c) above shall not relieve the
Receiving Party or its Representatives of the prohibitions set forth in this
agreement.
2. Use of Evaluation Material and Confidentiality.
(a) Subject to paragraph (b) below, the Evaluation Material will be kept
confidential by the Receiving Party and its Representatives and will not,
without the prior written consent of the Disclosing Party, be disclosed, in
whole or in part, to any third party by the Receiving Party or any of its
Representatives in any manner whatsoever, and will not be used by the
Receiving Party or any of its Representatives, directly or indirectly, for any
purpose other than in connection with the Receiving Party's evaluation of the
Proposed Transaction. In addition, the Receiving Party hereby agrees to
disclose that the Receiving Party is evaluating the Proposed Transaction and
to transmit Evaluation Material to only those of its Representatives who need
to know the information for the purpose of evaluating the Proposed Transaction
and are informed by the Receiving Party of the confidential nature of the
information. The Receiving Party agrees not to make any such disclosure or
transmission unless the Receiving Party is satisfied that its Representatives
will act in accordance herewith. The Receiving Party agrees that it will be
responsible for any breach of any of the provisions of this agreement by any
of its Representatives and the Receiving Party agrees to take, at its sole
expense, all reasonable measures to
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restrain its Representatives from prohibited or unauthorized disclosure or use
of the Evaluation Material (including, without limitation, the initiation of
court proceedings).
(b) In the event that the Receiving Party or any of its Representatives are
requested or required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose (a) any Evaluation Material, (b) any information relating
to the opinion, judgment or recommendation of any such person concerning the
Disclosing Party, its affiliates or subsidiaries, or (c) any other information
supplied to the Receiving Party in the course of the Receiving Party's, or its
Representatives', dealings with the Disclosing Party, the Receiving Party will
promptly notify the Disclosing Party of such request or requirement so that
the Disclosing Party may seek an appropriate protective order or waive
compliance with the provisions of this agreement, and/or take any other
mutually agreed action. If, in the absence of a protective order or the
receipt of a waiver hereunder, the Receiving Party or any of its
Representatives are, in the reasonable opinion of such person's counsel,
compelled to disclose information or else stand liable for contempt or suffer
other censure or significant penalty, the Receiving Party or such
Representative may disclose that portion of the requested information which
such person's counsel advises such person in writing that such person is
compelled to disclose. In any event, the Receiving Party and its
Representatives will furnish only that portion of the information which is
legally required and will exercise its best efforts to obtain reliable
assurance that confidential treatment will be accorded the information. In
addition, neither the Receiving Party nor any of its Representatives will
oppose action by the Disclosing Party to obtain an appropriate protective
order or other reliable assurance that such confidential treatment will be so
accorded and the Receiving Party and its Representatives shall cooperate with
the Disclosing Party to obtain such order or other assurance.
3. Nondisclosure of Negotiations. Except as otherwise expressly permitted
hereby, without the prior written consent of the Disclosing Party, the
Receiving Party will not, and will direct its Representatives not to, disclose
to any person the fact that any discussions (or any other discussions between
or involving the Receiving Party and the Disclosing Party) with respect to the
matters contemplated hereby are taking, have taken or are proposed to take
place or other facts with respect to such discussions, including the status
thereof, or the fact (if such becomes the case) that any Evaluation Material
has been made available to the Receiving Party, nor otherwise make any public
disclosure, whether written or oral, with respect to this agreement or the
actions or transactions contemplated hereby; provided, however, that a party
may, without the prior consent of the other party, issue such press release or
make such public statement as may be required by law (including, without
limitation, the provisions of the federal securities laws) or the applicable
rules of any stock exchange or Nasdaq if it has used its reasonable best
efforts to consult with the other party prior to issuing such release or
making such public statement and to obtain such party's prior consent, but has
been unable to do so in a timely manner. No request or proposal to amend,
modify or waive any provision of this agreement shall be made or solicited
except in a non-public and confidential manner. The term "person" as used in
this agreement shall be broadly interpreted to include, without limitation,
any corporation, company, partnership or individual.
4. Federal Securities Laws. The Receiving Party hereby acknowledges that it
and its Representatives are aware that the United States securities laws
prohibit any person who has material, non-public information concerning a
company from purchasing or selling securities of such company or from
communicating such information to any other person under circumstances in
which it is reasonably foreseeable that such person is likely to purchase or
sell such securities.
5. Exclusivity. Seller and Buyer will negotiate in good faith and will use
their best efforts to enter into a definitive agreement setting forth, among
other things, the price and terms of the Proposed Transaction by September 22,
1998 (the "Exclusivity Period"). Buyer's obligations under the previous
sentence are subject to, among other things, its satisfactory completion of a
due diligence investigation of Seller's business, properties, assets,
financial condition and prospects. Seller agrees to cooperate fully with Buyer
in its due diligence investigation of Seller during the Exclusivity Period.
Until the expiration of the Exclusivity Period, neither Seller nor any of its
Representatives shall (and Seller shall use its best efforts to cause all of
its Representatives not to), directly or indirectly, solicit, initiate,
knowingly encourage or enter into any agreement with respect to or participate
in negotiations with, provide any confidential information to, enter into any
agreement with or
2
<PAGE>
otherwise cooperate in any way in connection with, any Third Party (as
hereinafter defined) concerning any Competing Transaction (as hereinafter
defined). Seller agrees to terminate, immediately following the execution of
this agreement, all pending discussions or negotiations with any Third Party
with respect to any possible Competing Transaction. For purposes of this
agreement, the term "Third Party" shall mean any individual, group (as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), corporation, partnership, or other entity other than Buyer
or any of its Representatives, and the term "Competing Transaction" shall mean
any of the following involving the Seller: (i) any merger, consolidation,
business combination, or other similar transaction, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of all or
substantially all of the assets of Seller, or (iii) any tender offer or
exchange offer for, or other offer to acquire, 20% or more of the outstanding
shares of Seller's Common Stock.
6. Standstill. Buyer agrees that until the earlier of (i) the date that is
six months immediately following the date of this agreement or (ii) the date
on which Buyer and Seller enter into a definitive agreement concerning the
Proposed Transaction, unless specifically requested by Seller, neither Buyer
nor any of its Representatives will in any manner, directly or indirectly, (a)
effect, offer or propose (whether publicly or otherwise) to effect, or cause
or participate in or in any way assist any other person to effect an offer or
propose (whether publicly or otherwise) to effect, (i) any acquisition of any
securities (or beneficial ownership thereof) of Seller which would result in
Buyer beneficially owning (as determined in accordance with Rule 13d-3
promulgated under the Exchange Act) any outstanding shares of Seller's Common
Stock; (ii) any tender or exchange offer, merger or other business combination
involving Seller; (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to Seller; or (iv)
any "solicitation" of "proxies" (as such terms are defined in the rules
enacted under the Exchange Act) to vote any voting securities of Seller; (b)
form, join or in any way participate in a group or otherwise act, alone or in
concert with others, to seek to control or influence the management, Board of
Directors or policies of Seller; (c) take any action which might force Seller
to make a public announcement regarding any of the types of matters set forth
in subsection (a) above; or (d) enter into any discussions or arrangements
with any Third Party with respect to any of the foregoing.
Notwithstanding the preceding paragraph, if (i) a Third Party makes an
unsolicited offer relating to a Competing Transaction, or (ii) the Board of
Directors of Seller decides to pursue offers from Third Parties relating to a
Competing Transaction, Seller agrees to promptly notify Buyer of the terms
thereof and release Buyer from the provisions of this Section 6. If after
considering such Third Party offer or offers the Board of Directors of Seller
decides to pursue negotiations with a Third Party, Seller also agrees to allow
Buyer to make a proposal to the Board of Directors of Seller. The procedures
for making such proposal shall be substantially similar to the procedures
applicable to such Third Party or Third Parties in the submission of their
proposals.
Notwithstanding the foregoing, it is understood that any financial advisor
to either Seller or Buyer may be a full service securities firm and as such,
may, from time to time effect transactions for its own account or the account
of its customers, and hold positions in securities of either Seller or Buyer
or other companies or entities (information on which may be included in the
Evaluation Material), in the ordinary course of its business as a broker-
dealer, investment adviser, block positioner, or investment banker so long as
(i) such financial advisor has established a "Chinese Wall" between
individuals working on the transaction involving Seller and Buyer and those
individuals involved in effectuating trades of securities, and (ii) and such
purchases, sales or dealings are made only in accordance with such "Chinese
Wall" policies and in accordance with applicable law.
7. Return of Evaluation Material. The Receiving Party and its
Representatives will keep a written record of the location of the Evaluation
Material and will, promptly upon the request of the Disclosing Party and, in
any event, if the Receiving Party and the Disclosing Party do not enter into
an agreement with respect to the Proposed Transaction within 90 days of the
date hereof, will return to the Disclosing Party all copies of the Evaluation
Material furnished to the Receiving Party and in its possession or in the
possession of its Representatives, without retaining a copy thereof. The
Receiving Party and its Representatives will destroy any analyses,
compilations, studies or other documents prepared by or for the Receiving
Party's, or its Representatives', internal use which include, utilize or
reflect the Evaluation Material. Such destruction will be confirmed by the
Receiving Party upon request, in writing. Notwithstanding the return or
destruction of the
3
<PAGE>
Evaluation Material, the Receiving Party and its Representatives will continue
to be bound by its obligations of confidentiality hereunder.
8. No Definitive Agreement. The Receiving Party agrees that unless and until
a definitive agreement between the Disclosing Party and the Receiving Party
with respect to the Proposed Transaction has been executed and delivered,
neither the Disclosing Party nor the Receiving Party will be under any legal
obligation of any kind whatsoever with respect to any such transaction by
virtue of this or any written or oral expression with respect to such a
transaction by any of the Receiving Party's or the Disclosing Party's
respective Representatives except, in the case of this agreement, for the
matters specifically agreed to herein.
9. Accuracy of Evaluation Material. The Receiving Party hereby acknowledges
that although the Disclosing Party has endeavored to include in the Evaluation
Material information known to the Disclosing Party and that it believes to be
relevant to the Receiving Party's evaluation, the Receiving Party understands
that neither the Disclosing Party nor any of its Representatives makes any
representation or warranty as to the accuracy or completeness of the
Evaluation Material. The Receiving Party agrees that it shall assume full
responsibility for all conclusions it derives from the Evaluation Material and
that neither the Disclosing Party nor any of its Representatives shall have
any liability with respect to the Evaluation Material or any use thereof. The
Receiving Party further acknowledges that it is not entitled to rely on the
accuracy or completeness of the Evaluation Material.
10. Remedies. The Receiving Party agrees that money damages would not be a
sufficient remedy for any breach of this agreement by the Receiving Party or
any of its Representatives, and that in addition to all other remedies, the
Disclosing Party shall be entitled to seek specific performance and injunctive
or other equitable relief as a remedy for any such breach, and the Receiving
Party further agrees to waive and to use its best efforts to cause its
Representatives to waive, any requirement for the securing or posting of any
bond in connection with any such remedy.
11. Waiver and Amendment. The Receiving Party understands and agrees that no
failure or delay by the Disclosing Party or any of its Representatives in
exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder. The agreements set forth herein may only be waived or modified by
an agreement in writing signed on behalf of the parties hereto.
12. Successors and Assigns. This agreement shall inure to the benefit of and
be enforceable by the Disclosing Party and its successors.
13. Severability. In case provisions of this agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions of the agreement shall not in any way be affected or
impaired thereby.
14. Governing Law; Venue. The validity, interpretation, performance and
enforcement of this agreement shall be governed by the laws of the State of
Delaware. The parties hereto hereby irrevocably and unconditionally consent to
the exclusive jurisdiction of the courts of the State of Delaware and the
United States District Court for the District of Delaware for any action, suit
or proceeding arising out of or relating to this agreement or the Proposed
Transaction, and agree not to commence any action, suit or proceeding related
thereto except in such courts. The parties hereto further hereby irrevocably
and unconditionally waive any objection to the laying of venue of any action,
suit or proceeding arising out of or relating to this agreement in the courts
of the State of Delaware or the United States District Court for the District
of Delaware, and hereby further irrevocably and unconditionally waive and
agree not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient
forum. Each of the parties hereto further agrees that service of any process,
summons, notice or document by U.S. registered mail to its address set forth
above shall be effective service of process for any action, suit or proceeding
brought against it in any such court.
4
<PAGE>
15. Counterparts. This agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
shall constitute the same agreement.
16. Termination. This Agreement and the obligations of the parties hereunder
shall terminate and be of no further force or effect on and after the date
that is the fifth anniversary of the date of this Agreement.
Please acknowledge your agreement to the foregoing by countersigning this
agreement in the place provided below and returning it to the undersigned.
Very truly yours,
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
Accepted and Agreed to,
this 27th day of August, 1998:
Carnegie Group, Inc.
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
Title:President and Chief
Executive Officer
5
<PAGE>
LOGICA INC.
32 HARTWELL AVENUE
LEXINGTON, MA 02173-3103
September 22, 1998
Carnegie Group, Inc.
Five PPG Place
Pittsburgh, PA 15222
Ladies and Gentlemen:
Reference is made to that certain letter agreement dated as of August 27,
1998 (the "August 27th Letter Agreement") between Carnegie Group, Inc.
("Seller") and Logica Inc., relating to the mutual consideration of a
potential transaction involving the acquisition of Seller by Logica Inc. or an
affiliate thereof ("Buyer"). Pursuant to Section 11 of the August 27th Letter
Agreement, the Buyer and Seller hereby agree that the reference to "September
22, 1998" appearing in the first sentence of Section 5 of the August 27th
Letter Agreement shall be deleted and replaced with "September 30, 1998."
Except as specifically provided for in the preceding sentence, all of the
terms and provisions of the August 27th Letter Agreement shall remain in full
force and effect.
Please acknowledge your agreement to the foregoing by countersigning this
agreement in the place provided below and returning it to the undersigned.
Very truly yours,
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
Accepted and Agreed to,
this 22nd day of September, 1998:
Carnegie Group, Inc.
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
Title:President and Chief
Executive Officer
1
<PAGE>
EXHIBIT (c)(12)
SEVERANCE TERMINATION AGREEMENT
This Severance Termination Agreement (the "Agreement") is made as of
September 30, 1998, by and between Carnegie Group, Inc., a Delaware corporation
(the "Company"), and Dennis Yablonsky (the "Executive"), but it shall become
effective only in accordance with Section 4 below.
WHEREAS, the Company and the Executive are parties to a certain Severance
Agreement, dated May 28, 1993, as amended (the "Severance Agreement");
WHEREAS, the Company is a party to that certain Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), among Logica Inc.
("Logica"), Logica Acquisition Corp. and the Company;
WHEREAS, Logica and the Executive are parties to that certain Employment
Agreement of even date herewith (the "Employment Agreement");
WHEREAS, the Company and the Executive desire to terminate their respective
obligations under the Severance Agreement in connection with the transactions
contemplated by the Merger Agreement and the Employment Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged by the Company and the Executive, and intending to be
legally bound, the parties hereto hereby agree as follows:
1. The Company and the Executive agree that immediately upon the
Effective Time (as defined in the Merger Agreement), and thereafter, neither the
Company nor the Executive shall have any obligations under the Severance
Agreement and the Severance Agreement shall forthwith terminate and be of no
force or effect.
2. This Agreement may be amended or modified only by a written instrument
signed by the Executive and by a duly authorized representative of the Company.
3. This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be taken to be an original; but such
counterparts shall together constitute one and the same document.
4. This Agreement is conditioned and shall become effective only upon the
Effective Time in accordance with the terms of the Merger Agreement, which shall
be deemed to occur only upon and as of the Effective Time.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company, by its duly authorized officer, and by the Executive, as of the
date first set forth above.
CARNEGIE GROUP, INC.
By: /s/ John W. Manzetti
-----------------------------------------
Name: John W. Manzetti
Title: Executive Vice President and
Chief Financial Officer
/s/ Dennis Yablonsky
--------------------------------------------
Dennis Yablonsky
<PAGE>
EXHIBIT (c)(13)
SEVERANCE TERMINATION AGREEMENT
This Severance Termination Agreement (the "Agreement") is made as of
September 30, 1998, by and between Carnegie Group, Inc., a Delaware corporation
(the "Company"), and John W. Manzetti (the "Executive"), but it shall become
effective only in accordance with Section 4 below.
WHEREAS, the Company and the Executive are parties to a certain Severance
Agreement, dated May 17, 1993, as amended (the "Severance Agreement");
WHEREAS, the Company is a party to that certain Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), among Logica Inc.
("Logica"), Logica Acquisition Corp. and the Company;
WHEREAS, Logica and the Executive are parties to that certain Employment
Agreement of even date herewith (the "Employment Agreement");
WHEREAS, the Company and the Executive desire to terminate their respective
obligations under the Severance Agreement in connection with the transactions
contemplated by the Merger Agreement and the Employment Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged by the Company and the Executive, and intending to be
legally bound, the parties hereto hereby agree as follows:
1. The Company and the Executive agree that immediately upon the Effective
Time (as defined in the Merger Agreement), and thereafter, neither the Company
nor the Executive shall have any obligations under the Severance Agreement and
the Severance Agreement shall forthwith terminate and be of no force or effect.
2. This Agreement may be amended or modified only by a written instrument
signed by the Executive and by a duly authorized representative of the Company.
3. This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be taken to be an original; but such
counterparts shall together constitute one and the same document.
4. This Agreement is conditioned and shall become effective only upon the
Effective Time in accordance with the terms of the Merger Agreement, which shall
be deemed to occur only upon and as of the Effective Time.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company, by its duly authorized officer, and by the Executive, as of the
date first set forth above.
CARNEGIE GROUP, INC.
By: /s/ John W. Manzetti
-----------------------------------------
Name: John W. Manzetti
Title: Executive Vice President and
Chief Financial Officer
/s/ John W. Manzetti
--------------------------------------------
John W. Manzetti
<PAGE>
EXHIBIT (c)(14)
SEVERANCE TERMINATION AGREEMENT
This Severance Termination Agreement (the "Agreement") is made as of
September 30, 1998, by and between Carnegie Group, Inc., a Delaware corporation
(the "Company"), and Bruce Russell (the "Executive"), but it shall become
effective only in accordance with Section 4 below.
WHEREAS, the Company and the Executive are parties to a certain Severance
Agreement, dated May 28, 1993, as amended (the "Severance Agreement");
WHEREAS, the Company is a party to that certain Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), among Logica Inc.
("Logica"), Logica Acquisition Corp. and the Company;
WHEREAS, Logica and the Executive are parties to that certain Employment
Agreement of even date herewith (the "Employment Agreement");
WHEREAS, the Company and the Executive desire to terminate their respective
obligations under the Severance Agreement in connection with the transactions
contemplated by the Merger Agreement and the Employment Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged by the Company and the Executive, and intending to be
legally bound, the parties hereto hereby agree as follows:
1. The Company and the Executive agree that immediately upon the
Effective Time (as defined in the Merger Agreement), and thereafter, neither the
Company nor the Executive shall have any obligations under the Severance
Agreement and the Severance Agreement shall forthwith terminate and be of no
force or effect.
2. This Agreement may be amended or modified only by a written instrument
signed by the Executive and by a duly authorized representative of the Company.
3. This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be taken to be an original; but such
counterparts shall together constitute one and the same document.
4. This Agreement is conditioned and shall become effective only upon the
Effective Time in accordance with the terms of the Merger Agreement, which shall
be deemed to occur only upon and as of the Effective Time.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company, by its duly authorized officer, and by the Executive, as of the
date first set forth above.
CARNEGIE GROUP, INC.
By: /s/ John W. Manzetti
-----------------------------------------
Name: John W. Manzetti
Title: Executive Vice President and
Chief Financial Officer
/s/ Bruce Russell
--------------------------------------------
Bruce Russell
<PAGE>
EXHIBIT (c)(15)
SEVERANCE TERMINATION AGREEMENT
This Severance Termination Agreement (the "Agreement") is made as of
September 30, 1998, by and between Carnegie Group, Inc., a Delaware corporation
(the "Company"), and Raymond B. Kalustyan (the "Executive"), but it shall become
effective only in accordance with Section 4 below.
WHEREAS, the Company and the Executive are parties to a certain Severance
Agreement, dated June 1, 1998 (the "Severance Agreement");
WHEREAS, the Company is a party to that certain Agreement and Plan of
Merger of even date herewith (the "Merger Agreement"), among Logica Inc.
("Logica"), Logica Acquisition Corp. and the Company;
WHEREAS, Logica and the Executive are parties to that certain Employment
Agreement of even date herewith (the "Employment Agreement");
WHEREAS, the Company and the Executive desire to terminate their respective
obligations under the Severance Agreement in connection with the transactions
contemplated by the Merger Agreement and the Employment Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged by the Company and the Executive, and intending to be
legally bound, the parties hereto hereby agree as follows:
1. The Company and the Executive agree that immediately upon the
Effective Time (as defined in the Merger Agreement), and thereafter, neither the
Company nor the Executive shall have any obligations under the Severance
Agreement and the Severance Agreement shall forthwith terminate and be of no
force or effect.
2. This Agreement may be amended or modified only by a written instrument
signed by the Executive and by a duly authorized representative of the Company.
3. This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be taken to be an original; but such
counterparts shall together constitute one and the same document.
4. This Agreement is conditioned and shall become effective only upon the
Effective Time in accordance with the terms of the Merger Agreement, which shall
be deemed to occur only upon and as of the Effective Time.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company, by its duly authorized officer, and by the Executive, as of the
date first set forth above.
CARNEGIE GROUP, INC.
By: /s/ John W. Manzetti
-----------------------------------------
Name: John W. Manzetti
Title: Executive Vice President and
Chief Financial Officer
/s/ Raymond B. Kalustyan
--------------------------------------------
Raymond B. Kalustyan
<PAGE>
EXHIBIT (c)(16)
LOAN TERMINATION AGREEMENT
This Loan Termination Agreement (the "Agreement") is made as of September
30, 1998, by and between Carnegie Group, Inc., a Delaware corporation (the
"Company"), and Dennis Yablonsky, an individual residing at 682 Osage Road,
Pittsburgh, Pennsylvania 15243 (the "Executive"), but it shall become effective
only in accordance with Section 4 below.
WHEREAS, the Company and the Executive are parties to a certain Loan
Agreement, dated September 11, 1997 (the "Loan Agreement");
WHEREAS, the Company is a party to that certain Agreement and Plan of
Merger, dated September 30, 1998 (the "Merger Agreement"), among Logica Inc.,
Logica Acquisition Corp. and the Company;
WHEREAS, the Company and the Executive desire to terminate their respective
obligations under the Loan Agreement in connection with the transactions
contemplated by the Merger Agreement;
NOW, THEREFORE, for good and valuable consideration, the receipt of which
is hereby acknowledged by the Company and the Executive, and intending to be
legally bound, the parties hereto hereby agree as follows:
1. The Company and the Executive agree that immediately upon the
Effective Time (as defined in the Merger Agreement), and thereafter, (i) except
as set forth herein, neither the Company nor the Executive shall have any
obligations under the Loan Agreement and the Loan Agreement shall forthwith
terminate and be of no force or effect, and (ii) any remaining Principal Sum (as
defined in the Loan Agreement), together with all accrued but unpaid interest
under the Loan Agreement, shall be deemed to have been paid in full and such
Principal Sum and interest shall no longer be payable by the Executive. The
Company further agrees that in connection with the loan forgiveness provided for
in the preceding sentence, Article 2 of the Loan Agreement shall remain in full
force and effect, and the date on which the Effective Time occurs shall be
deemed to be the date of the "Change in Control," as such term is used in
Article 2 of the Loan Agreement.
2. This Agreement may be amended or modified only by a written instrument
signed by the Executive and by a duly authorized representative of the Company.
3. This Agreement may be executed in any number of counterparts, each of
which when so executed and delivered shall be taken to be an original; but such
counterparts shall together constitute one and the same document.
4. This Agreement is conditioned and shall become effective only upon the
Effective Time in accordance with the terms of the Merger Agreement, which shall
be deemed to occur only upon and as of the Effective Time.
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed as a sealed instrument
by the Company, by its duly authorized officer, and by the Executive, as of the
date first set forth above.
CARNEGIE GROUP, INC.
By: /s/ John W. Manzetti
-----------------------------------------
Name: John W. Manzetti
Title: Executive Vice President and
Chief Financial Officer
/s/ Dennis Yablonsky
--------------------------------------------
Dennis Yablonsky
