<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[ ] Preliminary Proxy Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material pursuant to Rule 14a-11(c) or Rule 14a-12
BA MERCHANT SERVICES, INC.
---------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
---------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
1) Title of each class of securities to which transaction applies:
Class A Common Stock
---------------------------------------------------------------------------
2) Aggregate number of securities to which transaction applies:
16,252,027 shares of Class A Common Stock plus options to
purchase 864,234 shares of Class A Common Stock
- --------------------------------------------------------------------------------
3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined):
The filing fee was determined based upon: (a) the purchase
of 16,252,027 shares of Class A Common Stock of the
Registrant as of March 26, 1999 at a price of $20.50 per
share; and (b) the cancellation of options to purchase an
aggregate of 864,234 shares of Class A Common Stock, in
consideration for a payment equal to the excess of $20.50
over the exercise price of such options multiplied by the
number of shares subject to such options.
- --------------------------------------------------------------------------------
4) Proposed maximum aggregate value of transaction:
$339,236,350
---------------------------------------------------------------------------
5) Total fee paid: $67,847.27
---------------------------------------------------------------------------
[X] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
-----------------------------------------------------------------------
2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
3) Filing Party:
-----------------------------------------------------------------------
4) Date Filed:
-----------------------------------------------------------------------
<PAGE> 2
BA Merchant Services, Inc. Logo
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of BA
Merchant Services, Inc. (the "Company"), to be held at 315 Montgomery Street,
Mezzanine Level, Room A, San Francisco, California, on April 28, 1999, at 11:00
a.m., local time (the "Meeting"). A notice of the Meeting, a proxy and a proxy
statement containing information about the matters to be acted upon are
enclosed. Stockholders of record at the close of business on March 26, 1999 (the
"Record Date") will be entitled to vote at the Meeting or any postponement or
adjournment thereof.
At the Meeting you will be asked to consider and vote upon a proposal to
approve and adopt an Agreement and Plan of Merger (the "Merger Agreement"),
dated as of December 22, 1998, among the Company, BankAmerica Corporation, a
Delaware corporation ("BankAmerica"), and BAMS Acquisition Corporation, a
Delaware corporation and a wholly owned subsidiary of BankAmerica ("Acquisition
Corp."), pursuant to which Acquisition Corp. will be merged with and into the
Company (the "Merger"). If the Merger Agreement is approved and adopted and the
Merger becomes effective, each share of Class A Common Stock, par value $.01 per
share, of the Company ("Class A Common Stock") outstanding immediately prior to
the Merger (except for shares as to which appraisal rights have been perfected)
will be converted into the right to receive $20.50 in cash, without interest
thereon. Approval and adoption of the Merger Agreement requires the affirmative
vote of the holders of a majority of the Company's outstanding shares of Class A
Common Stock and Class B Common Stock, par value $.01 per share ("Class B Common
Stock"), voting as a single class. As of the Record Date, BankAmerica, directly
or indirectly, owned 100% of the outstanding Class B Common Stock, which, on
that date, represented approximately 66.6% of the economic ownership of the
Company and approximately 95.2% of the combined voting power of the Company.
Therefore, BankAmerica has sufficient voting power to approve and adopt the
Merger Agreement, regardless of the vote of any other stockholder. In the Merger
Agreement, BankAmerica has agreed to vote in favor of the Merger provided that
the recommendation of the Special Committee of the Company's Board of Directors
(as defined below) with respect to the Merger is not revoked, modified or
qualified in a manner adverse to BankAmerica. AS A RESULT OF THE VOTING POWER OF
BANKAMERICA AND THE AGREEMENT OF BANKAMERICA TO VOTE IN FAVOR OF THE MERGER, THE
MERGER MAY BE APPROVED AT THE MEETING REGARDLESS OF THE VOTE OF ANY OTHER
STOCKHOLDER.
Details of the proposed Merger and other important information are set
forth in the accompanying Proxy Statement, which you are urged to read
carefully.
Your Board of Directors (of which four of the seven members are current or
former employees of BankAmerica or its affiliates) has voted unanimously to
approve the Merger in accordance with the recommendation of a special committee
of the Board of Directors consisting of three independent directors (the
"Special Committee"), none of whom is an employee of BankAmerica or its
affiliates or the Company. In making its recommendation, the Special Committee
carefully reviewed and considered the terms and conditions of the proposed
Merger as described in the enclosed Proxy Statement. In addition, the Special
Committee has received an opinion from its independent financial advisor, Credit
Suisse First Boston Corporation, that the consideration to be received in the
Merger by the Company's public stockholders is fair to such public stockholders
from a financial point of view.
Based upon the unanimous recommendation of the Special Committee, your
Board of Directors, recommends that you vote FOR approval and adoption of the
Merger Agreement.
Only holders of record of Class A Common Stock and Class B Common Stock at
the close of business on the Record Date will be entitled to notice of, and to
vote at, the Meeting.
Whether or not you plan to attend the Meeting, please complete, sign and
date the accompanying proxy card and return it in the enclosed prepaid envelope.
If you attend the Meeting, you may revoke such proxy and vote in person if you
wish, even if you have previously returned your proxy card. Your prompt
attention to this matter and cooperation are greatly appreciated.
Very truly yours,
/s/ Sharif M. Bayyari
-------------------------------------
Sharif M. Bayyari
President and Chief Executive Officer
March 29, 1999
<PAGE> 3
BA MERCHANT SERVICES, INC.
---------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON APRIL 28, 1999
---------------------
To the Stockholders of BA Merchant Services, Inc.:
A special meeting of the stockholders of BA Merchant Services, Inc., a
Delaware corporation (the "Company"), will be held at 315 Montgomery Street,
Mezzanine Level, Room A, San Francisco, California, on April 28, 1999, at 11:00
a.m., local time (the "Meeting"), for the following purposes:
1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger (the "Merger Agreement"), dated as of December
22, 1998, among the Company, BankAmerica Corporation, a Delaware
corporation ("BankAmerica"), and BAMS Acquisition Corporation, a Delaware
corporation ("Acquisition Corp."), pursuant to which, among other things:
(i) Acquisition Corp., which is a wholly owned subsidiary of BankAmerica,
will be merged with and into the Company (the "Merger"); (ii) each
outstanding share of Class A Common Stock, par value $.01 per share, of the
Company ("Class A Common Stock"), except shares as to which appraisal
rights have been perfected, will be converted into the right to receive in
the Merger $20.50 in cash, without interest thereon; and (iii) each
outstanding share of the Company's Class B Common Stock, par value $.01 per
share ("Class B Common Stock"), (all of which are owned, directly or
indirectly, by BankAmerica) will be converted into 100 shares of the common
stock of the surviving corporation.
2. To transact such other business as may be properly brought before
the Meeting, or any adjournments or postponements thereof.
The Board of Directors of the Company has fixed the close of business on
March 26, 1999 as the record date for the determination of the stockholders
entitled to notice of and to vote at the Meeting and any adjournment or
postponement thereof. Accordingly, only holders of record of Class A Common
Stock and Class B Common Stock at the close of business on such date shall be
entitled to notice of and to vote at the Meeting and any adjournment or
postponement thereof.
Approval and adoption of the Merger Agreement will require the affirmative
vote of a majority of the outstanding shares of Class A Common Stock and Class B
Common Stock, voting as a single class. As of the record date, BankAmerica,
directly or indirectly, owned 100% of the outstanding Class B Common Stock,
which, on that date, represented approximately 66.6% of the economic ownership
of the Company and approximately 95.2% of the combined voting power of the
Company. Therefore, BankAmerica has sufficient voting power to approve and adopt
the Merger Agreement, regardless of the vote of any other stockholder. In the
Merger Agreement, BankAmerica has agreed to vote in favor of the Merger,
provided that the recommendation of the Special Committee with respect to the
Merger is not revoked, modified or qualified in a manner adverse to BankAmerica.
Any stockholder of the Company has the right to dissent from the Merger and
to obtain the "fair value" of such stockholder's shares of Class A Common Stock,
provided that such stockholder perfects his or her appraisal rights in
accordance with Section 262 of the Delaware General Corporation Law. Please see
the discussion of appraisal rights in the accompanying Proxy Statement and
Section 262, a copy of which is attached as Annex III to the Proxy Statement.
<PAGE> 4
Whether or not you plan to attend the Meeting, please complete, sign and
date the accompanying proxy card and return it promptly in the enclosed prepaid
envelope. If you attend the Meeting, you may revoke such proxy and vote in
person if you wish, even if you have previously returned your proxy card.
By Order of the Board of Directors
/s/ Edward J. Stark
----------------------
Edward J. Stark
Secretary
San Francisco, California
March 29, 1999
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE COMPLETE, SIGN AND
DATE YOUR PROXY CARD AND RETURN IT PROMPTLY IN THE ENCLOSED ENVELOPE, WHICH
REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES. DO NOT SEND ANY STOCK
CERTIFICATES WITH THE ENCLOSED PROXY CARD. THE PROCEDURE FOR THE EXCHANGE OF
YOUR SHARES AFTER THE MERGER IS CONSUMMATED IS SET FORTH IN THE ATTACHED PROXY
STATEMENT.
<PAGE> 5
BA MERCHANT SERVICES, INC.
PROXY STATEMENT
---------------------
SPECIAL MEETING OF STOCKHOLDERS
APRIL 28, 1999
---------------------
This Proxy Statement is being furnished to holders of Class A Common Stock,
par value $.01 per share ("Class A Common Stock"), and holders of Class B Common
Stock, par value $.01 per share ("Class B Common Stock"), of BA Merchant
Services, Inc., a Delaware corporation (including, where the context so
requires, the subsidiaries thereof, the "Company"), in connection with the
solicitation of proxies by the Board of Directors of the Company for use at a
special meeting of the stockholders of the Company to be held on April 28, 1999,
at 315 Montgomery Street, Mezzanine Level, Room A, San Francisco, California,
commencing at 11:00 a.m., local time, and at any adjournment or postponement
thereof (the "Meeting").
---------------------
The purpose of the Meeting is to consider and act upon a proposal to approve
and adopt the Agreement and Plan of Merger, dated as of December 22, 1998 (the
"Merger Agreement"), among the Company, BankAmerica Corporation, a Delaware
corporation ("BankAmerica"), and BAMS Acquisition Corporation, a Delaware
corporation and a wholly owned subsidiary of BankAmerica ("Acquisition Corp."),
pursuant to which Acquisition Corp. will be merged with and into the Company
(the "Merger"), with the Company being the surviving corporation.
In the Merger, each share of Class A Common Stock outstanding immediately
prior to the effective time of the Merger (except for shares as to which
appraisal rights have been perfected) will be converted into the right to
receive $20.50 in cash, without interest thereon.
As of the Record Date, BankAmerica, directly or indirectly, owned 100% of
the outstanding Class B Common Stock, which, on that date, represented
approximately 66.6% of the economic ownership of the Company and approximately
95.2% of the combined voting power of the Company.
On March 25, 1999, the last reported sale price for the Class A Common Stock
on the New York Stock Exchange ("NYSE") was $20.1875. On October 22, 1998, the
date immediately prior to the initial announcement of the proposal by
BankAmerica for the Merger, the last reported sale price for the Class A Common
Stock on the NYSE was $13.625.
THE BOARD OF DIRECTORS, AFTER CAREFUL CONSIDERATION, HAS VOTED UNANIMOUSLY
TO APPROVE THE MERGER IN ACCORDANCE WITH THE RECOMMENDATION OF A SPECIAL
COMMITTEE OF THE BOARD OF DIRECTORS CONSISTING OF THREE INDEPENDENT DIRECTORS
(THE "SPECIAL COMMITTEE"), HAS DETERMINED THAT THE MERGER IS FAIR TO AND IN THE
BEST INTERESTS OF THE STOCKHOLDERS OF THE COMPANY AND RECOMMENDS THAT
STOCKHOLDERS APPROVE AND ADOPT THE MERGER AGREEMENT.
In determining that the Merger is fair to and in the best interests of
holders of Class A Common Stock and recommending approval of the Merger
Agreement, the Special Committee considered the following factors among others:
the stock ownership and voting power of BankAmerica; the fairness opinion and
related presentations of Credit Suisse First Boston Corporation ("CSFB"), the
financial advisor to the Special Committee; the arm's-length negotiations of the
Merger Agreement; the terms of the Merger Agreement; and the availability of
appraisal rights. For a more detailed discussion of the factors considered by
the Special Committee, see "Special Factors -- Reasons for the Merger;
Recommendation of the Company's Board of Directors and the Special Committee."
BANKAMERICA CURRENTLY INTENDS TO VOTE IN FAVOR OF THE APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT. AS A RESULT, THE MERGER AGREEMENT MAY BE APPROVED AND
ADOPTED AT THE MEETING EVEN IF NO STOCKHOLDER OTHER THAN BANKAMERICA VOTES IN
FAVOR OF THE PROPOSAL.
These proxy materials are being mailed on or about March 29, 1999 to holders
of record on March 26, 1999 (the "Record Date") of the Class A Common Stock and
the Class B Common Stock. Each outstanding share of Class A Common Stock
entitles the holder thereof to one vote and each outstanding share of Class B
Common Stock entitles the holder thereof to ten votes. As of the Record Date,
there were 16,252,027 shares of Class A Common Stock outstanding and 32,400,000
shares of Class B Common Stock outstanding. The presence in person or by proxy
of 51% of such shares of common stock shall constitute a quorum.
THIS TRANSACTION HAS NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE FAIRNESS OR MERITS OF
SUCH TRANSACTION NOR UPON THE ACCURACY OR ADEQUACY OF THE INFORMATION CONTAINED
IN THIS DOCUMENT. ANY REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
You may revoke your proxy at any time prior to its exercise by filing with
the Secretary of the Company an instrument of revocation or a duly executed
proxy bearing a later date or by attending the Meeting and voting in person.
Appearance at the Meeting by a stockholder who has given a valid proxy will not,
by itself, constitute a revocation of such proxy. If shares of common stock are
represented by more than one properly executed proxy, the executed proxy bearing
the latest date will be voted at the Meeting. See "The Meeting -- Proxies."
THE DATE OF THIS PROXY STATEMENT IS MARCH 29, 1999.
<PAGE> 6
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"), including the Rule 13e-3
Transaction Statement on Schedule 13E-3 filed in connection with the Merger. The
reports, proxy statements and other information filed by BankAmerica and the
Company with the Commission can be inspected and copied at the public reference
facilities maintained by the Commission at Judiciary Plaza, Room 1024, 450 Fifth
Street, N.W., Washington, D.C. 20549, and at the Regional Offices of the
Commission at Room 1400, 75 Park Place, New York, New York 10007 and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material also can be obtained from the
Public Reference Section of the Commission, 450 Fifth Street, N.W., Washington,
D.C. 20549 at prescribed rates. Such material may also be accessed
electronically by means of the Commission's home page on the Internet at
http://www.sec.gov. In addition, material filed by the Company can be inspected
at the offices of the New York Stock Exchange, Inc. (the "NYSE"), 20 Broad
Street, New York, New York 10005, on which the Company's Class A Common Stock is
listed.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents filed with the Commission by the Company (File No.
333-13985) pursuant to the Exchange Act are incorporated by reference in this
Proxy Statement:
1. The Company's Annual Report on Form 10-K for the fiscal year ended
December 31, 1997;
2. The Company's Quarterly Reports on Form 10-Q for the fiscal quarters
ended March 31, June 30, and September 30, 1998;
3. The Company's Proxy Statement dated March 23, 1998 for the Annual
Meeting of Stockholders held on May 7, 1998; and
4. The Company's Current Reports on Form 8-K as filed with the
Commission on April 17, June 1, October 2, October 23, November 19,
and December 24, 1998.
All documents and reports subsequently filed by the Company pursuant to
Sections 13(a), 13(c), 14 and 15(d) of the Exchange Act after the date of this
Proxy Statement and prior to the date of the Meeting shall be deemed to be
incorporated by reference in this Proxy Statement and to be part hereof from the
date of filing of such documents or reports. Any statement contained in a
document incorporated or deemed to be incorporated by reference herein shall be
deemed to be modified or superseded for purposes of this Proxy Statement to the
extent that a statement contained herein or in any other subsequently filed
document that also is or is deemed to be incorporated by reference herein
modifies or supersedes such statement. Any such statement so modified or
superseded shall not be deemed, except as so modified or superseded, to
constitute a part of this Proxy Statement.
THIS PROXY STATEMENT INCORPORATES BY REFERENCE DOCUMENTS RELATING TO THE
COMPANY THAT ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS
(OTHER THAN EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY
INCORPORATED HEREIN BY REFERENCE) ARE AVAILABLE TO ANY PERSON, INCLUDING ANY
BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT IS DELIVERED, WITHOUT CHARGE, ON
WRITTEN OR ORAL REQUEST DIRECTED TO BA MERCHANT SERVICES, INC., ONE SOUTH VAN
NESS AVENUE, 5TH FLOOR, SAN FRANCISCO, CALIFORNIA 94103, ATTENTION: INVESTOR
RELATIONS (TELEPHONE NUMBER: (415) 241-7732). IN ORDER TO ENSURE TIMELY DELIVERY
OF THE DOCUMENTS, ANY REQUESTS SHOULD BE MADE BY APRIL 18, 1999.
2
<PAGE> 7
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION....................................... 2
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............. 2
SUMMARY..................................................... 5
The Parties; The Meeting.................................. 5
The Merger................................................ 6
Summary Financial Information of the Company.............. 12
THE MEETING................................................. 14
General................................................... 14
Matters to be Considered at the Meeting................... 14
Board of Directors Recommendation......................... 14
Voting at the Meeting; Record Date; Quorum................ 14
Proxies................................................... 15
SPECIAL FACTORS............................................. 16
Background of the Merger.................................. 16
Reasons for the Merger; Recommendation of the Company's
Board of Directors
and the Special Committee.............................. 22
Opinion of CSFB........................................... 25
Certain Projected Financial Information................... 29
Certain Effects of the Merger............................. 30
Interests of Certain Persons in the Merger................ 30
THE MERGER.................................................. 31
General................................................... 31
Certain Effects of the Merger............................. 32
Representations and Warranties............................ 33
Certain Covenants......................................... 33
Treatment of Options and Other Company Stock-Based
Awards................................................. 34
Indemnification........................................... 35
Taiwan Business........................................... 35
Conditions................................................ 36
Termination............................................... 36
Effect of Termination..................................... 37
Amendment and Waiver...................................... 37
Approval by Special Committee............................. 37
Accounting Treatment...................................... 37
Certain Federal Income Tax Consequences................... 37
Appraisal Rights.......................................... 39
Litigation................................................ 42
SELECTED HISTORICAL FINANCIAL DATA.......................... 44
CONTROLLING PERSONS, DIRECTORS AND EXECUTIVE OFFICERS OF
BANKAMERICA, ACQUISITION CORP. AND THE COMPANY............ 46
Background of Named Persons............................... 46
Past Contacts, Transactions and Negotiations.............. 46
Plans or Proposals........................................ 46
Interest in the Company's Securities...................... 46
Contracts, Arrangements or Understandings Concerning the
Company's Securities................................... 46
</TABLE>
3
<PAGE> 8
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
CERTAIN TRANSACTIONS AND RELATIONSHIPS BETWEEN
BANKAMERICA AND THE COMPANY............................... 47
General................................................... 47
Intercompany Agreements and Arrangements.................. 47
Payment for Services...................................... 48
HISTORICAL MARKET PRICE AND DIVIDEND DATA................... 48
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT................................................ 49
FEES AND EXPENSES........................................... 52
INDEPENDENT PUBLIC ACCOUNTANTS.............................. 52
OTHER MATTERS............................................... 52
</TABLE>
<TABLE>
<S> <C> <C> <C>
EXHIBITS:
Exhibit A -- Certain Projected Financial Information........................ A-1
ANNEXES:
Annex I -- Agreement and Plan of Merger................................ I-1
Annex II -- Opinion of CSFB............................................. II-1
Annex III -- Section 262 of the DGCL..................................... III-1
Annex IV -- Information Concerning Directors and Officers of the IV-1
Company, BankAmerica, the Bank and Acquisition Corp. .......
</TABLE>
4
<PAGE> 9
SUMMARY
The following is a summary of certain information contained elsewhere in
this Proxy Statement. Reference is made to the more detailed information
contained, or incorporated by reference, in this Proxy Statement and the
Exhibits and Annexes hereto. Unless otherwise defined herein, capitalized terms
used in this summary have the respective meanings ascribed to them elsewhere in
this Proxy Statement. Stockholders are urged to read this Proxy Statement and
the Exhibits and Annexes hereto in their entirety.
THE PARTIES; THE MEETING
BA Merchant Services,
Inc........................ The Company is a Delaware corporation engaged
primarily in merchant and payment processing. The
Company's net revenue and net income were $161.0
million and $37.4 million, respectively, for the
year ended December 31, 1997. During this same
period, the number of card transactions processed
was 531.2 million. For the nine months ended
September 30, 1998, the Company's net revenue and
net income were $135.8 million and $29.1 million,
respectively, and the number of card transactions
processed was 508.3 million. The principal
executive offices of the Company are located at One
South Van Ness Avenue, 5th Floor, San Francisco,
California 94103. Its telephone number is (415)
241-3390.
BankAmerica Corporation.... BankAmerica is a Delaware corporation and a bank
holding company organized under the Bank Holding
Company Act of 1956, as amended. BankAmerica had
consolidated total assets of approximately $571.0
billion and total stockholders' equity of
approximately $44.6 billion at December 31, 1997.
At September 30, 1998, BankAmerica had consolidated
total assets of approximately $594.7 billion and
total stockholders' equity of approximately $47.3
billion. The principal executive offices of
BankAmerica are located at 100 North Tryon Street,
Charlotte, North Carolina 28255. Its telephone
number is (704) 386-5000.
BAMS Acquisition
Corporation.............. Acquisition Corp. is a Delaware corporation and a
wholly owned subsidiary of BankAmerica formed
solely for the purpose of the Merger and is not
engaged in any business activity unrelated to the
Merger. The principal executive offices of
Acquisition Corp. are located at 100 North Tryon
Street, Charlotte, North Carolina 28255. Its
telephone number is (704) 386-5000.
Surviving Corporation...... The Company shall be the surviving corporation of
the Merger (the "Surviving Corporation"). Pursuant
to the Merger Agreement, the Certificate of
Incorporation of the Surviving Corporation shall,
at the Effective Time (as defined herein), be
amended to read in its entirety as set forth in
Exhibit A to the Merger Agreement. At the Effective
Time, the Bylaws of the Surviving Corporation shall
be the Bylaws of Acquisition Corp. as in effect
immediately prior to the Effective Time.
Special Meeting Time, Date
and Place.................. The Meeting will be held at 11:00 a.m., local time,
on April 28, 1999, at 315 Montgomery Street,
Mezzanine Level, Room A, San Francisco, California.
Record Date, Shares
Entitled to Vote........... Holders of record of shares of Class A Common Stock
and Class B Common Stock (collectively, the "Common
Stock") at the close of business on March 26, 1999
(the "Record Date") are entitled to notice
5
<PAGE> 10
of and to vote at the Meeting. At such date there
were outstanding 16,252,027 shares of Class A
Common Stock, each of which will be entitled to one
vote at the Meeting, and 32,400,000 shares of Class
B Common Stock, each of which will be entitled to
ten votes at the Meeting. The Class A Common Stock
and Class B Common Stock will vote on the Merger as
a single class. See "The Meeting -- Voting at the
Meeting; Record Date; Quorum."
Purpose of the Meeting..... The purpose of the Meeting is to consider and vote
upon a proposal to approve and adopt the Merger
Agreement. See "The Meeting -- Matters to be
Considered at the Meeting."
Votes Required............. The approval and adoption of the Merger Agreement
by stockholders of the Company will require the
affirmative vote of the holders of a majority of
the outstanding shares of Class A Common Stock and
Class B Common Stock, voting as a single class.
As of the Record Date, BankAmerica, directly or
indirectly, owned 100% of the outstanding Class B
Common Stock (constituting approximately 66.6% of
the economic ownership of the Company and 95.2% of
the combined voting power of the Company).
Therefore, BankAmerica has sufficient voting power
to constitute a quorum and to approve all matters
to be considered at the Meeting, regardless of the
vote of any other stockholder. BankAmerica has
agreed to vote all shares of Common Stock over
which it has control for approval and adoption of
the Merger Agreement, provided that the
recommendation of the Special Committee with
respect to the Merger is not revoked, modified or
qualified in a manner adverse to BankAmerica. See
"The Meeting -- Voting at the Meeting; Record Date;
Quorum."
THE MERGER
Effect of the Merger....... At the Effective Time, pursuant to the Merger
Agreement: (i) Acquisition Corp. will be merged
with and into the Company, which will be the
Surviving Corporation; and (ii) each issued and
outstanding share of Class A Common Stock, other
than any share as to which appraisal rights have
been perfected, will be converted into the right to
receive $20.50 in cash, without interest thereon.
Promptly after the Effective Time, the Company will
send to holders of Class A Common Stock a
transmittal letter containing instructions for the
surrender of certificates previously representing
Class A Common Stock. The transmittal letter will
set forth the procedure for surrendering such
certificates for exchange to ChaseMellon
Shareholder Services, L.L.C., as the disbursing
agent (the "Exchange Agent"). In order to receive
the payment to which he or she is entitled, each
stockholder of the Class A Common Stock will be
required, following the Merger, to surrender his or
her stock certificate(s), together with a duly
executed and properly completed transmittal letter
(and any other required documents), to the Exchange
Agent. Holders of Class A Common Stock should
surrender certificates formerly representing shares
of Class A Common Stock only with a transmittal
letter. Stock certificates should not be sent with
the enclosed proxy card. After surrendering the
certificate(s), each stockholder of Class A Common
Stock will receive, in exchange for such
certificate(s), cash in an amount equal to the
product of the number of shares of Class A Common
Stock formerly
6
<PAGE> 11
represented by his or her certificate(s) and
$20.50. No interest will be paid on the cash
payable upon the surrender of the Class A Common
Stock certificates. See "The Merger -- General."
Each issued and outstanding share of Class A Common
Stock as to which appraisal rights have been
perfected will be treated as described herein under
"The Merger -- Appraisal Rights."
Each share of Class A Common Stock and Class B
Common Stock issued and outstanding immediately
prior to the Effective Time and owned by
BankAmerica or its affiliates will be converted
into 100 shares of the common stock of the
Surviving Corporation.
Upon consummation of the Merger, the Company will
be a wholly owned subsidiary of Bank of America
National Trust and Savings Association (the "Bank"
or "Bank of America"), itself a wholly owned
subsidiary of BankAmerica, and the holders of Class
A Common Stock immediately prior to the Merger will
cease to have ownership interests in the Company or
rights as stockholders (other than statutory
appraisal rights, in the case of those stockholders
who perfect such rights under Delaware law). The
public stockholders will no longer benefit from any
increases in the value of the Company or any
payment of dividends on Class A Common Stock and
will no longer bear the risk of any decreases in
the value of the Company. See "Special
Factors -- Certain Effects of the Merger."
Background of the Merger... See "Special Factors -- Background of the Merger."
Reasons for the Merger..... See "Special Factors -- Reasons for the Merger;
Recommendation of the Company's Board of Directors
and the Special Committee."
Special Committee.......... The Board of Directors of the Company formed a
Special Committee consisting of three of the
Company's directors, Donald R. Dixon, William E.
Fisher and Hatim A. Tyabji, none of whom is an
employee or former employee of either BankAmerica
and its affiliates or the Company, for the purpose
of independently evaluating and negotiating the
terms of the Merger and making a recommendation to
the full Board of Directors whether to accept or
reject the Merger proposal. The Special Committee
retained its own financial and legal advisors to
assist it in such evaluation. The Special Committee
unanimously recommended to the full Board of
Directors of the Company that the Board approve the
Merger Agreement and recommends its approval by the
stockholders of the Company. See "Special
Factors -- Background of the Merger" and
"-- Reasons for the Merger; Recommendation of the
Company's Board of Directors and the Special
Committee."
Recommendation of the Board
of Directors of the
Company.................. The Board of Directors of the Company (of which
four of the seven members are employees or former
employees of BankAmerica or its affiliates), in
accordance with the unanimous recommendation of the
Special Committee, unanimously approved the Merger
Agreement and recommends a vote in favor of its
approval and adoption by the stockholders of the
Company.
In determining that the Merger is fair to and in
the best interests of holders of Class A Common
Stock and recommending approval of the Merger
Agreement, the Special Committee considered the
following
7
<PAGE> 12
factors among others: the stock ownership and
voting power of BankAmerica; the fairness opinion
and related presentations of CSFB; the arm's-length
negotiations of the Merger Agreement; the terms of
the Merger Agreement; and the availability of
appraisal rights. For further discussion of the
factors considered by the Board of Directors of the
Company and the Special Committee in reaching their
decisions, see "Special Factors -- Reasons for the
Merger; Recommendation of the Company's Board of
Directors and the Special Committee."
Opinion of CSFB............ Credit Suisse First Boston Corporation ("CSFB") has
delivered its written opinion, dated December 21,
1998, to the Special Committee to the effect that,
as of that date, the consideration to be received
in the Merger by the Company's public stockholders
is fair to such public stockholders from a
financial point of view.
A COPY OF THE OPINION OF CSFB, WHICH SETS FORTH THE
ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF
ITS REVIEW, IS ATTACHED TO THIS PROXY STATEMENT AS
ANNEX II AND SHOULD BE READ IN ITS ENTIRETY. SEE
"SPECIAL FACTORS -- OPINION OF CSFB."
Interests of Certain
Persons in the Merger...... In considering the recommendations of the Company's
Board of Directors and of the Special Committee
with respect to the Merger, stockholders should be
aware that certain members of the Special Committee
and the Board of Directors may have certain
interests in the Merger that are in addition to or
different from the interests of stockholders of the
Company generally. The Board of Directors of the
Company and the Special Committee were aware of
these interests and considered them, along with
other matters, in approving and adopting the Merger
Agreement and the transactions contemplated
thereby. See "Special Factors -- Interests of
Certain Persons in the Merger."
Effective Time of the
Merger..................... It is anticipated that the Merger will become
effective as promptly as practicable after
stockholder approval has been obtained, assuming
all other conditions to the Merger have been
satisfied or waived. The Merger will become
effective as of the date and time specified in a
certificate of merger to be filed with the
Secretary of State of the State of Delaware (such
date and time, the "Effective Time"). See "The
Merger -- General."
Conditions to the Merger;
Termination of the Merger
Agreement................ The obligations of BankAmerica, Acquisition Corp.
and the Company to consummate the Merger are
subject to the satisfaction of certain conditions,
including obtaining requisite stockholder approval
of the Merger Agreement and the absence of any
injunction prohibiting consummation of the Merger.
See "The Merger -- Conditions."
The Merger Agreement may be terminated under
certain circumstances, either before or after
approval of the Merger Agreement by the
stockholders, by the mutual consent of BankAmerica,
Acquisition Corp. and the Company. Furthermore, the
Merger Agreement may be terminated by any party
thereto if there has been a breach of any
representation, warranty, covenant or agreement by
any other party and such breach has a material
adverse effect on such other party and is not cured
prior to the earlier of the 30th day after notice
of such breach or April 30, 1999. The
8
<PAGE> 13
Merger Agreement may also be terminated if any
permanent injunction or other order of a court or
other United States governmental entity preventing
the consummation of the Merger becomes final and
non-appealable. The Merger Agreement may also be
terminated if the Merger is not consummated before
April 30, 1999 (unless a breach by the party
seeking to terminate is the cause of or resulted in
the failure of the Merger to occur). The Company
may terminate the Merger Agreement, if the Merger
shall not have been approved by the holders of a
majority of the outstanding shares of Common Stock
entitled to vote thereon at the Meeting.
BankAmerica may terminate the Merger Agreement if
the Special Committee, after the date of this Proxy
Statement, revokes or modifies in a manner adverse
to BankAmerica or qualifies in a manner adverse to
BankAmerica, its recommendation in favor of the
approval of the Merger Agreement and the Merger.
See "The Merger -- Termination."
Appraisal Rights........... Any stockholder who (i) gives written notice to the
Company, prior to the vote on the Merger Agreement,
that such stockholder intends to demand to be paid
fair value for such stockholder's shares of Class A
Common Stock, (ii) does not vote in favor of the
Merger and (iii) complies with certain other
requirements after the Merger shall be entitled to
receive payment for such shares equal to the value
of such shares immediately prior to the Merger plus
interest thereon pursuant to the Delaware General
Corporation Law (the "DGCL"), which payment may be
higher or lower than the value of the consideration
to be received by nondissenting stockholders in the
Merger. See "The Merger -- Appraisal Rights."
Therefore, a stockholder wishing to exercise and
preserve appraisal rights must deliver to the
Company, before the taking of the vote on the
Merger at the Meeting, a written demand for
appraisal of his or her shares, and such shares
must not be voted in favor of adoption of the
Merger Agreement. If a stockholder delivers such
notice on a timely basis and satisfies other
conditions under the DGCL, such stockholder may
file a petition in the Delaware Court of Chancery
demanding a determination of the fair value of the
shares of Class A Common Stock for which appraisal
rights have been exercised, which petition must be
made within 120 days after the Effective Time.
A copy of Section 262 of the DGCL is attached to
this Proxy Statement as Annex III. A stockholder
who fails to satisfy any of the procedural
requirements provided by Delaware law may lose his
or her appraisal rights.
Certain Federal Income Tax
Consequences............. The receipt of cash by stockholders in exchange for
shares of Class A Common Stock 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
or other tax laws. Stockholders should consult
their tax advisor with respect to the tax
consequences of the Merger, including the
applicability and effect of federal, state, local,
foreign and other tax laws. See "The
Merger -- Certain Federal Income Tax Consequences."
Accounting Treatment....... The acquisition of the Company's public shares in
the Merger will be accounted for by BankAmerica as
a "purchase" under generally accepted accounting
principles. See "The Merger -- Accounting
Treatment."
9
<PAGE> 14
Treatment of Options and
Other Awards............... Upon the Effective Time, all outstanding options
("Company Options") issued under the Company's
Long-Term Incentive Plan and Non-Employee Director
Stock Plan (collectively, the "Stock Plans") shall
be canceled in exchange for a cash payment of an
amount equal to (i) the excess, if any, of (x) the
Merger Consideration per share over (y) the
exercise price per share of such Company Option,
multiplied by (ii) the number of shares of Class A
Common Stock subject to such Company Option for
which such Company Option shall not theretofore
have been exercised, whether or not then vested and
exercisable. Each outstanding share of unvested
restricted Class A Common Stock issued pursuant to
a Stock Plan (each, a "Restricted Share") shall,
immediately prior to the Effective Time, be
canceled and be converted into, and become the
right to receive, the Merger Consideration. The
executive officers and directors of the Company
(including the members of the Special Committee)
hold options to purchase an aggregate of 722,072
shares of Class A Common Stock at a weighted
average exercise price of $13.63 per share. The
members of the Special Committee hold options to
purchase an aggregate of 35,591 shares of Class A
Common Stock, The executive officers and directors
of the Company hold an aggregate of 82,698
Restricted Shares. No Restricted Shares are held by
members of the Special Committee. All of these
Restricted Shares and 166,851 of the Company
Options are affected by the accelerated vesting
feature. See "Special Factors -- Reasons for the
Merger; Recommendation of the Company's Board of
Directors and the Special Committee -- The Special
Committee" and "Security Ownership of Certain
Beneficial Owners and Management." The amount
otherwise payable in respect of certain Restricted
Shares to certain executive officers of the Company
shall be distributed to such officers on a deferred
basis. See "The Merger -- Treatment of Options and
Other Company Stock-Based Awards."
Security Ownership of
BankAmerica, Management
and Certain Other
Persons.................. As of March 26, 1999, BankAmerica, directly or
indirectly, was the beneficial owner of 32,400,000
shares of Class B Common Stock, representing 100%
of the outstanding Class B Common Stock and
approximately 95.2% of the combined voting power of
the outstanding Common Stock. As of March 26, 1999,
the directors and officers of BankAmerica as a
group were beneficial owners of less than one
percent of the Class A Common Stock, and the
directors and officers of the Company as a group
were beneficial owners of approximately 3.40% of
the Class A Common Stock (constituting less than
one percent of the combined voting power of the
outstanding Common Stock). See "Security Ownership
of Certain Beneficial Owners and Management."
Stockholder Litigation..... Subsequent to the announcement by BankAmerica and
the Company on October 22, 1998, that BankAmerica
was offering to acquire through merger each
outstanding share of Class A Common Stock for
$15.50 per share in cash, three putative class
actions were filed in the Court of Chancery of the
State of Delaware. Each of these actions challenge
the terms of BankAmerica's initial proposal, name
as defendants certain present and former directors
of the Company, the Company and BankAmerica and
allege that these named defendants breached their
fiduciary duties to the public stockholders of the
Company. These
10
<PAGE> 15
actions seek to have the Merger enjoined or, if it
is consummated, to have it rescinded and to recover
unspecified damages, fees and expenses. On December
22, 1998, counsel to BankAmerica, the Company and
the other defendants entered into a Memorandum of
Understanding with counsel to the plaintiffs in
such cases for the settlement thereof, subject to
court approval and certain other conditions. On
February 9, 1999, BankAmerica, the Company and the
other defendants entered into a Stipulation and
Agreement of Compromise, Settlement and Release
(the "Stipulation") with counsel to the plaintiffs
in such cases for the settlement thereof.
Confirmatory discovery took place on January 27 and
28, 1999. On February 16, 1999, a Notice of
Pendency of Class Action, Temporary and Proposed
Class Action Determination, Proposed Settlement of
Class Action, Settlement Hearing and Right to
Appear (the "Notice of Hearing") was mailed to all
recordholders of the Company's Class A Common
Stock, and on February 18, 1999, such notice was
mailed to each new owner who became such between
the close of business on October 23, 1998 and the
close of business on February 17, 1999. A hearing
to consider approval of the settlement and the
attorneys' fee request of plaintiffs' counsel was
held on March 18, 1999 (the "Settlement Hearing").
At the Settlement Hearing, an Order and Final
Judgment was entered, wherein it is provided, in
accordance with the Stipulation, that the Lawsuit
is dismissed with prejudice. Fees and expenses were
awarded to the Plaintiffs' counsel in the amount of
$1,100,000 and $34,878.25, respectively. The
effective date of the settlement provided by the
Stipulation will occur five days after the later of
(i) the consummation of the Merger (which will
occur after the Special Meeting of Stockholders,
scheduled for April 28, 1999) and (ii) the Order
and Final Judgment of March 18, 1999 becoming
final, which, in the absence of appeal, will occur
on April 19, 1999. See "The Merger -- Litigation."
11
<PAGE> 16
SUMMARY FINANCIAL INFORMATION OF THE COMPANY
The summary financial information included in the table below for each of
the five years in the period ended December 31, 1997 has been derived from and
is qualified in its entirety by the audited financial statements of the Company
including those incorporated herein by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1997, available as described above
under "Incorporation of Certain Documents by Reference." The summary financial
data presented below for the nine months ended September 30, 1998 and 1997 and
as of September 30, 1998 and 1997 has been derived from and should be read in
conjunction with the unaudited interim financial statements of the Company
included in its Quarterly Report on Form 10-Q for the nine months ended
September 30, 1998, incorporated herein by reference. In the opinion of the
Company, such unaudited interim financial statements have been prepared on the
same basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations for the interim periods.
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
YEAR ENDED DECEMBER 31,(1) SEPTEMBER 30,
----------------------------------------------- -----------------
1997 1996 1995 1994 1993 1998 1997
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net Revenue............................... $ 161.0 $ 138.8 $ 119.9 $ 106.2 $ 88.9 $ 135.8 $ 116.0
------- ------- ------- ------- ------- ------- -------
OPERATING EXPENSE:
Salaries and employee benefits.......... 34.7 27.9 24.1 21.6 19.0 30.0 25.2
Data processing and communications...... 34.4 29.5 28.4 25.0 27.9 29.8 24.3
General and administrative.............. 24.8 20.7 20.8 18.5 17.3 19.3 18.3
Depreciation............................ 10.6 9.1 6.6 4.6 3.7 11.4 7.9
Employee stock exchange(2).............. -- 2.4 -- -- -- -- --
Amortization of intangibles............. 0.8 1.1 1.2 1.3 1.5 1.5 0.3
------- ------- ------- ------- ------- ------- -------
Total operating expense............... 105.3 90.7 81.1 71.0 69.4 91.9 76.1
------- ------- ------- ------- ------- ------- -------
Income from operations.................... 55.7 48.1 38.8 35.2 19.5 43.9 40.0
Net interest income (expense)............. 7.7 (1.5) (0.8) -- -- 5.4 5.8
------- ------- ------- ------- ------- ------- -------
Income before income taxes.............. 63.4 46.6 38.0 35.2 19.5 49.3 45.8
Provision for income taxes................ 26.0 19.2 15.7 14.5 8.0 20.2 18.9
------- ------- ------- ------- ------- ------- -------
Net income.............................. $ 37.4 $ 27.4 $ 22.3 $ 20.7 $ 11.5 $ 29.1 $ 26.9
======= ======= ======= ======= ======= ======= =======
Basic and diluted earnings per common
share (3)............................... $ 0.77 $ 0.56 N/A N/A N/A $ 0.60 $ 0.55
======= ======= ======= ======= ======= ======= =======
Pro forma basic and diluted earnings per
common share(4)......................... N/A N/A $ .46 $ .43 $ .25 N/A N/A
======= ======= ======= ======= ======= ======= =======
Pro forma basic and diluted earnings per
common share, as adjusted(3)(5)......... N/A $ .69 $ .57 $ .51 N/A N/A N/A
======= ======= ======= ======= ======= ======= =======
BALANCE SHEET DATA (AT PERIOD END):
Total assets.............................. $ 332.1 $ 318.3 $ 150.1 $ 125.9 $ 90.1 $ 354.3 $ 323.7
Total liabilities......................... 40.8 38.3 27.3 27.4 19.1 33.7 43.2
BankAmerica's equity interest (6)......... -- 27.9 122.8 98.5 71.0 -- --
Stockholders' equity...................... 291.3 252.1 N/A N/A N/A 320.6 280.5
OTHER DATA:
Total transactions processed.............. 531.2 386.2 322.2 251.6 201.8 508.3 370.6
Total sales volume processed.............. $33,900 $26,430 $21,241 $16,979 $14,503 $29,844 $24,103
Book value per common share............... $ 5.99 $ 5.76 N/A N/A N/A $ 6.59 $ 5.77
</TABLE>
- ------------------------------
(1) All data presented for the years ended December 31, 1997, 1996, 1995 and
1994 include the historical results of the acquisitions by the Company in
the second and third quarters of 1997 of BankAmerica's merchant processing
business in Thailand, the Philippines and Taiwan and its merchant processing
12
<PAGE> 17
administrative office in Hong Kong (collectively, the "Asia Acquisitions").
The acquisition of these entities has been accounted for as a reorganization
of entities under common control. Prior to January 1, 1994, the Asian
operations were fully integrated with the operations of BankAmerica in each
of the respective countries. Certain amounts have been reclassified to
conform with the current year presentation. Amounts reflected in this table
may not foot due to rounding.
(2) On December 31, 1996, certain employees of the Company elected to exchange
their employee stock options and restricted stock from BankAmerica for
options and restricted stock of the Company. This employee stock exchange
resulted in a one-time expense of $2.4 million.
(3) Basic and diluted earnings per common share for the year ended 1996 has been
calculated as if the initial offerings of Class A Common Stock had been
completed on January 1, 1993, and 48.5 million shares (32.4 million shares
of Class B Common Stock and 16.1 million shares of Class A Common Stock) had
been outstanding for all periods presented.
(4) Pro forma diluted earnings per common share for all periods presented has
been calculated as if the initial offerings of Class A Common Stock had been
completed on January 1, 1993, and 48.5 million shares (32.4 million shares
of Class B Common Stock and 16.1 million shares of Class A Common Stock) had
been outstanding for all periods presented.
(5) Pro forma earnings per share, as adjusted, assumes that the proceeds from
the initial offerings were available from January 1, 1994 and were invested
in short-term investments, and excludes the one-time expense related to the
employee stock exchange ($2.4 million) and interest expense of $492,000 from
the 1996 results.
(6) BankAmerica's equity interest represents cumulative historical net income of
the Company adjusted for net cash transfers to and from BankAmerica. On
December 3, 1996, BankAmerica exchanged its equity interest in the domestic
operations of the Company for 30.2 million shares of Class B Common Stock.
During the second and third quarters of 1997, BankAmerica exchanged its
equity interest in certain Asian operations of the Company for 2.2 million
shares of Class B Common Stock which management estimates had an approximate
aggregate fair value of $41.8 million based upon the market values at the
dates of issuance of the Class A Common Stock. For additional information,
see "Certain Transactions and Relationships Between BankAmerica and the
Company -- General."
13
<PAGE> 18
THE MEETING
GENERAL
This Proxy Statement is being furnished to holders of the Class A Common
Stock and the Class B Common Stock in connection with the solicitation of
proxies by the Board of Directors of the Company for use at the Meeting to be
held on April 28, 1999, at 315 Montgomery Street, Mezzanine Level, Room A, San
Francisco, California, commencing at 11:00 a.m., local time, and at any
adjournment or postponement thereof.
This Proxy Statement, the enclosed Notice of Special Meeting of
Stockholders and the accompanying form of proxy are first being mailed to
stockholders of the Company on or about March 29, 1999.
MATTERS TO BE CONSIDERED AT THE MEETING
At the Meeting, holders of Common Stock will consider and vote upon a
proposal to approve and adopt the Merger Agreement, pursuant to which
Acquisition Corp. will be merged with and into the Company, with the Company
being the Surviving Corporation. Upon consummation of the Merger, each share of
Class A Common Stock (except for shares as to which appraisal rights have been
perfected) will be converted into the right to receive $20.50 in cash, without
interest thereon (the "Merger Consideration").
BANKAMERICA, DIRECTLY OR INDIRECTLY, BENEFICIALLY OWNS AND HAS THE RIGHT TO
VOTE AT THE MEETING A SUFFICIENT NUMBER OF SHARES TO APPROVE AND ADOPT THE
MERGER AGREEMENT UNDER DELAWARE LAW WITHOUT THE APPROVAL OF ANY OTHER
STOCKHOLDER. BANKAMERICA HAS AGREED TO VOTE ALL SUCH SHARES IN FAVOR OF THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT, PROVIDED THAT THE RECOMMENDATION
OF THE SPECIAL COMMITTEE WITH RESPECT TO THE MERGER IS NOT REVOKED, MODIFIED OR
QUALIFIED. ACCORDINGLY, NO ACTION BY ANY OTHER STOCKHOLDER IS REQUIRED TO
APPROVE AND ADOPT THE MERGER AGREEMENT.
BOARD OF DIRECTORS RECOMMENDATION
The Board of Directors of the Company (four of the seven being employees or
former employees of BankAmerica or its affiliates) unanimously approved and
adopted the Merger Agreement (in accordance with the unanimous recommendation of
the Special Committee) and the Board of Directors recommends that stockholders
of the Company vote FOR the approval and adoption of the Merger Agreement. For
further information see "Special Factors" and "The Merger" generally and
"Special Factors -- Reasons for the Merger; Recommendation of the Company's
Board of Directors and the Special Committee" specifically.
VOTING AT THE MEETING; RECORD DATE; QUORUM
The Company has fixed March 26, 1999 as the Record Date for the
determination of the stockholders entitled to notice of and to vote at the
Meeting. Accordingly, only holders of record of Common Stock on the Record Date
will be entitled to notice of and to vote at the Meeting. As of March 26, 1999
there were 16,252,027 shares of Class A Common Stock outstanding and entitled to
vote, none of which were held, directly or indirectly, by BankAmerica and all of
which were held, directly or indirectly, by approximately 44 holders of record,
and 32,400,000 shares of Class B Common Stock outstanding and entitled to vote,
all of which were held, directly or indirectly, by BankAmerica. Each holder of
record of Class A Common Stock on the Record Date is entitled to cast one vote
per share, and each holder of record of Class B Common Stock on the Record Date
is entitled to cast ten votes per share, on all matters properly submitted for
the vote of the Company's stockholders. The presence at the Meeting, in person
or by properly executed proxy, of the holders of a majority of the shares of
Common Stock entitled to vote is necessary to constitute a quorum at the
Meeting. Each properly executed proxy will be voted in accordance with the
instructions thereon; however, a properly executed proxy marked "ABSTAIN,"
although counted for purposes of determining whether there is a quorum at the
Meeting, will not be voted.
14
<PAGE> 19
The approval and adoption of the Merger Agreement by stockholders of the
Company will require the affirmative vote of the holders of a majority of the
outstanding Class A Common Stock and the outstanding Class B Common Stock,
voting as a single class.
As of March 26, 1999, BankAmerica was, directly or indirectly, the
beneficial owner of 100% of the outstanding Class B Common Stock, representing
approximately 66.6% of the economic ownership of the Company and 95.2% of the
combined voting power of the Company. BankAmerica has agreed to vote all shares
of the Common Stock over which it has voting control FOR approval and adoption
of the Merger Agreement, provided that the recommendation of the Special
Committee with respect to the Merger is not revoked, modified or qualified.
UPON THE VOTE OF THE SHARES OF COMMON STOCK HELD BY BANKAMERICA IN
ACCORDANCE WITH ITS OBLIGATION AND INTENTIONS STATED ABOVE, BOTH THE QUORUM AND
VOTE REQUIRED AT THE MEETING FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT
WOULD BE SATISFIED.
PROXIES
All shares of Common Stock represented at the Meeting by properly executed
proxies received prior to or at the Meeting, and not revoked, will be voted at
the Meeting in accordance with the instructions indicated on such proxies. If no
instructions are indicated, such proxies will be voted FOR approval and adoption
of the Merger Agreement.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by: (i) filing
with the Secretary of the Company, at or before the taking of the vote at the
Meeting, a written notice of revocation bearing a later date than the proxy;
(ii) duly executing a later dated proxy relating to the same shares and
delivering it to the Secretary of the Company before the taking of the vote at
the Meeting; or (iii) attending the Meeting and voting in person (although
attendance at the Meeting will not in and of itself constitute a revocation of a
proxy). Any written notice of revocation or subsequent proxy should be sent and
delivered to BA Merchant Services, Inc., c/o Bank of America National Trust and
Savings Association, 555 California Street, 6th Floor, San Francisco, California
94104, Attention: Corporate Secretary, or hand delivered to the Secretary of the
Company at or before the taking of the vote at the Meeting.
Management does not know of any matters to be presented at the Meeting
other than those set forth in this Proxy Statement and the accompanying Notice.
If other matters should properly come before the Meeting, the proxy holders will
vote on such matters in accordance with their best judgment, unless such
authority is withheld. Shares of Common Stock represented at the Meeting by a
properly executed, dated and returned proxy will be treated as present at the
Meeting for purposes of determining a quorum, without regard to whether the
proxy is marked as casting a vote or abstaining. Proxies relating to shares of
Common Stock held in "street name" by brokers will be counted as shares of
Common Stock present for purposes of determining the presence of a quorum, but
will not be treated as shares having voted at the Meeting as to approval and
adoption of the Merger Agreement if instructions as to how to vote thereon are
not given by the beneficial owners thereof to the broker. Abstentions will be
treated as shares of Common Stock that are present at the Special Meeting for
purposes of determining whether a quorum exists but will have the effect of
votes against approval and adoption of the Merger Agreement. In light of the
treatment of abstentions and broker non-votes and the fact that the affirmative
votes required to authorize and adopt the Merger Agreement are stated
percentages of the total number of outstanding shares of Common Stock on the
Record Date, abstentions and broker non-votes will have the same effect as votes
against the approval and adoption of the Merger Agreement. Because of
BankAmerica's current intention to vote its shares in favor of the approval and
adoption of the Merger Agreement, no action of any other stockholder will be
required to approve and adopt the Merger Agreement.
The Board of Directors is soliciting the proxies, and all expenses of
preparing this Proxy Statement, except the cost of printing and mailing, will be
paid by the Company. Printing and mailing costs will be paid by BankAmerica. In
addition to solicitation by use of the mails, proxies may be solicited by
directors, officers and employees of the Company in person or by telephone,
telegram or other means of communication. Such
15
<PAGE> 20
directors, officers and employees will not be additionally compensated, but may
be reimbursed for out-of-pocket expenses in connection with such solicitation.
Arrangements will also be made with custodians, nominees and fiduciaries for
forwarding of proxy solicitation materials to beneficial owners of shares of
Common Stock held of record by such custodians, nominees and fiduciaries, and
the Company may reimburse such custodians, nominees and fiduciaries for
reasonable expenses incurred in connection therewith.
STOCKHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY CARDS.
THE PROCEDURE FOR THE EXCHANGE OF YOUR SHARES AFTER THE MERGER IS CONSUMMATED IS
SET FORTH IN THIS PROXY STATEMENT. SEE "THE MERGER -- GENERAL."
SPECIAL FACTORS
BACKGROUND OF THE MERGER
The Company and its Initial Public Offering
The Company was incorporated in October 1996. On December 3, 1996, the
merchant processing business of Bank of America, a multi-state operation based
in California, and the merchant processing business of the Seafirst Bank
Division of Bank of America NW, National Association ("Bank NW"), with assets
located principally in the State of Washington, were transferred to the Company.
At December 31, 1996, both Bank of America and Bank NW were wholly owned
subsidiaries of BankAmerica Corporation, a Delaware corporation (referred to
herein as "BAC" when the context refers to such corporation prior to its merger
with NationsBank Corporation, as described below under "-- Consideration of the
Merger"). On January 1, 1997, Bank NW was merged with and into Bank of America.
On December 19, 1996, the Company commenced initial public offerings (the
"Offerings") of 16.1 million shares of the Class A Common Stock at $15.50 per
share. Of these shares, 12.9 million shares were offered in the United States
and 3.2 million shares were offered in a concurrent international offering
outside the United States. The Company completed the Offerings on December 31,
1996. Net proceeds from the Offerings were $232.9 million.
During the second and third quarters of 1997, the Company acquired BAC's
merchant processing businesses in Thailand, the Philippines and Taiwan and its
merchant processing administrative office in Hong Kong in consideration for a
total of 2.2 million newly-issued shares of Class B Common Stock. The
acquisition of these entities is collectively referred to herein as the "Asia
Acquisitions."
As a result of the completion of the Offerings and the subsequent Asia
Acquisitions, BankAmerica indirectly owns 100 percent of the outstanding Class B
Common Stock which, as of the date of this Proxy Statement, represented
approximately 66.6% of the economic ownership of the Company and 95.2% of the
combined voting power of the Company.
For additional information, see "Certain Transactions and Relationships
Between BankAmerica and the Company."
Consideration of the Merger
On April 13, 1998, BAC and NationsBank Corporation ("NationsBank")
announced an agreement and plan of merger pursuant to which BAC and NationsBank
would merge into a combined bank holding company (the "BankAmerica/NationsBank
Merger").
On May 29, 1998, following discussions with BAC and NationsBank, the
Company announced that BAC and NationsBank had determined that the Company would
be the principal merchant processor for their combined organization following
the BankAmerica/NationsBank Merger. Prior to such time, NationsBank offered
merchant processing services through Unified Merchant Services ("UMS"), a joint
venture that NationsBank formed in April 1995 with NaBANCO, the predecessor to
First Data Corporation ("FDC"), a
16
<PAGE> 21
large merchant payment services company. In connection with the formation of
UMS, NationsBank acquired a 20% ownership interest in UMS.
On September 30, 1998, the BankAmerica/NationsBank Merger was consummated.
The possible acquisition by BankAmerica of the entire economic interest in
the Company became the subject of internal study by BankAmerica in October 1998,
following the BankAmerica/NationsBank Merger. Senior management of BankAmerica
determined in mid-October 1998 to pursue the possibility of acquiring the entire
economic interest in the Company and determined to raise the matter with the
Board of Directors of the Company at its next regularly scheduled meeting on
October 22, 1998. For a discussion of BankAmerica's reasons for pursuing the
acquisition of the entire economic interest in the Company at this time, see
"Reasons for the Merger; Recommendation of the Company's Board of Directors and
the Special Committee -- BankAmerica."
At the Company's October 22, 1998 regularly scheduled Board of Directors
meeting, a representative of BankAmerica's Corporate Strategy and Development
Department attended and proposed to the Company's Board of Directors a merger
transaction (the "Merger") in which each share of Class A Common Stock not owned
by BankAmerica would be converted into the right to receive $15.50 in cash. As a
result of the Merger, the Company would become a wholly owned subsidiary of Bank
of America.
On October 22, 1998, the Company and BankAmerica each issued a press
release announcing the BankAmerica proposal.
On November 13, 1998, BankAmerica announced that it planned to sell its 20%
ownership interest in UMS to FDC. This sale was completed on December 18, 1998.
The Special Committee
On October 22, 1998, at a regularly scheduled meeting of the Company's
Board of Directors, following receipt of the BankAmerica proposal, a Special
Committee was appointed to evaluate and consider the BankAmerica proposal. The
Special Committee consisted of Donald R. Dixon, William E. Fisher and Hatim A.
Tyabji, three of the Company's directors not otherwise affiliated with
BankAmerica. Mr. Tyabji was originally appointed as Chairman of the Special
Committee.
Mr. Dixon has served as a member of the Board of Directors of the Company
since November 1996. He has been the president of Trident Capital, Inc., a
venture capital firm, since 1993. He was co-president of Partech International,
a private equity fund manager associated with Banque Paribas, from 1988 to 1993.
Prior to that time, he was a managing director of Alex Brown & Sons,
Incorporated and a vice president of Morgan Stanley & Co. Mr. Fisher has served
as a member of the Board of Directors of the Company since November 1996. He is
the president, chief executive officer and chairman of Transaction Systems
Architects, Inc., where he has been employed since 1987. Mr. Tyabji has served
as a member of the Board of Directors of the Company since May 1998. He was the
president and chief executive officer of VeriFone Inc. commencing in 1986 and
was the chairman of VeriFone Inc. commencing in 1992 until retiring from such
positions in 1998.
The initial mandate of the Special Committee was to review, evaluate and
make recommendations to the Company's Board of Directors regarding the
BankAmerica proposal. The Company's Board of Directors also authorized the
Special Committee to select and retain, at the Company's expense, independent
legal, financial and other advisors to advise and assist the Special Committee
in connection with the BankAmerica proposal.
On October 22, 1998, following the meeting of the Company's full Board of
Directors, the Special Committee held a meeting at which representatives of
Cooley Godward LLP, Palo Alto, California, and representatives of Credit Suisse
First Boston Corporation ("CSFB") were present, to discuss the possible
retention of Cooley Godward as independent legal counsel to the Special
Committee and the possible engagement of CSFB as independent financial advisor
to the Special Committee.
On October 23, 1998, the Special Committee held a meeting at which
representatives of Cooley Godward and CSFB were present to further discuss the
retention of Cooley Godward as independent legal counsel to the Special
Committee and the engagement of CSFB as independent financial advisor to the
Special
17
<PAGE> 22
Committee. At such meeting, the Special Committee also discussed with Cooley
Godward the mandate of the Special Committee and determined that it would be
advisable for the Special Committee to consider, with the assistance of Cooley
Godward and Delaware counsel, whether the Special Committee's mandate, as
established by the Company's Board of Directors, should be expanded. The Special
Committee asked Cooley Godward to help the Special Committee identify possible
Delaware counsel to the Special Committee. In addition, although the Special
Committee was not prepared to formally engage CSFB until it was satisfied that
such firm was sufficiently independent from BankAmerica, at such meeting the
Special Committee asked CSFB to commence a due diligence review of the Company.
Following the October 23, 1998 Special Committee meeting, CSFB commenced its
financial due diligence which included a series of meetings with Company
management.
On October 29, 1998, the Special Committee met with representatives of
Cooley Godward and CSFB and formally determined to retain Cooley Godward as
independent legal counsel to the Special Committee. The Special Committee also
further reviewed the engagement of CSFB as independent financial advisor to the
Special Committee.
On November 5, 1998, the Special Committee met with representatives of
Cooley Godward, CSFB and Richards, Layton & Finger, P.A., Wilmington, Delaware.
At such meeting the Special Committee formally determined to engage CSFB as the
independent financial advisor to the Special Committee and discussed the
retention of Richards, Layton & Finger as independent Delaware counsel to the
Special Committee. The Special Committee subsequently formally engaged Richards,
Layton & Finger as special Delaware counsel.
The engagement of CSFB, as well as the retention of legal counsel, was
determined following the Special Committee's conclusion that neither CSFB nor
legal counsel had previously been engaged in any respect by the Company, BAC,
BankAmerica or NationsBank, or their respective affiliates, which would
materially and adversely affect their ability to represent and advise the
Special Committee. In so concluding, the Special Committee gave careful
consideration to certain previous engagements of CSFB by BankAmerica and
NationsBank and also considered certain legal engagements by BAC, BankAmerica
and certain of their affiliates of the legal counsel to the Special Committee.
The previous engagements of CSFB by BankAmerica or NationsBank included an
engagement to advise NationsBank in a previous acquisition of a securities firm
in 1997 for which CSFB received a fee of approximately $4 million and an
engagement by BankAmerica in 1998 to advise it in connection with an asset
portfolio sale, which transaction had been deferred indefinitely and as to which
no fee had been received by CSFB. The previous engagements of Cooley Godward by
BankAmerica and various affiliates of BAC and BankAmerica involved limited
representations, for which such counsel had received legal fees in an amount not
material to such firm. Both CSFB and such legal counsel gave assurances to the
Special Committee to the effect that those prior engagements would not
materially and adversely affect their ability to represent and advise the
Special Committee.
At the October 29, 1998 Special Committee meeting, the Special Committee
also requested and received a report from Cooley Godward regarding the
Stockholders' Litigation (as defined below) and requested that updates regarding
the Stockholders' Litigation be provided at future Special Committee meetings.
Such updates were provided from time to time at subsequent Special Committee
meetings. The Special Committee also requested and received a report from CSFB
regarding its financial due diligence to that date and the likely timing of the
completion by CSFB of its financial analyses. It was also reported at such
meeting that Mr. Tyabji had been admitted to the hospital for personal health
reasons and would not be able to participate in Special Committee matters for an
undetermined period of time.
At the November 5, 1998 Special Committee meeting, representatives of CSFB
discussed with the Special Committee the status of CSFB's due diligence
investigation of the Company and certain preliminary financial analyses
performed by CSFB regarding the Company and the BankAmerica proposal. See
"-- Opinion of CSFB." CSFB also advised the Special Committee that, based upon
its preliminary valuation analyses, if asked, it might not be able to render an
opinion to the Special Committee to the effect that a price of $15.50 per share
of Class A Common Stock is fair to the public stockholders of the Company from a
financial point of view. It was also decided at such meeting that, in light of
Mr. Tyabji's health problems, the Special Committee would recommend to the
Company that Mr. Tyabji be removed from the Special
18
<PAGE> 23
Committee. Moreover, it was decided that Mr. Dixon would be the Chairman of the
Special Committee and that the Special Committee would defer making any decision
relating to the BankAmerica proposal until the mandate of the Special Committee
was appropriately expanded.
On November 10, 1998, at a meeting of the Board of Directors of the
Company, the mandate of the Special Committee was expanded. The expanded mandate
authorized the Special Committee to review, consider and evaluate, and take all
actions that the Special Committee deemed appropriate to determine the
advisability of, the BankAmerica proposal, including such actions as negotiating
with BankAmerica the terms of the transaction contemplated by the BankAmerica
proposal, to cause the Company to take such actions as the Special Committee
deemed appropriate in connection with the BankAmerica proposal and to make
recommendations to the Board of Directors regarding the BankAmerica proposal.
The Company's Board of Directors also removed Mr. Tyabji from the Special
Committee due solely to personal health problems.
On November 12, 1998, the Special Committee met with representatives of
Cooley Godward, Richards, Layton & Finger and CSFB. At such meeting, the Special
Committee reviewed further with CSFB its analyses of the BankAmerica proposal
and directed a representative of CSFB to contact a representative of BankAmerica
and advise him that the Special Committee had concluded that the $15.50 proposal
was inadequate, but that the Special Committee remained willing to discuss a
transaction at an appropriate price. After the adjournment of the November 12,
1998 meeting, a representative of CSFB contacted a representative of BankAmerica
and advised him that the $15.50 proposal was inadequate, but that the Special
Committee remained willing to discuss a transaction at an appropriate price.
On November 16, 1998, the Company issued a press release identifying the
legal counsel and the financial advisor selected by the Special Committee and
announcing that the Special Committee had determined that the $15.50 per share
value offered by BankAmerica was inadequate, but that the Special Committee
remained willing to discuss a transaction at an appropriate per share value.
At a meeting of the Company's Board of Directors held on December 1, 1998,
in light of a significant improvement in Mr. Tyabji's health, Mr. Tyabji was
reinstated to the Special Committee.
On December 5, 1998, the Special Committee met with representatives of
Cooley Godward, Richards, Layton & Finger and CSFB. In addition to the other
members of the Special Committee, Mr. Tyabji, whose health had significantly
improved and who had been reinstated to the Special Committee, was present at
such meeting. The members of the Special Committee and the Special Committee's
advisors discussed the BankAmerica proposal and the request made by BankAmerica
for a meeting between the members of the Special Committee and representatives
of BankAmerica. The members of the Special Committee and the Special Committee's
advisors also discussed the request made by one of the Company's major public
stockholders for a meeting with the Special Committee. Following such
discussion, it was determined that the members of the Special Committee and
representatives of CSFB would meet with BankAmerica and that the members of the
Special Committee, together with representatives of CSFB and a representative of
Cooley Godward, would make themselves available to listen to the major
stockholder's views regarding the BankAmerica proposal.
On December 7, 1998, the members of the Special Committee, together with
representatives of CSFB and a representative of Cooley Godward, made themselves
available by telephone to listen to the views of a major stockholder of the
Company regarding the BankAmerica proposal. The members of the Special Committee
merely listened to the views of this major stockholder during a short telephone
conversation, and did not ask questions of or engage in discussions with such
stockholder. During such telephone call, such stockholder expressed its view
that the $15.50 proposal was inadequate, based upon, among other reasons, such
stockholder's views relating to the Company's growth prospects, opportunities
presented by the BankAmerica/NationsBank Merger and comparable transactions. The
views of the major stockholder were consistent with the information that the
members of the Special Committee had already considered and, therefore, did not
have a material impact on the Special Committee's analysis of the proposed
transaction.
In addition, on December 7, 1998, representatives of BankAmerica met with
the members of the Special Committee and representatives of CSFB to further
discuss the BankAmerica proposal. At the beginning of the
19
<PAGE> 24
meeting, the members of the Special Committee and the representatives of CSFB
stated the position that the $15.50 proposal was inadequate.
The representatives of BankAmerica responded that there were a number of
factors supporting the adequacy and fairness of the proposed consideration. The
BankAmerica representatives noted that, in their opinion, the market value of
the Company's stock at the time BankAmerica originally submitted its proposal to
the Company's Board of Directors fairly valued the Company and the BankAmerica
proposal represented a reasonable premium over that value. The BankAmerica
representatives also noted that, in their opinion, the attractiveness of the
merchant services industry was highly uncertain at this time. It was further
noted that, in their opinion, there has been considerable competitive price
compression on the fees for merchant services. Changes in interchange fees
charged to merchants by the credit card issuers have also been occurring and are
expected to continue causing the risk of customer attrition to increase. It was
also noted that analysts differ on industry growth rates with expectations
ranging from a relatively modest six to eight percent to approximately 13% and
that this has contributed to the relative underperformance of merchant services
stocks in the past several years. The representatives of BankAmerica also noted
that, in their opinion, the strategic position of the Company was uncertain and
in some cases had become disadvantaged in terms of its stock value relative to
its major competitors. In that regard, it was noted that certain independent
merchant processors have been able to successfully complete acquisitions using
pooling of interests accounting which is not available to the Company due to its
affiliation with BankAmerica. It was also noted that the original promise of the
Company's business in Asia has dimmed in light of the financial and economic
difficulties of that region. The representatives of BankAmerica also noted that
the trading price of the Company's stock had compared unfavorably to its major
competitors. It was also indicated that, while the BankAmerica/NationsBank
Merger presents some opportunities for the Company, it is not clear that the
Company's success rate in Bank of America's existing branch network in acquiring
new merchant customers through referrals will be transferable in the near term
to the subsidiaries of NationsBank given the lack of a common history and
culture. It was also noted that the fee arrangement for referrals from
subsidiaries of NationsBank had yet to be determined, as had the timing of the
merger of the NationsBank banking affiliates and Bank of America. BankAmerica
also noted that there was a limited term (approximately three years) remaining
on its current contractual arrangements with the Company.
The representatives of BankAmerica then indicated, however, their
willingness to increase the offered price in light of the increase of
approximately 18% in the average price to earnings ratio of certain competitors
of the Company in the merchant processing sector since the announcement of the
BankAmerica proposal in late October. They indicated a cash price of $19.30 per
share would be acceptable. The representatives of CSFB indicated that they
believed that the Special Committee would consider a proposal at a cash per
share price of $21.75. BankAmerica's representatives responded to the
representatives of CSFB that in light of the Special Committee's insistence on a
higher value, BankAmerica would be willing to entertain a cash price of $19.90
per share. The representatives of CSFB strongly suggested that the $19.90 per
share price would not be deemed adequate by the Special Committee. After further
discussions, the representatives of BankAmerica indicated a tentative
willingness to agree upon a cash price of $20.50 per share, subject to agreement
on other significant terms of the transaction, and subject to approval by the
Board of Directors of BankAmerica and the negotiation of a satisfactory
definitive agreement. After further discussion and deliberation, the members of
the Special Committee determined it could consider a BankAmerica proposal of
$20.50 per share, subject to the negotiation of a satisfactory merger agreement
(which, among other terms, would not contain significant conditions to closing)
and the receipt of a fairness opinion from CSFB. After the discussion of price,
the representatives of BankAmerica and the members of the Special Committee also
briefly discussed other terms of a possible merger agreement, including terms
relating to the treatment of employees generally and of stock options and
restricted stock. No conclusions were reached at that meeting relating to such
other terms. Rather, the persons participating in the meeting agreed to gather
additional information and to continue to discuss such terms.
At the meeting on December 7, 1998, the representatives of BankAmerica also
expressed their desire that a resolution of the pending stockholder litigation
be a condition to completing the Merger. See "The Merger -- Litigation." The
representatives of CSFB expressed to the representatives of BankAmerica their
20
<PAGE> 25
belief that the merger agreement to be negotiated should not be subject to
extensive conditions. The parties to the negotiation agreed that counsel to
BankAmerica should promptly contact legal counsel to the plaintiffs in the
pending stockholder litigation to determine whether a settlement to such
litigation might be possible in light of all the circumstances. Such contact was
made initially on December 11, 1998, and telephone contacts continued on a
number of occasions from December 11, 1998 to December 18, 1998, at which time
an agreement in principle was reached with plaintiffs' counsel for a settlement
of such litigation. On December 22, 1998, a Memorandum of Understanding (the
"MOU") was executed by counsel for the plaintiffs, BankAmerica, the Company and
the other defendants in such litigation relating to the settlement of such
litigation, subject to certain conditions. See "The Merger -- Litigation."
After the conclusion of the December 7, 1998 meeting, BankAmerica
instructed its counsel to prepare a draft of a definitive merger agreement which
was first submitted to counsel to the Special Committee for review on December
11, 1998. The initial draft of the merger agreement contained a blank place
holder relating to the manner in which outstanding options to purchase shares of
Class A Common Stock and outstanding restricted shares of Class A Common Stock
would be treated in the Merger.
On December 11, 1998, the Special Committee met with representatives of
Cooley Godward, Richards, Layton & Finger and CSFB. At such meeting the Special
Committee reviewed with CSFB the revised BankAmerica proposal of $20.50 per
share and discussed with representatives of Cooley Godward the draft merger
agreement. After such meeting, counsel to the Special Committee returned the
merger agreement to counsel to BankAmerica, marked with certain proposed
changes. Those proposed changes included provisions indicating that (i) the
vesting of all unvested stock options and unvested shares of restricted stock
would accelerate immediately prior to the consummation of the Merger, (ii) the
options would either be exchanged for the difference between the Merger
Consideration and the exercise price or for options to purchase shares of
BankAmerica common stock, and (iii) the restricted shares would be exchanged for
the Merger Consideration.
On December 13, 1998, legal counsel to BankAmerica and legal counsel to the
Special Committee held a telephone conference call to discuss BankAmerica's
proposed merger agreement. Also on December 13, 1998, counsel to BankAmerica
submitted a revised draft of the merger agreement to counsel to the Special
Committee. The revised draft of the merger agreement included provisions
relating to stock options and restricted stock similar to those contained in the
final merger agreement. See "The Merger -- Treatment of Options and Other
Company Stock-Based Awards."
On December 15, 1998, the Board of Directors of BankAmerica approved the
Merger at a meeting held in Charlotte, North Carolina, and authorized the
appropriate officers of BankAmerica to negotiate, execute and deliver a merger
agreement relating to the Merger.
On December 15, 16 and 18, 1998, the Special Committee, its legal counsel
and CSFB held meetings to consider the proposed merger agreement.
On several occasions between December 15 and 21, 1998, legal counsel for
BankAmerica and legal counsel for the Special Committee conferred by telephone
about the terms and provisions of the proposed merger agreement and exchanged
several further drafts of the merger agreement as the negotiations continued.
On December 21, 1998, the Special Committee met again with CSFB and legal
counsel. At such meeting, the Special Committee reviewed with CSFB and legal
counsel the draft merger agreement and the BankAmerica proposal. CSFB rendered
its oral opinion, subsequently confirmed in writing on December 21, 1998, that,
as of such date, the consideration of $20.50 per share of Class A Common Stock
to be received by the holders of the Class A Common Stock in the Merger is fair
to such holders from a financial point of view. At such time the members of the
Special Committee unanimously determined that the terms of the Merger Agreement
and the Merger, including the price per share of $20.50 for the Class A Common
Stock, were in the best interests of the holders of the shares of Class A Common
Stock and unanimously agreed to recommend to the Board of Directors of the
Company that it approve the terms of the Merger Agreement and the Merger. See
"-- Opinion of CSFB."
21
<PAGE> 26
Later in the day on December 21, 1998, the Board of Directors of the
Company, including the members of the Special Committee, met to consider the
Merger Agreement. The members of the Special Committee informed the Board of
Directors of the Company that it recommended approval of the Merger Agreement
and the Merger. The Board of Directors of the Company, by unanimous vote of all
directors, approved the proposal and authorized the execution and delivery of
the Merger Agreement.
Thereafter, legal counsel to BankAmerica and legal counsel to the Special
Committee finalized the Merger Agreement, and the Merger Agreement was executed
and delivered by officers of BankAmerica, Acquisition Corp. and the Company with
the terms approved by the Boards of Directors of the Company and Acquisition
Corp.
On December 22, 1998, prior to commencement of trading on the NYSE,
BankAmerica and the Company jointly announced the execution of the Merger
Agreement and the agreement in principle regarding the settlement of the
Stockholders' Litigation. See "The Merger -- Litigation."
In addition to the foregoing meetings, the members of the Special
Committee, both individually and together, conferred frequently with their legal
counsel and CSFB or both, and with each other concerning aspects of the
BankAmerica proposal and the issues that arose in connection with the proposal
and the negotiation of a final transaction.
Based upon the agreed consideration of $20.50 per share of Class A Common
Stock to be paid to the holders of the Class A Common Stock in the Merger, and
the number of such shares outstanding as of the Record Date, upon consummation
of the Merger, BankAmerica will acquire all of the outstanding shares of Class A
Common Stock for approximately $339.2 million in cash. Such cash payment will be
funded from BankAmerica's current cash flow.
REASONS FOR THE MERGER; RECOMMENDATION OF THE COMPANY'S BOARD OF DIRECTORS AND
THE SPECIAL COMMITTEE
BankAmerica
BankAmerica determined to make the proposal to acquire ownership of all of
the outstanding common stock of the Company for several reasons. First, the
BankAmerica/NationsBank Merger, coupled with changes in the merchant processing
industry, altered many of the original motivations for the Offerings of the
Company's stock in 1996. Among other things, BankAmerica's management perceived
that, as a consequence of the BankAmerica/NationsBank Merger, conflicts were
arising between BankAmerica's evolving post-merger retail and commercial bank
strategy of customer orientation and integrated product delivery and the
orientation of the Company as an independent "monoline" company, i.e. a company
which focuses on a single line of business. Thus, the Company's desire to enter
into merchant processing relationships with particular customers only when the
merchant processing relationship is profitable had been determined in some
instances to be potentially inconsistent with BankAmerica's objective of
delivering a full array of banking services to particular customer relationships
when such relationships, taken as a whole, are profitable. Additionally, due in
part to increasing concentration and price competition in the merchant
processing industry, the market value of the Company's stock, and that of stocks
in the merchant processing industry generally, since 1996 have compared
unfavorably to the market values prevailing in the financial services industry
generally, including values of the stocks of major bank holding companies such
as BankAmerica, and the sector multiples between these segments of the financial
services industry have converged in recent years. Management of BankAmerica had
also begun to reconsider the original strategy of using acquisitions to grow the
business of the Company in light of the increasing concentration in the merchant
processing industry and the consequent reduction of acquisition opportunities
and the increased pricing levels of acquisitions. BankAmerica's management also
considered the potential expense savings associated with operating the Company
as a wholly owned subsidiary; however, such expense savings are not anticipated
to be material in amount and, as a result, were not considered a significant
factor.
22
<PAGE> 27
The Company
The Board of Directors of the Company, in accordance with the unanimous
recommendation of the Special Committee, recommends that the Company's
stockholders vote FOR approval and adoption of the Merger Agreement. The Board
of Directors, including the members of the Special Committee, believe that the
Merger is fair to and in the best interests of holders of Class A Common Stock
for the reasons described below in "-- The Special Committee."
The Special Committee
The Special Committee believes that the Merger is fair to and in the best
interests of holders of Class A Common Stock and unanimously recommends that
such holders vote FOR approval and adoption of the Merger Agreement.
In determining that the Merger is fair to holders of Class A Common Stock
and recommending the approval of the Merger Agreement, the Special Committee
considered the following factors among others:
Stock Ownership and Voting Power of BankAmerica. The Special Committee
recognized that BankAmerica owns approximately 66.6% of the outstanding economic
interest in the Company and 95.2% of the voting power of the Company. This
ownership precluded any acquisition by a third party without BankAmerica's
consent, and BankAmerica advised the Special Committee that it would not be
willing to consider the possibility of selling its interest in the Company now
or in the future. BankAmerica was not willing to consider the possibility of
selling its interest in the Company because BankAmerica regards the merchant
processing business as being part of the variety of services which it desires to
continue to offer to its business customers through its general strategy of
integrated product delivery.
The Special Committee also recognized that BankAmerica had sufficient
voting power to eliminate the minority interest in the Company in a transaction
not approved by the Special Committee or the Company's Board of Directors.
Fairness Opinion and Related Presentations. The Special Committee
considered the opinion delivered orally to it by CSFB to the effect that as of
the date of such opinion the consideration to be received by the Company's
stockholders (other than BankAmerica and its affiliates) in the Merger was fair
to such stockholders from a financial point of view. In this regard, the Special
Committee recognized and took into consideration the fact that the Merger did
not require the approval of the holders of a majority of shares not owned by
BankAmerica and its affiliates. The Special Committee nevertheless concluded
that the Merger is fair to the holders of Class A Common Stock based upon the
factors described in the following paragraphs.
The Special Committee also considered the advice it received from CSFB
during the course of its engagement, including the CSFB Opinion (as defined
below) and the analyses relating to such opinion described below under
"-- Opinion of CSFB." The Special Committee considered the international
reputation of CSFB, its extensive experience in mergers and acquisition
transactions and the fact that the fees payable to CSFB were not conditioned
upon the conclusion reached with respect to fairness of the Merger.
The Special Committee and the Board of Directors have considered the fact
that an updated opinion of CSFB will not be obtained by the Special Committee in
evaluating whether they believe that the terms of the transaction are fair to
the holders of the Class A Common Stock. The Special Committee analyzed the
fairness of the consideration offered by BankAmerica as of the date that the
Merger Agreement was signed, taking into account the CSFB Opinion and the other
factors described in this Proxy Statement, and concluded that an update of such
opinion was not necessary in light of the agreed-upon economic terms of the
transaction which were regarded as fair by CSFB and the members of the Special
Committee and in light of the other factors pertaining to the Merger, including
the other terms of the Merger Agreement which were regarded as favorable, as
described in this Proxy Statement. Accordingly, the Merger Agreement, as
negotiated, does not condition the Company's obligations thereunder on obtaining
an updated opinion of CSFB.
23
<PAGE> 28
The Special Committee also considered as favorable the fact that the $20.50
per share represented a significant premium over the $13.625 per share closing
price on the day prior to the announcement of the BankAmerica proposal.
Arm's-Length Negotiations. The Special Committee considered as favorable
that the terms of the Merger were reached through arm's-length negotiations by
the Special Committee and its independent legal and financial advisors with
BankAmerica and its legal advisors. The Special Committee does not believe that
further negotiations would have resulted in a superior merger proposal.
Terms of the Merger Agreement. The Special Committee considered the terms
of the Merger Agreement generally to be favorable. In particular, the Special
Committee viewed as favorable, among other things, the fact that the Merger
Agreement (a) contains only a limited number of representations and warranties,
(b) requires BankAmerica to vote in favor of the Merger unless the Special
Committee revokes, modifies or qualifies its recommendation with respect to the
Merger, (c) does not require the payment of a termination fee if the Merger
Agreement is terminated, and (d) imposes no significant conditions to the
closing of the Merger, thus making consummation of the Merger more likely than
one that imposes more significant conditions to consummation.
Interests of Certain Persons in the Merger. The Special Committee also
took into consideration the fact that certain directors and executive officers
of the Company, including the members of the Special Committee, own shares of
restricted Class A Common Stock and/or options to purchase shares of Class A
Common Stock, and that such restricted shares and options would be converted
into the difference between the Merger Consideration and the exercise price
thereof (if any), whether or not then vested or exercisable. See "-- Interests
of Certain Persons in the Merger," "The Merger -- Treatment of Options and Other
Company-Based Stock Awards" and "Security Ownership of Certain Beneficial Owners
and Management." In this regard, the Board of Directors, including the Special
Committee, concluded that the transaction was fair to the holders of Class A
Common Stock and that the benefits to the members of the Special Committee from
acceleration of the vesting of the stock options held by such individuals were
immaterial in amount and significance to such individuals and, therefore, did
not affect their ability to evaluate the fairness of the transaction. Further,
it was recognized that the vesting of the stock options held by the members of
the Special Committee, in the absence of the Merger, was expected to occur, in
any event, in May 1999. Also, as described above under "-- Background of the
Merger -- The Special Committee," the Special Committee and the representatives
of BankAmerica had reached a tentative agreement upon a cash price of $20.50 per
share of the Class A Common Stock before addressing various other issues,
including the terms of a possible merger agreement and the treatment of
employees generally and of existing stock options and restricted stock of the
Company. The Board of Directors, including the Special Committee, was aware of
the foregoing interests and considered them, along with other matters, in
approving and adopting the Merger Agreement and the transactions contemplated
thereby.
Appraisal Rights. The Special Committee considered as favorable the fact
that holders of shares of Class A Common Stock would be entitled under the DGCL
to obtain a judicial determination of the fair value of their shares. See "The
Merger -- Appraisal Rights."
The foregoing discussion of factors considered by the Special Committee is
not intended to be exhaustive but is believed to include all material factors
considered by the Special Committee. Given the variety and complexity of the
factors considered by the Special Committee in its evaluation of the terms of
the Merger, it did not find it practicable to, and did not, quantify or
otherwise attempt to assign relative weights to the specific factors it
considered in reaching its determinations.
Position of BankAmerica and Acquisition Corp.
BankAmerica and Acquisition Corp. have concluded, based upon the
recommendation of the Special Committee to the Board of Directors of the
Company, the conclusions of the Special Committee and the fact
24
<PAGE> 29
that CSFB issued a fairness opinion to the Special Committee, that the Merger is
fair to the Company's Class A Common stockholders. BankAmerica has considered
the fact that an updated opinion of CSFB will not be obtained by the Special
Committee in evaluating whether it believes that the terms of the transaction
are fair to the holders of the Class A Common Stock.
OPINION OF CSFB
CSFB is acting as the exclusive financial advisor to the Special Committee
in connection with the Merger. CSFB was selected by the Special Committee to act
as its financial advisor based on CSFB's qualifications, expertise and
reputation, as well as CSFB's familiarity with the Company.
On December 21, 1998, the Special Committee met to review the Merger and
the final terms of the Merger Agreement. During this meeting, CSFB rendered its
oral opinion, subsequently confirmed in writing on December 21, 1998 (the "CSFB
Opinion"), that, as of that date, based upon and subject to the various
considerations set forth in the CSFB Opinion, the Merger Consideration to be
received by the holders of Class A Common Stock in the Merger is fair to such
stockholders from a financial point of view. The closing of the Merger is not
conditioned upon the delivery of an updated CSFB Opinion at the Effective Time.
THE FULL TEXT OF THE CSFB OPINION, WHICH SETS FORTH, AMONG OTHER THINGS,
THE ASSUMPTIONS MADE, PROCEDURES FOLLOWED, MATTERS CONSIDERED, AND
QUALIFICATIONS AND LIMITATIONS ON THE SCOPE OF THE REVIEW UNDERTAKEN BY CSFB IN
RENDERING THE CSFB OPINION, IS ATTACHED AS ANNEX II TO THIS DOCUMENT.
STOCKHOLDERS ARE URGED TO, AND SHOULD, READ THE CSFB OPINION CAREFULLY AND IN
ITS ENTIRETY. THE CSFB OPINION WAS DELIVERED TO THE SPECIAL COMMITTEE FOR ITS
USE IN CONNECTION WITH ITS CONSIDERATION OF THE MERGER AND ADDRESSES ONLY THE
FAIRNESS OF THE MERGER CONSIDERATION TO BE RECEIVED BY THE HOLDERS OF CLASS A
COMMON STOCK FROM A FINANCIAL POINT OF VIEW AS OF THE DATE OF THE CSFB OPINION.
THE CSFB OPINION IS NOT INTENDED TO BE, AND DOES NOT CONSTITUTE, A
RECOMMENDATION TO ANY STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE AT THE
MEETING. THE SUMMARY OF THE CSFB OPINION SET FORTH IN THIS DOCUMENT IS QUALIFIED
BY REFERENCE TO THE FULL TEXT OF THE CSFB OPINION.
A copy of the CSFB financial analysis discussed below has been filed as an
exhibit to the Rule 13e-3 Transaction Statement on Schedule 13E-3 (the "Schedule
13E-3") filed with the Commission with respect to the Merger, and will be made
available for inspection and copying at the Company's principal executive
offices at One South Van Ness Avenue, San Francisco, California 94103 during
regular business hours by any interested stockholder or his or her
representative who has been so designated in writing.
In arriving at its opinion, CSFB reviewed certain publicly available
business and financial information relating to the Company, including, but not
limited to, the terms and conditions of the existing contractual relationship
between the Company and BankAmerica, as well as the Merger Agreement. CSFB also
reviewed certain other information, including financial forecasts, provided to
it by the Company and met with the Company's management to discuss the business
and prospects of the Company. See "-- Certain Projected Financial Information."
CSFB also considered certain financial and stock market data of the
Company, and compared that data with similar data for other publicly-held
companies in businesses similar to those of the Company. CSFB also considered
the financial terms, to the extent publicly available, of certain other business
combinations and other transactions which had recently been effected. CSFB
considered that BankAmerica's ownership of 100% of the outstanding shares of
Class B Common Stock represents 95.2% of the voting power of the outstanding
Common Stock. CSFB also considered such other information, financial studies,
analyses and investigations and financial, economic and market criteria which it
deemed relevant.
In connection with its review, CSFB did not assume any responsibility for
independent verification of any of the foregoing information and relied on its
being complete and accurate in all material respects. With respect to the
financial forecasts, CSFB assumed, with the permission of the Special Committee,
that they had been reasonably prepared on bases reflecting the best currently
available estimates and judgments of the Company's management as to the future
financial performance of the Company. In addition, CSFB did not make an
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of the
25
<PAGE> 30
Company, nor was CSFB furnished with any such evaluations or appraisals. The
CSFB Opinion was necessarily based upon financial, economic, market and other
conditions as they existed and could be evaluated as of the date of the CSFB
Opinion. Due to changes in financial, economic, market and other conditions, the
Company's financial or operating performance may increase or decrease prior to
the consummation of the Merger. CSFB was not requested to, and at the Special
Committee's direction did not, solicit third party indications of interest in
acquiring all or any part of the Company.
In preparing the CSFB Opinion, CSFB performed a variety of financial and
comparative analyses. The preparation of a fairness opinion is a complex process
and is not necessarily susceptible to partial analysis or summary description.
CSFB believes that its analyses must be considered as a whole and that selecting
portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create a misleading view of the
processes underlying the CSFB Opinion. No company or transaction used in the
analysis performed by CSFB as a comparison is identical to the Company or the
contemplated transaction. In addition, CSFB may have given various analyses more
or less weight than other analyses, and may have deemed various assumptions more
or less probable than other assumptions, so that the range of valuation
resulting from any particular analysis described below should not be taken to be
CSFB's view of the actual value of the Company. In performing its analyses, CSFB
made numerous assumptions with respect to industry performance, general business
and economic conditions and other matters including, among other things,
assumptions relating to the continuation of general levels of economic activity,
continued relative stability in the capital markets and the continued viability
of the transaction processing industry in which the Company operates, many of
which are beyond the control of the Company. CSFB realized that many of those
assumptions were beyond the control of the Company. The analyses performed by
CSFB are not necessarily indicative of actual values or actual future results,
which may be significantly more or less favorable than suggested by such
analyses. In addition, analyses relating to the value of businesses or assets do
not purport to be appraisals or to necessarily reflect the prices at which
businesses or assets may actually be sold. The analyses performed were prepared
solely as part of CSFB's analysis of the fairness of the consideration to be
received by the Company's stockholders, other than BankAmerica or its
affiliates, from a financial point of view and were provided to the Special
Committee in connection with the delivery of the CSFB Opinion.
The following is a summary of the material analyses performed by CSFB in
connection with the preparation of the CSFB Opinion, and reviewed with the
Special Committee at a series of meetings culminating in a meeting held on
December 21, 1998. The first three analyses summarized below were not intended
to, and did not, generate ranges of implied values per share of the Class A
Common Stock. These analyses were provided to the Special Committee and prepared
by CSFB to provide a context in which to consider the results of the other
analyses prepared by CSFB.
Historical Stock Price Analysis. CSFB analyzed the prices at which Class A
Common Stock traded over the 498 trading days subsequent to the Company's
initial public offering on December 19, 1996 through December 9, 1998 (the
"Observed Period"). CSFB noted that the all-time high price for Class A Common
Stock was $21.81 on September 22, 1997 and the all-time low price for Class A
Common Stock was $10.38 on October 9, 1998. CSFB noted that 32.1% of shares of
Class A Common Stock traded during the Observed Period were traded for a price
below $16.00 per share, 62.1% were traded for a price between $16.00 to $20.00,
and 5.8% were traded for a price above $20.00 per share.
Comparative Stock Price Performance. As part of its analyses, CSFB
reviewed the recent stock price performance of the Company and compared such
performance with that of other companies involved in the transaction processing
industry including Concord EFS, Inc.; First Data Corporation; National Data
Corporation; National Processing, Inc.; NOVA Corporation; Paymentech, Inc.;
Total System Services, Inc.; and Transaction Network Services, Inc.
(collectively, the "Transaction Processors"). CSFB noted that during the
Observed Period, the market price of Class A Common Stock decreased 3.6%,
compared with a decrease of 12.2% for the Transaction Processors and an increase
of 58.2% for the NASDAQ composite index. CSFB noted that over the Observed
Period, Class A Common Stock underperformed relative to the NASDAQ composite
index and outperformed the Transaction Processors.
Peer Group Comparison. CSFB compared certain information relating to the
Company with the Transaction Processors. Such information included, among other
things, share price as a multiple of next
26
<PAGE> 31
twelve months ("NTM") earnings per share ("EPS") and share price as a multiple
of NTM EPS divided by the First Call consensus estimated long-term growth rate
("NTM PEG"). The multiples are based on publicly available information and a
compilation by First Call of earnings per share and long-term growth rate
consensus forecasts by securities research analysts. For the Company, the First
Call NTM EPS projection (for the period ending September 30, 1999) was $0.97 and
the First Call long-term growth rate projection was 18.75%, both of which were
generally in line with the Company's internal expectations.
<TABLE>
<CAPTION>
AVERAGE MULTIPLE OVER THE OBSERVED PERIOD
--------------------------------------------------
TRANSACTION NATIONAL
METRIC COMPANY PROCESSORS PAYMENTECH PROCESSING
------ ------- ----------- ---------- ----------
<S> <C> <C> <C> <C>
Share Price/First Call NTM EPS.................. 19.2x 29.7x 25.2x 15.6x
Premium/(Discount) Received by the Company...... - (35.4%) (22.9%) 25.0%
Share Price/First Call NTM PEG.................. 1.01x 1.37x 1.14x 0.99x
</TABLE>
Selected Precedent Transactions. CSFB reviewed the publicly available
financial terms of the six most relevant precedent transactions in
technology-based services from November 2, 1994 through November 24, 1998 (the
"Technology-Based Services Transactions"). These six transactions were viewed as
comparable to the Company transaction because, among other things, of the
acquired companies' specific focus on transaction processing services.
<TABLE>
<CAPTION>
ANNOUNCEMENT DATE TARGET
- ----------------- ACQUIROR ------
<S> <C> <C>
November 24, 1998 Concord EFS, Inc. Electronic Payment Services, Inc.
September 3, 1998 DST Systems, Inc. USCS International, Inc.
June 18, 1998 NOVA Corporation PMT Services, Inc.
April 20, 1998 Associates First Capital SPS Transaction Services, Inc.
Corporation
June 13, 1995 First Data Corporation First Financial Management
Corporation
November 2, 1994 First Data Corporation Card Establishment Services
</TABLE>
For each of the Technology-Based Services Transactions, CSFB analyzed the
price paid by the acquiror as a multiple of various operating metrics of the
target. CSFB then derived a range of multiples paid for each operating metric in
the Technology-Based Services Transactions and applied these ranges to the
relevant operating statistic for the Company to imply a value per share of Class
A Common Stock. CSFB noted that with respect to the multiples of LTM revenue,
LTM earnings before interest, taxes, depreciation and amortization, LTM earnings
before interest and taxes and LTM EPS, the consideration of $20.50 per share of
Class A Common Stock to be paid to the holders of the Class A Common Stock in
the Merger exceeds the low end of the range of implied values per share of Class
A Common Stock derived from such multiples and falls slightly below the low end
of the range of implied values per share of Class A Common Stock derived from
the multiple of First Call next fiscal year EPS. CSFB viewed each of the
multiples set forth below as meaningful but placed less emphasis on the multiple
of latest twelve months ("LTM") revenue given the differing revenue recognition
policies employed in the transaction processing industry.
<TABLE>
<CAPTION>
DERIVED RANGE OF
MULTIPLES PAID IN IMPLIED VALUE PER
TECHNOLOGY-BASED SHARE OF CLASS A
TYPE OF MULTIPLE SERVICES TRANSACTIONS COMMON STOCK
---------------- --------------------- -----------------
<S> <C> <C>
Aggregate Transaction Value/
LTM revenue 2.00 - 4.00 x $9.22 - $16.00
Aggregate Transaction Value/
LTM earnings before interest, taxes, depreciation and
amortization 10.0 - 18.0 x $16.50 - $28.55
Aggregate Transaction Value/
LTM earnings before interest and taxes 12.0 - 24.0 x $15.84 - $29.93
Share Price/
LTM EPS 20.0 - 36.0 x $16.25 - $29.26
Share Price/
First Call next fiscal year EPS 20.0 - 32.0 x $20.80 - $33.28
</TABLE>
27
<PAGE> 32
Premium Analysis. CSFB reviewed publicly available premiums paid in 102
selected precedent minority squeeze-out transactions between January 1, 1990 and
December 11, 1998 (the "Precedent Minority Squeeze-Outs"); the Technology-Based
Services Transactions; and 4,686 mergers and acquisitions between January 1,
1990 and November 1, 1998 (the "M&A Transactions"). Such analysis compared the
average premiums paid in each transaction over the stock price one day, one
week, and one month preceding the public announcement of each transaction. CSFB
applied these premia to the $13.63 closing price per share of Class A Common
Stock on October 22, 1998 (the last trading day prior to BankAmerica's initial
offer to purchase all shares of Class A Common Stock outstanding for $15.50 per
share or the "Unaffected Date"), and to the theoretical price per share of Class
A Common Stock of $14.80 (the "Indexed Price") on December 9, 1998 implied by
the indexed return of the Transaction Processors from the Unaffected Date
through December 9, 1998. The following table sets forth information concerning
the implied value per share of Class A Common Stock based on the range of premia
paid in each of the sets of transactions set forth above.
<TABLE>
<CAPTION>
TYPE OF TRANSACTION RELEVANT PREMIUM RANGE VALUE PER SHARE OF CLASS A COMMON STOCK
------------------- ---------------------- ---------------------------------------
<S> <C> <C>
Precedent Minority Squeeze-Outs......... 19.7% - 26.1% $16.29 - $18.20
Technology-Based Services 20.2% - 33.2% $16.38 - $19.23
Transactions..........................
M&A Transactions........................ 29.7% - 38.3% $17.54 - $19.96
</TABLE>
CSFB noted that the consideration of $20.50 per share of Class A Common
Stock to be paid to the holders of the Class A Common Stock in the Merger
exceeds the low end of the range of values per share of Class A Common Stock
implied by each set of transactions discussed above.
CSFB also reviewed the increase from the initial offer price to the final
offer price in 26 selected precedent minority squeeze-out transactions between
January 1, 1997 and December 10, 1998 (the "Recent Minority Squeeze-Outs"). CSFB
noted that there was no increase from the initial offer price to the final offer
price in 42.3% of the Recent Minority Squeeze-Outs, a 0% to 20% increase from
the initial offer price to the final offer price in 50.0% of the Recent Minority
Squeeze-Outs and a greater than 20% increase from the initial offer price to the
final offer price in 7.7% of the Recent Minority Squeeze-Outs. CSFB noted that
the increase from BankAmerica's initial offer price of $15.50 per share of Class
A Common Stock outstanding to BankAmerica's final offer price of $20.50 per
share of Class A Common Stock outstanding represented an increase of 32.3%.
Discounted Cash Flow Analysis. CSFB analyzed the present value of future
cash flows potentially realizable from the continued operation of the Company
based on estimates and guidance provided by the Company's management for
estimated Company operating results through the end of fiscal year 2004. CSFB
computed the present value of the free cash flows of the Company for the five
fiscal years from 1999 through 2003 by applying a range of discount rates of
12.0% to 15.0% per year. CSFB also computed the present value of the terminal
value of the Company at the end of fiscal year 2003 by applying a range of net
income multiples of 12.0 to 16.0 times the Company's estimated fiscal year 2004
net income and applying to these terminal values a range of discount rates of
12.0% to 15.0% per year. The range of terminal net income multiples was
determined by analyzing the current and historic NTM net income multiples of the
Company and the Transaction Processors and factoring in the expected growth
prospects of the Company at the end of fiscal 2003. The discounted cash flow
analysis implied a range of values per share of Class A Common Stock on a fully
diluted basis of $19.21 to $27.06. CSFB noted that the consideration of $20.50
per share of Class A Common Stock to be paid to the holders of the Class A
Common Stock in the Merger exceeds the low end of the range of values per share
of Class A Common Stock implied by the discounted cash flow analysis.
Potential Future Trading Value Analysis. CSFB computed the present value
per share of Class A Common Stock under several future trading periods and
multiples. Such analysis was based upon the Company's expected EPS in fiscal
years 2000 and 2001 utilizing both First Call consensus EPS projections and the
Company's management EPS estimates. For a discussion of the Company's management
estimates, see "-- Certain Projected Financial Information." CSFB calculated
implied future values per share of Class A Common Stock using multiples ranging
from 12.0 to 18.0 times the Company's NTM EPS for both fiscal 2000 and 2001. The
implied future values per share of Class A Common Stock were discounted to
arrive at a
28
<PAGE> 33
present value using discount rates of 12.0% and 15.0% per year. The potential
future trading value analysis implied a range of values per share of Class A
Common Stock of $12.91 to $23.24. CSFB noted that the consideration of $20.50
per share of Class A Common Stock to be paid to the holders of the Class A
Common Stock in the Merger exceeds the low end of the range of values per share
of Class A Common Stock implied by the potential future trading value.
As described above, CSFB's opinion and presentation to the Special
Committee was one of many factors taken into consideration by the Special
Committee in making its determination to recommend the Merger Agreement and the
transactions contemplated thereby. Consequently, the analyses described above
should not be viewed as determinative of the opinion of the Special Committee,
the Board of Directors, or the Company's management with respect to the value of
the Company or whether the Special Committee would have been willing to
recommend a Merger at a different level of consideration.
The Special Committee retained CSFB to act as its financial advisor in
connection with the Merger. CSFB was selected by the Special Committee based on
CSFB's qualifications, expertise and reputation, as well as CSFB's familiarity
with the Company. CSFB is an internationally recognized investment banking and
advisory firm. CSFB, as part of its investment banking business, is continuously
engaged in the valuation of businesses and securities in connection with mergers
and acquisitions, negotiated underwritings, competitive biddings, secondary
distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. In the ordinary course of its
business, CSFB may actively trade the securities and loans of the Company and
BankAmerica and its affiliates 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 securities and loans.
Pursuant to a letter dated October 23, 1998 (the "Engagement Letter"), the
Company, at the direction of the Special Committee, engaged CSFB to provide
financial advisory services to the Special Committee in connection with the
Merger, including, among other things, rendering the CSFB Opinion and making the
presentation referred to above. Pursuant to the terms of the Engagement Letter,
the Company agreed to pay CSFB (i) a retainer fee of $150,000 and (ii) an
opinion fee of 0.80% of the product of the highest price per share of Class A
Common Stock offered by BankAmerica times the number of shares of Class A Common
Stock outstanding, against which the amount referred to in clause (i) would be
credited if previously paid. In addition, the Company has agreed to reimburse
CSFB for its out-of-pocket expenses, including attorney's fees, incurred in
connection with its engagement, and to indemnify CSFB and certain related
persons against certain liabilities and expenses arising out of or in
conjunction with its rendering of services under its engagement, including
liabilities arising under the federal securities laws.
CERTAIN PROJECTED FINANCIAL INFORMATION
The Company does not, as a matter of course, make public forecasts or
projections as to future revenues or results of operations. However, in order to
aid the analysis of the proposed Merger by the Special Committee and CSFB and
CSFB's assessment of the fairness, from a financial point of view, of the Merger
Consideration, the Company furnished to the Special Committee and
representatives of CSFB certain estimates of the Company's future financial
performance. See "-- Opinion of CSFB." Management prepared such projections in
October 1998 and provided such projections to representatives of CSFB in early
November 1998. The projections furnished by management of the Company to CSFB
are attached to this Proxy Statement as Exhibit A.
These projections are subject to risks and uncertainties and may be
affected by various factors that may cause actual results to differ materially
from those in the projections. Actual results may differ from management's
expectations and beliefs based on a number of risks and uncertainties, many of
which risks and uncertainties have been described in the Company's filings with
the Commission. See "Incorporation of Certain Documents by Reference."
While presented with numerical specificity, the projections are based upon
numerous estimates and assumptions that are inherently subject to significant
business, economic, industry and competitive uncertainties and contingencies,
all of which are difficult to predict and many of which are beyond the Company's
control. Certain assumptions on which the projections were based related to the
achievement of strategic
29
<PAGE> 34
goals, objectives and targets over the applicable periods that are more
aggressive than recent historical results. Further assumptions were made
concerning portfolio revenue degradation resulting from competitive pricing
pressures, portfolio attrition from loss of existing merchants and projected
sales and revenue growth including the NationsBank franchise. The forecast
excludes transaction related costs and assumes reduced reliance on third party
processors in 1999 and beyond. There can be no assurance that the projected
results would be realized or that actual results would not be significantly
higher or lower than those predicted. While the projections were prepared in
good faith, no assurance can be made regarding future events. Therefore, such
projections cannot be considered a reliable predictor of future operating
results, and this information should not be relied upon as such. Additionally,
the financial projections do not reflect revised prospects for the Company,
changes in general business and economic conditions, or any other transaction or
event that has occurred or may occur and that was not anticipated at the time
such information was prepared. The projections were not prepared with a view
toward public disclosure or complying with either the published guidelines of
the Commission regarding projections or forecasts or the American Institute of
Certified Public Accountants' Guide for Prospective Financial Statements. The
projections do not purport to present operations in accordance with generally
accepted accounting principles, and the Company's independent auditors have not
examined, compiled or performed any procedures regarding these projections, and
accordingly, assume no responsibility for them. Holders of Class A Common Stock
are cautioned not to place undue reliance on the projections.
CERTAIN EFFECTS OF THE MERGER
After the Merger, BankAmerica will own all of the outstanding capital stock
of the Company and the holders of Class A Common Stock will no longer have any
ownership interest in the Company or rights as stockholders (other than
statutory appraisal rights, in the case of those who perfect their rights under
Delaware law). As a result of the Merger, BankAmerica will have a 100% interest
in the net book value and net earnings of the Company. Currently, BankAmerica
has an approximately 66.6% interest in such net book value and net earnings of
the Company. Thus, the holders of Class A Common Stock will no longer benefit
from any increase in the value of the Company or any payment of dividends on the
common stock of the Company and will no longer bear the risk of any decrease in
the value of the Company. As a result of the Merger, the Class A Common Stock
will no longer be listed on the NYSE and the Company will no longer be required
to file periodic reports with the Commission. The Company will also be relieved
of the obligation to comply with the proxy rules of the Commission under the
Exchange Act and its officers, directors and 10% stockholders will be relieved
of the reporting requirements and restrictions on insider trading imposed by
section 16 of the Exchange Act. See "The Merger -- Certain Effects of the
Merger."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Board of Directors of the Company
with respect to the Merger, stockholders should be aware that certain members of
the Special Committee and the Board of Directors and certain executive officers
of the Company may have certain interests in the Merger that are in addition to
or are different from the interests of stockholders of the Company generally.
Certain directors and executive officers of the Company, including the members
of the Special Committee, own Class A Common Stock. See "Security Ownership of
Certain Beneficial Owners and Management." Certain directors and executive
officers of the Company, including the members of the Special Committee, own
shares of restricted Class A Common Stock and/or options to purchase shares of
Class A Common Stock, the cancellation and conversion of which is provided for
in the Merger Agreement. See "The Merger -- Treatment of Options and Other
Company Stock-Based Awards" and "Security Ownership of Certain Beneficial Owners
and Management." Certain directors and executive officers of the Company also
are employees of BankAmerica. Certain directors and executive officers of the
Company participate in BankAmerica's employee benefit plans, including health
and retirement plans. Nominees for the Company's Board of Directors are
recommended by the Company's Board of Directors, four of whom are current or
former employees of BankAmerica. As provided in the Merger Agreement,
BankAmerica and/or the Surviving Corporation will provide certain
indemnification and insurance in favor of the current and former directors and
executive officers of the Company. See "The Merger -- Indemnification."
30
<PAGE> 35
The Board of Directors of the Company has authorized the payment of a
special fee in the amount of $25,000 to each member of the Special Committee for
that member's service on the Committee.
The Board of Directors of the Company was aware of the foregoing interests
and considered them, along with other matters, in approving and adopting the
Merger Agreement and the transactions contemplated thereby.
THE MERGER
The following is a brief summary of certain provisions of the Merger
Agreement, which is attached as Annex I to this Proxy Statement. Stockholders
are urged to read Annex I in its entirety.
GENERAL
The Merger Agreement provides that, at the Effective Time (as defined
below), Acquisition Corp. will be merged with and into the Company, the Company
will continue as the Surviving Corporation and the separate existence of
Acquisition Corp. will cease.
Pursuant to the provisions of the Merger Agreement, as promptly as
practicable following the satisfaction or waiver of certain conditions
summarized herein, a certificate of merger will be prepared, executed and
verified by each of Acquisition Corp. and the Company and will be delivered to
the Secretary of State of the State of Delaware for filing, as provided in the
DGCL. The Merger will become effective at the date and time specified in the
certificate of merger filed with the Secretary of State of the State of Delaware
(such date and time, the "Effective Time").
Pursuant to the Merger Agreement, at the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, each share of
Class A Common Stock (except shares as to which appraisal rights have been
perfected and shares held in the treasury of the Company) will be converted
solely into the right to receive $20.50 in cash, without interest thereon. Such
shares of Class A Common Stock will no longer be outstanding and will be
canceled. All of the shares of Common Stock held by BankAmerica or its
affiliates will, in the aggregate, be converted into and become the right to
receive, 100 shares of common stock of the Surviving Corporation.
Holders of shares of Class A Common Stock who do not vote to approve and
adopt the Merger Agreement and who otherwise strictly comply with the provisions
of the DGCL regarding statutory appraisal rights have the right to seek a
determination of the fair value of their shares of Class A Common Stock and
payment in cash therefor in lieu of the Merger Consideration to which they would
otherwise be entitled. See "-- Appraisal Rights."
As a result of the foregoing, at the Effective Time, the Company will
become a wholly owned subsidiary of the Bank, itself a wholly owned subsidiary
of BankAmerica. As a result of the Merger, holders of certificates formerly
evidencing shares of Class A Common Stock will cease to have any equity interest
in the Company.
Promptly after the Effective Time, a letter of transmittal will be mailed
by the Exchange Agent to each holder of record of Class A Common Stock
immediately prior to the Effective Time to be used in forwarding such holder's
certificates evidencing such shares for surrender and exchange for the Merger
Consideration to which such holder has become entitled. After receipt of the
letter of transmittal, each holder of certificates formerly representing Class A
Common Stock should surrender such certificates together with the letter of
transmittal duly executed, and any other required documents as set forth in the
letter of transmittal, to the Exchange Agent, and each such holder will receive
in exchange the Merger Consideration to which such holder is entitled. The
letter of transmittal will be accompanied by instructions specifying other
details of the exchange. STOCKHOLDERS SHOULD NOT SEND IN THEIR CERTIFICATES
UNTIL THEY RECEIVE THE LETTER OF TRANSMITTAL. Thereafter, the stockholder will
receive as promptly as practicable in exchange therefor cash in an amount equal
to the product of the number of shares of Class A Common Stock formerly
represented by such stockholder's certificate(s) and $20.50. No interest will be
paid on the cash payable upon surrender of such certificate(s).
31
<PAGE> 36
After the Effective Time, each certificate formerly representing Class A
Common Stock, until surrendered and exchanged, will be deemed for all purposes
to evidence only the right to receive the Merger Consideration for each share of
Class A Common Stock represented.
After the Effective Time, there will be no transfers of shares of Class A
Common Stock on the stock transfer books of the Company. If, after the Effective
Time, certificates theretofore representing shares of Class A Common Stock are
presented for transfer, they will be canceled and exchanged for the Merger
Consideration pursuant to the terms of the Merger Agreement.
No transfer taxes will be payable in connection with any such payment for
shares of Class A Common Stock, except that if the check for such payment is to
be delivered to a person other than the person in whose name the certificates
surrendered are registered, the person requesting delivery of the check must,
prior to the delivery thereof, either (a) pay to the Exchange Agent any
resulting transfer taxes or other taxes or (b) establish to the satisfaction of
the Exchange Agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Exchange Agent nor any party to
the Merger Agreement will be liable to any holder of stock certificates for any
amount paid to a public official pursuant to any applicable abandoned property,
escheat or similar law. Except as otherwise indicated in the immediately
preceding paragraph, the Company will pay all charges and expenses, including
those of the Exchange Agent, in connection with the exchange of stock
certificates for the Merger Consideration.
Notwithstanding anything in the Merger Agreement to the contrary, shares of
Class A Common Stock that are issued and outstanding immediately prior to the
Effective Time and that are held by stockholders who have not voted such shares
in favor of the Merger and who have complied with the requirements of DGCL
Section 262 shall represent only the right to receive payment for such shares as
provided in the DGCL, and shall not be converted into the Merger Consideration,
unless such holder shall fail to perfect or shall effectively withdraw or lose
such stockholder's right to receive payment for such shares under the DGCL. See
"-- Appraisal Rights." If such holder shall have so failed to perfect or shall
have effectively withdrawn or lost such right, such stockholder's shares of
Class A Common Stock thereupon will be deemed, as of the Effective Time, to be
converted into the Merger Consideration.
The Merger Agreement also provides that the Certificate of Incorporation of
the Surviving Corporation shall, at the Effective Time, be amended to read in
its entirety as set forth in Exhibit A to the Merger Agreement. At the Effective
Time, the Bylaws of the Surviving Corporation will be the Bylaws of Acquisition
Corp. as in effect immediately prior to the Effective Time. In addition, the
Merger Agreement provides that the officers of the Company at the Effective Time
will be, except as provided in the Merger Agreement, the officers of the
Surviving Corporation. The directors of the Company at the Effective Time shall
be those individuals designated by BankAmerica prior to the Effective Time.
CERTAIN EFFECTS OF THE MERGER
Following the Merger, BankAmerica will indirectly own 100% of the Surviving
Corporation's outstanding capital stock and the stockholders of Class A Common
Stock immediately prior to the Merger will cease to have any ownership interests
in the Company or rights of stockholders (other than statutory appraisal rights,
in the case of those stockholders who perfect such rights under Delaware law).
Thus, following the Merger, BankAmerica will have a 100% interest in the net
book value and net earnings of the Company. Currently, BankAmerica has an
approximately 66.6% interest in such net book value and net earnings.
Accordingly, the holders of Class A Common Stock will no longer benefit from any
increase in the value of the Company or any payment of dividends on the Common
Stock of the Company and will no longer bear the risk of any decrease in the
value of the Company after the Merger.
As a result of the Merger, the Class A Common Stock of the Company will
cease to be quoted on the NYSE and the Company will no longer be required to
file periodic reports with the Commission. The Company will also no longer be
obligated to comply with the proxy rules of the Commission under the Exchange
Act and its officers, directors and 10% stockholders will be relieved of the
reporting requirements and restrictions on insider trading imposed by section 16
of the Exchange Act.
32
<PAGE> 37
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties by
BankAmerica, Acquisition Corp. and/or the Company relating to, among other
things: (a) the organization and similar corporate matters of BankAmerica, the
Company and certain of their subsidiaries; (b) the capital structure of the
Company and the ownership of Acquisition Corp. by BankAmerica; (c) the
authorization, execution, delivery, performance and enforceability of the Merger
Agreement and related matters; (d) required consents and approvals of
governmental authorities, or conflicts under certificates of incorporation,
bylaws or material agreements, or material violations of law as a result of the
consummation of the transactions contemplated by the Merger Agreement; (e) the
accuracy of information supplied by the Company and BankAmerica in connection
with this Proxy Statement; and (f) absence of material violations of law.
CERTAIN COVENANTS
In the Merger Agreement, the Company has agreed, among other things, that,
through the Effective Time and except as expressly contemplated or permitted by
the Merger Agreement or as otherwise consented to by BankAmerica, the Company
and any of its subsidiaries will, with certain exceptions, carry on their
business in the usual, regular and ordinary course in substantially the same
manner as heretofore conducted and will not (a) declare, set aside or pay any
dividend on or make any other distribution in respect of any of its capital
stock or split, combine or reclassify any shares of its capital stock, or
repurchase, redeem or otherwise acquire any shares of capital stock or voting
debt or any securities convertible into or rights to acquire its capital stock
or effect certain other changes in its capitalization; (b) issue, deliver or
sell, or authorize or propose the issuance, delivery or sale of, any shares of
its capital stock, or any rights, warrants, calls, subscriptions, options or
convertible or similar securities, subject to certain exceptions; (c) engage in
material acquisitions; (d) sell, lease, license, encumber or otherwise dispose
of material assets except in the ordinary course of business consistent with
past practice; (e) incur indebtedness for borrowed money or guarantee any such
indebtedness other than in the ordinary course of business consistent with past
practice; (f) make any change in accounting principles or practices, subject to
certain exceptions; (g) enter into, adopt, amend (except as required by law) or
terminate any employee benefit plan or certain other arrangements and
agreements, subject to certain exceptions; (h) take any action or fail to take
any action that would or would be reasonably likely to result in any of its
representations and warranties becoming untrue such that any of the conditions
to the Merger would not be satisfied; (i) pay, discharge, settle or satisfy any
claims, liabilities or obligations, subject to certain exceptions; (j) except in
the ordinary course of business consistent with past practice or as required by
the Merger Agreement, modify, amend or terminate any material contract, lease or
agreement to which the Company or such subsidiary is a party, subject to certain
exceptions; and (k) amend or propose to amend its Certificate of Incorporation
or Bylaws.
In the Merger Agreement, the Company also agreed that it will not, and that
it will use its reasonable best efforts to cause its officers, directors, agents
and employees not to, initiate, knowingly encourage or solicit, directly or
indirectly, the making of any proposal or offer (an "Acquisition Proposal") to
acquire all or a substantial part of the business and properties or capital
stock of the Company, whether by merger, purchase of securities or assets,
tender offer or otherwise (any such transaction is referred to as an
"Acquisition Transaction"), or participate in any discussions or negotiations
regarding, or furnish to any other person, any information with respect to an
Acquisition Proposal. The Company may furnish or cause to be furnished
information subject to a confidentiality agreement in a form substantially
similar to that previously executed by BankAmerica and, in response to an
Acquisition Proposal, issue a communication to its stockholders of a type
contemplated by applicable securities laws or otherwise communicate the Board of
Director's position with respect to such Acquisition Proposal to the Company's
stockholders. The Company has agreed promptly to inform BankAmerica of the
material terms of any Acquisition Proposal that it receives.
In the Merger Agreement, the Company agreed, among other things, (i) to
convene a meeting of its stockholders to be held as promptly as practicable for
the purpose of voting upon the Merger Agreement; (ii) to afford representatives
of BankAmerica access to the Company's properties, books, contracts, records and
information; and (iii) through its Board of Directors, subject to fiduciary
requirements of applicable law, to recommend that the stockholders approve the
Merger Agreement; provided, however, that at any time prior
33
<PAGE> 38
to the Meeting either or both of the Special Committee or the Board of
Directors, may revoke, modify or qualify its recommendation with respect to the
Merger Agreement if they shall determine, in good faith (after consultation with
legal counsel), that failure so to do would create a material risk of liability
for breach of their fiduciary duties. In the Merger Agreement, the Company and
BankAmerica agreed to prepare and file with the Commission this Proxy Statement.
BankAmerica has agreed that at any meeting of the Company's stockholders
convened to vote on the Merger Agreement (and at any adjournment or postponement
thereof), all of the shares of Class B Common Stock will be voted in favor of
the Merger Agreement, provided that the recommendation of the Special Committee
shall not have been revoked, modified or qualified in a manner adverse to
BankAmerica.
In the Merger Agreement, the Company and BankAmerica agreed that, for the
purposes of the Merger Agreement, no representation or warranty of the Company
contained in the Merger Agreement shall be deemed to be untrue, incorrect or
breached if (A) the failure of the representation or warranty to be true or
correct, or the breach of the representation or warranty, results from any act
or omission of (1) BankAmerica, (2) any person or persons acting at the request
or direction of BankAmerica, or (3) any one or more officer(s), director(s),
employee(s) or representative(s) of BankAmerica or its affiliates (including,
without limitation, any one or more member(s) of the Board of Directors of the
Company other than the members of the Special Committee (each such officer,
director, employee and representative being referred to in the Merger Agreement
as a "BankAmerica Nominee")); or (B) any facts or circumstances that constitute
or give rise to the untruth or inaccuracy in (or breach of) the representation
or warranty were known to BankAmerica or any BankAmerica Nominee at the time
such representation or warranty was made by the Company. The Company and
BankAmerica also agreed that, for purposes of the Merger Agreement, the Company
shall not be deemed to have breached any of its covenants or agreements
contained in the Merger Agreement if (A) the breach of the covenant or agreement
results from any act or omission of (1) BankAmerica, (2) any person or persons
acting at the request or direction of BankAmerica, or (3) any one or more
BankAmerica Nominee(s); or (B) any facts or circumstances that constitute or
give rise to such breach were known to BankAmerica or any BankAmerica Nominee at
the time of or prior to the occurrence of such breach and if, after BankAmerica
shall have become aware of such facts and circumstances, BankAmerica shall have
failed promptly to advise the Special Committee in writing of such facts or
circumstances. For purposes of the two preceding sentences, BankAmerica shall be
deemed to have knowledge of a fact or circumstance or act or omission if such
fact or circumstance or act or omission was formally considered at a meeting of
the Board of Directors of the Company at which any BankAmerica Nominee was
present throughout such consideration or included in any written materials
provided to any such BankAmerica Nominee.
TREATMENT OF OPTIONS AND OTHER COMPANY STOCK-BASED AWARDS
The Merger Agreement provides that, as soon as practicable following the
date thereof, the Board of Directors of the Company (or, if appropriate, any
committee administering the Company's Long-Term Incentive Plan and Non-Employee
Director Stock Plan (collectively, the "Stock Plans")) shall adopt such
resolutions or take such other actions as are required to provide for the
cancellation of all outstanding options issued under the Stock Plans ("Company
Options") upon the Effective Time, in exchange for a cash payment of an amount
equal to (i) the excess, if any, of (x) the Merger Consideration per share over
(y) the exercise price per share of such Company Option, multiplied by (ii) the
number of shares of Class A Common Stock subject to such Company Option for
which such Company Option shall not theretofore have been exercised, whether or
not then vested and exercisable. The Merger Agreement further provides that,
prior to the Effective Time, the Company shall use its commercially reasonable
efforts to (A) obtain any necessary consents from holders of Company Options,
and (B) make any amendments to the terms of such options that are necessary to
give effect to the transactions contemplated by the Merger Agreement; provided,
however, that the failure by the Company to obtain any such consents or to make
any such amendments or the failure of the Company's Board of Directors to take
any such action shall not give rise to a right of termination by BankAmerica or
Acquisition Corp. under any provision of the Merger Agreement or result in a
failure of condition to BankAmerica's or Acquisition Corp.'s obligation to
consummate the transactions contemplated by the Merger Agreement. The Merger
Agreement further provides that each outstanding share of unvested restricted
Class A Common Stock issued pursuant to a Stock Plan (each, a "Restricted
Share") shall,
34
<PAGE> 39
immediately prior to the Effective Time, be canceled and be converted into, and
become the right to receive, the Merger Consideration. See "Security Ownership
of Certain Beneficial Owners and Management." The amount otherwise payable in
respect of certain Restricted Shares to certain senior executive officers of the
Company shall be distributed to such officers on a deferred basis.
The Merger Agreement also requires that the Board of Directors of the
Company (or, if appropriate, any committee administering the Stock Plans) adopt
such resolutions or take such actions as are required to terminate the Stock
Plans as of the Effective Time, to delete as of the Effective Time the provision
in any other benefit plan of the Company providing for the issuance, transfer or
grant of any capital stock of the Company or any interest in respect of any
capital stock of the Company and to ensure that following the Effective Time no
holder of a Company Option or any participant in any Stock Plan or other Company
benefit plan shall have any right thereunder to acquire any capital stock of the
Company or the Surviving Corporation.
INDEMNIFICATION
The Merger Agreement provides that: (a) for a period of six years from the
Effective Time, the Surviving Corporation will maintain all rights to
indemnification (including with respect to the advancement of expenses incurred
in the defense of any action or suit) existing on the date of the Merger
Agreement in favor of the current and former directors and executive officers of
the Company as provided in the Company's Certificate of Incorporation and Bylaws
or otherwise, in each case as in effect on the date of the Merger Agreement; (b)
the Certificate of Incorporation and Bylaws of the Surviving Corporation will
not be amended to reduce or limit such rights of indemnity; and (c) for a period
of six years from the Effective Time, the Surviving Corporation will indemnify
such persons to the fullest extent possible under its Certificate of
Incorporation, its Bylaws and applicable law against all losses, damages,
liabilities or claims made against them arising from their service in such
capacity prior to and including the Effective Time, to at least the same extent
as such persons currently are required to be indemnified pursuant to the
Company's Certificate of Incorporation and Bylaws. The Merger Agreement also
provides that, for a period of six years from the Effective Time, BankAmerica
shall, to the extent permitted by applicable law, indemnify and hold harmless
each current and former director and executive officer against and from any
costs, fees, and expenses (including reasonable attorneys' fees), judgments,
fines, losses, claims, damages, liabilities, and amounts paid in settlement in
connection with any lawsuit, court action or other court proceeding, claim, or
investigation, to the extent that such legal proceeding arises out of or
pertains to (1) any action or omission or alleged action or omission in his or
her capacity as a director or executive officer, or as employee or agent, of the
Company or (2) any of the transactions contemplated by the Merger Agreement. The
Merger Agreement also provides that, for a period of six years from the
Effective Time, the Surviving Corporation (or BankAmerica on its behalf) will
cause to be maintained in effect, at no expense to the beneficiaries thereof,
directors' and officers' liability insurance providing at least the same
coverage with respect to the Company's officers and directors as the policies,
if any, maintained from time to time by or on behalf of BankAmerica with respect
to its directors and officers or, if broader in scope, the policies maintained
by the Company as of the date of the Merger Agreement; provided, however, that
the aggregate annual premium payable therefor shall not exceed 150% of the
aggregate annual premium payable for such directors' and officers' liability
insurance policies currently in effect (it being understood that if the
aggregate annual premium of such insurance coverage exceeds the amount referred
to in this sentence, BankAmerica shall be obligated to obtain a policy with the
broadest coverage available for a cost not exceeding such amount).
TAIWAN BUSINESS
On December 9, 1998, BankAmerica announced a plan to divest certain of the
assets and businesses of BankAmerica and its affiliates which are located in
various countries in Asia, including possibly certain assets and businesses
located in the Republic of China. The proposed sale of such Asian operations,
including possibly the assets and business of the Company located in the
Republic of China (the "Taiwan Business"), arose, in part, as a consequence of
the BankAmerica/NationsBank Merger, and the post-merger evaluation of the
strategic and economic significance of BankAmerica's varied business operations.
The Merger Agreement provides that the Taiwan Business may, at the election of
BankAmerica, be included within certain assets and
35
<PAGE> 40
businesses of BankAmerica or its affiliates which may be the subject of
divestitures by BankAmerica or its affiliates after the date of the Merger
Agreement. BankAmerica has agreed to consult with the Company in connection with
such divestitures and has further agreed that the Company shall be entitled to
receive its allocable proportion of the consideration received by BankAmerica
and its affiliates for such Asian assets and businesses, of which the Taiwan
Business shall be a part, such allocation to be determined in good faith by
BankAmerica. In the event that the Merger Agreement shall be terminated for any
reason and prior to or thereafter the divestiture of the Taiwan Business shall
be consummated on terms which result in the consideration therefor receivable
under the Merger Agreement by the Company being less than the market value of
the securities of the Company issued in connection with the acquisition thereof,
determined in the manner consistent with the valuation used at the time of such
acquisitions, BankAmerica shall promptly pay to the Company the difference
between such market value and the consideration therefor receivable. For
additional information, see "Certain Transactions and Relationships Between
BankAmerica and the Company -- General."
CONDITIONS
The respective obligations of BankAmerica and Acquisition Corp., on the one
hand, and the Company, on the other hand, to effect the Merger are subject to
the following conditions: (a) no statute, rule, regulation, executive order,
decree, preliminary or permanent injunction or restraining order shall have been
enacted, entered, promulgated or enforced by any United States federal or state
court of competent jurisdiction or other United States governmental entity that
prohibits the consummation of the Merger; and (b) the representations and
warranties of the other party set forth in the Merger Agreement shall be true
and correct, and the other party shall have performed all obligations required
to be performed by it under the Merger Agreement, in all respects; provided that
in determining the accuracy of such representations and warranties no effect
shall be given to any qualification or exception relating to materiality
contained therein and a party's representations and warranties shall be deemed
to be true and correct unless any breaches thereof, individually or in the
aggregate, would have or would be reasonably likely to have a material adverse
effect on the Company, as to the condition to BankAmerica's and Acquisition
Corp.'s obligation to close the Merger, or on BankAmerica and Acquisition Corp.,
as to the condition of the Company's obligation to close the Merger; and
provided, further, that any failure by the Company to perform its obligations
must not have and must not be reasonably likely to have a material adverse
effect on the Company or on the economic consequences to BankAmerica of the
transactions contemplated by the Merger Agreement.
TERMINATION
The Merger Agreement may be terminated and the Merger abandoned at any time
prior to the Effective Time, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of the Company: (a)
by mutual consent of the parties thereto; (b) by either BankAmerica, Acquisition
Corp. or the Company (i) if there has been a breach of any representation,
warranty, covenant or agreement on the part of any other party which breach
shall have had a material adverse effect on such party and shall not have been
cured prior to the earlier of (x) 30 days following notice of such breach or (y)
April 30, 1999, or (ii) if any permanent injunction or other order of a United
States federal or state court or other competent United States governmental
entity preventing the consummation of the Merger shall have become final and
non-appealable; (c) by either BankAmerica, Acquisition Corp. or the Company if
the Merger shall not have been consummated before April 30, 1999 (unless such
party's breach is the cause or resulted in the failure of the Merger to occur);
(d) by the Company if the Merger shall not have been approved by the holders of
a majority of the outstanding shares of Common Stock of the Company entitled to
vote thereon at the Meeting; or (e) by BankAmerica if the Special Committee
shall have, after the date of this Proxy Statement, revoked or modified in a
manner adverse to BankAmerica, its recommendation in favor of the adoption and
approval of the Merger Agreement or the approval of the Merger.
36
<PAGE> 41
EFFECT OF TERMINATION
In the event of any termination of the Merger Agreement by either
BankAmerica, Acquisition Corp. or the Company, the Merger Agreement will become
void and there will be no liability or obligation on the part of BankAmerica,
Acquisition Corp., the Company or their respective officers, directors or
stockholders except to the extent that such termination results from the willful
breach by a party of any of its representations, warranties, covenants or
agreements set forth in the Merger Agreement.
AMENDMENT AND WAIVER
Subject to applicable law and the approval and authorization of the Special
Committee (as described below), (a) the Merger Agreement may be amended at any
time by action taken or authorized by the respective Boards of Directors of
BankAmerica, Acquisition Corp. and the Company and (b) the parties may, to the
extent legally allowed, extend the time for performance of the obligations of
the other parties to the Merger Agreement and may waive inaccuracies in the
representations and warranties or compliance with any agreements or conditions
for their respective benefit contained in the Merger Agreement.
APPROVAL BY SPECIAL COMMITTEE
The Merger Agreement provides that, to the extent permitted by applicable
law, (a) the approval of a majority of the members of the Special Committee
shall be required to authorize (i) any termination of the Merger Agreement by
the Company, (ii) any agreement by the Company to amend the Merger Agreement,
(iii) any extension of time for the performance of any of the obligations or
other acts of BankAmerica or Acquisition Corp., or (iv) any waiver of compliance
with or any waiver of any breach of any of the representations, warranties,
covenants or conditions contained in the Merger Agreement for the benefit of the
Company; and (b) the authorization of any such action by a majority of the
Special Committee shall constitute authorization of such action by the Board of
Directors of the Company.
ACCOUNTING TREATMENT
The acquisition of the Company's public shares in the Merger will be
accounted for by BankAmerica as a "purchase" under generally accepted accounting
principles.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Under currently applicable law, the following are the material United
States federal income tax considerations generally applicable to the Merger. The
tax treatment described herein may vary depending upon each stockholder's
particular circumstances and tax position. Certain stockholders (including
insurance companies, tax-exempt organizations, financial institutions or
broker-dealers, foreign corporations, persons who are not citizens or residents
of the United States, stockholders who do not hold their shares as capital
assets and stockholders who have acquired their existing stock upon the exercise
of options or otherwise as compensation) may be subject to special rules not
discussed below. No ruling from the Internal Revenue Service ("IRS") will be
sought with respect to the federal income tax consequences discussed herein and,
accordingly, there can be no assurance that the IRS will agree with the
conclusions stated herein. The discussion below is based upon the provisions of
the Internal Revenue Code of 1986, as amended (the "Code"), and regulations,
rulings and judicial decisions thereunder as of the date hereof, and such
authorities may be repealed, revoked or modified so as to result in U.S. federal
income tax consequences different from those discussed below. In addition, this
discussion does not consider the effect of any applicable foreign, state, local
or other tax laws. Each stockholder should consult his or her own tax advisor as
to the particular tax consequences to him or her of the Merger, including the
applicability and effect of any foreign, state, local or other tax laws.
Characterization of the Merger for U.S. Federal Income Tax Purposes. For
U.S. federal income tax purposes, the transitory existence of Acquisition Corp.
will be disregarded and the Merger treated for such purposes as the purchase by
BankAmerica of outstanding shares of Class A Common Stock at $20.50 per share.
37
<PAGE> 42
Stockholders Receiving Cash in the Merger. Each Company stockholder
receiving cash in the Merger will recognize either capital gain or loss
(assuming the Company stock is held by such stockholder as a capital asset at
the Effective Time) equal to the difference between the amount realized on his
or her deemed sale of Company stock to BankAmerica and the stockholder's
adjusted tax basis in such Company stock. Such gain or loss generally will be
long-term capital gain or loss if the Company stock is held as a capital asset
by the stockholder for more than one year at the Effective Time.
Dissenting Stockholders. For federal income tax purposes, dissenting
stockholders receiving cash as a result of exercise of their rights of appraisal
will be treated as having had their shares of Class A Common Stock redeemed by
the Company in exchange for that cash. As the Company will be indirectly wholly
owned by BankAmerica following the Merger, the deemed redemption of a dissenting
stockholder's shares of Company stock should be treated as a sale of such stock
through application of the "complete termination of interest" rules under
section 302 of the Code so that the federal income tax consequences to
dissenting stockholders should be as described under "Stockholders Receiving
Cash in the Merger," above.
Backup Withholding. The Company or the Exchange Agent will be required to
withhold 31% of the gross proceeds payable to a stockholder or other payee in
the Merger unless the stockholder or payee provides, in a properly completed
substitute Form W-9 included with the transmittal letter, the stockholder's
taxpayer identification number and certifies under penalties of perjury that
such number is correct and that the stockholder is not subject to backup
withholding, unless an exemption applies under applicable law and regulations.
Therefore, unless such an exemption exists and is demonstrated in a manner
satisfactory to the Company or the Exchange Agent, in accordance with the
instructions that will accompany the substitute Form W-9, each stockholder
should complete and sign the substitute Form W-9 that will be made available to
the stockholder with the transmittal letter, so as to provide the information
and certification necessary to avoid backup withholding.
Foreign Stockholders. The following is a general discussion of certain
U.S. federal income tax consequences of the Merger to foreign stockholders. For
this purpose, a foreign stockholder is any person who is, for U.S. federal
income tax purposes, a foreign corporation, a nonresident alien individual, a
foreign partnership or a foreign estate or trust.
In general, any gain realized upon a foreign stockholder's sale of shares
of Class A Common Stock will not be subject to U.S. federal income tax unless
(i) the gain is effectively connected with a trade or business in the United
States of the foreign stockholder or (ii) in the case of a foreign stockholder
who is an individual, such individual is present in the United States for 183
days or more in the taxable year of the sale and certain other conditions are
met. If the gain is effectively connected with the conduct of a U.S. trade or
business, the foreign stockholder will generally be subject to U.S. federal
income tax on such gain on a net income basis in the same manner as if it were a
U.S. taxpayer. In addition, if the foreign stockholder is a foreign corporation,
it may be subject to a branch profits tax equal to 30% (or applicable lower tax
treaty rate) on its effectively connected earnings and profits for the taxable
year, subject to adjustments. For this purpose, effectively connected gain from
the sale of shares of Class A Common Stock would be included in such foreign
corporation's earnings and profits.
The Company or the Exchange Agent will be required to withhold 31% of the
gross proceeds payable to a foreign stockholder in the Merger unless the foreign
stockholder (i) provides his name and address, and certifies, under penalties of
perjury, that he is not a U.S. person (which certification may be made in a
properly completed substitute Form W-8 included with the transmittal letter or
in Form W-8BEN) or (ii) a financial institution holding the shares of Class A
Common Stock on behalf of the beneficial owner certifies, under penalties of
perjury, that such statement has been received by it and furnishes a paying
agent with a copy thereof. Therefore, unless an exemption exists and is
demonstrated in a manner satisfactory to the Company or the Exchange Agent, in
accordance with the instructions that will accompany the substitute Form W-8,
each foreign stockholder should complete and sign the substitute Form W-8 that
will be made available to stockholders with the transmittal letter, so as to
provide the information and certification necessary to avoid backup withholding.
Beneficial owners holding shares of Class A Common Stock through
38
<PAGE> 43
others are urged to consult their tax advisors regarding application of the U.S.
backup withholding rules to their circumstances.
ALTHOUGH THE FOREGOING ARE THE MATERIAL U.S. FEDERAL INCOME TAX
CONSIDERATIONS GENERALLY APPLICABLE TO THE MERGER, THE DISCUSSION DOES NOT
ADDRESS EVERY FEDERAL INCOME TAX CONCERN WHICH MAY BE APPLICABLE TO A PARTICULAR
STOCKHOLDER. EACH STOCKHOLDER IS URGED TO CONSULT SUCH STOCKHOLDER'S OWN TAX
ADVISOR TO DETERMINE THE TAX CONSEQUENCES TO SUCH STOCKHOLDER, IN THE LIGHT OF
HIS OR HER PARTICULAR CIRCUMSTANCES, OF THE DISPOSITION OF SHARES OF CLASS A
COMMON STOCK PURSUANT TO THE MERGER.
APPRAISAL RIGHTS
THE FOLLOWING SUMMARY DOES NOT PURPORT TO BE A COMPLETE STATEMENT OF
APPRAISAL RIGHTS UNDER THE DGCL. REFERENCE SHOULD BE MADE TO THE FULL TEXT OF
SECTION 262 OF THE DGCL, A COPY OF WHICH IS ATTACHED AS ANNEX III TO THIS PROXY
STATEMENT.
Record holders of Class A Common Stock are entitled to appraisal rights
under Section 262 of the DGCL in connection with the Merger. The following
provides a discussion of the material provisions of the law pertaining to
appraisal rights under the DGCL. Such discussion is not a complete statement of
such law and is qualified in its entirety by the full text of Section 262 which
is presented in its entirety as Annex III to this Proxy Statement. Except as set
forth herein, stockholders of the Company will not be entitled to appraisal
rights in connection with the Merger. All record holders of Class A Common Stock
who wish to exercise their appraisal rights with respect to such shares must
comply with the procedures of Section 262 of the DGCL.
Section 262. Under the DGCL, record holders of shares of Class A Common
Stock who follow the procedures set forth in Section 262 and who have not voted
in favor of the Merger will be entitled to have their shares of Class A Common
Stock appraised by the Delaware Court of Chancery and to receive payment of the
"fair value" of such shares, exclusive of any element of value arising from the
accomplishment or expectation of the Merger, together with a fair rate of
interest, if any, as determined by such court. A person having a beneficial
interest in shares of Class A Common Stock held of record in the name of another
person, such as a broker or nominee, must act promptly to cause the record
holder to follow the steps summarized below properly and in a timely manner to
perfect appraisal rights.
Under Section 262, where a merger is to be submitted for approval at a
meeting of stockholders, as in the case of the Meeting, not less than 20 days
prior to the meeting, the company must notify each of the record holders of
shares of capital stock at the close of business on the record date for such
meeting that such appraisal rights are available and include in each such notice
a copy of Section 262. This Proxy Statement constitutes such notice and the
applicable statutory provision of the DGCL is attached to this Proxy Statement
as Annex III. Any stockholder who wishes to exercise appraisal rights should
review the following discussion and Annex III carefully because the failure to
timely and properly comply with the procedures specified in Section 262 will
result in the loss of appraisal rights under the DGCL.
A record holder of shares of Class A Common Stock wishing to exercise
appraisal rights must deliver to the Company, before the taking of the vote on
the Merger at the Meeting, a written demand for appraisal of such holder's
shares of Class A Common Stock and such shares must not be voted in favor of
adoption of the Merger Agreement. Such written demand must reasonably inform the
Company of the identity of the stockholder of record and that such record
stockholder intends thereby to demand appraisal of such shares. In addition, a
holder of shares of Class A Common Stock wishing to exercise appraisal rights
must hold of record such shares on the date the written demand for appraisal is
made and must continue to hold of record such shares through the Effective Time.
Accordingly, a holder of shares who is the record holder of shares on the date
the written demand for appraisal is made, but who thereafter transfers such
shares prior to the consummation of the Merger, will lose any right to appraisal
in respect of such shares. A holder of shares who votes against adoption of the
Merger Agreement will not be deemed to have satisfied the notice requirement of
39
<PAGE> 44
such holder with respect to appraisal rights merely by so voting. The written
demand for appraisal must be in addition to and separate from any proxy or vote
abstaining from or against adoption of the Merger Agreement.
Only a holder of record of shares of Class A Common Stock is entitled to
assert appraisal rights for such shares registered in that holder's name. A
demand for appraisal should be executed by or on behalf of the holder of record
fully and correctly, as the holder's name appears on the stock certificates.
If shares of Class A Common Stock are owned of record in a fiduciary
capacity, such as by a trustee, guardian or custodian, execution of the demand
should be made in that capacity, and if the shares of Class A Common Stock are
owned of record by more than one person, as in a joint tenancy or tenancy in
common, the demand should be executed by or on behalf of all joint owners. An
authorized agent, including one or more joint owners, may execute a demand for
appraisal on behalf of a holder of record; however, the agent must identify the
record owner or owners and expressly disclose the fact that, in executing the
demand, he or she is acting as agent for such owner or owners. A record holder
such as a broker who holds shares of Class A Common Stock as nominee for several
beneficial owners may exercise appraisal rights with respect to the shares of
Class A Common Stock held for one or more beneficial owners while not exercising
such rights with respect to the shares of Class A Common Stock held for other
beneficial owners. In such case, the written demand should set forth the number
of shares of Class A Common Stock as to which appraisal is sought and the number
of shares of Class A Common Stock held in the name of the record owner. When no
number of shares is expressly mentioned, the demand will be presumed to cover
all shares of Class A Common Stock held in the name of the record owner. Holders
of Class A Common Stock who hold their shares in brokerage accounts or other
nominee forms and who wish to exercise appraisal rights are urged to consult
with their brokers to determine the appropriate procedures for the making of a
demand for appraisal by such nominee.
All written demands for appraisal of shares of Class A Common Stock should
be sent or delivered to the Company, c/o Bank of America National Trust and
Savings Association, 555 California Street, 6th Floor, San Francisco, California
94104, Attention: Corporate Secretary, and must be received before the taking of
the vote on the Merger by holders of Common Stock at the Meeting.
Within ten days after the Effective Time, the Company, as the Surviving
Corporation, must send a notice as to the effectiveness of the Merger to each
person who has satisfied the appropriate provisions of Section 262. Within 120
days after the Effective Time, but not thereafter, any holder of shares of Class
A Common Stock who has satisfied the foregoing conditions and is otherwise
entitled to appraisal rights under Section 262, may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
shares of Class A Common Stock held by all such stockholders. If no such
petition is filed, appraisal rights will be lost for all stockholders who had
previously demanded appraisal of their shares of Class A Common Stock.
Stockholders seeking to exercise appraisal rights should assume that the
Surviving Corporation will not file a petition with respect to the appraisal of
the value of shares of Class A Common Stock and that the Surviving Corporation
will not initiate any negotiations with respect to the "fair value" of shares of
Class A Common Stock. Accordingly, stockholders who wish to exercise their
appraisal rights should regard it as their obligation to take all steps
necessary to perfect their appraisal rights in the manner prescribed in Section
262.
Within 120 days after the Effective Time, any record holder of shares of
Class A Common Stock who has complied with the provisions of Section 262 will be
entitled, upon written request, to receive from the Surviving Corporation a
statement setting forth the aggregate number of shares of Class A Common Stock
not voted in favor of the Merger and with respect to which demands for appraisal
were received by the Company and the aggregate number of holders of such shares
of Class A Common Stock. Such statement must be mailed within ten days after a
written request therefor has been received by the Surviving Corporation or
within ten days after expiration of the time for delivery of demands for
appraisal under Section 262, whichever is later.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court of Chancery will determine which holders of shares
of Class A Common Stock are entitled to appraisal rights. The Delaware Court of
Chancery may require the holders of Class A Common Stock who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to
40
<PAGE> 45
the Register in Chancery for notation thereon of the pendency of the appraisal
proceedings; and if any holder of shares of Class A Common Stock fails to comply
with such direction, the Delaware Court of Chancery may dismiss the proceedings
as to such stockholder. Where proceedings are not dismissed, the Delaware Court
of Chancery will appraise the shares of Class A Common Stock owned by such
stockholders, determining the fair value of such shares exclusive of any element
of value arising from the accomplishment or expectation of the Merger, together
with a fair rate of interest, if any, to be paid upon the amount determined to
be the fair value.
Although the Special Committee believes that the Merger Consideration is
fair, no representation is made as to the outcome of the appraisal of fair value
as determined by the Delaware Court of Chancery, and holders of Class A Common
Stock should recognize that such an appraisal could result in a determination of
a value higher or lower than, or the same as, the Merger Consideration.
Moreover, BankAmerica does not anticipate offering more than the Merger
Consideration to any holder of Class A Common Stock exercising appraisal rights
and reserves the right to assert, in any appraisal proceeding, that, for
purposes of Section 262, the "fair value" of a share of Class A Common Stock is
less than the Merger Consideration. In determining "fair value," the Delaware
Court of Chancery is required to take into account all relevant factors. In
Weinberger v. UOP, Inc. the Delaware Supreme Court discussed the factors that
could be considered in determining fair value in an appraisal proceeding,
stating that "proof of value by any techniques or methods which are generally
considered acceptable in the financial community and otherwise admissible in
court" should be considered and that "[f]air price obviously requires
consideration of all relevant factors involving the value of a company." The
Delaware Supreme Court has stated that in making this determination of fair
value the court must consider market value, asset value, dividends, earnings
prospects, the nature of the enterprise and any other facts which could be
ascertained as of the date of the merger which throw any light on future
prospects of the merged corporation. Section 262 provides that fair value is to
be "exclusive of any element of value arising from the accomplishment or
expectation of the merger." In Cede & Co. v. Technicolor, Inc., the Delaware
Supreme Court stated that such exclusion is a "narrow exclusion [that] does not
encompass known elements of value," but which rather applies only to the
speculative elements of value arising from such accomplishment or expectation.
In Weinberger, the Delaware Supreme Court construed Section 262 to mean that
"elements of future value, including the nature of the enterprise, which are
known or susceptible of proof as of the date of the merger and not the product
of speculation, may be considered." The Court also stated that the "monetary
remedy" for a stockholder in a merger ordinarily should be confined to the
appraisal remedy. However, the Court stated that the appraisal remedy "may not
be adequate in certain cases, particularly where fraud, misrepresentation,
self-dealing, deliberate waste of corporate assets, or gross and palpable
overreaching are involved," in which cases the Delaware Court of Chancery would
have the power "to fashion any form of equitable and monetary relief as may be
appropriate."
The Court will also determine the amount of interest, if any, to be paid
upon the amounts to be received by persons whose shares of Class A Common Stock
have been appraised. The costs of the action may be determined by the Court and
taxed upon the parties as the Court deems equitable. The Court may also order
that all or a portion of the expenses incurred by any holder of shares of Class
A Common Stock in connection with an appraisal, including, without limitation,
reasonable attorneys' fees and the fees and expenses of experts utilized in the
appraisal proceeding, be charged pro rata against the value of all of the shares
of Class A Common Stock entitled to appraisal.
Any holder of shares of Class A Common Stock who has duly demanded an
appraisal in compliance with Section 262 will not, after the Effective Time, be
entitled to vote his or her shares of Class A Common Stock for any purpose nor,
after the Effective Time, be entitled to the payment of dividends or other
distributions thereon (except dividends or other distributions payable to
holders of record of shares of Class A Common Stock as of a date prior to the
Effective Time).
A holder of shares of Class A Common Stock will fail to perfect, or
effectively lose, the right to appraisal if no petition for appraisal is filed
within the time provided. If a stockholder delivers to the Surviving Corporation
a written withdrawal of his or her demand for an appraisal and an acceptance of
the Merger, within 60 days after the Effective Time or with the written approval
of the Surviving Corporation thereafter, then the right of such stockholder to
an appraisal will cease and such stockholder shall be entitled to receive
41
<PAGE> 46
the Merger Consideration, without interest, as if he or she had not demanded
appraisal of his or her shares of Class A Common Stock. However, no appraisal
proceeding pending in the Court of Chancery will be dismissed as to any
stockholder without the approval of the Court, which approval may be conditioned
on such terms as the Court deems just.
FAILURE TO STRICTLY COMPLY WITH THE PROCEDURES SET FORTH IN SECTION 262 OF
THE DGCL FOR PERFECTING APPRAISAL RIGHTS MAY RESULT IN THE TERMINATION OR WAIVER
OF SUCH RIGHTS.
The foregoing is a summary of certain of the provisions of Section 262 of
the DGCL. Reference should be made to the full text of such Section, a copy of
which is attached hereto as Annex III.
LITIGATION
On October 27, 1998, two putative class actions entitled Crandon Capital
Partners v. Sharif M. Bayyari, et al., Civil Action No. 16734 (the "Crandon
Action"), and Gold Plate Holdings, Inc. v. Sharif M. Bayyari, et al., Civil
Action No. 16735 (the "Gold Plate Action"), were filed in the Court of Chancery
of the State of Delaware in and for New Castle County in connection with the
announcement by BankAmerica and the Company on October 22, 1998 (the
"Announcement") that BankAmerica was offering to acquire through merger each
outstanding share of Class A Common Stock for $15.50 per share, in cash (the
"Proposal"). A third putative class action, entitled Value Holdings, L.P. v.
Sharif M. Bayyari, et al., Civil Action No. 16755NC (the "Value Holdings
Action"), was filed on October 29, 1998 in the Court of Chancery of the State of
Delaware in and for New Castle County.
The Crandon, Gold Plate and Value Holdings Actions, collectively referred
to herein as the "Stockholders' Litigation", by order of the court dated
December 29, 1998, were consolidated into the lawsuit (the "Lawsuit") entitled
In re BA Merchant Services, Inc. Shareholders' Litigation, Civil Action No.
16734. Those lawsuits challenge the terms of the Proposal and name as defendants
Sharif M. Bayyari, Barbara J. Desoer, Donald R. Dixon, William E. Fisher, James
G. Jones, Hatim A. Tyabji, the Company and BankAmerica. H. Eugene Lockhart was
originally named as a defendant but was dismissed by order of the court dated
December 29, 1998. The Lawsuit alleges that the named defendants breached their
fiduciary duties to the public stockholders of the Company and that BankAmerica,
through its control of the Company and by taking advantage of the purportedly
depressed state of the market, acted unfairly towards such public stockholders
in making the Proposal which in turn was alleged to represent unfair and
inadequate consideration tendered for the shares of Class A Common Stock. All
defendants deny those allegations.
The Lawsuit seeks to have the Merger enjoined or, if it is consummated, to
have it rescinded and to recover unspecified damages, fees and expenses. Co-lead
counsel have been designated by the plaintiffs.
On December 22, 1998, counsel to BankAmerica, the Company and the other
defendants entered into a Memorandum of Understanding with lead counsel for the
plaintiffs in such actions for the settlement thereof. The Memorandum of
Understanding provides for a full and complete settlement of the Lawsuit.
Plaintiffs' counsel and their clients in the Lawsuit have agreed to the proposed
settlement, based on the terms of the Merger Agreement after reviewing the
matter with a financial services consultant retained by plaintiffs' counsel in
connection with the litigation and conferring with counsel to BankAmerica
regarding the consideration being offered for the shares of Class A Common
Stock. The proposed settlement contemplated by the Memorandum of Understanding
was subject to certain additional discovery by plaintiffs' counsel and approval
by the court. Following such confirmatory discovery, on February 9, 1999,
BankAmerica, the Company and the other defendants entered into a Stipulation and
Agreement of Compromise, Settlement and Release (the "Stipulation") with counsel
to the plaintiffs in such cases for the settlement thereof. The Stipulation
provides, among other things, that (i) the parties agree that the increased cash
consideration of $20.50 per share of Class A Common Stock constitutes fair,
adequate and reasonable consideration for such shares and for the settlement of
all claims which were raised or could have been raised by plaintiffs in the
Stockholders' Litigation and that BankAmerica took into account the desirability
of satisfactorily addressing the claims asserted in the Lawsuit in agreeing to
the increased consideration to be paid for the shares of Class A Common Stock
and that the pendency of the Lawsuit and communications with plaintiffs' counsel
were contributive and influential factors in connection with the enhanced terms
of the Merger; (ii) the
42
<PAGE> 47
Stipulation provides for the dismissal of all claims with prejudice and without
cost to any party, except as provided in the Stipulation, and also provides for
class certification of a class consisting of all holders of shares of Class A
Common Stock on any day during the period from October 22, 1998 through and
including the closing of the Merger; (iii) the Stipulation provides that all
defendants have denied, and continue to deny, that they have committed any
violation of law; (iv) plaintiffs will provide for releases of claims against
all defendants; (v) the parties will present the settlement to the court for
hearing and approval as soon as practicable and, following appropriate notice to
members of the class, will use their best efforts to obtain final court approval
of the settlement and the release and dismissal of the actions with prejudice
against the plaintiffs and the class; (vi) the Merger may be consummated prior
to final court approval of the settlement; (vii) subject to obtaining final
court approval of the proposed settlement and final dismissal with prejudice of
the Lawsuit, defendants will not oppose an application by plaintiffs' counsel in
the Lawsuit, acting through lead counsel, for an award of attorneys' fees not to
exceed $1.1 million and an award of actual documented expenses not to exceed
$50,000, which amounts are to be reviewed and approved by the court for
reasonableness; and (viii) the Stipulation will be terminated if, among other
reasons, the Merger Agreement is terminated or if the Merger is not consummated.
The Stipulation also provides that any claim for appraisal rights pursuant to
the DGCL Section 262 shall not be released. See "-- Appraisal Rights."
Confirmatory discovery took place on January 27 and 28, 1999. On February
16, 1999, as of the close of business on October 22, 1998, a Notice of Pendency
of Class Action, Temporary and Proposed Class Action Determination, Proposed
Settlement of Class Action, Settlement Hearing and Right to Appear (the "Notice
of Hearing") was mailed to all recordholders of the Company's Class A Common
Stock, and on February 18, 1999, such notice was mailed to each new owner who
became such between the close of business on October 23, 1998, and the close of
business on February 17, 1999.
A hearing to consider approval of the settlement and the attorneys' fee
request of plaintiffs' counsel was held on March 18, 1999 (the "Settlement
Hearing"). At the Settlement Hearing, an Order and Final Judgment was entered,
wherein it is provided, in accordance with the Stipulation, that the Lawsuit is
dismissed with prejudice. Fees and expenses were awarded to the Plaintiffs'
counsel in the amount of $1,100,000 and $34,878.25, respectively. The effective
date of the settlement provided by the Stipulation will occur five days after
the later of (i) the consummation of the Merger (which will occur after the
Special Meeting of Stockholders, scheduled for April 28, 1999) and (ii) the
Order and Final Judgment of March 18, 1999 becoming final, which, in the absence
of appeal, will occur on April 19, 1999.
43
<PAGE> 48
SELECTED HISTORICAL FINANCIAL DATA
The selected financial information included in the table below for each of
the five years in the period ended December 31, 1997 has been derived from and
is qualified in its entirety by the audited financial statements of the Company
including those incorporated herein by reference to the Company's Annual Report
on Form 10-K for the year ended December 31, 1997, available as described above
under "Incorporation of Certain Documents by Reference." The selected financial
data presented below for the nine months ended September 30, 1998 and 1997 and
as of September 30, 1998 and 1997 has been derived from and should be read in
conjunction with the unaudited interim financial statements of the Company
included in its Quarterly Report on Form 10-Q for the nine months ended
September 30, 1998, incorporated herein by reference. In the opinion of the
Company, such unaudited interim financial statements have been prepared on the
same basis as the audited financial statements and include all adjustments,
consisting only of normal recurring adjustments, necessary for a fair
presentation of the results of operations for the interim periods.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
YEAR ENDED DECEMBER 31,(1) SEPTEMBER 30,
----------------------------------------------- -----------------
1997 1996 1995 1994 1993 1998 1997
------- ------- ------- ------- ------- ------- -------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net Revenue......................... $ 161.0 $ 138.8 $ 119.9 $ 106.2 $ 88.9 $ 135.8 $ 116.0
------- ------- ------- ------- ------- ------- -------
OPERATING EXPENSE:
Salaries and employee benefits.... 34.7 27.9 24.1 21.6 19.0 30.0 25.2
Data processing and
communications................. 34.4 29.5 28.4 25.0 27.9 29.8 24.3
General and administrative........ 24.8 20.7 20.8 18.5 17.3 19.3 18.3
Depreciation...................... 10.6 9.1 6.6 4.6 3.7 11.4 7.9
Employee stock exchange (2)....... -- 2.4 -- -- -- -- --
Amortization of intangibles....... 0.8 1.1 1.2 1.3 1.5 1.5 0.3
------- ------- ------- ------- ------- ------- -------
Total operating expense........... 105.3 90.7 81.1 71.0 69.4 91.9 76.1
------- ------- ------- ------- ------- ------- -------
Income from operations.............. 55.7 48.1 38.8 35.2 19.5 43.9 40.0
Net interest income (expense)....... 7.7 (1.5) (0.8) -- -- 5.4 5.8
------- ------- ------- ------- ------- ------- -------
Income before income taxes........ 63.4 46.6 38.0 35.2 19.5 49.3 45.8
Provision for income taxes.......... 26.0 19.2 15.7 14.5 8.0 20.2 18.9
------- ------- ------- ------- ------- ------- -------
Net income..................... $ 37.4 $ 27.4 $ 22.3 $ 20.7 $ 11.5 $ 29.1 $ 26.9
======= ======= ======= ======= ======= ======= =======
Basic and diluted earnings per
common share (3).................. $ 0.77 $ 0.56 N/A N/A N/A $ 0.60 $ 0.55
======= ======= ======= ======= ======= ======= =======
Pro forma basic and diluted earnings
per common share(4)............... N/A N/A $ .46 $ .43 $ .25 N/A N/A
======= ======= ======= ======= ======= ======= =======
Pro forma basic and diluted earnings
per common share, as adjusted
(3)(5)............................ N/A $ .69 $ .57 $ .51 N/A N/A N/A
======= ======= ======= ======= ======= ======= =======
BALANCE SHEET DATA (AT PERIOD END):
Total assets........................ $ 332.1 $ 318.3 $ 150.1 $ 125.9 $ 90.1 $ 354.3 $ 323.7
Total liabilities................... 40.8 38.3 27.3 27.4 19.1 33.7 43.2
BankAmerica's equity interest (6)... -- 27.9 122.8 98.5 71.0 -- --
Stockholders' equity................ 291.3 252.1 N/A N/A N/A 320.6 280.5
OTHER DATA:
Total transactions processed........ 531.2 386.2 322.2 251.6 201.8 508.3 370.6
Total sales volume processed........ $33,900 $26,430 $21,241 $16,979 $14,503 $29,844 $24,103
Book value per common share......... $ 5.99 $ 5.76 N/A N/A N/A $ 6.59 $ 5.77
</TABLE>
- ------------------------------
(1) All data presented for the years ended December 31, 1997, 1996, 1995 and
1994 include the historical results of the Asia Acquisitions. The
acquisition of these entities has been accounted for as a
44
<PAGE> 49
reorganization of entities under common control. Prior to January 1, 1994,
the Asian operations were fully integrated with the operations of
BankAmerica in each of the respective countries. Certain amounts have been
reclassified to conform with the current year presentation. Amounts
reflected in this table may not foot due to rounding.
(2) On December 31, 1996, certain employees of the Company elected to exchange
their employee stock options and restricted stock from BankAmerica for
options and restricted stock of the Company. This employee stock exchange
resulted in a one-time expense of $2.4 million.
(3) Basic and diluted earnings per common share for the year ended 1996 has been
calculated as if the initial offerings of Class A Common Stock had been
completed on January 1, 1993, and 48.5 million shares (32.4 million shares
of Class B Common Stock and 16.1 million shares of Class A Common Stock) had
been outstanding for all periods presented.
(4) Pro forma diluted earnings per common share for all periods presented has
been calculated as if the initial offerings of Class A Common Stock had been
completed on January 1, 1993, and 48.5 million shares (32.4 million shares
of Class B Common Stock and 16.1 million shares of Class A Common Stock) had
been outstanding for all periods presented.
(5) Pro forma earnings per share, as adjusted, assumes that the proceeds from
the initial offerings were available from January 1, 1994 and were invested
in short-term investments, and excludes the one-time expense related to the
employee stock exchange ($2.4 million) and interest expense of $492,000 from
the 1996 results.
(6) BankAmerica's equity interest represents cumulative historical net income of
the Company adjusted for net cash transfers to and from BankAmerica. On
December 3, 1996, BankAmerica exchanged its equity interest in the domestic
operations of the Company for 30.2 million shares of Class B Common Stock.
During the second and third quarters of 1997, BankAmerica exchanged its
equity interest in certain Asian operations of the Company for 2.2 million
shares of Class B Common Stock which management estimates had an approximate
aggregate fair value of $41.8 million based upon the market values at the
dates of issuance of the Class A Common Stock. For additional information,
see "Certain Transactions and Relationships Between BankAmerica and the
Company -- General."
45
<PAGE> 50
CONTROLLING PERSONS, DIRECTORS AND EXECUTIVE OFFICERS
OF BANKAMERICA, ACQUISITION CORP. AND THE COMPANY
BACKGROUND OF NAMED PERSONS
The Company, BankAmerica and Acquisition Corp. have jointly filed a Rule
13e-3 Transaction Statement with the Commission with respect to the Merger. The
principal executive offices of BankAmerica, Acquisition Corp. and the Company
are set forth in this Proxy Statement under the caption "Summary -- The Parties;
The Meeting." BankAmerica, Acquisition Corp. and the Company are all Delaware
corporations.
Set forth on Annex IV hereto for each controlling person, director and
executive officer of BankAmerica, Acquisition Corp. and the Company
(collectively, the "Named Persons") is such person's: (i) name; (ii) business
address; (iii) present principal occupation or employment; and (iv) material
occupation, positions, offices and employments during the past five years, if
such person is an individual, and the name and address of the organizations in
which such individual conducted such material occupations, positions, offices
and employments. All of the named persons are United States citizens.
During the past five years neither the Company, BankAmerica, Acquisition
Corp. nor any Named Person has been convicted in a criminal proceeding
(excluding traffic violations or similar misdemeanors) or was a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining further violations of, or prohibiting activities subject to,
federal or state securities laws or finding any violations of such laws.
All information in the Proxy Statement concerning the Named Persons and any
affiliates and associates referred to herein is to the best knowledge of the
Company.
PAST CONTACTS, TRANSACTIONS AND NEGOTIATIONS
Except as described in this Proxy Statement, since January 1, 1997, neither
BankAmerica, Acquisition Corp. nor any Named Person has had any contacts,
negotiations or transactions with the Company concerning any acquisition,
acquisition of securities, consolidation, election of directors, merger, tender
offer or sale or other transfer of a material amount of assets.
PLANS OR PROPOSALS
Except as described in this Proxy Statement, neither the Company,
BankAmerica, Acquisition Corp. nor any Named Person has any plan or proposal
concerning any extraordinary corporate transaction involving the Company, any
sale or transfer of a material amount of the Company's assets, any change in the
Board of Directors or management, any material change in the Company's present
dividend rate or the Company's present policy on indebtedness or capitalization,
or any other change in the Company's corporate structure or business.
INTEREST IN THE COMPANY'S SECURITIES
Except as described in this Proxy Statement, neither the Company,
BankAmerica, Acquisition Corp., any pension, profit sharing or similar plan of
the Company, BankAmerica or Acquisition Corp., any Named Person, nor any
associate or majority owned subsidiary of the Company, BankAmerica or
Acquisition Corp., beneficially owns any shares of the Common Stock or has
engaged in any transaction involving shares of Common Stock during the past 60
days.
CONTRACTS, ARRANGEMENTS OR UNDERSTANDINGS CONCERNING THE COMPANY'S SECURITIES
Except as described in this Proxy Statement, neither the Company,
BankAmerica, Acquisition Corp. nor any Named Person has any arrangement,
contract, relationship or understanding with any person with respect to any
security of the Company, including any arrangement, contract, relationship or
understanding concerning the transfer or the voting of any security of the
Company, any joint venture, any loan or option
46
<PAGE> 51
arrangement, any put or call, any guarantee of a loan, any guarantee against
loss, or any giving or withholding of any authorization, consent or proxy.
CERTAIN TRANSACTIONS AND RELATIONSHIPS
BETWEEN BANKAMERICA AND THE COMPANY
GENERAL
The Company was incorporated in October 1996 to combine the domestic
merchant processing businesses of subsidiaries of BAC. BAC's subsidiaries
transferred these merchant processing businesses in December 1996 in exchange
for an aggregate of 30,200,000 shares of Class B Common Stock. In 1997, the
Company acquired the Asian merchant processing businesses of the Bank. On June
2, 1997, the Company acquired the Bank's merchant processing business in
Thailand in consideration for 150,000 shares of Class B Common Stock. On July 1,
1997, the Company acquired the Bank's merchant processing business in the
Philippines in consideration for 550,000 shares of Class B Common Stock. On
September 30, 1997, the Company acquired the Bank's merchant processing business
in Taiwan and merchant processing administrative office in Hong Kong in
consideration for 1,500,000 shares of Class B Common Stock. The consideration
paid (consisting of such shares of the Class B Common Stock, which management
estimates had an approximate aggregate fair value of $41.8 million based upon
the market values at the dates of issuance of the Class A Common Stock) and
other terms of the transactions pursuant to which the Company acquired the
Bank's merchant processing businesses in Thailand, the Philippines and Taiwan
were approved as to their fairness to the Company by the directors of the
Company who were not affiliated with BAC. On October 31, 1998, the Company
closed its merchant processing operations in Thailand.
BankAmerica holds no shares of Class A Common Stock and 32,400,000 shares
of Class B Common Stock (100% of the outstanding Class B Common Stock),
representing in the aggregate approximately 66.6% of the total number of
outstanding shares of Common Stock. Since shares of Class B Common Stock are
entitled to ten votes per share, and shares of Class A Common Stock are entitled
to one vote per share, BankAmerica controls approximately 95.2% of the combined
voting power of the Common Stock. Such ownership also permits BankAmerica,
either as the holder of Class B Common Stock or in some cases upon the
conversion of such stock into Class A Common Stock, to effect amendments to the
Company's Certificate of Incorporation, a merger, sale of assets, "going
private" or other corporate transactions without the approval of present holders
of Class A Common Stock. Four of the directors of the Company are employees or
former employees of BankAmerica. Three directors of the Company are not
affiliated with BankAmerica or the Company (other than in their capacity as
directors).
The Company has engaged, and continues to engage, in certain transactions
with BankAmerica and its subsidiaries. Management believes that there would not
have been any material change in aggregate historical revenues or expenses of
the Company had the transactions been between unrelated parties or had the
Company been operating other than as a division of a subsidiary of BankAmerica.
INTERCOMPANY AGREEMENTS AND ARRANGEMENTS
The Company and the Bank engage in various intercompany transactions and
arrangements, including the provision by the Bank of various services to the
Company. Such services are provided pursuant to certain intercompany agreements
which provide, among other things, for the grant to the Company of a license to
use the Bank name and certain trademarks and servicemarks in connection with the
Company's business. The intercompany agreements also provide for the Bank to
perform for the Company certain product distribution services, processing
services, marketing services, system support services, association and network
sponsorship and representation in the Visa and MasterCard associations,
telecommunications services, tax and treasury services, regulatory, compliance,
accounting and audit services, and other miscellaneous support and
administrative services. The Company and the Bank also have entered into
agreements concerning registration rights, the allocation of tax liabilities and
the leasing of certain facilities by the Company from the Bank. In general, the
intercompany agreements have a term of five years from December 1996 and may be
terminated
47
<PAGE> 52
by the Bank if it beneficially owns shares representing less than a majority of
the voting power of the outstanding common stock of the Company.
The above-described intercompany agreements and the Non-Competition and
Corporate Opportunities Allocation Agreement (described below) were entered into
at a time when the Company was still wholly owned by the Bank, and therefore
they were not the result of arm's length negotiations between the parties, and
the Company was not represented in connection therewith by separate counsel.
The Bank and the Company have also entered into a Non-Competition and
Corporate Opportunities Allocation Agreement pursuant to which the Bank will not
compete with the Company for a period of five years from December 1996, with
respect to payment processing for merchants to the extent that such payments
arise in the use of credit, charge or debit cards for the purchase of goods and
services and are authorized through an electronic medium originating at the
point of sale in the United States and in Taiwan, Thailand and the Philippines.
PAYMENT FOR SERVICES
Fees paid for the services provided to the Company or its predecessors by
BankAmerica as described above in "-- Intercompany Agreements and Arrangements"
were approximately $8.2 million, $10.9 million and $7.8 million for the years
ended December 31, 1995, 1996 and 1997, respectively. As part of the
intercompany arrangements, the Company (or its predecessor) paid BankAmerica
total rental expense of $2.2 million, $2.2 million and $2.6 million for the
years ended December 31, 1995, 1996 and 1997, respectively. The Company leases
its facilities from BankAmerica under a five-year lease agreement which can be
canceled with six months notice. In addition, the Company (or its predecessor)
paid BankAmerica $14.7 million, $15.9 million and $3.9 million for the years
ended December 31, 1995, 1996 and 1997, respectively, under tax allocation
arrangements. The Company believes that the cost of services provided under the
intercompany arrangements is not materially different from the costs that would
have been incurred if the Company was unaffiliated with BankAmerica.
HISTORICAL MARKET PRICE AND DIVIDEND DATA
Shares of Class A Common Stock are listed for trading on the NYSE under the
symbol "BPI." The table below sets forth, for the calendar quarters indicated,
the reported high and low sale prices of Class A Common Stock as quoted on the
NYSE. As of the Record Date, the Company had 44 holders of record of Class A
Common Stock. The closing market price for Class A Common Stock on October 22,
1998, the last trading day prior to the announcement of the proposed Merger, was
$13.625. On March 25, 1999, the latest practicable trading day prior to the date
of this Proxy Statement, the closing market price for Class A Common Stock was
$20.1875. At the Effective Time, the shares of Class A Common Stock will cease
to be traded on the NYSE.
The Company has never paid any cash dividends on Class A Common Stock.
<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
DECEMBER 19, TO DECEMBER 31, 1996........................... $18.25 $16.38
YEAR ENDED DECEMBER 31, 1997
First Quarter............................................. 17.75 12.75
Second Quarter............................................ 19.50 12.00
Third Quarter............................................. 22.25 17.13
Fourth Quarter............................................ 19.50 14.13
YEAR ENDED DECEMBER 31, 1998
First Quarter............................................. 21.75 16.00
Second Quarter............................................ 20.63 14.31
Third Quarter............................................. 21.63 11.81
Fourth Quarter............................................ 20.13 10.16
</TABLE>
48
<PAGE> 53
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table indicates the name, address and stock ownership of the
only persons or groups of persons known by the Company to own more than five
percent of the outstanding shares of either Class A Common Stock or Class B
Common Stock as of March 26, 1999:
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK
NAME AND ADDRESS OF BENEFICIALLY PERCENT OF
CLASS OF COMMON STOCK BENEFICIAL OWNER OWNED CLASS(1)
- --------------------- ------------------- ------------ ----------
<S> <C> <C> <C>
Class A Common Stock William Blair & Company, L.L.C.(2) 2,671,786(3) 16.44%
Class A Common Stock FMR Corp.(4) 1,178,200(5) 7.25%
Class A Common Stock Friess Associates, Inc.(6) 1,144,000(7) 7.04%
Class A Common Stock Gabelli Funds, Inc., Gabelli Funds, 2,391,500(9) 14.72%
LLC, GAMCO Investors, Inc., Gabelli
Associates Fund, Gabelli Associates
Limited, Gabelli International
Limited, Gabelli Fund, LDC, Gabelli
Foundation, Inc., Gabelli Asset
Management Inc., Marc J. Gabelli,
Mario J. Gabelli(8)
Class A Common Stock Milton Arbitrage Partners, 819,600(11) 5.04%
L.L.C.(10)
Class B Common Stock(12) Bank of America National Trust 32,400,000(14) 100.00%
and Savings Association(13)
</TABLE>
- ------------------------------
(1) Calculated based on the number of shares of Class A Common Stock issued and
outstanding on the Record Date.
(2) The address of the principal place of business of William Blair & Co.,
L.L.C. is 222 W. Adams St., Chicago, Illinois 60606.
(3) According to an amendment to Schedule 13G filed with the Commission on
March 17, 1999, William Blair & Company, L.L.C. has sole power to vote (or
direct the vote) of 962,100 shares of Class A Common Stock and sole power
to dispose (or direct the disposition of) 2,671,786 shares of Class A
Common Stock.
(4) The address of the principal place of business of FMR Corp. is 82
Devonshire Street, Boston, Massachusetts 02109.
(5) According to an amendment to Schedule 13G filed February 11, 1999, Fidelity
Management & Research Company, a wholly owned subsidiary of FMR Corp. and
an investment advisor to various mutual funds, is the beneficial owner of
1,178,200 shares of Class A Common Stock. FMR Corp. and Edward C. Johnson
3d, Chairman of FMR Corp., through their control of Fidelity Management &
Research Company, have sole power to dispose (or direct the disposition) of
1,178,200 shares of Class A Common Stock. Neither FMR Corp. nor Edward C.
Johnson 3d has the sole power to vote (or to direct the voting) of the
shares owned directly by the Fidelity Funds, which power resides with the
Funds' Boards of Trustees.
(6) The address of the principal place of business of Friess Associates, Inc.
is 115 E. Snow King, Jackson, Wyoming 83001.
(7) According to a Schedule 13G filed March 20, 1998, Friess Associates, Inc.
has sole power to vote (or to direct the vote) and sole power to dispose
(or to direct the disposition) of 1,144,000 shares of Class A Common Stock.
(8) The address of the principal place of business of Gabelli Funds, Inc.,
Gabelli Funds, LLC, GAMCO Investors, Inc., Gabelli Associates Fund, Gabelli
Asset Management Inc., Marc J. Gabelli and Mario J. Gabelli is One
Corporate Center, Rye, New York 10580-1434; the address of the principal
place of business of Gabelli Associates Limited and Gabelli International
Limited is c/o MeesPierson (Cayman) Limited, British American Centre, Dr.
Roy's Drive-Phase 3, George Town, Grand Cayman, British West Indies; the
address of the principal place of business of Gabelli Fund, LDC is c/o
Tremont
49
<PAGE> 54
(Bermuda) Limited, Tremont House, 4 Park Road, Hamilton HM II, Bermuda; and
the principal place of business of Gabelli Foundation, Inc. is 165 West
Liberty Street, Reno, Nevada 89501.
(9) According to an amendment to Schedule 13D filed with the Commission on
March 23, 1999, Gabelli Funds, LLC, a wholly-owned subsidiary of Gabelli
Asset Management Inc. and an investment adviser, is the beneficial owner of
985,800 shares of Class A Common Stock; GAMCO Investors, Inc., a wholly
owned subsidiary of Gabelli Funds, Inc. and an investment adviser, is the
beneficial owner of 926,200 shares of Class A Common Stock; Gabelli
Associates Fund, a limited partnership, the general partners of which are
Gabelli Securities, Inc. and Mario J. Gabelli, is the beneficial owner of
347,000 shares of Class A Common Stock; Gabelli Fund, LDC, is the
beneficial owner of 2,500 shares of Class A Common Stock; Gabelli
International Limited is the beneficial owner of 50,000 shares of Class A
Common Stock; Gabelli Associates Limited is the beneficial owner of 50,000
shares of Class A Common Stock; Gabelli Foundation, Inc. is the beneficial
owner of 30,000 shares of Class A Common Stock; and Marc J. Gabelli and
Mario J. Gabelli are the beneficial owners of no shares of Class A Common
Stock. Mario J. Gabelli is deemed to have beneficial ownership of the
shares owned beneficially by each of the foregoing persons other than Marc
J. Gabelli. Gabelli Funds, Inc., the parent company of Gabelli Asset
Management Inc., and Gabelli Asset Management Inc., a parent company for a
variety of companies engaged in the securities business, are deemed to have
beneficial ownership of the shares owned beneficially by each of the
foregoing persons other than Mario J. Gabelli and Marc J. Gabelli.
According to such Schedule 13D, each of the foregoing persons has the sole
power to vote and sole power to dispose or direct the disposition of the
shares reported for it, with certain exceptions stated in the Schedule 13D.
(10) The address of the principal place of business of Milton Arbitrage
Partners, L.L.C. is 165 Mason Street, Greenwich, Connecticut 06830.
(11) According to a Schedule 13G filed February 9, 1999, Milton Arbitrage
Partners, L.L.C. and its affiliate Milton Partners, L.P. have sole power to
vote (or direct the vote) and sole power to dispose (or direct the
disposition) of 819,600 shares of Class A Common Stock.
(12) The Class B Common Stock is convertible, upon the occurrence of certain
events set forth in the Company's Amended and Restated Certificate of
Incorporation, into Class A Common Stock. The Class B Common Stock
represents approximately 66.6% of the outstanding Common Stock of the
Company and 95.2% of the combined voting power of the Company's outstanding
Common Stock.
(13) The address of the principal place of business of Bank of America National
Trust and Savings Association is 555 California Street, San Francisco,
California 94104 and of BankAmerica is 100 North Tryon Street, Charlotte,
North Carolina 28255.
(14) According to an amendment to Schedule 13D filed with the Commission on
December 23, 1998, Bank of America National Trust and Savings Association
and BankAmerica Corporation have shared power to vote (or to direct the
vote) and shared power to dispose (or to direct the disposition) of
32,400,000 shares of Class B Common Stock.
50
<PAGE> 55
The following table sets forth, as of March 26, 1999, the ownership of
shares of the Class A Common Stock by each director and certain executive
officers of the Company, and of all directors and executive officers of the
Company as a group. Except as otherwise noted, each director and executive
officer had sole voting and investment power with respect to the shares held by
such director or executive officer. Sharif M. Bayyari and James H. Williams each
have beneficial ownership of approximately 1.38% and 1.22%, respectively, of the
Class A Common Stock issued and outstanding. Except for Mr. Bayyari and Mr.
Williams, each individual owns less than one percent of the Company's Class A
Common Stock issued and outstanding.
<TABLE>
<CAPTION>
ADDITIONAL
TOTAL OPTIONS
BENEFICIALLY VESTING AT THE RESTRICTED
NAME DIRECT OPTIONS OWNED(1) EFFECTIVE TIME(2) SHARES(3) TOTAL
---- ------ ------- ------------ ----------------- ---------- -------
<S> <C> <C> <C> <C> <C> <C>
Sharif M. Bayyari......... 1,674 225,077 226,751 59,386 25,698 311,835
Christopher A. Callero.... -- -- -- -- -- --
Barbara J. Desoer......... -- -- -- -- -- --
Donald R. Dixon........... 6,450 14,324 20,774 -- -- 20,774
William E. Fisher......... 6,450 14,324 20,774 -- -- 20,774
James G. Jones............ -- -- -- -- -- --
Hatim A. Tyabji........... -- 6,943 6,943 -- -- 6,943
James H. Williams......... 2,000 198,117 200,117 44,939 21,000 266,056
Le Tran-Thi............... -- 34,534 34,534 20,842 12,000 67,376
Michael J. Sanders........ -- 27,150 27,150 19,304 12,000 58,454
James M. Aviles........... -- 34,752 34,752 22,380 12,000 69,132
All directors and
executive officers as a
group (11 persons)...... 16,574 555,221 571,795 166,851 82,698 821,344
</TABLE>
- ------------------------------
(1) All shares which the identified person or persons have the right to acquire
by exercise of options or vesting of restricted stock within sixty days of
March 26, 1999 are deemed to be beneficially owned.
(2) Upon the Effective Time, each outstanding Company Option shall be canceled
in exchange for a cash payment equal to the excess, if any, of the Merger
Consideration per share over the exercise price per share of such Company
Option. See "The Merger -- Treatment of Options and Other Company Stock-
Based Awards."
(3) Each Restricted Share shall, immediately prior to the Effective Time, be
canceled and converted into, and become the right to receive, the Merger
Consideration. See "The Merger -- Treatment of Options and Other Company
Stock-Based Awards."
As of March 26, 1999, the directors and executive officers of the Company
as a group beneficially owned (including certain family holdings) 571,795 shares
of the Class A Common Stock, constituting approximately 3.40% of the Class A
Common Stock issued and outstanding and less than one percent of the combined
voting power of the outstanding Common Stock.
The executive officers and directors of the Company (including the members
of the Special Committee) hold options to purchase an aggregate of 722,072
shares of Class A Common Stock at a weighted average exercise price of $13.63
per share. The members of the Special Committee hold options to purchase an
aggregate of 35,591 shares of Class A Common Stock. The executive officers and
directors of the Company hold an aggregate of 82,698 Restricted Shares. No
Restricted Shares are held by members of the Special Committee. All of these
Restricted Shares and 166,851 of the Company Options are affected by the
accelerated vesting provisions of the Merger Agreement.
51
<PAGE> 56
FEES AND EXPENSES
Whether or not the Merger is consummated, all costs and expenses incurred
in connection with the Merger Agreement and solely and directly related to the
transactions contemplated thereby will be paid by the party that incurred such
costs and expenses. However, the printing and mailing costs associated with this
Proxy Statement and the Schedule 13E-3 will be paid by BankAmerica. If the
Merger Agreement shall have been terminated as a result of the willful breach by
a party of any of its representations, warranties, covenants or agreements set
forth in the Merger Agreement, such breaching party will pay the costs and
expenses incurred by the other parties in connection with this Merger Agreement.
The Company estimates that the fees and expenses to be borne by the Company
in connection with the Merger will be as set forth below.
<TABLE>
<S> <C>
Filing Fees................................................. $ 67,847
Investment Banking Fees and Expenses........................ 2,768,000
Legal Fees and Expenses..................................... 1,383,000
Exchange Agent Fees and Expenses............................ 10,000
Miscellaneous............................................... 185,000
----------
Total............................................. $4,413,847
==========
</TABLE>
The Company will reimburse banks, custodians, fiduciaries, nominees,
securities dealers, trust companies and other persons for their reasonable
expenses in forwarding this Proxy Statement to the Company's stockholders. The
Company will also reimburse such persons for their reasonable expenses in
forwarding to the beneficial owners of the Class A Common Stock the letter of
transmittal and the instructions thereto that the Exchange Agent will send to
the stockholders of Class A Common Stock following consummation of the Merger.
The Company has also agreed to indemnify the Exchange Agent against certain
liabilities and expenses in connection with the Merger.
INDEPENDENT PUBLIC ACCOUNTANTS
Ernst & Young LLP serves as the Company's independent public accountants. A
representative of Ernst & Young LLP will be at the Meeting to answer questions,
as appropriate, by stockholders and will have the opportunity to make a
statement if so desired.
OTHER MATTERS
The Board of Directors of the Company knows of no other matter to be acted
upon at the Meeting. However, if other matters are properly brought before the
Meeting, the persons named in the accompanying form of proxy will vote thereon
in accordance with their best judgment, unless such authority is withheld.
The above notice and Proxy Statement are sent by order of the Board of
Directors.
/s/ Edward J. Stark
--------------------------------------
Edward J. Stark
Secretary
Dated: March 29, 1999
52
<PAGE> 57
EXHIBIT A
CERTAIN PROJECTED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
BA MERCHANT SERVICES ACTUAL FORECAST PROFORMA PROFORMA PROFORMA
($000S) 1997 1998 1999 2000 2001
- -------------------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net Revenue..................... $ 161,000 $ 186,600 $ 221,300 $ 262,700 $ 311,700
Operating expense:
Data processing and
communications............. 34,438 39,100 41,645 49,339 58,407
Salaries and employee
benefits................... 34,657 41,500 47,578 56,094 66,379
General and administrative.... 21,817 24,000 24,792 27,271 29,998
Occupancy..................... 2,984 2,400 3,730 4,500 4,700
Depreciation.................. 10,592 14,600 16,756 19,269 22,160
Amortization of intangibles... 801 1,800 3,252 3,252 3,252
Total operating
expense............. 105,289 123,400 137,753 159,726 184,896
Income from operations.......... 55,711 63,200 83,547 102,974 126,804
Operating margin................ 34.8% 33.9% 37.8% 39.2% 40.7%
Net interest income............. $ 7,700 $ 7,700 $ 7,496 $ 7,600 $ 7,700
Income before income taxes.... 63,411 70,900 91,043 110,574 134,504
Provision for income taxes...... 25,999 29,069 37,328 45,336 55,147
Net Income.................... 37,412 41,831 53,715 65,239 79,357
EPS............................. 0.77 0.86 1.10 1.33 1.62
Credit Card Sales............... 30,752,910 37,416,216 44,294,284 53,540,754 64,860,190
Debit Card Sales................ 3,296,189 3,823,000 4,200,000 4,830,000 5,554,500
----------- ----------- ----------- ----------- -----------
Total Sales
($000's)............ $34,049,099 $41,239,216 $48,494,284 $58,370,754 $70,414,690
Credit Card Transactions........ 421,167 546,336 661,421 805,664 985,380
Debit Card Transactions......... 110,660 157,000 175,000 201,250 231,438
----------- ----------- ----------- ----------- -----------
Total Transactions
(000's)............. 531,827 703,336 836,421 1,006,914 1,216,817
Operating expense per item:
Data processing and
communications............. $ 0.065 $ 0.056 $ 0.050 $ 0.049 $ 0.048
Salaries and employee
benefits................... 0.065 0.059 0.057 0.056 0.055
General and administrative.... 0.041 0.034 0.030 0.027 0.025
Occupancy..................... 0.006 0.003 0.004 0.004 0.004
Depreciation.................. 0.020 0.021 0.020 0.019 0.018
Amortization of intangibles... 0.002 0.003 0.004 0.003 0.003
Total operating
expense per item.... $ 0.198 $ 0.175 $ 0.165 $ 0.159 $ 0.152
</TABLE>
See "Special Factors -- Certain Projected Financial Information" for a
discussion of this Exhibit. Amounts reflected in this Exhibit may not foot due
to rounding.
The projected financial information is based on numerous estimates and
assumptions that are inherently subject to significant business, economic,
industry and competitive uncertainties and contingencies, all of which are
difficult to predict and many of which are beyond the Company's control. The
projected financial information assumes an economic environment similar to that
experienced during 1998. Assumptions concerning portfolio revenue degradation
resulting from competitive pricing pressures and from loss of existing merchants
reflect a continuation of trends experienced in the recent past. Projected sales
and revenue growth assumes continued growth in the Company's sales force as well
as increased merchant prospect referrals as a result of the merger of
BankAmerica and NationsBank. The projected financial information excludes costs
associated with the proposed plan of merger and assumes ongoing operating
expense benefits from a reduced reliance on third-party transaction processors
in 1999 and beyond.
<PAGE> 58
BA MERCHANT SERVICES
Net Revenue ($mm)
<TABLE>
<CAPTION>
ACTUAL FORECAST PROFORMA PROFORMA PROFORMA
1997 1998 1999 2000 2001
------ -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Portfolio....................................... $127.3 $125.1 $123.9 $123.3 $123.1
Reversals/Closed Accounts....................... (1.1) (2.0) (1.8) (1.8) (1.8)
Re-Pricing...................................... 1.5 2.5
New Business 1997............................... 14.3 22.8 22.0 21.5 21.0
New Business 1998............................... -- 15.6 25.4 25.0 24.5
New Business 1999............................... -- -- 17.4 28.4 27.9
New Business 2000............................... -- -- -- 20.4 33.2
New Business 2001............................... -- -- -- -- 23.4
NaBANCO......................................... 2.1 7.7 7.3 6.9 6.6
NationsBank 1999................................ -- -- 2.5 4.0 3.8
NationsBank 2000................................ 5.0 8.0
NationsBank 2001................................ 7.5
Asia............................................ 11.6 8.7 10.1 11.6 13.3
Other........................................... 6.8 8.9 14.5 16.9 18.7
------ ------ ------ ------ ------
Totals................................ $161.0 $186.6 $221.3 $262.7 $311.7
Variance to previous year....................... $ 25.6 $ 34.7 $ 41.4 $ 49.0
Variance %...................................... 16% 19% 19% 19%
Revenue Spread.................................. 0.45% 0.45% 0.45% 0.44%
Revenue per Transaction......................... $0.265 $0.265 $0.261 $0.256
</TABLE>
See "Special Factors -- Certain Projected Financial Information" for a
discussion of this Exhibit. Amounts reflected in this Exhibit may not foot due
to rounding.
<PAGE> 59
ANNEX I
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER (this "Merger Agreement") is made as of
December 22, 1998 among BankAmerica Corporation, a Delaware corporation
("Parent"), BAMS Acquisition Corporation, a Delaware corporation and a wholly
owned subsidiary of Parent ("Acquisition Corp."), and BA Merchant Services,
Inc., a Delaware corporation (the "Company").
RECITALS
WHEREAS, on the date of this Merger Agreement, Parent has represented to
the Company that it is directly or indirectly the beneficial owner of 32,400,000
shares of Class B common stock, par value $.01 per share ("Class B Common
Stock"), of the Company (collectively, the "Control Shares");
WHEREAS, the Board of Directors of the Company, based upon the unanimous
recommendation of a special committee of independent directors of the Company
(the "Special Committee"), the Board of Directors of Parent and the Board of
Directors of Acquisition Corp. deem it advisable and in the best interests of
their respective stockholders to consummate, and have unanimously adopted
resolutions approving, the merger of Acquisition Corp. with and into the Company
upon the terms and subject to the conditions set forth herein (the "Merger");
WHEREAS, Parent has adopted this Merger Agreement and approved the Merger
as the sole stockholder of Acquisition Corp.; and
WHEREAS, the Board of Directors of the Company has directed that this
Merger Agreement be submitted to a vote of its stockholders;
NOW, THEREFORE, in consideration of the foregoing and the representations,
warranties, covenants and agreements set forth herein, the parties agree as
follows:
ARTICLE I
THE MERGER
SECTION 1.1 The Merger. Upon the terms and subject to the conditions
hereof, at the Effective Time (as defined in Section 1.2), Acquisition Corp.
shall be merged with and into the Company, with the Company continuing as the
surviving corporation, and the separate existence of Acquisition Corp. shall
cease. Acquisition Corp. and the Company are sometimes referred to as the
"Constituent Corporations" and the Company is sometimes referred to as the
"Surviving Corporation." The Merger shall have the effects set forth in Section
251 of the Delaware General Corporation Law (the "DGCL").
SECTION 1.2 Effective Time of the Merger. Subject to the provisions of
this Merger Agreement, at the Closing (as defined in Section 1.3) a certificate
of merger (the "Certificate of Merger") shall be duly prepared, executed and
verified by the Company and immediately thereafter delivered to the Secretary of
State of the State of Delaware for filing, as provided in the DGCL, as soon as
practicable on or after the Closing Date (as defined in Section 1.3). The Merger
shall become effective as of the date and time specified in the Certificate of
Merger (such date and time, the "Effective Time").
SECTION 1.3 Closing. Promptly following the satisfaction or waiver of the
conditions set forth in Article VII hereof and prior to the filing of the
Certificate of Merger, a closing (the "Closing") will take place for the purpose
of confirming the satisfaction or, if permissible, waiver of the conditions set
forth in Article VII hereof, at the offices of Pillsbury Madison & Sutro LLP,
235 Montgomery Street, San Francisco, California 94104, unless another place is
agreed to by the parties. The date and time of the Closing is referred to as the
"Closing Date."
<PAGE> 60
SECTION 1.4 Certificate of Incorporation; Bylaws.
(a) The Certificate of Incorporation of the Surviving Corporation, as in
effect immediately prior to the Effective Time, shall, at the Effective Time, be
amended to read in its entirety as set forth in Exhibit A hereto.
(b) Subject to Section 6.9, the Bylaws of Acquisition Corp., as in effect
immediately prior to the Effective Time, shall be the Bylaws of the Surviving
Corporation without change or amendment until thereafter amended in accordance
with the provisions thereof, the Certificate of Incorporation, Section 6.9 and
applicable laws.
SECTION 1.5 Succession. At the Effective Time, the separate existence of
Acquisition Corp. shall cease, and the Company shall become entitled to all the
rights, privileges, powers and franchises of a public and private nature, and be
subject to all the obligations, duties, restrictions and disabilities of each of
the Constituent Corporations; and all property, real, personal and mixed, and
all debts due to each of the Constituent Corporations on whatever account, as
well as stock subscriptions and all other things in action belonging to each of
the Constituent Corporations, shall be vested in the Surviving Corporation; and
all and every other interest shall be thereafter as effectually the property of
the Surviving Corporation as they were of the respective Constituent
Corporations; and the title to any real estate vested, by deed or otherwise, in
either of such Constituent Corporations shall not revert or be in any way
impaired by reason of the Merger, but all rights of creditors and all liens upon
any property of Acquisition Corp. shall be preserved unimpaired. To the extent
permitted by law, any claim existing or action or proceedings pending by or
against either of the Constituent Corporations may be prosecuted as if the
Merger had not taken place. All debts, liabilities and duties of the respective
Constituent Corporations shall thenceforth attach to the Surviving Corporation
and may be enforced against it to the same extent as if such debts, liabilities
and duties had been incurred or contracted by it. To the extent permitted by
law, all corporate acts, plans, policies, agreements, arrangements, approvals
and authorizations of Acquisition Corp., its stockholder, Board of Directors and
committees thereof, officers and agents which were valid and effective
immediately prior to the Effective Time, shall be taken for all purposes as the
acts, plans, policies, agreements, arrangements, approvals and authorizations of
the Surviving Corporation and shall be as effective and binding thereon as the
same were with respect to Acquisition Corp. The employees and agents of
Acquisition Corp. shall become the employees and agents of the Surviving
Corporation and continue to be entitled to the same rights and benefits which
they enjoyed as employees and agents of Acquisition Corp.
SECTION 1.6 Directors and Officers of the Surviving Corporation.
(a) The directors of the Company at the Effective Time shall be those
individuals designated by Parent prior to the Closing Date, until their
successors have been duly elected and qualified or until their earlier death,
resignation or removal in accordance with the Surviving Corporation's
Certificate of Incorporation and Bylaws.
(b) The officers of the Company at the Effective Time shall be the officers
of the Surviving Corporation until their successors shall have been duly
appointed and qualified or until their earlier death, resignation or removal in
accordance with the Surviving Corporation's Certificate of Incorporation and
Bylaws.
(c) (i) Parent may at any time change the method of effecting the
transactions contemplated hereby if and to the extent that Parent deems such a
change to be reasonably desirable; provided, however, that no such change shall
(A) alter or change the amount or kind of consideration to be received by the
holders of the Class A Common Stock (as defined in Section 3.2) as provided for
in this Merger Agreement or cause other adverse or potentially adverse
consequences for any such stockholders or any Indemnified Persons (as defined in
Section 6.9) or any holder of Company Options (as defined in Section 2.3)
relative to the consequences provided for in this Merger Agreement; (B) cause a
delay in the consummation of the transactions contemplated by this Merger
Agreement or cause any decrease in the probability that the transactions
contemplated hereby shall be consummated; or (C) take the form of an asset
purchase agreement.
(ii) To facilitate the Merger, the Company will execute such additional
agreements and documents, including any amendment to this Merger Agreement
required in order to effectuate any change provided for in
<PAGE> 61
subsection (i) of this Section 1.6(c), and take such other actions as Parent
reasonably determines necessary or appropriate.
ARTICLE II
CONVERSION AND EXCHANGE OF SECURITIES; DISSENTERS' SHARES
SECTION 2.1 Conversion of Capital Stock. At the Effective Time, by virtue
of the Merger and without any action on the part of the holder thereof: (a) each
share of Class A Common Stock issued and outstanding immediately prior to the
Effective Time shall be canceled and be converted into, and become the right to
receive: (i) in the case of such shares other than Dissenting Shares (as defined
in Section 2.4), a cash payment equal to $20.50 (the "Merger Consideration"),
without interest; and (ii) in the case of Dissenting Shares, the consideration
set forth in Section 2.4; (b) all of the Control Shares issued and outstanding
immediately prior to the Effective Time shall in the aggregate be converted
into, and become the right to receive, 100 shares of common stock of the
Surviving Corporation; and (c) each share of capital stock of Acquisition Corp.,
issued and outstanding immediately prior to the Effective Time, shall be
canceled and extinguished and no consideration shall be paid therefor.
SECTION 2.2 Exchange of Certificates.
(a) From and after the Effective Time, ChaseMellon Shareholder Services,
L.L.C. (the "Exchange Agent") shall act as exchange agent in effecting the
exchange of the Merger Consideration for certificates representing shares of
Class A Common Stock entitled to payment pursuant to Section 2.1(a)(i) (the
"Certificates").
(b) Promptly after the Effective Time, the Exchange Agent shall mail to
each record holder of Certificates a letter of transmittal in customary form
(which shall specify that delivery shall be effected, and risk of loss and title
to the Certificates shall pass, only upon proper delivery of the Certificates to
the Exchange Agent) and instructions for use in surrendering Certificates and
receiving the Merger Consideration therefor. Upon the surrender of each
Certificate, together with such letter of transmittal duly executed and
completed in accordance with the instructions thereto, the holder of such
Certificate shall be unconditionally entitled to receive in exchange therefor an
amount equal to the Merger Consideration multiplied by the number of shares of
Class A Common Stock formerly represented by such Certificate, and such
Certificate shall be canceled. Until so surrendered, each such Certificate shall
represent solely the right to receive, upon compliance with the conditions set
forth in this subsection 2.2(b), an amount equal to the Merger Consideration
multiplied by the number of shares of Class A Common Stock formerly represented
by such Certificate. No interest shall be paid or accrue on the Merger
Consideration payable upon the surrender of the Certificates. If any Merger
Consideration is to be paid to a person (the "Payee") other than the person in
whose name the Certificate surrendered in exchange therefor is registered (the
"Record Holder"), such Certificate shall be accompanied by all documents
required to evidence and effect the transfer of the rights represented by such
Certificate from the Record Holder to the Payee, and it shall be a condition to
such exchange that the person requesting such exchange shall pay to the Exchange
Agent any transfer or other taxes required by reason of the payment of such
Merger Consideration to the Payee, or that such person shall establish to the
reasonable satisfaction of the Exchange Agent that such tax has been paid or is
not applicable. Notwithstanding the foregoing, to the fullest extent permitted
by law, neither the Exchange Agent nor any party hereto shall be liable to a
holder of shares of Class A Common Stock for any Merger Consideration properly
delivered to a public official pursuant to applicable abandoned property,
escheat and similar laws.
(c) Promptly following the date which is 360 days after the Effective Time,
the Exchange Agent's duties shall terminate, and any funds deposited with the
Exchange Agent that remain unclaimed by holders of Certificates shall be paid to
the Surviving Corporation upon demand. Thereafter, each holder of a Certificate
may surrender such Certificate to the Surviving Corporation along with the
applicable letter of transmittal and (subject to applicable abandoned property,
escheat and similar laws) receive in exchange therefor an amount equal to the
Merger Consideration multiplied by the number of shares of Class A Common Stock
formerly
<PAGE> 62
represented by such Certificate, without any interest thereon, but shall have no
greater rights against the Surviving Corporation than may be accorded to general
creditors of the Surviving Corporation.
(d) After the Effective Time, there shall be no transfers on the stock
transfer books of the Surviving Corporation of any shares of Common Stock (as
defined in Section 3.2). If, after the Effective Time, Certificates (other than
Certificates relating to the Control Shares) are presented to the Surviving
Corporation or the Exchange Agent, they shall be canceled and exchanged for the
applicable Merger Consideration, as provided herein, subject to applicable law
in the case of Dissenting Shares.
SECTION 2.3 Options and Restricted Stock. (a) As soon as practicable
following the date of this Merger Agreement, the Board of Directors of the
Company (or, if appropriate, any committee administering the Company's Long-Term
Incentive Plan and Non-Employee Director Stock Plan (collectively, the "Stock
Plans")) shall adopt such resolutions or take such other actions as are required
to provide for the cancellation of all outstanding options issued under the
Stock Plans ("Company Options") upon the Effective Time, in exchange for a cash
payment of an amount equal to (i) the excess, if any, of (x) the Merger
Consideration per share over (y) the exercise price per share of such Company
Option, multiplied by (ii) the number of shares of Class A Common Stock subject
to such Company Option for which such Company Option shall not theretofore have
been exercised, whether or not then vested and exercisable. Prior to the
Effective Time, the Company shall use its commercially reasonable efforts to (A)
obtain any consents from holders of Company Options, and (B) make any amendments
to the terms of such options that are necessary to give effect to the
transactions contemplated by this Section 2.3(a); provided, however, that the
failure by the Company to obtain any such consents specified in the preceding
clause (A) or to make any amendments specified in the preceding clause (B) or
the failure of the Company's Board of Directors to take any action referred to
in this Section 2.3 shall not give rise to a right of termination by Parent or
Acquisition Corp. under any provision of this Merger Agreement or result in the
failure of the condition set forth in Section 7.2(a) or any other condition to
Parent's or Acquisition Corp.'s obligation to consummate the transactions
contemplated by this Merger Agreement. Notwithstanding any other provision of
this Section 2.3(a), payment may be withheld in respect of any Company Option
until necessary consents are obtained.
(b) Each outstanding share of unvested restricted Class A Common Stock
issued pursuant to a Stock Plan (each, a "Restricted Share") shall, immediately
prior to the Effective Time, be canceled and be converted into, and become the
right to receive, the Merger Consideration in accordance with Section 2.1.
Notwithstanding the foregoing, the amount otherwise payable to certain senior
executive officers of the Company pursuant to this Section 2.3(b) shall be
distributed to such officers on a deferred basis, payable to each such executive
officer in accordance with such officer's originally scheduled release dates for
the Restricted Shares and otherwise, including as to acceleration of vesting
events, in accordance with the provisions of the BankAmerica Corporation
Restricted Stock Retention Grant Program. Pending such distribution, such
deferred amounts shall bear an agreed rate of return.
(c) All amounts payable pursuant to this Section 2.3 shall be subject to
any required withholding of taxes and, except as provided in Section 2.3(b),
shall be paid without interest.
(d) The Board of Directors of the Company (or, if appropriate, any
committee administering the Stock Plans) shall adopt such resolutions or take
such actions as are required to terminate the Stock Plans as of the Effective
Time, to delete as of the Effective Time the provision in any other benefit plan
of the Company providing for the issuance, transfer or grant of any capital
stock of the Company or any interest in respect of any capital stock of the
Company and to ensure that following the Effective Time no holder of a Company
Option or any participant in any Stock Plan or other Company benefit plan shall
have any right thereunder to acquire any capital stock of the Company or the
Surviving Corporation.
SECTION 2.4 Dissenters' Rights. Notwithstanding anything in this Merger
Agreement to the contrary, shares of Class A Common Stock which are issued and
outstanding immediately prior to the Effective Time and which are held by
stockholders that have not voted such shares in favor of the Merger and have
delivered a written demand for the appraisal of such shares in the manner
provided in the DGCL (such shares, the "Dissenting Shares") shall not be
converted into or represent the right to receive the Merger Consideration and
the holders thereof shall only be entitled to such rights as are granted by
Section 262 of the
<PAGE> 63
DGCL. Each holder of Dissenting Shares that becomes entitled to payment for such
shares pursuant to Section 262 of the DGCL shall receive payment therefor from
the Surviving Corporation in accordance with the DGCL; provided, however, that
(i) if any such holder of Dissenting Shares shall have failed to establish that
such holder is entitled to appraisal rights as provided in Section 262 of the
DGCL, or (ii) if any such holder of Dissenting Shares shall have effectively
withdrawn the demand for appraisal of such shares or lost the right to appraisal
and payment of such shares under Section 262 of the DGCL, or (iii) if neither
the Surviving Corporation nor such holder of Dissenting Shares shall have filed
a petition demanding a determination of the value of all Dissenting Shares
within the time provided in Section 262 of the DGCL, such holder's or holders'
(as the case may be) shares of Class A Common Stock shall thereupon be deemed to
have been converted, as of the Effective Time, into and represent the right to
receive from the Surviving Corporation the Merger Consideration, without
interest thereon, as provided in Section 2.1 hereof.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of Parent and Acquisition Corp.
as follows:
SECTION 3.1 Organization. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power and corporate authority and all necessary
governmental approvals to own, lease and operate its properties and to carry on
its business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power, authority and
governmental approvals would not have a Company Material Adverse Effect (as
defined in Section 9.9). The Company is duly qualified or licensed to do
business and in good standing in each jurisdiction in which the property owned,
leased or operated by it or the nature of business conducted by it makes such
qualification or licensing necessary, except where the failure to be so duly
qualified or licensed and in good standing individually or in the aggregate
would not have a Company Material Adverse Effect.
SECTION 3.2 Capitalization. As of the date hereof, the authorized capital
stock of the Company consists of: (i) 200,000,000 shares of Class A common
stock, par value $.01 per share ("Class A Common Stock" and, collectively with
the Class B Common Stock, the "Common Stock"), of which, as of the date hereof,
16,267,110 shares were issued and outstanding and no shares were held in
treasury; (ii) 50,000,000 shares of Class B Common Stock, of which, as of the
date hereof, 32,400,000 shares were issued and outstanding and no shares were
held in treasury; and (iii) 10,000,000 shares of preferred stock, par value $.01
per share, of which no shares are issued and outstanding and no shares are held
in treasury. As of the date hereof, 1,608,454 shares of Class A Common Stock
were reserved for issuance upon exercise of outstanding Company Options and
payments of other outstanding awards pursuant to the Stock Plans. All the
outstanding shares of the Company's capital stock are, and all shares which may
be issued pursuant to the exercise of Company Options or other outstanding
awards or the conversion of outstanding shares of Class B Common Stock will be,
when issued in accordance with the respective terms thereof, duly authorized,
validly issued, fully paid and nonassessable and free of any preemptive rights.
Except as set forth above and except for shares of Class A Common Stock issued
upon the exercise of Company Options, and except pursuant to the provisions of
this Merger Agreement, as of the date hereof there is no (i) share of capital
stock of the Company issued and outstanding or (ii) option, warrant, call,
subscription or other right, agreement or commitment of any character (a)
relating to the issued or unissued capital stock of the Company to which the
Company is a party (other than the Company Options) (b) obligating the Company
to issue, transfer or sell or cause to be issued, transferred or sold any share
of capital stock of, or other equity interest in, the Company or securities
convertible into or exchangeable for such shares or equity interests or
obligating the Company to grant, extend or enter into any such option, warrant,
call, subscription or other right, agreement or commitment. There is no
outstanding obligation of the Company to repurchase, redeem or otherwise acquire
any shares of capital stock of the Company. Except pursuant to this Merger
Agreement, there is no voting trust or other agreement or understanding to which
the Company is a party or by which it is bound with respect to the voting of the
capital stock of the Company. Except for that certain Registration Rights
<PAGE> 64
Agreement, dated as of December 3, 1996 among the Company, the Bank and Bank of
America N.W., National Association, there are no agreements obligating the
Company to register any of its shares of capital stock under the Securities Act.
SECTION 3.3 Authority. The Company has the requisite corporate power and
corporate authority to execute and deliver this Merger Agreement and to carry
out its obligations hereunder. The execution, delivery and performance by the
Company of this Merger Agreement and the consummation by the Company of the
Merger and of the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company, and no
other corporate proceedings on the part of the Company are necessary to
authorize this Merger Agreement or to consummate the transactions contemplated
hereby (other than with respect to the Merger, the approval and adoption of the
Merger Agreement by the stockholders of the Company in accordance with the DGCL
and the Company's Certificate of Incorporation). This Merger Agreement has been
duly executed and delivered by the Company and constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
SECTION 3.4 Consents and Approvals. Except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Act of 1933 (the "Securities Act"),
the Securities Exchange Act of 1934 (the "Exchange Act") and state securities or
blue sky laws, and the delivery of the Certificate of Merger to the Secretary of
State of the State of Delaware for filing as required by the DGCL, no filing
with or notice to, and no permit, authorization, consent or approval of, any
United States federal or state court or tribunal or United States
administrative, governmental or regulatory body, agency or authority (each, a
"Governmental Entity") is required to be made or obtained by the Company on or
before the Closing Date for the execution and delivery by the Company of this
Merger Agreement or for the consummation by the Company of the Merger, except
where the failure to obtain such permits, authorizations, consents or approvals
or to make such filings or give such notice would not have a Company Material
Adverse Effect.
SECTION 3.5 Information. None of the information supplied by the Company
specifically for inclusion or incorporation by reference in (i) the Proxy
Statement (as defined in Section 6.1) and (ii) any other document (the "Other
Filings") to be filed with the Securities and Exchange Commission (the "SEC") or
any regulatory agency by Parent, Acquisition Corp. or the Company in connection
with the transactions contemplated by this Merger Agreement, at the respective
times filed with the SEC or such other regulatory agency and, in addition, in
the case of the Proxy Statement, at the date it or any amendment or supplement
is mailed to stockholders and at the time of the Stockholders' Meeting (as
defined in Section 6.3), will contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply in all material
respects with the provisions of the Exchange Act and the rules and regulations
thereunder, except that no representation or warranty is made by the Company
with respect to statements made therein based on information supplied by Parent
or Acquisition Corp. specifically for inclusion or incorporation by reference in
the Proxy Statement.
SECTION 3.6 Opinion of Financial Advisor. The Special Committee and the
Board of Directors of the Company (at meetings duly called and held) each have
determined as of the date hereof that the Merger is fair to and in the best
interests of the holders (other than Parent and its Affiliates (as defined in
Section 9.9)) of Class A Common Stock. The Special Committee has received the
opinion, dated the date hereof, of Credit Suisse First Boston Corporation (the
"Financial Advisor"), the Special Committee's financial advisor, substantially
to the effect that the consideration to be received in the Merger by the holders
(other than Parent and its Affiliates) of Class A Common Stock is fair to such
holders from a financial point of view.
SECTION 3.7 Brokers. No broker, finder or investment banker (other than
the Financial Advisor) is entitled to any brokerage, finder's or other fee or
commission payable by the Company in connection with the transactions
contemplated by this Merger Agreement based upon arrangements made by or on
behalf of the Company.
<PAGE> 65
SECTION 3.8 State Takeover Statutes. The provisions of Section 203 of the
DGCL are not applicable to the transactions contemplated hereby by virtue of the
provisions of Article Fifth of the Company's Certificate of Incorporation. No
other state takeover statute or similar statute or regulation applies or
purports to apply to the Merger, this Merger Agreement and the transactions
contemplated hereby.
SECTION 3.9 Compliance with Laws. (a) Except as set forth in Schedule
3.9(a), to the best of the Company's knowledge, the Company is in compliance
with all laws, rules, regulations, policies and guidelines of regulatory
agencies, reporting and licensing requirements and orders applicable to its
business or to its employees conducting its business (including, without
limitation, all federal and state securities laws) and with its internal
policies and procedures, except where the failure to be in such compliance would
not individually or in the aggregate have a Company Material Adverse Effect.
(b) Except as set forth in Schedule 3.9(b), the Company has not received
any notification or communication from any agency or department of any United
States federal, state or local government, including, without limitation, the
SEC and the New York Stock Exchange and the staffs thereof (collectively, the
"Regulatory Authorities"), (i) asserting that the Company is not in compliance
with any of the statutes, regulations or ordinances which such agency,
department or Regulatory Authority enforces, or the internal policies and
procedures of the Company, unless such noncompliance would not have a Company
Material Adverse Effect, (ii) threatening to revoke any license, franchise,
permit or governmental authorization which is material to the Company, (iii)
requiring or threatening to require the Company to, or indicating that the
Company may be required to, enter into a cease and desist order, agreement or
memorandum of understanding or any other agreement restricting or limiting or
purporting to restrict or limit in any manner the operations of the Company,
unless such restriction or limitation other than with respect to a cease and
desist order would not have a Company Material Adverse Effect, or (iv)
directing, restricting or limiting, or purporting to direct, restrict or limit,
in any material respect the operations of the Company (any such notice,
communication, memorandum, agreement or order described in this sentence herein
referred to as a "Regulatory Agreement").
(c) The Company has not consented to or entered into any Regulatory
Agreement.
SECTION 3.10 Stock Plans. Prior to the execution and delivery of this
Merger Agreement, the Company has delivered to Parent true and correct copies of
all of the Stock Plans currently adopted by, maintained by or sponsored in whole
or in part by, the Company for the benefit of any employee of the Company or
under which any employee of the Company is eligible to participate. Set forth in
Schedule 3.10 is a list of the number of shares covered by, exercise prices for,
and holders of, all stock options or shares of restricted Class A Common Stock
granted under the Stock Plans as of December 10, 1998. All of such grants of
options or restricted Class A Common Stock have been made in accordance with the
terms of the Stock Plans. Since December 10, 1998, the Company has not granted
any awards of stock options or awards of shares of restricted Class A Common
Stock under the Stock Plans.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF PARENT AND ACQUISITION CORP.
Parent and Acquisition Corp. represent and warrant to the Company as
follows:
SECTION 4.1 Organization. Each of Parent and Acquisition Corp. is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has all requisite corporate power
and corporate authority and all necessary governmental approvals to own, lease
and operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing or to
have such power, authority and governmental approvals would not have a material
adverse effect on Parent and its Subsidiaries (as defined in Section 9.9) taken
as a whole. Each of Parent and Acquisition Corp. is duly qualified or licensed
to do business and in good standing in each jurisdiction in which the property
owned, leased or operated by it or the nature of the business conducted by it
<PAGE> 66
makes such qualification or licensing necessary, except where the failure to be
so duly qualified or licensed and in good standing individually or in the
aggregate would not have a material adverse effect on Parent and its
Subsidiaries taken as a whole.
As of the date hereof, the authorized capital stock of Acquisition Corp.
consists of 100 shares of common stock, par value $.01 per share, all of which
are validly issued, fully paid and nonassessable and owned by Parent.
SECTION 4.2 Authority. Each of Parent and Acquisition Corp. has the
requisite corporate power and corporate authority to execute and deliver this
Merger Agreement and to carry out its obligations hereunder. The execution,
delivery and performance by each of Parent and Acquisition Corp. of this Merger
Agreement and the consummation by each of Parent and Acquisition Corp. of the
Merger and of the other transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of Parent and
Acquisition Corp. (including by Parent as the sole stockholder of Acquisition
Corp.), and no other corporate proceedings on the part of Parent or Acquisition
Corp. are necessary to authorize this Merger Agreement or to consummate the
transactions contemplated hereby. This Merger Agreement has been duly executed
and delivered by each of Parent and Acquisition Corp. and constitutes a valid
and binding obligation of each of Parent and Acquisition Corp., enforceable
against them in accordance with its terms.
SECTION 4.3 Consents and Approvals. Except for filings, permits,
authorizations, consents and approvals as may be required under, and other
applicable requirements of, the Securities Act, the Exchange Act and state
securities or blue sky laws, and the delivery of the Certificate of Merger to
the Secretary of State of the State of Delaware for filing as required by the
DGCL, no filing with or notice to, and no permit, authorization, consent or
approval of, any Governmental Entity is required to be made or obtained by
Parent or any Affiliate (other than the Company) on or before the Closing Date
for the execution and delivery by Parent and Acquisition Corp. of this Merger
Agreement or for the consummation by Parent and Acquisition Corp. of the Merger,
except where the failure to obtain such permits, authorizations, consents or
approvals or to make such filings or give such notice would not have a material
adverse effect on Parent and its Subsidiaries taken as a whole.
SECTION 4.4 Information. None of the information supplied by Parent or
Acquisition Corp. specifically for inclusion or incorporation by reference in
the Proxy Statement and the Other Filings, at the respective times filed with
the SEC or such other regulatory agency and, in addition, in the case of the
Proxy Statement, at the date it or any amendment or supplement is mailed to
stockholders and at the time of the Stockholders' Meeting, will contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary in order to make the statements therein, in
light of the circumstances under which they are made, not misleading.
SECTION 4.5 Interim Operations of Acquisition Corp. Acquisition Corp. was
formed solely for the purpose of engaging in the transactions contemplated
hereby and has not engaged in any business activities or conducted any
operations other than in connection with the transactions contemplated hereby.
SECTION 4.6 Brokers. No broker, finder or investment bank is entitled to
any brokerage, finder's or other fee or commission payable by Parent in
connection with the transactions contemplated by this Merger Agreement based
upon arrangements made by or on behalf of Parent or any of its Subsidiaries
(other than the Company).
SECTION 4.7 Class B Common Stock. Parent is directly or indirectly the
beneficial owner of, and has (and as of the record date for persons entitled to
notice of, and to vote at, the Stockholders' Meeting, will have) the
unrestricted right to vote or cause its Affiliates to vote, all of the
outstanding shares of Class B Common Stock.
<PAGE> 67
ARTICLE V
COVENANTS
SECTION 5.1 Conduct of Business by the Company Pending the Merger. From
the date of this Merger Agreement through the earlier of the Effective Time or
the termination of this Merger Agreement, the Company agrees as follows (except
as expressly contemplated or permitted by this Merger Agreement, including
Section 6.10, or to the extent that Parent otherwise shall consent in writing):
(a) The Company will carry on its business in the usual, regular
and ordinary course in substantially the same manner as heretofore
conducted and use all reasonable efforts to preserve intact its
current business organizations, maintain in effect all Company Permits
(as defined in Section 9.9), keep available the services of its
current officers and employees and preserve its advantageous
relationships with customers, suppliers and others having business
dealings with it.
(b) The Company will not, nor will it take any action to formally
propose to, (i) declare, set aside or pay any dividend on or make any
other distribution in respect of any of its capital stock, (ii) split,
combine or reclassify any shares of its capital stock or issue or
authorize or propose the issuance of any other securities in respect
of, in lieu of or in substitution for, shares of its capital stock or
(iii) except pursuant to a Stock Plan, repurchase, redeem or otherwise
acquire, any shares of capital stock or voting debt or any securities
convertible into, or any rights, warrants, calls, subscriptions or
options to acquire, shares of capital stock or voting debt of the
Company.
(c) The Company will not issue, deliver or sell, or authorize or
propose the issuance, delivery or sale of, any shares of its capital
stock of any class, or any securities convertible into, or any rights,
warrants, calls, subscriptions or options to acquire, any such shares,
or convertible securities, other than the issuance of shares of Class
A Common Stock upon the conversion of shares of Class B Common Stock
or the exercise of Company Options or stock grants pursuant to the
Stock Plans, in each case outstanding on the date of this Merger
Agreement and in accordance with their current terms.
(d) The Company will not acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial equity interest
in or substantial portion of the assets of, or by any other manner,
any business or any corporation, partnership, association or other
business organization or division thereof or otherwise (except in the
ordinary course of business) acquire or agree to acquire any assets,
in each case that are material individually or in the aggregate to the
Company.
(e) The Company will not sell, lease, license, encumber or
otherwise dispose of, or agree to sell, lease, license, encumber or
otherwise dispose of, any of its assets that are material individually
or in the aggregate to the Company, other than in the ordinary course
of business consistent with past practice.
(f) The Company will not incur any indebtedness for borrowed
money or guarantee any such indebtedness or issue or sell any debt
securities or warrants or rights to acquire any debt securities of the
Company or guarantee any debts or other obligations of others or
assume or otherwise become liable for any debts or other obligations
of others, other than in each case in the ordinary course of business
consistent with past practice (which shall be deemed to include the
renewal of the Company's line of credit with Bank of America National
Trust and Savings Association).
(g) The Company will not make any material change in any of the
accounting principles or practices used by it except as required by
the SEC, the Financial Accounting Standards Board or any other legal
or regulatory requirement applicable to the Company.
(h) The Company will not (x) enter into, adopt, amend (except as
may be required by law) or terminate any employee benefit plan or any
agreement, arrangement, plan or policy between the Company and one or
more of its directors, officers, employees or independent contractors
or (y) except for normal increases in the ordinary course of business
consistent with past practice that in the aggregate do not result in a
material increase in benefit or compensation expense to the
<PAGE> 68
Company, increase in any manner the compensation or benefits
(including severance benefits) of any director, officer, employee or
independent contractor or pay any benefit not required by any plan and
arrangement as in effect at the date hereof (including the granting of
stock appreciation rights or performance units) or enter into any
contract, agreement, commitment or arrangement to do any of the
foregoing.
(i) The Company will not take any action that would, or would be
reasonably likely to, result in any of the Company's representations
and warranties set forth in this Merger Agreement not being true in
all respects such that any of the conditions to the Merger set forth
in Article VII shall not be satisfied or agree to take any of the
actions specified in this Section 5.1(i).
(j) The Company shall not pay, discharge, settle or satisfy any
claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than the payment,
discharge, settlement or satisfaction, in the ordinary course of
business consistent with past practice or in accordance with their
terms, of liabilities reflected or reserved against in, or
contemplated by, the most recent consolidated financial statements (or
the notes thereto) of the Company or incurred since the date of such
financial statements in the ordinary course of business consistent
with past practice.
(k) Except in the ordinary course of business consistent with
past practice or as required by the terms of this Merger Agreement,
the Company shall not modify, amend or terminate any material
contract, lease or agreement to which the Company is a party or waive,
release or assign any material rights or claims thereunder. Without
the prior written consent of Parent, the Company shall not enter into
any contract, agreement or arrangement other than in the ordinary
course of business or which involves the payment by the Company of
more than $500,000 per annum.
(l) The Company shall not amend or propose to amend its
Certificate of Incorporation or Bylaws.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Preparation of the Proxy Statement and Schedule 13E-3. The
parties will promptly prepare and file with the SEC a proxy statement in
connection with the vote of the Company's stockholders with respect to the
Merger (the "Proxy Statement") and a Transaction Statement on Schedule 13E-3
(the "Schedule 13E-3") as required under the Exchange Act in connection with the
Merger. Each of the Company and Parent will furnish all information concerning
itself and its Affiliates that is required to be included in the Proxy Statement
and the Schedule 13E-3 for inclusion in the Proxy Statement and the Schedule
13E-3.
SECTION 6.2 Access to Information. During the period prior to the first
to occur of the Effective Time or the termination of this Merger Agreement, (i)
upon reasonable notice, the Company will afford to the officers, employees,
accountants, counsel and other representatives of Parent, reasonable access,
during normal business hours, to all its properties, books, contracts,
commitments and records, and (ii) the Company will furnish promptly to Parent
(a) a copy of each report, schedule, registration statement and other document
filed or received by it during such period pursuant to the requirements of the
Federal securities laws and (b) all other information concerning its business,
properties and personnel as Parent reasonably may request; provided, however,
that the Company shall not be required to permit any access, or to furnish any
information, that in the reasonable judgment of the Special Committee, after
consultation with counsel to the Special Committee, would jeopardize protections
afforded the Company or the Special Committee under the attorney-client
privilege or the attorney work product doctrine.
SECTION 6.3 Stockholders' Meeting. The Company will call a meeting of its
stockholders (the "Stockholders' Meeting") to be held as promptly as practicable
for the purpose of voting upon the Merger Agreement and shall submit the Merger
Agreement to its stockholders for a vote at such Stockholders'
<PAGE> 69
Meeting. The Company shall not, without the prior written consent of Parent
(which consent shall not be unreasonably withheld), postpone or adjourn the
Stockholders' Meeting unless this Merger Agreement shall be terminated prior to
the date thereof. The Company, through its Board of Directors, subject to the
fiduciary duties of the Board of Directors of the Company or the Special
Committee after consultation with counsel, will recommend approval of the Merger
Agreement to the Company's stockholders; provided, however, that at any time at
or prior to the Stockholders' Meeting either the Special Committee or the Board
of Directors of the Company (or both the Board of Directors and the Special
Committee) may revoke, modify or qualify its recommendation with respect to the
Merger Agreement if the Board of Directors of the Company or the Special
Committee determines in good faith (after consultation with legal counsel) that
failure to revoke, modify or qualify such recommendation would create a material
risk of liability for breach of its fiduciary duties. At the Stockholders'
Meeting (and at any adjournment or postponement thereof), Parent will vote or
cause to be voted in favor of approval and adoption of the Merger Agreement and
approval of the Merger all of the outstanding shares of Class B Common Stock;
provided, however, that if such recommendation of the Special Committee is
revoked, modified or qualified in a manner adverse to Parent, Parent may, but
shall not be obligated to, cause such shares to be so voted.
SECTION 6.4 Legal Requirements to Merger. Each of the Company, Parent and
Acquisition Corp. will take, or cause to be taken, all reasonable actions
necessary to comply promptly with all legal requirements that may be imposed on
it with respect to the Merger and will cooperate with and furnish information to
each other in connection with any such requirements imposed upon any of them or
any of their Subsidiaries in connection with the Merger. Each of the Company,
Parent and Acquisition Corp. will, and will cause any of its Subsidiaries to,
take all reasonable actions necessary to obtain (and will cooperate with each
other in obtaining) any consent, authorization, order or approval of, or any
exemption by, any Governmental Entity required to be obtained or made by Parent,
Acquisition Corp., or any Affiliate thereof, or the Company in connection with
the Merger.
SECTION 6.5 Additional Agreements; Commercially Reasonable
Efforts. Subject to the terms and conditions of this Merger Agreement, each of
the parties will use its commercially reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to consummate and make
effective the transactions contemplated by this Merger Agreement, subject to the
appropriate vote of stockholders of the Company described in Section 6.3,
including cooperating (to the extent reasonable) with the other parties and
providing all relevant information. If after the Effective Time any further
action is necessary or desirable to carry out the purposes of this Merger
Agreement or to vest the Surviving Corporation with full title to all
properties, assets, rights, approvals, immunities and franchises of either of
the Constituent Corporations, the proper officers and directors of each party
will take all such necessary action.
SECTION 6.6 Expenses. Whether or not the Merger is consummated, but
subject to Section 6.10, all costs and expenses incurred in connection with this
Merger Agreement and solely and directly related to the transactions
contemplated hereby will be paid by the party that incurred such costs and
expenses; provided, however, that the printing and mailing costs associated with
the Proxy Statement and the Schedule 13E-3 will be paid by Parent; provided
further, however, that costs and expenses incurred by or on behalf of an
individual stockholder (or a group of stockholders) shall not be treated as
solely and directly related to the transactions contemplated hereby; provided
further, that if this Merger Agreement shall have been terminated pursuant to
Section 8.1 as a result of the willful breach by a party of any of its
representations, warranties, covenants or agreements set forth in this Merger
Agreement, such breaching party will pay the costs and expenses incurred by the
other parties in connection with this Merger Agreement.
SECTION 6.7 Acquisition Proposals. The Company shall not, and shall use
its reasonable best efforts to cause its officers, directors and employees and
any investment banker, attorney, accountant or other agent retained by it not to
(i) initiate, knowingly encourage or solicit, directly or indirectly, the making
of any proposal or offer (an "Acquisition Proposal") to acquire all or any
significant part of the business and properties or capital stock of the Company,
whether by merger, purchase of securities or assets, tender offer or otherwise
(an "Acquisition Transaction"), or initiate, directly or indirectly, any contact
with any person in an effort to or with a view towards soliciting any
Acquisition Proposal or (ii) participate in any discussion or
<PAGE> 70
negotiations regarding, or furnish to any other person any information with
respect to, an Acquisition Proposal. Notwithstanding the foregoing, the Company
may (x) furnish or cause to be furnished information subject to a
confidentiality agreement in a form substantially similar to that previously
executed by Parent and (y) in response to an Acquisition Proposal, issue a
communication to its security holders of the type contemplated by Rule 14d-9(e)
or 14e-2 under the Exchange Act or otherwise communicate the Board of Director's
position with respect to such Acquisition Proposal to the stockholders of the
Company. In the event that the Company receives an Acquisition Proposal, it
shall promptly inform Parent as to the material terms thereof.
SECTION 6.8 Public Statements. The parties will consult with each other
prior to issuing any public announcement with respect to this Merger Agreement
or the transactions contemplated hereby and will not issue any such public
announcement prior to such consultation, except that any party may issue such a
public announcement prior to such consultation if and to the extent required by
law or any listing agreement with a national securities exchange, in which case
such party will use its commercially reasonable efforts to consult with the
other parties prior to issuing such public announcement.
SECTION 6.9 Indemnification and Insurance.
(a) For a period of six years from the Effective Time, the
Surviving Corporation will maintain all rights to indemnification
(including with respect to the advancement of expenses incurred in the
defense of any action or suit) existing on the date of this Merger
Agreement in favor of the current and former directors and executive
officers of the Company (each such current or former director or
executive officer being referred to in this Merger Agreement as an
"Indemnified Person") as provided in the Company's Certificate of
Incorporation and Bylaws or otherwise, in each case in effect on the
date of this Merger Agreement and (ii) the Surviving Corporation will
not take any action to: (i) amend the Certificate of Incorporation or
Bylaws of the Surviving Corporation to reduce or limit the rights of
indemnity afforded to any Indemnified Person; (ii) restrict the
ability of the Surviving Corporation to indemnify any Indemnified
Person; or (iii) hinder, delay or make more difficult the exercise of
such rights of indemnity or the ability to indemnify.
(b) For a period of six years from the Effective Time, the
Surviving Corporation will indemnify to the fullest extent possible
under its Certificate of Incorporation, its Bylaws and applicable law
each Indemnified Person against all losses, damages, liabilities or
claims made against such Indemnified Person arising from such
Indemnified Person's service in such capacity prior to and including
the Effective Time, which indemnity shall be not less favorable in any
respect than that currently available pursuant to the Company's
Certificate of Incorporation and Bylaws.
(c) Should any claim or claims be made against any Indemnified
Person, arising from his or her services as such, the provisions of
this Section 6.9 respecting the Certificate of Incorporation and
Bylaws will continue in effect until the final disposition of all such
claims.
(d) Without limiting the provisions of paragraphs (a) through (c)
or (e) through (g) of this Section 6.9, for a period of six years from
the Effective Time, Parent shall, to the extent permitted by
applicable law, indemnify and hold harmless each Indemnified Person
against and from any costs, fees and expenses (including reasonable
attorneys' fees), judgments, fines, losses, claims, damages,
liabilities and amounts paid in settlement in connection with any
lawsuit, court action or other court proceeding, claim, or
investigation, whether civil, criminal, administrative or
investigative (each, a "Legal Proceeding"), to the extent such Legal
Proceeding arises out of or pertains to (1) any action or omission or
alleged action or omission in his or her capacity as a director or
executive officer, or as employee or agent, of the Company (regardless
of whether such action or omission, or alleged action or omission,
occurred prior to the Effective Time) or (2) any of the transactions
contemplated by this Merger Agreement; provided, however, that if, at
any time prior to the sixth anniversary of the Effective Time, any
Indemnified Person delivers to Parent a written notice asserting a
claim for indemnification under this Section 6.9(d), then the claim
asserted in such notice shall survive the sixth anniversary of the
Effective Time until such time as such claim
<PAGE> 71
is fully and finally resolved; provided further, however, that the
obligations of Parent to advance any costs incurred in connection with
a Legal Proceeding in advance of any disposition of such Legal
Proceeding shall be required to be made only upon delivery to Parent
by the Indemnified Person of an undertaking to repay all amounts so
advanced if it shall ultimately be determined that such Indemnified
Person is not entitled to indemnification hereunder. Notwithstanding
anything to the contrary contained in this Merger Agreement, Parent
agrees that it will not settle or compromise or consent to the entry
of any judgment or otherwise seek termination with respect to any
Legal Proceeding for which indemnification may be sought under this
Merger Agreement unless such settlement, compromise, consent or
termination includes an unconditional release of all Indemnified
Persons from all liability arising out of such Legal Proceeding. The
amount of any cost, fee, expense, judgment, fine, loss, claim,
liability and amount paid in settlement for which indemnification is
provided under this Section 6.9(d) shall be net of any amounts
recovered or recoverable therefor by any Indemnified Party under any
applicable insurance policies or otherwise.
(e) For a period of six years from the Effective Time, the
Surviving Corporation (or Parent on its behalf) will cause to be
maintained in effect, at no expense to the beneficiaries thereof,
directors' and officers' liability insurance providing at least the
same coverage with respect to the Company's officers and directors as
the policies, if any, maintained from time to time by or on behalf of
Parent with respect to its officers and directors (or, if broader in
scope, the policies maintained by the Company as of the date of this
Merger Agreement); provided, however, that (i) the aggregate annual
premium payable therefor shall not exceed 150% of the aggregate annual
premium payable for such directors' and officers' liability insurance
policies as are currently in effect, and (ii) if the aggregate annual
premium of such insurance coverage exceeds the amount referred to in
clause (i) of this sentence, Parent shall be obligated to obtain a
policy with the broadest coverage available for a cost not exceeding
such amount. In the event any claim is made against the current or
former directors or officers of the Company that is covered or
potentially covered by, insurance, the Surviving Corporation and
Parent will do nothing that would forfeit, jeopardize, restrict or
limit the insurance coverage available for that claim until the final
disposition of that claim.
(f) If the Surviving Corporation or any of its successors or
assigns or Parent or any of its successors and assigns (i)
consolidates with or merges into any other person and shall not be the
continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties
and assets to any person, proper provision shall be made so that the
successors and assigns of the Surviving Corporation or Parent, as the
case may be, shall assume the obligations of the Surviving Corporation
set forth in this Section 6.9.
(g) The provisions of this Section 6.9 are intended to be for the
benefit of, and shall be enforceable by, each Indemnified Person and
his or her heirs and representatives.
SECTION 6.10 Taiwan Business. It is agreed that the assets and business
of the Company located in the Republic of China (the "Taiwan Business") may, at
the election of Parent, be included within certain assets and businesses of
Parent or its Affiliates which may be the subject of divestitures by Parent or
its Affiliates after the date of this Merger Agreement. Parent agrees to consult
with the Company in connection with such divestitures. It is further agreed that
the Company shall be entitled to receive its allocable proportion of the
consideration received by Parent and its Affiliates for such Asian assets and
businesses, of which the Taiwan Business shall be a part, such allocation to be
determined in good faith by Parent. In the event that this Merger Agreement
shall be terminated for any reason and prior to or thereafter the divestiture of
the Taiwan Business shall be consummated on terms which result in the
consideration therefor receivable hereunder by the Company being less than the
market value of the securities of the Company issued in connection with the
acquisition thereof, determined in the manner consistent with the valuation used
at the time of such acquisitions, Parent shall promptly pay to the Company the
difference between such market value and the consideration therefor receivable.
<PAGE> 72
ARTICLE VII
CONDITIONS
SECTION 7.1 Conditions to Each Party's Obligation To Effect the
Merger. The respective obligations of Parent, Acquisition Corp. and the Company
to effect the Merger and of each party to satisfy its obligations hereunder
shall be subject to the satisfaction or, where permissible, waiver at or prior
to the Effective Time of the following conditions:
(a) No statute, rule, regulation, executive order, decree, preliminary
or permanent injunction or restraining order shall have been enacted,
entered, promulgated or enforced by any U.S. federal or state court of
competent jurisdiction or other Governmental Entity that prohibits the
consummation of the Merger.
SECTION 7.2 Conditions to Obligations of Parent and Acquisition Corp. The
obligations of Acquisition Corp. to effect the Merger and of Parent and
Acquisition Corp. to satisfy their respective obligations hereunder are subject
to the satisfaction of the following conditions unless waived by Parent and
Acquisition Corp.:
(a) The representations and warranties of the Company set forth
in this Merger Agreement shall be true and correct in all respects as
of the date of this Merger Agreement and (except to the extent such
representations and warranties speak specifically as of an earlier
date) as of the Closing Date as though made on and as of the Closing
Date, except as otherwise contemplated by this Merger Agreement;
provided, however, that for purposes of determining under this Section
7.2(a) whether such representations and warranties are true and
correct, (i) no effect shall be given to any qualifications or
exceptions contained in such representations and warranties concerning
"materiality" or "Company Material Adverse Effect", and (ii) such
representations and warranties shall be deemed to be true and correct
in all respects unless the failure or failures of such representations
and warranties to be so true and correct (giving effect to clause (i)
hereof), individually or in the aggregate, would have or would be
reasonably likely to have a Company Material Adverse Effect. The
Company shall have performed in all respects all obligations required
to be performed by it under this Merger Agreement at or prior to the
Closing Date unless the failure of such obligations to be performed,
individually or in the aggregate, would not have or would not be
reasonably likely to have a Company Material Adverse Effect or to have
a material adverse effect on the economic consequences to Parent of
the transactions contemplated hereby. Parent shall have received a
certificate signed on behalf of the Company by the chief executive
officer or an executive vice president of the Company to the foregoing
effect.
SECTION 7.3 Conditions to Obligations of the Company. The obligations of
the Company to effect the Merger and to satisfy its obligations hereunder is
subject to the satisfaction of the following conditions unless waived by the
Company:
(a) The representations and warranties of Parent and Acquisition
Corp. set forth in this Merger Agreement shall be true and correct in
all respects as of the date of this Merger Agreement and (except to
the extent such representations and warranties speak specifically as
of an earlier date) as of the Closing Date as though made on and as of
the Closing Date, except as otherwise contemplated by this Merger
Agreement; provided, however, that for purposes of determining under
this Section 7.3(a) whether such representations and warranties are
true and correct, (i) no effect shall be given to any qualifications
or exceptions contained in such representations and warranties
concerning "materiality" or "material adverse effect", and (ii) such
representations and warranties shall be deemed to be true and correct
in all respects unless the failure or failures of such representations
and warranties to be so true and correct (giving effect to clause (i)
hereof), individually or in the aggregate, would have or would be
reasonably likely to have a material adverse effect on Parent and
Acquisition Corp. Parent and Acquisition Corp. shall have performed in
all respects all obligations required to be performed by them under
this Merger Agreement at or prior to the Closing Date. The Company
shall have received a certificate signed
<PAGE> 73
on behalf of Parent by the chief executive officer or an executive
vice president of Parent to the foregoing effect.
(b) All material consents and approvals of Governmental Entities
necessary for consummation of the Merger shall have been obtained.
ARTICLE VIII
TERMINATION AND AMENDMENT
SECTION 8.1 Termination. This Merger Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval and adoption of the Merger Agreement by the stockholders of
the Company:
(a) by mutual written consent of Parent, Acquisition Corp. and
the Company;
(b) by Parent or Acquisition Corp. if there exists any breach of
any representation, warranty, covenant or agreement of the Company set
forth in this Merger Agreement such that the condition set forth in
Section 7.2(a) would not be satisfied as of the time of the expiration
of the cure period with respect to such breach, which breach shall not
have been cured prior to the earlier of (x) 30 days following written
notice from Parent to the Company of such breach and (y) the Outside
Date (as defined below); provided, however, that Parent shall not be
permitted to terminate this Merger Agreement pursuant to this Section
8.1(b) if Parent shall have materially breached any provision of this
Merger Agreement;
(c) by the Company if there exists any breach of any
representation, warranty, covenant or agreement of Parent or
Acquisition Corp. set forth in this Merger Agreement, which breach
shall not have been cured prior to the earlier of (x) 30 days
following written notice from the Company to Parent of such breach and
(y) the Outside Date; provided, however, that the Company shall not be
permitted to terminate this Merger Agreement pursuant to this Section
8.1(c) if the Company shall have materially breached any provision of
this Merger Agreement;
(d) by either Parent, Acquisition Corp. or the Company if any
permanent injunction or other order of a United States federal or
state court or other competent Governmental Entity preventing the
consummation of the Merger shall have become final and non-appealable;
(e) by either Parent, Acquisition Corp. or the Company if the
Merger shall not have been consummated before April 30, 1999 (the
"Outside Date"); provided, however, that the right to terminate this
Merger Agreement under this Section 8.1(e) will not be available to
any party whose breach of its representations and warranties in this
Merger Agreement or whose failure to perform any of its covenants and
agreements under this Merger Agreement has been the cause of or
resulted in the failure of the Merger to occur on or before such date;
(f) by Parent if the Special Committee shall not have recommended
in the Proxy Statement that the Company's stockholders approve this
Merger Agreement and the Merger, or if the Special Committee shall
have subsequently revoked or modified in a manner adverse to Parent or
qualified in a manner adverse to Parent, its recommendation in favor
of the adoption and approval of this Merger Agreement or the approval
of the Merger; or
(g) by the Company if the Merger shall not have been approved by
the holders of a majority of the outstanding shares of Common Stock of
the Company entitled to vote thereon at the Stockholders' Meeting.
SECTION 8.2 Effect of Termination. In the event of a termination of this
Merger Agreement by either Parent, Acquisition Corp. or the Company as provided
in Section 8.1, this Merger Agreement forthwith will become void and there will
be no liability or obligation on the part of Parent, Acquisition Corp. or the
Company or their respective officers, directors or stockholders, except to the
extent that such termination
<PAGE> 74
results from the willful breach by a party to this Merger Agreement of any of
its representations, warranties, covenants or agreements set forth herein.
SECTION 8.3 Amendment; Extension; Waiver.
(a) This Merger Agreement may be amended by the parties, by action taken or
authorized by their respective Boards of Directors, at any time before or after
approval and adoption of the Merger Agreement by the stockholders of the
Company. After any such approval, however, no amendment shall be made that by
law requires further approval by such stockholders without such further
approval. This Merger Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties.
(b) At any time prior to the Effective Time the parties, to the extent
legally allowed, (i) may extend the time for the performance of any obligation
of the other parties, (ii) may waive any inaccuracy in the representations and
warranties contained in this Merger Agreement or in any document delivered
pursuant hereto and (iii) may waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party to any such
extension or waiver shall be valid only if set forth in a written instrument
signed on behalf of such party.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1 Effect of Action or Knowledge of Parent or Parent
Nominees. Notwithstanding anything to the contrary contained in this Merger
Agreement, for purposes of this Merger Agreement (including, without limitation,
Sections 7.2(a) and 8.1(b)):
(a) no representation or warranty of the Company contained in this Merger
Agreement shall be deemed to be untrue, incorrect or breached if (A) the failure
of the representation or warranty to be true or correct, or the breach of the
representation or warranty, results from any act or omission of (1) Parent, (2)
any person or persons acting at the request or direction of Parent, or (3) any
one or more officer(s), director(s), employee(s) or representative(s) of Parent
or its Affiliates (including, without limitation, any one or more member(s) of
the Board of Directors of the Company other than the members of the Special
Committee) (each such officer, director, employee and representative referred to
in this clause (3) being referred to in this Merger Agreement as a "Parent
Nominee"); or (B) any facts or circumstances that constitute or give rise to the
untruth or inaccuracy in (or breach of) the representation or warranty were
known to Parent or any Parent Nominee at the time such representation or
warranty was made by the Company, and
(b) the Company shall not be deemed to have breached any of its covenants
or agreements contained in this Merger Agreement if (A) the breach of the
covenant or agreement results from any act or omission of (1) Parent, (2) any
person or persons acting at the request or direction of Parent, or (3) any one
or more Parent Nominee(s); or (B) any facts or circumstances that constitute or
give rise to such breach were known to Parent or any Parent Nominee at the time
of or prior to the occurrence of such breach and if, after Parent shall have
become aware of such facts and circumstances, Parent shall have failed promptly
to advise the Special Committee in writing of such facts or circumstances.
For purposes of this Section 9.1, Parent shall be deemed to have knowledge of a
fact or circumstance or act or omission if such fact or circumstance or act or
omission was formally considered at a meeting of the Board of Directors of the
Company at which any Parent Nominee was present throughout such consideration or
included in any written materials provided to any such Parent Nominee.
SECTION 9.2 Approval by Special Committee. To the extent permitted by
applicable law, (1) the approval of a majority of the members of the Special
Committee shall be required to authorize each of the following actions (and none
of such actions shall be valid unless approved by a majority of the members of
the Special Committee): (i) any termination of this Merger Agreement by the
Company, (ii) any agreement by the Company to amend this Merger Agreement, (iii)
any extension of time for the performance of any of the obligations or other
acts of Parent or Acquisition Corp., and (iv) any waiver of compliance with or
any waiver of any breach of any of the representations, warranties, covenants or
conditions contained in this Merger
<PAGE> 75
Agreement for the benefit of the Company; and (2) the authorization of any such
action by a majority of the Special Committee shall constitute the authorization
of such action by the Board of Directors of the Company, and no other action on
the part of the Company or any other director of the Company shall be required
to authorize such action.
SECTION 9.3 Nonsurvival of Representations, Warranties and
Agreements. None of the representations, warranties, covenants and agreements
in this Merger Agreement (or the exhibits and schedules hereto) or in any
instrument delivered pursuant to this Merger Agreement shall survive the
Effective Time, except for the agreements contained in Sections 2.2, 2.3, 6.5,
6.9 and 6.10.
SECTION 9.4 Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given (a) upon receipt, if delivered
personally or telecopied (and confirmed) or (b) two business days after being
mailed by registered or certified mail (return receipt requested), to the
parties at the following addresses (or at such other address for a party as
shall be specified by like notice):
(a) if to Acquisition Corp., to
BAMS Acquisition Corporation
c/o BankAmerica Corporation
101 South Tryon Street
NC1-002-29-01
Charlotte, NC 28255
Attention: General Counsel
Telephone: (704) 386-1621
Telecopy: (704) 386-1670
with copies to
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Attention: Rodney R. Peck, Esq.
Telephone: (415) 983-1000
Telecopy: (415) 983-1200
(b) if to Parent, to
BankAmerica Corporation
101 South Tryon Street
NC1-002-29-01
Charlotte, NC 28255
Attention: General Counsel
Telephone: (704) 386-1621
Telecopy: (704) 386-1670
with copies to
Pillsbury Madison & Sutro LLP
235 Montgomery Street
San Francisco, California 94104
Attention: Rodney R. Peck, Esq.
Telephone: (415) 983-1000
Telecopy: (415) 983-1200
and
(c) if to the Company, to
BA Merchant Services, Inc.
One South Van Ness Avenue, 5th Floor
San Francisco, CA 94103
Attention: General Counsel
Telephone: (415) 241-8235
Telecopy: (415) 241-4198
<PAGE> 76
with copies to
Mr. Donald R. Dixon
Trident Capital, Inc.
2480 Sand Hill Road, Suite 100
Menlo Park, CA 94025
Telephone: (650) 233-4301
Telecopy: (650) 233-4333
Mr. William E. Fisher
Transaction Systems Architects, Inc.
224 South 108th Avenue
Omaha, NE 68154
Telephone: (402) 390-7688
Telecopy: (402) 390-8077
Mr. Hatim Tyabji
28130 Story Hill Lane
Los Altos Hills, CA 94022
Telephone: (650) 949-0212
Telecopy: (650) 949-5887
Cooley Godward LLP
Five Palo Alto Square
3000 El Camino Real
Palo Alto, CA 94306-2155
Attention: Lee Benton, Esq.
Telephone: (650) 843-5000
Telecopy: (650) 857-0663
SECTION 9.5 Headings. When a reference is made in this Merger Agreement
to a Section, Schedule or Exhibit, such reference shall be to a Section of, or a
Schedule or Exhibit to, this Merger Agreement unless otherwise indicated. The
headings contained in this Merger Agreement are for reference purposes only and
will not affect in any way the meaning or interpretation of this Merger
Agreement.
SECTION 9.6 Entire Agreement; No Third Party Beneficiaries. This Merger
Agreement (including the documents, exhibits and instruments referred to herein)
(a) constitutes the entire agreement and supersedes all prior agreements and
understandings, both written and oral, among the parties with respect to the
subject matter hereof and (b) except as provided in Section 6.9, are not
intended to confer upon any person other than the parties any right or remedy
hereunder.
SECTION 9.7 Specific Performance. Each of the parties acknowledges and
agrees that the other party or parties would be irreparably damaged in the event
any covenant or agreement contained in this Merger Agreement is not performed in
accordance with its specific terms or is otherwise breached. Accordingly, each
of the parties will be entitled, without bond or other security, to an
injunction or injunctions to prevent breaches of the covenants or agreements
contained in this Merger Agreement and to enforce specifically this Merger
Agreement and the covenants and agreements contained herein in any action
instituted in any court of the United States or any state thereof having subject
matter jurisdiction, in addition to any other remedy to which such party may be
entitled, at law or in equity. Each party agrees that, should any court or other
competent authority hold any provision of this Merger Agreement or part hereof
to be null, void or unenforceable, or order any party to take any action
inconsistent herewith or not to take any action required herein, the other party
shall not be entitled to specific performance of such provision or part hereof
or to any other remedy, including money damages, for breach hereof as a result
of such holding or order.
SECTION 9.8 Assignment. Neither this Merger Agreement nor any of the
rights, interests or obligations hereunder shall be assigned by any of the
parties (whether by operation of law or otherwise) without the prior written
consent of the other parties, except that Acquisition Corp. may assign, subject
to the reasonable approval of the Company, any or all of its rights, interests
and obligations hereunder to Parent or to any wholly owned Subsidiary of Parent.
Subject to the preceding sentence, this Merger Agreement will be
<PAGE> 77
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
SECTION 9.9 Certain Definitions.
(a) "Subsidiary" means, with respect to any party, any
corporation, limited liability company or other organization, whether
incorporated or unincorporated, of which (i) such party or any other
Subsidiary of such party is a general partner (excluding partnerships
the general partnership interests of which held by such party or any
Subsidiary of such party do not have a majority of the voting interest
in such partnership) or managing member or (ii) at least a majority of
the securities or other interests having by their terms ordinary
voting power to elect a majority of the Board of Directors or others
performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such
party or by any one or more of its Subsidiaries, or by such party and
one or more of its Subsidiaries; provided, however, that BMCF Gaming,
L.L.C. shall not be deemed to be a Subsidiary of the Company for
purpose of this definition.
(b) "Company Material Adverse Effect" means any material adverse
effect on the financial condition, properties, assets (including
intangible assets), or results of operations of the Company; provided,
however, that: (i) any adverse effect arising from or relating to
general business or economic conditions shall not be deemed to
constitute, and shall not be taken into account in determining whether
there has been, a "Company Material Adverse Effect"; (ii) any adverse
effect relating to or affecting the payment processing services
industry generally shall not be deemed to constitute, and shall not be
taken into account in determining whether there has been, a "Company
Material Adverse Effect"; (iii) any adverse effect arising from or
relating to the announcement or pendency of the Merger or any of the
other transactions contemplated by this Merger Agreement, including,
without limitation, any stockholder litigation, shall not be deemed to
constitute, and shall not be taken into account in determining whether
there has been, a "Company Material Adverse Effect"; and (iv) any
adverse effect arising from or relating to the taking of any action
permitted or contemplated by this Merger Agreement shall not be deemed
to constitute, and shall not be taken into account in determining
whether there has been, a "Company Material Adverse Effect".
(c) "Company Permits" means, with respect to the Company, all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the lawful conduct of its
business.
(d) "Affiliate" means, with respect to any party, any person
(including, without limitation, any corporation, limited liability
company or other organization, whether incorporated or unincorporated)
that directly, or indirectly through one or more intermediaries,
controls or is controlled by, or is under common control with, the
party specified.
(e) Whenever the words "include", "includes" or "including" are
used in this Merger Agreement they shall be deemed to be followed by
the words "without limitation".
SECTION 9.10 Counterparts. This Merger Agreement may be executed in two
or more counterparts, all of which shall be considered one and the same
agreement.
SECTION 9.11 Severability. If any one or more of the provisions of this
Merger Agreement shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision of this Merger Agreement, and this Merger
Agreement shall be construed as if such invalid, illegal or unenforceable
provision were not contained herein.
SECTION 9.12 Governing Law. This Merger Agreement shall be governed and
construed in accordance with the laws of the State of Delaware without regard to
any applicable principles of conflicts of law.
<PAGE> 78
IN WITNESS WHEREOF, Parent, Acquisition Corp. and the Company have caused
this Merger Agreement to be signed by their respective officers thereunto duly
authorized as of the date first written above.
BANKAMERICA CORPORATION
By: /s/ BARRY L. PYLE
------------------------------------
Barry L. Pyle
Executive Vice President
BAMS ACQUISITION CORPORATION
By: /s/ JOHN H. HUFFSTUTLER
------------------------------------
John H. Huffstutler
President
BA MERCHANT SERVICES, INC.
By: /s/ SHARIF M. BAYYARI
------------------------------------
Sharif M. Bayyari
President and Chief Executive
Officer
<PAGE> 79
EXHIBIT A
CERTIFICATE OF INCORPORATION
OF THE SURVIVING CORPORATION
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
BA MERCHANT SERVICES, INC.
FIRST: The name of the corporation is:
BA MERCHANT SERVICES, INC.
SECOND: The address of its registered office in the State of Delaware is
Corporation Trust Center, 1209 Orange Street, in the City of Wilmington, County
of New Castle. The name of its registered agent at such address is:
The Corporation Trust Company
Corporation Trust Center
1209 Orange Street
Wilmington, Delaware 19801
THIRD: The nature of the business or purposes to be conducted or promoted
is to engage in any lawful act or activity for which corporations may be
organized under the General Corporation Laws of the State of Delaware.
FOURTH: The total number of shares of stock which the Corporation shall
have authority to issue is one hundred (100) shares of Common Stock, $.01 par
value per share.
FIFTH: The Board of Directors is authorized to adopt, amend or repeal the
Bylaws of the Corporation. Election of directors need not be by ballot.
SIXTH: No director of the Corporation shall be liable to the Corporation or
its stockholders for monetary damages for breach of fiduciary duty as a
director, except for liability (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a knowing violation of
law, (iii) under Section 174 of the Delaware General Corporation Law, or (iv)
for any transaction from which the director derived an improper personal
benefit.
If the Delaware Corporation Law hereafter is amended to further eliminate
or limit the liability of directors, then the liability of a director of the
Corporation, in addition to the limitation on personal liability provided
herein, shall be limited to the fullest extent permitted by the amended Delaware
General Corporation Law. Any repeal or modification of this paragraph by the
stockholders of the Corporation shall be prospective only, and shall not
adversely affect any limitation on the personal liability of a director of the
Corporation existing at the time of such repeal or modification.
<PAGE> 80
ANNEX II
OPINION OF CSFB
December 21, 1998
Special Committee of the Board of Directors
BA Merchant Services, Inc.
One South Van Ness Avenue
San Francisco, CA 94103
Dear Sirs:
You have asked us to advise you with respect to the fairness to the stockholders
of BA Merchant Services, Inc. (the "Company"), other than BankAmerica
Corporation and its affiliates ("BankAmerica"), from a financial point of view
of the Consideration (as defined below) to be received by such stockholders
pursuant to the terms of the Agreement and Plan of Merger, dated as of December
21, 1998 (the "Merger Agreement"), among the Company, BankAmerica and BAMS
Acquisitions Corporation (the "Merger Sub"). The Merger Agreement provides for,
among other things, the merger (the "Merger") of Merger Sub with and into the
Company pursuant to which the Company will become a wholly-owned subsidiary of
BankAmerica and each outstanding share of Class A common stock, par value $.01
per share (the "Class A Common Stock"), of the Company, other than such shares
of Class A Common Stock owned by BankAmerica, will be converted into the right
to receive $20.50 in cash (the "Consideration"). It is our understanding that,
as of the date hereof, BankAmerica owns 100% of the outstanding shares of the
Class B common stock, par value $0.01 per share (the "Class B Common Stock", and
together with the Class A Common Stock, the "Common Stock"), which represents
95.2% of the voting power of the Common Stock.
In arriving at this opinion, we have reviewed certain publicly available
business and financial information relating to the Company, including, but not
limited to, the terms and conditions of the existing contractual relationship
between the Company and BankAmerica, as well as the Merger Agreement. We have
also reviewed certain other information, including financial forecasts, provided
to us by the Company and have met with the Company's management to discuss the
business and prospects of the Company.
We have also considered certain financial and stock market data of the Company,
and we have compared that data with similar data for other publicly-held
companies in businesses similar to those of the Company and we have considered
the financial terms, to the extent publicly available, of certain other business
combinations and other transactions which have recently been effected. We have
considered that BankAmerica's ownership of 100% of the outstanding shares of the
Class B Common Stock represents 95.2% of the voting power of the Common Stock.
We also considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria which we deemed
relevant.
In connection with our review, we have not assumed any responsibility for
independent verification of any of the foregoing information and have relied on
its being complete and accurate in all material respects. With respect to the
financial forecasts, we have assumed with your permission that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgments of the Company's management as to the future financial performance
of the Company. In addition, we have not made an independent evaluation or
appraisal of the assets or liabilities (contingent or otherwise) of the Company,
nor have we been furnished with any such evaluations or appraisals. Our opinion
is necessarily based upon financial, economic, market and other conditions as
they exist and can be evaluated on the date hereof. We were not requested to,
and at your direction did not, solicit third party indications of interest in
acquiring all or any part of the Company.
<PAGE> 81
Special Committee of the Board of Directors
December 21, 1998
Page 2
We have acted as financial advisor to the Special Committee in connection with
the Merger and will receive a fee for our services, a significant portion of
which is contingent upon the rendering of this opinion. In the past, we have
performed certain investment banking and financial advisory services for
NationsBank Corporation, the predecessor to BankAmerica ("NationsBank"), and
BankAmerica Corporation, a corporation merged with and into NationsBank, and may
continue to do so, and have received, and may receive, fees for the rendering of
such services. In addition, in the ordinary course of our business, Credit
Suisse First Boston and its affiliates may actively trade the debt and equity
securities of both the Company and BankAmerica for their own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities.
It is understood that this letter is for the information of the Special
Committee in connection with its consideration of the Merger, does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed Merger and is not to be quoted or referred to, in whole or
in part, in any registration statement, prospectus or proxy statement, or in any
other document used in connection with the offering or sale of securities, nor
shall this letter be used for any other purposes, without Credit Suisse First
Boston's prior written consent.
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 the Class A Common
Stock, other than BankAmerica, in the Merger is fair to such stockholders from a
financial point of view.
Very truly yours,
CREDIT SUISSE FIRST BOSTON CORPORATION
By: /s/ GEORGE F. BOUTROS
--------------------------------------------------------
Name: George F. Boutros
Title: Managing Director
<PAGE> 82
ANNEX III
SECTION 262 OF THE DGCL
Section 262. Appraisal Rights.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to sec. 228 of
this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of the stockholder's shares of stock under the circumstances
described in subsections (b) and (c) of this section. As used in this section,
the word "stockholder" means a holder of record of stock in a stock corporation
and also a member of record of a nonstock corporation; the words "stock" and
"share" mean and include what is ordinarily meant by those words and also
membership or membership interest of a member of a nonstock corporation; and the
words "depository receipt" mean a receipt or other instrument issued by a
depository representing an interest in one or more shares, or fractions thereof,
solely of stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to sec. 251 (other than a merger effected pursuant to
sec. 251(g) of this title), sec. 252, sec. 254, sec. 257, sec. 258, sec. 263 or
sec. 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date fixed
to determine the stockholders entitled to receive notice of and to vote at
the meeting of stockholders to act upon the agreement of merger or
consolidation, were either (i) listed on a national securities exchange or
designated as a national market system security on an interdealer quotation
system by the National Association of Securities Dealers, Inc. or (ii) held
of record by more than 2,000 holders; and further provided that no
appraisal rights shall be available for any shares of stock of the
constituent corporation surviving a merger if the merger did not require
for its approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class or series
of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to
sec.sec. 251, 252, 254, 257, 258, 263 and 264 of this title to accept for
such stock anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts in
respect thereof) or depository receipts at the effective date of the
merger or consolidation will be either listed on a national securities
exchange or designated as a national market system security on an
interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this
paragraph; or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts
described in the foregoing subparagraphs a., b. and c. of this
paragraph.
(3) In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not owned by the
parent corporation immediately prior to the merger, appraisal rights shall
be available for the shares of the subsidiary Delaware corporation.
<PAGE> 83
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section, shall apply as nearly as is practicable.
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days prior to
the meeting, shall notify each of its stockholders who was such on the
record date for such meeting with respect to shares for which appraisal
rights are available pursuant to subsection (b) or (c) hereof that
appraisal rights are available for any or all of the shares of the
constituent corporations, and shall include in such notice a copy of this
section. Each stockholder electing to demand the appraisal of such
stockholder's shares shall deliver to the corporation, before the taking of
the vote on the merger or consolidation, a written demand for appraisal of
such stockholder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such stockholder's
shares. A proxy or vote against the merger or consolidation shall not
constitute such a demand. A stockholder electing to take such action must
do so by a separate written demand as herein provided. Within 10 days after
the effective date of such merger or consolidation, the surviving or
resulting corporation shall notify each stockholder of each constituent
corporation who has complied with this subsection and has not voted in
favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to sec. 228
or sec. 253 of this title, each constituent corporation, either before the
effective date of the merger or consolidation or within ten days
thereafter, shall notify each of the holders of any class or series of
stock of such constituent corporation who are entitled to appraisal rights
of the approval of the merger or consolidation and that appraisal rights
are available for any or all shares of such class or series of stock of
such constituent corporation, and shall include in such notice a copy of
this section; provided that, if the notice is given on or after the
effective date of the merger or consolidation, such notice shall be given
by the surviving or resulting corporation to all such holders of any class
or series of stock of a constituent corporation that are entitled to
appraisal rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such stockholders
of the effective date of the merger or consolidation. Any stockholder
entitled to appraisal rights may, within 20 days after the date of mailing
of such notice, demand in writing from the surviving or resulting
corporation the appraisal of such holder's shares. Such demand will be
sufficient if it reasonably informs the corporation of the identity of the
stockholder and that the stockholder intends thereby to demand the
appraisal of such holder's shares. If such notice did not notify
stockholders of the effective date of the merger or consolidation, either
(i) each such constituent corporation shall send a second notice before the
effective date of the merger or consolidation notifying each of the holders
of any class or series of stock of such constituent corporation that are
entitled to appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall send
such a second notice to all such holders on or within 10 days after such
effective date; provided, however, that if such second notice is sent more
than 20 days following the sending of the first notice, such second notice
need only be sent to each stockholder who is entitled to appraisal rights
and who has demanded appraisal of such holder's shares in accordance with
this subsection. An affidavit of the secretary or assistant secretary or of
the transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of fraud, be
prima facie evidence of the facts stated therein. For purposes of
determining the stockholders entitled to receive either notice, each
constituent corporation may fix, in advance, a record date that shall be
not more than 10 days prior to the date the notice is given, provided, that
if the notice is given on or after the effective date of the merger or
consolidation, the record date shall be such effective date. If no record
date is fixed and the notice is given prior to the effective date, the
record date shall be the close of business on the day next preceding the
day on which the notice is given.
<PAGE> 84
(e) Within 120 days after the effective date of the merger or
consolidation, the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw such stockholder's demand for appraisal and to accept the terms offered
upon the merger or consolidation. Within 120 days after the effective date of
the merger or consolidation, any stockholder who has complied with the
requirements of subsections (a) and (d) hereof, upon written request, shall be
entitled to receive from the corporation surviving the merger or resulting from
the consolidation a statement setting forth the aggregate number of shares not
voted in favor of the merger or consolidation and with respect to which demands
for appraisal have been received and the aggregate number of holders of such
shares. Such written statement shall be mailed to the stockholder within 10 days
after such stockholder's written request for such a statement is received by the
surviving or resulting corporation or within 10 days after expiration of the
period for delivery of demands for appraisal under subsection (d) hereof,
whichever is later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the addresses
therein stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such publication as
the Court deems advisable. The forms of the notices by mail and by publication
shall be approved by the Court, and the costs thereof shall be borne by the
surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any element
of value arising from the accomplishment or expectation of the merger or
consolidation, together with a fair rate of interest, if any, to be paid upon
the amount determined to be the fair value. In determining such fair value, the
Court shall take into account all relevant factors. In determining the fair rate
of interest, the Court may consider all relevant factors, including the rate of
interest which the surviving or resulting corporation would have had to pay to
borrow money during the pendency of the proceeding. Upon application by the
surviving or resulting corporation or by any stockholder entitled to participate
in the appraisal proceeding, the Court may, in its discretion, permit discovery
or other pretrial proceedings and may proceed to trial upon the appraisal prior
to the final determination of the stockholder entitled to an appraisal. Any
stockholder whose name appears on the list filed by the surviving or resulting
corporation pursuant to subsection (f) of this section and who has submitted
such stockholder's certificates of stock to the Register in Chancery, if such is
required, may participate fully in all proceedings until it is finally
determined that such stockholder is not entitled to appraisal rights under this
section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock forthwith, and the case of holders of shares
represented by certificates upon the surrender to the corporation of the
certificates representing such stock. The Court's decree may be enforced as
<PAGE> 85
other decrees in the Court of Chancery may be enforced, whether such surviving
or resulting corporation be a corporation of this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection (d) of
this section shall be entitled to vote such stock for any purpose or to receive
payment of dividends or other distributions on the stock (except dividends or
other distributions payable to stockholders of record at a date which is prior
to the effective date of the merger or consolidation); provided, however, that
if no petition for an appraisal shall be filed within the time provided in
subsection (e) of this section, or if such stockholder shall deliver to the
surviving or resulting corporation a written withdrawal of such stockholder's
demand for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the corporation, then the right of such stockholder to an appraisal
shall cease. Notwithstanding the foregoing, no appraisal proceeding in the Court
of Chancery shall be dismissed as to any stockholder without the approval of the
Court, and such approval may be conditioned upon such terms as the Court deems
just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation.
<PAGE> 86
ANNEX IV
INFORMATION CONCERNING DIRECTORS AND
OFFICERS OF THE COMPANY, BANKAMERICA, THE BANK
AND ACQUISITION CORP.
1. BA MERCHANT SERVICES, INC. The following table sets forth the names,
ages, addresses and principal occupations (present and for the past five years)
of the directors and executive officers of BA Merchant Services, Inc. (the
"Company"). Each such person is a citizen of the United States of America.
Directors of the Company
<TABLE>
<CAPTION>
NAME (AGE) ADDRESS PRINCIPAL OCCUPATION
- ---------- ------- --------------------
<S> <C> <C>
Sharif M. Bayyari (54) BA Merchant Services, Inc. President and Chief Executive
One South Van Ness Avenue Officer; prior thereto, Executive
5th Floor Vice President,
San Francisco, CA 94103 Bank of America (1993-1996).
Barbara J. Desoer (46) Bank of America President, Northern California
555 California Street, Banking, Bank of America; prior
40th Floor thereto,
San Francisco, CA 94104 Group Executive Vice President,
Bank of America (1996-1998);
Executive Vice President,
Bank of America (1993-1996).
Christopher A. Callero (47) Bank of America Group Executive Vice President,
555 California Street Bank of America;
40th Floor prior thereto, Executive Vice
San Francisco, CA 94104 President,
Bank of America (1992-1994).
Donald R. Dixon (51) Trident Capital, Inc. Managing Director of Trident
2480 Sand Hill Road, Capital, Inc. and its affiliated
Suite 100 entities;
Menlo Park, CA 94025 prior thereto, Co-President, Partech
International (1988-1993).
William E. Fisher (52) Transaction Systems President, Chief Executive Officer
Architects, Inc. and Chairman, Transaction Systems
224 South 108th Avenue Architects, Inc.
Omaha, NE 68154
James G. Jones (50) Bank of America President, Direct Banking and
The Clock Tower, Insurance, Bank of America; prior
425 First Street, 3rd Floor thereto,
San Francisco, CA 94105 Group Executive Vice President,
Bank of America (1992-1998).
Hatim A. Tyabji (53) 28130 Story Hill Lane Retired; prior thereto, President
Los Altos Hills, CA 94022 and Chief Executive Officer,
VeriFone Inc. (1986-1998);
Chairman, VeriFone Inc. (1992-1998).
</TABLE>
IV-1
<PAGE> 87
Executive Officers of the Company
<TABLE>
<CAPTION>
NAME (AGE) ADDRESS PRINCIPAL OCCUPATION
- ---------- ------- --------------------
<S> <C> <C>
James H. Williams (55) BA Merchant Services, Inc. Executive Vice President, Chief
One South Van Ness Avenue Financial Officer, Chief Accounting
5th Floor Officer and Treasurer; prior
San Francisco, CA 94103 thereto,
Group Executive Vice President and
Chief Accounting Officer, Bank of
America, and Executive Vice
President, BankAmerica Corporation
(1994-1996);
Chief Financial Officer and Manager
of Operations and Finance Group,
Seafirst Corporation (1993-1994).
Le Tran-Thi (52) BA Merchant Services, Inc. Senior Vice President and Director
One South Van Ness Avenue of Operations and Asia Merchant
5th Floor Services; prior thereto, Senior Vice
San Francisco, CA 94103 President, Bank of America
(1993-1996).
Michael J. Sanders (49) BA Merchant Services, Inc. Senior Vice President and Director
One South Van Ness Avenue of Sales; prior thereto, Senior Vice
5th Floor President and Sales Director, Bank
San Francisco, CA 94103 of America's merchant services
business (1993-1996).
James M. Aviles (38) BA Merchant Services, Inc. Senior Vice President and Director
One South Van Ness Avenue of Product/Strategy/Technology
5th Floor Support; prior thereto, Vice
San Francisco, CA 94103 President, Bank of America's
merchant services business
(1993-1996).
</TABLE>
2. BANKAMERICA CORPORATION. The following table sets forth the names, ages,
addresses and principal occupations (present and for the past five years) of the
directors and executive officers of BankAmerica Corporation ("BankAmerica").
Each such person is a citizen of the United States of America.
Directors of BankAmerica
<TABLE>
<CAPTION>
NAME (AGE) ADDRESS PRINCIPAL OCCUPATION
- ---------- ------- --------------------
<S> <C> <C>
Charles W. Coker (65) Post Office Box 160 Chairman, Sonoco Products Company;
Hartsville, SC 29551-0160 prior thereto, Chief Executive
Officer and Chairman, Sonoco
Products Company (until April 1998).
Timm Crull (67) 1024 E. Balboa Boulevard Retired Chairman, Nestle USA, Inc.;
Newport Beach, CA 92661 prior thereto, Chairman and Chief
Executive Officer, Nestle USA, Inc.
(until December 1994).
Alan T. Dickson (67) 1800 Two First Union Center Chairman of the Board,
Charlotte, NC 28282 Ruddick Corporation; President,
Ruddick Corporation (until February
1994).
Kathleen Feldstein (57) 147 Clifton Street President, Economic Studies, Inc.
Belmont, MA 02178
Paul Fulton (64) First Stratford Building Chairman and CEO, Bassett
101 S. Stratford Road Suite Furniture Industries, Inc.; prior
355 thereto, Dean, Kenan, Flagler
Winston-Salem, NC 27104 Business School, University of North
Carolina (January 1994-August 1997).
</TABLE>
<PAGE> 88
<TABLE>
<CAPTION>
NAME (AGE) ADDRESS PRINCIPAL OCCUPATION
- ---------- ------- --------------------
<S> <C> <C>
Donald E. Guinn (66) Pacific Telesis Center Chairman Emeritus, Pacific
130 Kearny Street Telesis Group
Room 3200
San Francisco, CA 94108
C. Ray Holman (56) Post Office Box 5840 Chairman and Chief Executive
St. Louis, MO 63134 Officer, Mallinckrodt Inc.
W.W. Johnson (67) BankAmerica Corporation Chairman, Executive Committee,
100 North Tryon Street BankAmerica Corporation.
Charlotte, NC 28255
Walter Massey (60) Office of the President President, Morehouse College; prior
830 Westview Drive, SW thereto, Provost and Senior Vice
Atlanta, GA 30314 President for Academic Affairs,
University of California (until
1995).
Hugh L. McColl, Jr. (63) BankAmerica Corporation Chairman and Chief Executive
100 North Tryon Street Officer, BankAmerica Corporation
Charlotte, NC 28255 (Chairman since September 1998 and
December 1992-1997).
Richard M. Rosenberg (68) 555 California Street Retired Chairman, President and
11th Floor Chief Executive Officer, the former
San Francisco, CA 94104 BankAmerica Corporation (since May
1996, August 1995 and December 1995,
respectively).
O. Temple Sloan, Jr. (59) Post Office Box 26006 Chairman, General Parts Inc.
Raleigh, NC 27611
Meredith R. Spangler (61) 668 Hempstead Place Chairman, C.D. Spangler Foundation.
Charlotte, NC 28207-2320
A. Michael Spence (55) Stanford University Dean of Graduate School of Business,
Memorial Way, Room 140 Stanford University.
Stanford, CA
Ronald Townsend (57) Gannett Television Communications Consultant; prior
c/o WTLV-TV12 thereto, Chairman, US FiberOptics
1070 East Adams Street Corporation (October 1996-September
Jacksonville, FL 32202 1997); prior thereto, President,
Gannett Television, Gannett Company,
Inc.
Solomon Trujillo (47) 1801 California Street President and Chief Executive
52nd Floor Officer, USWest Communications Group
Denver, CO 80202 (since 1995); prior thereto,
President and Chief Executive
Officer, USWest Marketing Resources
Group.
Jackie M. Ward (60) 5775 Peachtree-Dunwoody Rd President and Chief Executive
Building G, Fourth Floor Officer, Computer Generation
Stone Mountain, GA 30342 Incorporated.
Virgil R. Williams (59) 2076 West Park Place Chairman and Chief Executive Officer
Atlanta, GA 30087 (since July 1996), Williams Group
International, Inc.
Shirley Young (63) 400 Renaissance Center Vice President, General Motors
Detroit, MI 48265-4000 Corporation.
</TABLE>
<PAGE> 89
Executive Officers of BankAmerica
<TABLE>
<CAPTION>
NAME (AGE) ADDRESS PRINCIPAL OCCUPATION
- ---------- ------- --------------------
<S> <C> <C>
Hugh L. McColl, Jr. (63) BankAmerica Corporation Chairman and Chief Executive Officer
100 North Tryon Street (Chairman since September 1998 and
Charlotte, NC 28255 December 1992-January 1997).
James H. Hance, Jr. (54) BankAmerica Corporation Vice Chairman and Chief Financial
100 North Tryon Street Officer.
Charlotte, NC 28255
Kenneth D. Lewis (51) BankAmerica Corporation President, Consumer and Commercial
100 North Tryon Street Banking (since September 1998);
Charlotte, NC 28255 prior thereto, President,
NationsBank Corporation.
Michael J. Murray (54) BankAmerica Corporation President, Global Corporate and
555 California Street Investment Banking (since October
San Francisco, CA 94104 1998); prior thereto, President,
Global Wholesale Bank (1997-1998);
Vice Chairman (1995-1997); Group
Executive Vice President, U.S.
Corporate Group (1994-1995); Vice
Chairman, Continental Bank
Corporation (1993-1994).
Michael E. O'Neill (52) BankAmerica Corporation President, Financial Services (since
555 California Street October 1998); prior thereto, Vice
San Francisco, CA 94104 Chairman and Chief Financial Officer
(1995-1998); Group Executive Vice
President, Global Equity Group
(1994-1995); Chief Financial
Officer, Continental Bank
Corporation (1993-1994).
F. William Vandiver, Jr. (50) BankAmerica Corporation Corporate Risk Management Executive
100 North Tryon Street (since September 1998); prior
Charlotte, NC 28255 thereto, Chairman, Corporate Risk
Policy (since July 1997); President,
NationsBank Global Finance (January
1996-June 1997); prior thereto,
President, Specialized Finance
Group.
</TABLE>
3. BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION. The following
table sets forth the names, ages, addresses and principal occupations (present
and for the past five years) of the directors and executive officers of Bank of
America National Trust and Savings Association (the "Bank"). Each such person is
a citizen of the United States of America.
Directors of the Bank
<TABLE>
<CAPTION>
NAME (AGE) ADDRESS PRINCIPAL OCCUPATION
- ---------- ------- --------------------
<S> <C> <C>
Hugh L. McColl, Jr. (63) BankAmerica Corporation Chairman and Chief Executive
100 North Tryon Street Officer.
Charlotte, NC 28255
James H. Hance, Jr. (54) BankAmerica Corporation Vice Chairman and Chief Financial
100 North Tryon Street Officer.
Charlotte, NC 28255
</TABLE>
IV-4
<PAGE> 90
<TABLE>
<CAPTION>
NAME (AGE) ADDRESS PRINCIPAL OCCUPATION
- ---------- ------- --------------------
<S> <C> <C>
Kenneth D. Lewis (51) BankAmerica Corporation President, Consumer and Commercial
100 North Tryon Street Banking (since September 1998);
Charlotte, NC 28255 prior thereto, President,
NationsBank Corporation.
Michael J. Murray (54) BankAmerica Corporation President, Global Corporate and
555 California Street Investment Banking (since October
San Francisco, CA 94104 1998); prior thereto, President,
Global Wholesale Bank (1997-1998);
Vice Chairman (1995-1997); Group
Executive Vice President, U.S.
Corporate Group (1994-1995); Vice
Chairman, Continental Bank
Corporation (1993-1994).
Michael E. O'Neill (52) BankAmerica Corporation President, Financial Services (since
555 California Street October 1998); prior thereto, Vice
San Francisco, CA 94104 Chairman and Chief Financial Officer
(1995-1998); Group Executive Vice
President, Global Equity Group
(1994-1995); Chief Financial
Officer, Continental Bank
Corporation (1993-1994).
F. William Vandiver Jr. (50) BankAmerica Corporation Corporate Risk Management Executive
100 North Tryon Street (since September 1998); prior
Charlotte, NC 28255 thereto, Chairman, Corporate Risk
Policy (since July 1997); President,
NationsBank Global Finance (January
1996-June 1997); prior thereto,
President, Specialized Finance
Group.
</TABLE>
Executive Officers of the Bank
<TABLE>
<CAPTION>
NAME (AGE) ADDRESS PRINCIPAL OCCUPATION
- ---------- ------- --------------------
<S> <C> <C>
Hugh L. McColl, Jr. (63) BankAmerica Corporation Chairman and Chief Executive
100 North Tryon Street Officer.
Charlotte, NC 28255
James H. Hance, Jr. (54) BankAmerica Corporation Vice Chairman and Chief Financial
100 North Tryon Street Officer.
Charlotte, NC 28255
Kenneth D. Lewis (51) BankAmerica Corporation President, Consumer and Commercial
100 North Tryon Street Banking (since September 1998);
Charlotte, NC 28255 prior thereto, President,
NationsBank Corporation.
</TABLE>
IV-5
<PAGE> 91
<TABLE>
<CAPTION>
NAME (AGE) ADDRESS PRINCIPAL OCCUPATION
- ---------- ------- --------------------
<S> <C> <C>
Michael J. Murray (54) BankAmerica Corporation President, Global Corporate and
555 California Street Investment Banking (since October
San Francisco, CA 94104 1998); prior thereto, President,
Global Wholesale Bank (1997-1998);
Vice Chairman (1995-1997); Group
Executive Vice President, U.S.
Corporate Group (1994-1995); Vice
Chairman, Continental Bank
Corporation (1993-1994).
Michael E. O'Neill (52) BankAmerica Corporation President, Financial Services (since
555 California Street October 1998); prior thereto, Vice
San Francisco, CA 94104 Chairman and Chief Financial Officer
(1995-1998); Group Executive Vice
President, Global Equity Group
(1994-1995); Chief Financial
Officer, Continental Bank
Corporation (1993-1994).
F. William Vandiver, Jr. (50) BankAmerica Corporation Corporate Risk Management Executive
100 North Tryon Street (since September 1998); prior
Charlotte, NC 28255 thereto, Chairman, Corporate Risk
Policy (since July 1997); President,
NationsBank Global Finance (January
1996-June 1997); prior thereto,
President, Specialized Finance
Group.
</TABLE>
4. BAMS ACQUISITION CORPORATION. The following table sets forth the names,
ages, addresses and principal occupations (present and for the past five years)
of the directors and executive officers of BAMS Acquisition Corporation
("Acquisition Corp."). Each such person is a citizen of the United States of
America.
Directors of Acquisition Corp.
<TABLE>
<CAPTION>
NAME (AGE) ADDRESS PRINCIPAL OCCUPATION
- ---------- ------- --------------------
<S> <C> <C>
John H. Huffstutler (49) BankAmerica Corporation Senior Vice President and Chief
555 California Street Regulatory Counsel, Bank of America
San Francisco, CA 94104 (since 1995); prior thereto,
Assistant General Counsel and Group
Manager, Bank of America
(1993-1995).
Arthur H. Colas, Jr. (51) BankAmerica Corporation Assistant General Counsel, Bank of
555 California Street America.
San Francisco, CA 94104
</TABLE>
Executive Officers of Acquisition Corp.
<TABLE>
<CAPTION>
NAME (AGE) ADDRESS PRINCIPAL OCCUPATION
- ---------- ------- --------------------
<S> <C> <C>
John H. Huffstutler (49) BankAmerica Corporation President and Treasurer.
555 California Street
San Francisco, CA 94104
Arthur H. Colas, Jr. (51) BankAmerica Corporation Vice President and Secretary.
555 California Street
San Francisco, CA 94104
</TABLE>
IV-6
<PAGE> 92
PROXY
BA MERCHANT SERVICES, INC.
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS
APRIL 28, 1999
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF BA MERCHANT
SERVICES, INC. The undersigned hereby appoints Sharif M. Bayyari, James H.
Williams and James M. Aviles, as proxies, each with the power to appoint his
substitute, and hereby authorizes them to represent and to vote, as designated
on the reverse hereof, all the shares of Common Stock of BA Merchant Services,
Inc. held of record by the undersigned on March 26, 1999, at the Special
Meeting of Stockholders of BA Merchant Services, Inc. and any adjournment or
postponement thereof, as follows: THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE
VOTED AS DIRECTED HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS
INDICATED, THIS PROXY WILL BE VOTED FOR APPROVAL OF PROPOSAL 1. The proposal
was proposed by the Board of Directors of BA Merchant Services, Inc.
(CONTINUED AND TO BE SIGNED ON REVERSE SIDE.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
PRINTED ON RECYCLED PAPER
<PAGE> 93
Please mark
your votes [X]
as indicated in
this example
1. Adoption and Approval of the Agreement and Plan of FOR AGAINST ABSTAIN
Merger dated as of December 22, 1998, among BA Merchant [ ] [ ] [ ]
Services, Inc., BankAmerica Corporation and BAMS
Acquisition Corporation, pursuant to which, among other
things: (i) BAMS Acquisition Corporation, which is a wholly
owned subsidiary of BankAmerica Corporation, will be merged
with and into BA Merchant Services, Inc. (the "Merger");
(ii) each outstanding share of Class A Common Stock of BA
Merchant Services, Inc. except shares as to which appraisal
rights have been perfected, will be converted into the right
to receive, in the Merger $20.50 in cash, without interest
thereon; and (iii) each outstanding share of Class B Common
Stock of BA Merchant Services, Inc. (all of which are owned,
directly or indirectly, by BankAmerica Corporation), will be
converted into 100 shares of the common stock of the
surviving corporation.
The undersigned hereby revokes all proxies heretofore given
to vote such shares.
PLEASE SIGN, DATE AND RETURN PROMPTLY
Signature(s)_____________________________________________Dated:___________, 1999
(Please sign exactly as your name or names appear(s) above. When signing as an
executor, administrator, trustee or guardian, please give the full title of the
capacity in which you are acting, and where more than one executor, etc. is
named, a majority must sign. If a corporation, please sign full corporate name
by president or other authorized officer. If a partnership, please sign full
partnership name by an authorized person.)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
