<PAGE>
FILED PURSUANT
TO RULE 424(b)(3)
[LOGO] FILE NO. 33-64089
CERIDIAN CORPORATION
8100 34TH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55425
November 9, 1995
Dear Ceridian Stockholder:
A Special Meeting of holders of Common Stock of Ceridian Corporation
("Ceridian") has been scheduled for Tuesday, December 12, 1995, at the Peninsula
Hotel, Rachel Room, 700 Fifth Avenue, New York, New York, at 7:00 a.m., New York
City time. The accompanying Notice of Special Meeting, Joint Proxy
Statement/Prospectus and Proxy Card set forth the formal business to be
transacted at the meeting. I strongly encourage you to review these materials
carefully and to attend the Special Meeting.
At the Special Meeting, holders of Ceridian Common Stock will be asked to
approve the issuance of Ceridian Common Stock pursuant to the Agreement and Plan
of Merger dated as of August 23, 1995 by and among Ceridian, Convoy Acquisition
Corp., a newly formed wholly-owned subsidiary of Ceridian (referred to as "Sub")
and Comdata Holdings Corporation ("Comdata") (the "Merger Agreement"), pursuant
to which Ceridian would acquire Comdata through a merger of Sub with and into
Comdata (the "Merger"), with Comdata being the surviving corporation and
becoming a wholly-owned subsidiary of Ceridian. Based on the total number of
shares of Comdata common stock outstanding at October 27, 1995, and the
application of the exchange ratio of 0.57 specified in the Merger Agreement (the
"Exchange Ratio"), approximately 20,439,532 new shares of Ceridian Common Stock
would be issued to stockholders of Comdata in connection with the Merger,
representing approximately 30.5% of the total number of shares of Ceridian
Common Stock outstanding at October 27, 1995, after giving effect to such
issuance. An additional 1,112,179 shares of Ceridian Common Stock would be
reserved for issuance to option holders of Comdata in connection with Ceridian's
assumption of Comdata's Stock Option Plan. The rules of the New York Stock
Exchange require that the issuance of Ceridian Common Stock pursuant to the
Merger Agreement be approved by a majority of the votes cast at the Special
Meeting, provided that the total vote cast on the proposal represents over 50%
of the outstanding shares of Ceridian Common Stock. Consummation of the Merger
is conditioned upon, among other things, the receipt of all required stockholder
and certain regulatory approvals.
Ceridian's Board of Directors has received an opinion of Bear, Stearns & Co.
Inc., Ceridian's financial advisor, that, as of the date of the accompanying
Joint Proxy Statement/Prospectus, the Merger is fair, from a financial point of
view, to the stockholders of Ceridian. A copy of this opinion is included as
Appendix B to the Joint Proxy Statement/Prospectus.
Your Board of Directors has carefully reviewed and considered the terms and
conditions of the Merger Agreement and the transactions contemplated thereby,
has unanimously approved the Merger Agreement and the transactions contemplated
thereby, and believes that these actions are in the best interests of Ceridian
and its stockholders. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT YOU
VOTE IN FAVOR OF THE ISSUANCE OF CERIDIAN COMMON STOCK PURSUANT TO THE MERGER
AGREEMENT.
You should read carefully the accompanying Notice of Special Meeting of
Stockholders and the Joint Proxy Statement/Prospectus for additional related
information.
Your vote is important no matter how many shares you hold. I urge you to
complete, sign, date and return the accompanying Proxy Card as soon as possible,
even if you plan to attend the Special Meeting. This procedure will not prevent
you from voting in person, but will ensure that your vote is counted if you are
unable to attend.
Very truly yours,
[SIGNATURE]
Lawrence Perlman
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
<PAGE>
CERIDIAN CORPORATION
8100 34TH AVENUE SOUTH
MINNEAPOLIS, MINNESOTA 55425
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 12, 1995
---------------------
NOTICE IS HEREBY GIVEN that a Special Meeting (the "Special Meeting") of
holders of the common stock, par value $.50 per share, of Ceridian Corporation
("Ceridian Common Stock") will be held on Tuesday, December 12, 1995, at the
Peninsula Hotel, Rachel Room, 700 Fifth Avenue, New York, New York, at 7:00
a.m., New York City time. A Proxy Card and Joint Proxy Statement/Prospectus for
the Special Meeting are enclosed.
The Special Meeting is for the purpose of considering and acting upon:
1. A proposal to approve the issuance of additional shares of Ceridian
Common Stock pursuant to the Agreement and Plan of Merger dated as of
August 23, 1995 by and among Ceridian Corporation ("Ceridian"), Convoy
Acquisition Corp., a newly formed wholly-owned subsidiary of Ceridian
(referred to as "Sub"), and Comdata Holdings Corporation ("Comdata") (the
"Merger Agreement"). The Merger Agreement provides for Ceridian to
acquire Comdata through the merger of Sub with and into Comdata (the
"Merger"), with Comdata being the surviving corporation and becoming a
wholly-owned subsidiary of Ceridian. Pursuant to the Merger Agreement,
each outstanding share of the common stock, par value $.01 per share, of
Comdata ("Comdata Common Stock") would be converted into 0.57 (the
"Exchange Ratio") of a share of Ceridian Common Stock (with cash paid in
lieu of fractional shares). In addition, as a result of the Merger, each
outstanding option to purchase Comdata Common Stock would be assumed by
Ceridian at the effective time of the Merger and would be converted into
an option to acquire such number of whole shares of Ceridian Common Stock
as is equal to the product of the Exchange Ratio and the number of shares
of Comdata Common Stock remaining subject to the original option
immediately prior to the effective time of the Merger, at an exercise
price per share equal to the exercise price per share of Comdata Common
Stock under such option immediately prior to the effective time of the
Merger, divided by the Exchange Ratio.
2. Such other matters as may properly come before the Special Meeting,
including any motion to adjourn to a later date to permit further
solicitation of proxies if necessary, or before any adjournments thereof.
The Board of Directors of Ceridian is not aware of any other business to
come before the Special Meeting.
Any action may be taken on any one of the foregoing proposals at the Special
Meeting on the date specified above or on any date to which the Special Meeting
may properly be adjourned. Pursuant to the Ceridian Bylaws, the Board has fixed
the close of business on October 27, 1995 as the record date for determination
of the holders of Ceridian Common Stock entitled to vote at the Special Meeting
and any adjournments thereof.
The accompanying Joint Proxy Statement/Prospectus and the exhibits thereto,
including the Merger Agreement, form a part of this Notice.
You are requested to complete and sign the accompanying Proxy Card, which is
solicited by the Ceridian Board of Directors, and mail it promptly in the
enclosed envelope. No proxy will be used if you attend and vote at the Special
Meeting (or any adjournment thereof) in person. EXECUTED BUT UNMARKED PROXIES
WILL BE VOTED FOR APPROVAL OF THE ISSUANCE OF CERIDIAN COMMON STOCK PURSUANT TO
THE MERGER AGREEMENT. The presence of a stockholder at the Special Meeting will
not automatically revoke such stockholder's proxy. A stockholder may, however,
revoke a proxy at any time prior to its exercise by filing a written notice of
revocation
<PAGE>
with, or by delivering a duly executed proxy bearing a later date to, Mr. John
A. Haveman, Secretary, Ceridian Corporation, 8100 34th Avenue South,
Minneapolis, Minnesota 55425, or by attending the Special Meeting and voting in
person.
BY ORDER OF THE BOARD OF DIRECTORS
[SIGNATURE]
John A. Haveman
SECRETARY
Minneapolis, Minnesota
November 9, 1995
IMPORTANT: PLEASE RETURN EACH PROXY CARD SENT TO YOU. THE PROMPT RETURN OF
PROXIES WILL SAVE CERIDIAN THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN ORDER
TO ASSURE A QUORUM. AN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVENIENCE. NO
POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
[LOGO]
COMDATA HOLDINGS CORPORATION
5301 MARYLAND WAY
BRENTWOOD, TENNESSEE 37027
November 9, 1995
Dear Comdata Stockholder:
You are cordially invited to attend a Special Meeting of Stockholders (the
"Special Meeting") of Comdata Holdings Corporation ("Comdata") to be held on
Tuesday, December 12, 1995 at the Waldorf Astoria Hotel, Board Dining Room, 301
Park Avenue, New York, New York, at 7:00 a.m., New York City time.
At the Special Meeting, you will be asked to consider and vote upon the
Agreement and Plan of Merger dated as of August 23, 1995 by and among Ceridian
Corporation ("Ceridian"), Convoy Acquisition Corp., a newly formed wholly-owned
subsidiary of Ceridian (referred to as "Sub") and Comdata (the "Merger
Agreement"), and the transactions contemplated thereby, pursuant to which Sub
would merge with and into Comdata, with Comdata being the surviving corporation
and becoming a wholly-owned subsidiary of Ceridian (the "Merger"). If the
proposed Merger, described in the accompanying Joint Proxy Statement/
Prospectus, becomes effective, each outstanding share of Comdata Common Stock
automatically would be exchanged for 0.57 (the "Exchange Ratio") of a share of
Ceridian Common Stock (with cash paid in lieu of fractional shares). In
addition, as a result of the Merger, each outstanding option to purchase Comdata
Common Stock would be assumed by Ceridian at the effective time of the Merger
and would be converted into an option to acquire a number of whole shares of
Ceridian Common Stock equal to the product of the Exchange Ratio and the number
of shares of Comdata Common Stock remaining subject to the original option
immediately prior to the effective time of the Merger, at an exercise price per
share equal to the exercise price per share of Comdata Common Stock immediately
prior to the effective time of the Merger, divided by the Exchange Ratio. Based
on the last reported sale price of Ceridian Common Stock on the New York Stock
Exchange on November 7, 1995, the Exchange Ratio would result in a per share
purchase price for Comdata Common Stock of $24.51. If the Merger is completed,
Comdata stockholders would no longer hold any interest in Comdata following the
Merger other than through their interest in shares of Ceridian Common Stock.
All of Comdata's Series B and Series C Preferred Stock was automatically
converted on October 25, 1995 into an aggregate of 19,025,102 shares of Comdata
Common Stock.
The proposed Merger is subject, among other things, to approval by holders
of a majority of the outstanding shares of Comdata Common Stock. Certain
significant holders of Comdata Common Stock have advised Ceridian by letter of
their intent to vote certain of their shares of Comdata Common Stock in favor of
approving the Merger and the Merger Agreement and the other transactions
contemplated thereby, subject to certain conditions.
The Board of Directors of Comdata has carefully reviewed and considered the
terms and conditions of the Merger Agreement and the transactions contemplated
thereby, has unanimously approved the Merger Agreement and the transactions
contemplated thereby and believes that the Merger is in the best interests of
Comdata and its stockholders. ACCORDINGLY, THE BOARD UNANIMOUSLY RECOMMENDS THAT
YOU VOTE IN FAVOR OF APPROVING AND ADOPTING THE MERGER AGREEMENT. You should
read carefully the accompanying Notice of Special Meeting of Stockholders and
the Joint Proxy Statement/Prospectus for additional related information.
<PAGE>
Comdata's Board of Directors has received an opinion of Lazard, Freres & Co.
LLC, Comdata's financial advisor, that, as of the date of the Merger Agreement
(and as of November 1, 1995, as orally reaffirmed on that date), the Exchange
Ratio is fair from a financial point of view to the holders of Comdata Common
Stock. A copy of this opinion is included as Appendix C to the Joint Proxy
Statement/Prospectus.
It is important that you consider carefully the terms of the proposed Merger
which are described in the Joint Proxy Statement/Prospectus. In order to ensure
that your vote is represented at the meeting, please indicate your choice on the
enclosed Proxy Card, date and sign it, and return it in the enclosed envelope.
You are welcome to attend the Special Meeting and vote in person even if you
have previously returned the Proxy Card.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME. If the Merger
Agreement is approved and the Merger is consummated, you will be sent
instructions regarding the surrender of your existing Comdata stock
certificates.
Sincerely,
George L. McTavish
CHAIRMAN OF THE BOARD AND
CHIEF EXECUTIVE OFFICER
<PAGE>
COMDATA HOLDINGS CORPORATION
5301 MARYLAND WAY
BRENTWOOD, TENNESSEE 37027
------------------------
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON DECEMBER 12, 1995
---------------------
NOTICE IS HEREBY GIVEN that a Special Meeting of Stockholders (the "Special
Meeting") of Comdata Holdings Corporation ("Comdata") will be held at the
Waldorf Astoria Hotel, Board Dining Room, 301 Park Avenue, New York, New York,
at 7:00 a.m., New York City time, on Tuesday, December 12, 1995 to consider and
take action on the following:
1. A proposal to approve and adopt the Agreement and Plan of Merger dated
as of August 23, 1995 by and among Ceridian Corporation ("Ceridian"),
Convoy Acquisition Corp., a newly formed wholly-owned subsidiary of
Ceridian (referred to as "Sub"), and Comdata (the "Merger Agreement") and
the transactions contemplated thereby. The Merger Agreement provides for
Ceridian to acquire Comdata through the merger of Sub with and into
Comdata, with Comdata being the surviving corporation and becoming a
wholly-owned subsidiary of Ceridian (the "Merger"). Pursuant to the
Merger Agreement, each outstanding share of Comdata common stock, par
value $.01 per share ("Comdata Common Stock"), would be converted into
0.57 (the "Exchange Ratio") of a share of the common stock, par value
$.50 per share of Ceridian ("Ceridian Common Stock") (with cash paid in
lieu of fractional shares). In addition, as a result of the Merger, each
outstanding option to purchase Comdata Common Stock would be assumed by
Ceridian at the effective time of the Merger and would be converted into
an option to acquire such whole number of shares of Ceridian Common Stock
as is equal to the product of the Exchange Ratio and the number of shares
of Comdata Common Stock remaining subject to the original option
immediately prior to the effective time of the Merger, at an exercise
price per share equal to the exercise price per share of Comdata Common
Stock under such option immediately prior to the effective time of the
Merger, divided by the Exchange Ratio.
2. Such other matters as may properly come before the Special Meeting,
including a motion to adjourn to a later date to permit further
solicitation of proxies if necessary, or before any adjournments thereof.
The Board of Directors of Comdata is not aware of any other business to come
before the Special Meeting.
Only holders of record of Comdata Common Stock at the close of business on
October 27, 1995 are entitled to notice of, and to vote at, the Special Meeting.
Any action may be taken on any one of the foregoing proposals at the Special
Meeting on the date specified above or on any date to which the Special Meeting
may properly be adjourned.
The accompanying Joint Proxy Statement/Prospectus and the exhibits thereto,
including the Merger Agreement, form a part of this Notice.
If the accompanying Proxy Card is properly executed and returned to Comdata
in time to be voted at the Special Meeting and not revoked, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT. The presence of a stockholder at the Special Meeting
will not automatically revoke such stockholder's proxy. A stockholder may,
however, revoke a proxy at any time prior to its exercise by filing a written
notice of revocation with, or by delivering a duly executed Proxy Card bearing a
later date to, Mr. Peter D. Voysey, Secretary, Comdata Holdings Corporation,
5301 Maryland Way, Brentwood, Tennessee, 37027, or by attending the Special
Meeting and voting in person.
<PAGE>
It is important that all holders of Comdata Common Stock be represented at
the Special Meeting. We urge you to sign and return the enclosed Proxy Card as
promptly as possible whether or not you plan to attend the Special Meeting. The
Proxy Card should be returned in the enclosed envelope.
By Order of the Board of Directors
Peter D. Voysey
SECRETARY
Date: November 9, 1995
IMPORTANT: PLEASE RETURN EACH PROXY CARD SENT TO YOU. THE PROMPT RETURN OF
PROXIES WILL SAVE COMDATA THE EXPENSE OF FURTHER REQUESTS FOR PROXIES IN
ORDER TO ASSURE A QUORUM. AN ADDRESSED ENVELOPE IS ENCLOSED FOR YOUR CONVEN-
IENCE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
<PAGE>
CERIDIAN CORPORATION
AND
COMDATA HOLDINGS CORPORATION
JOINT PROXY STATEMENT
------------------
PROSPECTUS OF
CERIDIAN CORPORATION
------------------
COMMON STOCK, $.50 PAR VALUE
------------------
This Joint Proxy Statement/Prospectus is being furnished to the holders of
common stock of Ceridian Corporation ("Ceridian") and the holders of common
stock of Comdata Holdings Corporation ("Comdata") in connection with the
solicitation of proxies by the respective Boards of Directors of Ceridian and
Comdata for use at special meetings of such holders (respectively, the "Ceridian
Special Meeting" and the "Comdata Special Meeting," and, collectively, the
"Special Meetings"), each to be held on December 12, 1995. At the Comdata
Special Meeting, Comdata common stockholders will be asked to consider and act
upon a proposal to approve and adopt the Agreement and Plan of Merger dated as
of August 23, 1995 by and among Ceridian, Convoy Acquisition Corp., which is a
newly formed wholly-owned subsidiary of Ceridian (referred to as "Sub"), and
Comdata (the "Merger Agreement"), and the transactions contemplated thereby,
pursuant to which, among other things, Comdata would be acquired by Ceridian by
means of the merger of Sub with and into Comdata, with Comdata being the
surviving corporation and becoming a wholly-owned subsidiary of Ceridian (the
"Merger"). At the Ceridian Special Meeting, holders of Ceridian common stock
will be asked to consider and act upon a proposal to approve the issuance of
additional shares of Ceridian common stock pursuant to the terms of the Merger
Agreement. A copy of the Merger Agreement is attached hereto as Appendix A and
is incorporated herein by reference.
Upon consummation of the Merger, each outstanding share of Comdata common
stock, par value $.01 per share ("Comdata Common Stock"), will be converted into
0.57 (the "Exchange Ratio") of a share of Ceridian common stock, par value $.50
per share ("Ceridian Common Stock") (with cash being paid in lieu of fractional
shares). In addition, as a result of the Merger, each outstanding option to
purchase Comdata Common Stock will be assumed by Ceridian at the effective time
of the Merger and will be converted into an option to acquire a number of whole
shares of Ceridian Common Stock equal to the product of the Exchange Ratio and
the number of shares of Comdata Common Stock remaining subject to the original
option immediately prior to the effective time of the Merger, at an exercise
price per share equal to the exercise price per share of Comdata Common Stock
under such option immediately prior to the effective time of the Merger, divided
by the Exchange Ratio. The
(CONTINUED ON NEXT PAGE)
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THE ABOVE MATTERS ARE DISCUSSED IN DETAIL IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. THE PROPOSED MERGER IS A COMPLEX TRANSACTION.
STOCKHOLDERS ARE STRONGLY URGED TO READ AND CONSIDER CAREFULLY
THIS JOINT PROXY STATEMENT/PROSPECTUS IN ITS
ENTIRETY.
The date of this Joint Proxy Statement/Prospectus is November 9, 1995.
<PAGE>
(CONTINUED FROM PREVIOUS PAGE)
outstanding shares of Ceridian Common Stock are, and it is a condition to
consummation of the Merger that the shares of Ceridian Common Stock to be issued
in the Merger be (subject to official notice of issuance), listed on the New
York Stock Exchange (the "NYSE") under the symbol "CEN." The last reported sale
price of Ceridian Common Stock on the NYSE Composite Tape on November 7, 1995
was $43.00 per share. Based on such last reported sale price, the Exchange Ratio
would result in a per share purchase price for the Comdata Common Stock of
$24.51.
BECAUSE THE EXCHANGE RATIO IS FIXED, A CHANGE IN THE MARKET PRICE OF
CERIDIAN COMMON STOCK BEFORE THE MERGER WILL AFFECT THE VALUE OF THE CERIDIAN
COMMON STOCK TO BE RECEIVED IN THE MERGER.
Consummation of the Merger is conditioned upon, among other things,
satisfaction of certain conditions precedent, including the receipt of all
required stockholder and regulatory approvals. Because of the uncertainty of the
timing of the satisfaction of the conditions precedent and receipt of regulatory
approvals, the Merger may not be consummated for a substantial period of time
after any receipt of approvals by the stockholders of Ceridian and Comdata. See
"The Merger--Regulatory Approvals Required."
Bear, Stearns & Co. Inc. has rendered its opinion dated the date of this
Joint Proxy Statement/ Prospectus, updating its opinion dated August 23, 1995,
to the Board of Directors of Ceridian that, as of such date the Merger is fair,
from a financial point of view, to the stockholders of Ceridian. See "The
Merger--Opinion of Ceridian Financial Advisor." Lazard Freres & Co. LLC has
orally reaffirmed to the Board of Directors of Comdata on November 1, 1995 its
opinion dated August 23, 1995 to the Board of Directors of Comdata that, as of
such dates, the Exchange Ratio is fair, from a financial point of view, to the
stockholders of Comdata. See "The Merger--Opinion of Comdata Financial Advisor."
THE BOARD OF DIRECTORS OF CERIDIAN UNANIMOUSLY RECOMMENDS THAT HOLDERS OF
CERIDIAN COMMON STOCK VOTE FOR APPROVAL OF THE ISSUANCE OF CERIDIAN COMMON STOCK
IN ACCORDANCE WITH THE MERGER AGREEMENT. THE BOARD OF DIRECTORS OF COMDATA
UNANIMOUSLY RECOMMENDS THAT HOLDERS OF COMDATA COMMON STOCK VOTE FOR APPROVAL
AND ADOPTION OF THE MERGER AGREEMENT.
This Joint Proxy Statement/Prospectus and the Proxy Cards for the respective
Special Meetings are first being mailed to the holders of Comdata Common Stock
and the holders of Ceridian Common Stock on or about November 10, 1995.
This Joint Proxy Statement/Prospectus is part of a Registration Statement on
Form S-4 (together with all amendments and exhibits thereto, including documents
and information incorporated by reference therein, the "Registration Statement")
filed by Ceridian with the Securities and Exchange Commission (the
"Commission"), relating to the registration under the Securities Act of 1933, as
amended (the "Securities Act"), of up to 21,114,881 shares of Ceridian Common
Stock to be issued in connection with the Merger. This Joint Proxy
Statement/Prospectus serves as a proxy statement for each of Ceridian and
Comdata in connection with their respective Special Meetings and as the
Prospectus of Ceridian filed with and constituting a part of the Registration
Statement. All information in this Joint Proxy Statement/Prospectus regarding
Comdata and its affiliates has been furnished by Comdata, and all information
herein regarding Ceridian and its affiliates has been furnished by Ceridian.
2
<PAGE>
AVAILABLE INFORMATION
Ceridian and Comdata each is subject to the informational requirements of
the Securities Exchange Act of 1934, as amended (the "Exchange Act") and, in
accordance therewith, each files reports, proxy statements and other information
with the Commission. Reports, proxy statements and other information concerning
Ceridian and Comdata can be inspected and copied at the public reference
facilities of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549,
and at the Commission's Regional Offices at Seven World Trade Center, 13th
Floor, New York, New York 10048 and 1400 Northwestern Atrium Center, 500 Madison
Street, Chicago, Illinois 60661. Copies of such materials can be obtained from
the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549, at prescribed rates. Reports, proxy statements and other
information concerning Ceridian also can be inspected at the offices of the
NYSE, 20 Broad Street, New York, New York 10005 and concerning Comdata can be
inspected at the offices of the Nasdaq ("NASDAQ") National Market System,
Reports Section, 1735 K Street, N.W., Washington, D.C. 20006.
For further information, reference is made to the Registration Statement and
to the exhibits thereto. This Joint Proxy Statement/Prospectus does not contain
all the information set forth in the Registration Statement, certain parts of
which are omitted in accordance with the rules and regulations of the
Commission. Statements contained in this Joint Proxy Statement/Prospectus as to
the contents of any document are not necessarily complete, and in each instance
reference is made to such document itself, and each such statement is qualified
in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
This Joint Proxy Statement/Prospectus incorporates documents by reference
which are not presented herein or delivered herewith. Documents incorporated
herein by reference relating to Ceridian (excluding exhibits to such documents
which are not specifically incorporated herein by reference) are available
without charge upon written or oral request to Stockholder Services, Ceridian
Corporation, 8100 34th Avenue South, Minneapolis, Minnesota 55425, telephone
number (612) 853-6701. Documents incorporated herein by reference relating to
Comdata (excluding exhibits to such documents which are not specifically
incorporated herein by reference) are available without charge upon written or
oral request to Peter D. Voysey, Comdata Holdings Corporation, 5301 Maryland
Way, Brentwood, Tennessee, 37027, telephone number (615) 370-7000. In order to
ensure timely delivery of the documents prior to the Special Meetings, any
request should be received by Ceridian and Comdata no later than December 5,
1995.
The following Ceridian documents which have been filed by Ceridian with the
Commission are hereby incorporated by reference in this Joint Proxy
Statement/Prospectus: (i) Ceridian's Annual Report on Form 10-K for the year
ended December 31, 1994; (ii) Ceridian's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1995 and June 30, 1995; and (iii) Ceridian's Current
Reports on Form 8-K dated January 19, 1995 and August 24, 1995.
The following Comdata documents which have been filed by Comdata with the
Commission are hereby incorporated by reference in this Joint Proxy
Statement/Prospectus: (i) Comdata's Annual Report on Form 10-K for the year
ended December 31, 1994; (ii) Comdata's Quarterly Reports on Form 10-Q for the
quarters ended March 31, 1995 and June 30, 1995; (iii) Comdata's Current Report
on Form 8-K filed with the Commission on August 31, 1995; (iv) Comdata's
Registration Statement on Form 8-A dated August 24, 1987; and (v) any amendment
or report filed for the purpose of updating such description of Comdata Common
Stock filed subsequent to the date of this Joint Proxy Statement/Prospectus and
prior to the termination of the offering described herein.
All documents filed by Ceridian or Comdata pursuant to Sections 13(a),
13(c), 14 or 15(d) of the Exchange Act after the date hereof and before the
respective Special Meetings shall be deemed to be incorporated herein by
reference and to be a part hereof from the date of filing of such documents. Any
statement contained herein or in a document incorporated or deemed to be
incorporated by reference
3
<PAGE>
herein shall be deemed to be modified or superseded for purposes of this Joint
Proxy Statement/ Prospectus to the extent that a statement contained herein or
in another subsequently filed document which also is or is deemed to be
incorporated by reference herein modifies or supersedes such statement. Any
statement so modified or superseded shall not be deemed, except as so modified
or superseded, to constitute a part of this Joint Proxy Statement/Prospectus.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS IN
CONNECTION WITH THE SOLICITATION OF PROXIES AND THE OFFERING MADE HEREBY AND, IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY COMDATA OR CERIDIAN. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE THE SOLICITATION OF A PROXY OR AN OFFER
TO SELL OR A SOLICITATION OF AN OFFER TO PURCHASE ANY SECURITIES IN ANY
JURISDICTION IN WHICH SUCH SOLICITATION OR OFFER MAY NOT LAWFULLY BE MADE. THIS
JOINT PROXY STATEMENT/PROSPECTUS DOES NOT COVER ANY RESALES OF THE CERIDIAN
COMMON STOCK OFFERED HEREBY TO BE RECEIVED BY STOCKHOLDERS OF COMDATA DEEMED TO
BE AFFILIATES OF COMDATA OR CERIDIAN UPON THE CONSUMMATION OF THE MERGER.
NEITHER THE DELIVERY OF THIS JOINT PROXY STATEMENT/PROSPECTUS NOR ANY
DISTRIBUTION OF SECURITIES MADE HEREUNDER SHALL IMPLY THAT THERE HAS BEEN NO
CHANGE IN THE INFORMATION SET FORTH HEREIN OR IN THE AFFAIRS OF COMDATA OR
CERIDIAN SINCE THE DATE HEREOF.
------------------------
4
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION...................................................................................... 3
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE............................................................ 3
SUMMARY.................................................................................................... 7
The Companies............................................................................................ 7
Recent Conversion of Comdata Preferred Stock............................................................. 8
The Proposed Merger...................................................................................... 9
Effective Time of the Merger............................................................................. 9
The Special Meetings..................................................................................... 9
Votes Required........................................................................................... 10
Recommendation of the Ceridian Board of Directors........................................................ 11
Recommendation of the Comdata Board of Directors......................................................... 11
Interests of Certain Persons in the Merger............................................................... 12
Opinion of Ceridian Financial Advisor.................................................................... 13
Opinion of Comdata Financial Advisor..................................................................... 13
Limitation on Negotiations............................................................................... 13
Agreement to Vote by Certain Comdata Stockholders........................................................ 13
Regulatory Approvals Required............................................................................ 14
Ceridian's Net Operating Loss Carryforwards.............................................................. 14
Conditions to Consummation of the Merger................................................................. 15
Waiver and Amendment..................................................................................... 15
Termination and Termination Fee.......................................................................... 15
Exchange of Comdata Stock Certificates................................................................... 16
Certain Federal Income Tax Consequences.................................................................. 16
Resale of Ceridian Common Stock.......................................................................... 17
Accounting Treatment..................................................................................... 17
No Dissenters' Rights of Appraisal....................................................................... 17
Market and Market Prices................................................................................. 18
Differences in Rights of Stockholders.................................................................... 19
COMPARATIVE UNAUDITED PER SHARE DATA....................................................................... 20
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA................................................. 21
SELECTED HISTORICAL FINANCIAL DATA OF CERIDIAN CORPORATION................................................. 22
SELECTED HISTORICAL FINANCIAL DATA OF COMDATA HOLDINGS CORPORATION......................................... 23
UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA OF CERIDIAN CORPORATION AND COMDATA HOLDINGS
CORPORATION............................................................................................... 24
INFORMATION CONCERNING THE CERIDIAN SPECIAL MEETING........................................................ 25
General.................................................................................................. 25
Solicitation, Quorum, Voting and Revocability of Proxies................................................. 25
INFORMATION CONCERNING THE COMDATA SPECIAL MEETING......................................................... 26
General.................................................................................................. 26
Solicitation, Quorum, Voting and Revocability of Proxies................................................. 27
THE MERGER................................................................................................. 28
Background of the Merger................................................................................. 28
Reasons of Ceridian for the Merger; Recommendation of Ceridian Board of Directors........................ 31
Opinion of Ceridian Financial Advisor.................................................................... 32
Reasons of Comdata for the Merger; Recommendation of Comdata Board of Directors.......................... 39
Opinion of Comdata Financial Advisor..................................................................... 40
Terms of the Merger; Consideration to be Received by Comdata Stockholders................................ 43
No Fractional Shares..................................................................................... 44
Effective Time of the Merger............................................................................. 44
Surrender of Comdata Common Stock Certificates........................................................... 44
</TABLE>
5
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Ceridian's Net Operating Loss Carryforwards.............................................................. 45
Conditions to Consummation of the Merger................................................................. 46
Regulatory Approvals Required............................................................................ 48
Waiver and Amendment..................................................................................... 49
Termination; Termination Fee............................................................................. 49
Limitation on Negotiations............................................................................... 50
Representations and Warranties........................................................................... 50
Conduct of Comdata Business Pending the Merger........................................................... 51
Conduct of Ceridian Business Pending the Merger.......................................................... 51
Tender Offer for Comdata Debt............................................................................ 52
Agreement to Vote by Certain Comdata Stockholders........................................................ 52
Expenses................................................................................................. 53
Interests of Certain Persons in the Merger............................................................... 53
Effect on Comdata Employee Benefit Plans and Stock Option Plan........................................... 55
No Dissenters' Rights of Ceridian or Comdata Stockholders................................................ 55
Certain Federal Income Tax Consequences.................................................................. 55
Stock Exchange Listing of Ceridian Common Stock.......................................................... 57
Resale of Ceridian Common Stock.......................................................................... 57
Accounting Treatment..................................................................................... 58
Certain Differences in Rights of Stockholders............................................................ 58
BUSINESS OF CERIDIAN....................................................................................... 59
General.................................................................................................. 59
Recent Developments...................................................................................... 63
BUSINESS OF COMDATA........................................................................................ 64
General.................................................................................................. 64
Comdata's Industry Environment........................................................................... 64
Recent Developments...................................................................................... 65
PRINCIPAL STOCKHOLDERS OF CERIDIAN......................................................................... 66
PRINCIPAL STOCKHOLDERS OF COMDATA.......................................................................... 68
MANAGEMENT'S DISCUSSION AND ANALYSIS OF PRO FORMA FINANCIAL CONDITION AND RESULTS OF OPERATIONS............ 70
Results of Operations.................................................................................... 70
Liquidity and Capital Resources.......................................................................... 70
DESCRIPTION OF CERIDIAN SECURITIES......................................................................... 73
General.................................................................................................. 73
Common Stock............................................................................................. 73
Depositary Shares........................................................................................ 74
5 1/2% Preferred Stock................................................................................... 74
Section 203 of the Delaware General Corporation Law...................................................... 77
DESCRIPTION OF COMDATA CAPITAL STOCK....................................................................... 77
Section 203 of the Delaware General Corporation Law...................................................... 78
ADJOURNMENT OF SPECIAL MEETINGS............................................................................ 78
LEGAL MATTERS.............................................................................................. 78
EXPERTS.................................................................................................... 79
INDEPENDENT PUBLIC ACCOUNTANTS............................................................................. 79
STOCKHOLDER PROPOSALS...................................................................................... 79
MANAGEMENT AND ADDITIONAL INFORMATION...................................................................... 79
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS................................................ 80
Appendix A--Agreement and Plan of Merger................................................................... A-1
Appendix B--Opinion of Bear, Stearns & Co. Inc............................................................. B-1
Appendix C--Opinion of Lazard Freres & Co. LLC............................................................. C-1
Appendix D--Voting Agreement, as Supplemented.............................................................. D-1
</TABLE>
6
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ALL RESPECTS BY THE MORE DETAILED
INFORMATION INCLUDED IN THIS JOINT PROXY STATEMENT/PROSPECTUS, THE APPENDICES
HERETO AND THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE. AS USED IN THIS JOINT
PROXY STATEMENT/PROSPECTUS, THE TERMS "CERIDIAN" AND "COMDATA" REFER TO CERIDIAN
CORPORATION AND COMDATA HOLDINGS CORPORATION, RESPECTIVELY, AND, WHERE THE
CONTEXT SO REQUIRES, TO SUCH CORPORATIONS AND THEIR RESPECTIVE SUBSIDIARIES.
UNLESS OTHERWISE DEFINED HEREIN, CAPITALIZED TERMS USED IN THIS SUMMARY HAVE THE
RESPECTIVE MEANINGS ASCRIBED TO THEM ELSEWHERE IN THIS JOINT PROXY
STATEMENT/PROSPECTUS. ALL INFORMATION INCLUDED HEREIN CONCERNING CERIDIAN HAS
BEEN FURNISHED BY CERIDIAN, AND ALL INFORMATION INCLUDED HEREIN CONCERNING
COMDATA HAS BEEN FURNISHED BY COMDATA.
THE COMPANIES
CERIDIAN. Ceridian Corporation is comprised of two business segments:
Information Services, which consists of the Human Resources Group and The
Arbitron Company ("Arbitron"), and Defense Electronics, which consists of
Computing Devices International ("Computing Devices").
The Human Resources Group, whose principal business is Ceridian Employer
Services ("Employer Services"), offers a broad range of products and services
designed to help employers more effectively manage their work forces and
information that is integral to human resource processes. These products and
services include payroll processing, payroll tax filing and training services;
human resource management, benefits administration and skills management
software; and employee assistance programs. In terms of revenue and market
share, Arbitron is the leading provider of radio audience measurement
information, and also provides electronic media and marketing information to
broadcasters, advertising agencies and advertisers. Information Services
reported revenue of $393.7 million and $448.2 million for the first nine months
of 1995 and for fiscal 1994, respectively, representing 51.3% and 48.0%,
respectively, of Ceridian's total revenue.
Computing Devices develops, manufactures and markets electronic systems,
subsystems and components and provides systems integration and other services
primarily to government defense agencies. Computing Devices reported revenue of
$373.5 million and $486.3 million for the first nine months of 1995 and for
fiscal 1994, respectively, representing 48.7% and 52.0%, respectively, of
Ceridian's total revenue.
Ceridian was founded in 1957 and is incorporated in Delaware. The principal
executive office of Ceridian is located at 8100 34th Avenue South, Minneapolis,
Minnesota 55425, telephone (612) 853-8100.
For further information concerning Ceridian, see "Business of Ceridian"
herein and the Ceridian documents incorporated by reference herein as described
under "Incorporation of Certain Documents by Reference."
COMDATA. Comdata is a leading provider of transaction processing services
to the trucking and gaming industries. Comdata provides funds transfer,
regulatory permit and other services to trucking companies at numerous truck
stops and other locations. Other trucking company services include debit card
issuance and authorization, telephone services and backhaul information, all of
which make use of the information processing or telecommunications capabilities
of Comdata's proprietary computerized telecommunications network.
Comdata also provides cash advance services to the gaming industry using
credit cards and debit services employing automated teller machines and similar
devices. Comdata uses its network to provide a system by which individuals may
use MasterCard, VISA and Discover credit cards or their bank automatic teller
machine card to obtain cash in casinos, racetracks and other gaming locations.
In 1994, Comdata processed approximately 35.8 million funds transfer
transactions for the trucking industry and approximately 6.6 million cash
advance transactions at gaming locations, collectively involving approximately
$8.4 billion.
Comdata and its subsidiaries had consolidated revenue of $204.3 million and
$243.3 million for the first nine months of 1995 and for fiscal 1994,
respectively.
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Comdata was incorporated in Delaware in 1987 for the purpose of acquiring,
in a leveraged acquisition, Comdata Network, Inc. ("Network"), a Maryland
corporation organized in 1969. Comdata acquired all the outstanding capital
stock of Network in a merger transaction on September 9, 1987, and Comdata's
investment in Network and Network's subsidiaries represents Comdata's only
material asset. The principal executive office of Comdata is located at 5301
Maryland Way, Brentwood, Tennessee 37027, telephone (615) 370-7000.
For further information concerning Comdata, see "Business of Comdata" herein
and the Comdata documents incorporated by reference herein as described under
"Incorporation of Certain Documents by Reference."
Both Ceridian and Comdata have experienced recent periods of significant
growth due in large measure to a number of acquisitions. It is expected that the
combined company will continue to seek to expand various aspects of its business
through acquisitions. The combined company's ability to effectively manage its
internal growth and assimilate recent and future acquisitions will require it to
continue to improve its operational, financial and information management
systems and controls, and to attract, retain, motivate and manage employees
effectively.
RECENT CONVERSION OF COMDATA PREFERRED STOCK
At the time the Merger Agreement was executed, Comdata's issued and
outstanding capital stock consisted of 16,755,016 shares of Comdata Common
Stock, 558,970 shares of Series B Convertible Preferred Stock, par value $.01
per share ("Series B Preferred Stock") and 247,975 shares of Series C
Convertible Preferred Stock, par value $.01 per share ("Series C Preferred
Stock" and, together with the Series B Preferred Stock, the "Comdata Preferred
Stock"). In accordance with the Certificate of Designations, Preferences and
Rights of Preferred Stock, as amended, pursuant to which the Comdata Preferred
Stock was issued, Comdata was entitled, under certain circumstances, to force
conversion of all outstanding shares of Comdata Preferred Stock into the number
of shares of Comdata Common Stock equal to the aggregate liquidation value of
such shares of Comdata Preferred Stock divided by the then-current conversion
price of the Comdata Preferred Stock. Specifically, Comdata was entitled to
force conversion if Comdata's Common Stock reached and maintained for stated
time periods a volume-weighted average trading price, as defined in the
Certificate of Designations, greater than $19.50 per share, and reached a
specified trading volume for a stated time period.
Comdata determined that, as of September 25, 1995, these preconditions to
its ability to force conversion of the Comdata Preferred Stock were satisfied.
The Comdata Preferred Stock accrued dividends on a daily basis, which were not
paid in cash, but instead increased the liquidation value of the Comdata
Preferred Stock and therefore increased the number of shares of Comdata Common
Stock into which the Comdata Preferred Stock could be converted. The financial
impact of crediting the dividends in this manner was to increase Comdata's fully
diluted shares outstanding by approximately 7% per year. Accordingly, Comdata
elected to require the conversion of all outstanding shares of Comdata Preferred
Stock (the "Preferred Stock Conversion"), thereby halting this dividend
accretion. The required notice of conversion was mailed to each holder of record
of Comdata Preferred Stock as of September 25, 1995, specifying a conversion
date of October 25, 1995. As a result of the termination of the dividend
accretion on the Comdata Preferred Stock prior to consummation of the Merger,
the number of shares of Ceridian Common Stock that otherwise would have been
issued in the Merger will be reduced by approximately 177,000 shares, assuming
the Merger is consummated on or about December 12, 1995.
The Preferred Stock Conversion became effective on October 25, 1995,
resulting in the issuance of 19,025,102 shares of Comdata Common Stock to the
former holders of Comdata Preferred Stock. Accordingly, no shares of Comdata
Preferred Stock are currently outstanding. References to the Comdata Preferred
Stock in the Merger Agreement and the voting agreement, dated as of August 23,
1995, that was entered into by Ceridian, Sub and certain significant holders of
Comdata Preferred Stock in connection with the Merger Agreement (the "Original
Voting Agreement") are not described in this Joint Proxy Statement/ Prospectus
since such references are no longer applicable. The Original Voting Agreement
was supplemented by certain Comdata stockholders as of September 25, 1995 (as
supplemented, the "Voting Agreement") (see "--Agreement to Vote by Certain
Comdata Stockholders").
8
<PAGE>
THE PROPOSED MERGER
The Merger Agreement provides for the merger of a newly formed wholly-owned
subsidiary of Ceridian, Convoy Acquisition Corp. (referred to as "Sub"), with
and into Comdata, with Comdata surviving as a wholly-owned subsidiary of
Ceridian. Upon consummation of the Merger, each outstanding share of Comdata
Common Stock will be converted into 0.57 (the "Exchange Ratio") of a share of
Ceridian Common Stock, with cash to be paid in lieu of fractional shares of
Ceridian Common Stock. If the Merger is completed, Comdata stockholders will no
longer hold any interest in Comdata other than through their interest in shares
of Ceridian Common Stock. See "The Merger--Terms of the Merger; Consideration to
be Received by Comdata Stockholders." In addition, as a result of the Merger,
each outstanding option to purchase shares of Comdata Common Stock ("Comdata
Option") will be assumed by Ceridian at the effective time of the Merger and
will be converted into an option to acquire a number of whole shares of Ceridian
Common Stock equal to the product of the Exchange Ratio and the number of shares
of Comdata Common Stock remaining subject to such Comdata Option immediately
prior to the effective time of the Merger, at an exercise price per share equal
to the exercise price per share of Comdata Common Stock subject to such Comdata
Option immediately prior to the effective time of the Merger, divided by the
Exchange Ratio. See "The Merger--Effect on Comdata Employee Benefit Plans and
Stock Option Plan." Upon effectiveness of the Merger, each outstanding share of
Sub common stock will be converted into one share of common stock of the
surviving corporation.
BECAUSE THE EXCHANGE RATIO IS FIXED, A CHANGE IN THE MARKET PRICE OF
CERIDIAN COMMON STOCK BEFORE THE MERGER WILL AFFECT THE VALUE OF THE CERIDIAN
COMMON STOCK TO BE RECEIVED BY COMDATA STOCKHOLDERS IN THE MERGER.
Each outstanding share of Ceridian capital stock will remain outstanding and
unchanged following the Merger. Based on the Exchange Ratio and the number of
shares of Ceridian Common Stock and Comdata Common Stock outstanding as of
October 27, 1995, approximately 20,439,532 new shares of Ceridian Common Stock
would be issued to stockholders of Comdata in connection with the Merger,
representing approximately 30.5% of the outstanding Ceridian Common Stock, after
giving effect to such issuance. An additional 1,112,179 shares of Ceridian
Common Stock would be reserved for issuance to holders of Comdata Options that
are converted in the Merger into options to acquire Ceridian Common Stock.
Ceridian expects that in connection with the Merger, in the quarter the
Merger is consummated, it will record charges of approximately $70 million
related to the costs of an anticipated refinancing of Comdata's indebtedness
(including the write-off of existing deferred debt expense) and costs associated
with the Merger.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of a properly executed
certificate of merger relating thereto with the Secretary of State of Delaware,
or at such later time as may be specified therein. Such certificate of merger is
to be filed as soon as practicable after the satisfaction or waiver of each of
the conditions to consummation of the Merger. See "The Merger--Effective Time of
the Merger" and
"--Conditions to Consummation of the Merger." If the Merger is consummated,
holders of Comdata Common Stock will be sent a notice and transmittal form
advising such holders of the effectiveness of the Merger and the procedure for
surrendering to The Bank of New York (the "Exchange Agent") certificates
formerly evidencing Comdata Common Stock in exchange for new certificates
evidencing newly issued shares of Ceridian Common Stock. See "The
Merger--Surrender of Comdata Common Stock Certificates."
THE SPECIAL MEETINGS
CERIDIAN SPECIAL MEETING. The Ceridian Special Meeting to consider and vote
upon the proposal to issue shares of Ceridian Common Stock pursuant to the
Merger Agreement will be held at the Peninsula Hotel, Rachel Room, 700 Fifth
Avenue, New York, New York, on Tuesday, December 12, 1995 at 7:00 a.m., New York
City time. Only holders of record of Ceridian Common Stock at the close of
business on October 27, 1995 (the "Ceridian Record Date") will be entitled to
notice of and to vote at the Ceridian Special Meeting. At the close of business
on the Ceridian Record Date, there were outstanding and entitled
9
<PAGE>
to vote 46,631,602 shares of Ceridian Common Stock. Each share of Ceridian
Common Stock is entitled to one vote on the proposal to issue Ceridian Common
Stock pursuant to the terms of the Merger Agreement. See "Information Concerning
the Ceridian Special Meeting."
COMDATA SPECIAL MEETING. The Comdata Special Meeting to consider and vote
upon the Merger Agreement will be held at the Waldorf Astoria Hotel, Board
Dining Room, 301 Park Avenue, New York, New York, on Tuesday, December 12, 1995
at 7:00 a.m., New York City time. Only holders of record of Comdata Common Stock
at the close of business on October 27, 1995 (the "Comdata Record Date") will be
entitled to notice of and to vote at the Comdata Special Meeting. At the close
of business on the Comdata Record Date, there were outstanding and entitled to
vote 35,858,828 shares of Comdata Common Stock. Each share of Comdata Common
Stock is entitled to one vote on the proposal to approve and adopt the Merger
Agreement and the transactions contemplated thereby. See "Information Concerning
the Comdata Special Meeting."
VOTES REQUIRED
CERIDIAN VOTES REQUIRED. Because the number of shares of Ceridian Common
Stock to be issued or reserved for issuance in connection with the Merger will
exceed 20% of the number of shares of Ceridian Common Stock outstanding prior to
the Merger, approval by holders of Ceridian Common Stock of the proposal to
issue Ceridian Common Stock pursuant to the Merger Agreement is required under
the rules of the NYSE. Under NYSE rules, the proposal to issue Ceridian Common
Stock pursuant to the Merger Agreement must be approved by a majority of the
votes cast at the Ceridian Special Meeting, provided that the total votes cast
on the proposal represents over 50% of the outstanding shares of Ceridian Common
Stock. If holders of Ceridian Common Stock do not vote to approve such issuance,
the Merger will not be consummated. Ceridian is not a constituent corporation to
the Merger and, therefore, specific approval of the Merger Agreement by
Ceridian's stockholders is not required under the Delaware General Corporation
Law (the "DGCL") or the Ceridian Restated Certificate of Incorporation (the
"Ceridian Certificate of Incorporation") or the Ceridian Bylaws, as amended (the
"Ceridian Bylaws").
It is expected that all the 441,538 shares of Ceridian Common Stock (which
excludes shares subject to stock options) beneficially owned by directors and
executive officers of Ceridian and their affiliates at the Ceridian Record Date
(0.9% of the total number of shares of Ceridian Common Stock outstanding at such
date) will be voted for approval of the proposal to issue Ceridian Common Stock
pursuant to the Merger Agreement. As of the Ceridian Record Date, Comdata and
its directors and executive officers and their affiliates beneficially owned no
shares of Ceridian Common Stock. See "Information Concerning the Ceridian
Special Meeting--Solicitation, Voting and Revocability of Proxies."
COMDATA VOTES REQUIRED. Pursuant to the DGCL and the Comdata Restated
Certificate of Incorporation, as amended (the "Comdata Certificate of
Incorporation") and the Comdata Bylaws, as amended (the "Comdata Bylaws"),
approval of the Merger Agreement requires the affirmative vote of at least a
majority of the outstanding shares of Comdata Common Stock entitled to vote at
the Comdata Special Meeting.
It is expected that all the 18,661,529 shares of Comdata Common Stock (which
excludes shares subject to stock options) beneficially owned by directors and
executive officers of Comdata and their affiliates at the Comdata Record Date
(representing approximately 52.0% of the outstanding shares of Comdata Common
Stock outstanding at such date and which includes the shares subject to the
Voting Agreement as described below) will be voted for approval and adoption of
the Merger Agreement.
In connection with the Merger Agreement, certain affiliates of Comdata have
separately agreed, pursuant to the Voting Agreement, to vote the shares of
Comdata Common Stock received by them as a result of the Preferred Stock
Conversion (the "Conversion Shares"), representing approximately 24.5% of the
outstanding shares of Comdata Common Stock, in favor of approval and adoption of
the Merger Agreement, subject to the designee of such affiliates on Comdata's
Board of Directors not modifying his recommendation in favor of approval and
adoption of the Merger Agreement. The parties to the Voting Agreement are not
obligated to vote any other shares of Comdata Common Stock held by them in favor
of
10
<PAGE>
the Merger Agreement or in accordance with the Voting Agreement. See "The
Merger--Agreement to Vote by Certain Comdata Stockholders." A copy of the Voting
Agreement is attached as Appendix D to this Joint Proxy Statement/Prospectus.
As of the Comdata Record Date, Ceridian beneficially owned no shares of
Comdata Common Stock and Ceridian's directors and executive officers and their
affiliates beneficially owned less than .01% in the aggregate of the outstanding
shares of Comdata Common Stock. It is expected that all shares of Comdata Common
Stock beneficially owned by Ceridian's directors and officers will be voted for
approval and adoption of the Merger Agreement. See "Information Concerning the
Comdata Special Meeting--Solicitation, Quorum, Voting and Revocability of
Proxies."
RECOMMENDATION OF THE CERIDIAN BOARD OF DIRECTORS
The Board of Directors of Ceridian considered a variety of factors in
evaluating the Merger, including the following: (i) the acquisition of Comdata
is expected to strengthen Ceridian's position as a diversified information
services and data processing company; (ii) the acquisition of Comdata is
expected to provide critical mass to Ceridian's Information Services segment in
the face of industry consolidation, and will evidence to investors Ceridian's
commitment to emphasize the growth of that segment; (iii) the acquisition is
expected to enhance Ceridian's revenue growth, operating margin improvement,
cash flow and utilization of Ceridian's net operating loss carryforwards, and is
expected to be accretive to Ceridian's earnings per share beginning in 1996;
(iv) the acquisition is expected to provide additional vertical market segments
across which Ceridian can apply its horizontal technology expertise in payroll
processing and related employer services, with a platform to exploit emerging
information services opportunities; and (v) the information derived in the due
diligence review of Comdata's business, operations, technology and competitive
position, and possible synergistic and expansion opportunities for the combined
company. The Board of Directors of Ceridian also considered information
concerning the financial position, results of operations and stock prices of
Comdata as well as the prospective financial performance of Ceridian and Comdata
on a combined basis, the terms of the Merger Agreement and the Original Voting
Agreement, the opinion of Bear, Stearns & Co. Inc. ("Bear Stearns") that, as of
the date of the Merger Agreement (and confirmed as of the date of this Joint
Proxy Statement/Prospectus), the Merger is fair, from a financial point of view,
to the stockholders of Ceridian and the analysis of Bear Stearns presented in
connection therewith. ON THE BASIS OF THESE FACTORS, THE BOARD OF DIRECTORS OF
CERIDIAN BELIEVES THAT THE TERMS OF THE MERGER ARE FAIR TO AND IN THE BEST
INTERESTS OF CERIDIAN AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE
HOLDERS OF CERIDIAN COMMON STOCK VOTE FOR APPROVAL OF THE ISSUANCE OF CERIDIAN
COMMON STOCK PURSUANT TO THE MERGER AGREEMENT. See "The Merger--Reasons of
Ceridian for the Merger; Recommendation of the Ceridian Board of Directors."
RECOMMENDATION OF THE COMDATA BOARD OF DIRECTORS
The Board of Directors of Comdata considered a variety of factors in
evaluating the Merger, including: (i) the rapid consolidation occurring within
Comdata's industries; (ii) the relative market positions of each of Comdata and
Ceridian and the increased market penetration of the combined entity; (iii) the
ability of management of the combined entity to realize the full potential of
the combined entity; (iv) the opportunities that the combination would afford
Comdata stockholders to acquire an equity participation in a larger, more
diversified enterprise with significantly larger equity value than Comdata; (v)
the terms of the Merger Agreement; (vi) the financial advice rendered by, and
the opinion of, Lazard Freres & Co. LLC ("Lazard Freres") that, as of the date
of the Merger Agreement (and as of November 1, 1995, as orally reaffirmed on
that date), the Exchange Ratio is fair from a financial point of view to the
stockholders of Comdata; and (vii) Comdata's due diligence review of Ceridian's
business and operations. The Comdata Board of Directors also concluded that the
Merger is preferable to the other alternatives available to Comdata, such as
remaining independent and growing internally or through future acquisitions, or
remaining independent for a period of time with a view toward being acquired or
merging in the future. BASED ON THESE FACTORS, THE COMDATA BOARD OF DIRECTORS
BELIEVES THAT THE TERMS OF THE MERGER ARE IN THE BEST INTERESTS OF COMDATA AND
ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS THAT THE HOLDERS OF COMDATA COMMON
STOCK VOTE FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. See "The
Merger--Reasons of Comdata for the Merger; Recommendation of the Comdata Board
of Directors."
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<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
CHANGE IN CONTROL/SEVERANCE AGREEMENTS. In November 1994, Comdata entered
into change in control severance agreements with each of George L. McTavish, its
Chairman and Chief Executive Officer, Dennis R. Hanson, its Chief Financial
Officer, and Edward A. Barbieri, its President and Chief Operating Officer. The
agreements provide for certain benefit payments if the executive is employed as
of the date of a change in control (the Merger would be a change in control for
purposes of such agreements) and such executive's employment is terminated
within the 18-month period beginning on the date of the change in control other
than (i) by reason of the executive's death, disability or retirement, (ii) by
Comdata for cause, or (iii) by the executive without "good reason," as defined
therein. See "The Merger--Interests of Certain Persons in the Merger--Change in
Control/Severance Agreements."
STOCK OPTIONS. Upon effectiveness of the Merger, each Comdata Option
granted pursuant to Comdata's Stock Option and Restricted Stock Purchase Plan,
as amended (the "Comdata Stock Option Plan"), and outstanding immediately prior
to the effective time of the Merger will be assumed by Ceridian and converted
automatically into an option to purchase shares of Ceridian Common Stock. The
number of shares of Ceridian Common Stock to be subject to each new option will
equal the product of the Exchange Ratio and the number of shares of Comdata
Common Stock remaining subject to the Comdata Option, rounded down to the
nearest whole share, and the exercise price per share of Ceridian Common Stock
under the new option will equal the exercise price per share of Comdata Common
Stock under the Comdata Option, divided by the Exchange Ratio, rounded down to
the nearest whole cent. The vesting, duration and terms of the new option will
otherwise be the same as the Comdata Option. Ceridian will file with the
Commission a registration statement on Form S-8 in order to register all shares
of Ceridian Common Stock issuable pursuant to its assumption of the Comdata
Options after the effective time of the Merger, and will use all reasonable
efforts to have the registration statement become effective as promptly as
practicable after the effective time of the Merger.
As of October 27, 1995, directors and executive officers of Comdata held
Comdata Options to purchase an aggregate of 1,063,504 shares of Comdata Common
Stock, representing approximately 2.88% of the total number of shares of Comdata
Common Stock outstanding on such date (including as outstanding, for purposes of
this calculation, such options held by executive officers and directors).
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that all
rights to indemnification, advancement of litigation expenses and limitation of
personal liability existing in favor of the directors and officers of Comdata
and its subsidiaries under the provisions existing on the date of the Merger
Agreement in Comdata's Certificate of Incorporation or Bylaws will survive the
effective time of the Merger with respect to any matter existing or occurring at
or prior to such effective time (including the Merger). Ceridian and the
surviving corporation in the Merger will assume all obligations of Comdata in
respect thereof as to any claim or claims asserted prior to or within a six-year
period immediately after the effective time of the Merger. The Merger Agreement
also requires Comdata to maintain in effect, for three years after the Merger
becomes effective, directors' and officers' liability insurance with respect to
claims arising from facts or events which occurred before the Merger became
effective in at least the same amounts, and containing coverage, terms and
conditions no less advantageous, as the insurance currently provided by Comdata,
subject to a stated maximum annual premium. See "The Merger--Interests of
Certain Persons in the Merger--Indemnification and Insurance."
CERIDIAN BOARD OF DIRECTORS POSITIONS. The Merger Agreement obligated
Ceridian, after the effective time of the Merger, to take necesssary action to
enable two persons designated by Comdata, who could not be members of Comdata's
management and who were acceptable to Ceridian, to be appointed to Ceridian's
Board of Directors. Comdata has elected not to name two designees. Ceridian and
Comdata expect, however, that during 1996, the Nominating and Board Governance
Committee of Ceridian's Board of Directors will discuss with Bruce K. Anderson,
a director of Comdata and a general partner of the investment firm of Welsh,
Carson, Anderson & Stowe ("WCAS"), whether it would be mutually desirable for
Mr. Anderson to join Ceridian's Board of Directors.
12
<PAGE>
OPINION OF CERIDIAN FINANCIAL ADVISOR
Ceridian's financial advisor, Bear Stearns, has rendered its opinion dated
the date of this Joint Proxy Statement/Prospectus, updating its opinion dated
August 23, 1995, to the Ceridian Board of Directors, that, as of such date, the
Merger is fair, from a financial point of view, to the stockholders of Ceridian.
A copy of the written opinion of Bear Stearns dated the date of this Joint Proxy
Statement/Prospectus is attached hereto as Appendix B and should be read in its
entirety for a description of the procedures followed, assumptions and
qualifications made, matters considered and qualifications and limitations on
the review undertaken by Bear Stearns.
OPINION OF COMDATA FINANCIAL ADVISOR
Comdata's financial advisor, Lazard Freres, has orally reaffirmed on
November 1, 1995 its opinion dated August 23, 1995 to the Comdata Board of
Directors that, as of such dates, the Exchange Ratio is fair from a financial
point of view to the stockholders of Comdata. A copy of the August 23, 1995
Lazard Freres opinion is attached as Appendix C hereto and should be read in its
entirety for a description of the procedures followed, assumptions and
qualifications made, matters considered and qualifications and limitations on
the review undertaken by Lazard Freres.
LIMITATION ON NEGOTIATIONS
The Merger Agreement provides that Comdata (including its subsidiaries) will
not, and will cause its officers, directors, employees, agents and affiliates
not to, directly or indirectly, solicit, initiate, facilitate or encourage
(including by way of furnishing or disclosing non-public information) any
inquiries or the making of any proposal with respect to any merger,
consolidation or other business combination involving Comdata (or its
subsidiaries) or the acquisition of all or any significant assets or capital
stock of Comdata (or its subsidiaries) taken as a whole (an "Acquisition
Transaction") or negotiate, or otherwise engage in discussions with any person
(other than Ceridian) with respect to any Acquisition Transaction or enter into
any agreement, arrangement or understanding with respect to any such Acquisition
Transaction or which would require it to abandon, terminate or fail to
consummate the Merger. Notwithstanding the foregoing, in response to an
unsolicited written proposal from a third party, Comdata may provide information
to and engage in discussions with such third party, but in each case only if the
Board of Directors of Comdata determines in good faith by a majority vote, after
consultation with its financial advisors and based upon the written opinion of
outside counsel to Comdata, that failing to take such action would result in a
breach of the fiduciary duties of the Board of Directors. The Merger Agreement
also requires Comdata to notify Ceridian immediately in writing if a proposal,
offer, inquiry or contact is made concerning any other Acquisition Transaction
and to provide Ceridian with information concerning such proposal, offer,
inquiry or contact, including the party making the proposal, offer, inquiry or
contact and the terms thereof.
AGREEMENT TO VOTE BY CERTAIN COMDATA STOCKHOLDERS
In connection with the Merger Agreement, and with the prior approval of the
Comdata Board of Directors, Ceridian and Sub entered into the Original Voting
Agreement with Charterhouse Equity Partners L.P. ("Charterhouse") and various
limited partnerships affiliated with WCAS, pertaining to the voting of their
shares of Comdata Preferred Stock at the Comdata Special Meeting. In connection
with the Preferred Stock Conversion, the limited partnerships affiliated with
WCAS, but not Charterhouse, agreed with Ceridian and Sub to supplement the
Original Voting Agreement to specify its applicability to the Conversion Shares.
See "The Merger--Agreement to Vote by Certain Comdata Stockholders." Under the
terms of the Voting Agreement (as supplemented), each WCAS stockholder party
thereto has agreed to vote all shares of Comdata Common Stock received by them
as a result of the Preferred Stock Conversion, representing in the aggregate
approximately 24.5% of the outstanding shares of Comdata Common Stock (i) in
favor of approval and adoption of the Merger Agreement, the Merger and the other
transactions contemplated thereby, and (ii) against any proposals or agreements
providing for any recapitalization, merger, consolidation, sale of assets,
reorganization, liquidation or business combination involving Comdata or any of
its subsidiaries (other than the Merger) or any other action or agreement that
would result in a breach of any covenant, representation or warranty or any
other obligation or agreement of Comdata under the Merger Agreement or which
would result in the conditions to Comdata's obligations under the Merger
Agreement
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<PAGE>
not being fulfilled. No WCAS stockholder party to the Voting Agreement is
obligated to vote its Conversion Shares in accordance with the terms of the
Voting Agreement if, prior to such vote, such stockholder's designee on the
Comdata Board of Directors withdraws, amends or modifies, in the exercise of his
or her fiduciary duties as a Comdata director, his or her recommendation for, or
approval of, the Merger and the Merger Agreement. The Voting Agreement does not
cover shares of Comdata Common Stock owned by such WCAS stockholders other than
the Conversion Shares. See "The Merger--Agreement to Vote by Certain Comdata
Stockholders."
REGULATORY APPROVALS REQUIRED
Ceridian and Comdata each filed a notification and report under the
Hart-Scott-Rodino Anti-Trust Improvements Act of 1976, as amended, and the rules
promulgated thereunder (the "HSR Act") with the Federal Trade Commission (the
"FTC") and the Anti-Trust Division of the Department of Justice (the "Department
of Justice"). The applicable waiting period under the HSR Act has expired.
Network and an affiliate thereof are licensees pursuant to certain state
sale of checks and/or payment instruments laws. In accordance with certain of
those laws, approvals must be obtained from state regulatory authorities prior
to the consummation of the Merger. Comdata and Ceridian have obtained certain of
those approvals and are actively seeking, and expect to obtain, the remaining
required approvals. In addition, Network is licensed under the New Jersey Casino
Control Act to provide money transmission services at gambling venues in
Atlantic City, New Jersey, and the approval of the New Jersey Casino Control
Commission has been obtained.
Neither Ceridian nor Comdata is aware of any other material governmental or
regulatory approval required for consummation of the Merger, other than
compliance with applicable securities laws and filings under the DGCL.
CERIDIAN'S NET OPERATING LOSS CARRYFORWARDS
Ceridian estimates that it currently has net operating loss carryforwards
for U.S. federal income tax purposes ("NOLs") of approximately $1.0 billion,
which, if unused, will begin to expire in 1997 and which may be used, to the
extent available, to offset regular taxable income of Ceridian (including
Comdata following completion of the Merger) during the carryforward period
(through 2008). Ceridian also has accrued approximately $300 million of expenses
for financial statement reporting purposes which are expected to be deductible
for federal income tax purposes in future taxable years as they accrue for tax
purposes. Section 382 of the Internal Revenue Code of 1986, as amended (the
"Code"), contains complex rules that place an annual limit on the amount of NOLs
that a corporation may utilize after an "Ownership Change" as defined in the
Code. All the shares of Ceridian Common Stock to be issued in the Merger will be
included in the calculation of whether an Ownership Change has occurred at the
effective time of the Merger. Based on its review of the rules under Section 382
of the Code and the facts relevant to a determination as to whether an Ownership
Change has occurred, including filings as of the date hereof with the
Commission, and assuming no significant changes in such filings and no new
filings, Ceridian believes that it has not experienced, and as a result of the
Merger will not experience, an Ownership Change. Ceridian's belief with respect
to this matter is supported by advice received from Hogan & Hartson L.L.P.
("Hogan & Hartson"), special tax counsel to Ceridian, as to the reasonableness
of Ceridian's processes, calculations and conclusions under applicable law.
Application of the rules under Section 382 of the Code does, however, involve
certain technical issues which are not definitively answered under the Code,
Treasury Regulations and published administrative interpretations. Given such
lack of definitive guidance, and the inherently factual nature of the matter,
Ceridian has not requested special tax counsel's opinion with respect to this
matter, and there can be no assurance that the Internal Revenue Service will
agree with Ceridian's conclusion.
The annual NOL limit is calculated by multiplying the equity value of a
corporation as determined under the Code immediately before an Ownership Change
by the then applicable federal long-term tax exempt rate. Thus, in general, the
higher Ceridian's equity value at the time of an Ownership Change of Ceridian,
the higher the resulting annual NOL limitation applicable to Ceridian. For
example, based on the last reported sales prices of Ceridian capital stock on
the NYSE on November 8, 1995, and a federal long-
14
<PAGE>
term tax exempt rate of 5.75%, Ceridian estimates that the occurrence of an
Ownership Change on that date would limit its ability to utilize its NOLs in
subsequent taxable years to approximately $125 million per year. If, however, an
Ownership Change were to occur after completion of the Merger, and assuming
similar market prices for Ceridian's capital stock and a similar federal
long-term tax exempt rate, Ceridian believes that its equity value for Section
382 purposes would be substantially higher, and the then applicable Section 382
annual NOL limitation would be approximately $175 million.
Events could occur prior to the Merger, either within or beyond the control
of Ceridian, which could cause consummation of the Merger to result in an
Ownership Change. In such event, consummation of the Merger would limit the
utilization of Ceridian's NOLs to an annual amount based on Ceridian's equity
value immediately prior to the Merger (which would not include the equity value
of the shares of Ceridian Common Stock issued in the Merger). If that were to
occur, Ceridian expects that the resulting limitation on its ability to utilize
its NOLs would cause the Merger to be dilutive to Ceridian's stockholders.
Accordingly, consummation of the Merger is conditioned upon each of Ceridian and
Comdata determining that no Ownership Change has occurred with respect to
Ceridian and that consummating the Merger would not cause an Ownership Change to
occur with respect to Ceridian. See "The Merger--Ceridian's Net Operating Loss
Carryforwards."
CONDITIONS TO CONSUMMATION OF THE MERGER
In addition to the stockholder and regulatory approvals and the condition
with respect to Ceridian's NOLs described above, consummation of the Merger is
subject to the following conditions: (i) Ceridian and Comdata shall have each
received letters from their respective accountants to the effect that the Merger
qualifies for pooling-of-interests treatment for financial reporting purposes,
(ii) Ceridian and Comdata shall have each received the requisite opinions of tax
counsel (see "--Certain Federal Income Tax Consequences"); (iii) the
authorization for listing on the NYSE, upon official notice of issuance, of the
shares of Ceridian Common Stock to be issued in the Merger; and (iv) certain
other conditions customary in transactions such as the Merger. See "The
Merger--Conditions to Consummation of the Merger."
WAIVER AND AMENDMENT
At any time before the Merger becomes effective, either Ceridian or Comdata
may (i) extend the time for performance of any obligations or other acts of the
other under the Merger Agreement or (ii) waive compliance with any agreements
contained in the Merger Agreement of the other or with any conditions contained
therein to its own obligations. If, however, the conditions relating to either
of: (i) the receipt of requisite opinions of tax counsel as to the anticipated
tax consequences of the Merger, or (ii) the determination that, with respect to
Ceridian's NOLs, no Ownership Change has occurred with respect to Ceridian and
that consummating the Merger would not cause an Ownership Change to occur with
respect to Ceridian is not met, either the Merger Agreement will be terminated
or new stockholder approval will be sought from both the holders of Ceridian
Common Stock and the holders of Comdata Common Stock on the basis of
supplemental Joint Proxy Statement/Prospectus materials disclosing the effect of
such waivers or as to a revised Merger Agreement.
In addition, the Merger Agreement may be amended by written instrument
signed on behalf of each of the parties thereto. The Merger Agreement may be
amended without the approval of holders of Ceridian Common Stock or Comdata
Common Stock, except that no such amendment will be made following approval and
adoption of the Merger Agreement by holders of Comdata Common Stock and approval
of the issuance of Ceridian Common Stock pursuant to the Merger Agreement by
holders of Ceridian Common Stock if such amendment requires further stockholder
approval under applicable law or NYSE rule, unless such further stockholder
approval has been obtained. See "The Merger--Waiver and Amendment."
TERMINATION AND TERMINATION FEE
The Merger Agreement may be terminated at any time before the Merger becomes
effective: (i) by mutual consent of Ceridian and Comdata; (ii) by Ceridian or
Comdata if the Merger has not become effective before February 29, 1996 or the
approval of either the holders of Comdata Common Stock or the holders of
Ceridian Common Stock is not obtained at the respective Special Meeting or any
adjournments thereof (unless caused by the action or failure to act of the party
seeking to terminate the Merger Agreement
15
<PAGE>
in breach of such party's obligations thereunder); (iii) by Ceridian or Comdata
if any permanent injunction or action by any governmental entity of competent
jurisdiction preventing the consummation of the Merger has become final and
non-appealable; (iv) by Ceridian or Comdata if there has been a breach of any
representation or warranty of the other party which would have a material
adverse effect on that other party or if there has been a breach in any material
respect of any obligation, agreement or covenant to be performed and complied
with by that other party under the Merger Agreement which breach is not curable,
or if curable, is not cured within thirty days after written notice of such
breach is given to that other party by the party not in breach; (v) by Ceridian
if the Board of Directors of Comdata (x) withdraws or amends or modifies in a
manner adverse to Ceridian its recommendation for approval in respect of the
Merger after Comdata has received, or there has been publicly announced or
otherwise made to the Comdata stockholders, a bona fide offer or proposal with
respect to an Acquisition Transaction, (y) makes any recommendation with respect
to an Acquisition Transaction (including making no recommendation or stating an
inability to make a recommendation) other than a recommendation to reject such
Acquisition Transaction or (z) takes any action with respect to an Acquisition
Transaction that would be prohibited by the "no solicitation" provisions of the
Merger Agreement; (vi) by Comdata if such termination is necessary to allow
Comdata to enter into an Acquisition Transaction that its Board of Directors
determines in good faith by a majority vote, upon consultation with its
financial advisors and based upon the written opinion of outside counsel to
Comdata, is more favorable to the Comdata stockholders than is the Merger
(subject to prior payment of the termination fee described below); (vii) by
Ceridian if third parties shall have acquired in excess of 15% of the
outstanding voting equity of Comdata (or, if any stockholder already owning in
excess of 15% shall have increased its ownership by more than an additional 1%);
and (viii) by Ceridian if it undergoes an Ownership Change (within the meaning
of Section 382 of the Code) prior to the effective time of the Merger or if
consummation of the Merger would cause such an Ownership Change. See "The
Merger--Termination; Termination Fee."
If the Merger Agreement is terminated (x) by Ceridian under the
circumstances described in clause (v) above or by Comdata under the
circumstances described in clause (vi) above, (y) by either Ceridian or Comdata
under the circumstances described in clause (ii) above, including the failure to
obtain the approval of either the holders of Comdata Common Stock or the holders
of Ceridian Common Stock, or by Ceridian under the circumstances described in
clause (vii) above, and within one year of such termination, Comdata enters into
a definitive agreement for, or consummates, an Acquisition Transaction, or (z)
by Ceridian as a result of there being a material uncured breach by Comdata of
any of its obligations, agreements or covenants thereunder, then Comdata is
required promptly to pay to Ceridian a termination fee of $25,000,000, plus an
amount (not to exceed $2,500,000) equal to Ceridian's actual out-of-pocket
expenses directly attributable to the Merger and related transactions. See "The
Merger--Termination; Termination Fee." If the Merger Agreement is terminated by
Ceridian under the circumstances described in clause (viii) above, then Ceridian
is required promptly to reimburse Comdata in an amount (not to exceed
$2,500,000) equal to Comdata's actual out-of-pocket expenses directly
attributable to the negotiation and execution of the Merger Agreement. See "The
Merger--Termination; Termination Fee."
EXCHANGE OF COMDATA STOCK CERTIFICATES
Promptly following the Merger, the Exchange Agent will send a notice and
transmittal form, with instructions, to each holder of record of Comdata Common
Stock at the effective time of the Merger advising such holder of the
effectiveness of the Merger and of the procedure for surrendering to the
Exchange Agent certificates formerly evidencing Comdata Common Stock in exchange
for new certificates evidencing newly issued Ceridian Common Stock. Comdata
stockholders should not send in their stock certificates until they receive the
notice and transmittal form from the Exchange Agent. See "The Merger-- Surrender
of Comdata Common Stock Certificates."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The obligations of both Comdata and Ceridian to consummate the Merger are
conditioned on, among other things, the receipt of opinions of Reboul,
MacMurray, Hewitt, Maynard & Kristol ("Reboul MacMurray"), counsel to Comdata,
and Hogan & Hartson, special tax counsel to Ceridian. It is a condition to the
obligation of Comdata to consummate the Merger that Comdata receive the opinion
of Reboul MacMurray,
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<PAGE>
which will be based upon certain certificates, representations and assumptions,
to the effect that, for federal income tax purposes, (i) the Merger will qualify
as a "reorganization" under Section 368(a) of the Code, (ii) no gain or loss
will be recognized by any Comdata stockholder upon the exchange of Comdata
Common Stock for Ceridian Common Stock in the Merger (except in connection with
the receipt of cash in lieu of a fractional share interest), (iii) the basis of
the Ceridian Common Stock received by a Comdata stockholder in the Merger
(including any fractional share interest to which the holder would otherwise
have been entitled) will be the same as the basis of the Comdata Common Stock
surrendered in exchange therefor, (iv) the holding period of the Ceridian Common
Stock received by a Comdata stockholder in the Merger will include the period
during which the Comdata Common Stock surrendered in exchange therefor was held
by the Comdata stockholder (provided that such Comdata Common Stock was held as
a capital asset as of the effective time of the Merger), and (v) no gain or loss
will be recognized by Ceridian, Comdata or Sub as a result of the Merger. It is
a condition to the obligation of Ceridian to consummate the Merger that Ceridian
receive (i) the opinion of Hogan & Hartson, which will be based upon certain
certificates, representations and assumptions, to the effect that no gain or
loss will be recognized by Ceridian, Comdata or Sub as a result of the Merger,
and (ii) the opinion of Reboul MacMurray described in the second sentence of
this paragraph, addressed to Ceridian. Hogan & Hartson (as special tax counsel
to Ceridian) was not retained to provide any opinion to Comdata or the Comdata
stockholders.
Each Comdata stockholder is advised to consult with such stockholder's own
tax advisor concerning the federal income tax consequences of the Merger, as
well as any applicable state, local, foreign or other tax consequences, based
upon such stockholder's own particular facts and circumstances. See "The
Merger-- Certain Federal Income Tax Consequences."
RESALE OF CERIDIAN COMMON STOCK
The shares of Ceridian Common Stock issuable to stockholders of Comdata upon
consummation of the Merger may be traded freely by those stockholders who are
not "affiliates" of Comdata or Ceridian. Comdata has agreed to use its best
efforts to obtain signed representations from each stockholder of Comdata who
may reasonably be deemed an "affiliate" of Comdata (as such term is used in Rule
145 under the Securities Act) to the effect that such person will not transfer
or dispose of, or in any way reduce such person's risk of investment or
ownership in, (i) shares of Ceridian Common Stock issued to such person pursuant
to the Merger except in compliance with Rule 145 under the Securities Act, in a
transaction that is otherwise exempt from the registration requirements under
the Securities Act or in an offering registered under the Securities Act, and
(ii) for the 30-day period prior to the effective time of the Merger, the shares
of Comdata stock held by such person and, until such time as financial results
covering at least 30 days of post-Merger combined operations of Ceridian and
Comdata have been published by Ceridian, the shares of Ceridian Common Stock
issued to such person pursuant to the Merger. See "The Merger--Resale of
Ceridian Common Stock" and "--Accounting Treatment." In addition, Ceridian has
agreed to use its best efforts to obtain signed representations from Ceridian
affiliates to the effect that they will not dispose of, or in any way reduce
their risk of investment or ownership in, Ceridian capital stock and rights to
acquire such Ceridian capital stock during the time periods described in clause
(ii) above.
ACCOUNTING TREATMENT
Ceridian intends to account for the Merger using the "pooling-of-interests"
method under generally accepted accounting principles. The obligations of
Ceridian and Comdata to consummate the Merger are conditioned on, among other
things, having received from KPMG Peat Marwick LLP and Arthur Andersen LLP,
respectively, a letter dated no earlier than five days before the closing date
of the Merger, to the effect that, subject to customary qualifications, the
Merger qualifies for pooling-of-interests treatment for financial reporting
purposes and that such treatment is in accordance with generally accepted
accounting principles. See "The Merger--Conditions to Consummation of the
Merger" and "--Accounting Treatment" and "Unaudited Pro Forma Condensed Combined
Financial Statements."
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NO DISSENTERS' RIGHTS OF APPRAISAL
Pursuant to Section 262(b)(1) of the DGCL, neither the holders of Comdata
Common Stock nor the holders of Ceridian Common Stock have any dissenters'
rights of appraisal with respect to such shares as a result of the matters to be
voted upon at their respective Special Meetings. See "The Merger--No Dissenters'
Rights of Ceridian or Comdata Stockholders."
MARKET AND MARKET PRICES
CERIDIAN. Ceridian Common Stock is listed on the NYSE under the symbol
"CEN." The following table sets forth the range of high and low sale prices
reported on the NYSE for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1993
First Quarter............................................. $ 16 1/8 $ 14 3/8
Second Quarter............................................ $ 16 1/8 $ 13
Third Quarter............................................. $ 18 1/2 $ 14 3/8
Fourth Quarter............................................ $ 19 7/8 $ 17 1/2
FISCAL YEAR ENDED DECEMBER 31, 1994
First Quarter............................................. $ 24 3/4 $ 18 1/2
Second Quarter............................................ $ 25 5/8 $ 21 1/2
Third Quarter............................................. $ 27 1/2 $ 24
Fourth Quarter............................................ $ 27 1/8 $ 23 1/2
FISCAL YEAR ENDED DECEMBER 31, 1995
First Quarter............................................. $ 34 1/2 $ 26 1/8
Second Quarter............................................ $ 37 5/8 $ 31 5/8
Third Quarter............................................. $ 46 7/8 $ 36 3/4
Fourth Quarter (through November 7, 1995)................. $ 47 1/2 $ 40 3/8
</TABLE>
COMDATA. Comdata Common Stock is traded on the NASDAQ National Market
System under the symbol "CMDT." The following table sets forth the range of high
and low sale prices reported on the NASDAQ National Market System for Comdata
Common Stock for the periods indicated:
<TABLE>
<CAPTION>
HIGH LOW
--------- ---------
<S> <C> <C>
FISCAL YEAR ENDED DECEMBER 31, 1993
First Quarter............................................................. $ 7 7/8 $ 5 1/4
Second Quarter............................................................ $ 7 7/8 $ 5 7/16
Third Quarter............................................................. $ 10 1/2 $ 6 3/8
Fourth Quarter............................................................ $ 14 5/8 $ 7 1/4
FISCAL YEAR ENDED DECEMBER 31, 1994
First Quarter............................................................. $ 8 1/2 $ 7
Second Quarter............................................................ $ 8 1/2 $ 6 1/2
Third Quarter............................................................. $ 9 $ 6 3/4
Fourth Quarter............................................................ $ 11 7/8 $ 8 1/4
FISCAL YEAR ENDED DECEMBER 31, 1995
First Quarter............................................................. $ 12 5/8 $ 10 3/8
Second Quarter............................................................ $ 15 5/8 $ 11 1/8
Third Quarter............................................................. $ 25 3/8 $ 15 5/8
Fourth Quarter (through November 7, 1995)................................. $ 26 3/4 $ 22 5/8
</TABLE>
The following table sets forth the closing price per share of Ceridian
Common Stock, the closing price per share of Comdata Common Stock and the
"equivalent per share price" (as defined below) of Comdata Common Stock as of
(i) August 23, 1995, the last trading day before Ceridian and Comdata announced
the signing of the Merger Agreement, and (ii) November 7, 1995, the most recent
practicable date prior to the
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printing of this Joint Proxy Statement/Prospectus for which such information was
obtainable. The "equivalent per share price" of Comdata Common Stock as of such
dates equals the closing price per share of Ceridian Common Stock on such dates
multiplied by the Exchange Ratio of 0.57. See "The Merger--Terms of the Merger;
Consideration to be Received by Comdata Stockholders."
<TABLE>
<CAPTION>
CERIDIAN COMDATA EQUIVALENT PER
MARKET PRICE PER SHARE AT: COMMON STOCK COMMON STOCK SHARE PRICE
- -------------------------------------------------------- -------------- -------------- ---------------
<S> <C> <C> <C>
August 23, 1995......................................... $ 41.875 $ 19.875 $ 23.87
November 7, 1995........................................ $ 43.00 $ 24.00 $ 24.51
</TABLE>
Ceridian and Comdata believe that Comdata Common Stock presently trades on the
basis of the value of the Ceridian Common Stock expected to be issued in
exchange for such Comdata Common Stock in the Merger, discounted for the time
value of money and for the uncertainties associated with such a transaction.
Apart from the publicly disclosed information concerning Ceridian which is
included and incorporated by reference in this Joint Proxy Statement/Prospectus,
Ceridian cannot state with certainty what factors account for changes in the
market price of its stock.
Comdata stockholders are advised to obtain current market quotations for
Ceridian Common Stock and Comdata Common Stock. No assurance can be given as to
the market prices of Ceridian Common Stock or Comdata Common Stock at any time
before the Merger becomes effective or as to the market price of Ceridian Common
Stock at any time thereafter. BECAUSE THE EXCHANGE RATIO IS FIXED, THE EXCHANGE
RATIO WILL NOT BE ADJUSTED TO COMPENSATE COMDATA STOCKHOLDERS FOR DECREASES OR
INCREASES IN THE MARKET PRICE OF CERIDIAN COMMON STOCK WHICH COULD OCCUR BEFORE
THE MERGER BECOMES EFFECTIVE. AS A RESULT, IN THE EVENT THE MARKET PRICE OF
CERIDIAN COMMON STOCK DECREASES OR INCREASES, THE VALUE AT THE EFFECTIVE TIME OF
THE MERGER OF THE CERIDIAN COMMON STOCK TO BE RECEIVED IN THE MERGER IN EXCHANGE
FOR COMDATA COMMON STOCK WOULD CORRESPONDINGLY DECREASE OR INCREASE. See "The
Merger--Terms of the Merger; Consideration to be Received by Comdata
Stockholders," "--Conditions to Consummation of the Merger" and "--Termination;
Termination Fee."
Following the Merger, all Comdata Common Stock will be owned by Ceridian
and, as a result, Comdata Common Stock will no longer be listed on the NASDAQ
National Market System.
DIFFERENCES IN RIGHTS OF STOCKHOLDERS
Upon consummation of the Merger, holders of Comdata Common Stock will become
holders of Ceridian Common Stock. As a result, their rights as stockholders,
which are now governed by Delaware corporate law and Comdata's Certificate of
Incorporation and Bylaws, will be governed by Delaware corporate law and
Ceridian's Certificate of Incorporation and Bylaws. Because of certain
differences between the provisions of Comdata's Certificate of Incorporation and
Bylaws and Ceridian's Certificate of Incorporation and Bylaws, the current
rights of Comdata stockholders will change after the Merger. For a discussion of
various differences between the rights of stockholders of Comdata and the rights
of stockholders of Ceridian, see "The Merger--Certain Differences in Rights of
Stockholders."
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COMPARATIVE UNAUDITED PER SHARE DATA
The following table presents selected comparative unaudited per share data
for Ceridian on a historical and pro forma combined basis, and for Comdata on a
historical and pro forma equivalent basis, giving effect to the Merger using the
pooling-of-interests method of accounting. The information presented below is
derived from the consolidated historical financial statements of Ceridian and
Comdata, including the related notes thereto, incorporated by reference into
this Joint Proxy Statement/Prospectus. This information should be read in
conjunction with such historical and pro forma financial statements and the
related notes thereto. See "Incorporation of Certain Documents by Reference" and
"Unaudited Pro Forma Condensed Combined Financial Statements."
The pro forma earnings (loss) per share data do not reflect (i) the direct
transaction costs of the Merger or the costs of the anticipated refinancing of
Comdata's outstanding debt, or (ii) any benefits from the anticipated
refinancing of Comdata's debt or from utilization of Ceridian's NOLs to shelter
Comdata's income from U.S. federal income taxes. The per share data set forth
below is not necessarily indicative of the results of the future operations of
the combined entity or the actual results that would have been achieved had the
Merger been consummated prior to the periods indicated.
<TABLE>
<CAPTION>
CERIDIAN COMMON STOCK COMDATA COMMON STOCK
------------------------ ------------------------
PRO FORMA PRO FORMA
HISTORICAL COMBINED HISTORICAL EQUIVALENT
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
BOOK VALUE (1)
September 30, 1995................................................ $ 0.53 $ (1.71) $ (10.63) $ (0.97)
December 31, 1994................................................. $ (1.12) $ (3.21) $ (11.76) $ (1.83)
EARNINGS (LOSS) FROM CONTINUING OPERATIONS-- FULLY DILUTED (2)
Nine Months Ended September 30, 1995.............................. $ 1.30 $ 1.22 $ 0.62 $ 0.70
Nine Months Ended September 30, 1994.............................. $ 0.98 $ 0.94 $ 0.63 $ 0.54
Year Ended December 31, 1994...................................... $ 1.35 $ 1.26 $ 0.89 $ 0.72
Year Ended December 31, 1993...................................... $ (0.61) $ (3.72) $ (15.90) $ (2.08)
Year Ended December 31, 1992...................................... $ (0.76) $ (0.47) $ 0.07 $ (0.27)
<FN>
- ------------
NOTES TO COMPARATIVE UNAUDITED PER SHARE DATA
(1) The historical book values per share are calculated by reducing
stockholders' equity (deficit) by the redemption value of the outstanding
preferred shares which have priority in liquidation over the common stocks,
and dividing the result by the common shares outstanding, all amounts being
as of the date indicated. The pro forma combined book values per share of
Ceridian are based upon the pro forma total common equity for Ceridian and
Comdata, divided by the total pro forma common shares outstanding of the
combined entity assuming the conversion of the Comdata outstanding common
shares at the Exchange Ratio. The pro forma equivalent book values per
share of Comdata Common Stock represent the pro forma combined amounts
multiplied by the Exchange Ratio. See "The Merger--Terms of the Merger;
Consideration to be Received by Comdata Stockholders."
(2) The fully diluted earnings (loss) per common share from continuing
operations are based upon the pro forma combined earnings (loss) for
Ceridian and Comdata, divided by the weighted average pro forma common
shares and equivalents of the combined entity, including those which would
be issued due to an assumed conversion of Ceridian's 5 1/2% Cumulative
Convertible Exchangeable Preferred Stock and assumed exercise of Ceridian
options granted in replacement of Comdata options. The pro forma equivalent
of the fully diluted earnings (loss) per common share from continuing
operations of Comdata represents the pro forma combined fully diluted
earnings (loss) per common share from continuing operations multiplied by
the Exchange Ratio. See "The Merger--Terms of the Merger; Consideration to
be Received by Comdata Stockholders."
Ceridian historical earnings (loss) per share amounts include restructuring
losses of $67.0 million in 1993 and $76.2 million in 1992. The per share
amounts do not include an extraordinary loss from early retirement of debt
in 1993, a loss from discontinued operations in 1992, and a charge for the
cumulative effect of the adoption of FAS No. 106 in 1992. Fully diluted per
share amounts would not differ materially from primary amounts in years
prior to 1994.
Comdata historical earnings (loss) per share amounts include a $230.3
million write-off of goodwill and other intangibles in 1993, but do not
include an extraordinary loss from early retirement of debt in 1992. All
Comdata share and per share data have been adjusted to reflect the 1 for 3
reverse common stock split which occurred in the fourth quarter of 1993.
Fully diluted per share amounts would not differ materially from the
primary amounts in any period reported.
</TABLE>
20
<PAGE>
SELECTED HISTORICAL AND UNAUDITED PRO FORMA FINANCIAL DATA
The following tables set forth certain selected historical consolidated
financial information for Ceridian and Comdata, and certain unaudited pro forma
combined financial information giving effect to the Merger using the
pooling-of-interests method of accounting. For a description of the
pooling-of-interests method of accounting with respect to the Merger and the
related effects on the historical financial statements of Ceridian, see "The
Merger--Accounting Treatment." The historical selected financial data for the
five years ended December 31, 1994 is derived from the respective audited
consolidated financial statements of Ceridian and Comdata. The historical
selected financial data for the nine months ended September 30, 1995 and 1994 is
derived from the respective unaudited historical financial statements of
Ceridian and Comdata and reflects, in the respective opinions of management of
Ceridian and Comdata, all adjustments (consisting only of normal recurring
adjustments) necessary for a fair presentation of such data. Interim operating
results are not necessarily indicative of results that may be achieved for the
entire year. This information should be read in conjunction with the
consolidated financial statements of Ceridian and Comdata, and the related notes
thereto, included in documents incorporated by reference in this Joint Proxy
Statement/ Prospectus, and in conjunction with the unaudited pro forma financial
information, including the notes thereto, appearing elsewhere in this Joint
Proxy Statement/Prospectus. See "Incorporation of Certain Documents by
Reference" and "Unaudited Pro Forma Condensed Combined Financial Statements."
The pro forma condensed combined statements of operations data do not
reflect (i) the direct transaction costs of the Merger or the costs of the
anticipated refinancing of Comdata's outstanding debt, or (ii) any benefits from
the anticipated refinancing of Comdata's outstanding debt or from utilization of
Ceridian's NOLs to shelter Comdata's income from U.S. federal income taxes. The
pro forma combined financial information set forth below is not necessarily
indicative of the results of the future operations of the combined entity or the
actual results that would have been achieved had the Merger been consummated
prior to the periods presented.
21
<PAGE>
CERIDIAN CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
(IN MILLIONS, EXCEPT EMPLOYEE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue.......................................... $ 767.2 $ 695.0 $ 934.5 $ 897.5 $ 838.1 $ 768.8 $ 939.1
--------- --------- --------- --------- --------- --------- ---------
Earnings (Loss) before interest and taxes (1).... $ 74.1 $ 54.5 $ 74.7 $ (14.7) $ (29.1) $ 67.3 $ 49.5
Interest income................................ 9.4 7.9 10.7 8.4 17.8 22.2 33.9
Interest expense............................... (1.0) (1.2) (1.6) (16.5) (16.3) (20.8) (35.3)
--------- --------- --------- --------- --------- --------- ---------
Earnings (Loss) before income taxes.............. 82.5 61.2 83.8 (22.8) (27.6) 68.7 48.1
Income tax provision............................. 6.6 5.0 6.7 3.8 5.1 4.1 3.4
--------- --------- --------- --------- --------- --------- ---------
Earnings (Loss) from continuing operations....... 75.9 56.2 77.1 $ (26.6) $ (32.7) $ 64.6 $ 44.7
Preferred stock dividends........................ 9.7 9.7 13.0 0.3 0.3 0.5 0.5
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) from continuing operations
for common stock................................ $ 66.2 $ 46.5 $ 64.1 $ (26.9) $ (33.0) $ 64.1 $ 44.2
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings (Loss) per share--Primary............... $ 1.37 $ 1.00 $ 1.37 $ (0.61) $ (0.76) $ 1.48 $ 1.02
Earnings per share--Fully diluted (2)............ $ 1.30 $ 0.98 $ 1.35
Weighted average common shares outstanding (in
thousands)
Primary........................................ 48,137 46,771 46,764 43,980 43,466 43,375 43,366
Fully diluted.................................. 58,521 57,155 57,148
</TABLE>
<TABLE>
<CAPTION>
AS OF SEPTEMBER 30,
1995
-------------------
<S> <C>
BALANCE SHEET:
Cash and short-term investments............................................................... $ 192.0
Total assets.................................................................................. $ 806.8
Debt obligations, net......................................................................... $ 12.6
Stockholders' equity (deficit)................................................................ $ 260.8
Number of employees........................................................................... 8,000
<FN>
- ------------
(1) Includes restructuring loss (gain) of $67.0 million in 1993, $76.2 million
in 1992, ($16.2 million) in 1991 and $1.5 million in 1990.
(2) Fully diluted earnings (loss) per share would not differ materially from
the primary amounts in periods prior to 1994.
</TABLE>
22
<PAGE>
COMDATA HOLDINGS CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
(IN MILLIONS, EXCEPT EMPLOYEE AND PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED SEPTEMBER 30,
YEAR ENDED DECEMBER 31,
-------------------- -----------------------------------------------------
1995 1994 1994 1993 1992 1991 1990
--------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA:
Revenue......................................... $ 204.3 $ 181.5 $ 243.3 $ 212.3 $ 193.1 $ 184.5 $ 189.8
--------- --------- --------- --------- --------- --------- ---------
Earnings (Loss) before interest and taxes (1)... $ 53.8 $ 45.9 $ 62.0 $ (186.6) $ 39.6 $ 27.4 $ --
Interest income............................... -- -- -- -- 0.1 0.3 0.2
Interest expense.............................. (22.3) (23.1) (30.6) (30.3) (37.2) (39.1) (41.0)
--------- --------- --------- --------- --------- --------- ---------
Earnings (Loss) before income taxes............. 31.5 22.8 31.4 (216.9) 2.5 (11.4) (40.8)
Income tax provision (benefit).................. 10.0 2.6 3.3 0.2 0.1 (0.9) --
--------- --------- --------- --------- --------- --------- ---------
Earnings (Loss) before extraordinary item....... 21.5 20.2 28.1 (217.1) 2.4 (10.5) (40.8)
Preferred dividend requirement.................. (9.9) (9.8) (12.9) (12.6) (1.4) (0.3) --
--------- --------- --------- --------- --------- --------- ---------
Net earnings (loss) for common stock before
extraordinary item............................. $ 11.6 $ 10.4 $ 15.2 $ (229.7) $ 1.0 $ (10.8) $ (40.8)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Earnings (Loss) per share before extraordinary
item (2)(3)(4)................................. $ 0.62 $ 0.63 $ 0.89 $ (15.90) $ 0.07 $ (0.77) $ (3.00)
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
Weighted average common shares and equivalents
outstanding (in thousands)..................... 34,617 30,813 31,777 14,447 14,282 14,147 13,597
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30,
1995
-------------
<S> <C>
BALANCE SHEET:
Cash and short-term investments.............. $ 23.9
Total assets................................. $318.9
Debt obligations, net........................ $212.6
Stockholders' equity (deficit)............... $(65.6)
Number of employees.......................... 1,800
<FN>
- ------------
(1) Includes a write-off of goodwill and other intangibles of $230.3 million in
1993 and $28.2 million in 1990.
(2) All share and per share data have been adjusted to reflect a 1 for 3
reverse common stock split effected in November 1993.
(3) Fully diluted earnings (loss) per share would not differ materially from
the primary amounts in any period presented.
(4) Conversion of preferred stock into common stock and the elimination of the
preferred dividend requirement is assumed in all periods where the result
is dilutive; specifically, the nine months ended September 30, 1995 and
1994 and the year ended December 31, 1994.
</TABLE>
23
<PAGE>
CERIDIAN CORPORATION AND COMDATA HOLDINGS CORPORATION
UNAUDITED SELECTED PRO FORMA COMBINED FINANCIAL DATA
(IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
NINE MONTHS
ENDED
SEPTEMBER 30, YEAR ENDED DECEMBER 31,
-------------------- -------------------------------
1995 1994 1994 1993 1992
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA (1):
Revenue........................................................ $ 971.5 $ 876.5 $ 1,177.8 $ 1,109.8 $ 1,031.2
--------- --------- --------- --------- ---------
Earnings (Loss) before interest and taxes...................... $ 127.9 $ 100.4 $ 136.7 $ (201.3) $ 10.5
Interest income.............................................. 9.4 7.9 10.7 8.4 17.9
Interest expense............................................. (23.3) (24.3) (32.2) (46.8) (53.5)
--------- --------- --------- --------- ---------
Earnings (Loss) before income taxes............................ 114.0 84.0 115.2 (239.7) (25.1)
Income tax provision........................................... 15.9 9.6 16.3 4.0 5.2
--------- --------- --------- --------- ---------
Earnings (Loss) from continuing operations--fully diluted...... 98.1 74.4 98.9 (243.7) (30.3)
Preferred stock dividends...................................... 9.7 9.7 13.0 0.3 0.3
--------- --------- --------- --------- ---------
Net earnings (loss) from continuing operations for common
stock--primary................................................ $ 88.4 $ 64.7 $ 85.9 $ (244.0) $ (30.6)
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
Weighted average common shares and equivalents outstanding (in
thousands):
Primary...................................................... 69,737 68,371 68,364 65,580 65,066
Fully diluted................................................ 80,121 78,755 78,748 65,580 65,066
</TABLE>
<TABLE>
<CAPTION>
AS OF
SEPTEMBER 30, 1995
------------------
<S> <C>
BALANCE SHEET (1):
Cash and short-term investments................................................................. $ 182.7
Total assets.................................................................................... $ 1,079.2
Debt obligations, net........................................................................... $ 225.2
Stockholders' equity............................................................................ $ 119.4
<FN>
- ------------
(1) Unaudited pro forma selected statements of operations and balance sheet
data for all periods has been derived from the Unaudited Pro Forma
Condensed Combined Financial Statements appearing elsewhere in this Joint
Proxy Statement/Prospectus.
</TABLE>
24
<PAGE>
INFORMATION CONCERNING THE CERIDIAN SPECIAL MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to holders of
Ceridian Common Stock as part of the solicitation of proxies by the Ceridian
Board of Directors for use at the Ceridian Special Meeting to be held on
Tuesday, December 12, 1995 and at any adjournment thereof. This Joint Proxy
Statement/Prospectus, and the accompanying Proxy Card, are first being mailed to
holders of Ceridian Common Stock on or about November 10, 1995.
The purpose of the Ceridian Special Meeting is to consider and vote upon the
proposal to approve the issuance of Ceridian Common Stock pursuant to the Merger
Agreement, which sets forth the terms and conditions of the Merger. Under the
terms of the Merger Agreement, the number of shares of Ceridian Common Stock to
be issued in connection with the Merger will exceed 20% of the Ceridian Common
Stock outstanding prior to the Merger. Accordingly, approval by holders of
Ceridian Common Stock of the issuance of Ceridian Common Stock pursuant to the
Merger Agreement is required by the rules of the NYSE.
Upon consummation of the Merger, each outstanding share of Comdata Common
Stock will be converted at the Exchange Ratio into 0.57 of a share of Ceridian
Common Stock, with cash paid in lieu of fractional shares. In addition, as a
result of the Merger, each outstanding Comdata Option will be assumed by
Ceridian at the effective time of the Merger and will be converted into a new
option to acquire a number of shares of Ceridian Common Stock equal to the
product of the Exchange Ratio and the number of shares of Comdata Common Stock
remaining subject to the Comdata Option (immediately before the effective time
of the Merger), rounded down to the nearest whole share. The exercise price per
share of Ceridian Common Stock under the new option will equal the exercise
price per share of Comdata Common Stock under the Comdata Option, divided by the
Exchange Ratio, rounded down to the nearest whole cent. The vesting, duration
and terms of the new option otherwise will be the same as the Comdata Option.
Based on the number of shares of Comdata Common Stock outstanding at the
Comdata Record Date, consummation of the Merger would result in the issuance of
approximately 20,439,532 shares of Ceridian Common Stock (approximately 30.5% of
the total number of shares of Ceridian Common Stock outstanding at the Ceridian
Record Date, after giving effect to the Merger). An additional 1,112,179 shares
of Ceridian Common Stock would be reserved for issuance to holders of Comdata
Options that are converted in the Merger into options to acquire Ceridian Common
Stock. The Merger is subject to a number of conditions, including the receipt of
required regulatory and stockholder approvals.
SOLICITATION, QUORUM, VOTING AND REVOCABILITY OF PROXIES
The Board of Directors of Ceridian has fixed the close of business on
October 27, 1995 as the Ceridian Record Date. Accordingly, only holders of
record of shares of Ceridian Common Stock at the close of business on such date
will be entitled to notice of and to vote at the Ceridian Special Meeting, with
each share entitling its owner to one vote on all matters properly presented at
the Ceridian Special Meeting. On the Ceridian Record Date, there were 46,631,602
shares of Ceridian Common Stock outstanding and 17,782 holders of record of such
shares. The presence, in person or by proxy, of a majority of the total number
of shares of Ceridian Common Stock outstanding on the Ceridian Record Date is
necessary to constitute a quorum at the Ceridian Special Meeting.
Under NYSE rules, the proposal to issue Ceridian Common Stock pursuant to
the Merger Agreement must be approved by a majority of the votes cast at the
Ceridian Special Meeting, provided that the total vote cast on the proposal
represents over 50% of the outstanding shares of Ceridian Common Stock. Ceridian
is not a constituent corporation to the Merger and, therefore, specific approval
of the Merger Agreement by holders of Ceridian Common Stock is not required
under Delaware law or the Ceridian Certificate of Incorporation or Bylaws.
It is expected that all the 441,538 shares of Ceridian Common Stock
(excluding shares subject to stock options) beneficially owned by directors and
executive officers of Ceridian and their affiliates at the Ceridian Record Date
(0.9% of the total number of outstanding shares of Ceridian Common Stock at such
date) will
25
<PAGE>
be voted for approval of the proposal to issue Ceridian Common Stock pursuant to
the Merger Agreement. As of the Ceridian Record Date, Comdata and its directors
and executive officers and their affiliates beneficially owned no shares of
Ceridian Common Stock.
If the accompanying Ceridian Proxy Card is properly executed and returned to
Ceridian in time to be voted at the Ceridian Special Meeting, the shares
represented thereby will be voted in accordance with the instructions marked
thereon at the Ceridian Special Meeting and any adjournment thereof. EXECUTED
BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL OF THE ISSUANCE OF SHARES OF
CERIDIAN COMMON STOCK PURSUANT TO THE MERGER AGREEMENT. If an executed Proxy
Card is returned and the stockholder has specifically abstained from voting on
any matter, the shares represented by such proxy will be considered present at
the meeting for purposes of determining a quorum and for purposes of calculating
the vote, but not be considered to have been voted in favor of such matter. If
an executed Proxy Card is returned by a broker holding shares in street name
which indicates that the broker does not have discretionary authority as to
certain shares to vote on one or more matters, such shares will be considered
present at the meeting for purposes of determining a quorum, but will not be
considered to be represented at the meeting for purposes of calculating the vote
with respect to such matter.
The Board of Directors of Ceridian is not aware of any matters other than
those described in the Notice of the Ceridian Special Meeting that are to come
before the Ceridian Special Meeting. If any other matters are properly brought
before the Ceridian Special Meeting or any adjournment thereof, one or more of
the persons named in the Proxy Card will vote the shares represented by such
proxy upon such matters as determined in their discretion. However, executed
Proxy Cards that are properly marked to vote against the proposal to issue
shares of Ceridian Common Stock pursuant to the Merger Agreement will not be
counted as a vote for an adjournment of the Ceridian Special Meeting unless it
is specifically so indicated.
THE BOARD OF DIRECTORS OF CERIDIAN UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF CERIDIAN VOTE FOR APPROVAL OF THE ISSUANCE OF CERIDIAN COMMON
STOCK PURSUANT TO THE MERGER AGREEMENT.
The presence of a stockholder at the Ceridian Special Meeting will not
automatically revoke such stockholder's proxy. A stockholder may, however,
revoke a proxy at any time prior to its exercise by filing a written notice of
revocation with, or by delivering a duly executed proxy bearing a later date to:
John A. Haveman, Secretary, Ceridian Corporation, 8100 34th Avenue South,
Minneapolis, Minnesota 55425, or by attending the Ceridian Special Meeting and
voting in person.
The cost of soliciting proxies for the Ceridian Special Meeting will be
borne by Ceridian. In addition to use of the mails, proxies may be solicited
personally or by telephone or facsimile by directors, officers and employees of
Ceridian, who will not be specially compensated for such activities. Ceridian
will also request persons, firms and companies holding shares in their names or
in the name of their nominees, which are beneficially owned by others, to send
proxy materials to and obtain proxies from such beneficial owners, and Ceridian
will reimburse such persons for their reasonable expenses incurred in that
connection. Ceridian has retained Georgeson & Company to assist in the
solicitation of proxies at a cost of approximately $7,500, plus customary
expenses.
INFORMATION CONCERNING THE COMDATA SPECIAL MEETING
GENERAL
This Joint Proxy Statement/Prospectus is being furnished to holders of
Comdata Common Stock as part of the solicitation of proxies by the Comdata Board
of Directors for use at the Comdata Special Meeting to be held on Tuesday,
December 12, 1995 and at any adjournment thereof. This Joint Proxy Statement/
Prospectus, and the accompanying Proxy Card, are first being mailed to Comdata
stockholders on or about November 10, 1995.
The purpose of the Comdata Special Meeting is to consider and vote upon the
proposal to approve and adopt the Merger Agreement, which sets forth the terms
and conditions of the Merger, and the transactions contemplated thereby. Upon
consummation of the Merger, each outstanding share of Comdata Common Stock will
be converted at the Exchange Ratio into 0.57 of a share of Ceridian Common Stock
(with cash
26
<PAGE>
paid in lieu of fractional shares). In addition, as a result of the Merger, each
outstanding Comdata Option will be assumed by Ceridian at the effective time of
the Merger and will be converted into an option to acquire a number of shares of
Ceridian Common Stock equal to the product of the Exchange Ratio and the number
of shares of Comdata Common Stock remaining subject to the original option
(immediately before the effective time of the Merger), rounded down to the
nearest whole share. The exercise price per share of Ceridian Common Stock under
the new option will equal the exercise price per share of Comdata Common Stock
under the original option, divided by the Exchange Ratio, rounded down to the
nearest whole cent. The vesting, duration and terms of the new option will
otherwise be the same as the original option.
Based on the last reported sale price of Ceridian Common Stock on the NYSE
on November 7, 1995, the Exchange Ratio would result in a per share purchase
price for Comdata Common Stock of $24.51. If the Merger is completed, Comdata
stockholders will no longer hold any interest in Comdata other than through
their interest in shares of Ceridian Common Stock. The Merger is subject to a
number of conditions, including the receipt of required regulatory and
stockholder approvals.
SOLICITATION, QUORUM, VOTING AND REVOCABILITY OF PROXIES
The Board of Directors of Comdata has fixed the close of business on October
27, 1995 as the Comdata Record Date. Accordingly, only holders of record of
shares of Comdata Common Stock at the close of business on such date will be
entitled to notice of and to vote at the Comdata Special Meeting. On the Comdata
Record Date, there were 35,858,828 shares of Comdata Common Stock outstanding
and 333 holders of record of such shares.
Pursuant to Delaware law and Comdata's Certificate of Incorporation and
Bylaws, approval and adoption of the Merger Agreement requires the affirmative
vote of the holders of at least a majority of the outstanding shares of Comdata
Common Stock entitled to vote at the Comdata Special Meeting. The presence, in
person or by proxy, of the holders of at least a majority of the outstanding
shares of Comdata Common Stock outstanding on the Comdata Record Date is
necessary to constitute a quorum at the Comdata Special Meeting.
In connection with the Merger Agreement, certain affiliates of Comdata have
separately agreed, pursuant to the Voting Agreement, to vote the Conversion
Shares held by them (representing in the aggregate approximately 24.5% of the
outstanding shares of Comdata Common Stock outstanding at the Comdata Record
Date) in favor of approval and adoption of the Merger Agreement, subject to the
designee of such affiliates on Comdata's Board of Directors not modifying his
recommendation in favor of approval and adoption of the Merger Agreement. See
"The Merger--Voting Agreement with Certain Comdata Stockholders." It is expected
that all the 18,661,529 shares of Comdata Common Stock (which excludes shares
subject to stock options), beneficially owned by directors and executive
officers of Comdata and their affiliates at the Comdata Record Date
(representing approximately 52.0% of the outstanding shares of Comdata Common
Stock as of such date, and including the shares subject to the Voting Agreement
as identified above) will be voted for approval and adoption of the Merger
Agreement.
As of the Comdata Record Date, Ceridian beneficially owned no shares of
Comdata Common Stock, and directors and executive officers of Ceridian
beneficially owned less than .01% in the aggregate of the outstanding shares of
Comdata Common Stock. It is expected that all shares of Comdata Common Stock
beneficially owned by Ceridian directors and executive officers will be voted
for approval and adoption of the Merger Agreement.
If the accompanying Comdata Proxy Card is properly executed and returned to
Comdata in time to be voted at the Comdata Special Meeting, the shares
represented thereby will be voted in accordance with the instructions marked
thereon. EXECUTED BUT UNMARKED PROXIES WILL BE VOTED FOR APPROVAL AND ADOPTION
OF THE MERGER AGREEMENT. If an executed Comdata Proxy Card is returned and the
stockholder has specifically abstained from voting on any matter, the shares
represented by such proxy will be considered present at the meeting for purposes
of determining a quorum and for purposes of calculating the vote, but will not
be considered to have been voted in favor of such matter. If an executed proxy
is returned by a broker holding shares in street name which indicates that the
broker does not have discretionary authority as to certain
27
<PAGE>
shares to vote on one or more matters, such shares will be considered present at
the meeting for purposes of determining a quorum, but will not be considered to
be represented at the meeting for purposes of calculating the vote with respect
to such matter.
The Board of Directors of Comdata is not aware of any matters other than
those described in the Notice of the Comdata Special Meeting that are to come
before the Comdata Special Meeting. If any other matters are properly brought
before the Comdata Special Meeting, one or more of the persons named in the
Proxy Card will vote the shares represented by such proxy upon such matters as
determined in their discretion. However, executed Proxy Cards that are properly
marked to vote against the proposal to approve and adopt the Merger Agreement
will not be counted as a vote for an adjournment of the Comdata Special Meeting
unless it is specifically so indicated.
THE BOARD OF DIRECTORS OF COMDATA UNANIMOUSLY RECOMMENDS THAT THE
STOCKHOLDERS OF COMDATA VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
The presence of a stockholder at the Comdata Special Meeting will not
automatically revoke such stockholder's proxy. A stockholder may, however,
revoke a proxy at any time prior to its exercise by filing a written notice of
revocation with, or by delivering a duly executed proxy bearing a later date to:
Peter D. Voysey, Secretary, Comdata Holdings Corporation, 5301 Maryland Way,
Brentwood, Tennessee, 37027, or by attending the Comdata Special Meeting and
voting in person.
The cost of soliciting proxies for the Comdata Special Meeting will be borne
by Comdata. In addition to use of the mails, proxies may be solicited personally
or by telephone or facsimile by directors, officers and employees of Comdata,
who will not be specially compensated for such activities. Comdata will also
request persons, firms and companies holding shares in their names or in the
name of their nominees, which are beneficially owned by others, to send proxy
materials to and obtain proxies from such beneficial owners, and Comdata will
reimburse such persons for their reasonable expenses incurred in that
connection. Comdata has retained Corporate Communications, Inc. to assist in the
solicitation of proxies at a cost of approximately $3,500, plus customary
expenses.
THE MERGER
This section of the Joint Proxy Statement/Prospectus describes certain
aspects of the proposed Merger. The following description does not purport to be
complete and is qualified in its entirety by reference to the Merger Agreement
and the Voting Agreement, copies of which are attached hereto as Appendix A and
Appendix D, respectively, and the other appendices hereto, all of which are
incorporated herein by reference. All holders of Ceridian Common Stock and
Comdata Common Stock are urged to read the Merger Agreement and the other
appendices hereto in their entirety.
BACKGROUND OF THE MERGER
Significant consolidation has occurred in the information services industry
during the past several years, as industry participants have sought to establish
or enhance their presence in selected vertical market segments and to reduce
cost structures through economies of scale and increased operating efficiencies.
Both Ceridian and Comdata have participated in this consolidation in recent
years through smaller acquisitions, and both believe that this consolidation
trend will continue for the foreseeable future. Recognizing these market forces,
the Boards of Directors and senior management of both Ceridian and Comdata have
expended considerable efforts in analyzing their financial and strategic
alternatives and reviewing their options for strategic combinations of various
types.
Following the spin-off of its computer products business in July 1992,
Ceridian was principally focused during 1993 and 1994 on improving the operating
performance and strategic plans of its three principal businesses, Employer
Services, Arbitron and Computing Devices. Consistent with this focus,
acquisitions made by Ceridian during this period were intended to improve
technology or processes, provide additional product and service offerings and
increase the customer base of these three businesses. The largest acquisition
made by Ceridian during this period was of Tesseract Corporation in June 1994,
which had 1994 revenue of about $24 million. Because of the more attractive
growth opportunities available in its Information Services segment, the
financial characteristics of businesses in the information services industry and
the
28
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higher stock price multiples awarded by financial markets to information
services companies, Ceridian's Board and senior management also recognized that
they could best foster growth in stockholder value by emphasizing growth in
Ceridian's Information Services segment. Although prior to 1995 Ceridian did
make certain preliminary assessments of larger information services acquisitions
and business combinations, including some (such as Comdata) outside of the
employer services and marketing information areas, for various reasons Ceridian
concluded that any such action would be premature. During this period, Bear
Stearns provided general financial advisory services and assistance to Ceridian
in preliminarily assessing potential acquisitions, pursuant to an engagement
letter dated August 5, 1993.
Beginning in early 1995, Ceridian senior management, with the continuing
assistance of Bear Stearns, began to more actively and seriously consider the
desirability of making larger acquisitions in the information services area in
order to accelerate the growth of that segment of its business in light of the
industry consolidation and attractive financial characteristics referenced
earlier, and in order to accelerate the utilization of its NOLs. Although
initially the primary focus was on possible acquisitions in the employer
services and marketing information areas, Ceridian management was also attracted
by the benefits that could be derived from acquiring a third major information
services business to complement Employer Services and Arbitron. In March 1995,
Lawrence Perlman, Ceridian's Chairman, President and Chief Executive Officer,
and John R. Eickhoff, Ceridian's Executive Vice President and Chief Financial
Officer, met with representatives of Bear Stearns in New York to review with
Bear Stearns a number of potential acquisition candidates, some in the employer
services and marketing information areas, but others in the broader information
services category, including Comdata.
On April 27, 1995, Ceridian's Board and senior management met for an
in-depth strategic review. As a result of this meeting, there was a consensus
that at this time Ceridian and its stockholders would benefit from pursuing a
more aggressive acquisition strategy in the information services industry than
had been the case during the past few years, and that the most desirable course
of action in this regard would be to pursue a "dual track" strategy of seeking
out attractive acquisition candidates in the employer services area while also
assessing other information services acquisition possibilities. As to the latter
track, desirable characteristics of potential acquisition candidates were
described as including long-term customer relationships with substantial
recurring revenue, substantial revenue and earnings growth potential, the
ability to use pooling-of-interests accounting treatment for the acquisition,
manageable future capital needs, enhanced competitive position upon becoming a
part of Ceridian, strong market position, technology base and operating
management, and business combinations that would be accretive to earnings within
a relatively short period of time. Included among acquisition possibilities
mentioned was Comdata.
During the next month and a half, representatives of Ceridian and Bear
Stearns continued to assess acquisition possibilities in the employer services
area and the information services industry. During this period of time, Ceridian
senior management concluded that a large acquisition in the employer services
area was unlikely in the near term, and consideration of other information
services acquisitions intensified. On June 22, 1995, Mr. Perlman met with Bruce
K. Anderson, a director of Comdata and a general partner of WCAS, to discuss a
possible acquisition of Comdata by Ceridian. Investment partnerships affiliated
with WCAS are major stockholders of Comdata, and WCAS and Ceridian have explored
joint investment opportunities in the past. Mr. Perlman is a limited partner of
WCAS Information Partners, L.P., one of the WCAS investment partnerships holding
Comdata stock, and has known Mr. Anderson for approximately seven years in both
personal and professional capacities. This limited partnership, in which Mr.
Perlman has a 0.8% interest, held approximately 2,038 shares of Comdata Series B
Preferred Stock, which were converted into 48,099 shares of Comdata Common Stock
on October 25, 1995, representing less than 0.2% of the outstanding shares of
Comdata Common Stock on that date. Although they had engaged in prior
conversations over a period of years regarding various WCAS investments,
including Comdata, and at times had discussed in general terms whether Ceridian
might have a strategic interest in certain of these investments, this was the
first conversation between them which seriously attempted to discern whether
Comdata would be a desirable acquisition for Ceridian. Following these
discussions, representatives of Ceridian and Bear Stearns who were assessing
acquisition possibilities were directed to focus their analysis on Comdata. On
June 26, 1995, Ceridian and Comdata executed and delivered a confidentiality
agreement regarding evaluation material to be provided to Ceridian by Comdata.
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Prior to this time, in late 1994, the Board and senior management of Comdata
had concluded that it would be advisable to conduct a comprehensive assessment
of Comdata's capital structure and the options available to it to enhance
stockholder value. Bear Stearns was one of several investment banking firms
invited to assess Comdata's situation, and in January 1995 Bear Stearns
presented several alternatives to Comdata management, including various
recapitalization strategies and business combinations involving Comdata. During
the course of the next few months, representatives of Bear Stearns and Comdata
continued to discuss various recapitalization and business combination
possibilities for Comdata, and on April 21, 1995, Comdata formally retained Bear
Stearns as its exclusive financial advisor in connection with the potential sale
of Comdata. By that time, Bear Stearns had identified several possible
acquirors, including but not principally Ceridian. In June 1995, after two of
the principal potential acquirors identified by Bear Stearns, and with whom
preliminary discussions had been held, announced their intention to merge with
each other, Comdata decided to halt its specific efforts to identify a potential
acquiror and terminated Bear Stearns' engagement.
At a June 29, 1995 Ceridian Board meeting, Mr. Perlman reported that, while
certain acquisition possibilities in the employer services area that had
previously been discussed with the Board were now considered unlikely in the
near term, Comdata had now been identified as a potentially desirable
acquisition candidate, but that further refinement of Ceridian's analysis was
necessary. The Board concurred that further analysis and exploratory discussions
with WCAS and Comdata management would be appropriate, and authorized Ceridian
management to proceed with such analysis and discussions. Ceridian and Bear
Stearns executed an engagement letter dated July 7, 1995, retaining Bear Stearns
(with the concurrence of Comdata) to act as Ceridian's exclusive financial
advisor in connection with the proposed acquisition of Comdata. On July 19,
1995, Mr. Perlman, Mr. Eickhoff and James D. Miller, Ceridian's Vice President
of Strategic Initiatives, met with George L. McTavish, Chairman and Chief
Executive Officer of Comdata, Mr. Anderson and Patrick J. Welsh, a director of
Comdata and a general partner of WCAS, to discuss in greater detail the
respective businesses of Ceridian and Comdata and the possibility of an
acquisition of Comdata by Ceridian. It was agreed by all participants that a
possible acquisition should be further investigated.
On July 25, 1995, a possible acquisition of Comdata was considered at the
meeting of the Strategy Review Committee of Ceridian's Board, and the following
day at the Ceridian Board meeting. Ceridian management and representatives of
Bear Stearns presented information regarding Comdata's business, its potential
strategic fit within the evolving information services strategy of Ceridian,
preliminary assessments of the possible structure and pricing of an acquisition
transaction, the anticipated financial performance of the combined entity and
the expected impact of such a transaction on the utilization of Ceridian's NOLs.
Ceridian's Board concurred that it would be appropriate to commence intensive
due diligence regarding Comdata.
Representatives of Ceridian, its outside counsel, its external auditors,
Bear Stearns and other consultants conducted extensive due diligence of Comdata
in Brentwood, Tennessee and Minneapolis, Minnesota during the weeks of July 31
and August 7, 1995, the results of which were reviewed extensively with Ceridian
senior management. Ceridian's Board held a special meeting on August 16, 1995,
which was also attended by representatives of Bear Stearns, senior management of
Ceridian, outside counsel and the due diligence team. At this meeting, members
of Ceridian's senior management, together with its legal and financial advisors,
reviewed with the Board, among other things, the due diligence findings, various
financial analyses of the proposed transaction (including the possible
refinancing of Comdata's debt), the rationale for the transaction, the expected
terms of such a transaction and the duties and responsibilities of Ceridian's
directors under relevant corporate law. The Board unanimously approved a
resolution authorizing Ceridian senior management to seek to negotiate a
definitive merger and related agreements with Comdata, and scheduled a meeting
for August 23, 1995 to consider the proposed agreements resulting from such
negotiations.
Comdata's Board held a special meeting on August 16, 1995, by telephone
conference, in which outside counsel participated. At this meeting, members of
Comdata's senior management reported on the discussions with Ceridian and the
strategic implications of a possible transaction with Ceridian. Comdata's Board
reviewed the rationale for the transaction, the possible structure and terms of
such a transaction and the duties and responsibilities of Comdata's directors
under relevant corporate law. Comdata's Board concurred that further discussions
with Ceridian would be appropriate and authorized Comdata's senior management to
proceed with such discussions and retain Lazard Freres to act as financial
advisor in connection with the proposed transaction. On August 16, 1995, Comdata
executed an engagement letter with Lazard Freres.
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Between August 17 and August 22, 1995, representatives of Comdata, its
outside counsel, Lazard Freres and other advisors conducted extensive due
diligence of Ceridian, including in Minneapolis, the results of which were
reviewed extensively with Comdata's senior management. During the week of August
14, 1995, Comdata and Ceridian executed a confidentiality agreement regarding
evaluation material provided to Comdata by Ceridian.
Negotiation of the terms of the definitive Merger Agreement and Original
Voting Agreement occurred during the period August 19-23, 1995. Agreement on the
Exchange Ratio was achieved as a result of direct negotiations between Mr.
Perlman on behalf of Ceridian, and Mr. McTavish on behalf of Comdata, subject to
approval of Ceridian's and Comdata's Boards of Directors.
On August 23, 1995, the Ceridian Board held a special meeting to consider
the proposed Merger Agreement and Original Voting Agreement and the transactions
contemplated thereby. At the special meeting, members of Ceridian's senior
management, together with its legal and financial advisors, reviewed with the
Board, among other things, the background of the proposed transaction (including
Mr. Perlman's interest in a WCAS investment partnership holding a small amount
of Comdata Preferred Stock), the potential benefits and risks of the
transaction, including the strategic and financial rationale, a summary of the
financial and valuation analyses of the transaction and the terms of the Merger
Agreement and the Original Voting Agreement. At the conclusion of the
presentation, Bear Stearns delivered its oral opinion (confirmed in writing as
of the same day) that, as of the date of the Merger Agreement, the Merger is
fair, from a financial point of view, to the stockholders of Ceridian. See
"--Opinion of Ceridian Financial Advisor" for a discussion of the factors
considered and the analytical methods employed by Bear Stearns in reaching such
conclusion. The Ceridian Board, by a unanimous vote of those directors present
at the meeting, approved the Merger Agreement and the Original Voting Agreement
and the transactions contemplated thereby (with the two absent directors
subsequently ratifying the same).
On August 23, 1995, the Comdata Board held a special meeting to consider the
proposed Merger Agreement, the Original Voting Agreement and the transactions
contemplated thereby. At the meeting, the Board, together with its legal and
financial advisors, reviewed the results of Comdata's due diligence examination
of Ceridian, the background of the proposed transaction, the potential benefits
and risks of the transaction, including the strategic and financial rationale, a
summary of the financial and valuation analysis of the transaction and the terms
of the Merger Agreement and the Original Voting Agreement. At the conclusion of
the presentation, Lazard Freres delivered its written opinion that, as of the
date of the Merger Agreement, the Exchange Ratio is fair, from a financial point
of view, to the stockholders of Comdata. See "--Opinion of Comdata Financial
Advisor" for a discussion of the factors considered and the analytical methods
employed by Lazard Freres in delivering such opinion. The Comdata Board, by a
unanimous vote of the directors, approved the Merger Agreement and the Original
Voting Agreement (including approval for purposes of Section 203 of the DGCL)
and the transactions contemplated thereby.
REASONS OF CERIDIAN FOR THE MERGER; RECOMMENDATION OF CERIDIAN BOARD OF
DIRECTORS
The Board of Directors of Ceridian approved the Merger Agreement and the
Original Voting Agreement and the transactions contemplated thereby by the
unanimous vote of all directors present at the August 23, 1995 special meeting
(with the two absent directors subsequently ratifying the same). THE CERIDIAN
BOARD BELIEVES THAT THE TERMS OF THE MERGER AGREEMENT ARE FAIR AND THAT THE
MERGER IS IN THE BEST INTERESTS OF CERIDIAN AND ITS STOCKHOLDERS AND UNANIMOUSLY
RECOMMENDS THAT THE HOLDERS OF CERIDIAN COMMON STOCK VOTE FOR THE ISSUANCE OF
CERIDIAN COMMON STOCK PURSUANT TO THE MERGER AGREEMENT.
In reaching its determination to approve the Merger Agreement, the Original
Voting Agreement and the transactions contemplated thereby, the Ceridian Board
considered a variety of factors, although it did not assign any relative or
specific weight to the factors considered. The factors considered included the
following:
(1) That the acquisition of Comdata is expected to strengthen Ceridian's
position as a diversified information services and data processing company
by adding a business that has leadership positions in two attractive
vertical market segments and that possesses desired characteristics such as
long-term customer relationships and substantial recurring revenue.
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(2) That the acquisition of Comdata is expected to provide critical mass
to Ceridian's Information Services segment in the face of a consolidating
information services industry, and to provide evidence to investors of
Ceridian's commitment to emphasize the growth of its Information Services
segment.
(3) Information regarding the financial position, results of operations
and stock prices of Comdata, as well as the prospective financial
performance of Ceridian and Comdata on a combined basis, with the
acquisition expected to enhance Ceridian's revenue growth, improve operating
margins and cash flow, accelerate utilization of Ceridian's NOLs, and be
accretive to Ceridian's earnings per share beginning in 1996.
(4) That the acquisition of Comdata is expected to provide Ceridian with
additional vertical market segments across which Ceridian can apply its
horizontal technology expertise in payroll processing and related employer
services, and with a platform of transaction services and database
capabilities to exploit emerging information services opportunities.
(5) The extensive due diligence review which had been conducted with
respect to Comdata's business, operations, technology and competitive
position, and with respect to possible synergistic and expansion
opportunities for the two companies.
(6) The oral opinion of Bear Stearns delivered August 23, 1995,
confirmed by a written opinion as of the same date, that, as of the date of
the Merger Agreement, the Merger is fair, from a financial point of view, to
the stockholders of Ceridian, as well as the underlying financial analyses
of Bear Stearns presented in connection therewith.
(7) The expectation that the Merger will be tax free for federal income
tax purposes to Ceridian and will qualify for pooling-of-interests treatment
for financial reporting purposes.
(8) The ability to refinance or defease some or all of Comdata's debt,
the timing and transaction costs thereof and the associated future debt
service cost savings therefrom.
(9) A review with the Board's outside counsel of the terms of the Merger
Agreement, including the circumstances under which either Ceridian or
Comdata can terminate the Merger Agreement (and the fees triggered thereby)
and the closing conditions to the Merger contained therein (including with
respect to the continued unlimited availability of Ceridian's NOLs).
(10) A review with the Board's outside counsel of the terms of the
Original Voting Agreement.
OPINION OF CERIDIAN FINANCIAL ADVISOR
Ceridian, pursuant to an engagement letter dated July 7, 1995 (the
"Engagement Letter"), retained Bear Stearns as its exclusive financial advisor
in connection with Ceridian's proposed acquisition of Comdata.
At the August 23, 1995 meeting of the Board of Directors of Ceridian, Bear
Stearns delivered its opinion to the effect that, as of the date of such opinion
and based upon and subject to the various conditions set forth therein, the
Merger is fair, from a financial point of view, to the stockholders of Ceridian.
Bear Stearns has subsequently updated such opinion to the Board of Directors of
Ceridian as of the date of this Joint Proxy Statement/Prospectus. THE FULL TEXT
OF THE WRITTEN OPINION OF BEAR STEARNS, DATED THE DATE OF THIS JOINT PROXY
STATEMENT/PROSPECTUS, WHICH IS SUBSTANTIALLY SIMILAR TO BEAR STEARNS' AUGUST 23,
1995 OPINION, IS ATTACHED AS APPENDIX B HERETO AND IS INCORPORATED HEREIN BY
REFERENCE. CERIDIAN STOCKHOLDERS ARE URGED TO READ THIS OPINION IN ITS ENTIRETY
FOR ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY BEAR
STEARNS IN ARRIVING AT ITS OPINION. THE SUMMARY OF THE OPINION OF BEAR STEARNS
SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE FULL TEXT OF SUCH OPINION.
No limitations were imposed by Ceridian on Bear Stearns with respect to the
investigations made or the procedures followed by Bear Stearns in rendering its
opinions. The opinions of Bear Stearns are directed to the Board of Directors of
Ceridian and address only the fairness, from a financial point of view, of the
Merger to the stockholders of Ceridian and do not constitute a recommendation to
any stockholder of Ceridian as to how such stockholder should vote with respect
to the issuance of Ceridian Common Stock
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pursuant to the Merger Agreement. Each Bear Stearns' opinion is necessarily
based upon the economic, market and other conditions as in effect on, and the
information made available to it as of, the date of its opinion.
The Exchange Ratio was determined by arm's-length negotiation between
Ceridian and Comdata after consultation by each of such parties with their
respective financial advisors as to various matters, including preliminary
ranges of value, and was not based on a recommendation by Bear Stearns, although
Bear Stearns evaluated the financial terms of the Merger and participated in
discussions concerning the Exchange Ratio.
In connection with rendering its opinions, Bear Stearns, among other things:
(i) reviewed the Merger Agreement in substantially its final form; (ii) reviewed
Ceridian's and Comdata's respective Annual Reports to Shareholders and Annual
Reports on Form 10-K for the years ended December 31, 1992 through 1994, and
their respective Quarterly Reports on Form 10-Q for the periods ended March 31
and June 30, 1995; (iii) reviewed certain operating and financial information
provided by the managements of Ceridian and Comdata relating to their respective
businesses, including internal projections of future financial results used for
planning purposes (the "Ceridian Management Projections" and the "Comdata
Management Projections," respectively, and, collectively, the "Projections");
(iv) met with certain members of Ceridian's senior management to discuss
Ceridian's operations, historical financial statements and future prospects, as
well as their views with respect to the operations, historical financial
statements and future prospects of Comdata, and their views of the business,
operational and strategic benefits, potential synergies and other implications
of the Merger; (v) met with certain members of Comdata's senior management to
discuss Comdata's operations, historical financial statements and future
prospects, as well as their views of the business, operational and strategic
benefits, potential synergies and other implications of the Merger; (vi)
reviewed the pro forma financial impact of the Merger on Ceridian; (vii)
reviewed the historical stock prices and trading volumes of Ceridian Common
Stock and Comdata Common Stock; (viii) reviewed certain publicly available
financial information and stock market performance data of other publicly-held
companies which it deemed generally comparable to Ceridian and to Comdata; (ix)
reviewed the financial terms of certain other recent acquisitions of companies
which it deemed generally comparable to Comdata; and (x) considered such other
studies, analyses, inquiries and investigations as it deemed appropriate.
In the course of its review, Bear Stearns relied upon and assumed, without
independent verification, the accuracy and completeness of all of the financial
and other information provided to it by Ceridian and Comdata and the
reasonableness of the assumptions made by the managements of Ceridian and
Comdata with respect to their respective Projections. Bear Stearns did not
assume any responsibility for independent verification of the information
provided by Ceridian and Comdata and further relied upon the assurances of the
managements of Ceridian and Comdata that such managements were not aware of any
facts that would make the information provided to Bear Stearns incomplete or
misleading. In arriving at its opinions, Bear Stearns did not perform or obtain
any independent appraisal of the assets of Ceridian or Comdata nor was it
furnished with any such appraisals.
Each of the Ceridian and Comdata Management Projections reflected internal
projections of future financial results prepared for planning purposes such as
internal forecasting, budgeting and long-range planning, and not with a view
towards public disclosure or compliance with published guidelines of the
Commission or the guidelines established by the American Institute of Certified
Public Accountants regarding projections. The Ceridian and Comdata Management
Projections were derived from data developed by each of their respective
business units. Each business unit, with the assistance of its senior
management, generated forecasts, where applicable, of revenue, cost of revenue,
operating expenses and other operating items. The data from each business unit
was then compiled and adjusted by the respective company's senior management to
reflect general corporate overhead and company-wide items.
The Ceridian Management Projections did not give effect to the Merger and
were predicated on assumptions which included the following: (i) Ceridian's
business operations would continue in their present form with no significant
acquisitions during the Projection period; (ii) there would be no Ownership
Change resulting in an annual limitation on the utilization of Ceridian's net
loss carryforwards, resulting in an assumed effective income tax rate of
approximately 10% during the Projection period; (iii) there would be
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annual revenue growth ranging between 7.5% and 9.9% during the Projection
period, which compares with an annual rate of revenue growth of approximately
10% from 1993 to 1994 (adjusted for the 1993 discontinuance of Arbitron's
syndicated television ratings operations) and from the first nine months of 1994
to the comparable 1995 period; (iv) expenditures for capital assets and software
would decrease from a peak in 1995, reflecting the expected 1996 introduction of
Employer Services' enhanced payroll processing system; (v) operating margins
would improve during the Projection period, although at a decreased rate of
improvement than has been experienced since 1993; and (vi) current economic
conditions and the rate of inflation would remain constant during the Projection
period.
In preparing the Comdata Management Projections for periods through 1997,
Comdata assumed that its business operations would continue in their present
form with no significant acquisition activity, and that the growth in
transportation revenue would be similar to, and the growth in gaming revenue
would be slightly below, the respective revenue growth rates experienced during
1994 and the year-to-date period of 1995. As a result of such assumptions,
Comdata's combined revenue was projected to increase at approximately 1% per
annum less than the revenue growth rate for 1994 and the first nine months of
1995. Comdata also assumed that annual expenditures for capital assets and
software would be less than the level of such expenditures during 1994 and the
year-to-date period of 1995. Comdata also projected improved operating margins
through 1997, although the rate of improvement would be less than the rate in
recent periods. The Comdata Management Projections also assumed that current
economic conditions and the rate of inflation would remain constant through
1997.
Because the assumptions underlying the Ceridian and Comdata Management
Projections are inherently subject to significant economic and competitive
uncertainties and contingencies beyond the control of Ceridian or Comdata, there
can be no assurances that the assumptions will prove valid or that the estimates
set forth in the Projections are capable of being, or will be, realized. Actual
results may be higher or lower than those contemplated by the Projections, and
possibly in significant amounts.
With respect to each of the Ceridian and Comdata Management Projections,
Bear Stearns considered a variety of factors that could affect the achievability
of the results set forth therein. In the case of the Comdata Management
Projections, Bear Stearns made certain adjustments for purposes of its analyses
to reflect certain factors that Bear Stearns believed could affect the Comdata
Management Projections, including the elimination of two acquisitions then under
consideration by Comdata and an assumed slower growth rate with respect to a
routing and scheduling software business acquired by Comdata in 1994, resulting
in a corresponding reduction in estimated future revenue and operating profit
(such projections, as adjusted, the "Comdata Adjusted Management Projections").
Bear Stearns also developed an alternative scenario for purposes of sensitivity
analysis for the Comdata Adjusted Management Projections that assumed certain
possible reduced operating results (including reductions in revenue from
unsettled transactions, slower revenue growth in consumer gaming services,
additional costs for computer systems development and increased growth in gaming
agent commissions) and which it considered in connection with arriving at its
opinions. Bear Stearns similarly developed an alternative scenario for purposes
of sensitivity analysis for the Ceridian Management Projections that assumed
possible reductions in the rate of revenue growth in Arbitron due to the
elimination of small planned acquisitions and possible increases in spending
requirements (with a corresponding impact on operating margins) in Ceridian's
Human Resources Group, which Bear Stearns considered in connection with arriving
at its opinions. With respect to analyses performed using the Ceridian
Management Projections and the Comdata Adjusted Management Projections, such
analyses are hereinafter referred to as the "Ceridian Base Case" and the
"Comdata Base Case", respectively. With respect to analyses performed using the
Comdata alternative scenario and the Ceridian alternative scenario, such
analyses are hereinafter referred to as the "Comdata Alternative Case" and the
"Ceridian Alternative Case," respectively.
In preparing its opinions, Bear Stearns performed a variety of financial and
comparative analyses. The summary of such analyses set forth below does not
purport to be a complete description of the analyses underlying Bear Stearns'
opinions. The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to summary description. Bear Stearns believes that its
analyses must be considered as a whole, and that selecting portions of its
analyses could create an incomplete view of the processes
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underlying Bear Stearns' opinions. Moreover, the estimates contained in such
analyses are not necessarily indicative of actual values or predictive of future
results or values, which may be significantly more or less favorable than those
suggested by such analyses. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or necessarily reflect
the prices at which businesses or securities actually may be sold. Accordingly,
because such estimates are inherently subject to substantial uncertainty, none
of Ceridian, Comdata, Bear Stearns or any other person assumes responsibility
for their accuracy. Furthermore, no opinion is being expressed as to the prices
at which shares of Ceridian Common Stock may trade at any future time.
The following is a summary of the material analyses performed by Bear
Stearns in connection with its opinion dated August 23, 1995.
IMPLIED TRANSACTION MULTIPLES. Bear Stearns calculated market equity values
for each of Ceridian and Comdata of $2.369 billion and $675.6 million,
respectively, based on Ceridian's and Comdata's last 30-days average share
prices, as of August 22, 1995, of $40.36 and $18.26, respectively (the "Current
Stock Prices"), and 58.7 million shares of Ceridian Common Stock and 37.0
million shares of Comdata Common Stock, respectively, outstanding on a fully
diluted basis (using the treasury method, which assumes the use of option
proceeds to repurchase shares). Using the same information and applying the
Exchange Ratio thereto, Bear Stearns also calculated an implied transaction
equity value for Comdata of $855.1 million, or $23.00 per share on a fully
diluted basis. Bear Stearns also calculated enterprise values for each of
Ceridian, based on market value, and Comdata, based on market value ("Comdata
Market") and based on the Exchange Ratio ("Comdata Transaction"), of $2.1684
billion, $885.7 million and $1.0652 billion, respectively, by adjusting the
previously calculated equity values (i) in the case of Ceridian, by adding $14.4
million of Ceridian debt outstanding and subtracting $214.0 million of cash on
hand, and (ii) in the case of Comdata, by adding $226.5 million of Comdata debt
outstanding and subtracting $16.3 million of cash on hand. Bear Stearns then
calculated certain financial multiples for each of Ceridian, Comdata Market and
Comdata Transaction for each of fiscal years 1995 and 1996 based on such equity
values and enterprise values, utilizing the Ceridian Management Projections and
the Comdata Adjusted Management Projections, respectively, including the
calculation of equity value as a multiple of estimated net income, enterprise
value as a multiple of estimated revenue, enterprise value as a multiple of
estimated operating cash flow, and enterprise value as a multiple of estimated
operating income.
IMPUTED EQUITY VALUATION ANALYSIS. (a) Bear Stearns derived a reference
range of estimated equity values for Comdata. This reference range of values was
based on (i) a discounted cash flow analysis, (ii) a public stockholder
valuation analysis, (iii) a comparable company analysis, and (iv) a selected
acquisition analysis.
- DISCOUNTED CASH FLOW ANALYSIS. Bear Stearns calculated the estimated free
cash flows that Comdata is expected to generate over the five-year period
ending December 31, 1999, using the Comdata Management Projections as
adjusted for the Comdata Base Case and the Comdata Alternative Case. Bear
Stearns then calculated estimated terminal values (as of December 31,
1999) for Comdata by applying terminal exit multiples to each of Comdata's
projected 1999 revenues (multiples ranging from 2.5x to 3.5x), net income
(multiples ranging from 20.0x to 24.0x) and earnings before interest,
taxes, depreciation and amortization ("EBITDA") (multiples ranging from
10.0x to 12.0x). The sum of the free cash flows for such five-year period
and the range of terminal values were then discounted to present value
using discount rates ranging from 11.0% to 14.0%. Based on this analysis,
and applying its judgment to the results thereof, Bear Stearns derived
estimated enterprise values for Comdata ranging from $1 billion to $1.2
billion under the Comdata Base Case, and from $900 million to $1.05
billion under the Comdata Alternative Case.
- PUBLIC STOCKHOLDER VALUATION ANALYSIS. Bear Stearns calculated estimated
terminal values of equity (as of December 31, 2000) for Comdata by
applying terminal exit multiples ranging from 16.0x to 20.0x to Comdata's
projected earnings per share ("EPS") on a fully diluted basis (assuming
37.0 million shares outstanding, using the treasury method), using the
Comdata Management Projections as
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adjusted for the Comdata Base Case and the Comdata Alternative Case. Bear
Stearns then discounted to present value the resulting range of terminal
values using equity discount rates ranging from 13.0% to 16.0%. Bear
Stearns made no adjustments for dividends since neither the Comdata Base
Case nor the Comdata Alternative Case assumed the payment of any
dividends. Based on this analysis, and applying its judgment to the
results thereof, Bear Stearns derived estimated enterprise values for
Comdata ranging from $900 million to $1.05 billion under the Comdata Base
Case, and from $750 million to $900 million under the Comdata Alternative
Case.
- COMPARABLE COMPANY ANALYSIS. Bear Stearns reviewed and compared certain
actual and estimated financial, operating and market information of
Comdata with that of fourteen selected publicly traded companies in the
data processing and information services industries that Bear Stearns
believed to be comparable in certain relevant respects to Comdata (the
"Comparable Companies"). Bear Stearns calculated certain financial
multiples for each of the Comparable Companies, including price to
earnings ("P/E") multiples based on 1995 and 1996 EPS estimates (based on
published reports) and enterprise value as a multiple of each of latest
twelve months ("LTM") revenues, LTM EBITDA and LTM earnings before
interest and taxes ("EBIT").
This analysis resulted in (i) mean 1995 and 1996 estimated P/E multiples of
23.4x and 19.6x, respectively, for the Comparable Companies, compared to
20.8x and 16.3x, respectively, for Comdata, and (ii) mean multiples of
enterprise value to LTM revenues, LTM EBITDA and LTM EBIT of 2.4x, 11.5x
and 16.3x, respectively, for the Comparable Companies, compared with 3.5x,
11.6x and 13.2x, respectively, for Comdata. Bear Stearns then calculated
imputed enterprise values for Comdata by applying the multiples derived
from the foregoing analyses of the Comparable Companies to Comdata's
estimated fiscal year 1996 revenues (using a multiple range of 2.5x to
3.5x), EBITDA (using a multiple range of 10.0x to 12.5x) and EBIT (using a
multiple range of 13.0x to 16.0x), based on Comdata Management Projections.
Based on this analysis, and applying its judgment to the results thereof,
Bear Stearns derived estimated enterprise values for Comdata ranging from
$900 million to $1.2 billion under the Comdata Base Case, and $750 million
to $1.1 billion under the Comdata Alternative Case.
Bear Stearns noted that no company utilized in the above comparable company
analysis is identical to Comdata. Accordingly, an analysis of the foregoing
is not purely mathematical and involves complex considerations and
judgments concerning differences in financial and operating characteristics
of the Comparable Companies and other factors that could affect their
public trading value.
- SELECTED ACQUISITION ANALYSIS. Bear Stearns also reviewed twelve
transactions (the "Selected Acquisitions") involving the acquisition or
proposed acquisition of all or part of certain companies in the data
processing and information services industries. Ten of the Selected
Acquisitions dated from 1994 or later; two were earlier. Bear Stearns
calculated certain financial multiples for each of the Selected
Acquisitions, including P/E multiples as of the time of the announcement
and implied enterprise value as a multiple of each of LTM revenues, LTM
EBITDA and LTM EBIT, and compared the resulting mean multiples with the
comparable implied transaction multiples for Comdata resulting from the
Merger. Bear Stearns also calculated imputed enterprise values for Comdata
by applying the multiples derived from the foregoing analyses of the
Selected Acquisitions to Comdata's estimated fiscal year 1996 net income
(using a multiple range of 18.0x to 25.0x), revenues (using a multiple
range of 2.5x to 4.0x), EBITDA (using a multiple range of 11.0x to 14.0x)
and EBIT (using a multiple range of 13.0x to 17.5x), based on Comdata
Management Projections. Based on this analysis, and applying its judgment
to the results thereof, Bear Stearns derived estimated enterprise values
for Comdata ranging from $1.05 billion to $1.35 billion under the Comdata
Base Case, and $900 million to $1.25 billion under the Comdata Alternative
Case.
Bear Stearns noted that no transaction utilized in the above selected
acquisition transaction analysis is identical to the Merger. Accordingly,
an analysis of the foregoing is not purely mathematical and
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involves complex considerations and judgments concerning differences in
financial and operating characteristics of the acquired companies in such
transactions and other factors that could affect their acquisition and
public trading values.
(b) Based upon the foregoing four valuation analyses, Bear Stearns
calculated estimated reference ranges of enterprise values for Comdata from $1.0
billion to $1.25 billion under the Comdata Base Case, and from $900 million to
$1.2 billion under the Comdata Alternative Case. Based upon these ranges of
estimated hypothetical enterprise values for Comdata, Bear Stearns then
calculated imputed estimated reference ranges of equity values for Comdata by
subtracting $226.5 million of Comdata debt outstanding and adding $16.3 million
of cash on hand and $16.0 million of estimated proceeds from the exercise of
outstanding options. The resulting imputed estimated reference ranges of equity
values for Comdata were from $806 million to $1.056 billion under the Comdata
Base Case, and from $706 million to $1.006 billion under the Comdata Alternative
Case. Assuming 37.875 million shares of Comdata Common Stock outstanding on a
fully diluted basis (before option proceeds), Bear Stearns then calculated
imputed estimated reference ranges of equity values per share of Comdata Common
Stock from $21.28 to $27.88 under the Comdata Base Case, and from $18.64 to
$26.56 under the Comdata Alternative Case, and compared these results to the
imputed purchase price for each share of Comdata Common Stock in the Merger of
$23.00 under Bear Stearns' implied transaction multiples analysis described
above.
RELATIVE CONTRIBUTION ANALYSIS. Bear Stearns analyzed the respective
projected contributions of each of Ceridian and Comdata to, among other
financial measures, the pro forma combined revenues, operating cash flow,
operating income and net income of the two companies assuming completion of the
Merger, based on their respective projected results for fiscal years 1996 and
1997 under each of two scenarios. The first scenario (the "Base Case Scenario")
utilized the projections under the Ceridian Base Case and the Comdata Base Case
and the second scenario (the "Sensitivity Case Analysis") utilized the
projections under the Ceridian Base Case and the Comdata Alternative Case. Under
the Base Case Scenario, such analysis indicated that Comdata would contribute
22.5%, 35.4%, 39.6% and 23.9%, respectively, to the estimated pro forma
revenues, operating cash flow, operating income and net income of the
post-Merger combined entity for fiscal year 1996, and 23.5%, 37.2%, 41.0% and
25.2%, respectively, to the estimated pro forma revenues, operating cash flow,
operating income and net income of the post-Merger combined entity for fiscal
year 1997. Under the Sensitivity Case Scenario, such analysis indicated that
Comdata would contribute 22.2%, 33.6%, 37.5% and 21.0%, respectively, to the
estimated pro forma revenues, operating cash flow, operating income and net
income of the post-Merger combined entity for fiscal year 1996, and 22.9%,
34.3%, 37.8% and 21.4%, respectively, to the estimated pro forma revenues,
operating cash flow, operating income and net income of the post-Merger combined
entity for fiscal year 1997. In performing such analyses under both scenarios,
Bear Stearns noted that it (i) did not take into account any potential synergies
or cost savings that might be realized after the Merger, (ii) assumed that no
"Ownership Change" within the meaning of Section 382 of the Code will have
occurred prior to or as a result of the Merger that would limit the combined
entity's ability to continue to utilize Ceridian's NOLs, (iii) assumed the
Merger would be afforded pooling-of-interests accounting treatment and (iv)
assumed a contemporaneous refinancing of substantially all of Comdata's
outstanding debt resulting in lower debt service costs (collectively, the "Pro
Forma Assumptions").
Bear Stearns also calculated Comdata's market equity value and imputed
enterprise value as percentages of the combined market equity values and imputed
enterprise values of Comdata and Ceridian, in each case using values derived
from Bear Stearns' implied transaction multiple analysis described above. This
analysis indicated that Comdata's market value constituted 22.2% of the combined
market equity value of Ceridian and Comdata and that Comdata's imputed
enterprise value constituted 29.0% of the combined imputed enterprise values of
Ceridian and Comdata. Bear Stearns also calculated that, on a pro forma basis,
the former stockholders of Comdata would own approximately 26.9% of the
outstanding shares of Ceridian
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Common Stock (on a fully diluted basis) immediately after, and giving effect to,
the Merger. Bear Stearns then compared the percentages indicated by these two
analyses with the percentage contributions indicated by its relative
contribution analyses under each of the Base Case Scenario and the Sensitivity
Case Scenario.
PRO FORMA MERGER ANALYSIS. Bear Stearns also analyzed certain pro forma
effects of the Merger on the combined entity's estimated EPS for each of the
fiscal years 1995, 1996 and 1997 under each of the Base Case Scenario and the
Sensitivity Case Scenario and utilizing the Pro Forma Assumptions. Under the
Base Case Scenario, such analysis indicated that the Merger would be $0.64 per
share dilutive in 1995 and $0.17 per share and $0.34 per share accretive,
respectively, in 1996 and 1997. Under the Sensitivity Case Scenario, such
analysis indicated that the Merger would be $0.63 per share dilutive in 1995 and
$0.08 per share and $0.19 per share accretive, respectively, in years 1996 and
1997. Bear Stearns noted that the dilutive effects of the Merger in 1995
reflected Ceridian's anticipated recording in the fourth quarter of 1995 of
costs associated with the Merger and the anticipated refinancing of Comdata's
debt.
BREAKEVEN P/E ANALYSIS. Bear Stearns conducted a sensitivity analysis of
certain effects of changes in the P/E multiple for the combined entity following
the Merger, using a range of assumed P/E multiples from 18.0x to 21.0x. The
range of multiples utilized reflected Ceridian's and Comdata's stand-alone
estimated 1996 P/E multiples, using the Current Stock Prices, of 19.5x and
19.6x, respectively, under the Base Case Scenario, and of 19.5x and 23.0x,
respectively, under the Sensitivity Case Scenario. At each assumed P/E multiple,
using the Current Stock Prices, Bear Stearns calculated the 1996 EPS level that
would be required to achieve a non-accretive/non-dilutive transaction for
Ceridian stockholders. These EPS levels were $2.24, $2.12, $2.02 and $1.92,
respectively, at the P/E multiples of 18.0x, 19.0x, 20.0x and 21.0x. Bear
Stearns then compared these results with the estimated pro forma EPS in fiscal
year 1996 for the combined entity, under the Base Case Scenario and under the
Sensitivity Case Scenario, both of which fell within the range of $1.92 to
$2.24. Bear Stearns' calculations also included, for each assumed P/E multiple
and using such 1996 estimated pro forma EPS levels, the resulting ranges of
imputed stock prices for Ceridian and imputed values received by Comdata
stockholders at the Exchange Ratio.
HISTORICAL STOCK TRADING ANALYSIS. Bear Stearns reviewed the historical
public trading prices of Ceridian Common Stock and of Comdata Common Stock for
the period from May 18, 1995 through August 18, 1995, as well as the historical
ratio of the public trading price per share of Comdata Common Stock to the
public trading price per share of Ceridian Common Stock. Such analysis indicated
that the ratio of the price per share of Comdata Common Stock to the price per
share of Ceridian Common Stock during the period from May 18, 1995 to August 18,
1995 ranged from 0.38 on June 21, 1995 to 0.49 on August 10, 1995 (as compared
to the Exchange Ratio of 0.57). Bear Stearns also compared the stock price
performance of Ceridian and Comdata over this same period with the S&P 500 index
and an industry index based on the stock prices of the Comparable Companies.
OTHER ANALYSES. Bear Stearns conducted such other analyses as it deemed
necessary, including reviewing selected investment research reports on, and
earnings estimates for, Ceridian and Comdata, reviewing and analyzing the status
of Ceridian's NOLs, utilizing each of the Ceridian and Comdata Base and
Alternative Cases, and analyzing available information regarding the stock
ownership profiles of Ceridian and Comdata.
OPINION DATED THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS. In
connection with its opinion dated as of the date of this Joint Proxy
Statement/Prospectus, Bear Stearns performed procedures to update certain of its
analyses made in connection with its August 23, 1995 opinion and reviewed the
assumptions on which such analyses were based and the factors considered in
connection therewith.
Pursuant to the Engagement Letter, Ceridian agreed to pay Bear Stearns a fee
of $1.5 million for rendering its opinion in connection with the Merger, payable
at the time Bear Stearns indicated it was prepared to render such opinion.
Ceridian has also agreed to pay Bear Stearns an additional fee, payable upon
consummation of the Merger, of $5.36 million. In addition, Ceridian has agreed
to pay Bear Stearns a fee of $1 million upon Ceridian's determination that an
Ownership Change has not occurred prior to or as a result of the Merger.
Ceridian has also agreed to reimburse Bear Stearns for its reasonable
out-of-pocket
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expenses, including the reasonable fees and expenses of its accountants and
counsel, and to indemnify Bear Stearns and certain related persons against
certain liabilities in connection with its engagement, including certain
liabilities under the federal securities laws.
Bear Stearns is an internationally recognized investment banking firm and
was selected as financial advisor to Ceridian in connection with the Merger
because of its experience and expertise and its familiarity with Ceridian. In
addition to its assistance to Ceridian since August 1993 in connection with
preliminarily assessing potential acquisitions, Bear Stearns also acted as lead
underwriter for the December 1993 issuance of Ceridian's 5 1/2% Cumulative
Convertible Exchangeable Preferred Stock. As part of its investment banking
business, Bear Stearns regularly is 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 estate, corporate and
other purposes.
In the ordinary course of its business, Bear Stearns may actively trade the
equity securities of Ceridian and Comdata for its own account and for the
accounts of customers and, accordingly, may at any time hold a long or short
position in such securities. As of the date of its engagement (July 7, 1995) and
the date of delivery of its original written fairness opinion to the Ceridian
Board of Directors (August 23, 1995), Bear Stearns held no proprietary positions
in any Ceridian or Comdata securities, other than hedged arbitrage positions
matching long positions in Ceridian's 5 1/2% Cumulative Convertible Exchangeable
Preferred Stock with substantially equivalent short positions in Ceridian Common
Stock and other than in connection with ordinary course customer trading or
clearing activities. As noted above, Bear Stearns was briefly engaged by Comdata
in 1995, but did not earn any fees pursuant to such engagement.
REASONS OF COMDATA FOR THE MERGER; RECOMMENDATION OF COMDATA BOARD OF DIRECTORS
The Board of Directors of Comdata unanimously approved the Merger Agreement
and the Original Voting Agreement and the transactions contemplated thereby at
its August 23, 1995 special meeting. THE COMDATA BOARD BELIEVES THAT A
COMBINATION WITH CERIDIAN, ON THE TERMS SET FORTH IN THE MERGER AGREEMENT, IS IN
THE BEST INTERESTS OF COMDATA AND ITS STOCKHOLDERS AND UNANIMOUSLY RECOMMENDS
THAT HOLDERS OF COMDATA COMMON STOCK VOTE FOR THE APPROVAL AND ADOPTION OF THE
MERGER AGREEMENT AND THE TRANSACTIONS CONTEMPLATED THEREBY.
In evaluating the proposed Merger, the Comdata Board, with the assistance of
Lazard Freres and Comdata's outside counsel and other advisors, considered a
variety of factors. The Comdata Board did not find it practicable to, and did
not, quantify or otherwise attempt to assign relative weights to the specific
factors considered in reaching its determination. The factors considered by the
Comdata Board included the following:
(1) The Comdata Board considered the rapid consolidation in the
information and transaction processing industry and concluded that a
strategic combination with Ceridian, a significant participant in the
industry, would accelerate the strategic and market position of the combined
business enterprise. The Comdata Board believed that the larger
capitalization of the combined companies, coupled with the utilization of
Ceridian's NOLs, would make the resulting enterprise a broader platform to
continue growth.
(2) The Comdata Board observed the strengths of Comdata and Ceridian in
the vertical market segments each serves and concluded that the combined
business would achieve greater potential market penetration as a diversified
information services and data processing company. The Comdata Board believed
that the Merger would enhance cross-selling opportunities for Comdata and
permit Comdata to exploit emerging information services opportunities.
(3) The Comdata Board concluded that the operational experience and
business strategy of Ceridian's senior management, combined with the
experience of Comdata's key employees, would enable Ceridian's senior
management to realize the full potential of the combined Ceridian/Comdata
business.
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(4) The Comdata Board concluded that the Merger would provide Comdata
stockholders with the opportunity to have continued equity participation in
a larger, more diversified enterprise with equity value that will be
considerably larger than Comdata's current equity value. In addition,
Comdata's Board concluded that the accelerated use of Ceridian's NOLs
resulting from the Merger would increase the net present value of the NOLs
to the stockholders of the combined enterprise.
(5) The Comdata Board concluded that the terms and conditions of the
Merger Agreement, generally, are reasonable and fair to Comdata's
stockholders.
(6) The Comdata Board considered the presentation of Lazard Freres at
the special meeting on August 23, 1995, including Lazard Freres' opinion
that, as of the date of the Merger Agreement, based upon and subject to the
various conditions set forth in their opinion, the Exchange Ratio is fair,
from a financial point of view, to the stockholders of Comdata. See
"--Opinion of Comdata's Financial Advisor."
(7) The Comdata Board considered the results of the due diligence review
which had been conducted with respect to Ceridian's business, operations,
technology and competitive position and the potential synergies and
expansion opportunities for the combined companies.
OPINION OF COMDATA FINANCIAL ADVISOR
GENERAL. Comdata retained Lazard Freres on August 16, 1995 to render
financial advisory and investment banking services in connection with an
evaluation of Comdata's strategic alternatives from a transactional basis.
Lazard Freres has delivered to the Board of Directors of Comdata the written
opinion of Lazard Freres, dated August 23, 1995, and has orally reaffirmed that
opinion on November 1, 1995, to the effect that, based upon and subject to
various considerations set forth in the written opinion, as of such dates, the
Exchange Ratio is fair, from a financial point of view, to the holders of the
Comdata Common Stock and the Comdata Preferred Stock. Although the Lazard Freres
written opinion was rendered prior to the Preferred Stock Conversion, Lazard
Freres has confirmed to Comdata that neither the analysis reflected in nor the
conclusions contained in such opinion are affected by such Preferred Stock
Conversion. No limitations were imposed by the Board of Directors of Comdata
upon Lazard Freres with respect to the investigations made or the procedures
followed by Lazard Freres in rendering its opinion. However, although Lazard
Freres analyzed various alternative transactions which may be available to
Comdata, Lazard Freres was not authorized to and did not solicit third party
indications of interest for all or any part of Comdata or its assets.
THE FULL TEXT OF THE OPINION OF LAZARD FRERES DATED AUGUST 23, 1995, WHICH
SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED AND LIMITS ON THE REVIEW
UNDERTAKEN, IS ATTACHED AS APPENDIX C TO THIS JOINT PROXY STATEMENT/PROSPECTUS
AND IS INCORPORATED HEREIN BY REFERENCE. COMDATA STOCKHOLDERS ARE URGED TO READ
SUCH OPINION CAREFULLY AND IN ITS ENTIRETY. LAZARD FRERES' OPINION IS DIRECTED
ONLY TO THE FAIRNESS OF THE EXCHANGE RATIO AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY COMDATA STOCKHOLDER AS TO HOW SUCH STOCKHOLDER SHOULD VOTE
AT THE COMDATA SPECIAL MEETING. THE SUMMARY OF THE OPINION OF LAZARD FRERES SET
FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS IS QUALIFIED IN ITS ENTIRETY BY
REFERENCES TO THE FULL TEXT OF SUCH OPINION.
In arriving at its opinion, Lazard Freres (i) reviewed the financial terms
and conditions of the Merger Agreement; (ii) reviewed certain historical
business and financial information relating to Comdata and Ceridian; (iii)
reviewed various financial forecasts and other data provided to Lazard Freres by
Comdata and Ceridian relating to their respective businesses; (iv) held
discussions with members of the senior management of Comdata and Ceridian with
respect to the businesses and prospects of Comdata and Ceridian, respectively,
the strategic objectives of each, and possible benefits which might be realized
following the Merger; (v) reviewed public information with respect to certain
other companies in lines of business Lazard Freres believed to be generally
comparable in whole or in part to the businesses of Comdata and Ceridian; (vi)
reviewed the financial terms of certain business combinations involving
companies in lines of business Lazard Freres believed to be generally comparable
in whole or in part to those of Comdata and Ceridian,
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and in other industries generally; (vii) reviewed the historical stock prices
and trading volumes of the Comdata Common Stock and the Ceridian Common Stock;
and (viii) conducted such other financial studies, analyses and investigations
as Lazard Freres deemed appropriate.
In connection with its review, Lazard Freres relied upon the accuracy and
completeness of the financial and other information provided by Comdata and
Ceridian to, reviewed by or for or discussed with, Lazard
Freres or which was publicly available, and did not assume any responsibility
for any independent verification of such information or any independent
valuation or appraisal of any of the assets or liabilities of Comdata or
Ceridian, nor was Lazard Freres provided with any such appraisals. With respect
to the financial forecasts and other information referred to above, Lazard
Freres assumed that such forecasts and information were reasonably prepared or
reviewed, as the case may be, on bases reflecting the best currently available
estimates and judgments of management of Comdata and Ceridian as to the future
financial performance of Comdata and Ceridian, respectively. Lazard Freres
assumed no responsibility for and expressed no view as to such forecasts or the
assumptions on which they were based. Lazard Freres' opinion was necessarily
based on economic, monetary, market and other conditions as in effect on, and
the information made available as of the date of, the opinion and did not
address Comdata's underlying business decision to effect the Merger or
constitute a recommendation to any stockholder of Comdata as to how such
stockholder should vote with respect to the Merger. Lazard Freres assumed that
the Merger would be consummated on the terms described in the Merger Agreement,
without any waiver of any material terms or conditions by Comdata.
In connection with its written opinion delivered to the Comdata Board of
Directors on August 23, 1995, Lazard Freres performed certain analyses which
involved the following:
ANALYSIS AT VARIOUS PRICES. Lazard Freres reviewed certain historical
financial information of Comdata and Ceridian and calculated the imputed value
of the Merger to holders of Comdata Common Stock. This analysis showed that at a
value of $23.87 per share of Comdata Common Stock, the multiple of equity value
to Comdata's 1995 estimated revenues (as estimated by Comdata management's
internal projections) was 3.9x and the multiple of equity value to Comdata's
1995 EBIT and Comdata's 1995 EBITDA, each as estimated by Comdata management's
internal projections, was 14.6x and 12.7x, respectively. Lazard Freres advised
the Comdata Board of Directors that these multiples were within the range of
both comparable public companies and comparable transactions. See also
"Comparable Public Company Trading Analysis" and "Comparable Transactions
Analysis" below. Lazard Freres also calculated the premium which the Exchange
Ratio represents, based on the $23.87 per share purchase price, when compared to
Comdata's Common Stock closing market price on August 22, 1995 ($20.13), the
30-day trading average price ($18.26) and the 90-day trading average price
($14.82), to be 18.6%, 30.7% and 61.1%, respectively.
CONTRIBUTION ANALYSIS. Lazard Freres analyzed the relative contribution of
each of Comdata and Ceridian to certain pro forma income statement items,
including estimated 1995 revenues, net income and EBITDA of the combined
company. Lazard Freres then compared the ownership percentages (after accounting
for debt contributed) of the combined company implied by the relative
contributions of such income statement items to the pro forma equity ownership
percentage for Comdata stockholders of approximately 26.6% at the Exchange
Ratio. The contribution analysis showed that Comdata would contribute
approximately 21.5%, 23.2% and 36.9% respectively, of the estimated 1995
revenues, net income and EBITDA of the combined company.
COMPARABLE PUBLIC COMPANY TRADING ANALYSIS. Lazard Freres analyzed certain
publicly available financial, operating and stock market data of 17 companies in
the transaction processing and information industry, including Ceridian, whose
lines of business made them, in Lazard Freres' judgment, comparable to Comdata
(the "Public Comparables"), as well as that of Comdata. Lazard Freres examined,
among other things, multiples of equity value to (i) LTM EBITDA and 1995
estimated EBITDA (based on Wall Street financial analysts' estimates), (ii) LTM
revenues and 1995 estimated revenues (based on Wall Street financial analysts'
estimates), and (iii) LTM EBIT and 1995 estimated EBIT and 1996 EBIT (based on
Wall Street financial analysts' estimates). The analysis indicated that the most
relevant Public Comparables traded at ranges of (a) 9.8x to 13.4x and 8.5x to
12.8x LTM EBITDA and estimated 1995 EBITDA, respectively, (b)
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2.0x to 3.4x and 2.0x to 3.2x LTM revenues and estimated 1995 revenues,
respectively, and (c) 13.4x to 22.4x and 12.6x to 21.6x, LTM EBIT and estimated
1995 EBIT. Lazard Freres noted that Comdata traded at multiples of (x) 12.3x and
10.9x LTM EBITDA and estimated 1995 EBITDA, respectively (based on Comdata
management's internal projections), (y) 3.6x and 3.3x LTM revenues and estimated
1995 revenues, respectively (based on Comdata management's internal
projections), and (z) 13.9x and 12.5x LTM EBIT and 1995 estimated EBIT,
respectively (based on Comdata management's internal projections). Lazard Freres
also noted that Ceridian traded at multiples (without giving effect to the
Merger) of (x) 17.5x and 15.5x LTM EBITDA and estimated 1995 EBITDA,
respectively (based on Ceridian management's internal projections), (y) 2.3x and
2.2x LTM revenues and estimated 1995 revenues, respectively (based on Ceridian
management's internal projections), and (z) 25.6x and 22.8x LTM EBIT and 1995
estimated EBIT, respectively (based on Ceridian management's internal
projections).
COMPARABLE TRANSACTIONS ANALYSIS. Lazard Freres reviewed and analyzed
selected financial and operating information relating to 17 acquisition
transactions in the transaction processing and information industry since
February 1988, and selected a number of those acquisitions which it believed
were most comparable to a transaction involving the sale of Comdata (the
"Comparable Transactions"). With respect to the Comparable Transactions, the
analysis considered, among other things, the transaction value and the multiple
of transaction value to LTM EBITDA, LTM revenues and LTM EBIT. An analysis of
the Comparable Transactions indicated LTM EBITDA multiples ranging from 11.7x to
16.2x, compared with a multiple of 14.5x associated with the Exchange Ratio, LTM
revenue multiples ranging from 0.9x to 4.7x, compared with a multiple of 4.3x
associated with the Exchange Ratio, and LTM EBIT multiples ranging from 13.2x to
21.7x, compared with a multiple of 16.5x associated with the Exchange Ratio.
Multiples were derived from publicly available sources, which may or may not be
reliable.
DISCOUNTED CASH FLOW ANALYSIS. Based upon projections prepared by
management of Comdata, Lazard Freres used a discounted cash flow methodology to
estimate the net present value of future free cash
flows as of December 31, 1995 available to the equity holders of Comdata if
Comdata were to perform on a stand-alone basis (without giving effect to the
Merger). In conducting this analysis, Lazard Freres assumed discount rates
ranging from 16.5% to 18.5%, derived from a weighted average cost of capital
analysis of Comdata and the Public Comparables, and terminal value multiples
ranging from 11.0x to 13.0x, derived from a review of the Public Comparables and
the Comparable Transactions applied to estimated 2000 EBIT. The net present
value of projected free cash flow, when combined with the terminal values,
yielded a total enterprise value in the range of $987.4 million to $1.219
billion. In order to derive total equity value and the equity value per share of
Comdata, Lazard Freres subtracted from the total enterprise value the estimated
net debt and other liabilities forecasted by management of Comdata at December
31, 1995 to yield a total equity value range of $812.4 million to $1.044
billion, or a per share equity value in the range of between $21.80 and $28.00
per share.
Lazard Freres utilized the various analyses described above to value
Comdata. The methodologies described above were used by Lazard Freres to
determine whether the Exchange Ratio was fair to the stockholders of Comdata in
light of Lazard Freres' valuation of Comdata.
In arriving at its written opinion and oral reaffirmation, Lazard Freres
performed a variety of financial analyses, the material portions of which are
summarized above. The summary set forth above does not purport to be a complete
description of the analyses performed by Lazard Freres. The preparation of a
fairness opinion is a complex process and is not necessarily susceptible to
partial analysis or summary description. The analyses must be considered as a
whole and selecting portions of such analyses and the factors considered by
Lazard Freres, without considering all such analyses and factors, could create
an incomplete view of the process underlying the analyses set forth in the
opinion. No company or transaction used in the above analyses as a comparison is
identical to Comdata or the transaction contemplated by the Merger Agreement.
Accordingly, an analysis of the foregoing is not mathematical; rather, it
involves complex considerations and judgments concerning differences in
financial and operating characteristics of the comparable companies and other
factors that could affect the acquisition or public trading value of the
comparable companies to which Comdata is being compared. The fact that any
specific analysis has been referred to in the summary above is not meant to
indicate that such analysis was given more weight than any other analyses.
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In performing its analyses, Lazard Freres made numerous assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of Comdata or Ceridian. The
analyses were prepared solely for purposes of Lazard Freres providing its
opinion to the Comdata Board of Directors as to the fairness, from a financial
point of view, of the Exchange Ratio to the stockholders of the Comdata and do
not purport to be appraisals or necessarily reflect the prices at which
businesses or securities actually may be sold, which may be significantly more
or less favorable than as set forth in these analyses. Similarly, any estimate
of values or forecast of future results contained in the analyses is not
necessarily indicative of actual values or actual future results, which
estimates are inherently subject to uncertainty. Lazard Freres' opinion to the
Comdata Board of Directors was one of many factors taken into consideration by
the Comdata Board of Directors in making its determination to approve the Merger
Agreement. The foregoing summary does not purport to be a complete description
of the analyses performed by Lazard Freres and is qualified by reference to the
written opinion of Lazard Freres set forth in Appendix C hereto.
Lazard Freres, in connection with its oral reaffirmation on November 1, 1995
of its August 23, 1995 opinion, updated those analyses performed and reviewed
those assumptions underlying the analyses as it deemed necessary, to reaffirm
its August 23, 1995 opinion.
Lazard Freres is an internationally recognized investment banking firm that
regularly engages in the valuation of businesses and their securities in
connection with mergers and acquisitions. The Comdata Board of Directors
selected Lazard Freres to act as its financial advisor in connection with the
Merger and related matters based upon its qualifications, expertise and
reputation in investment banking in general and mergers and acquisitions
specifically. Lazard Freres has acted exclusively for the Comdata Board in
rendering its fairness opinion and will receive a fee from Comdata for its
services. Lazard Freres acted as financial adviser to Comdata in connection
with, and participated in certain of the negotiations leading to, the Merger
Agreement. During the course of such negotiations, Lazard Freres was not asked
to, and did not, propose the specific Exchange Ratio. The Exchange Ratio was
determined by arms-length negotiation between Comdata and Ceridian after
consultation by each of the parties with their respective financial advisors as
to various matters, including preliminary ranges of value.
As of the date hereof, Lazard Freres does not own any shares of Comdata
Common Stock or Ceridian Common Stock or any other securities of Comdata or
Ceridian other than 1,030 shares of Ceridian Common Stock in a non-proprietary
account for the benefit of a client. Lazard Freres held the same positions in
the securities of Comdata and Ceridian at the time of Lazard Freres' engagement
by the Comdata Board of Directors (August 16, 1995), the date its written
fairness opinion was delivered to the Comdata Board of Directors (August 23,
1995), the date the proposed Merger was publicly announced (August 24, 1995) and
the date of its oral reaffirmation of its opinion (November 1, 1995).
Comdata's engagement of Lazard Freres provides for a financial advisory fee
of $100,000 due upon the signing of that certain engagement letter dated August
16, 1995 between Lazard Freres and Comdata and a cash fee of $1,575,000 payable
(i) upon delivery of Lazard Freres' fairness opinion to the Comdata Board, if
requested, and (ii) upon consummation of a business combination transaction,
such as the Merger, to which any payments pursuant to clause (i) shall be
creditable in full. Comdata has also agreed to reimburse Lazard Freres for its
reasonable out-of-pocket expenses and to indemnify Lazard Freres and its
affiliates, and their respective partners, directors, officers, employees,
agents and controlling persons against certain expenses and liabilities,
including liabilities under the federal securities laws.
TERMS OF THE MERGER; CONSIDERATION TO BE RECEIVED BY COMDATA STOCKHOLDERS
At the time the Merger becomes effective, Convoy Acquisition Corp. (referred
to as "Sub"), a newly formed wholly-owned subsidiary of Ceridian, will merge
with and into Comdata, with Comdata being the surviving corporation and becoming
a wholly-owned subsidiary of Ceridian. Upon consummation of the Merger, each
issued and outstanding share of Comdata Common Stock will be converted at the
Exchange Ratio into 0.57 of a share of Ceridian Common Stock, with cash paid in
lieu of fractional shares (as described below). The Certificate of Incorporation
and Bylaws of Sub as in effect immediately prior to the Merger will be the
Certificate of Incorporation and Bylaws of the surviving corporation until
further amended as provided therein and in
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accordance with applicable law. The directors of Sub immediately prior to the
Merger will be the initial directors of the surviving corporation, and the
officers of Comdata immediately prior to the Merger will be the initial officers
of the surviving corporation. If the Merger is completed, holders of Comdata
Common Stock will no longer hold any interest in Comdata other than through
their interest in shares of Ceridian Common Stock. Shares of Ceridian capital
stock issued and outstanding at the effective time of the Merger will remain
issued and outstanding thereafter and will not be affected by the Merger.
Sub is a newly formed Delaware corporation created for the sole purpose of
consummating the merger transaction contemplated by the Merger Agreement. Sub
has not conducted any activities other than those incident to its formation and
its execution of the Merger Agreement and Voting Agreement. Upon effectiveness
of the Merger, each outstanding share of Sub common stock will be converted into
one share of common stock of the surviving corporation.
BECAUSE THE EXCHANGE RATIO IS FIXED AND WILL NOT INCREASE OR DECREASE DUE TO
FLUCTUATIONS IN THE MARKET PRICE OF EITHER THE CERIDIAN COMMON STOCK OR THE
COMDATA COMMON STOCK, COMDATA STOCKHOLDERS WILL NOT BE COMPENSATED FOR DECREASES
OR INCREASES IN THE MARKET PRICE OF CERIDIAN COMMON STOCK WHICH COULD OCCUR
BEFORE THE EFFECTIVE TIME OF THE MERGER. As a result, in the event the market
price of Ceridian Common Stock decreases or increases prior to the effective
time of the Merger, the value at the effective time of the Merger of the
Ceridian Common Stock to be received in the Merger would correspondingly
decrease or increase. The market prices of Ceridian Common Stock and Comdata
Common Stock as of a recent date are set forth herein under "Summary--Markets
and Market Prices," and Comdata stockholders are advised to obtain recent market
quotations for Ceridian Common Stock and Comdata Common Stock. No assurance can
be given as to the market prices of Ceridian Common Stock or Comdata Common
Stock at the effective time of the Merger or as to the market price of Ceridian
Common Stock thereafter.
NO FRACTIONAL SHARES
No fractional shares of Ceridian Common Stock will be issued in the Merger.
The Merger Agreement provides that, in lieu of any fractional share, Ceridian
will pay to each holder of Comdata Common Stock who otherwise would be entitled
to receive a fractional share of Ceridian Common Stock an amount of cash
(without interest) determined by multiplying (i) the average of the per share
closing prices for Ceridian Common Stock on the NYSE for the five trading days
immediately preceding the date on which the Merger becomes effective, by (ii)
the fractional share interest of Ceridian Common Stock to which such holder
would otherwise be entitled.
EFFECTIVE TIME OF THE MERGER
The Merger will become effective upon the filing of, or at such later time
specified in, a properly executed certificate of merger relating thereto filed
with the Secretary of State of Delaware. The Merger Agreement provides that the
parties thereto will cause such certificate of merger to be filed as soon as
practicable after the holders of Ceridian Common Stock have approved the
issuance of Ceridian Common Stock pursuant to the Merger Agreement, the holders
of Comdata Common Stock have approved and adopted the Merger Agreement, all
required regulatory approvals and actions have been obtained or taken and all
other conditions to the consummation of the Merger have been satisfied or
waived. See "--Regulatory Approvals Required" and "--Conditions to Consummation
of the Merger." There can be no assurance that the conditions precedent to the
Merger will be satisfied. Moreover, the Merger Agreement may be terminated by
either Ceridian or Comdata under various conditions as specified in the Merger
Agreement. See "--Termination; Termination Fee." Thus, there can be no assurance
as to whether or when the Merger will become effective.
SURRENDER OF COMDATA COMMON STOCK CERTIFICATES
As soon as practicable after the effective time of the Merger, The Bank of
New York, the Exchange Agent, will send a notice and transmittal form, with
instructions, to each holder of Comdata Common Stock of record at the effective
time of the Merger advising such holder of the effectiveness of the Merger and
of the procedure for surrendering to the Exchange Agent the certificates
formerly evidencing Comdata Common Stock in exchange for (i) new certificates
evidencing Ceridian Common Stock and (ii) cash in lieu of fractional shares.
COMDATA STOCKHOLDERS SHOULD NOT SEND IN THEIR STOCK CERTIFICATES UNTIL THEY
RECEIVE THE LETTER OF TRANSMITTAL FORM AND INSTRUCTIONS FROM THE EXCHANGE AGENT.
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Upon surrender to the Exchange Agent of one or more certificates formerly
evidencing Comdata Common Stock, together with a properly completed and signed
letter of transmittal, there will be issued and mailed to the holder thereof a
new certificate or certificates representing the number of whole shares of
Ceridian Common Stock to which such holder is entitled under the Merger
Agreement and, where applicable, a check for the amount of cash payable in lieu
of a fractional share of Ceridian Common Stock (after giving effect to any
required tax withholding). Until surrendered as described above, certificates
formerly evidencing Comdata Common Stock will, after the effective time of the
Merger, represent only the right to receive, upon such surrender, a certificate
or certificates representing shares of Ceridian Common Stock and, if applicable,
cash in lieu of fractional shares, as described above. No dividends or
distributions that are declared on shares of Ceridian Common Stock will be paid
to persons entitled to receive certificates representing shares of Ceridian
Common Stock until such persons surrender their certificates formerly evidencing
Comdata Common Stock.
A certificate representing Ceridian Common Stock or a check in lieu of a
fractional share will be issued in a name other than the name in which the
surrendered Comdata Common Stock certificate was registered only if (i) the
Comdata Common Stock certificate surrendered is properly endorsed or accompanied
by appropriate stock powers and is otherwise in proper form for transfer, and
(ii) the person requesting the issuance of such certificate or check either pays
to the Exchange Agent any transfer or other taxes required by reason of the
issuance of such certificate or check in a name other than that of the
registered holder of the certificate surrendered or establishes to the
satisfaction of the Exchange Agent that such tax has been paid or is not
applicable.
CERIDIAN'S NET OPERATING LOSS CARRYFORWARDS
Ceridian estimates that it currently has NOLs of approximately $1.0 billion,
which if unused will begin to expire in 1997 and which may be used, to the
extent available, to offset regular taxable income of Ceridian (including
Comdata following completion of the Merger) during the carryforward period
(through 2008). Ceridian also has accrued approximately $300 million of expenses
for financial statement reporting purposes which have not yet accrued for
federal income tax purposes but which are expected to be deductible for federal
income tax purposes in future taxable years as they accrue. Section 382 of the
Code contains complex rules that place an annual limitation on the amount of
NOLs that a corporation may utilize after an "Ownership Change." Ceridian
believes that even if it were to undergo an Ownership Change, Section 382 would
only apply to the unutilized portion of Ceridian's NOLs and not to any unaccrued
portion of Ceridian's approximately $300 million of expected future tax
deductions.
In general, an Ownership Change occurs if the aggregate of the increases in
the percentage of stock owned on a particular date by certain stockholders over
the lowest percentage owned in the past three years by such stockholders exceeds
50 percentage points. In general, stockholders that must be taken into account
under Section 382 include each stockholder owning during the three-year period
directly or indirectly 5% or more of the stock of the corporation and certain
stockholders receiving stock in a new issuance during the three-year period. For
purposes of Section 382, "ownership" means beneficial ownership, but shares held
or controlled by investment advisors who may be required to file Forms 13G with
the Commission are generally not treated as owned by such investment advisors
for Section 382 purposes.
The annual NOL limit is calculated by multiplying the equity value of a
corporation as determined under the Code (generally the corporation's market
capitalization reduced by capital contributions made to the corporation during
the previous two years) immediately before an Ownership Change by the then
applicable federal long-term tax exempt rate (which is 5.75% for the month of
November 1995). Thus, in general, the higher Ceridian's equity value at the time
of an Ownership Change of Ceridian, the higher the resulting annual NOL
limitation applicable to Ceridian. For example, based on the last reported sales
prices of Ceridian capital stock on the NYSE on November 8, 1995, and a federal
long-term tax exempt rate of 5.75%, Ceridian estimates that the occurrence of an
Ownership Change on that date would limit its ability to utilize its NOLs in
subsequent taxable years to approximately $125 million per year, and that any
taxable income (net of deductions properly accruing for tax purposes in such
years) from U.S. operations in excess of that amount would be subject to U.S.
federal income tax. If, however, an Ownership Change were to occur after
completion
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of the Merger, and assuming similar market prices for Ceridian's capital stock
and a similar federal long-term tax exempt rate, Ceridian believes that its
equity value for Section 382 purposes would be substantially higher, and the
then applicable Section 382 annual NOL limitation would be approximately $175
million.
All the shares of Ceridian Common Stock to be issued in the Merger will be
included in the calculation of whether an Ownership Change has occurred at the
effective time of the Merger. Based on its review of the rules under Section 382
of the Code and the facts relevant to a determination as to whether an Ownership
Change has occurred, including filings as of the date hereof with the Commission
on Schedules 13D, 13F and 13G (or any similar schedules), and assuming no
significant changes in such filings and no new filings, Ceridian believes that
it has not experienced, and as a result of the Merger it will not experience, an
Ownership Change. Ceridian's belief with respect to this matter is supported by
advice received from Hogan & Hartson, special tax counsel to Ceridian, as to the
reasonableness of Ceridian's processes, calculations and conclusions under
applicable law. Application of the rules under Section 382 of the Code does,
however, involve certain technical issues which are not definitively answered
under the Code, Treasury Regulations and published administrative
interpretations. Given such lack of definitive guidance, and the inherently
factual nature of the matter, Ceridian has not requested special tax counsel's
opinion with respect to this matter, and there can be no assurance that the
Internal Revenue Service will agree with Ceridian's conclusion.
Events could occur prior to the Merger, either within or beyond the control
of Ceridian, which could cause consummation of the Merger to result in an
Ownership Change. In such event, consummation of the Merger would limit
utilization of Ceridian's NOLs to an annual amount based on Ceridian's equity
value immediately prior to the Merger (which would not include the equity value
of the shares of Ceridian Common Stock issued in the Merger). If that were to
occur, Ceridian expects that the resulting limitation on its ability to utilize
its NOLs would cause the Merger to be dilutive to Ceridian's stockholders.
Accordingly, consummation of the Merger is conditioned upon each of Ceridian and
Comdata determining, based on the existence (or absence) of filings with the
Commission on Schedules 13D, 13F and 13G (or any similar schedules), that no
Ownership Change with respect to Ceridian has occurred, and, based on such
filings and the number of shares issued in the Merger, that consummating the
Merger would not cause an Ownership Change to occur with respect to Ceridian.
See "--Conditions to Consummation of the Merger."
Events subsequent to the Merger, either within or beyond the control of
Ceridian, may also cause an Ownership Change that could trigger the limitations
of Section 382. Depending upon the equity value of Ceridian immediately prior to
such an Ownership Change and Ceridian's future U.S. taxable income, imposition
of the annual NOL limitation could delay or prevent the utilization of the NOLs
that Ceridian otherwise would be entitled to use. This could result in higher
federal income taxes in a given year than if Ceridian had not been subject to
the annual limitation. Moreover, due to uncertainties in the meaning and
application of certain aspects of Section 382, there can be no assurance that
the Internal Revenue Service will not challenge Ceridian's determination as to
the amount of its NOLs, whether or when an Ownership Change may have occurred,
the calculation of Ceridian's equity value immediately prior to an Ownership
Change, or other factual and legal determinations relating to Section 382 and
its application to Ceridian, or that such a challenge, if asserted, would not be
sustained by a court.
CONDITIONS TO CONSUMMATION OF THE MERGER
The Merger will occur only if the Merger Agreement is approved and adopted
by the requisite vote of holders of Comdata Common Stock and the issuance of
shares of Ceridian Common Stock pursuant to the Merger Agreement is approved by
the requisite vote of holders of Ceridian Common Stock. In addition,
consummation of the Merger is subject to the satisfaction or waiver (to the
extent such waiver is permitted by law) of certain other conditions. A failure
of any such conditions to be satisfied, if not waived, would prevent
consummation of the Merger.
The obligations of both Ceridian and Comdata to consummate the Merger are
subject to satisfaction of the following conditions: (i) any waiting period
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated and no action shall have been instituted and not
withdrawn or terminated by the FTC or the Department of Justice challenging or
seeking to enjoin the Merger; (ii) no
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governmental entity (including a federal or state court) of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
statute, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is in effect and which
materially restricts, prevents or prohibits consummation of the Merger or any
transaction contemplated by the Merger Agreement; (iii) all filings with and
approvals and consents of any governmental entity, the failure of which to make
or obtain would have a material adverse effect at or after the effective time of
the Merger on either Ceridian or the surviving corporation and Network, taken as
a whole, shall have been made or obtained (including in connection with the New
Jersey Casino Control Act and certain state sale of checks and/or payment laws);
(iv) the Registration Statement of which this Joint Proxy Statement/Prospectus
is a part shall have become effective under the Securities Act and shall not be
subject to a stop order or proceeding of the Commission seeking a stop order,
and Ceridian shall have received all state securities or "blue sky" permits and
other authorizations necessary to issue the shares of Ceridian Common Stock
pursuant to the Merger Agreement; (v) an opinion of Reboul MacMurray, counsel to
Comdata, addressed to both Comdata and Ceridian, shall have been obtained to the
effect that for federal income tax purposes, (a) the Merger will qualify as a
"reorganization" under Section 368(a) of the Code, (b) no gain or loss will be
recognized by any Comdata stockholder (except in connection with the receipt of
cash in lieu of fractional shares) upon the exchange of Comdata Common Stock for
Ceridian Common Stock in the Merger, (c) the basis of the Ceridian Common Stock
received by a Comdata stockholder in exchange for Comdata Common Stock
(including any fractional share interest to which the holder would otherwise
have been entitled) will be the same as the basis of the Comdata Common Stock
surrendered, (d) the holding period of the Ceridian Common Stock received by a
Comdata stockholder will include the period during which the Comdata Common
Stock surrendered in exchange therefor was held (provided that such Comdata
Common Stock was held as a capital asset at the effective time of the Merger),
and (e) no gain or loss will be recognized by Ceridian, Comdata or Sub as a
result of the Merger; (vi) the Ceridian Common Stock to be issued to holders of
Comdata Common Stock in the Merger shall have been approved for listing on the
NYSE, upon official notice of issuance; (vii) Ceridian and Comdata shall have
each received from KPMG Peat Marwick LLP and Arthur Andersen LLP, respectively,
a letter dated not more than five days prior to the effective time of the Merger
to the effect that, subject to customary qualifications, the Merger qualifies
for pooling-of-interests accounting treatment for financial reporting purposes
and that such treatment is in accordance with generally accepted accounting
principles; and (viii) each of Ceridian and Comdata shall have determined, based
on the existence (or absence) of certain reports of beneficial ownership filed
with the Commission that, with respect to Ceridian, no Ownership Change has
occurred since the date of the Merger Agreement, and based on such filings and
the number of shares of Ceridian Common Stock to be issued in connection with
the Merger, consummating the Merger will not cause an Ownership Change to occur.
In addition to the foregoing conditions, the obligation of Ceridian to
consummate the Merger is subject to satisfaction or waiver of the following
conditions: (i) the representations and warranties of Comdata set forth in the
Merger Agreement that are qualified with reference to materiality shall be true
and correct and the representations and warranties that are not so qualified
shall be true and correct in all material respects, in each case as of the date
of the Merger Agreement and as of the effective time of the Merger, and the
aggregate effect of all inaccuracies in such representations and warranties does
not and will not have a material adverse effect on the financial condition,
results of operations, business, assets, liabilities, prospects or properties of
Comdata and its subsidiaries taken as a whole or on the ability of Comdata to
consummate the Merger; (ii) Comdata shall have performed in all material
respects all obligations required to be performed by it under the Merger
Agreement at or prior to the effective time of the Merger; (iii) Ceridian shall
have received a certificate of the Chief Executive Officer or the Chief
Financial Officer of Comdata to the effect that the conditions set forth in (i)
and (ii) above have been fulfilled; (iv) Ceridian shall have received from each
"affiliate" of Comdata a written agreement whereby such affiliate agrees not to
sell, transfer or otherwise dispose of (x) any Comdata securities during the
period beginning 30 days prior to the effective time of the Merger, (y) any
shares of Ceridian Common Stock received in the Merger until Ceridian publishes
financial results covering at least 30 days of post-Merger combined operation,
or (z) any shares of Ceridian Common Stock received in the Merger except in
compliance with the requirements of the
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Securities Act, see "--Resale of Ceridian Common Stock"; (v) Ceridian shall have
received an opinion of Hogan & Hartson, special tax counsel to Ceridian,
substantially to the effect that no gain or loss will be recognized by Ceridian,
Sub or Comdata as a result of the Merger; and (vi) Comdata shall have delivered
letters of resignation from the members of the Boards of Directors of itself and
of Network, which resignations shall be effective as of the effective time of
the Merger.
In addition to the foregoing conditions, the obligation of Comdata to
consummate the Merger is subject to satisfaction or waiver of the following
conditions: (i) the representations and warranties of Ceridian set forth in the
Merger Agreement that are qualified with reference to materiality shall be true
and correct and the representations and warranties that are not so qualified
shall be true and correct in all material respects, in each case as of the date
of such agreement and as of the effective time of the Merger, and the aggregate
effect of all inaccuracies in such representations and warranties does not and
will not have a material adverse effect on the financial condition, results of
operations, business, assets, liabilities, prospects or properties of Ceridian
and its subsidiaries, taken as a whole, or on the ability of Ceridian to
consummate the Merger; (ii) Ceridian shall have performed in all material
respects all obligations required to be performed by it under the Merger
Agreement at or prior to the effective time of the Merger; (iii) Comdata shall
have received a certificate of the Chief Executive Officer or the Chief
Financial Officer of Ceridian to the effect that the conditions set forth in (i)
and (ii) above have been fulfilled; and (iv) Comdata shall have received from
each "affiliate" of Ceridian a written agreement whereby such affiliate agrees
not to sell, transfer or otherwise dispose of any Ceridian securities during a
period beginning 30 days prior to the effective time of the Merger, and
continuing until Ceridian publishes financial results covering at least 30 days
of post-Merger combined operations. See "--Resale of Ceridian Common Stock."
REGULATORY APPROVALS REQUIRED
Under the Merger Agreement, the obligations of both Ceridian and Comdata to
consummate the Merger are conditioned upon (i) the expiration or termination of
any waiting period applicable to the consummation of the Merger under the HSR
Act and (ii) all filings with, approvals and consents of and the expiration of
waiting periods imposed by, any governmental entity, the failure of which to
make, obtain or occur would have a material adverse effect at or after the
effective time of the Merger on either Ceridian or the surviving corporation and
Network, taken as a whole, shall have been made, obtained or occurred; see
"--Conditions to Consummation of the Merger." There can be no assurance that any
applicable regulatory authority will approve or take other required action with
respect to the Merger or as to the timing of such regulatory approval or other
action. Ceridian and Comdata are not aware of any governmental approvals or
actions that are required in order to consummate the Merger except in connection
with the Securities Act, the filing of Merger-related documents under the DGCL
or as described below. Should such other approval or action be required, it is
contemplated that Ceridian and Comdata would seek such approval or action. There
can be no assurance as to whether or when any such other approval or action, if
required, could be obtained.
Pursuant to the HSR Act, on September 6, 1995, Ceridian and Comdata each
furnished notification of the Merger and provided certain information to the FTC
and the Department of Justice. The waiting period under the HSR Act expired on
October 6, 1995.
At any time before or after the effective time of the Merger, the FTC, the
Department of Justice or a private person or entity could seek under the
antitrust laws, among other things, to enjoin the Merger or to cause Ceridian to
divest itself, in whole or in part, of Comdata or of other businesses conducted
by Ceridian. There can be no assurance that a challenge to the Merger will not
be made or that, if such a challenge is made, Ceridian and Comdata will prevail.
The obligations of Ceridian and Comdata to consummate the Merger are subject to
the condition that no governmental entity (including a federal or state court)
of competent jurisdiction shall have enacted, issued, promulgated, enforced or
entered any statute, rule, regulation, executive order, decree, injunction or
other order (whether temporary, preliminary or permanent) which is in effect and
which materially restricts, prevents or prohibits consummation of the Merger.
Each party has agreed to use its reasonable best efforts to vacate or lift any
such prohibition.
Network and an affiliate thereof are licensees pursuant to certain state
sale of checks and/or payment instruments laws. In accordance with certain of
those laws, approvals must be obtained from state regulatory
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authorities prior to the consummation of the Merger. Comdata and Ceridian have
obtained certain of those approvals and are actively seeking, and expect to
obtain, the remaining required approvals. In addition, Network is licensed under
the New Jersey Casino Control Act to provide money transmission services at
gambling venues in Atlantic City, New Jersey, and the approval of the New Jersey
Casino Control Commission has been obtained.
WAIVER AND AMENDMENT
At any time before the Merger becomes effective, Ceridian or Comdata may (i)
extend the time for performance of any obligations or other acts of the other
under the Merger Agreement; (ii) waive any inaccuracies in the representations
and warranties of the other contained in the Merger Agreement; or (iii) waive
compliance by the other with any agreements contained in the Merger Agreement or
with any conditions contained therein which may legally be waived. If, however,
the conditions relating to either of (i) the receipt of requisite opinions of
tax counsel as to the anticipated tax consequences of the Merger, or (ii) the
determination that, with respect to Ceridian's NOLs, no Ownership Change has
occurred with respect to Ceridian and that consummating the Merger would not
cause an Ownership Change to occur with respect to Ceridian is not met, either
the Merger Agreement will be terminated or new stockholder approvals will be
sought from the holders of Ceridian Common Stock and the holders of Comdata
Common Stock, on the basis of supplemental Joint Proxy Statement/Prospectus
materials disclosing the effect of such waivers or as to a revised Merger
Agreement.
The Merger Agreement may not be amended except in writing signed by each of
the parties thereto. The Merger Agreement may be amended without the approval of
the holders of Ceridian Common Stock and the holders of Comdata Common Stock,
except that no such amendment will be made following approval and adoption of
the Merger Agreement by holders of Comdata Common Stock and approval of the
issuance of Ceridian Common Stock pursuant to the Merger Agreement by holders of
Ceridian Common Stock if such amendment would require further stockholder
approval under applicable law or NYSE rule, unless such further approval has
been obtained.
TERMINATION; TERMINATION FEE
The Merger Agreement may be terminated at any time before the Merger becomes
effective: (i) by mutual consent of Ceridian and Comdata; (ii) by Ceridian or
Comdata if the Merger has not become effective on or before February 29, 1996 or
the approval of either the holders of Comdata Common Stock or the holders of
Ceridian Common Stock is not obtained at their respective Special Meeting or any
adjournment thereof (unless caused by the action or failure to act of the party
seeking to terminate the Merger Agreement in breach of such party's obligations
thereunder); (iii) by Ceridian or Comdata if any permanent injunction or action
by any governmental entity of competent jurisdiction preventing the consummation
of the Merger has become final and non-appealable; (iv) by Ceridian or Comdata
if there has been a breach of any representation or warranty of the other party
which would have a material adverse affect on that other party or if there has
been a breach in any material respect of any obligation, agreement or covenant
to be performed and complied with by that other party under the Merger Agreement
which breach is not curable, or if curable, is not cured within 30 days after
written notice of such breach is given to that other party by the party not in
breach; (v) by Ceridian if the Board of Directors of Comdata (x) withdraws or
amends or modifies in a manner adverse to Ceridian its recommendation for
approval in respect of the Merger after Comdata has received, or there has been
publicly announced or otherwise made to the Comdata stockholders, a bona fide
offer or proposal with respect to an Acquisition Transaction, (y) makes any
recommendation with respect to an Acquisition Transaction (including making no
recommendation or stating an inability to make a recommendation) other than a
recommendation to reject such Acquisition Transaction, or (z) takes any action
with respect to an Acquisition Transaction that would be prohibited by the "no
solicitation" provisions of the Merger Agreement; (vi) by Comdata in connection
with seeking a transaction that is more favorable to the Comdata stockholders
than is the Merger if such termination is necessary to allow Comdata to enter
into an Acquisition Transaction that its Board of Directors determines in good
faith by a majority vote, after consultation with its financial advisors and
based upon the written opinion of outside counsel to Comdata, is more favorable
than the Merger to the Comdata stockholders (subject to prior payment of the
termination fee as described below); (vii) by Ceridian if third parties shall
have acquired beneficial ownership of more than 15% of the outstanding voting
equity of Comdata (either on a primary or fully
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diluted basis) or if any stockholder already owning in excess of 15% shall have
increased its beneficial ownership by more than an additional 1%; and (viii) by
Ceridian if it has undergone an "Ownership Change" (within the meaning of
Section 382(g) of the Code) prior to the effective time of the Merger or if
consummation of the Merger would cause such an Ownership Change.
In the event the Merger Agreement is terminated pursuant to any of the
foregoing provisions, the Merger will be deemed abandoned and such termination
will be without liability of any party thereto except for liability for breach
of the Merger Agreement and except as set forth below in the following
paragraph. In the event of such a termination, the provisions of the Merger
Agreement regarding confidentiality and fees and expenses shall survive.
If the Merger Agreement is terminated (x) by Ceridian by reason of the
circumstances described in clause (v) above, or by Comdata under the
circumstances described in clause (vi) above, (y) by either Ceridian or Comdata
under the circumstances described in clause (ii) above, including the failure to
obtain the approval of either the holders of Comdata Common Stock or the holders
of Ceridian Common Stock, or by Ceridian under the circumstances described in
clause (vii) above, and within one year of a termination described in this
clause (y), Comdata (or any of its subsidiaries) directly or indirectly enters
into a definitive agreement for, or shall have consummated, an Acquisition
Transaction or (z) by Ceridian as the result of a breach in any material respect
of any of the covenants or agreements set forth in the Merger Agreement on the
part of Comdata, which breach is not curable or, if curable, is not cured within
30 days after written notice is given by Ceridian, then, in any of such cases,
Comdata shall pay to Ceridian, concurrently with or prior to (or, in certain
cases, within two business days following) such termination, a termination fee
of $25,000,000, plus an amount (not to exceed $2,500,000) equal to Ceridian's
actual out-of-pocket expenses directly attributable to the Merger and related
transactions. If the Merger Agreement is terminated by Ceridian under the
circumstances described in clause (viii) above, then Ceridian is required to
reimburse Comdata, within five business days after such termination, an amount
(not to exceed $2,500,000) equal to Comdata's actual out-of-pocket expenses
directly attributable to the negotiation and execution of the Merger Agreement.
LIMITATION ON NEGOTIATIONS
The Merger Agreement provides that Comdata (including its subsidiaries) will
not, and will cause its officers, directors, employees, agents and affiliates
not to, directly or indirectly, solicit, initiate, facilitate or encourage
(including by way of furnishing or disclosing non-public information) any
inquiries or the making of any proposal with respect to any Acquisition
Transaction or negotiate, explore or otherwise engage in discussions with any
person (other than Ceridian) with respect to any Acquisition Transaction or
enter into any agreement, arrangement or understanding with respect to any such
Acquisition Transaction or which would require it to abandon, terminate or fail
to consummate the Merger. Notwithstanding the foregoing, in response to an
unsolicited written proposal from a third party, Comdata may furnish information
to and engage in discussions with such third party, but in each case only if the
Board of Directors of Comdata determines in good faith by a majority vote, after
consultation with its financial advisors and based upon the written opinion of
outside counsel to Comdata, that failing to take such action would result in a
breach of the fiduciary duties of the Board of Directors. The Merger Agreement
also requires Comdata to immediately notify Ceridian in writing if a proposal,
offer, inquiry or contact is made concerning any such Acquisition Transaction
and to provide Ceridian with information concerning such proposal, offer,
inquiry or contact, including the party making the proposal, offer, inquiry or
contact and the terms thereof.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various customary representations and
warranties of Ceridian and Comdata made to each other relating to, among other
things: (i) each of Ceridian's, Sub's and Comdata's organization and similar
corporate matters and the organization and similar corporate matters regarding
subsidiaries of Comdata; (ii) each of Ceridian's, Sub's and Comdata's capital
structure; (iii) authorization, execution, delivery, performance and
enforceability of the Merger Agreement and related matters; (iv) conflicts under
certificates of incorporation or bylaws, required consents or approvals and
violations of any instruments or law; (v) documents filed with the Commission
and the accuracy of the information
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contained therein; (vi) absence of certain specified material changes, material
litigation, material undisclosed liabilities or material defaults; (vii) certain
tax and employee benefit matters; (viii) in the case of Comdata, title to
properties and certain intellectual property matters; (ix) compliance with
applicable law including environmental law; (x) the accuracy of information
supplied by each of Ceridian and Comdata in connection with the preparation of
the Registration Statement and this Joint Proxy Statement/Prospectus; (xi) the
receipt of fairness opinions from their respective financial advisors; and (xii)
the approval of the Merger Agreement and the Original Voting Agreement by
Comdata's Board of Directors and the inapplicability of the provisions of
Section 203 of the DGCL (concerning business combinations with interested
stockholders) to the transactions contemplated thereby.
CONDUCT OF COMDATA BUSINESS PENDING THE MERGER
The Merger Agreement provides that from the date thereof to the effective
time of the Merger, except as otherwise permitted by the Merger Agreement or
agreed to in writing by Ceridian: (i) Comdata will conduct its business (and
that of its subsidiaries) in the ordinary and usual course consistent with past
practice, and will use its reasonable efforts to preserve intact the present
business organization, will keep available the services of its present officers
and key employees, and will preserve the goodwill of those having business
relationships with it; and (ii) Comdata will not: amend its charter, Bylaws or
other organizational documents; split, combine or reclassify any shares of its
outstanding capital stock; declare, set aside or pay any dividend or other
distribution payable in cash, stock or property; directly or indirectly redeem
or otherwise acquire any shares of its capital stock or shares of the capital
stock of any of its subsidiaries; authorize for issuance, issue or sell or agree
to issue or sell any shares of, or rights to acquire or convertible into any
shares of, its capital stock (except the issuance of shares upon the exercise of
outstanding options); merge or consolidate with another entity; acquire or
purchase an equity interest in or a substantial portion of the assets of another
organization or enter into any material contract, except in the ordinary and
usual course of business consistent with past practice; sell or dispose of any
of its assets outside the ordinary and usual course of business and consistent
with past practice; incur, assume or prepay any material indebtedness other than
in the ordinary course of business and consistent with past practice; assume,
guarantee or otherwise become liable or responsible for the obligations of any
other persons other than a subsidiary or customers of the funds transfer
business, in each case in the ordinary course of business and consistent with
past practice; make any loans, advances or capital contributions to or
investments in any other person other than a subsidiary; authorize any capital
expenditures in excess of the amounts currently budgeted; permit any insurance
policy naming Comdata or its subsidiaries to be cancelled or terminated other
than in the ordinary course of business; adopt, enter into, terminate or amend
any benefit plan or other arrangement for the current or future benefit or
welfare of any director, officer or current or former employee of Comdata;
increase in any manner the compensation or fringe benefits of, or pay any bonus
to, any director, officer or employee, except for normal increases in salary
compensation in the ordinary course of business and consistent with past
practice; take any action to fund or in any way secure, or to accelerate or
otherwise remove restrictions with respect to, the payment of compensation or
benefits under any employee plan, agreement, contract, arrangement or other
benefit plan; take any action with respect to, or make any material change in,
its accounting or tax policies or procedures, except as required by law or to
comply with generally accepted accounting principles; knowingly take or allow to
be taken any action which would jeopardize the treatment of Ceridian's
acquisition of Comdata as a pooling-of-interests for accounting purposes;
knowingly take any action which would jeopardize qualification of the Merger as
a reorganization within the meaning of Section 368(a) of the Code; or enter into
any contract, agreement, commitment or arrangement with respect to any of the
foregoing.
CONDUCT OF CERIDIAN BUSINESS PENDING THE MERGER
The Merger Agreement provides that from the date thereof to the effective
time of the Merger, except as otherwise permitted by the Merger Agreement or
agreed to in writing by Comdata: (i) Ceridian will conduct its business (and
that of its subsidiaries) in the ordinary and usual course consistent with past
practice, and will use its reasonable efforts to preserve intact the present
business organization, keep available the services of its present officers and
key employees, and preserve the goodwill of those having business relationships
with it; and (ii) Ceridian will not: amend the Ceridian Certificate of
Incorporation
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(other than to increase the number of authorized shares of Ceridian Common
Stock) or Bylaws; split, combine or reclassify any shares of its outstanding
capital stock; declare, set aside or pay any dividend or other distribution
payable in cash, stock or property (other than regular dividends on the Ceridian
5 1/2% Preferred Stock); authorize for issuance, issue or sell any shares of, or
rights to acquire or convert into any shares of, its capital stock (except for
the issuance of shares of Ceridian Common Stock upon the exercise of stock
options or other rights to purchase shares of Ceridian capital stock outstanding
on the date of the Merger Agreement or upon the conversion of Ceridian 5 1/2%
Preferred Stock, the issuance of rights to purchase Ceridian capital stock
pursuant to existing employee benefit plans or arrangements in a manner
consistent with past practice, the issuance of 5 1/2% Convertible Subordinated
Debentures due 2008 of Ceridian in exchange for Ceridian 5 1/2% Preferred Stock
(or the underlying Depositary Shares) and the issuance of shares of Ceridian
Common Stock and of options to acquire shares of Ceridian Common Stock in
connection with the acquisition by Ceridian of Resumix Inc.); take any action
with respect to, or make any material change in, its accounting or tax policies
or procedures, except as required by law or to comply with generally accepting
accounting principles; knowingly take any action which would jeopardize the
treatment of Ceridian's acquisition of Comdata as a pooling-of-interests for
accounting purposes; or knowingly take any action which would jeopardize
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
TENDER OFFER FOR COMDATA DEBT
Under the Merger Agreement, Ceridian may request Network to commence, prior
to the effective time of the Merger, an offer to purchase (the "Debt Tender
Offer") at least a majority in principal amount of Network's outstanding 12.5%
Senior Notes due 1999 and 13.25% Senior Subordinated Debentures due 2002
(collectively, the "Network Indebtedness"), and request Network to solicit
consents to amend certain covenants contained in the Indentures governing the
Network Indebtedness, with any such Debt Tender Offer being conditional upon the
consummation of the Merger, and Comdata has agreed (i) that if Ceridian
determines to commence the Debt Tender Offer, Comdata will reasonably cooperate,
and cause Network to cooperate, with Ceridian in connection with making the Debt
Tender Offer (including in connection with any solicitation of consents), and in
connection with Ceridian's obtaining financing therefor and for other
refinancing of other outstanding debt of Comdata or its subsidiaries (together
with the Network Indebtedness, the "Comdata Debt"), (ii) that if Ceridian so
requests, Comdata will commence and make the Debt Tender Offer (and the
solicitation of consents) itself, upon terms and conditions as advised by
Ceridian, and (iii) that Comdata will use, and cause Network to use, its
reasonable best efforts to prevent the occurrence, as a result of the Merger and
other transactions contemplated by the Merger Agreement or otherwise, of any
event which constitutes a default (or an event which with notice or passage or
lapse of time or both would become a default) under any of the Comdata Debt.
Although financing arrangements are not yet finalized, Ceridian has
requested that Network commence the Debt Tender Offer (and related solicitation
of consents) with respect to all outstanding Network Indebtedness prior to the
effective time of the Merger. See "Management's Discussion and Analysis of Pro
Forma Financial Condition and Results of Operations--Liquidity and Capital
Resources." There can be no assurance as to whether or not such Debt Tender
Offer (and related solicitation of consents) will be consummated or, if it is,
as to the terms thereof.
AGREEMENT TO VOTE BY CERTAIN COMDATA STOCKHOLDERS
In connection with the execution of the Merger Agreement, Ceridian and Sub
entered into the Original Voting Agreement with Charterhouse and various limited
partnerships affiliated with WCAS, pertaining to the voting of their shares of
Comdata Preferred Stock at the Comdata Special Meeting. At the time the Original
Voting Agreement was entered into, WCAS (through four affiliated limited
partnerships) held a majority of Comdata's outstanding Series B Preferred Stock
and Charterhouse held a majority of Comdata's outstanding Series C Preferred
Stock. These holdings gave each of WCAS and Charterhouse the unilateral power to
block approval of the Merger Agreement because Comdata's Certificate of
Incorporation required the approval of the Merger Agreement by separate class
votes of each series of Comdata Preferred Stock, as well as by a joint vote of
the Comdata Common Stock and the Comdata Preferred Stock (with the preferred
voting on the basis of its common stock conversion equivalent) (the "Multi-Class
Vote"). The Original
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Voting Agreement committed each of WCAS and Charterhouse to vote its Comdata
Preferred Stock (but not any other holdings) in favor of the Merger Agreement in
each of the separate class votes of the Comdata Preferred Stock and, subject to
a "fiduciary out" standard described below, in the Multi-Class Vote as well.
The Preferred Stock Conversion on October 25, 1995, by forcing the
conversion of all outstanding shares of Comdata Preferred Stock into Comdata
Common Stock, effectively mooted the veto concerns underlying the Original
Voting Agreement. To avoid confusion in the marketplace regarding their
positions with respect to the Merger, since the Original Voting Agreement had
been publicly disclosed, the limited partnerships affiliated with WCAS agreed to
supplement the Original Voting Agreement to explicitly specify its applicability
to the Conversion Shares. Charterhouse declined to execute a supplement, and
Ceridian did not press the matter (although neither Ceridian nor Comdata has any
reason to believe that Charterhouse has changed its support of the Merger).
Pursuant to the Voting Agreement (as supplemented), each WCAS-affiliated
stockholder party to the Voting Agreement has agreed to vote its Conversion
Shares (representing in the aggregate approximately 24.5% of the outstanding
shares of Comdata Common Stock) (i) in favor of approval and adoption of the
Merger Agreement, the Merger and the other transactions contemplated thereby,
and (ii) against any proposals or agreements providing for any recapitalization,
merger, consolidation, sale of assets, reorganization, liquidation or business
combination involving Comdata or any of its subsidiaries (other than the Merger)
or any other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of Comdata under
the Merger Agreement or which would result in the conditions to Comdata's
obligations under the Merger Agreement not being fulfilled. No WCAS-affiliated
stockholder party to the Voting Agreement is obligated to vote its Conversion
Shares in accordance with the terms of the Voting Agreement if, prior to such
vote, the designee of such stockholder on the Comdata Board of Directors
withdraws, amends or modifies, in the exercise of his fiduciary duty as a
director, his recommendation for approval of the Merger Agreement and the
Merger. The Voting Agreement does not cover shares of Comdata Common Stock owned
by any such WCAS-affiliated stockholder other than the Conversion Shares. The
Voting Agreement remains in effect until the earlier of (i) the effective time
of the Merger, and (ii) the termination of the Merger Agreement. The parties to
the Voting Agreement have agreed that, in the event of a breach of the Voting
Agreement, the nonbreaching party, in addition to any other remedy at law or
equity, would be entitled to specific performance.
EXPENSES
The Merger Agreement provides that all costs and expenses incurred in
connection with such agreement and the transactions contemplated thereby shall
be paid by the party incurring such costs and expenses, except for the filing
fee in connection with filings under the HSR Act, expenses incurred in
connection with printing the Registration Statement and this Joint Proxy
Statement/Prospectus, and the filing fees with the Commission with respect to
the Registration Statement and this Joint Proxy Statement/Prospectus, which will
be shared equally by Comdata and Ceridian, and except for the instances
described under "--Termination; Termination Fee."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
The following description of the interests of certain members of management
of Comdata in the Merger may mean that such persons have personal interests in
the Merger which may not be identical to the interests of other Comdata
stockholders.
CHANGE IN CONTROL/SEVERANCE AGREEMENTS. In November 1994, Comdata entered
into change in control/ severance agreements with each of George McTavish, its
Chairman and Chief Executive Officer, Dennis Hanson, its Chief Financial
Officer, and Edward Barbieri, its President and Chief Operating Officer. The
agreements provide for certain benefit payments if the executive is employed as
of the date of a change in control (the Merger would be a change in control for
purposes of such agreements) and such executive's employment is terminated
within the 18-month period beginning on the date of the change in control other
than (i) by reason of the executive's death, disability or retirement, (ii) by
Comdata for cause, or (iii) by the executive without good reason. For purposes
of these agreements, the executive would have "good reason" for termination if
(a) he is assigned duties inconsistent with his position, duties,
responsibilities and status
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with Comdata immediately prior to the change in control, there is a change in
his titles or offices in effect immediately prior to the change in control or he
is removed from or not reelected to any of such positions, (b) there is a
reduction in his base salary, (c) he is relocated, (d) there is a breach of the
agreement by Comdata, (e) there is a failure by Comdata to have any successor
(including Ceridian) assume Comdata's obligations under such agreement, or (f)
in the event of certain terminations effected without proper process. These
severance agreements remain in effect until the shortest of (x) three years, (y)
termination of employment by Comdata based on death, disability, retirement or
cause, or by the executive other than for "good reason" as described above, and
(z) 18 months after a change in control if the executive has not terminated his
own employment for good reason.
In the event of a qualifying termination of employment, the agreements
provide for the following benefits: (i) within five days after the termination,
a lump sum cash payment equal to two and one-half times (in the case of Messrs.
Barbieri and Hanson) or three times (in the case of Mr. McTavish) the sum of (a)
the average of the aggregate annual salary paid to such executive by Comdata
during the three calendar years preceding the change in control, plus (b) the
highest bonus paid to the executive by Comdata during any one of those years;
(ii) at Comdata's expense, two years' continuation of life, health and
disability insurance equivalent to that provided immediately before termination
of employment; and (iii) the full and immediate vesting of all outstanding
options and shares of restricted stock awarded pursuant to the Comdata Stock
Option Plan and, to the extent permitted by law, exercisability of options for
one year from termination.
In addition, if the benefits to which the executive is entitled pursuant to
the change in control/severance agreement or otherwise give rise to the 20%
excise tax applicable to excess parachute payments pursuant to Section 280G of
the Code, Comdata must pay to the executive an amount sufficient to put the
executive in the same after-tax position that such executive would have been in
had such executive not been required to pay the excise tax. Comdata is also
required to pay all legal fees and expenses the executive incurs as a result of
Comdata's contesting the validity, enforceability or interpretation of or
determinations under such agreements. Comdata believes that, in the event of a
qualifying termination of employment, the 20% excise tax would apply in the case
of any of Messrs. McTavish, Hanson or Barbieri. If any payment under the change
in control/severance agreements were to constitute an excess parachute payment
pursuant to Section 280G, such payment would not be deductible by Comdata for
federal income tax purposes.
In addition, Messrs. Barbieri, Hanson and Peter D. Voysey, Comdata's Vice
President, General Counsel and Secretary, each have severance agreements
providing that if their employment is terminated for any reason not associated
with a change in control, they will receive 18 months severance based upon their
salary at the time of any such action.
INDEMNIFICATION AND INSURANCE. The Merger Agreement provides that all
rights to indemnification, advancement of litigation expenses and limitation of
personal liability existing in favor of the directors and officers of Comdata
and its subsidiaries under the provisions existing on the date of the Merger
Agreement in Comdata's Certificate of Incorporation or Bylaws will survive the
effective time of the Merger with respect to any matter existing or occurring at
or prior to such effective time (including the Merger). Ceridian and the
surviving corporation in the Merger will assume all obligations of Comdata in
respect thereof as to any claim or claims asserted prior to or within a six-year
period immediately after the effective time of the Merger.
The Merger Agreement also requires Comdata to maintain in effect, for three
years after the effective time of the Merger, directors' and officers' liability
insurance with respect to claims arising from facts or events which occurred
before the effective time of the Merger in at least the same amounts, and
containing coverage, terms and conditions no less advantageous to the former
directors and officers of Comdata, as the insurance currently provided by
Comdata, subject to maximum annual premiums not in excess of 150% of current
annual premiums.
INTERESTS IN COMDATA STOCK AND OPTIONS. As of the Comdata Record Date,
executive officers and directors of Comdata beneficially owned in the aggregate
approximately 54.5% of the Comdata Options and 0.58% of the Comdata Common Stock
outstanding on such date (excluding from these calculations the beneficial
ownership by any WCAS investment partnership, Charterhouse or Prudential Venture
Partners II, L.P.).
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CERIDIAN BOARD OF DIRECTOR POSITIONS. The Merger Agreement obligated
Ceridian, after the effective time of the Merger, to take necessary action to
enable two persons designated by Comdata, who could not be members of Comdata's
management and who were acceptable to Ceridian, to be appointed to Ceridian's
Board of Directors. Comdata has elected not to name two designees. Ceridian and
Comdata expect, however, that during 1996, the Nominating and Board Governance
Committee of Ceridian's Board of Directors will discuss with Bruce K. Anderson,
a director of Comdata and a general partner of WCAS, whether it would be
mutually desirable for Mr. Anderson to join Ceridian's Board of Directors.
EFFECT ON COMDATA EMPLOYEE BENEFIT PLANS AND STOCK OPTION PLAN
BENEFIT PLANS GENERALLY. The Merger Agreement provides that for at least
one year after the effective time of the Merger, Ceridian will either continue
in force the current employee benefit plans of Comdata, or make available to
employees of Comdata reasonably comparable benefits, considered in the
aggregate, under employee benefit plans of Ceridian (or one of its
subsidiaries). Subject to the foregoing, Ceridian will have the right, one year
after the effective time of the Merger, to continue, amend or terminate any such
plans.
STOCK OPTIONS. At the effective time of the Merger, each Comdata Option
outstanding immediately prior to the effective time of the Merger will be
assumed by Ceridian and converted automatically into an option to purchase
shares of Ceridian Common Stock. The number of shares of Ceridian Common Stock
to be subject to each new option will equal the product of the Exchange Ratio
and the number of shares of Comdata Common Stock remaining subject to the
original Comdata Option (immediately before the effective time of the Merger),
rounded down to the nearest whole share. The exercise price per share of
Ceridian Common Stock under the new option will equal the exercise price per
share of Comdata Common Stock under the original Comdata Option, divided by the
Exchange Ratio, rounded down to the nearest whole cent. The vesting, duration
and terms of the new option otherwise will be the same as the original Comdata
Option. Ceridian will file with the Commission a registration statement on Form
S-8 to register all shares of Ceridian Common Stock issuable pursuant to such
new options after the effective time of the Merger, and will use all reasonable
efforts to have the registration statement become effective as promptly as
practicable after the effective time of the Merger.
As of October 27, 1995, directors and executive officers of Comdata held in
the aggregate 1,063,504 Comdata Options, representing approximately 2.88% of the
total number of shares of Comdata Common Stock outstanding on such date
(including as outstanding for purposes of the calculation, those options held by
directors and executive officers).
NO DISSENTERS' RIGHTS OF CERIDIAN OR COMDATA STOCKHOLDERS
Under the DGCL, (i) holders of Ceridian Common Stock will not have any
dissenters' rights of appraisal as a result of the matters to be voted upon at
the Ceridian Special Meeting, and (ii) holders of Comdata Common Stock will not
have any dissenters' rights of appraisal as a result of the matters to be voted
upon at the Comdata Special Meeting.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a summary description of the material federal income tax
consequences of the Merger to holders of Comdata Common Stock. This summary is
not intended to be a complete description of the federal income tax consequences
of the Merger. The following discussion does not cover all aspects of federal
income taxation that may be relevant to a Comdata stockholder in light of such
stockholder's particular individual circumstances or to certain Comdata
stockholders subject to special treatment under the federal income tax laws (for
example, insurance companies, dealers in securities, financial institutions,
tax-exempt investors, foreign corporations and individuals who are not citizens
or residents of the United States and stockholders who acquired shares pursuant
to the exercise of an employee stock option or otherwise as compensation) and
does not discuss any aspects of state, local or foreign taxation. This
discussion is based upon laws, regulations, rulings and decisions now in effect
and upon proposed regulations, all of which are subject to change (possibly with
retroactive effect) by legislation, administrative action or judicial decision.
No ruling has been or will be requested from the Internal Revenue Service (the
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"Service") on any tax matters relating to the tax consequences of the Merger.
EACH COMDATA STOCKHOLDER IS ADVISED TO CONSULT WITH SUCH STOCKHOLDER'S OWN TAX
ADVISOR REGARDING THE SPECIFIC FEDERAL, STATE, LOCAL AND FOREIGN TAX
CONSEQUENCES OF THE MERGER TO SUCH STOCKHOLDER.
The obligations of both Comdata and Ceridian to consummate the Merger are
conditioned on, among other things, the receipt of opinions of Reboul MacMurray,
counsel to Comdata, and Hogan & Hartson, special tax counsel to Ceridian. It is
a condition to the obligation of Comdata to consummate the Merger that Comdata
receive the opinion of Reboul MacMurray, which will be based upon certain
certificates, representations and assumptions, to the effect that for federal
income tax purposes (i) the Merger will qualify as a "reorganization" under
Section 368(a) of the Code, (ii) no gain or loss will be recognized by any
Comdata stockholder upon the exchange of Comdata Common Stock for Ceridian
Common Stock in the Merger (except in connection with the receipt of cash in
lieu of a fractional share interest), (iii) the basis of the Ceridian Common
Stock received by a Comdata stockholder in the Merger (including any fractional
share interest to which the holder would otherwise have been entitled) will be
the same as the basis of the Comdata Common Stock surrendered in exchange
therefor, (iv) the holding period of the Ceridian Common Stock received by a
Comdata stockholder in the Merger (including any fractional share interest to
which the holder would otherwise have been entitled) will include the period
during which the Comdata Common Stock surrendered in exchange therefor was held
by the Comdata stockholder (provided that such Comdata Common Stock was held as
a capital asset as of the effective time of the Merger), and (v) no gain or loss
will be recognized by Ceridian, Comdata or Sub as a result of the Merger. It is
a condition to the obligation of Ceridian to consummate the Merger that Ceridian
receive (a) the opinion of Hogan & Hartson, which will be based upon certain
certificates, representations and assumptions, to the effect that no gain or
loss will be recognized by Ceridian, Comdata or Sub as a result of the Merger
and (b) the opinion of Reboul MacMurray described in the second sentence of this
paragraph, addressed to Ceridian. Hogan & Hartson (as special tax counsel to
Ceridian) was not retained to provide any opinion to Comdata or the Comdata
stockholders. The opinions of Reboul MacMurray and Hogan & Hartson will be based
on the Code, the U.S. Treasury regulations promulgated thereunder, the
administrative interpretations thereof and the judicial decisions with respect
thereto, all as in effect as of the effective time of the Merger, on the
assumption that the Merger takes place as described in the Merger Agreement, and
on certain certificates and representations to be provided by Ceridian, Sub,
Comdata and certain stockholders of Comdata. Unlike a ruling from the Service,
an opinion of counsel is not binding on the Service and there can be no
assurance that the Service will not take a position contrary to one or more of
the positions reflected in such opinions or that such positions will be upheld
by the courts if challenged by the Service.
Based on certain assumptions, including the accuracy of certain certificates
and representations to be provided by Ceridian, Sub, Comdata and certain
stockholders of Comdata regarding the satisfaction of certain requirements to a
reorganization within the meaning of Section 368(a) of the Code (including the
absence of any plan or intention by certain holders of Comdata Common Stock to
sell, exchange or otherwise dispose of shares of Ceridian Common Stock to be
received by them in the Merger), Reboul MacMurray is of the opinion that the
Merger will qualify as a reorganization and that the principal federal income
tax consequences of the Merger to holders of Comdata Common Stock will be as
described below.
RECEIPT OF ONLY CERIDIAN COMMON STOCK. A holder of Comdata Common Stock who
receives only Ceridian Common Stock in the Merger (except for cash in lieu of
fractional shares as described below) in exchange for all shares of Comdata
Common Stock owned by such holder will not recognize gain or loss upon such
exchange for federal income tax purposes. The tax basis of the Ceridian Common
Stock actually received in such an exchange will be equal to the basis of the
Comdata Common Stock exchanged therefor (except for the basis attributable to
any fractional shares of Ceridian Common Stock to which the holder would
otherwise have been entitled, as discussed below). The holding period of the
Ceridian Common Stock received by a Comdata stockholder in the Merger (including
any fractional share interest to which the holder would otherwise have been
entitled) will include the holding period of the Comdata Common Stock exchanged
therefor (provided that such Comdata Common Stock was held as a capital asset as
of the effective time of the Merger).
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CASH RECEIVED IN LIEU OF FRACTIONAL SHARES. A holder of Comdata Common
Stock who receives cash in the Merger in lieu of a fractional share interest in
Ceridian Common Stock will be treated for federal income tax purposes as having
received such fractional share interest and having sold it for the cash
received. Such stockholder will recognize gain or loss as of the effective time
of the Merger equal to the difference between the amount of cash received and
the portion of the stockholder's adjusted tax basis in the shares of Comdata
Common Stock properly allocable to such fractional share interest. Such gain or
loss will be long-term capital gain or loss if such Comdata Common Stock is
considered to have been held for more than one year as of the effective time of
the Merger.
BACKUP WITHHOLDING AND INFORMATION REPORTING. Under the federal income tax
law concerning "backup withholding," Ceridian may be required to withhold, and
may withhold, 31% of any cash payments to which a stockholder may be entitled
pursuant to the Merger unless the holder provides its taxpayer identification
number and certifies that such number is correct or otherwise establishes that
the holder is an exempt holder (such as a corporation or certain foreign
individuals, partnerships or trusts). Each holder should sign the Substitute
Form W-9 included as part of the transmittal letter to be sent by the Transfer
Agent (or in the case of a nonresident alien or foreign entity, a Form W-8) to
prevent backup withholding. Holders who receive Ceridian Common Stock must also
comply with the information reporting requirements of the Treasury regulations
under Section 368 of the Code.
In the event that, notwithstanding the foregoing, the Merger does not
qualify as a reorganization under Section 368(a) of the Code (whether due to the
inaccuracy of certain assumptions or representations regarding the continuing
ownership interest on the part of former Comdata stockholders in Ceridian Common
Stock or otherwise), the Merger would be a taxable transaction, and (i) each
Comdata stockholder would recognize gain or loss as a result of the Merger in an
amount equal to the difference, if any, between the fair market value of
Ceridian Common Stock (plus any cash in lieu of fractional shares) received in
the Merger minus such stockholder's basis in the Comdata Common Stock exchanged
therefor, (ii) the basis of the Ceridian Common Stock received would equal the
fair market value of such shares as of the effective time of the Merger, and
(iii) the holding period of the Ceridian Common Stock received would begin on
the effective time of the Merger. Any gain or loss recognized by a Comdata
stockholder in the event that the Merger failed to qualify as a tax-free
reorganization generally would be capital gain or loss, and would be long-term
capital gain or loss, if the shares of Comdata Common Stock were held by such
stockholder for more than one year as of the effective time of the Merger.
Further, if the Merger does not qualify as a reorganization under Section 368(a)
of the Code, no gain or loss should be recognized by Ceridian, Comdata or Sub as
a result of the Merger.
STOCK EXCHANGE LISTING OF CERIDIAN COMMON STOCK
It is a condition to the obligations of Comdata and Ceridian to consummate
the Merger that the shares of Ceridian Common Stock that are issuable upon
consummation of the Merger are approved for listing on the NYSE, upon official
notice of issuance. Ceridian will file a listing application with the NYSE
covering such shares, and it is anticipated that such application will be
approved, subject to notice of issuance, at or before the effective time of the
Merger.
RESALE OF CERIDIAN COMMON STOCK
The shares of Ceridian Common Stock issuable to stockholders of Comdata upon
consummation of the Merger have been registered under the Securities Act. Such
shares may be traded freely without restriction by those stockholders who are
not deemed to be "affiliates" of Comdata or Ceridian, as that term is defined in
the rules under the Securities Act.
Shares of Ceridian Common Stock received by those stockholders of Comdata
who are deemed to be "affiliates" of Comdata may be resold without registration
under the Securities Act only as permitted by Rule 145 under the Securities Act
or as otherwise permitted under the Securities Act. Comdata has agreed in the
Merger Agreement to use its reasonable best efforts to obtain and deliver to
Ceridian at least 30 days prior to the effective time of the Merger signed
representations by each stockholder of Comdata who may reasonably be deemed to
be an "affiliate" of Comdata to the effect that such persons will not offer to
sell, transfer or otherwise dispose of, or in any way reduce such person's risk
of investment or ownership in,
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(i) any of the shares of Ceridian Common Stock distributed to them pursuant to
the Merger except in compliance with Rule 145, or in a transaction that is
otherwise exempt from the registration requirements of the Securities Act, or in
an offering which is registered under the Securities Act; and (ii) any shares of
Comdata capital stock held by them in the 30-day period immediately preceding
the effective time of the Merger and, until Ceridian has publicly released
combined financial results of Ceridian and Comdata for a period of at least 30
days of combined operations, any shares of Ceridian Common Stock distributed to
them pursuant to the Merger. Ceridian has also agreed to use its reasonable best
efforts to obtain and deliver to Comdata at least 30 days prior to the effective
time of the Merger signed representations by each stockholder of Ceridian who
may reasonably be deemed to be an "affiliate" of Ceridian to the effect that
such persons will not offer to sell, transfer or otherwise dispose of, or in any
way reduce such person's risk of investment or ownership in, any shares of
Ceridian capital stock held by them during the period commencing 30 days
immediately preceding the effective time of the Merger and continuing until
Ceridian has publicly released combined financial results of Ceridian and
Comdata for a period of at least 30 days of combined operations. The form of the
agreements of the affiliates of Ceridian and Comdata are set forth respectively
as Exhibits B-1 and B-2 to the Merger Agreement. This Joint Proxy
Statement/Prospectus does not cover any resales of Ceridian Common Stock
received by persons who are deemed to be "affiliates" of Comdata.
ACCOUNTING TREATMENT
The obligations of Ceridian and Comdata to consummate the Merger are
conditioned on, among other things, the receipt by Ceridian and Comdata from
KPMG Peat Marwick LLP and Arthur Andersen LLP, respectively, of letters, dated
not more than five days prior to the date on which the effective time of the
Merger occurs, to the effect that, subject to customary qualifications, the
Merger will qualify for pooling-of-interests treatment for financial reporting
purposes and that such treatment is in accordance with generally accepted
accounting principles. See "--Conditions to Consummation of the Merger." In
order for the Merger to qualify for pooling-of-interests accounting treatment,
numerous conditions must be satisfied, including that Ceridian Common Stock must
be issued in exchange for at least 90% of the outstanding Comdata Common Stock.
Comdata Common Stock as to which cash is paid in lieu of the issuance of
fractional shares of Ceridian Common Stock and Comdata Common Stock owned by
Ceridian (if any) do not count toward this 90%. See "--Terms of the Merger;
Consideration to be Received by Comdata Stockholders" and "Information
Concerning the Comdata Special Meeting--Solicitation, Quorum, Voting and
Revocability of Proxies." Ceridian and Comdata have agreed in the Merger
Agreement not to knowingly take or allow any action which would jeopardize
treatment of the Merger as a pooling-of-interests for accounting purposes.
Under the pooling-of-interests method of accounting, the historical basis of
the assets and liabilities of Ceridian and Comdata will be combined when the
Merger becomes effective and carried forward at their previously recorded
amounts, the stockholders' equity accounts of Ceridian and Comdata will be
combined on Ceridian's consolidated balance sheet, and no goodwill or other
intangible assets will be created. Financial statements of Ceridian issued after
consummation of the Merger will be restated retroactively to reflect the
consolidated operations of Ceridian and Comdata as if the Merger had been in
effect for the periods presented therein.
The pro forma financial information presented in this Joint Proxy
Statement/Prospectus has been prepared using the pooling-of-interests accounting
method to account for the Merger. See "Selected Historical and Unaudited Pro
Forma Financial Data" and "Unaudited Pro Forma Condensed Combined Financial
Statements."
CERTAIN DIFFERENCES IN RIGHTS OF STOCKHOLDERS
The rights of holders of Comdata Common Stock are governed by the Comdata
Certificate of Incorporation, the Comdata Bylaws and the laws of the State of
Delaware. The rights of Ceridian stockholders are governed by the Ceridian
Certificate of Incorporation, the Ceridian Bylaws and the laws of the State of
Delaware. After the Merger becomes effective, the rights of holders of Comdata
Common Stock who become holders of Ceridian Common Stock will be governed by the
Ceridian Certificate of Incorporation, the Ceridian Bylaws and the laws of the
State of Delaware. In many respects, the rights of holders of Comdata Common
Stock and Ceridian Common Stock are similar.
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GENERAL. The following discussion of certain similarities and material
differences between the rights of holders of Comdata Common Stock and the rights
of holders of Ceridian Common Stock under their respective Certificates of
Incorporation and Bylaws is only a summary of certain provisions and does not
purport to be a complete description of such similarities and differences. The
following discussion is qualified in its entirety by reference to the DGCL, the
common law thereunder and the full texts of the respective Certificates of
Incorporation and Bylaws of Comdata and Ceridian. Such Certificates of
Incorporation and Bylaws are incorporated by reference as exhibits to the
Registration Statement of which this Joint Proxy Statement/Prospectus is a part.
SUPERMAJORITY VOTING. The Ceridian Certificate of Incorporation contains a
provision that requires two-thirds of Ceridian's outstanding voting stock to
approve mergers, business combinations and certain other transactions involving
Ceridian as a constituent corporation (as defined therein) for which the DGCL
requires stockholder approval. Another provision requires an affirmative vote of
two-thirds of the outstanding shares of Ceridian Common Stock not beneficially
owned by "controlling persons" (as defined therein) to approve business
combinations and certain other transactions with "controlling persons," with a
minimum price per share payable for shares other than those held by such
"controlling persons" in connection with such a business combination. Because
Ceridian is not a constituent corporation to the Merger, specific approval of
the Merger Agreement by holders of Ceridian Common Stock is not required under
the DGCL or the Ceridian Certificate of Incorporation or Bylaws. The Comdata
Certificate of Incorporation and Bylaws do not impose supermajority voting
requirements for mergers or business combinations.
STOCKHOLDER MEETINGS. The Comdata Bylaws provide that in order for a
stockholder to call a special meeting of stockholders, such stockholder must
hold shares representing not less than 25% of the outstanding shares entitled to
vote at the meeting. Under the Ceridian Bylaws and the Ceridian Certificate of
Incorporation, special meetings of stockholders may only be called by the
Chairman or by the Ceridian Board of Directors.
DIRECTOR NOMINATIONS. The Ceridian Bylaws provide that no nominations for
directors of Ceridian by any person other than the Ceridian Board of Directors
may be presented at any meeting of stockholders unless the person making the
nomination is a record stockholder and has delivered a written notice to the
Secretary of Ceridian no earlier than the close of business 75 days, and no
later than the close of business 50 days, in advance of the stockholder meeting
or the close of business 15 days after the date on which notice of the meeting
is first given to Ceridian stockholders, whichever is later. Comdata's
Certificate of Incorporation and Bylaws do not impose comparable conditions on
the submission of director nominations by stockholders.
STOCKHOLDER PROPOSALS. The Ceridian Bylaws provide that no proposal by any
person other than the Board of Directors may be submitted for the approval of
the Ceridian stockholders at any regular or special meeting of stockholders
unless the person advancing the proposal has delivered a written notice to the
Secretary of Ceridian no earlier than the close of business 75 days, and no
later than the close of business 50 days, in advance of the stockholder meeting
or the close of business 15 days after the date on which notice of the meeting
is first given to Ceridian stockholders, whichever is later. The Comdata
Certificate of Incorporation and Bylaws do not impose comparable conditions on
the submission of stockholder proposals.
BUSINESS OF CERIDIAN
GENERAL
Ceridian is comprised of two business segments, Information Services and
Defense Electronics. The Information Services segment, which consists of the
Human Resources Group and Arbitron, provides technology-based services to
businesses as well as applications software on a repetitive or subscription
basis. The products and services provided by the Information Services businesses
address specified information management needs of other businesses to help them
improve their productivity and competitive position, and are typically provided
through long-term customer relationships that result in a high level of
recurring
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revenue. Information Services reported revenue of $393.7 million for the first
nine months of 1995, and $448.2 million for fiscal 1994, and earnings before
interest and taxes of $55.8 million in the first nine months of 1995 and $57.1
million in fiscal 1994.
The businesses comprising the Human Resources Group, the formation of which
was announced by Ceridian on October 23, 1995, offer a broad range of products
and services designed to help employers more effectively manage their work
forces and information that is integral to human resource processes. The Human
Resources Group reported revenue of $294.4 million for the first nine months of
1995 and $321.5 million for fiscal 1994. The products and services of the Human
Resources Group include payroll processing and payroll tax filing services,
human resources management software and services, and training services provided
through its Employer Services business (which includes Ceridian's Centre-file
and User Technology subsidiaries); payroll processing, benefits administration
and human resources management software provided through Ceridian's Tesseract
subsidiary; skills management software and services provided through Ceridian's
Resumix subsidiary; and employee assistance programs.
The substantial majority of the Human Resources Group's revenue is
attributable to payroll processing and payroll tax filing services provided by
Employer Services. Payroll processing consists primarily of preparing and
furnishing employee payroll checks, direct deposit advices and supporting
journals, summaries and other reports, but does not involve the handling or
transmission of customer payroll funds. Payroll tax filing services consist
primarily of processing federal, state and local withholding taxes on behalf of
employers based on payroll information they provide, and remitting such taxes
along with necessary reports to the appropriate taxing authorities.
Payroll-related services are typically priced on a fee-per-item-processed basis,
and quarterly revenue consequently fluctuates with the volume of items
processed. Employer Services also derives a portion of its payroll tax filing
revenue from investment income it receives on tax filing deposits temporarily
held pending remittance on behalf of customers to taxing authorities. These
funds are held in a tax filing trust established by Ceridian to more clearly
evidence the fiduciary capacity in which such funds are held. The trust invests
primarily in high quality collateralized short-term investments or top tier
commercial paper. The trust also invests in U.S. Treasury and Agency securities,
AAA rated asset-backed securities and corporate securities rated A3/A- or
better. The trust may not use leverage for investment purposes or purchase
highly structured securities of any kind. The duration of investments is
carefully managed to meet the liquidity needs of the trust. Because of the
significance of this investment income, Employer Services' quarterly revenue and
profitability vary as a result of changes in interest rates and in the amount of
tax filing deposits held. Because the volume of payroll taxes processed
increases in the first and fourth quarters of each year in connection with
employers' year-end reporting requirements, and because the amount of tax filing
deposits also tends to be greatest in the first quarter, Employer Services'
revenue and profitability tend to be greater in those quarters.
Ceridian is in the process of upgrading Employer Services' existing payroll
processing software in order to create an enhanced payroll processing system
that is more highly automated, easier and less costly to install and maintain,
and provides greatly increased functionality and flexibility to customers in
terms of product and service features and options. Ceridian anticipates that a
substantial majority of the existing payroll processing customers will elect to
eventually upgrade to this software. To achieve these goals, in 1994 Ceridian
acquired its Tesseract subsidiary, which provides proprietary payroll processing
software to large companies with complex requirements that process their
payrolls internally. The Tesseract software is being adapted to run in Employer
Services' multi-customer data center environment, and Ceridian is capitalizing
the costs, which are incremental to normal operations, of this internal
development effort. As of September 30, 1995, the net amount of these
capitalized costs was $32.8 million, and Ceridian expects that $25 million to
$35 million of additional costs, primarily for internally developed software but
also for hardware in connection with this project, will be capitalized during
the fourth quarter of 1995 and during 1996.
In connection with the decision to upgrade its payroll processing software,
Employer Services also decided to phase out payroll data processing in certain
of its district offices and to consolidate processing utilizing the upgraded
software in centralized facilities operated by Integrated Systems Solutions
Corporation ("ISSC") pursuant to a ten-year technology services agreement that
commenced in January 1995. The time when the consolidation of payroll processing
can begin is principally a function of the timing of
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Ceridian's introduction of its upgraded payroll processing software. Beta
testing of the first version of this software began in July 1995, and Ceridian
expects that these beta test customers will be utilizing this version of the
software exclusively beginning in January 1996. Beta testing of the "production"
version of the software will begin in the fourth quarter of 1995 and be
completed during the first half of 1996. By the second quarter of 1996, Ceridian
expects that existing customers who participated in the beta testing of the
production version will be utilizing this software exclusively, and that
Employer Services will be installing new payroll processing customers on the
enhanced system utilizing the upgraded software. While the transition of
existing customers to the enhanced system is expected to begin in the second
half of 1996, Employer Services will continue, for the forseeable future, to
make payroll processing utilizing its existing software available to customers
who do not wish to upgrade.
The transition of existing payroll customers to centralized processing on
the upgraded software in the ISSC center and the phased reduction of processing
capabilities in the district offices is expected to occur over a 30 to 36 month
period, largely because of the system conversion and customer training efforts
required of Employer Services to assure a satisfactory transition process for
customers electing the software upgrade. Ceridian expects that the transition
process will entail incremental costs that principally reflect the costs of
systems and data conversion, maintaining duplicate processing systems during the
transition period, and providing necessary training. Although a portion of these
incremental costs (relating to the discontinuance of processing and consequent
excess capacity in the district offices) is covered by existing restructure
reserves, the majority of the incremental costs, estimated to be between $50
million and $60 million over about a three year period, will be accounted for
outside of restructuring and will be incurred relatively evenly over the
transition period. The impact of these incremental costs is, however, expected
to be substantially offset over the course of the transition period by upgrade
fees to be paid by customers electing to take advantage of the added features of
the enhanced system and by various efficiencies, such as reduced installation,
operating and maintenance costs, resulting from increasing utilization of the
enhanced system. Because the benefits of these additional fees and efficiencies
should be greater in the latter portion of the transition period when a sizeable
percentage of customers will have completed the transition, the burden of the
incremental costs is expected to be relatively greater early in the transition
period, particularly during 1996.
In addition to providing Ceridian with the payroll processing software that
will be the core of Employer Services' enhanced payroll processing system, the
Tesseract acquisition provided Ceridian with payroll processing and benefits
administration software offerings for large customers with complex information
management needs that prefer to handle such tasks in-house. By being able to
address large companies' payroll processing preferences with both outsourcing
and in-house processing options, Ceridian believes that it will be in a better
position to attract large employers for its payroll processing and related
products and services. Toward that end, Ceridian has entered into a marketing
agreement with ISSC under which ISSC will remarket Employer Services' payroll
and tax filing services and Tesseract software where such services and software
are required as part of a larger information technology outsourcing project.
Ceridian is exploring similar cooperative marketing arrangements with other
software and human resource services providers.
Employer Services' human resources information service provides application
software to customers that enables them to combine their payroll and human
resource information databases and can serve as a "front-end" to Employer
Services' payroll processing system. This enables the customer to create a
single database of employee information for on-line inquiry, updating and
reporting in areas important to human resource administration and management.
Employer Services also provides related human resources information management
consulting services. The Human Resources Group's employee assistance service
provides confidential, around-the-clock assessment and referral services to
customers' employees to help them address legal and financial problems,
substance abuse, childcare, eldercare and other personal problems. It maintains
a network of professional counselors who are available to work with employees to
solve problems and to provide referrals to specialists if such referrals are
warranted by the circumstances.
Arbitron, which reported revenue of $99.3 million for the first nine months
of 1995 and $121.3 million for fiscal 1994, is the leading provider of radio
audience measurement information in terms of revenue and market share, and also
provides electronic media and marketing information to radio and television
broadcasters, cable operators, advertising agencies and advertisers. Arbitron's
proprietary data regarding
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radio audience size and demographics is provided to customers through multi-year
license agreements. Arbitron also provides software applications that give
customers flexible access to Arbitron's databases, and enable them to more
effectively analyze and understand that information. The radio audience
measurement service represented almost 90% of Arbitron's revenue during 1994. In
addition, through acquisitions, joint ventures and the introduction of new
products, Arbitron has obtained access to or developed services that provide
qualitative data regarding product purchasing decisions.
The Defense Electronics segment, consisting of Computing Devices, develops,
manufactures and markets electronic systems, subsystems and components, and
provides systems integration and other services, primarily to government defense
agencies. Computing Devices reported revenue of $373.5 million for the first
nine months of 1995 and $486.3 million for fiscal 1994, and earnings before
interest and taxes of $25.8 million in the first nine months of 1995 and $30.6
million in fiscal 1994. Approximately 97% and 96% of Computing Devices' revenue
for the first nine months of 1995 and for fiscal 1994, respectively, was derived
from contracts with governmental entities or with prime contractors to
governmental entities which typically pass through government contracting
requirements to their subcontractors. Computing Devices' products and services
feature its capabilities in signal processing, digital image manipulation,
"ruggedized" subsystems for harsh environments and real-time software systems. A
majority of Computing Devices' revenue is attributable to products and services
relating to avionics systems, including the AN/AYK-14 standard Navy airborne
mission computer systems; communication systems, including the Iris tactical
command, control and communications system being developed for the Canadian
armed forces; and intelligence and surveillance systems, including advanced
parallel processing, reconnaissance systems and imaging software. The remainder
of Computing Devices' revenue is primarily attributable to products and services
relating to shipboard subsystems, antisubmarine warfare subsystems, ground
subsystems, space processing, display subsystems and tactical reconnaissance
systems. Computing Devices employs technology developed through internal
research and development, contract research and development and customer funded
development programs.
Because the focus of defense spending has shifted in recent years, in large
measure due to changing geo-political conditions and government budgetary
constraints, Computing Devices has targeted what it believes are among the more
attractive business opportunities in the defense contracting market in programs
that involve weapons sophistication, electronics, surveillance and intelligence;
extending the service life of existing military equipment by upgrading,
enhancing and retrofitting; and incorporating lower cost commercial
off-the-shelf technology and components into military equipment.
Approximately 48.7%, 52.0% and 51.4% of Ceridian's revenue in the first nine
months of 1995 and in fiscal 1994 and 1993, respectively, was attributable to
Ceridian's Defense Electronics segment. Furthermore, approximately 25%, 32% and
23% of the revenue of Ceridian's Defense Electronics segment in the first nine
months of 1995 and in fiscal 1994 and 1993, respectively, was attributable to
the Iris contract. Ceridian's business is therefore dependent to a significant
degree on government contracts in general and on the Iris contract in
particular. Government contracts are subject to certain unique risks, including
dependence on annual appropriations, changing policies and regulations, and
complexity of design. In the case of fixed price contracts such as Iris,
Ceridian bears the risk of cost overruns. Ceridian has not historically
experienced to any material degree the kinds of problems, such as cost overruns
and project cancellations, that can be associated with government contracting.
Ceridian believes that, in large measure, this is attributable to Computing
Devices' depth of experience in managing its contracts and the type of programs
in which Computing Devices participates. With respect to the Iris contract
specifically, Computing Devices has not experienced to date, and does not
currently forsee, any significant cost overruns.
From 1986 to 1993, Ceridian significantly reshaped its operations through
divestitures, liquidations and other restructurings of various assets and
business units. It has narrowed and reoriented the focus of its continuing
operations to businesses that provide technology-based services pursuant to
long-term customer relationships. Ceridian's restructuring actions resulted in
large charges against Ceridian's earnings, and net losses of $30.4 million,
$392.5 million and $9.8 million in 1993, 1992 and 1991, respectively. The net
loss in 1993 included $67.0 million of net restructuring charges primarily
related to the discontinuance of Arbitron's
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syndicated television and cable ratings service. The net loss in 1992 included
losses from Ceridian's continuing operations of $29.1 million, losses from
Ceridian's discontinued operations of $321.6 million and a $41.8 million charge
for Ceridian's change in accounting methods for post-retirement healthcare
benefits. The 1991 net loss reflected losses from Ceridian's discontinued
operations of $74.7 million. As a result of its restructuring activities and
other historical operating losses, Ceridian currently has NOLs and future tax
deductions totalling approximately $1.3 billion for regular U.S. federal income
tax purposes. See "The Merger--Ceridian's Net Operating Loss Carryforwards."
Ceridian was founded in 1957 and is incorporated under Delaware law. The
principal executive office of Ceridian is located at 8100 34th Avenue South,
Minneapolis, Minnesota 55425 (telephone (612) 853-8100). For further information
concerning Ceridian, see the Ceridian documents incorporated by reference herein
as described under "Incorporation of Certain Documents by Reference."
RECENT DEVELOPMENTS
On August 31, 1995, Ceridian concluded the acquisition of Resumix, Inc.
("Resumix"), which provides skills management software and services to enable an
organization to manage large volumes of resume data to identify qualified
candidates for hire and match them with available staffing needs, and to manage
the skills of its existing work force by placing current employees in new jobs
or projects. Resumix' revenue was $16.7 million and $18.2 million for the first
nine months of 1995 and for fiscal 1994, respectively. In connection with the
acquisition, Ceridian issued 849,010 shares of its Common Stock and reserved for
issuance an additional 104,642 such shares in connection with the assumption of
outstanding Resumix stock options. Ceridian will account for the transaction as
a pooling-of-interests.
On October 2, 1995, Ceridian concluded the acquisition of the assets of the
Personnel and Payroll Services business ("Centre-file") conducted by NatWest
Group's Centre-file subsidiary for $52.1 million in cash. Centre-file provides
payroll processing services and human resource management software, and is the
largest outsourced payroll processing business in the United Kingdom in terms of
revenue. Centre-file's revenue was $31.5 million in 1994 and $24.9 million in
the first nine months of 1995. In connection with this transaction, Ceridian
recorded goodwill and other intangibles of $51.0 million.
On August 29, 1995, Ceridian and the Ceridian Corporation Retirement Plan
(the "Retirement Plan"), a defined benefit pension plan maintained for certain
U.S. employees of Ceridian, were named as co-defendants in a lawsuit filed in
U.S. District Court for the District of Minnesota. The two plaintiffs, who left
the employ of Ceridian in 1989 and elected at that time to receive their vested
benefit under the Retirement Plan in the form of a single enhanced lump sum
payment, purport to act on behalf of a class of all persons who elected to
receive a lump sum benefit under the Retirement Plan. The plaintiffs allege that
Ceridian and the Retirement Plan utilized an incorrect methodology in
calculating the amount of enhanced lump sum benefits payable to the plaintiffs
and the other class members. Specifically, the plaintiffs allege that an
improperly high interest (discount) rate was utilized to calculate the enhanced
lump sum benefit amounts, thereby lowering the benefit amounts, in contravention
of the Employee Retirement Income Security Act of 1974, the Retirement Plan and
the defendants' fiduciary duties. Ceridian believes that the proper methodology
was consistently utilized in calculating lump sum benefit payments since that
feature was introduced into the Retirement Plan in 1989, and denies the
plaintiffs' allegations. Any finding in favor of the plaintiffs would result in
an increase in Retirement Plan liabilities that is not currently estimable. Such
an increase in liabilities would, in turn, become one of many factors affecting
the funded status of the Retirement Plan. The funded status of the Retirement
Plan, in turn, is one of many factors affecting the determination of Ceridian's
obligation (if any) to make an annual contribution to the Retirement Plan and
the determination of its annual pension expense (if any) attributable to the
Retirement Plan.
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BUSINESS OF COMDATA
GENERAL
Comdata is a leading provider of transaction processing services to the
trucking and gaming industries. Comdata provides funds transfer and regulatory
permit services to trucking companies at numerous truck stops and other
locations. Other trucking company services include debit card issuance and
authorization, telephone services and backhaul information, all of which make
use of the information processing or telecommunications capabilities of Comdata.
Comdata also provides cash advance services to the gaming industry using
credit cards and debit services employing automated teller machines and similar
devices. Comdata uses its network to provide a system by which individuals may
use MasterCard, VISA and Discover credit cards or their bank automatic teller
machine cards to obtain cash in casinos, racetracks and other gaming locations.
These services are currently available in a majority of the casinos in Las
Vegas, Reno and Lake Tahoe, Nevada, and Atlantic City, New Jersey, and in many
other locations, including riverboat casinos.
By means of its proprietary computerized telecommunications network, in 1994
Comdata processed approximately 35.8 million funds transfer transactions for the
transportation industry and approximately 6.6 million cash advance transactions
at gaming locations and transferred in excess of $8.4 billion over its network.
Comdata's operating strategy is to increase revenue and operating profits by
emphasizing recurring revenues, maintaining its historically low capital
requirements and using its technological capability and diverse product lines to
provide better service to its customers and to increase its overall customer
base.
Comdata was incorporated in Delaware in 1987 for the purpose of acquiring,
in a leveraged acquisition, Network, a Maryland corporation organized in 1969.
Comdata acquired the outstanding capital stock of Network in a merger
transaction on September 9, 1987, and Comdata's investment in Network and
Network's subsidiaries represents Comdata's only material asset. The principal
executive offices of Comdata are located at 5301 Maryland Way, Brentwood,
Tennessee, 37027 (telephone (615) 370-7000). For further information concerning
Comdata, see the Comdata documents incorporated by reference herein as described
under "Incorporation of Certain Documents by Reference."
COMDATA'S INDUSTRY ENVIRONMENT
Providing funds transfer, regulatory permit and other services to the
trucking industry accounted for 57.3% and 57.6% of Comdata's revenue for the
first nine months of 1995 and for fiscal 1994, respectively. Comdata's results
of operations are, therefore, highly dependent on competitive conditions in the
trucking industry and upon the level of activity in that industry, which is
itself affected to a large degree by general economic conditions. Consolidation
of truck stops and trucking companies in recent years has increased the pressure
on Comdata's ability to increase revenue from this aspect of its business, due
largely to the greater purchasing power of larger, consolidated entities, volume
discounts that may be offered to larger customers, and the increased likelihood
of larger customers utilizing direct billing transactions, which result in a
lower fee to Comdata because Comdata's participation in funding such
transactions is not required. Moreover, Comdata faces increasing competition in
this aspect of its business from other providers of funds transfer services,
some of which are owned by entities which are larger and have greater resources
than Comdata.
Providing cash advance services to the gaming industry accounted for 42.3%
and 38.5% of Comdata's revenue for the first nine months of 1995 and for fiscal
1994, respectively. Comdata's ability to expand its cash advance services to
nongaming locations currently is prohibited by operating policies adopted by the
major credit card associations. Within the gaming industry itself, Comdata's
cash advance services are also subject to policies and regulations adopted from
time to time by such credit card associations, including the amount of the
merchant discounts assessed by such associations, which could have an adverse
effect on Comdata. In addition, Comdata faces increasing competition in this
aspect of its business from companies that supply similar services to those of
Comdata, certain large gaming establishments and automated teller machines that
participate in national networks. During the past twelve months, Comdata has
itself provided such automated teller machines to certain locations.
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<PAGE>
RECENT DEVELOPMENTS
Comdata announced on October 20, 1995 that it had been informed that
Imperial Bank of Los Angeles, California, filed a lawsuit against Comdata and
Network in the United States District Court for the Central District of
California, alleging that certain business practices of Network in providing
cash advance services at legalized gaming establishments, truck stops and check
cashing establishments violated the federal antitrust laws. Specifically, the
lawsuit alleges that certain provisions of Comdata's long-term contracts with
its customers unlawfully excluded others from providing competing services. The
lawsuit seeks injunctive relief, money damages, treble damages under the
antitrust laws and attorneys fees and costs. A similar lawsuit was filed on
October 27, 1995 in the United States District Court for the Northern District
of California by Preferred Card Services, Inc., which is understood to be an
independent marketing organization for Imperial Bank. The liability resulting
from any finding in favor of the plaintiff in either of these lawsuits is not
currently estimable. Comdata believes that it has not engaged in any illegal
conduct and intends to vigorously contest the lawsuits.
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<PAGE>
PRINCIPAL STOCKHOLDERS OF CERIDIAN
The following table sets forth, as of October 27, 1995 (unless otherwise
indicated), certain information with respect to the shares of Ceridian Common
Stock beneficially owned by (i) stockholders known to Ceridian to beneficially
own more than 5% of the shares of such class, (ii) Ceridian's directors and five
most highly compensated executive officers ("Named Executives") and (iii) all
Ceridian's directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES OF OF SHARES BENEFICIALLY
COMMON STOCK OWNED,
NAME AND ADDRESS OF BENEFICIALLY PERCENT SHARES THAT MAY BE
BENEFICIAL OWNERS (1) OWNED OF CLASS (2) ACQUIRED WITHIN 60 DAYS (3)
- -------------------------------------------- ------------ ------------ ---------------------------
<S> <C> <C> <C>
FMR Corp. 4,930,665(4) 10.4%
82 Devonshire Street
Boston, MA 02109
Michigan Department of Treasury 2,404,580(5) 5.2%
Bureau of Investments
P.O. Box 30117
Lansing, MI 48909
Directors
Ruth M. Davis 4,878 * 3,000
Allen W. Dawson 8,000 * 3,000
Ronald James 4,100 * 3,000
Richard G. Lareau 6,500(6) * 3,000
George R. Lewis 2,000 * 1,000
Charles Marshall 6,000 * 3,000
Lawrence Perlman 767,371 1.7% 631,704
Carole J. Uhrich 2,000 * 1,000
Richard W. Vieser 11,000 * 3,000
Paul S. Walsh 5,000 * 3,000
Named Executives
Ronald L. Turner 98,334 0.2% 43,334
James D. Miller 64,839(7) 0.1% 23,573
Stephen B. Morris 83,334 0.2% 33,334
John R. Eickhoff 175,424 0.4% 117,596
All executive officers and directors as a
group 1,388,331 3.0% 946,793
</TABLE>
- ------------
(1) Unless otherwise noted, all of the shares shown are held by persons
possessing sole voting and investment power with respect to such shares.
(2) Number of shares representing less than 0.1% of outstanding Common Stock
designated by *.
(3) All shares shown in this column may be acquired within 60 days through the
exercise of stock options granted by Ceridian. These shares are treated as
outstanding only when determining the amount and percent owned by the
applicable individual or group.
(4) Beneficial ownership as of September 30, 1995 as reported on Schedule 13F
filed with the Commission. Included in the total number of shares reported
as beneficially owned are 943,140 shares that would be issuable upon
conversion of Ceridian's 5 1/2% Preferred Stock.
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<PAGE>
(5) Beneficial ownership as of September 30, 1995 as reported on Schedule 13F
filed with the Commission.
(6) Does not include 500 shares of common stock owned by Mr. Lareau's wife as to
which Mr. Lareau may be deemed to share voting and investment power, but as
to which shares he disclaims any beneficial interest.
(7) Includes 421 shares owned by Mr. Miller's wife as to which Mr. Miller shares
voting and investment power.
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<PAGE>
PRINCIPAL STOCKHOLDERS OF COMDATA
The following table sets forth, as of October 27, 1995, certain information
with respect to the shares of Comdata Common Stock beneficially owned by (i)
stockholders known to Comdata to own beneficially more than 5% of the shares of
such class, (ii) Comdata's directors and executive officers and (iii) all
Comdata's executive officers and directors as a group. Such information reflects
the mandatory conversion of all outstanding shares of Comdata Preferred Stock
which was effective October 25, 1995.
<TABLE>
<CAPTION>
OF SHARES
BENEFICIALLY
SHARES OF OWNED, SHARES
COMMON STOCK THAT MAY BE
NAME AND ADDRESS OF BENEFICIALLY PERCENT ACQUIRED WITHIN
BENEFICIAL OWNERS (1) OWNED OF CLASS 60 DAYS (2)
- -------------------------------------------------------- ----------------- ------------ -----------------
<S> <C> <C> <C>
Welsh, Carson, Anderson & Stowe IV, L.P. (3) 2,941,734 8.2%
One World Financial Center
200 Liberty Street, Suite 3601
New York, New York 10281
Welsh, Carson, Anderson & Stowe VI, L.P. (3) 2,404,226 6.7%
One World Financial Center
200 Liberty Street, Suite 3601
New York, New York 10281
WCAS Information Partners, L.P. (3) 48,099 0.1%
One World Financial Center
200 Liberty Street, Suite 3601
New York, New York 10281
WCAS Venture Partners, L.P. (3) 75,000 0.2%
One World Financial Center
200 Liberty Street, Suite 3601
New York, New York 10281
WCAS Capital Partners, L.P. (3) 6,741,849 18.8%
One World Financial Center
200 Liberty Street, Suite 10281
New York, New York 10281
Northwestern Mutual Life 2,712,076 7.6%
Insurance Company
720 East Wisconsin Avenue
Milwaukee, Wisconsin 53202
FMR Corp. 1,903,700 5.3%
82 Devonshire Street
Boston, MA 02190
Charterhouse Equity Partners, L.P. 4,675,409 13.0%
535 Madison Avenue
New York, New York 10022
Bruce K. Anderson (3) 12,294,880 34.3%
Patrick J. Welsh (3) 12,246,781 34.2%
Dana J. O'Brien (4) 1,584,601 4.4%
Louis Buglioli -- 0.0%
Stephen Raville -- 0.0%
Phyllis Haberman (5) 4,675,409 13.0%
George L. McTavish 236,964 0.7% 231,201
</TABLE>
68
<PAGE>
<TABLE>
<CAPTION>
OF SHARES
BENEFICIALLY
SHARES OF OWNED, SHARES
COMMON STOCK THAT MAY BE
NAME AND ADDRESS OF BENEFICIALLY PERCENT ACQUIRED WITHIN
BENEFICIAL OWNERS (1) OWNED OF CLASS 60 DAYS (2)
- -------------------------------------------------------- ----------------- ------------ -----------------
<S> <C> <C> <C>
Edward A. Barbieri 101,490 0.3% 96,601
Dennis R. Hanson 76,612 0.2% 76,200
Henry P. Cincere 52,922 0.1% 28,003
Charles P. Harris 26,712 0.1% 26,202
David Wolverton 8,042 * 6,600
John A. West 12,200 * 12,000
Peter D. Voysey 15,197 * 14,120
All directors and executive officers as a group (14
persons) (6) 698,082 1.9 % 490,927
<FN>
- ------------
(1) Except as otherwise noted below, the persons named in the table have sole
voting power and investment power with respect to all shares set forth in
the table.
(2) All shares shown in this column may be acquired within 60 days through the
exercise of stock options granted by Comdata. These shares are treated as
outstanding only when determining the amount and percent owned by the
applicable individual or group.
(3) Messrs. Anderson and Welsh may be deemed to own beneficially the shares of
Common Stock owned by Welsh, Carson, Anderson & Stowe IV, L.P. ("WCAS IV"),
Welsh, Carson, Anderson & Stowe VI, L.P. ("WCAS VI"), WCAS Venture
Partners, L.P. and WCAS Capital Partners, L.P. because they are general
partners of the sole general partner of each of these partnerships. Mr.
Anderson is also a general partner of the sole general partner of WCAS
Information Partners, L.P. The shares listed opposite the names of Messrs.
Anderson and Welsh include shares owned by WCAS IV, WCAS VI, WCAS
Information Partners, L.P., WCAS Venture Partners, L.P. and WCAS Capital
Partners, L.P., respectively.
(4) Mr. O'Brien may be deemed to own beneficially the shares of Common Stock
owned by Prudential Venture Partners II ("PVP"), which owns 1,584,601
shares of Comdata Common Stock.
(5) Ms. Haberman may be deemed to own beneficially the shares of Common Stock
owned by Charterhouse, because Ms. Haberman is a Vice President of
Charterhouse. The shares listed opposite Ms. Haberman's name are owned by
or are issuable to Charterhouse.
(6) The shares beneficially owned by WCAS IV, WCAS VI, WCAS Information
Partners, L.P., WCAS Venture Partners, L.P., WCAS Capital Partners, L.P.,
PVP and Charterhouse, which are deemed to be benefically owned by Messrs.
Anderson, Welsh and Ms. Haberman, respectively, are not included in shares
owned by all directors and executive officers as a group.
</TABLE>
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<PAGE>
MANAGEMENT'S DISCUSSION AND
ANALYSIS OF PRO FORMA FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Comparing the first nine months of 1994 and 1995, revenue for the combined
entity increased 13.7%, from $876.5 million in the 1994 period to $996.4 million
in the 1995 period. This increase reflected 12.6% growth in Comdata's revenue,
10.4% growth in Ceridian's revenue and the assumed acquisition of the
Centre-file payroll processing business as of the beginning of 1995. Excluding
the results of Comdata's retail division which was sold in February 1995,
Comdata's revenue increased 16.8% in the nine month comparison, with the largest
portion of the increase attributable to its Consumer and Gaming division.
Revenue in Ceridian's Information Services segment increased 20.4% in the nine
month comparison, while revenue in the Defense Electronics segment increased
1.5% over the same period. The largest portion of the revenue increase in the
Information Services segment was attributable to the Human Resources Group,
reflecting internal growth, acquisitions during 1994 (most significantly
Tesseract in June 1994) and increased investment income from payroll tax filing
deposits.
Earnings before interest and taxes ("EBIT") for the combined entity
increased 28.8%, from $100.4 million in the first nine months of 1994 to $129.3
million in the first nine months of 1995. This represented an increase from
11.5% of revenue in the 1994 period to 13.0% of revenue in the 1995 period.
Ceridian's EBIT as a percentage of revenue increased from 7.9% to 9.7% in the
year-to-date comparison, reflecting improvements in both industry segments and a
shift in the relative revenue contributions of the segments toward Information
Services. Comdata's EBIT as a percentage of revenue increased from 25.3% to
26.3% over the same period, reflecting an improved gross profit margin and lower
operating expenses as a percentage of revenue.
Interest expense net of interest income decreased from $16.4 million in the
first nine months of 1994 to $13.9 million in the first nine months of 1995. The
pro forma condensed combined statements of operations do not reflect any
benefits from the expected refinancing of most of Comdata's outstanding debt, as
described below, which Ceridian expects would be approximately $12 million
annually based on current interest rates.
The income tax provision for the combined entity, which has been adjusted
for FAS 109 pooling-of-interests rules, increased from $9.6 million in the 1994
year-to-date period to $17.1 million in the comparable 1995 period. Comdata's
effective income tax rate increased from 20% in the 1994 period to 30% in the
1995 period, reflecting the utilization in 1994 of most of its NOLs. The pro
forma condensed combined statements of operations do not reflect any benefits
from the expected future utilization of Ceridian's NOLs to shelter Comdata's
income from U.S. federal income taxes. If one were to apply Ceridian's effective
income tax rate of 8% in the first nine months of 1995 to the combined entity's
pre-tax earnings for the same period, the income tax provision for the combined
entity would have been approximately $7.8 million less.
Net earnings for the combined entity before preferred stock dividend
requirements (but without regard to benefits from the expected refinancing of
Comdata's debt or future utilization of Ceridian's NOLs to shelter Comdata's
income) increased from $74.4 million, or 8.5% of revenue, to $98.3 million, or
9.9% of revenue, in the year-to-date comparison. The conversion of the Comdata
Preferred Stock (see "Summary -- Recent Conversion of Comdata Preferred Stock")
effective October 25, 1995 eliminated the accrual of dividends thereon which had
increased Comdata's fully diluted shares by approximately 7% per year. The pro
forma adjustments eliminate this preferred dividend requirement.
LIQUIDITY AND CAPITAL RESOURCES
On a pro forma combined basis, the Ceridian and Comdata cash and short-term
investments totaled $130.6 million at September 30, 1995, reflecting the usage
of $52.1 million to acquire the assets of the Centre-file business in the United
Kingdom, and $33.2 million for costs related to the planned refinancing of
Comdata's debt. Approximately $86.9 million of the September 30, 1995 cash and
short-term investments
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<PAGE>
were the U.S. dollar equivalent of unhedged Canadian dollar cash and short-term
investments held by Ceridian's Canadian subsidiary. Ceridian does not expect
that this balance in Canada will decrease appreciably during the remainder of
1995.
As contemplated by the Merger Agreement (see "The Merger--Tender Offer for
Comdata Debt"), Ceridian has requested that Network commence, prior to the
effective time of the Merger, a tender offer (the "Debt Tender Offer") to
purchase for cash all $130 million in principal amount of Network's outstanding
12.5% Senior Notes due 1999 (the "Senior Notes") and $75 million in principal
amount of Network's outstanding 13.25% Senior Subordinated Debentures due 2002
(the "Debentures"). In connection therewith, Network will solicit consents for
certain proposed amendments and waivers to the related Indentures to eliminate
substantially all of the restrictive covenants in such Indentures. The Debt
Tender Offer is conditioned upon, among other things, the consummation of the
Merger, receipt of the requisite consents with respect to the proposed
amendments and waivers and execution of the resulting Supplemental Indentures,
and the receipt by Network, pursuant to an inter-company loan from Ceridian, of
sufficient funds to pay the aggregate consideration for all securities validly
tendered pursuant to the Debt Tender Offer as well as related fees and expenses.
Ceridian also expects that, immediately after the effective time of the Merger,
it will cause Network to call for redemption the remaining $6.2 million in
principal amount of its 11% Junior Subordinated Extendible Notes due 1997 (the
"Junior Notes"), such redemption to be financed by an inter-company loan from
Ceridian.
Ceridian expects to borrow the funds necessary to complete the Debt Tender
Offer and the redemption of the Junior Notes pursuant to a $325 million
revolving credit facility (the "Credit Facility") that it expects to establish
with a syndicate of commercial banks immediately following the effective time of
the Merger. The specific terms of the Credit Facility have been set out in a
term sheet, but the final terms of the Credit Facility will not be established
until the definitive agreement is executed. The following discussion assumes
that the terms of the Credit Facility would be substantially the same as the
term sheet.
Under the Credit Facility, which would be unsecured but guaranteed by
Comdata and Network and is expected to have a final maturity of November 30,
1998, Ceridian would be able to obtain revolving credit advances and up to $75
million of standby letters of credit. Concurrently with the establishment of the
Credit Facility, the existing revolving credit facilities maintained by Ceridian
and Comdata would be cancelled. At September 30, 1995, Ceridian had $1.6 million
of letters of credit and no revolving loans outstanding under its existing
credit facility, while Comdata had $6.3 million of letters of credit and no
revolving loans outstanding under its existing credit facility. Interest rates
on revolving loans under the Credit Facility would be determined based on
Ceridian's post-Merger senior unsecured debt rating, which currently would
enable Ceridian to obtain revolving loans either at prime rate or at 65 basis
points above 1, 2, 3 or 6-month LIBOR. Based on rates that would be available as
of the date of this Joint Proxy Statement/Prospectus, Ceridian expects that
funds necessary for the Debt Tender Offer and to redeem the Junior Notes would
initially be available at an annual interest rate of approximately 6.5%.
Credit availability under the Credit Facility in excess of $75 million
initially would be limited to retirement of Senior Notes, Debentures, Junior
Notes and debt outstanding (if any) under Comdata's existing revolving credit
facility (collectively, the "Comdata Debt"). Once the Comdata Debt is retired,
the full amount of the Credit Facility would be available for working capital
and general corporate purposes. Under the expected terms of the Credit Facility,
various financial tests would need to be met by Ceridian (on a consolidated
basis, including Comdata). Ceridian would be required to maintain a minimum
consolidated net worth which would be subject to increase based on Ceridian's
consolidated net earnings after December 31, 1995 and certain equity
contributions to Ceridian after the same date. Ceridian would also be required
to maintain a fixed charge coverage ratio of 2.25 to 1 on a rolling four
quarters basis, and to limit consolidated debt to three times earnings before
interest, taxes, depreciation and amortization ("EBITDA"), minus capital
expenditures and dividends on Ceridian's 5 1/2% Preferred Stock on a rolling
four quarters basis. Ceridian estimates that as of December 31, 1995 when these
financial covenants would become effective, and assuming the completion of the
Merger and the refinancing of the Comdata Debt, the combined entity would be in
compliance with the net worth test by approximately $41.4 million, its fixed
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<PAGE>
charge coverage ratio will be approximately 2.6 to 1, and its permitted debt
ratio will be approximately 2.1 to 1. The Credit Facility would also limit
liens, contingent obligations, operating leases, minority equity investments and
divestitures.
As a result of the Merger, the Debt Tender Offer and the estimated $75.8
million addition to accumulated deficit to be recorded in connection therewith,
the pro forma stockholders' equity for the combined entity at September 30, 1995
would have been $119.4 million, compared to Ceridian's September 30, 1995
stockholders' equity of $260.8 million. Based on total pro forma non-current
indebtedness of $225.2 million at September 30, 1995, the combined entity would
have a pro forma debt to equity ratio of 1.9 to 1. Although the pro forma
indebtedness of the combined entity at September 30, 1995 is no different than
the sum of the actual Ceridian and Comdata debt outstanding as of that date, due
to lower interest rates the annual debt service on the pro forma indebtedness at
interest rates that would be available under the Credit Facility as of the date
of this Joint Proxy Statement/Prospectus is estimated to be approximately $12
million less than the annual debt service on the existing Comdata and Ceridian
debt.
The post-Merger liquidity needs of the combined entity (including accrued
restructure liabilities) are expected be to met from existing cash balances,
cash flow from operations and borrowings under the Credit Facility. Cash flows
from operations of the combined entity are expected to benefit from reduced debt
service costs, as described above, and utilization of Ceridian's NOLs (see "The
Merger--Ceridian's Net Operating Loss Carryforwards"). To the extent that the
combined entity's pre-tax U.S. earnings after the Merger are greater than
Ceridian's pre-tax U.S. earnings would have been on a stand-alone basis, and
assuming no Ownership Change occurs prior to or as a result of the Merger,
Ceridian's NOLs can be utilized more rapidly after the Merger, increasing their
present value. Ceridian currently estimates that its effective tax rate after
the Merger will be in the 8% to 8.5% range, primarily reflecting state and
foreign taxes.
The significance of reduced debt service costs and decreased effective tax
rate is underscored by Comdata's 1993 write-off of $230 million in goodwill and
certain other long-lived intangible assets, primarily relating to its
transportation business. Prior to 1993, Comdata evaluated the realizability of
goodwill using measurements of EBITDA. In 1993, Comdata determined that the
projected net income of each major business unit was a preferable measurement of
impairment of goodwill and related intangibles because it included the
significant costs of interest and income taxes, which were not included in the
method previously used. Financing costs had changed significantly after
Comdata's refinancing at the end of 1992, and the impact of income taxes on
Comdata's operations was then expected to increase as Comdata's tax payments
would be determined prior to goodwill amortization and Comdata anticipated the
use of most of its remaining NOLs during 1994 and a corresponding increase in
its effective tax rate. Furthermore, in light of Comdata's inability to complete
a secondary offering of its Common Stock in December 1993, it was also believed
that projected net income was a preferable measurement indicator of fair value
and more relevant to Comdata shareholders. In applying the net income test,
Comdata utilized projections indicating that revenue in the transportation
business would grow at rates comparable to those experienced during the five
years ended December 31, 1993, adjusted for the effects of acquisitions and
certain industry trends, with corresponding inflationary and other increases in
operating expenses. As a result, Comdata's projections reflected a net loss in
the transportation business after interest costs and income taxes. Industry
trends that adversely impacted the projections included a shift in Comdata's
customer base from smaller trucking companies to larger ones, consolidation of
truck stops and trucking companies, and increasing competitive pressures, all of
which contributed to a decrease in average transaction fees. See "Business of
Comdata-- Comdata's Industry Environment." Regulatory changes also affected the
projections, as a significant decline in temporary trip and fuel permits due to
changes in state regulations adversely affected permit service revenue. In light
of factors such as these and the resulting projections, Comdata determined that
substantially all of its goodwill related to the transportation business was
impaired.
Given the expected negative arbitrage between the interest rates applicable
to the combined entity's cash balances and interest rates under the Credit
Facility, Ceridian expects that it will commonly utilize excess cash to reduce
amounts outstanding under the Credit Facility. The combined entity may also
utilize cash from these sources to make acquisitions. Ceridian expects to remain
active in making acquisitions and to concentrate its efforts in areas related to
or which complement the combined entity's Information
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<PAGE>
Services segment. In structuring any such acquisitions, Ceridian would seek to
emphasize the use of its common stock as acquisition consideration in order to
make pooling-of-interests accounting treatment available.
DESCRIPTION OF CERIDIAN SECURITIES
The following description of the capital stock (and other securities) of
Ceridian does not purport to be complete and is subject, in all respects, to
applicable Delaware law, and is qualified by reference to the Ceridian
Certificate of Incorporation, and the agreements and documents referred to below
under "--Common Stock," "--Depositary Shares" and "--5 1/2% Preferred Stock,"
copies of which are incorporated by reference herein as described under
"Incorporation of Certain Documents by Reference."
GENERAL
The authorized capital stock of Ceridian consists of 100,000,000 shares of
Common Stock, par value $.50 per share, of which 46,631,602 shares were
outstanding as of the Ceridian Record Date; and 750,000 shares of undesignated
preferred stock, par value $100 per share, 50,600 shares of which have been
designated as a series of 5 1/2% Cumulative Convertible Exchangeable Preferred
Stock (the "5 1/2% Preferred Stock"). As of the Ceridian Record Date, 47,200
shares of 5 1/2% Preferred Stock were issued and outstanding, and 4,720,000
depositary shares were outstanding, each representing a one one-hundredth
interest in one share of the 5 1/2% Preferred Stock (the "Depositary Shares").
As of the Ceridian Record Date, an additional 17,755,777 shares of Ceridian
Common Stock were reserved for issuance in connection with various stock-based
compensation plans maintained by Ceridian and the potential conversion of the
Depositary Shares.
The following is a description of certain significant attributes of the
Ceridian Common Stock and the 5 1/2% Preferred Stock. Also described below are
the material terms of Ceridian's Depositary Shares. Depositary Shares are
exchangeable at the option of Ceridian on any dividend payment date with respect
to the 5 1/2% Preferred Stock beginning December 31, 1995 into 5 1/2% debentures
which would, if issued, be unsecured, subordinated obligations of Ceridian and
would mature on December 31, 2008 (the "Debentures"). For a complete legal
description of such securities, reference is made to the terms of the Deposit
Agreement (the "Deposit Agreement") entered into with The Bank of New York, as
Depositary (the "Depositary"), the Certificate of Designations of the 5 1/2%
Preferred Stock included as part of the Ceridian Certificate of Incorporation
(the "Ceridian Designation"), setting forth the rights, preferences, privileges,
qualifications, restrictions and limitations of the 5 1/2% Preferred Stock, and
the form of Indenture (the "Exchange Indenture") entered into with The Bank of
New York, as Trustee (the "Exchange Trustee") with regard to the Debentures. The
Deposit Agreement and the Exchange Indenture are filed as exhibits to the
Registration Statement of which this Joint Proxy Statement/Prospectus is a part.
COMMON STOCK
The holders of Ceridian Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of stockholders, and
stockholders have no right to cumulate their votes in the election of directors.
Subject to the prior rights of the 5 1/2% Preferred Stock and any other
preferred stock of Ceridian that may be issued in the future, holders of
Ceridian Common Stock are entitled to receive ratably such dividends as may be
declared by the Board of Directors out of funds legally available therefor.
Ceridian has paid no dividends on its Common Stock since 1985. Holders of
Ceridian Common Stock have no preemptive rights and no right to convert their
Ceridian Common Stock into other securities. There are no redemption or sinking
fund provisions applicable to the Ceridian Common Stock. All outstanding shares
of Ceridian Common Stock are fully paid and nonassessable.
In the event of a liquidation, dissolution or winding up of Ceridian,
holders of Ceridian Common Stock are entitled to share with each other on a
ratable basis as a single class in the net assets of Ceridian available for
distribution after payment of liabilities and satisfaction of any preferential
rights of holders of any Ceridian preferred stock. The rights, preferences and
privileges of holders of the Common Stock are subject to, and may be adversely
affected by, the rights of holders of shares of the 5 1/2% Preferred Stock and
any series of preferred stock which Ceridian may designate and issue in the
future.
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<PAGE>
Ceridian's Certificate of Incorporation contains provisions which: (i)
require the affirmative vote of two-thirds of the outstanding capital stock
entitled to vote to approve mergers, business combinations and certain other
transactions in which Ceridian is a constituent corporation and for which
stockholder approval is required by the DGCL; and (ii) require an affirmative
vote of two-thirds of the outstanding shares of Ceridian not beneficially owned
by "controlling persons" (as defined therein) to approve business combinations
with "controlling persons," with a minimum price per share payable for shares
other than those held by such "controlling persons" in connection with such a
business combination.
The Transfer Agent and Registrar for the Common Stock is The Bank of New
York.
DEPOSITARY SHARES
Each Depositary Share of Ceridian represents a one one-hundredth interest in
a share of 5 1/2% Preferred Stock deposited under the Deposit Agreement among
Ceridian, the Depositary and the holders from time to time of the Depositary
Receipts (as defined below) issued thereunder. Subject to the terms of the
Deposit Agreement, each owner of a Depositary Share is entitled, in proportion
to the fractional interest in a share of 5 1/2% Preferred Stock represented by
such Depositary Share, to all of the rights and preferences of the 5 1/2%
Preferred Stock represented thereby (including dividend, conversion, redemption,
exchange, liquidation and voting rights) contained in the Ceridian Designation,
which are summarized below under "--5 1/2% Preferred Stock." The Depositary
Shares and the Ceridian Common Stock issuable in respect of the Depositary
Shares are listed on the NYSE, but the 5 1/2% Preferred Stock is not listed on
any national securities exchange or any similar system of automated
dissemination of quotations of securities, and Ceridian has no plans to list
these securities. Accordingly, there is no public trading market for the 5 1/2%
Preferred Stock except as represented by the Depositary Shares. The Depositary
Shares are evidenced by depositary receipts issued pursuant to the Deposit
Agreement (the "Depositary Receipts"). By surrendering the Depositary Receipts
at the Corporate Trust Office of the Depositary (unless the related Depositary
Shares have previously been called for redemption), owners of Depositary Shares
are entitled to receive certificates representing whole shares of 5 1/2%
Preferred Stock on the basis of one share of 5 1/2% Preferred Stock for 100
Depositary Shares.
REDEMPTION OF DEPOSITARY SHARES. The Depositary Shares will be redeemed,
upon not less than 30 nor more than 60 days' notice, from the proceeds received
by the Depositary resulting from the redemption, in whole or in part, at
Ceridian's option, but subject to the terms and conditions applicable thereto,
of 5 1/2% Preferred Stock held by the Depositary. The redemption price per
Depositary Share will be equal to one one-hundredth of the redemption price per
share payable with respect to the 5 1/2% Preferred Stock. See "--5 1/2%
Preferred Stock--Optional Redemption." Whenever Ceridian redeems shares of
5 1/2% Preferred Stock from the Depositary, the Depositary will redeem as of the
same redemption date the number of Depositary Shares representing shares of
5 1/2% Preferred Stock so redeemed. If less than all the Depositary Shares are
to be redeemed, the Depositary Shares to be redeemed shall be selected pro rata
(as nearly as may be) by lot or by a substantially equivalent method determined
by the Depositary.
CONVERSION OF DEPOSITARY SHARES. The Depositary Shares are convertible, at
the option of the holder at any time prior to redemption, into shares of Common
Stock, proportionately and on the same terms and conditions as the underlying
5 1/2% Preferred Stock represented by such Depositary Shares.
EXCHANGE OF DEPOSITARY SHARES. The Depositary Shares are exchangeable at
Ceridian's option in whole for the Debentures, proportionately and on the same
terms and conditions as the underlying 5 1/2% Preferred Stock represented by
such Depositary Shares. Upon the exercise by Ceridian of its option to exchange
in whole the 5 1/2% Preferred Stock, the Depositary will exchange the Depositary
Shares representing the 5 1/2% Preferred Stock for the Debentures. See "--5 1/2%
Preferred Stock--Exchange Provisions."
5 1/2% PREFERRED STOCK
GENERAL. As described above, under its Certificate of Incorporation,
Ceridian has authority to issue 750,000 shares of undesignated preferred stock,
par value $100 per share. The Board of Directors of Ceridian has the authority,
without approval of the stockholders, to issue such shares of preferred stock in
one or more series and to fix the number of shares and the rights, preferences,
privileges, qualifications,
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restrictions and limitations of each series. Among the specific matters that may
be determined by the Board of Directors are the annual rate of dividends, the
redemption price, if any, the terms of a sinking fund, if any, the amount
payable in the event of any voluntary liquidation, dissolution or winding up of
the affairs of Ceridian, conversion rights, if any, voting, if any, and the
number of shares constituting any series or the designation of such series. If
additional shares of Ceridian preferred stock are issued, depending on the terms
of such shares as determined by the Board of Directors as to these matters, such
terms could adversely affect the interests of holders of Ceridian Common Stock.
The 5 1/2% Preferred Stock is duly and validly issued, fully paid and
non-assessable, and the holders thereof have no preemptive rights in connection
therewith. The rights and preferences of the 5 1/2% Preferred Stock are, in all
respects, superior and prior to the rights of the Ceridian Common Stock and will
rank at least on a parity with any future issuances of preferred stock.
DIVIDENDS. Holders of 5 1/2% Preferred Stock are entitled to receive, if,
when, and as declared by the Board of Directors, out of the funds of Ceridian
legally available therefor, an annual cash dividend at the rate per share of
$275 (which results in a rate of $2.75 per Depositary Share), payable in
quarterly installments on March 31, June 30, September 30 and December 31.
Dividends on the 5 1/2% Preferred Stock accrue and are cumulative from the date
of initial issuance. Accrued but unpaid dividends do not bear interest.
Dividends payable for any partial quarterly period are calculated on the basis
of a year of 360 days consisting of twelve 30-day months.
If the dividends are not paid in full on the 5 1/2% Preferred Stock and any
other preferred stock of Ceridian ranking on a parity with the 5 1/2% Preferred
Stock as to dividends, all dividends or other distributions declared on the
5 1/2% Preferred Stock and such other preferred stock (other than dividends paid
in stock of Ceridian ranking junior to the 5 1/2% Preferred Stock as to
dividends and upon liquidation, dissolution or winding up) may only be declared
pro rata so that in all cases the amount of dividends or other distributions
declared per share on the 5 1/2% Preferred Stock and such other preferred stock
bear to each other the same ratio that accumulated and unpaid dividends per
share on the shares of the 5 1/2% Preferred Stock and such other preferred stock
bear to each other. Except as set forth above, unless full cumulative dividends
on the 5 1/2% Preferred Stock have been paid, dividends (other than in Ceridian
Common Stock, other stock ranking junior to the 5 1/2% Preferred Stock as to
dividends and upon liquidation, dissolution or winding up and rights to acquire
the foregoing) may not be paid or declared and set aside for payment and other
distributions may not be made upon Ceridian Common Stock or on any other stock
of Ceridian ranking junior to or on a parity with the 5 1/2% Preferred Stock as
to dividends or upon liquidation or dissolution nor may any Ceridian Common
Stock or any other stock of Ceridian ranking junior to or on a parity with the
5 1/2% Preferred Stock as to dividends be redeemed, purchased or otherwise
acquired for any consideration by Ceridian (except by conversion into or
exchange for stock of Ceridian ranking junior to or on a parity with the 5 1/2%
Preferred Stock as to dividends and upon liquidation, dissolution or winding
up).
CONVERSION RIGHTS. Each share of 5 1/2% Preferred Stock is convertible at
the option of the holder, at any time, into a number of shares of Ceridian
Common Stock equal to the aggregate liquidation preference of a share of the
5 1/2% Preferred Stock surrendered for conversion, divided by the "conversion
price." If shares of the 5 1/2% Preferred Stock are called for redemption or
Ceridian elects to issue Debentures in exchange for the 5 1/2% Preferred Stock,
the conversion right will terminate at the close of business on the fifth
business day preceding the date fixed for redemption or exchange.
The conversion price per share of the 5 1/2% Preferred Stock is currently
$22.72. The conversion price is subject to adjustment (under formulas set forth
in the Ceridian Designation) in certain events, including the issuance of Common
Stock as a dividend or distribution on any class of the capital stock of
Ceridian; subdivisions, reclassifications and combinations of the Common Stock;
the issuance to all holders of Common Stock of rights, warrants or other
securities convertible into Common Stock entitling them to subscribe for or
purchase Common Stock at less than the then current market price (as defined in
the Ceridian Designation); and the distribution to all holders of Common Stock
of capital stock or evidences of indebtedness of Ceridian or cash or other
assets of Ceridian (excluding cash dividends or distributions from earnings).
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SPECIAL CONVERSION RIGHTS UPON CHANGE OF CONTROL. The 5 1/2% Preferred
Stock has a special conversion right that becomes effective upon the occurrence
of certain types of significant transactions affecting ownership or control of
Ceridian or the market for Ceridian Common Stock. The purpose of the special
conversion right is to provide (subject to certain exceptions) partial loss
protection upon the occurrence of a change of control (as defined in the
Ceridian Designation) at a time when the market value of the Common Stock is
less than the then prevailing conversion price. In such situations, the special
conversion right will permit a holder of 5 1/2% Preferred Stock, at the holder's
option during the 45-day period immediately following the mailing by Ceridian of
notice of the change of control (which notice shall be mailed within 30 days
after the occurrence of a change in control), to convert all, but not less than
all, the holder's 5 1/2% Preferred Stock at a conversion price equal to the
special conversion price, as defined in the Ceridian Designation.
Consummation of the Merger does not constitute a change of control for
purposes of this special conversion right.
EXCHANGE PROVISIONS. The 5 1/2% Preferred Stock is exchangeable in whole,
but not in part, at the option of Ceridian, for Debentures, on any dividend
payment date on or after December 31, 1995, at the rate of $5,000.00 principal
amount of Debentures for each share of 5 1/2% Preferred Stock outstanding at the
time of exchange (which results in an exchange rate of $50.00 principal amount
of Debentures for each Depositary Share); provided that the Debentures will be
issuable in denominations of $50.00 and integral multiples thereof and that all
accumulated dividends on the 5 1/2% Preferred Stock have been paid or set aside
for payment. Ceridian must mail written notice of its intention to exchange to
each holder of record of the 5 1/2% Preferred Stock not less than 30 nor more
than 60 days prior to the date fixed for exchange. Ceridian has no current plans
to exchange the 5 1/2% Preferred Stock for Debentures.
LIQUIDATION RIGHTS. In the event of any liquidation, dissolution or winding
up of Ceridian, whether voluntary or involuntary, the holders of shares of
5 1/2% Preferred Stock are entitled to receive out of assets of Ceridian
available for distribution to stockholders, whether from capital, surplus or
earnings, before any distribution of assets is made to holders of Common Stock
and of any other class of stock of Ceridian ranking junior to the 5 1/2%
Preferred Stock, liquidating distributions in the amount of $5,000.00 per share
(which results in a liquidation preference of $50.00 per Depositary Share), plus
accumulated and unpaid dividends to the date fixed for liquidation, dissolution
or winding up. If upon any liquidation, dissolution or winding up of Ceridian,
the amounts payable with respect to the 5 1/2% Preferred Stock and other
preferred stock ranking as to any such distribution on a parity with the 5 1/2%
Preferred Stock are not paid in full, the holders of the 5 1/2% Preferred Stock
and of such other preferred stock will share ratably in any such distribution of
assets in proportion to the full respective preferential amounts to which they
are entitled. After payment of the full amount of the liquidating distribution
to which they are entitled, the holders of shares of 5 1/2% Preferred Stock will
not be entitled to participation in any further distribution of assets by
Ceridian. Neither a consolidation or merger of Ceridian with another corporation
nor a voluntary sale, lease, transfer or exchange of all or substantially all of
Ceridian's assets will be considered a liquidation, dissolution or winding up of
Ceridian for these purposes.
OPTIONAL REDEMPTION. The 5 1/2% Preferred Stock is not subject to any
mandatory redemption or sinking fund provision. The 5 1/2% Preferred Stock is
redeemable, for cash, at the option of Ceridian, on at least 30 but not more
than 60 days' notice, in whole or in part, at any time on or after December 31,
1996 at certain redemption prices specified in the Ceridian Designation
together, in each case, with an amount equal to all dividends (whether or not
declared or due) accrued and unpaid to the date fixed for redemption.
If less than all the outstanding shares of 5 1/2% Preferred Stock are to be
redeemed, Ceridian will select those to be redeemed pro rata (as nearly as may
be) by lot or by a substantially equivalent method. Any shares of 5 1/2%
Preferred Stock for which a notice of redemption has been given may be converted
into shares of Common Stock at any time before the close of business on the
fifth business day preceding the date fixed for the redemption. All dividends
upon the shares of 5 1/2% Preferred Stock called for redemption shall
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<PAGE>
cease to accrue and all rights of the holders thereof as stockholders of
Ceridian (except the right to receive the redemption price without interest upon
the presentation of certificates representing the redeemed shares) shall
terminate on the date of redemption.
If a dividend upon any shares of 5 1/2% Preferred Stock is past due, the
5 1/2% Preferred Stock may be redeemed only in whole and Ceridian may not
purchase or otherwise acquire any shares of 5 1/2% Preferred Stock, except
pursuant to a purchase or exchange offer made on the same terms to all holders
of the 5 1/2% Preferred Stock.
VOTING RIGHTS. Except as provided by law or as indicated below, holders of
5 1/2% Preferred Stock have no voting rights. If at any time the equivalent of
six quarterly dividends (whether or not consecutive) payable on the 5 1/2%
Preferred Stock are accrued and unpaid, the number of directors of Ceridian will
be increased by two and the holders of all outstanding shares of 5 1/2%
Preferred Stock, voting as a single class, will be entitled to elect the
additional two directors until all dividends that were accrued and unpaid have
been paid in full. Upon any termination of such rights to vote for directors,
the term of office of all directors so elected shall terminate and the number of
directors will be reduced accordingly.
In addition, without the vote or consent of the holders of at least
two-thirds of the shares of 5 1/2% Preferred Stock then outstanding, Ceridian
may not (i) authorize, create, issue or increase the authorized or issued number
of shares of any class or classes of stock ranking senior to the 5 1/2%
Preferred Stock, either as to dividends or upon liquidation, dissolution or
winding up, or (ii) amend, alter or repeal any of the provisions of the Ceridian
Certificate of Incorporation (including the Ceridian Designation) so as to
affect adversely the powers, preferences or rights of the 5 1/2% Preferred
Stock. Accordingly, the voting rights of the holders of 5 1/2% Preferred Stock
could, under certain circumstances, operate to restrict the flexibility Ceridian
would otherwise have in connection with any future issuances of equity
securities or changes to its capital structure. Prior to the issuance of the
Debentures, the holders of 5 1/2% Preferred Stock will also be entitled to vote
on certain amendments to the Exchange Indenture establishing the Debentures, for
which the 5 1/2% Preferred Stock may be exchanged.
MISCELLANEOUS. The Transfer Agent, Conversion Agent and Registrar for the
5 1/2% Preferred Stock and the Transfer Agent and Registrar for the Common Stock
issuable upon conversion thereof is The Bank of New York.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Generally, Section 203 of the DGCL prohibits certain Delaware corporations
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless (i) prior to such date the board of
directors of the corporation approves either the business combination or the
transaction that resulted in the stockholder becoming an interested stockholder,
(ii) upon consummation of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owns at least 85%
of the outstanding voting stock, or (iii) on or after such date the business
combination is approved by the board and by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. A "business combination" includes mergers, asset sales and other
transactions resulting in a financial benefit to the interested stockholder. An
"interested stockholder" is a person who, together with affiliates and
associates, owns (or is an affiliate or associate of the corporation and within
three years did own) 15% or more of the corporation's voting stock. A Delaware
corporation may "opt out" from the application of Section 203 of the DGCL
through a provision in its certificate of incorporation or bylaws. Ceridian has
not "opted out" from the application of Section 203. Section 203 has no impact
upon the Merger.
DESCRIPTION OF COMDATA CAPITAL STOCK
The authorized capital stock of Comdata consists of 100,000,000 shares of
Common Stock, $.01 par value, and 5,000,000 shares of preferred stock, $.01 par
value. Of these shares of Comdata Common Stock, 35,858,828 were issued and
outstanding as of the Comdata Record Date. Under Comdata's Certificate of
Incorporation, the Comdata Board of Directors may, without further stockholder
action, authorize from
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time to time the issuance of shares of preferred stock of Comdata, in one or
more series, with such powers, preferences and rights, and qualifications,
limitations and restrictions, as shall be determined by the Comdata Board of
Directors. Of these shares of authorized Comdata preferred stock, 1,325,498 have
been designated as Series A Convertible Preferred Stock, none of which are
outstanding, 572,226 shares have been designated as Series B Convertible
Preferred Stock, none of which are outstanding, and 250,500 shares have been
designated as Series C Convertible Preferred Stock, none of which are
outstanding. All shares of Series B and Series C Preferred Stock previously
outstanding were mandatorily converted pursuant to the Preferred Stock
Conversion on October 25, 1995.
The Comdata Common Stock is described in Comdata's Registration Statement on
Form 8-A dated August 24, 1987, including any amendment or report filed for the
purpose of updating such description filed subsequent to the date of this Joint
Proxy Statement/Prospectus and prior to the termination of the offering
described herein.
SECTION 203 OF THE DELAWARE GENERAL CORPORATION LAW
Comdata, like Ceridian, has not "opted out" from the application of Section
203 of the DGCL. See "Description of Ceridian Securities--Section 203 of the
Delaware General Corporation Law." With respect to the Merger, the Comdata Board
of Directors specifically approved the Merger Agreement and the Voting Agreement
so as to exempt those agreements and the transactions contemplated thereby from
Section 203. Accordingly, Section 203 will not affect the Merger.
ADJOURNMENT OF SPECIAL MEETINGS
ADJOURNMENT OF CERIDIAN SPECIAL MEETING. In the event that there are not
sufficient votes to approve the issuance of shares of Ceridian Common Stock
pursuant to the Merger Agreement at the time of the Ceridian Special Meeting,
such proposal could not be approved unless the Ceridian Special Meeting were
adjourned in order to permit further solicitation of proxies from holders of
Ceridian Common Stock. Proxies that are being solicited by the Ceridian Board of
Directors grant the discretionary authority to vote for any such adjournment, if
necessary, although executed Proxy Cards that are properly marked to vote
against the proposal to issue shares of Ceridian Common Stock pursuant to the
Merger Agreement will not be counted as a vote for any adjournment, unless it is
specifically so indicated. If it is necessary to adjourn the Ceridian Special
Meeting and the adjournment is for a period of less than 30 days, no notice of
the time and place of the adjourned meeting is required to be given to
stockholders other than an announcement of such time and place at the Ceridian
Special Meeting. A majority of the shares represented and voting at the Special
Meeting is required to approve any such adjournment, provided that a quorum is
present.
ADJOURNMENT OF COMDATA SPECIAL MEETING. In the event that there are not
sufficient votes to approve and adopt the Merger Agreement at the time of the
Comdata Special Meeting, such proposal could not be approved unless the Comdata
Special Meeting were adjourned in order to permit further solicitation of
proxies from Comdata stockholders. Proxies that are being solicited by the
Comdata Board of Directors grant the discretionary authority to vote for any
such adjournment, if necessary, although executed Proxy Cards that are properly
marked to vote against the proposal to approve and adopt the Merger Agreement
will not be counted as a vote for any adjournment, unless it is specifically so
indicated. If it is necessary to adjourn the Comdata Special Meeting and the
adjournment is for a period of less than 30 days, no notice of the time and
place of the adjourned meeting is required to be given to stockholders other
than an announcement of such time and place at the Comdata Special Meeting. A
majority of the voting power represented and voting at the Special Meeting is
required to approve any such adjournment, provided that a quorum is present.
LEGAL MATTERS
The validity of the Ceridian Common Stock offered hereby has been passed
upon for Ceridian by Oppenheimer Wolff & Donnelly, Minneapolis, Minnesota.
Richard G. Lareau, a member of Oppenheimer Wolff & Donnelly, is a director of
Ceridian and owns 3,500 shares of Ceridian Common Stock and options to acquire
3,000 shares of Ceridian Common Stock.
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The opinions of counsel described under "The Merger--Certain Federal Income
Tax Consequences" have been rendered by Reboul, MacMurray, Hewitt, Maynard &
Kristol, New York, New York, counsel to Comdata, and by Hogan & Hartson L.L.P.,
Washington, D.C., special tax counsel to Ceridian. Members of Reboul, MacMurray,
Hewitt, Maynard & Kristol own 9,165 shares of Comdata Common Stock.
EXPERTS
The consolidated financial statements of Ceridian appearing in the Annual
Report on Form 10-K of Ceridian for the year ended December 31, 1994 have been
audited by KPMG Peat Marwick LLP, independent auditors, as set forth in their
reports thereon included therein and incorporated herein by reference. Such
consolidated financial statements are incorporated herein by reference in
reliance upon such reports given upon the authority of such firm as experts in
accounting and auditing.
The consolidated financial statements of Comdata appearing in the Annual
Report on Form 10-K of Comdata for the year ended December 31, 1994 have been
audited by Arthur Andersen LLP, independent public accountants, as indicated in
their reports with respect thereto included therein and incorporated herein by
reference. Such consolidated financial statements are incorporated herein by
reference in reliance upon the authority of such firm as experts in accounting
and auditing in giving said report.
INDEPENDENT PUBLIC ACCOUNTANTS
Representatives of Arthur Andersen LLP and KPMG Peat Marwick LLP, Comdata's
and Ceridian's independent auditors, respectively, are expected to be present at
the Comdata Special Meeting and the Ceridian Special Meeting, respectively. They
will be afforded the opportunity to make a statement if they desire to do so and
are expected to be available to respond to appropriate questions.
STOCKHOLDER PROPOSALS
CERIDIAN STOCKHOLDER PROPOSALS. In order to be eligible for inclusion in
Ceridian's proxy solicitation materials for its 1996 annual meeting of
stockholders, any stockholder proposal to be considered at such meeting must be
received by Ceridian's Corporate Secretary, John A. Haveman, or his successor,
at Ceridian's main office, 8100 34th Avenue South, Minneapolis, Minnesota 55425,
no later than December 1, 1995. Any such proposal shall be subject to the
requirements of the proxy rules adopted under the Exchange Act.
COMDATA STOCKHOLDER PROPOSALS. If the Merger is not consummated, Comdata is
expected to retain its December 31 fiscal year end. In such event, in order to
be eligible for inclusion in Comdata's proxy solicitation materials for its 1996
annual meeting of stockholders, any stockholder proposal to be considered at
such meeting must be received by Comdata's Corporate Secretary, Peter D. Voysey,
or his successor, at Comdata's main office, 5301 Maryland Way, Brentwood,
Tennessee 37027, no later than January 19, 1996. Any such proposal shall be
subject to the requirements of the proxy rules adopted under the Exchange Act.
MANAGEMENT AND ADDITIONAL INFORMATION
Certain information relating to the management, executive compensation,
various benefit plans (including stock plans), certain relationships and related
transactions and other related matters as to Ceridian and Comdata (and their
respective subsidiaries) is set forth in or incorporated herein by reference in
the respective Annual Reports on Form 10-K for the year ended December 31, 1994
of Ceridian and Comdata, which are incorporated herein by reference in this
Joint Proxy Statement/Prospectus. See "Incorporation of Certain Documents by
Reference." Ceridian and Comdata stockholders who wish to obtain copies of these
documents may contact Ceridian or Comdata, as applicable, at its address or
telephone number set forth under "Incorporation of Certain Documents by
Reference."
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UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma combined financial data, including the
notes thereto, give effect to the acquisition by Ceridian of all the outstanding
shares of Comdata pursuant to the Merger Agreement and are qualified in their
entirety by reference to, and should be read in conjunction with, the historical
consolidated financial statements of Ceridian and Comdata incorporated herein by
reference. The pro forma financial data is based on the pooling-of-interests
method of accounting for the Merger and, therefore, presents the combined
balance sheet of the two companies as of September 30, 1995, as if the Merger
had taken place on that date, and their combined statements of operations for
the years ended December 31, 1994, 1993 and 1992 and the nine-month periods
ended September 30, 1995 and 1994, as if the Merger had taken place on the first
day of the respective periods. The unaudited pro forma condensed combined
statements of operations do not reflect (i) the direct transaction costs of the
Merger or the costs of the expected refinancing of Comdata's outstanding debt,
or (ii) any benefits from the expected refinancing of Comdata's outstanding debt
or from utilization of Ceridian's NOLs to shelter Comdata's income from U.S.
federal income taxes. In addition, the unaudited pro forma condensed combined
financial data includes in the combined balance sheet as of September 30, 1995
the acquisition by Ceridian of Centre-file, which is not significant for pro
forma reporting purposes and occurred October 2, 1995, as if the acquisition had
taken place on that balance sheet date, and in the combined statements of
operations for the nine months ended September 30, 1995 and the year ended
December 31, 1994, as if the acquisition had taken place on the first day of the
respective periods. The unaudited pro forma condensed combined financial data is
provided for comparative purposes only and does not purport to be indicative of
the results which actually would have been obtained if the Merger and the other
acquisition had been effected on the dates indicated, nor is it necessarily
indicative of future operating results or financial position.
INDEX
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Unaudited Pro Forma Condensed Combined Balance Sheet at September 30, 1995................................. F-1
Unaudited Pro Forma Condensed Combined Statements of Operations:
Nine months ended September 30, 1995..................................................................... F-2
Nine months ended September 30, 1994..................................................................... F-3
Year ended December 31, 1994............................................................................. F-4
Year ended December 31, 1993............................................................................. F-5
Year ended December 31, 1992............................................................................. F-6
Notes to Unaudited Pro Forma Condensed Combined Financial Statements....................................... F-7
</TABLE>
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CERIDIAN CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
------------------ ---------------------- ---------- ----------------------
SEPTEMBER 30, 1995 CERIDIAN COMDATA ADJUSTMENTS RESULTS OTHER ADJUSTMENTS RESULTS
- -------------------------------------------------- -------- ------- ----------- -------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
ASSETS
Cash and short-term investments................. $ 192.0 $ 23.9 $ (33.2)(3) $ 182.7 $ $(52.1)(2) $ 130.6
Trade and other receivables, net................ 177.1 161.5 338.6 4.6 343.2
Inventories..................................... 32.8 -- 32.8 32.8
Other current assets............................ 24.3 9.0 (2.7)(4) 30.6 30.6
-------- ------- ----------- -------- --- ----------- --------
Total current assets........................ 426.2 194.4 (35.9) 584.7 4.6 (52.1) 537.2
Investments and advances........................ 5.8 5.8 5.8
Property, plant and equipment, net.............. 108.7 12.8 121.5 1.5 123.0
Prepaid pension cost............................ 88.9 88.9 88.9
Goodwill and other intangibles.................. 122.4 93.9 (7.5)(3) 208.8 51.0(2) 259.8
Other noncurrent assets......................... 54.8 17.8 (3.1)(4) 69.5 69.5
-------- ------- ----------- -------- --- ----------- --------
Total assets...................................... $ 806.8 $318.9 $ (46.5) $1,079.2 $ 6.1 $ (1.1) $1,084.2
-------- ------- ----------- -------- --- ----------- --------
-------- ------- ----------- -------- --- ----------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Short-term debt and current portion of long-term
obligations.................................... $ 1.5 $ 1.9 $ $ 3.4 $ $ $ 3.4
Drafts and settlements payable.................. 116.2 116.2 116.2
Accounts payable................................ 30.0 9.7 39.7 39.7
Customer advances............................... 63.5 6.5 70.0 70.0
Deferred income................................. 88.8 2.4 91.2 1.9 93.1
Accrued taxes................................... 59.3 8.0 67.3 67.3
Employee compensation and benefits.............. 51.3 3.7 55.0 55.0
Restructure reserves, current portion........... 21.3 21.3 21.3
Other accrued expenses.......................... 54.0 21.2 29.3(3) 104.5 3.1 107.6
-------- ------- ----------- -------- --- ----------- --------
Total current liabilities................... 369.7 169.6 29.3 $ 568.6 5.0 $ 0.0 573.6
Long-term obligations, less current portion..... 12.6 212.6 225.2 225.2
Deferred income taxes........................... 9.2 9.2 9.2
Restructure reserves, less current portion...... 51.0 51.0 51.0
Employee benefit plans.......................... 80.5 80.5 80.5
Deferred income and other noncurrent
liabilities.................................... 23.0 2.3 25.3 25.3
Stockholders' equity:
Preferred stock............................... 4.7 113.2 (113.2)(1) 4.7 4.7
Common stock.................................. 23.3 0.2 10.8(1) 34.3 34.3
Additional paid-in capital.................... 876.2 123.8 102.4(1) 1,102.4 1,102.4
Accumulated deficit........................... (610.1) (302.8 ) (75.8)(3)(4) (988.7) 1.1 (1.1)(2) (988.7)
Other equity.................................. (33.3) (33.3) (33.3)
-------- ------- ----------- -------- --- ----------- --------
Total stockholders' equity.................. 260.8 (65.6 ) (75.8) 119.4 1.1 (1.1) 119.4
-------- ------- ----------- -------- --- ----------- --------
Total liabilities and stockholders' equity........ $ 806.8 $318.9 $ (46.5) $1,079.2 $ 6.1 $ (1.1) $1,084.2
-------- ------- ----------- -------- --- ----------- --------
-------- ------- ----------- -------- --- ----------- --------
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
F-1
<PAGE>
CERIDIAN CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
------------------ --------------------- ---------- ---------------------
NINE MONTHS ENDED SEPTEMBER 30, 1995 CERIDIAN COMDATA ADJUSTMENTS RESULTS OTHER ADJUSTMENTS RESULTS
- -------------------------------------------------- -------- ------- ----------- ------- ---------- ----------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE........................................... $767.2 $204.3 $ 971.5 $24.9 $ 996.4
COST OF REVENUE................................... 471.1 112.8 583.9 11.0 594.9
-------- ------- ------- ----- -------
GROSS PROFIT...................................... $296.1 $ 91.5 $ 387.6 $13.9 $ 401.5
OPERATING EXPENSES
Selling, general and administrative............. 171.2 35.1 206.3 7.4 $ 2.5(1) 216.2
Technical expense............................... 50.0 2.6 52.6 2.6 55.2
Other expense (income).......................... 0.8 0.8 0.8
-------- ------- ------- ----- ----- -------
Total operating expenses...................... 222.0 37.7 259.7 10.0 2.5 272.2
-------- ------- ------- ----- ----- -------
EARNINGS (LOSS) BEFORE INTEREST AND TAXES......... 74.1 53.8 127.9 3.9 (2.5) 129.3
Interest income................................. 9.4 9.4 9.4
Interest expense................................ (1.0) (22.3) (23.3) (23.3)
-------- ------- ------- ----- ----- -------
EARNINGS (LOSS) BEFORE INCOME TAXES............... 82.5 31.5 114.0 3.9 (2.5) 115.4
Income tax provision............................ 6.6 10.0 (0.7)(2) 15.9 1.2 17.1
-------- ------- ------- ----- ----- -------
NET EARNINGS (LOSS) -- FULLY DILUTED.............. $ 75.9 $ 21.5 0.7 $ 98.1 $ 2.7 $ (2.5) $ 98.3
Preferred dividend requirement.................... 9.7 9.9 (9.9)(3) 9.7 9.7
-------- ------- ----------- ------- ----- ----- -------
NET EARNINGS (LOSS) FOR COMMON STOCK-PRIMARY...... $ 66.2 $ 11.6 $ 10.6 $ 88.4 $ 2.7 $ (2.5) $ 88.6
-------- ------- ----------- ------- ----- ----- -------
-------- ------- ----------- ------- ----- ----- -------
Primary earnings per share........................ $1.37 $ 1.27 $ 1.27
Fully diluted earnings per share.................. $1.30 $ 1.22 $ 1.23
Weighted average common shares and equivalents
outstanding (in thousands):
Primary....................................... 48,137 21,600 69,737 69,737
Fully diluted................................. 58,521 21,600 80,121 80,121
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
F-2
<PAGE>
CERIDIAN CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
------------------------ ------------------------
NINE MONTHS ENDED SEPTEMBER 30, 1994 CERIDIAN COMDATA ADJUSTMENTS RESULTS
- --------------------------------------------------------------------- ----------- ----------- ------------- ---------
<S> <C> <C> <C> <C>
REVENUE.............................................................. $ 695.0 $ 181.5 $ 876.5
COST OF REVENUE...................................................... 447.7 101.0 548.7
----------- ----------- ---------
GROSS PROFIT......................................................... $ 247.3 $ 80.5 $ 327.8
OPERATING EXPENSES
Selling, general and administrative................................ 155.0 33.4 188.4
Technical expense.................................................. 38.5 1.2 39.7
Other expense (income)............................................. (0.7) (0.7)
----------- ----------- ---------
Total operating expenses......................................... 192.8 34.6 227.4
----------- ----------- ---------
EARNINGS (LOSS) BEFORE INTEREST AND TAXES............................ 54.5 45.9 100.4
Interest income.................................................... 7.9 7.9
Interest expense................................................... (1.2) (23.1) (24.3)
----------- ----------- ---------
EARNINGS (LOSS) BEFORE INCOME TAXES.................................. 61.2 22.8 84.0
Income tax provision............................................... 5.0 2.6 2.0(2) 9.6
----------- ----------- ---------
NET EARNINGS (LOSS) -- FULLY DILUTED................................. $ 56.2 $ 20.2 (2.0) $ 74.4
Preferred dividend requirement....................................... 9.7 9.8 $ (9.8)(3) 9.7
----------- ----------- ------ ---------
NET EARNINGS (LOSS) FOR COMMON STOCK-PRIMARY......................... $ 46.5 $ 10.4 $ 7.8 $ 64.7
----------- ----------- ------ ---------
----------- ----------- ------ ---------
Primary earnings per share........................................... $ 1.00 $ 0.95
Fully diluted earnings per share..................................... $ 0.98 $ 0.94
Weighted average common shares and equivalents outstanding (in
thousands):
Primary............................................................ 46,771 21,600 68,371
Fully diluted...................................................... 57,155 21,600 78,755
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
F-3
<PAGE>
CERIDIAN CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA HISTORICAL PRO FORMA
------------------ ---------------------- ---------- ----------------------
FOR YEAR ENDED DECEMBER 31, 1994 CERIDIAN COMDATA ADJUSTMENTS RESULTS OTHER ADJUSTMENTS RESULTS
- ---------------------------------------------- -------- ------- ----------- -------- ---------- ----------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
REVENUE....................................... $934.5 $243.3 $1,177.8 $31.5 $1,209.3
COST OF REVENUE............................... 595.6 134.9 730.5 16.3 746.8
-------- ------- ----------- -------- ----- ----- --------
GROSS PROFIT.................................. $338.9 $108.4 $ 0.0 $ 447.3 $15.2 $ 0.0 $ 462.5
OPERATING EXPENSES
Selling, general and administrative......... 215.1 44.3 259.4 8.7 3.3(1) 271.4
Technical expense........................... 52.3 2.1 54.4 3.4 57.8
Other expense (income)...................... (3.2) (3.2) 0.0 (3.2)
-------- ------- ----------- -------- ----- ----- --------
Total operating expenses.................. 264.2 46.4 0.0 310.6 12.1 3.3 326.0
-------- ------- ----------- -------- ----- ----- --------
EARNINGS (LOSS) BEFORE INTEREST AND TAXES..... 74.7 62.0 0.0 136.7 3.1 (3.3) 136.5
Interest income............................. 10.7 0.0 10.7 0.0 10.7
Interest expense............................ (1.6) (30.6) (32.2) 0.0 (32.2)
-------- ------- ----------- -------- ----- ----- --------
EARNINGS (LOSS) BEFORE INCOME TAXES........... 83.8 31.4 0.0 115.2 3.1 (3.3) 115.0
Income tax provision........................ 6.7 3.3 6.3(2) 16.3 1.0 17.3
-------- ------- ----------- -------- ----- ----- --------
NET EARNINGS (LOSS)--FULLY DILUTED............ $ 77.1 $ 28.1 $ (6.3) $ 98.9 $ 2.1 $(3.3) $ 97.7
Preferred dividend requirement.............. 13.0 12.9 (12.9)(3) 13.0 13.0
-------- ------- ----------- -------- --------
NET EARNINGS (LOSS) FOR COMMON STOCK-
PRIMARY...................................... $ 64.1 $ 15.2 $ 6.6 $ 85.9 $ 2.1 $(3.3) $ 84.7
-------- ------- ----------- -------- ----- ----- --------
-------- ------- ----------- -------- ----- ----- --------
Primary earnings per share.................... $ 1.37 $ 1.26 $ 1.24
Fully diluted earnings per share.............. $ 1.35 $ 1.26 $ 1.24
Weighted average common shares and equivalents
outstanding (in thousands):
Primary..................................... 46,764 21,600 68,364 68,364
Fully diluted............................... 57,148 21,600 78,748 78,748
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
F-4
<PAGE>
CERIDIAN CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
---------------------- ------------------------
FOR YEAR ENDED DECEMBER 31, 1993 CERIDIAN COMDATA ADJUSTMENTS RESULTS
- ------------------------------------------------------------------- ---------- ---------- ------------- ---------
<S> <C> <C> <C> <C>
REVENUE............................................................ $ 897.5 $ 212.3 $ 1,109.8
COST OF REVENUE.................................................... 613.0 119.3 732.3
---------- ---------- ------ ---------
GROSS PROFIT....................................................... $ 284.5 $ 93.0 $ 0.0 $ 377.5
OPERATING EXPENSES
Selling, general and administrative.............................. 184.9 47.9 232.8
Technical expense................................................ 50.8 1.4 52.2
Other expense (income)........................................... (3.5) (3.5)
Write-off of goodwill and other intangibles...................... 230.3 230.3
Restructure loss (gain).......................................... 67.0 67.0
---------- ---------- ------ ---------
Total operating expenses..................................... 299.2 279.6 0.0 578.8
---------- ---------- ------ ---------
EARNINGS (LOSS) BEFORE INTEREST AND TAXES.......................... (14.7) (186.6) 0.0 (201.3)
Interest income.................................................. 8.4 0.0 8.4
Interest expense................................................. (16.5) (30.3) (46.8)
---------- ---------- ------ ---------
EARNINGS (LOSS) BEFORE INCOME TAXES................................ (22.8) (216.9) 0.0 (239.7)
Income tax provision............................................. 3.8 0.2 4.0
---------- ---------- ------ ---------
NET EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM--FULLY DILUTED....... $ (26.6) $ (217.1) $ 0.0 $ (243.7)
Preferred dividend requirement..................................... 0.3 12.6 (12.6)(3) 0.3
---------- ---------- ------ ---------
NET EARNINGS (LOSS) BEFORE EXTRAORDINARY ITEM FOR COMMON
STOCK-PRIMARY..................................................... $ (26.9) $ (229.7) $ 12.6 $ (244.0)
---------- ---------- ------ ---------
---------- ---------- ------ ---------
Primary earnings per share before extraordinary item............... $ (0.61) $ (3.72)
Fully diluted earnings per share before extraordinary item......... $ (0.61) $ (3.72)
Weighted average common shares and equivalents outstanding (in
thousands):
Primary.......................................................... 43,980 21,600 65,580
Fully diluted.................................................... 43,980 21,600 65,580
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
F-5
<PAGE>
CERIDIAN CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
----------------- ---------------------
FOR YEAR ENDED DECEMBER 31, 1992 CERIDIAN COMDATA ADJUSTMENTS RESULTS
- ------------------------------------------------------- -------- ------- ----------- --------
<S> <C> <C> <C> <C>
REVENUE................................................ $ 838.1 $ 193.1 $1,031.2
COST OF REVENUE........................................ 579.3 103.1 682.4
-------- ------- ----- --------
GROSS PROFIT........................................... $ 258.8 $ 90.0 $ 0.0 $ 348.8
OPERATING EXPENSES
Selling, general and administrative.................. 169.6 50.4 220.0
Technical expense.................................... 49.0 49.0
Other expense (income)............................... (6.9) (6.9)
Restructure loss (gain).............................. 76.2 76.2
-------- ------- ----- --------
Total operating expenses......................... 287.9 50.4 0.0 338.3
-------- ------- ----- --------
EARNINGS (LOSS) BEFORE INTEREST AND TAXES.............. (29.1) 39.6 0.0 10.5
Interest income...................................... 17.8 0.1 17.9
Interest expense..................................... (16.3) (37.2) (53.5)
-------- ------- ----- --------
EARNINGS (LOSS) BEFORE INCOME TAXES.................... (27.6) 2.5 0.0 (25.1)
Income tax provision................................. 5.1 0.1 5.2
-------- ------- ----- --------
NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS--FULLY
DILUTED............................................... $ (32.7) $ 2.4 $ 0.0 $ (30.3)
Preferred dividend requirement......................... 0.3 1.4 (1.4 (3) 0.3
-------- ------- ----- --------
NET EARNINGS (LOSS) FROM CONTINUING OPERATIONS FOR
COMMON STOCK-PRIMARY.................................. $ (33.0) $ 1.0 $ 1.4 $ (30.6)
-------- ------- ----- --------
-------- ------- ----- --------
Primary earnings from continuing operations per
share................................................. $ (0.76) $ (0.47)
Fully diluted earnings from continuing operations per
share................................................. $ (0.76) $ (0.47)
Weighted average common shares and equivalents
outstanding (in thousands):
Primary.............................................. 43,466 21,600 65,066
Fully diluted........................................ 43,466 21,600 65,066
</TABLE>
See notes to unaudited pro forma condensed combined financial statements.
F-6
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS
NOTE A. GENERAL
The Ceridian and Comdata consolidated statements of operations for each of
the three years ended December 31, 1994, 1993 and 1992 and their unaudited
consolidated statements of operations for the nine month periods ended September
30, 1995 and 1994 have been combined as if the Merger had taken place on the
first day of the respective periods. The results of operations of Resumix, Inc.
("Resumix"), acquired in a transaction accounted for as a pooling-of-interests
during the third quarter of 1995 as described in Note C below, are included in
the Ceridian amounts. The unaudited results of operations of the Centre-file
Personnel and Payroll Services business ("Centre-file"), which was purchased in
October 1995 as described in Note C below, have been added to the combined
statements of operations for the nine months ended September 30, 1995 and the
year ended December 31, 1994 as if that acquisition had taken place on the first
day of the respective periods. The pro forma condensed combined statements of
operations do not reflect (i) the direct transaction costs of the Merger or the
costs of the expected refinancing of Comdata's outstanding debt, or (ii) any
benefits from the expected refinancing of Comdata's outstanding debt or from
utilization of Ceridian's NOLs to shelter Comdata's income from U.S. federal
income taxes. The Ceridian and Comdata consolidated balance sheet as of
September 30, 1995 has been combined as if the Merger had taken place on that
date and the effect of the Centre-file acquisition has been added as if the
purchase had occurred on that same date. The unaudited pro forma condensed
combined financial data including the notes is not necessarily indicative either
of the financial position or results of operations that would have occurred had
the Merger and the Centre-file acquisition taken place on the dates assumed or
of future financial position or results of operations.
NOTE B. THE MERGER
The Merger Agreement provides that as a result of the Merger, each
outstanding share of Comdata Common Stock will be converted into 0.57 of a share
of Ceridian Common Stock.
NOTE C. OTHER ACQUISITIONS
During 1995, Ceridian acquired two businesses which are not significant
individually or in the aggregate for pro forma reporting purposes. During the
third quarter of 1995, Ceridian completed the acquisition, through a reverse
triangular merger, of Resumix, a skills management software company. In
connection with this transaction, Ceridian issued 849,010 shares of Ceridian
Common Stock and reserved for issuance an additional 104,642 shares of Ceridian
Common Stock in connection with Ceridian's assumption of the Resumix stock
option plan. On October 2, 1995, Ceridian purchased Centre-file, located in the
United Kingdom, for $52.1 million in cash. The effect of the purchase of
Centre-file (referred to as "Other") on the unaudited pro forma statements of
operations for the nine months ended September 30, 1995 and the year ended
December 31, 1994, as well as on the unaudited pro forma balance sheet as of
September 30, 1995, is presented to provide a more complete illustration of the
entity which would result from the Merger.
NOTE D. NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS
Not included in the pro forma statements of operations are material
nonrecurring charges or credits and related tax effects which result directly
from the Merger and the other acquisitions and which will be included in the
results of operations of the combined entity within 12 months after the
respective transaction. Such charges and credits include the following:
(a) Ceridian and Comdata estimate that direct transactions costs of
approximately $29.3 million will be incurred in connection with the
Merger, consisting of amounts due to investment bankers, attorneys,
accountants, the financial printer and for other related services. These
transaction costs are expected to be incurred during the third and fourth
quarters of 1995 and charged to operations in the fourth quarter of 1995.
(b) In connection with the Merger and during the fourth quarter of 1995,
Ceridian expects to refinance Comdata's outstanding indebtedness,
consisting principally of 12.5% Senior Notes and 13.25% Senior
Subordinated Debentures aggregating approximately $205 million. The
charge that Ceridian expects to record in the fourth quarter of 1995 to
cover such refinancing is expected to be approximately $40.7 million,
including the write-off of existing deferred debt expense of $7.5
million.
F-7
<PAGE>
NOTES TO UNAUDITED PRO FORMA CONDENSED
COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE D. NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF
OPERATIONS (CONTINUED)
No adjustments have been made to conform the accounting policies of the
combined companies. The nature and extent of such adjustments, if any, will be
based upon further study and are not expected to be significant. Certain amounts
for Comdata have been reclassified to conform with the financial statement
classification used by Ceridian. Such reclassifications may be refined in the
future as the result of further study, but such refinements are not expected to
materially affect the comparison of the pro forma data with historical or future
presentations of financial position or results of operations.
The numbered adjustments appearing below are included in the pro forma
statements of operations and give effect to events which are directly
attributable to the Merger and the purchase of Centre-file, are factually
supportable and are expected to have continuing impact:
(1) Amortization of the total of the excess of the purchase price of the
Centre-file acquisition over the fair value of the net assets acquired
("goodwill") and other intangibles of $51.0 million over an average life
of 15 years. The components of the $51.0 million of goodwill and other
intangibles and the respective amortization periods are as follows:
goodwill of $22.9 million over 20 years, software rights of $14.6 million
over 7 years, customer lists of $10.9 million over 10 years and other
amounts totaling $2.6 million over 5 to 20 years.
(2) Elimination of the historical Comdata deferred income tax benefits
related to federal income tax net operating loss carryforwards.
(3) Elimination of dividend requirements on Comdata preferred stock.
The income tax provision is generally based on historical tax rates
experienced by the entities included in these statements. Future U.S. federal
income tax provisions are expected to be reduced by the application of
Ceridian's NOLs as provided under Financial Accounting Standard No. 109.
NOTE E. NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
The numbered adjustments appearing below are included in the pro forma
balance sheet and give effect to events which are directly attributable to the
Merger and the Centre-file acquisition, and are factually supportable, including
those related to nonrecurring events and those expected to have continuing
impact:
(1) The forced conversion of Comdata Preferred Stock into Comdata Common
Stock prior to the effective time of the Merger, the issuance or
reservation for issuance of 21.6 million shares of Ceridian Common Stock
with an aggregate par value of $10.8 million and the elimination of
Comdata Common Stock due to the conversion of each outstanding share of
Comdata Common Stock into 0.57 of a share of Ceridian Common Stock. The
21.6 million shares include shares of Ceridian Common Stock reserved for
the assumption of outstanding Comdata stock options. The actual number of
shares of Ceridian Common Stock to be issued in connection with the
Merger will be based upon the number of Comdata shares and options
outstanding immediately prior to the effective time of the Merger.
(2) The October 1995 purchase of Centre-file for $52.1 million in cash, the
recording of goodwill and other intangibles of $51.0 million and the
elimination of the equity in net assets purchased of $1.1 million from
the combined accumulated deficit.
(3) The accrual of direct transaction costs of the Merger of $29.3 million,
and payment of $33.2 million of costs and the write-off of deferred debt
expense of $7.5 million (collectively representing an extraordinary loss
of $40.7 million) related to the planned early refinancing of Comdata
debt, for a total addition to the combined accumulated deficit of $70.0
million.
(4) The deferred income tax asset of $5.8 million recorded in the historical
financial statements of Comdata has been reversed due to the federal
income tax net operating loss status of the combined companies.
F-8
<PAGE>
APPENDIX A
[CONFORMED COPY]
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
CERIDIAN CORPORATION,
CONVOY ACQUISITION CORP.
AND
COMDATA HOLDINGS CORPORATION
DATED AS OF AUGUST 23, 1995
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE I
THE MERGER
Section 1.1 THE MERGER........................................ 1
Section 1.2 EFFECTIVE TIME OF THE MERGER...................... 1
Section 1.3 CLOSING........................................... 1
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 CERTIFICATE OF INCORPORATION...................... 2
Section 2.2 BY-LAWS........................................... 2
Section 2.3 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION... 2
ARTICLE III
CONVERSION OF SHARES
Section 3.1 EXCHANGE RATIO.................................... 2
Section 3.2 EXCHANGE OF COMPANY STOCK; PROCEDURES............. 3
Section 3.3 DIVIDENDS; TRANSFER TAXES; ESCHEAT................ 4
Section 3.4 NO FRACTIONAL SECURITIES.......................... 4
Section 3.5 CLOSING OF COMPANY TRANSFER BOOKS................. 4
Section 3.6 FURTHER ASSURANCES................................ 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Section 4.1 ORGANIZATION...................................... 5
Section 4.2 CAPITALIZATION.................................... 5
Section 4.3 COMPANY SUBSIDIARIES.............................. 6
Section 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT.............. 6
Section 4.5 CONSENTS AND APPROVALS; NO VIOLATIONS............. 6
Section 4.6 REPORTS AND FINANCIAL STATEMENTS.................. 7
Section 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS; MATERIAL
CONTRACTS........................................ 7
Section 4.8 LITIGATION........................................ 7
Section 4.9 ABSENCE OF UNDISCLOSED LIABILITIES................ 8
Section 4.10 NO DEFAULT........................................ 8
Section 4.11 TAXES............................................. 8
Section 4.12 TITLE TO PROPERTIES; ENCUMBRANCES................. 9
Section 4.13 INTELLECTUAL PROPERTY............................. 9
Section 4.14 COMPLIANCE WITH APPLICABLE LAW.................... 10
Section 4.15 INFORMATION IN DISCLOSURE DOCUMENTS AND
REGISTRATION STATEMENT........................... 10
Section 4.16 EMPLOYEE BENEFIT PLANS; ERISA..................... 11
Section 4.17 ENVIRONMENTAL LAWS AND REGULATIONS................ 11
Section 4.18 VOTE REQUIRED..................................... 12
Section 4.19 OPINION OF FINANCIAL ADVISOR...................... 12
Section 4.20 ACCOUNTING MATTERS................................ 12
Section 4.21 DGCL SECTION 203.................................. 12
Section 4.22 LABOR MATTERS..................................... 12
Section 4.23 AFFILIATE TRANSACTIONS............................ 12
Section 4.24 BROKERS........................................... 13
</TABLE>
A-i
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Section 5.1 ORGANIZATION...................................... 13
Section 5.2 CAPITALIZATION.................................... 13
Section 5.3 AUTHORITY RELATIVE TO THIS AGREEMENT.............. 14
Section 5.4 CONSENTS AND APPROVALS; NO VIOLATIONS............. 14
Section 5.5 REPORTS AND FINANCIAL STATEMENTS.................. 14
Section 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS; MATERIAL
CONTRACTS........................................ 14
Section 5.7 LITIGATION........................................ 15
Section 5.8 ABSENCE OF UNDISCLOSED LIABILITIES................ 15
Section 5.9 NO DEFAULT........................................ 15
Section 5.10 TAXES............................................. 15
Section 5.11 COMPLIANCE WITH APPLICABLE LAW.................... 16
Section 5.12 INFORMATION IN DISCLOSURE DOCUMENTS AND
REGISTRATION STATEMENT........................... 16
Section 5.13 EMPLOYEE BENEFIT PLANS; ERISA..................... 16
Section 5.14 ENVIRONMENTAL LAWS AND REGULATIONS................ 16
Section 5.15 VOTE REQUIRED..................................... 17
Section 5.16 OPINION OF FINANCIAL ADVISOR...................... 17
Section 5.17 ACCOUNTING MATTERS................................ 17
Section 5.18 BROKERS........................................... 17
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE
MERGER........................................... 17
Section 6.2 CONDUCT OF BUSINESS BY PARENT PENDING THE
MERGER........................................... 19
Section 6.3 CONDUCT OF BUSINESS OF SUB........................ 19
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS AND INFORMATION............................ 19
Section 7.2 NO SOLICITATION................................... 19
Section 7.3 REGISTRATION STATEMENT............................ 20
Section 7.4 PROXY STATEMENTS; STOCKHOLDER APPROVALS........... 20
Section 7.5 COMPLIANCE WITH THE SECURITIES ACT................ 21
Section 7.6 BEST EFFORTS...................................... 21
Section 7.7 VOTING AGREEMENT.................................. 22
Section 7.8 COMPANY STOCK OPTIONS............................. 22
Section 7.9 EMPLOYEE BENEFITS................................. 22
Section 7.10 PUBLIC ANNOUNCEMENTS.............................. 22
Section 7.11 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND
INSURANCE........................................ 22
Section 7.12 EXPENSES.......................................... 23
Section 7.13 COMPANY DEBT...................................... 23
Section 7.14 LISTING APPLICATION............................... 23
Section 7.15 SUPPLEMENTAL DISCLOSURE........................... 23
Section 7.16 LETTERS OF ACCOUNTANTS............................ 24
Section 7.17 DIRECTORS OF PARENT............................... 24
</TABLE>
A-ii
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT
THE MERGER....................................... 24
Section 8.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO
EFFECT THE MERGER................................ 25
Section 8.3 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT
THE MERGER....................................... 26
ARTICLE IX
TERMINATION
Section 9.1 TERMINATION....................................... 26
Section 9.2 EFFECT OF TERMINATION............................. 28
ARTICLE X
GENERAL PROVISIONS
Section 10.1 AMENDMENT AND MODIFICATION........................ 28
Section 10.2 WAIVER............................................ 28
Section 10.3 SURVIVABILITY; INVESTIGATIONS..................... 28
Section 10.4 NOTICES........................................... 29
Section 10.5 DESCRIPTIVE HEADINGS; INTERPRETATION.............. 29
Section 10.6 ENTIRE AGREEMENT; ASSIGNMENT...................... 30
Section 10.7 GOVERNING LAW..................................... 30
Section 10.8 SEVERABILITY...................................... 30
Section 10.9 COUNTERPARTS...................................... 30
EXHIBITS
Exhibit A VOTING AGREEMENT.................................. A-1
Exhibit B-1 FORM OF PARENT AFFILIATE LETTER................... B-1
Exhibit B-2 FORM OF COMPANY AFFILIATE LETTER.................. B-2
</TABLE>
A-iii
<PAGE>
GLOSSARY OF DEFINED TERMS
<TABLE>
<CAPTION>
TERM SECTION
- -------------------------------------------------- ----------
<S> <C>
ACQUIRING PERSON.................................. 9.1(d)
ACQUISITION TRANSACTION........................... 7.2
AFFILIATES........................................ 7.5(a)
AFFILIATE LETTERS................................. 7.5(b)
AGREEMENT......................................... Preamble
APPLICABLE LAW.................................... 4.14
BEAR STEARNS...................................... 5.16
BUSINESS.......................................... 4.13
CERTIFICATES...................................... 3.2(b)
CLOSING........................................... 1.3
CLOSING DATE...................................... 1.3
CODE.............................................. Preamble
COMDATA........................................... 4.3
COMPANY........................................... Preamble
COMPANY COMMON STOCK.............................. 3.1(a)
COMPANY DEBT...................................... 7.13
COMPANY ERISA AFFILIATE........................... 4.16(a)
COMPANY MATERIAL ADVERSE EFFECT................... 4.1
COMPANY PERMITS................................... 4.14
COMPANY PLANS..................................... 4.16(a)
COMPANY PREFERRED STOCK........................... Preamble
COMPANY SEC REPORTS............................... 4.6
COMPANY STOCK..................................... 3.1(c)
COMPANY STOCK OPTION.............................. 3.1(e)
COMPUTER SOFTWARE................................. 4.13(e)
CONFIDENTIALITY AGREEMENTS........................ 7.1
CONTRACT.......................................... 4.5
DEBT TENDER OFFER................................. 7.13
DISSENTING SHARES................................. 3.1(b)
DGCL.............................................. Preamble
EFFECTIVE TIME.................................... 1.2
ENVIRONMENTAL LAWS................................ 4.17(a)
ERISA............................................. 4.16(a)
EXCHANGE ACT...................................... 4.5
EXCHANGE AGENT.................................... 3.2(a)
EXCHANGE RATIO.................................... 3.1(a)
GAAP.............................................. 4.6
GOVERNMENTAL ENTITY............................... 4.5
HSR ACT........................................... 4.5
INTELLECTUAL PROPERTY............................. 4.13(a)
LAZARD FRERES..................................... 4.19
LIENS............................................. 4.3
MAXIMUM AMOUNT.................................... 7.11(b)
MERGER............................................ 1.1
NASD.............................................. 4.5
NEW OPTION........................................ 7.8
NGCA.............................................. 4.5
NJCCA............................................. 4.5
</TABLE>
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<TABLE>
<CAPTION>
TERM SECTION
- -------------------------------------------------- ----------
<S> <C>
NYSE.............................................. 3.4
PARENT............................................ Preamble
PARENT COMMON STOCK............................... 3.1(a)
PARENT ERISA AFFILIATE............................ 5.13(a)
PARENT MATERIAL ADVERSE EFFECT.................... 5.1
PARENT PERMITS.................................... 5.11
PARENT PLAN....................................... 5.13(a)
PARENT PREFERRED STOCK............................ 5.2(a)
PARENT SEC REPORTS................................ 5.5
PARENT STOCK OPTIONS.............................. 5.2(a)
POLICY............................................ 4.6
PROXY STATEMENT................................... 4.15
REBOUL MACMURRAY.................................. 8.3(d)
REGISTRATION STATEMENT............................ 4.15
RESUMIX TRANSACTION............................... 5.2(c)
RIGHTS............................................ 4.2(b)
SEC............................................... 4.6
SECURITIES ACT.................................... 4.5
SENIOR NOTES...................................... 7.13
SERIES A PREFERRED................................ 4.2(a)
SERIES B PREFERRED................................ 4.2(a)
SERIES C PREFERRED................................ 4.2(a)
SERVICE........................................... 4.11(a)
SUB............................................... Preamble
SUB COMMON STOCK.................................. 3.1(d)
SUBSIDIARY........................................ 3.1(c)
SURVIVING CORPORATION............................. 1.1
TAXES............................................. 4.11(b)
TAX RETURN........................................ 4.11(b)
VOTING AGREEMENT.................................. Preamble
</TABLE>
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AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of August 23, 1995 (this
"AGREEMENT"), by and among Ceridian Corporation, a Delaware corporation
("PARENT"), Convoy Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent ("SUB"), and Comdata Holdings Corporation, a Delaware
corporation (the "COMPANY").
WHEREAS, the Boards of Directors of Parent and Sub and the Company deem it
advisable and in the best interests of their respective stockholders that Parent
acquire the Company pursuant to the terms and conditions of this Agreement, and,
in furtherance of such acquisition, such Boards of Directors have approved the
merger of Sub with and into the Company in accordance with the terms of this
Agreement and the General Corporation Law of the State of Delaware (the "DGCL");
and
WHEREAS, concurrently with the execution and delivery of this Agreement and
as a condition and inducement to Parent's willingness to enter into this
Agreement, certain holders of shares of the Preferred Stock, par value $.01 per
share (the "COMPANY PREFERRED STOCK"), of the Company are entering into an
agreement with Parent and Sub in the form attached hereto as Exhibit A (the
"VOTING AGREEMENT") to vote such shares of the Company Preferred Stock in
accordance with the terms set forth in the Voting Agreement; and
WHEREAS, for federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE"); and
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests;
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, the
parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 THE MERGER. In accordance with the provisions of this
Agreement and the DGCL, at the Effective Time (as defined in Section 1.2), Sub
shall be merged with and into the Company (the "MERGER"), the separate existence
of Sub shall thereupon cease, and the Company shall be the surviving corporation
in the Merger (sometimes hereinafter called the "SURVIVING CORPORATION") and
shall continue its corporate existence under the laws of the State of Delaware.
The Merger shall have the effects set forth in Section 259 of the DGCL.
Section 1.2 EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective at the time of filing of, or at such later time specified in, a
properly executed Certificate of Merger, in the form required by and executed in
accordance with the DGCL, filed with the Secretary of State of the State of
Delaware in accordance with the provisions of Section 251 of the DGCL. Such
filing shall be made as soon as practicable after the Closing (as defined in
Section 1.3). When used in this Agreement, the term "EFFECTIVE TIME" shall mean
the date and time at which the Merger shall become effective.
Section 1.3 CLOSING. The closing of the transactions contemplated by this
Agreement (the "CLOSING") shall take place at the offices of Skadden, Arps,
Slate, Meagher & Flom, 919 Third Avenue, New York, New York, at 10:00 a.m.,
local time, on the day on which all of the conditions set forth in Article VIII
are satisfied or waived or on such other date and at such other time and place
as Parent and the Company shall agree (such date, the "CLOSING DATE").
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ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 CERTIFICATE OF INCORPORATION. The Certificate of Incorporation
of Sub in effect at the Effective Time shall be the Certificate of Incorporation
of the Surviving Corporation until amended in accordance with applicable law,
except that the name of the Surviving Corporation shall be "Comdata Holdings
Corporation."
Section 2.2 BY-LAWS. The By-Laws of Sub as in effect at the Effective Time
shall be the By-Laws of the Surviving Corporation until amended in accordance
with applicable law.
Section 2.3 DIRECTORS AND OFFICERS OF SURVIVING CORPORATION.
(a) The directors of Sub at the Effective Time shall be the initial
directors of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Certificate of Incorporation or By-Laws
of the Surviving Corporation or as otherwise provided by law.
(b) The officers of the Company at the Effective Time shall be the initial
officers of the Surviving Corporation and shall hold office from the Effective
Time until their respective successors are duly elected or appointed and
qualified in the manner provided in the Certificate of Incorporation or By-Laws
of the Surviving Corporation, or as otherwise provided by law.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 EXCHANGE RATIO. At the Effective Time, by virtue of the Merger
and without any action on the part of the holder thereof:
(a) Each share of Common Stock, par value $.01 per share (the "COMPANY
COMMON STOCK"), of the Company issued and outstanding immediately prior to
the Effective Time (other than shares to be cancelled in accordance with
Section 3.1(c)) shall be converted into the right to receive 0.570 (the
"EXCHANGE RATIO") of a share of the Common Stock, par value $.50 per share
(the "PARENT COMMON STOCK"), of Parent, payable upon the surrender of the
certificate formerly representing such share of Company Common Stock;
(b) Each share of Company Preferred Stock issued and outstanding
immediately prior to the Effective Time (other than shares to be cancelled
in accordance with Section 3.1(c) and other than shares of Company Preferred
Stock as to which appraisal rights shall have been duly demanded under the
DGCL ("DISSENTING SHARES")) shall be converted into the right to receive a
number of shares of Parent Common Stock equal to the product of (i) the
Exchange Ratio and (ii) the number of shares of Company Common Stock into
which such share of Company Preferred Stock was convertible immediately
prior to the Effective Time, payable upon the surrender of the certificate
formerly representing such share of Company Preferred Stock.
(c) All shares of Company Common Stock and all shares of Company
Preferred Stock (collectively sometimes hereinafter referred to as "COMPANY
STOCK") that, in either case, are (i) held by the Company as treasury shares
or (ii) owned by Parent or any wholly-owned Subsidiary of Parent, shall be
cancelled and retired and cease to exist, and no securities of Parent or
other consideration shall be delivered in exchange therefor. As used in this
Agreement, the term "SUBSIDIARY" means, with respect to any party, any
corporation or other organization, whether incorporated or unincorporated,
of which (x) 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 (y) at least a majority of the
securities or other
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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 and/or one or more of its Subsidiaries.
(d) Each share of Common Stock, par value $.01 per share ("SUB COMMON
STOCK"), of Sub issued and outstanding immediately prior to the Effective
Time shall be converted into and become one fully paid and nonassessable
share of Common Stock, par value $.01 per share, of the Surviving
Corporation.
(e) Each outstanding option to purchase Company Common Stock (each, a
"COMPANY STOCK OPTION") shall be assumed by Parent as more specifically
provided in Section 7.8.
(f) The holders of Dissenting Shares, if any, shall be entitled to
payment by the Surviving Corporation of the appraised value of such shares
to the extent permitted by and in accordance with the provisions of Section
262 of the DGCL; PROVIDED, HOWEVER, that (i) if any holder of the Dissenting
Shares shall, under the circumstances permitted by the DGCL, subsequently
deliver a written withdrawal of such holder's demand for appraisal of such
shares, or (ii) if any holder fails to establish such holder's entitlement
to rights to payment as provided in such Section 262, or (iii) if neither
any holder of Dissenting Shares nor the Surviving Corporation has filed a
petition demanding a determination of the value of all Dissenting Shares
within the time provided in such Section 262, such holder or holders (as the
case may be) shall forfeit such right to payment for such shares and such
shares shall thereupon be deemed to have been converted into Parent Common
Stock pursuant to Section 3.1(b) as of the Effective Time. The Surviving
Corporation shall be solely responsible for, and shall pay out of its own
funds, any amounts which become due and payable to holders of Dissenting
Shares, and such amounts shall not be paid directly or indirectly by Parent.
Section 3.2 EXCHANGE OF COMPANY STOCK; PROCEDURES.
(a) Prior to the Closing Date, Parent shall designate a bank or trust
company reasonably acceptable to the Company to act as Exchange Agent hereunder
(the "EXCHANGE AGENT"). As soon as practicable after the Effective Time, Parent
shall deposit with or for the account of the Exchange Agent stock certificates
representing the number of shares of Parent Common Stock issuable pursuant to
Section 3.1 in exchange for outstanding shares of Company Stock, which shares of
Parent Common Stock shall be deemed to have been issued at the Effective Time.
(b) As soon as practicable after the Effective Time, Parent shall cause the
Exchange Agent to mail to each holder of record of a certificate or certificates
which immediately prior to the Effective Time represented outstanding shares of
Company Stock (the "CERTIFICATES") that were converted pursuant to Section 3.1
into the right to receive shares of Parent Common Stock (i) a form of letter of
transmittal specifying 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 (ii) instructions for use in surrendering
such Certificates in exchange for certificates representing shares of Parent
Common Stock. Upon surrender of a Certificate for cancellation to the Exchange
Agent, together with such letter of transmittal, duly executed, the holder of
such Certificate shall be entitled to receive in exchange therefor (x) a
certificate representing that number of whole shares of Parent Common Stock
which such holder has the right to receive pursuant to the provisions of this
Article III and (y) cash in lieu of any fractional shares of Parent Common Stock
to which such holder is entitled pursuant to Section 3.4, after giving effect to
any required tax withholdings, and the Certificate so surrendered shall
forthwith be cancelled. In the event of a transfer of ownership of Company Stock
which is not registered in the transfer records of the Company, a certificate
representing the proper number of shares of Parent Common Stock may be issued to
a transferee if the Certificate representing such Company Stock is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer, and by evidence that any applicable stock transfer taxes have
been paid. Until surrendered as contemplated by this Section 3.2(b), each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender a certificate representing shares
of Parent Common Stock and cash in lieu of any fractional shares of Parent
Common Stock as contemplated by this Article III.
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Section 3.3 DIVIDENDS; TRANSFER TAXES; ESCHEAT. No dividends or
distributions that are declared on shares of Parent Common Stock will be paid to
persons entitled to receive certificates representing shares of Parent Common
Stock until such persons surrender their Certificates. Upon such surrender,
there shall be paid to the person in whose name the certificates representing
such shares of Parent Common Stock shall be issued, any dividends or
distributions with respect to such shares of Parent Common Stock which have a
record date after the Effective Time and shall have become payable between the
Effective Time and the time of such surrender. In no event shall the person
entitled to receive such dividends or distributions be entitled to receive
interest thereon. Promptly following the date which is six months after the
Effective Time, the Exchange Agent shall deliver to the Surviving Corporation
all cash, certificates and other documents in its possession relating to the
transactions described in this Agreement, and any holders of Company Stock who
have not theretofore complied with this Article III shall look thereafter only
to the Surviving Corporation for the shares of Parent Common Stock, any
dividends or distributions thereon, and any cash in lieu of fractional shares
thereof to which they are entitled pursuant to this Article III. Notwithstanding
the foregoing, neither the Exchange Agent nor any party hereto shall be liable
to a holder of Company Stock for any shares of Parent Common Stock, any
dividends or distributions thereon or any cash in lieu of fractional shares
thereof delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.
Section 3.4 NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional shares of Parent Common Stock shall be issued upon the
surrender for exchange of Certificates, and such fractional interests shall not
entitle the owner thereof to vote or to any rights of a security holder. In lieu
of any such fractional securities, each holder of Company Stock who would
otherwise have been entitled to a fraction of a share of Parent Common Stock
upon surrender of such holder's Certificates will be entitled to receive, and
Parent will timely provide (or cause to be provided) to the Exchange Agent
sufficient funds to make, a cash payment (without interest) determined by
multiplying (i) the fractional interest to which such holder would otherwise be
entitled (after taking into account all shares of Company Stock then held of
record by such holder) and (ii) the average of the per share closing prices for
Parent Common Stock on the New York Stock Exchange (the "NYSE") for the five
trading days immediately preceding the Effective Time. It is understood (i) that
the payment of cash in lieu of fractional shares of Parent Common Stock is
solely for the purpose of avoiding the expense and inconvenience to Parent of
issuing fractional shares and does not represent separately bargained-for
consideration and (ii) that no holder of Company Stock will receive cash in lieu
of fractional shares of Parent Common Stock in an amount greater than the value
of one full share of Parent Common Stock.
Section 3.5 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of shares of
Company Stock shall thereafter be made. If, after the Effective Time,
Certificates are presented to the Surviving Corporation, they shall be cancelled
and exchanged as provided in this Article III.
Section 3.6 FURTHER ASSURANCES. If, at any time after the Effective Time,
the Surviving Corporation shall consider or be advised that any deeds, bills of
sale, assignments, assurances or any other actions or things are necessary or
desirable to vest, perfect or confirm of record or otherwise in the Surviving
Corporation its right, title or interest in, to or under any of the rights,
properties or assets of either of Sub or the Company acquired or to be acquired
by the Surviving Corporation as a result of, or in connection with, the Merger
or otherwise to carry out this Agreement, the officers of the Surviving
Corporation shall be authorized to execute and deliver, in the name and on
behalf of each of Sub and the Company or otherwise, all such deeds, bills of
sale, assignments and assurances and to take and do, in such names and on such
behalves or otherwise, all such other actions and things as may be necessary or
desirable to vest, perfect or confirm any and all right, title and interest in,
to and under such rights, properties or assets in the Surviving Corporation or
otherwise to carry out the purposes of this Agreement.
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ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 4.1 ORGANIZATION. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Delaware
and has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. The Company is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary, except where
the failure to be so qualified will not have a material adverse effect,
individually or in the aggregate, on the financial condition, results of
operations, business, assets, liabilities, prospects or properties of the
Company and its Subsidiaries taken as a whole, or the ability of the Company to
consummate the Merger and the other transactions contemplated by this Agreement
(a "COMPANY MATERIAL ADVERSE EFFECT").
Section 4.2 CAPITALIZATION.
(a) The authorized capital stock of the Company consists of 100,000,000
shares of Company Common Stock and 5,000,000 shares of Company Preferred Stock.
With respect to the Company Preferred Stock, 1,325,498 shares have been
designated as Series A Convertible Preferred Stock (the "SERIES A PREFERRED"),
572,226 shares have been designated as Series B Convertible Preferred Stock (the
"SERIES B PREFERRED"), and 250,500 shares have been designated as Series C
Convertible Preferred Stock (the "SERIES C PREFERRED"). As of August 22, 1995,
(i) 16,755,016 shares of Company Common Stock were issued and outstanding, (ii)
no shares of Series A Preferred were issued and outstanding, (iii) 558,970
shares of Series B Preferred were issued and outstanding, held by 21 holders of
record and convertible into 12,935,020 shares of Company Common Stock, (iv)
247,975 shares of Series C Preferred were issued and outstanding, held by 9
holders of record and convertible into 5,692,852 shares of Company Common Stock,
(v) Company Stock Options to acquire 2,046,848 shares of Company Common Stock
were outstanding under all stock option plans of the Company, (vi) 3,250,000
shares of Company Common Stock were reserved for issuance pursuant to the
Company Stock Options and all other employee benefit plans of the Company, and
(vii) 18,627,872 shares of Company Common Stock were reserved for issuance upon
the conversion of the outstanding Series B Preferred and Series C Preferred. All
of the issued and outstanding shares of Company Common Stock and Company
Preferred Stock are validly issued, fully paid and nonassessable. Schedule
4.2(a) sets forth the liquidation values, as of each of June 15, 1995, September
15, 1995 and December 15, 1995, for each share of the Series B Preferred and the
Series C Preferred, and the accretion of dividends payable per day per share on
the Series B Preferred and the Series C Preferred for each of the three
quarterly dividend periods ending September 15, 1995, December 15, 1995 and
March 15, 1996.
(b) Except as disclosed in this Section 4.2 or as set forth on Schedule
4.2(b), (i) there is no outstanding right, subscription, warrant, call, option
or other agreement or arrangement of any kind (collectively, "Rights") to
purchase or otherwise to receive from the Company or any of its Subsidiaries any
of the outstanding authorized but unissued or treasury shares of the capital
stock or any other security of the Company or any of its Subsidiaries, (ii)
there is no outstanding security of any kind convertible into or exchangeable
for such capital stock, and (iii) there is no voting trust or other agreement or
understanding to which the Company or any of its Subsidiaries is a party or is
bound with respect to the voting of the capital stock of the Company or any of
its Subsidiaries.
(c) Since December 31, 1994, except as set forth on Schedule 4.2(c), the
Company has not in any manner accelerated or provided for the acceleration of
the vesting or exercisability of, or otherwise modified the terms and conditions
applicable to, any of the Company Stock Options, whether set forth in the
governing stock option plans of the Company, a stock option grant, award or
other agreement or otherwise. Except as set forth on Schedule 4.2(c), none of
the awards, grants or other agreements pursuant to which Company Stock Options
were issued have provisions which accelerate the vesting or right to exercise
such
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options upon the execution of this Agreement (including the documents attached
as Exhibits hereto), the consummation of the transactions contemplated hereby
(or thereby) or any other "change of control" events.
Section 4.3 COMPANY SUBSIDIARIES. Schedule 4.3(a) contains a complete and
accurate list of all Subsidiaries of the Company. Each Subsidiary of the Company
that is a corporation, including, without limitation, Comdata Network, Inc.
("COMDATA"), is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each Subsidiary of
the Company that is a partnership is duly formed and validly existing under the
laws of its jurisdiction of formation. Each Subsidiary of the Company has the
corporate power or the partnership power, as the case may be, to carry on its
business as it is now being conducted or presently proposed to be conducted.
Each Subsidiary of the Company is duly qualified as a foreign corporation or a
foreign partnership, as the case may be, authorized to do business, and is in
good standing, in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified will not have a Company
Material Adverse Effect. All of the outstanding shares of capital stock of the
Subsidiaries of the Company that are corporations are validly issued, fully paid
and nonassessable. Except as set forth on Schedule 4.3(b), all of the
outstanding shares of capital stock of Comdata are owned by the Company, free
and clear of any liens, pledges, security interests, claims, charges or other
encumbrances of any kind whatsoever ("LIENS"). Except as set forth in the
Company SEC Reports (as hereinafter defined), all of the outstanding shares of
capital stock of, or other ownership interests in, each other Subsidiary of the
Company are owned by the Company or a Subsidiary of the Company free and clear
of any Liens.
Section 4.4 AUTHORITY RELATIVE TO THIS AGREEMENT. The Company has the
requisite corporate power and authority to execute and deliver this Agreement
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the transactions contemplated on its part hereby have been duly authorized by
the Company's Board of Directors and, except for the approval of its
stockholders to be sought at the stockholders meeting contemplated by Section
7.4(a) with respect to this Agreement, no other corporate proceedings on the
part of the Company are necessary to authorize this Agreement or for the Company
to consummate the transactions contemplated hereby. This Agreement has been duly
and validly executed and delivered by the Company and constitutes a valid and
binding agreement of the Company, enforceable against the Company in accordance
with its terms.
Section 4.5 CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the execution,
delivery and performance of this Agreement by the Company, nor the consummation
by the Company of the transactions contemplated hereby, will (i) conflict with
or result in any breach of any provisions of the charter, by-laws or other
organizational documents of the Company or any of its Subsidiaries, (ii) require
a filing with, or a permit, authorization, consent or approval of, any federal,
state, local or foreign court, arbitral tribunal, administrative agency or
commission or other governmental or other regulatory authority or administrative
agency or commission (a "GOVERNMENTAL ENTITY"), except in connection with or in
order to comply with the applicable provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR ACT"), the Securities
Act of 1933, as amended (the "SECURITIES ACT"), the Securities Exchange Act of
1934, as amended (the "EXCHANGE ACT"), the New Jersey Casino Control Act (the
"NJCCA"), the Nevada Gaming Control Act (the "NGCA"), state banking laws, state
laws governing the issuance of financial instruments or the transfer of funds,
state securities or "blue sky" laws, the By-Laws of the National Association of
Securities Dealers (the "NASD") and the filing and recordation of a Certificate
of Merger as required by the DGCL, (iii) except as set forth on Schedule 4.5,
result in a violation or breach of, or constitute (with or without due notice or
lapse of time or both) a default (or give rise to any right of termination,
cancellation or acceleration) under, or result in the creation of a Lien on any
property or asset of the Company or any of its Subsidiaries pursuant to, any of
the terms, conditions or provisions of any material note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation (each,
a "CONTRACT") to which the Company or any of its Subsidiaries is a party or by
which any of them or any of their properties or assets may be bound or (iv)
violate any law, order, writ, injunction, decree, statute, rule or regulation of
any Governmental Entity
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applicable to the Company, any of its Subsidiaries or any of their properties or
assets, except, in the case of clauses (ii), (iii) and (iv), where the failure
to make such filing or obtain such authorization, consent or approval would not
have, or where such violations, breaches or defaults or Liens would not have, in
any such case, a Company Material Adverse Effect.
Section 4.6 REPORTS AND FINANCIAL STATEMENTS. The Company has timely filed
all reports required to be filed with the Securities and Exchange Commission
(the "SEC") pursuant to the Exchange Act or the Securities Act since January 1,
1994 (collectively, the "COMPANY SEC REPORTS"), and has previously made
available to Parent true and complete copies of all such Company SEC Reports.
Such Company SEC Reports, as of their respective dates, complied in all material
respects with the applicable requirements of the Securities Act and the Exchange
Act, as the case may be, and none of such Company SEC Reports contained any
untrue statement of a material fact or omitted to state a material fact required
to be stated therein or necessary to make the statements therein, in light of
the circumstances under which they were made, not misleading. The financial
statements of the Company included in the Company SEC Reports have been prepared
in accordance with United States generally accepted accounting principles
("GAAP") consistently applied throughout the periods indicated (except as
otherwise noted therein or, in the case of unaudited statements, as permitted by
Form 10-Q of the SEC) and fairly present (subject, in the case of unaudited
statements, to normal recurring year-end adjustments and any other adjustments
described therein) the consolidated financial position of the Company and its
consolidated Subsidiaries as at the dates thereof and the consolidated results
of operations and cash flows of the Company and its consolidated Subsidiaries
for the periods then ended. Since January 1, 1994, there has been no change in
any of the significant accounting (including tax accounting) policies, practices
or procedures of the Company or any of its consolidated Subsidiaries. In
connection with the Company's revenue recognition policy for unsettled
transactions (the "POLICY") that is described under the caption "Certain
Accounting Policies" in Item 7 of the Company's Report on Form 10-K for the
fiscal year ended December 31, 1994, (i) the Company has provided Parent with
true and complete copies of all legal and accounting assessments, reports,
memoranda and opinions it has obtained with respect to its adoption and
continuance of the Policy and (ii) the Company has not received or otherwise
become aware of any notices, inquiries or other communications from any
Governmental Entity alleging that, or seeking information in a context
suggesting an inquiry or investigation into whether, the Policy violates or
conflicts with any applicable abandoned property, escheat or similar laws or is
not in accordance with GAAP.
Section 4.7 ABSENCE OF CERTAIN CHANGES OR EVENTS; MATERIAL
CONTRACTS. Except as set forth on Schedule 4.7 or in the Company SEC Reports,
since December 31, 1994, (i) neither the Company nor any of its Subsidiaries has
conducted its business and operations other than in the ordinary course of
business and consistent with past practices or taken any actions that, if it had
been in effect, would have violated or been inconsistent with the provisions of
Section 6.1 and (ii) there has not been any fact, event, circumstance or change
affecting or relating to the Company or any of its Subsidiaries which has had or
is reasonably likely to have a Company Material Adverse Effect. Except as set
forth on Schedule 4.7, the transactions contemplated by this Agreement will not
constitute a change of control under or require the consent from or the giving
of notice to a third party pursuant to the terms, conditions or provisions of
any material Contract to which Parent or any of its Subsidiaries is a party.
Section 4.8 LITIGATION. Except for litigation disclosed in the notes to
the financial statements included in the Company's Annual Report to Stockholders
for the year ended December 31, 1994 or in the Company SEC Reports filed
subsequent thereto, there is no suit, action, proceeding or investigation
pending or, to the best knowledge of the Company, threatened against or
affecting the Company or any of its Subsidiaries, the outcome of which, in the
reasonable judgment of the Company, is likely to have a Company Material Adverse
Effect; nor is there any judgment, decree, injunction, ruling or order of any
Governmental Entity outstanding against the Company or any of its Subsidiaries
having, or which is reasonably likely to have a Company Material Adverse Effect.
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Section 4.9 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities or
obligations which are accrued or reserved against in the Company's financial
statements (or reflected in the notes thereto) included in the Company SEC
Reports or which were incurred after June 30, 1995 in the ordinary course of
business and consistent with past practice, and except as set forth on Schedule
4.9, none of the Company and its Subsidiaries has any liabilities or obligations
(whether absolute, accrued, contingent or otherwise) of a nature required by
GAAP to be reflected in a consolidated balance sheet (or reflected in the notes
thereto) or which would have a Company Material Adverse Effect.
Section 4.10 NO DEFAULT. Except as set forth on Schedule 4.10, neither the
Company nor any Subsidiary of the Company is in default or violation (and no
event has occurred which with notice or the lapse of time or both would
constitute a default or violation) of any term, condition or provision of (i)
its charter, by-laws or comparable organizational documents, (ii) any Contract
to which the Company or any of its Subsidiaries is a party or by which they or
any of their properties or assets may be bound, or (iii) any order, writ,
injunction, decree, statute, rule or regulation of any Governmental Entity
applicable to the Company or any of its Subsidiaries, except, in the cases of
clauses (ii) and (iii), for defaults or violations which would not have a
Company Material Adverse Effect.
Section 4.11 TAXES.
(a) The Company has heretofore delivered or will make available to Parent
true, correct and complete copies of the consolidated federal, state, local and
foreign income, franchise sales and other Tax Returns (as hereinafter defined)
filed by the Company and the Company Subsidiaries for each of the Company's
years ended December 31, 1994, 1993, 1992, 1991, 1990, 1989 and 1988 inclusive.
Except as set forth on Schedule 4.11, the Company has duly filed, and each
Subsidiary has duly filed, all material federal, state, local and foreign
income, franchise, sales and other Tax Returns required to be filed by the
Company or any of its Subsidiaries. All such Tax Returns are true, correct and
complete, in all material respects, and the Company and any of its Subsidiaries
have duly paid, all Taxes (as hereinafter defined) shown on such Tax Returns and
has made adequate provision for payment of all accrued but unpaid material Taxes
anticipated in respect of all periods since the periods covered by such Tax
Returns. Except as set forth on Schedule 4.11, all material deficiencies
assessed as a result of any examination of Tax Returns of the Company or any of
its Subsidiaries by federal, state, local or foreign tax authorities have been
paid or reserved on the financial statements of the Company in accordance with
GAAP consistently applied, and true, correct and complete copies of all revenue
agent's reports, "30-day letters," or "90-day letters" or similar written
statements proposing or asserting any Tax deficiency against the Company or any
of its Subsidiaries for any open year have been heretofore delivered to Parent.
The Company has heretofore delivered or will make available to Parent true,
correct and complete copies of all written tax-sharing agreements and written
descriptions of all such unwritten agreement or arrangements to which the
Company or any of its Subsidiaries is a party. Except as set forth in Schedule
4.11, no material issue has been raised during the past five years by any
federal, state, local or foreign taxing authority which, if raised with regard
to any other period not so examined, could reasonably be expected to result in a
proposed material deficiency for any other period not so examined. Except as
disclosed in Schedule 4.11 hereof, neither the Company nor any of its
Subsidiaries has granted any extension or waiver of the statutory period of
limitations applicable to any claim for any material Taxes. The consolidated
federal income tax returns of the Company and its Subsidiaries have been
examined by and settled with the Internal Revenue Service (the "SERVICE") for
all years through 1987. Except as set forth in Schedule 4.11, (i) neither the
Company nor any of the Company Subsidiaries is a party to any agreement,
contract or arrangement that would result, separately or in the aggregate, in
the payment of any "excess parachute payments" within the meaning of Section
280G of the Code; (ii) no consent has been filed under Section 341(f) of the
Code with respect to any of the Company or the Subsidiaries of the Company;
(iii) neither the Company nor any of the Subsidiaries of the Company has
participated in, or cooperated with, an international boycott within the meaning
of Section 999 of the Code; and (iv) neither the Company nor any of the
Subsidiaries of the Company has issued or assumed any corporate acquisition
indebtedness, as defined in Section 279(b) of the Code. The Company and each
Subsidiary of the Company have complied (and until the Effective Time will
comply) in all material respects with all applicable laws, rules and regulations
relating to the payment and withholding of Taxes (including, without limitation,
withholding of
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Taxes pursuant to Sections 1441 and 1442 of the Code or similar provisions under
any foreign laws) and have, within the time and in the manner prescribed by law,
withheld from employee wages and paid over to the proper governmental
authorities all amounts required to be so withheld and paid over under all
applicable laws.
(b) For purposes of this Agreement, the term "Taxes" shall mean all taxes,
charges, fees, levies, duties, imposts or other assessments, including, without
limitation, income, gross receipts, excise, property, sales, use, transfer,
gains, license, payroll, withholding, capital stock and franchise taxes, imposed
by the United States, or any state, local or foreign government or subdivision
or agency thereof, including any interest, penalties or additions thereto. For
purposes of this Agreement, the term "TAX RETURN" shall mean any report, return
or other information or document required to be supplied to a taxing authority
in connection with Taxes.
Section 4.12 TITLE TO PROPERTIES; ENCUMBRANCES. Except as described in the
following sentence, each of the Company and its Subsidiaries has good, valid and
marketable title to, or a valid leasehold interest in, all of its material
properties and assets (real, personal and mixed, tangible and intangible),
including, without limitation, all the properties and assets reflected in the
consolidated balance sheet of the Company and its Subsidiaries as of June 30,
1995 included in the Company's Quarterly Report on Form 10-Q for the period
ended on such date (except for properties and assets disposed of in the ordinary
course of business and consistent with past practices since June 30, 1995). None
of such properties or assets are subject to any Liens (whether absolute,
accrued, contingent or otherwise), except (i) as specifically set forth in the
Company SEC Reports and (ii) minor imperfections of title and encumbrances, if
any, which are not substantial in amount, do not materially detract from the
value of the property or assets subject thereto and do not impair the operations
of any of the Company and its Subsidiaries.
Section 4.13 INTELLECTUAL PROPERTY. (a) Except as set forth on Schedule
4.13(a), the Company and its Subsidiaries are the sole and exclusive owners of
all material patents, patent applications, patent rights, trademarks, trademark
rights, trade names, trade name rights, copyrights, service marks, trade
secrets, registrations for and applications for registration of trademarks,
service marks and copyrights, technology and know-how, rights in Computer
Software (as hereinafter defined) and other proprietary rights and information
and all technical and user manuals and documentation made or used in connection
with any of the foregoing, used or held for use in connection with the
businesses of the Company or any of its Subsidiaries as currently conducted
(collectively, the "INTELLECTUAL PROPERTY"), free and clear of all Liens except
as set forth on Schedule 4.13(a) and except minor imperfections of title and
encumbrances, if any, which are not substantial in amount, do not materially
detract from the value of the Intellectual Property subject thereto and do not
impair the operations of any of the Company and its Subsidiaries.
(b) All grants, registrations and applications for Intellectual Property
that are used in and are material to the conduct of the Business (as hereinafter
defined) (i) are valid, subsisting, in proper form and enforceable, and have
been duly maintained, including the submission of all necessary filings and fees
in accordance with the legal and administrative requirements of the appropriate
jurisdictions and (ii) have not lapsed, expired or been abandoned, and no
application or registration therefor is the subject of any legal or governmental
proceeding before any registration authority in any jurisdiction.
(c) Each of the Company and its Subsidiaries owns or has the right to use
all of the material Intellectual Property used by it or held for use by it in
connection with its business. To the knowledge of the Company, there are no
conflicts with or infringements of any Intellectual Property by any third party.
The conduct of the businesses of the Company and its Subsidiaries as currently
conducted (collectively, the "BUSINESS") does not conflict with or infringe in
any way any proprietary right of any third party, which conflict or infringement
would have a Company Material Adverse Effect, and there is no claim, suit,
action or proceeding pending or, to the knowledge of the Company, threatened
against the Company or any of its Subsidiaries (i) alleging any such conflict or
infringement with any third party's proprietary rights, or (ii) challenging the
ownership, use, validity or enforceability of the Intellectual Property.
(d) The Computer Software used by the Company or any of its Subsidiaries in
the conduct of the Business is either: (i) owned by the Company or such
Subsidiary of the Company, as the case may be, as the
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result of internal development by an employee of the Company or such Subsidiary
of the Company; (ii) developed on behalf of the Company or any of its
Subsidiaries by a consultant or contractor and all ownership rights therein have
been assigned or otherwise transferred to or vested in the Company or such
Subsidiary of the Company, as the case may be; or (iii) licensed or acquired
from a third party pursuant to a written license, assignment, or other Contract
which is in full force and effect and of which neither the Company nor any of
its Subsidiaries is in material breach. Except as set forth on Schedule 4.13(d),
(x) no third party has had access to any of the source code for any of the
Computer Software described in clause (i) or (ii) hereof and (y) no act has been
done or omitted to be done by the Company or any of its Subsidiaries to impair
or dedicate to the public or entitle any Governmental Entity to hold abandoned
any of such Computer Software.
(e) For purposes of this Agreement, the term "COMPUTER SOFTWARE" shall mean
(i) any and all computer programs consisting of sets of statements and
instructions to be used directly or indirectly in computer software or firmware,
(ii) databases and compilations, including without limitation any and all data
and collections of data, whether machine readable or otherwise, (iii) all
versions of the foregoing (x) including without limitation all screen displays
and designs thereof, and all component modules of source code or object code or
natural language code therefor, and (y) whether recorded on papers, magnetic
media or other electronic or non-electronic device, (iv) all descriptions,
flow-charts and other work product used to design, plan, organize and develop
any of the foregoing, and (v) all documentation, including without limitation
all technical and user manuals and training materials, relating to the
foregoing.
Section 4.14 COMPLIANCE WITH APPLICABLE LAW. Except as set forth on
Schedule 4.14 or as disclosed in the Company SEC Reports, (i) the Company and
its Subsidiaries hold, and are in compliance with the terms of, all permits,
licenses, exemptions, orders and approvals of all Governmental Entities
necessary for the current and proposed conduct of their respective businesses
("COMPANY PERMITS"), except for failures to hold or to comply with such permits,
licenses, exemptions, orders and approvals which would not have a Company
Material Adverse Effect, (ii) no fact exists or event has occurred, and no
action or proceeding is pending or, to the Company's knowledge, threatened, that
has a reasonable possibility of resulting in a revocation, non-renewal,
termination, suspension or other material impairment of any material Company
Permits, (iii) the businesses of the Company and its Subsidiaries are not being
conducted in violation of any applicable law, ordinance, regulation, judgment,
decree or order of any Governmental Entity ("APPLICABLE LAW"), except for
violations or possible violations which do not, and, insofar as reasonably can
be foreseen, in the future will not, have a Company Material Adverse Effect, and
(iv) to the knowledge of the Company, (x) no investigation or review by any
Governmental Entity with respect to the Company or its Subsidiaries is pending
or threatened and (y) no Governmental Entity has indicated an intention to
conduct the same, other than, in each case, those which the Company reasonably
believes will not have a Company Material Adverse Effect.
Section 4.15 INFORMATION IN DISCLOSURE DOCUMENTS AND REGISTRATION
STATEMENT. None of the information to be supplied by the Company or Comdata for
inclusion in (i) the Registration Statement to be filed with the SEC by Parent
on Form S-4 under the Securities Act for the purpose of registering the shares
of Parent Common Stock to be issued in connection with the Merger (the
"REGISTRATION STATEMENT") or (ii) the joint proxy statement to be distributed in
connection with Parent's and the Company's meetings of stockholders to vote upon
this Agreement (the "PROXY STATEMENT") will, in the case of the Registration
Statement, at the time it becomes effective and at the Effective Time, or, in
the case of the Proxy Statement or any amendments thereof or supplements
thereto, at the time of the mailing of the Proxy Statement and any amendments or
supplements thereto, and at the time of the meeting of stockholders of the
Company to be held in connection with the Merger, 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 as to form in all material respects with the applicable provisions
of the Exchange Act, and the rules and regulations promulgated thereunder,
except that no representation is made by the Company with respect to statements
made therein based on information supplied by Parent or its representatives for
inclusion in the Proxy Statement or with respect to information concerning
Parent or any of its Subsidiaries incorporated by reference in the Proxy
Statement.
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Section 4.16 EMPLOYEE BENEFIT PLANS; ERISA.
(a) Schedule 4.16 hereto sets forth a true and complete list of each
material employee benefit plan, arrangement or agreement that is maintained, or
was maintained at any time during the five (5) calendar years preceding the date
of this Agreement (the "COMPANY PLANS"), by the Company or by any trade or
business, whether or not incorporated (a "COMPANY ERISA AFFILIATE"), which
together with the Company would be deemed a "single employer" within the meaning
of Section 4001 of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA").
(b) Each of the Company Plans that is subject to ERISA is and has been in
compliance with ERISA and the Code in all material respects; each of the Company
Plans intended to be "qualified" within the meaning of Section 401(a) of the
Code is so qualified; no Company Plan has an accumulated or waived funding
deficiency within the meaning of Section 412 of the Code; neither the Company
nor any Company ERISA Affiliate has incurred, directly or indirectly, any
material liability (including any material contingent liability) to or on
account of a Company Plan pursuant to Title IV of ERISA; no proceedings have
been instituted to terminate any Company Plan that is subject to Title IV of
ERISA; no "reportable event," as such term is defined in Section 4043(b) of
ERISA, has occurred with respect to any Company Plan; and no condition exists
that presents a material risk to the Company or any Company ERISA Affiliate of
incurring a liability to or on account of a Company Plan pursuant to Title IV of
ERISA.
(c) The current value of the assets of each of the Company Plans that are
subject to Title IV of ERISA, based upon the actuarial assumptions (to the
extent reasonable) presently used by the Company Plans, exceeds the present
value of the accrued benefits under each such Company Plan; no Company Plan is a
multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA) and no
Company Plan is a multiple employer plan as defined in Section 413 of the Code;
and all material contributions or other amounts payable by the Company as of the
Effective Time with respect to each Company Plan in respect of current or prior
plan years have been either paid or accrued on the balance sheet of the Company.
To the best knowledge of the Company, there are no material pending, threatened
or anticipated claims (other than routine claims for benefits) by, on behalf of
or against any of the Company Plans or any trusts related thereto.
(d) Neither the Company nor any Company ERISA Affiliate, nor any Company
Plan, nor any trust created thereunder, nor any trustee or administrator thereof
has engaged in a transaction in connection with which the Company or any Company
ERISA Affiliate, any Company Plan, any such trust, or any trustee or
administrator thereof, or any party dealing with any Company Plan or any such
trust could be subject to either a material civil penalty assessed pursuant to
Section 409 or 502(i) of ERISA or a material tax imposed pursuant to Section
4975 or 4976 of the Code. No Company Plan provides death or medical benefits
(whether or not insured), with respect to current or former employees of the
Company or any Company ERISA Affiliate beyond their retirement or other
termination of service other than (i) coverage mandated by applicable law or
(ii) death benefits under any "employee pension plan," as that term is defined
in Section 3(2) of ERISA).
Section 4.17 ENVIRONMENTAL LAWS AND REGULATIONS. (a) Except as set forth
on Schedule 4.17(a) and except for matters which would not, individually or in
the aggregate, be reasonably expected to result in a Company Material Adverse
Effect: (i) the Company and its Subsidiaries are and have been in compliance
with, and there are no outstanding allegations by any person or entity that the
Company or its Subsidiaries has not been in compliance with, all applicable
laws, rules, regulations, common law, ordinances, decrees, orders or other
binding legal requirements relating to pollution (including the treatment,
storage and disposal of wastes and the remediation of releases and threatened of
materials), the preservation of the environment, and the exposure to materials
in the environment or work place ("ENVIRONMENTAL LAWS") and (ii) the Company and
its Subsidiaries currently hold all permits, licenses, registrations and other
governmental authorizations (including exemptions, waivers, and the like) and
financial assurance required under Environmental Laws for the Company and its
Subsidiaries to operate their businesses as currently conducted.
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(b) Except as set forth on Schedule 4.17(b), (i) to the knowledge of the
Company, there is no friable asbestos-containing material in or on any real
property currently owned, leased or operated by the Company or its Subsidiaries
and (ii) there are and have been no underground storage tanks (whether or not
required to be registered under any applicable law), dumps, landfills, lagoons,
surface impoundments, injection wells or other land disposal units in or on any
property currently owned, leased or operated by the Company or its Subsidiaries.
(c) Except as set forth on Schedule 4.17(c), (i) neither the Company nor its
Subsidiaries has received (x) any written communication from any person stating
or alleging that any of them may be a potentially responsible party under any
Environmental Law (including, without limitation, the Federal Comprehensive
Environmental Response, Compensation, and Liability Act of 1980, as amended)
with respect to any actual or alleged environmental contamination or (y) any
request for information under any Environmental Law from any Governmental Entity
with respect to any actual or alleged material environmental contamination; and
(ii) none of the Company, its Subsidiaries or any Governmental Entity is
conducting or has conducted (or, to the knowledge of the Company, is threatening
to conduct) any environmental remediation or investigation which could result in
a material liability of the Company or its Subsidiaries under any Environmental
Law.
Section 4.18 VOTE REQUIRED. The affirmative vote of (i) the holders of a
majority of the outstanding shares of capital stock of the Company entitled to
vote thereon, consisting of the Company Common Stock voting together as a single
class with the holders of the Seris B Preferred and the Seris C Preferred (with
such Seris B Preferred and Seris C Preferred holders being entitled to one vote
for each share of Company Common Stock into which such shares of Company
Preferred Stock so held would be convertible on the record date set for the
vote), (ii) the holders of a majority of the outstanding shares of Series B
Preferred, voting as a separate class, and (iii) the holders of a majority of
the outstanding shares of Seris C Preferred, voting as a separate class, are the
only votes of the holders of any class or series of the Company's capital stock
necessary to approve the Merger. The Board of Directors of the Company (at a
meeting duly called and held) has unanimously (i) approved this Agreement and
the Voting Agreement, (ii) determined that the transactions contemplated hereby
and thereby are fair to and in the best interests of the holders of Company
Common Stock and Company Preferred Stock and (iii) determined to recommend this
Agreement, the Merger and the other transactions contemplated hereby to such
holders for approval and adoption.
Section 4.19 OPINION OF FINANCIAL ADVISOR. The Company has received the
opinion of Lazard Freres & Co LLC ("LAZARD FRERES"), dated August 23, 1995,
substantially to the effect that the consideration to be received in the Merger
by the holders of Company Common Stock and Company Preferred Stock is fair to
such holders from a financial point of view, a copy of which opinion has been
delivered to Parent.
Section 4.20 ACCOUNTING MATTERS. None of the Company, any of its
Subsidiaries or, to the knowledge of the Company, any of their respective
directors, officers or stockholders, has taken any action which would prevent
the accounting for the Merger as a pooling of interests in accordance with
Accounting Principles Board Opinion No. 16, the interpretative releases pursuant
thereto and the pronouncements of the SEC.
Section 4.21 DGCL SECTION 203. Prior to the date hereof, the Board of
Directors of the Company has approved this Agreement and the Voting Agreement,
and the Merger and the other transactions contemplated hereby and thereby, and
such approval is sufficient to render inapplicable to the Merger and any of such
other transactions the provisions of Section 203 of the DGCL.
Section 4.22 LABOR MATTERS. Neither the Company nor any of its
Subsidiaries is a party to, or bound by, any collective bargaining agreement,
contract or other understanding with a labor union or labor organization and, to
the knowledge of the Company, there is no activity involving any employees of
the Company or its Subsidiaries seeking to certify a collective bargaining unit
or engaging in any other organizational activity.
Section 4.23 AFFILIATE TRANSACTIONS. Except as set forth in Schedule 4.23
or as disclosed in the Company SEC Reports, there are no material Contracts or
other transactions between the Company or any of its Subsidiaries, on the one
hand, and any (i) officer or director of the Company or any of its Subsidiaries,
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(ii) record or beneficial owner of five percent or more of the voting securities
of the Company or (iii) affiliate (as such term is defined in Regulation 12b-2
promulgated under the Exchange Act) of any such officer, director or beneficial
owner, on the other hand.
Section 4.24 BROKERS. Except for its financial advisor, Lazard Freres, no
broker, finder or financial advisor is entitled to any brokerage, finder's or
other fee or commission in connection with the Merger or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
the Company.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 5.1 ORGANIZATION. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power to carry on its business as it is now being conducted or
presently proposed to be conducted. Parent is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities make such qualification necessary, except where the failure to be so
qualified will not have a material adverse effect individually or in the
aggregate, on the financial condition, results of operations, business, assets,
liabilities, prospects or properties of Parent and its Subsidiaries taken as a
whole or on the ability of Parent to consummate the Merger and the other
transactions contemplated by this Agreement (a "PARENT MATERIAL ADVERSE
EFFECT"). Sub is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware. Sub has not engaged in any
business (other than in connection with this Agreement and the transactions
contemplated hereby) since the date of its incorporation. Schedule 5.1 contains
a complete and accurate list of all Subsidiaries of Parent.
Section 5.2 CAPITALIZATION.
(a) The authorized capital stock of Parent consists of 100,000,000 shares of
Parent Common Stock and 750,000 shares of Preferred Stock, par value $100.00 per
share ("PARENT PREFERRED STOCK"), of Parent. As of August 22, 1995, (i)
45,694,208 shares of Parent Common Stock were issued and outstanding, (ii)
50,600 shares of Parent Preferred Stock were designated as a series of "5 1/2%
Cumulative Convertible Exchangeable Preferred Stock," of which 47,200 shares
were issued and outstanding (with 4,720,000 depositary shares, each representing
a 1/100th interest in a share of such series of Parent Preferred Stock, also
issued and outstanding), (iii) options to acquire 3,802,072 shares of Parent
Common Stock (the "PARENT STOCK OPTIONS") were outstanding under all stock
option plans of Parent, (iv) 3,545,129 shares of Parent Common Stock were
reserved for issuance pursuant to the Parent Stock Options and all other
employee benefit plans of Parent, and (v) 10,384,000 shares of Parent Common
Stock were reserved for issuance upon the conversion of the outstanding Parent
Preferred Stock. All of the outstanding shares of capital stock of Parent are,
and the shares of Parent Common Stock issuable in exchange for shares of Company
Common Stock and Company Preferred Stock at the Effective Time in accordance
with this Agreement will be, when so issued, duly authorized, validly issued,
fully paid and nonassessable.
(b) The authorized capital stock of Sub consists of 1,000 shares of Sub
Common Stock, of which 1,000 shares, as of the date hereof, were issued and
outstanding. All of such outstanding shares are owned by Parent, and are validly
issued, fully paid and nonassessable.
(c) Except as disclosed in this Section 5.2, and except for up to 1,100,000
shares of Parent Common Stock reserved for issuance pending consummation of
Parent's planned transaction with Resumix, Inc. (the "RESUMIX TRANSACTION"), (i)
there are no outstanding Rights to purchase or otherwise to receive from Parent
or Sub any of the outstanding authorized but unissued or treasury shares of the
capital stock or any other security of Parent or Sub, (ii) there is no
outstanding security of any kind convertible into or exchangeable for such
capital stock, and (iii) there is no voting trust or other agreement or
understanding to which Parent or Sub is a party or is bound with respect to the
voting of the capital stock of Parent or Sub.
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Section 5.3 AUTHORITY RELATIVE TO THIS AGREEMENT. Each of Parent and Sub
has the requisite corporate power and authority to execute and deliver this
Agreement and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by each of Parent and Sub and the consummation by
Parent and Sub of the transactions contemplated on its part hereby have been
duly authorized by their respective Boards of Directors, and by Parent as the
sole stockholder of Sub, and, except for the approval of Parent's stockholders
to be sought at the stockholders' meeting contemplated by Section 7.4(b), no
other corporate proceedings on the part of Parent or Sub are necessary to
authorize this Agreement or for Parent and Sub to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by each of Parent and Sub and constitutes a valid and binding
agreement of each of Parent and Sub, enforceable against Parent and Sub in
accordance with its terms.
Section 5.4 CONSENTS AND APPROVALS; NO VIOLATIONS. Neither the execution,
delivery and performance of this Agreement by Parent or Sub, nor the
consummation by Parent or Sub of the transactions contemplated hereby will (i)
conflict with or result in any breach of any provisions of the Certificate of
Incorporation or By-Laws of Parent or of Sub, (ii) require a filing with, or a
permit, authorization, consent or approval of, any Governmental Entity except in
connection with or in order to comply with the applicable provisions of the HSR
Act, the Securities Act, the Exchange Act, the NJCCA, the NGCA, state banking
laws, state laws governing the issuance of financial instruments or the transfer
of funds, state or foreign laws relating to take-overs, if applicable, state
securities or "blue sky" laws, the By-Laws of the NYSE and other exchanges on
which the shares of Parent Common Stock are listed, and the filing and
recordation of a Certificate of Merger as required by the DGCL, (iii) except as
set forth on Schedule 5.4 hereto, result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, or
result in the creation of a Lien on any property or asset of Parent or any of
its Subsidiaries pursuant to, any of the terms, conditions or provisions of any
material Contract to which Parent or Sub is a party or by which either of them
or any of their properties or assets may be bound or (iv) violate any law,
order, writ, injunction, decree, statute, rule or regulation of any Governmental
Entity applicable to Parent, Sub or any of their properties or assets, except,
in the case of clauses (ii), (iii) and (iv), where the failure to make such
filing or obtain such authorization, consent or approval would not have, or
where such violations, breaches or defaults or Liens would not have, in any such
case, a Parent Material Adverse Effect.
Section 5.5 REPORTS AND FINANCIAL STATEMENTS. Parent has timely filed all
reports required to be filed with the SEC pursuant to the Exchange Act or the
Securities Act since January 1, 1994 (collectively, the "PARENT SEC REPORTS"),
and has previously made available to the Company true and complete copies of all
such Parent SEC Reports. Such Parent SEC Reports, as of their respective dates,
complied in all material respects with the applicable requirements of the
Securities Act and the Exchange Act, as the case may be, and none of such SEC
Reports contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The financial statements of Parent included in the Parent SEC
Reports have been prepared in accordance with GAAP consistently applied
throughout the periods indicated (except as otherwise noted therein or, in the
case of unaudited statements, as permitted by Form 10-Q of the SEC) and fairly
present (subject, in the case of unaudited statements, to normal, recurring
year-end adjustments and any other adjustments described therein) the
consolidated financial position of Parent and its consolidated Subsidiaries as
at the dates thereof and the consolidated results of operations and cash flows
of Parent and its consolidated Subsidiaries for the periods then ended. Since
January 1, 1994, there has been no change in any of the significant accounting
(including tax accounting) policies, practices or procedures of the Parent or,
except as set forth on Schedule 5.5, any of its consolidated Subsidiaries.
Section 5.6 ABSENCE OF CERTAIN CHANGES OR EVENTS; MATERIAL
CONTRACTS. Except as set forth in the Parent SEC Reports, and except for the
Resumix Transaction, since December 31, 1994, (i) Parent has not conducted its
business and operations other than in the ordinary course of business and
consistent with past practices or taken any of the actions set forth in Section
6.2(b) and (ii) there has not been any fact, event, circumstance or change
affecting or relating to Parent and its Subsidiaries which has had or is
reasonably likely to have a Parent Material Adverse Effect.
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Section 5.7 LITIGATION. Except for litigation disclosed in the notes to
the financial statements included in Parent's Annual Report to Stockholders for
the year ended December 31, 1994 or in the Parent SEC Reports filed subsequent
thereto, there is no suit, action, proceeding or investigation pending or, to
the best knowledge of Parent, threatened against or affecting Parent or any of
its Subsidiaries, the outcome of which, in the reasonable judgment of Parent, is
likely to have a Parent Material Adverse Effect; nor is there any judgment,
decree, injunction, ruling or order of any Governmental Entity outstanding
against Parent or any of its Subsidiaries having, or which is reasonably likely
to have, a Parent Material Adverse Effect.
Section 5.8 ABSENCE OF UNDISCLOSED LIABILITIES. Except for liabilities or
obligations which are accrued or reserved against in Parent's financial
statements (or reflected in the notes thereto) included in the Parent SEC
Reports or which were incurred after June 30, 1995 in the ordinary course of
business and consistent with past practice none of Parent and its Subsidiaries
has any liabilities or obligations (whether absolute, accrued, contingent or
otherwise) of a nature required by GAAP to be reflected in a consolidated
balance sheet (or reflected in the notes thereto) or which would have a Parent
Material Adverse Effect.
Section 5.9 NO DEFAULT. Neither Parent nor any Subsidiary of Parent is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (i) its charter, by-laws or comparable organizational documents,
(ii) Contracts to which Parent or its Subsidiaries is a party or by which they
or any of their properties or assets may be bound, or (iii) any order, writ,
injunction, decree, statute, rule or regulation of any Governmental Entity
applicable to Parent or any of its Subsidiaries, except, in the case of clauses
(ii) and (iii) above, for defaults or violations which would not have a Parent
Material Adverse Effect.
Section 5.10 TAXES. Parent has heretofore delivered or will make available
to the Company true, correct and complete copies of the consolidated federal,
state, local and foreign income, franchise, sales and other Tax Returns filed by
Parent and its Subsidiaries for each of the Parent's years ended December 31,
1994, 1993, 1992, 1991, 1990, 1989 and 1988 inclusive. Parent has duly filed,
and each of its Subsidiaries has duly filed, all material federal, state, local
and foreign income, franchise, sales and other Tax Returns required to be filed
by Parent or the Subsidiaries of Parent. All such Tax Returns are true, correct
and complete, in all material respects, and Parent and the Subsidiaries of
Parent have duly paid all Taxes shown on such Tax Returns and has paid or made
adequate provision for payment of all accrued but unpaid material Taxes in
respect of all periods since the periods covered by such Tax Returns. Parent has
heretofore delivered or will make available to the Company true, correct and
complete copies of all written tax-sharing agreements and written descriptions
of all such unwritten agreements or arrangements to which Parent or any
Subsidiary of Parent is a party. All material deficiencies assessed as a result
of any examination of Tax Returns of Parent or the Subsidiaries of Parent by
federal, state, local or foreign tax authorities have been paid or reserved on
the financial statements of Parent in accordance with GAAP consistently applied,
and true, correct and complete copies of all revenue agent's reports, "30-day
letters," or "90-day letters" or similar written statements proposing or
asserting any Tax deficiency against Parent or the Subsidiaries of Parent for
any open year have been heretofore delivered to the Company. No material issue
has been raised during the past five years by any federal, state, local or
foreign taxing authority which, if raised with regard to any other period not so
examined, could reasonably be expected to result in a proposed material
deficiency for any other period not so examined. Neither Parent nor any of its
Subsidiaries has granted any extension or waiver of the statutory period of
limitations applicable to any claim for any material Taxes. The consolidated
federal income tax returns of Parent and the Subsidiaries of Parent have been
examined by and settled with the Service for all years through 1986. Neither
Parent nor any Subsidiary of Parent (i) is a party to any agreement, contract or
arrangement that would result, separately or in the aggregate, in the payment of
any "excess parachute payments" within the meaning of Section 280G of the Code;
(ii) has filed a consent under Section 341(f) of the Code with respect to any of
Parent or the Subsidiaries of Parent; (iii) has participated in, or cooperated
with, an international boycott within the meaning of Section 999 of the Code; or
(iv) has issued or assumed any corporate acquisition indebtedness, as defined in
Section 279(b) of the Code. Parent and each of the Subsidiaries of Parent have
complied (and until the Closing will comply) in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes (including, without limitation, withholding of Taxes pursuant to
Sections 1441 and 1442 of the Code or
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similar provisions under any foreign laws) and have, within the time and in the
manner prescribed by law, withheld from employee wages and paid over to the
proper governmental authorities all amounts required to be so withheld and paid
over under all applicable laws.
Section 5.11 COMPLIANCE WITH APPLICABLE LAW. Except as disclosed in the
Parent SEC Reports, (i) Parent and its Subsidiaries hold, and are in compliance
with the terms of, all permits, licenses, exemptions, orders and approvals of
all Governmental Entities necessary for the current or proposed conduct of their
respective businesses ("PARENT PERMITS"), except for failures to hold or to
comply with such permits, licenses, exemptions, orders and approvals which would
not have a Parent Material Adverse Effect, (ii) no fact exists or event has
occurred, and no action or proceeding is pending or, to Parent's knowledge,
threatened, that has a reasonable possibility of resulting in a revocation,
non-renewal, termination, suspension or other material impairment of any
material Parent Permits, (iii) the businesses of Parent and its Subsidiaries are
not being conducted in violation of any Applicable Law, except for violations or
possible violations which do not, and, insofar as reasonably can be foreseen, in
the future will not, have a Parent Material Adverse Effect, and (iv) to the
knowledge of Parent, (x) no investigation or review by any Governmental Entity
with respect to Parent or its Subsidiaries is pending or threatened and (y) no
Governmental Entity has indicated an intention to conduct the same, other than,
in each case, those which Parent reasonably believes will not have a Parent
Material Adverse Effect.
Section 5.12 INFORMATION IN DISCLOSURE DOCUMENTS AND REGISTRATION
STATEMENT. None of the information to be supplied by Parent or Sub for
inclusion in (i) the Registration Statement or (ii) the Proxy Statement will in
the case of the Registration Statement, at the time it becomes effective and at
the Effective Time, or, in the case of the Proxy Statement or any amendments
thereof or supplements thereto, at the time of the mailing of the Proxy
Statement and any amendments or supplements thereto, and at the time of the
meeting of stockholders of Parent to be held in connection with the Merger,
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 Registration Statement and the Proxy Statement will comply as to
form in all material respects with the applicable provisions of the Securities
Act and the Exchange Act, and the rules and regulations promulgated thereunder,
except that no representation is made by Parent with respect to statements made
therein based on information supplied by the Company, Comdata or their
respective representatives for inclusion in the Registration Statement or the
Proxy Statement or with respect to information concerning the Company or any of
its Subsidiaries incorporated by reference in the Registration Statement or the
Proxy Statement.
Section 5.13 EMPLOYEE BENEFIT PLANS; ERISA.
(a) As used in this Agreement, the term "PARENT PLAN" shall mean each
material employee benefit plan, arrangement or agreement that is maintained, or
was maintained at any time during the five (5) calendar years preceding the date
of this Agreement, by Parent or by any trade or business, whether or not
incorporated (a "PARENT ERISA AFFILIATE"), which together with Parent would be
deemed a "single employer" within the meaning of Section 4001 of ERISA.
(b) Except as set forth in the Parent SEC Reports and except for matters
which would not, individually or in the aggregate, be reasonably expected to
result in a Parent Material Adverse Effect: (i) each of the Parent Plans that is
subject to ERISA is and has been in compliance with ERISA and the Code; (ii) no
Parent Plan has an accumulated or waived funding deficiency within the meaning
of Section 412 of the Code; (iii) neither Parent nor a Parent ERISA Affiliate
has incurred, directly or indirectly, any liability to or on account of a Parent
Plan pursuant to Title IV of ERISA and no condition exists that presents a
material risk of incurring such liability; and (iv) no Parent Plan is a
multiemployer plan (within the meaning of Section 4001(a)(3) of ERISA).
Section 5.14 ENVIRONMENTAL LAWS AND REGULATIONS. (a) Except for matters
which would not, individually or in the aggregate, be reasonably expected to
result in a Parent Material Adverse Effect: (i) the Parent and its Subsidiaries
are and have been in compliance with, and there are no outstanding allegations
by any person or entity that the Parent or its Subsidiaries has not been in
compliance with, Environmental Laws and
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(ii) the Parent and its Subsidiaries currently hold all permits, licenses,
registrations and other governmental authorizations (including exemptions,
waivers, and the like) and financial assurance required under Environmental Laws
for the Parent and its Subsidiaries to operate their businesses as currently
conducted.
(b) Except for matters which would not, individually or in the aggregate, be
reasonably expected to result in a Parent Material Adverse Effect: (i) neither
Parent nor its Subsidiaries has received (x) any written communication from any
person stating or alleging that any of them may be a potentially responsible
party under any Environmental Law (including, without limitation, the Federal
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
as amended) with respect to any actual or alleged material environmental
contamination or (y) any request for information under any Environmental Law
from any Governmental Entity with respect to any actual or alleged material
environmental contamination; and (ii) none of Parent, its Subsidiaries or any
Governmental Entity is conducting or has conducted (or, to the knowledge of
Parent, is threatening to conduct) any environmental remediation or
investigation which could result in a material liability of Parent or its
Subsidiaries under any Environmental Law.
Section 5.15 VOTE REQUIRED. The affirmative vote of the holders of a
majority of the shares of Parent Common Stock present in person or represented
by proxy at the stockholders meeting of Parent described in Section 7.4(b)
(provided that the shares so present or represented constitute a majority of the
outstanding shares of Parent Common Stock) is the only vote of the holders of
any class or series of Parent capital stock necessary to approve the Merger and
the issuance of shares of Parent Common Stock pursuant thereto. The affirmative
vote of Parent, as the sole stockholder of all outstanding shares of Sub Common
Stock, is the only vote of the holders of any class or series of Sub capital
stock necessary to approve the Merger. The Board of Directors of Parent (at a
meeting duly called and held) has by the unanimous vote of the directors present
(i) approved this Agreement and the Voting Agreement, (ii) determined that the
transactions contemplated hereby are fair to and in the best interests of the
holders of Parent Common Stock, (iii) determined to recommend this Agreement,
the Merger and the other transactions contemplated hereby to such holders for
approval and adoption and (iv) caused Parent, as the sole stockholder of Sub, to
approve and adopt this Agreement and the Voting Agreement. The Board of
Directors of Sub (by unanimous written consent) has approved this Agreement and
the Voting Agreement.
Section 5.16 OPINION OF FINANCIAL ADVISOR. Parent has received the opinion
of Bear Stearns & Co. Inc. ("BEAR STEARNS"), dated August 23, 1995,
substantially to the effect that the Exchange Ratio is fair to the stockholders
of Parent from a financial point of view, a copy of which opinion has been
delivered to the Company.
Section 5.17 ACCOUNTING MATTERS. None of Parent, any of its Subsidiaries
or, to the knowledge of Parent, any of their respective directors, officers or
stockholders, has taken any action which would prevent the accounting for the
Merger as a pooling of interests in accordance with Accounting Principles Board
Opinion No. 16, the interpretative releases pursuant thereto and the
pronouncements of the SEC.
Section 5.18 BROKERS. Except for its financial advisor, Bear Stearns, no
broker, finder or financial advisor is entitled to any brokerage finder's or
other fee or commission in connection with the Merger or the transactions
contemplated by this Agreement based upon arrangements made by or on behalf of
Parent or Sub.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER. Prior
to the Effective Time, unless Parent shall otherwise agree in writing, or as
otherwise expressly contemplated by this Agreement:
(a) the Company shall conduct, and cause each of its Subsidiaries to
conduct, its business only in the ordinary and usual course consistent with
past practice, and the Company shall use, and cause each
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of its Subsidiaries to use, its reasonable efforts to preserve intact the
present business organization, keep available the services of its present
officers and key employees, and preserve the goodwill of those having
business relationships with it;
(b) the Company shall not, nor shall it permit any of its Subsidiaries
to, (i) amend its charter, by-laws or other organizational documents, (ii)
split, combine or reclassify any shares of its outstanding capital stock,
(iii) declare, set aside or pay any dividend or other distribution payable
in cash, stock or property, except for the accretion of the regular
dividends under the Series B Preferred and the Series C Preferred to the
liquidation value thereof, or (iv) directly or indirectly redeem or
otherwise acquire any shares of its capital stock or shares of the capital
stock of any of its Subsidiaries;
(c) the Company shall not, nor shall it permit any of its Subsidiaries
to, (i) authorize for issuance, issue or sell or agree to issue or sell any
shares of, or Rights to acquire or convertible into any shares of, its
capital stock or shares of the capital stock of any of its Subsidiaries
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), except for the issuance of
shares of Company Common Stock (x) upon the exercise of Company Stock
Options outstanding on the date of this Agreement or (y) upon the conversion
of the Series B Preferred and the Series C Preferred in accordance with
their present terms; (ii) merge or consolidate with another entity; (iii)
acquire or purchase an equity interest in or a substantial portion of the
assets of another corporation, partnership or other business organization or
otherwise acquire any assets outside the ordinary and usual course of
business and consistent with past practice or otherwise enter into any
material contract, commitment or transaction outside the ordinary and usual
course of business consistent with past practice; (iv) sell, lease, license,
waive, release, transfer, encumber or otherwise dispose of any of its assets
outside the ordinary and usual course of business and consistent with past
practice; (v) incur, assume or prepay any material indebtedness or any other
material liabilities other than in the ordinary course of business and
consistent with past practice; (vi) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise)
for the obligations of any other person other than a Subsidiary of the
Company or customers of the funds transfer business, in each case in the
ordinary course of business and consistent with past practice; (vii) make
any loans, advances or capital contributions to, or investments in, any
other person, other than to Subsidiaries of the Company; (viii) authorize or
make capital expenditures in excess of the amounts currently budgeted
therefor; (ix) permit any insurance policy naming the Company or any
Subsidiary of the Company as a beneficiary or a loss payee to be cancelled
or terminated other than in the ordinary course of business; or (x) enter
into any contract, agreement, commitment or arrangement with respect to any
of the foregoing;
(d) the Company shall not, nor shall it permit its Subsidiaries to, (i)
adopt, enter into, terminate or amend (except as may be required by
Applicable Law) any Company Plan or other arrangement for the current or
future benefit or welfare of any director, officer or current or former
employee, (ii) increase in any manner the compensation or fringe benefits
of, or pay any bonus to, any director, officer or employee (except for
normal increases in salaried compensation in the ordinary course of business
consistent with past practice, or (iii) take any action to fund or in any
other way secure, or to accelerate or otherwise remove restrictions with
respect to, the payment of compensation or benefits under any employee plan,
agreement, contract, arrangement or other Company Plan (including the
Company Stock Options);
(e) the Company shall not, nor shall it permit its Subsidiaries to, take
any action with respect to, or make any material change in, its accounting
or tax policies or procedures, except as required by law or to comply with
GAAP;
(f) the Company shall not (i) knowingly take or allow to be taken any
action which would jeopardize the treatment of Parent's acquisition of the
Company as a pooling of interests for accounting purposes; or (ii) knowingly
take any action which would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code.
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Section 6.2 CONDUCT OF BUSINESS BY PARENT PENDING THE MERGER. Prior to the
Effective Time, unless the Company shall otherwise agree in writing, or as
otherwise expressly contemplated by this Agreement:
(a) the business of Parent shall be conducted only in the ordinary and
usual course consistent with past practice, and Parent shall use its
reasonable efforts to preserve intact the present business organization, to
keep available the services of its present officers and key employees, and
preserve the goodwill of those having business relationships with it;
(b) Parent shall not (i) amend its Certificate of Incorporation (other
than to increase the number of authorized shares of Parent Common Stock) or
By-Laws; (ii) split, combine or reclassify any shares of its outstanding
capital stock; or (iii) declare, set aside or pay any dividend or other
distribution payable in cash, stock or property (other than regular
dividends on the Parent Preferred Stock);
(c) Parent shall not authorize for issuance, issue or sell or agree to
issue or sell any shares of, or Rights to acquire or convertible into any
shares of, its capital stock, except for (i) the issuance of shares of
Parent Common Stock (x) upon the exercise of Parent Stock Options or other
Rights outstanding on the date of this Agreement (y) upon the exercise of
Rights described in the immediately following clause (ii) or (z) upon the
conversion of the Parent Preferred Stock in accordance with its present
terms, (ii) the issuance of Rights pursuant to existing employee benefit
plans or arrangements in a manner consistent with past practice, (iii) the
issuance of 5 1/2% Convertible Subordinated Debentures Due 2008 of Parent in
exchange for Parent Preferred Stock (or the underlying depositary shares),
and (iv) the issuance of shares of Parent Common Stock in connection with
the Resumix Transaction;
(d) neither Parent nor Sub shall take any action with respect to, or
make any material change in, its accounting or tax policies or procedures,
except as required by law or to comply with GAAP;
(e) neither Parent nor Sub shall (i) knowingly take or allow to be taken
any action which would jeopardize the treatment of Parent's acquisition of
the Company as a pooling of interests for accounting purposes; or (ii)
knowingly take any action which would jeopardize qualification of the Merger
as a reorganization within the meaning of Section 368(a) of the Code.
Section 6.3 CONDUCT OF BUSINESS OF SUB. During the period from the date of
this Agreement to the Effective Time, Sub shall not engage in any activities of
any nature except as provided in or contemplated by this Agreement. It is
understood that Sub was formed by Parent solely for the purpose of effecting the
Merger, and that Sub will have no material assets and no material liabilities
prior to the Merger.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 ACCESS AND INFORMATION. Each of the Company and Parent shall
(and shall cause its Subsidiaries and its and their respective officers,
directors, employees, auditors and agents to) afford to the other and to the
other's officers, employees, financial advisors, legal counsel, accountants,
consultants and other representatives reasonable access during normal business
hours throughout the period prior to the Effective Time to all of its books and
records (other than privileged documents and, in the case of Parent, documents
relating to classified Department of Defense matters) and its properties, plants
and personnel and, during such period, each shall furnish promptly to the other
a copy of each report, schedule and other document filed or received by it
pursuant to the requirements of federal securities laws, provided that no
investigation pursuant to this Section 7.1 shall affect any representations or
warranties made herein or the conditions to the obligations of the respective
parties to consummate the Merger. Unless otherwise required by law, each party
agrees that it (and its Subsidiaries and its and their respective
representatives) shall hold in confidence all non-public information so acquired
in accordance with the terms of the separate confidentiality agreements,
respectively dated August 9, 1995 and June 26, 1995, between Parent and the
Company (the "CONFIDENTIALITY AGREEMENTS").
Section 7.2 NO SOLICITATION. Prior to the Effective Time, the Company
agrees that neither it, any of its Subsidiaries or its affiliates, nor any of
the respective directors, officers, employees, agents or representatives
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of the foregoing will, directly or indirectly, solicit, initiate, facilitate or
encourage (including by way of furnishing or disclosing non-public information)
any inquiries or the making of any proposal with respect to any merger,
consolidation or other business combination involving the Company, Comdata or
any other Subsidiary of the Company or the acquisition of all or any significant
assets or capital stock of the Company, Comdata or any other Subsidiary of the
Company taken as a whole (an "ACQUISITION TRANSACTION") or negotiate, explore or
otherwise engage in discussions with any person (other than Parent and its
representatives) with respect to any Acquisition Transaction or enter into any
agreement, arrangement or understanding with respect to any such Acquisition
Transaction or which would require it to abandon, terminate or fail to
consummate the Merger or any other transaction contemplated by this Agreement;
PROVIDED, HOWEVER, that the Company may, in response to an unsolicited written
proposal from a third party, furnish information to and engage in discussions
with such third party, in each case only if the Board of Directors of the
Company determines in good faith by a majority vote, after consultation with its
financial advisors and based upon the written opinion of outside counsel to the
Company, that failing to take such action would result in a breach of the
fiduciary duties of the Board of Directors. The Company agrees that as of the
date hereof, it, its Subsidiaries and affiliates, and the respective directors,
officers, employees, agents and representatives of the foregoing, shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any person (other than Parent and its
representatives) conducted heretofore with respect to any Acquisition
Transaction. The Company agrees to immediately advise Parent in writing of any
inquiries or proposals (or desire to make a proposal) received by (or indicated
to), any such information requested from, or any such negotiations or
discussions sought to be initiated or continued with, any of it, its
Subsidiaries or affiliates, or any of the respective directors, officers,
employees, agents or representatives of the foregoing, in each case from a
person (other than Parent and its representatives) with respect to an
Acquisition Transaction, and the terms thereof, including the identity of such
third party, and to update on an ongoing basis or upon Parent's request, the
status thereof, as well as any actions taken or other developments pursuant to
this Section 7.2.
Section 7.3 REGISTRATION STATEMENT. As promptly as practicable, Parent and
the Company shall in consultation with each other prepare and file with the SEC
the Proxy Statement and Parent in consultation with the Company shall prepare
and file with the SEC the Registration Statement. Each of Parent and the Company
shall use its reasonable best efforts to have the Registration Statement
declared effective as soon as practicable. Parent shall also use its reasonable
best efforts to take any action required to be taken under state securities or
"blue sky" laws in connection with the issuance of the shares of Parent Common
Stock pursuant to this Agreement in the Merger. The Company shall furnish Parent
with all information concerning the Company and the holders of its capital stock
and shall take such other action as Parent may reasonably request in connection
with the Registration Statement and the issuance of shares of Parent Common
Stock. If at any time prior to the Effective Time any event or circumstance
relating to Parent, any Subsidiary of Parent, the Company, any Subsidiary of the
Company, or their respective officers or directors, should be discovered by such
party which should be set forth in an amendment or a supplement to the
Registration Statement or Proxy Statement, such party shall promptly inform the
other thereof and take appropriate action in respect thereof.
Section 7.4 PROXY STATEMENTS; STOCKHOLDER APPROVALS.
(a) The Company, acting through its Board of Directors, shall, subject to
and in accordance with applicable law and its Certificate of Incorporation and
By-Laws, promptly and duly call, give notice of, convene and hold as soon as
practicable following the date upon which the Registration Statement becomes
effective a meeting of the holders of Company Common Stock and of Company
Preferred Stock for the purpose of voting to approve and adopt this Agreement
and the transactions contemplated hereby, and, subject to the fiduciary duties
of the Board of Directors of the Company under applicable law as advised by
outside legal counsel, recommend approval and adoption of this Agreement and the
transactions contemplated hereby, by the stockholders of the Company and include
in the Proxy Statement such recommendation and (ii) take all reasonable and
lawful action to solicit and obtain such approval.
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(b) Parent, acting through its Board of Directors, shall, subject to and in
accordance with applicable law and its Certificate of Incorporation and By-Laws,
promptly and duly call, give notice of, convene and hold as soon as practicable
following the date upon which the Registration Statement becomes effective a
meeting of the holders of Parent Common Stock for the purpose of voting to
approve and adopt this Agreement and the transactions contemplated hereby, and,
subject to the fiduciary duties of the Board of Directors of Parent under
applicable law as advised by outside counsel, (i) recommend approval and
adoption of this Agreement and the transactions contemplated hereby, by the
stockholders of Parent and include in the Proxy Statement such recommendation,
and (ii) take all reasonable and lawful action to solicit and obtain such
approval.
(c) Parent and the Company, as promptly as practicable (or with such other
timing as they mutually agree), shall cause the definitive Proxy Statement to be
mailed to their stockholders.
(d) At or prior to the Closing, each of Parent and the Company shall deliver
to the other a certificate of its Secretary setting forth the voting results
from its stockholder meeting.
Section 7.5 COMPLIANCE WITH THE SECURITIES ACT.
(a) At least 45 days prior to the Effective Time, each of Parent and the
Company shall cause to be delivered to the other a list identifying all persons
who were, in its reasonable judgment, at the record date for its stockholders'
meeting convened in accordance with Section 7.4 hereof, "affiliates" of such
party as that term is used in paragraphs (c) and (d) of Rule 145 under the
Securities Act (the "AFFILIATES").
(b) Each of Parent and the Company shall use its reasonable best efforts to
cause each person who is identified as one of its Affiliates in its list
referred to in Section 7.5(a) above to deliver to Parent (with a copy to the
Company), at least 30 days prior to the Effective Time, a written agreement, in
the form attached hereto as Exhibit B-1, in the case of Affiliates of Parent,
and in the form attached hereto as Exhibit B-2, in the case of Affiliates of the
Company (the "AFFILIATE LETTERS").
(c) If any Affiliate of the Company refuses to provide an Affiliate Letter,
Parent may place appropriate legends on the certificates evidencing the shares
of Parent Common Stock to be received by such Affiliate pursuant to the terms of
this Agreement and to issue appropriate stop transfer instructions to the
transfer agent for shares of Parent Common Stock to the effect that the shares
of Parent Common Stock received by such Affiliate pursuant to this Agreement
only may be sold, transferred or otherwise conveyed (i) pursuant to an effective
registration statement under the Securities Act, (ii) in compliance with Rule
145 promulgated under the Securities Act, or (iii) pursuant to another exemption
under the Securities Act.
Section 7.6 REASONABLE BEST EFFORTS. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use its reasonable best
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 Agreement, including, without limitation, the obtaining of all necessary
waivers, consents and approvals and the effecting of all necessary registrations
and filings. Without limiting the generality of the foregoing, as promptly as
practicable, the Company, Parent and Sub shall make all filings and submissions
under the HSR Act as may be reasonably required to be made in connection with
this Agreement and the transactions contemplated hereby. Subject to the
Confidentiality Agreements, the Company will furnish to Parent and Sub, and
Parent and Sub will furnish to the Company, such information and assistance as
the other may reasonably request in connection with the preparation of any such
filings or submissions. Subject to the Confidentiality Agreements, the Company
will provide Parent and Sub, and Parent and Sub will provide the Company, with
copies of all material written correspondence, filings and communications (or
memoranda setting forth the substance thereof) between such party or any of its
representatives and any Governmental Entity, with respect to the obtaining of
any waivers, consent or approvals and the making of any registrations or
filings, in each case that is necessary to consummate the Merger and the other
transactions contemplated hereby. In case at any time after the Effective Time
any further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers or directors of Parent and the Surviving
Corporation shall take all such necessary action.
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Section 7.7 VOTING AGREEMENT. Concurrently herewith, and as an essential
inducement for Parent's entering into this Agreement, Parent and Sub are
entering into the Voting Agreement with certain holders of the Series B
Preferred and the Series C Preferred with respect to all such shares of Company
Preferred Stock held by such holders.
Section 7.8 COMPANY STOCK OPTIONS. At the Effective Time, each of the
Company Stock Options which is outstanding immediately prior to the Effective
Time shall be assumed by Parent and converted automatically into an option to
purchase shares of Parent Common Stock (a "NEW OPTION") in an amount and at an
exercise price determined as provided below:
(a) The number of shares of Parent Common Stock to be subject to the New
Option shall be equal to the product of the number of shares of Company
Common Stock remaining subject (as of immediately prior to the Effective
Time) to the original option and the Exchange Ratio, provided that any
fractional shares of Parent Common Stock resulting from such multiplication
shall be rounded down to the nearest share; and
(b) The exercise price per share of Parent Common Stock under the New
Option shall be equal to the exercise price per share of Company Common
Stock under the original option divided by the Exchange Ratio, provided that
such exercise price shall be rounded down to the nearest cent.
The adjustment provided herein with respect to any options which are "incentive
stock options" (as defined in Section 422 of the Code) shall be and is intended
to be effected in a manner which is consistent with Section 424(a) of the Code.
After the Effective Time, each New Option shall be exercisable and shall vest
upon the same terms and conditions as were applicable to the related Company
Stock Option immediately prior to the Effective Time, except that all references
to the Company shall be deemed to be references to Parent. Parent shall file
with the SEC a registration statement on Form S-8 (or other appropriate form) or
a post-effective amendment to the Registration Statement and shall take any
action required to be taken under state securities "blue sky" laws for purposes
of registering all shares of Parent Common Stock issuable after the Effective
Time upon exercise of the New Options, and use all reasonable efforts to have
such registration statement or post-effective amendment become effective with
respect thereto as promptly as practicable after the Effective Time.
Section 7.9 EMPLOYEE BENEFITS. Parent agrees to cause the Surviving
Corporation, for not less than one year after the Effective Time, (i) to
continue to maintain the Company Plans listed on Schedule 4.16 that are in
effect as of the date hereof or (ii) to make available to employees of the
Surviving Corporation reasonably comparable benefits, considered in the
aggregate, under one or more employee benefit plans of Parent or any of its
Subsidiaries.
Section 7.10 PUBLIC ANNOUNCEMENTS. Each of Parent, Sub, and the Company
agrees that it will not issue any press release or otherwise make any public
statement with respect to this Agreement (including the Exhibits hereto) or the
transactions contemplated hereby (or thereby) without the prior consent of the
other party, which consent shall not be unreasonably withheld or delayed;
PROVIDED, HOWEVER, that such disclosure can be made without obtaining such prior
consent if (i) the disclosure is required by law or by obligations imposed
pursuant to any listing agreement with any national securities exchange and (ii)
the party making such disclosure has first used its reasonable best efforts to
consult with (but not obtain the consent of) the other party about the form and
substance of such disclosure.
Section 7.11 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. (a)
All rights to indemnification, advancement of litigation expenses and limitation
of personal liability existing in favor of the directors and officers of the
Company and its Subsidiaries under the provisions existing on the date hereof in
the Company's Certificate of Incorporation or By-Laws shall, with respect to any
matter existing or occurring at or prior to the Effective Time (including the
transactions contemplated by this Agreement), survive the Effective Time, and,
as of the Effective Time, Parent and the Surviving Corporation shall assume all
obligations of the Company in respect thereof as to any claim or claims asserted
prior to or within a six-year period immediately after the Effective Time.
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(b) For a period of three years after the Effective Time, the Surviving
Corporation shall cause to be maintained in effect the current policies of
directors' and officers' liability insurance maintained by the Company (provided
that the Surviving Corporation may substitute therefor polices of at least the
same coverage and amounts containing terms and conditions which are no less
advantageous to former officers and directors of the Company) with respect to
claims arising from facts or events which occurred before the Effective Time;
PROVIDED, HOWEVER, that in no event shall the Surviving Corporation be required
to expend pursuant to this Section 7.11(b) more than an amount equal to 150% of
current annual premiums paid by the Company for such insurance (the "MAXIMUM
AMOUNT") (which premiums the Company represents and warrants to be $180,000 in
the aggregate). If the amount of the annual premiums necessary to maintain or
procure such insurance coverage exceeds the Maximum Amount, the Surviving
Corporation during such three-year period shall maintain or procure as much
coverage as possible for an annual premium not to exceed the Maximum Amount.
Section 7.12 EXPENSES. Except as otherwise set forth in Section 9.2(b),
whether or not the Merger is consummated, all costs and expenses incurred in
connection with this Agreement (including the Exhibits hereto) and the
transactions contemplated hereby (and thereby) shall be paid by the party
incurring such expenses, except that (i) the filing fee in connection with
filings under the HSR Act, (ii) the expenses incurred in connection with
printing the Registration Statement and the Proxy Statement and (iii) the filing
fee with the SEC relating to the Registration Statement or the Proxy Statement
will be shared equally by Parent and the Company.
Section 7.13 COMPANY DEBT. The Company (a) acknowledges that it is aware
that Parent may determine to commence or request Comdata to commence, prior to
the Effective Time, an offer to purchase (the "DEBT TENDER OFFER") at least a
majority in principal amount of Comdata's outstanding 12.5% Senior Notes due
1999 and 13.25% Senior Subordinated Debentures due 2002 (collectively, the
"SENIOR NOTES") and may solicit, or request Comdata to solicit, consents to
amend certain covenants contained in the indentures relating to the Senior Notes
and (b) agrees (i) that, if Parent determines to so commence the Debt Tender
Offer, the Company will reasonably cooperate, and cause Comdata so to cooperate,
with Parent in connection with the making of the Debt Tender Offer (including in
connection with any solicitation of consents) and in connection with Parent's
obtaining of financing therefor and for any other refinancing of other
outstanding debt of the Company or its Subsidiaries (together with the Senior
Notes, the "COMPANY DEBT"), (ii) that, if Parent so requests, it will commence
and make the Debt Tender Offer (and the solicitation of consents) itself, upon
terms and conditions as advised by Parent (it being understood, however, that
the prior occurrence of the Closing will be a condition to the closing of the
Debt Tender Offer) and (iii) that it will use, and cause Comdata to use, its
reasonable best efforts to prevent the occurrence, as a result of the Merger and
the other transactions contemplated by this Agreement or otherwise, of any event
which constitutes a default (or an event which with notice or lapse of time or
both would become a default) under any of the Company Debt.
Section 7.14 LISTING APPLICATION. Parent will use its reasonable best
efforts to cause the shares of Parent Common Stock to be issued pursuant to this
Agreement in the Merger (as well as the shares of Parent Common Stock issuable
after the Effective Time upon exercise of the New Options) to be listed for
trading on the NYSE.
Section 7.15 SUPPLEMENTAL DISCLOSURE. The Company shall give prompt notice
to Parent, and Parent shall give prompt notice to the Company, of (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which would be likely to cause (x) any representation or warranty contained
in this Agreement to be untrue or inaccurate or (y) any covenant, condition or
agreement contained in this Agreement not to be complied with or satisfied and
(ii) any failure of the Company or Parent, as the case may be, to comply with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to
this Section 7.15 shall not have any effect for the purpose of determining the
satisfaction of the conditions set forth in Article VIII of this Agreement or
otherwise limit or affect the remedies available hereunder to any party.
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Section 7.16 LETTERS OF ACCOUNTANTS.
(a) Parent shall use all reasonable efforts to cause to be delivered to the
Company (i) a letter of KPMG Peat Marwick LLP, Parent's independent auditors,
dated a date within two business days before the date on which the Registration
Statement shall become effective and addressed to the Company, in form and
substance reasonably satisfactory to the Company and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement, which letter
shall be brought down to the Effective Time, and (ii) the letter referred to in
8.1(g).
(b) The Company shall use all reasonable best efforts to cause to be
delivered to Parent (i) a letter of Arthur Andersen LLP, the Company's
independent auditors, dated a date within two business days before the date on
which the Registration State shall become effective and addressed to Parent, in
form and substance reasonably satisfactory to Parent and customary in scope and
substance for letters delivered by independent public accountants in connection
with registration statements similar to the Registration Statement, which letter
shall be brought down to the Effective Time, and (ii) the letter referred to in
8.1(g).
Section 7.17 DIRECTORS OF PARENT. Parent agrees that, promptly after the
Effective Time, Parent shall take such action as may be necessary to enable two
non-management designees of the Company, which designees shall be acceptable to
Parent, to be appointed to the Board of Directors of Parent.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE
MERGER. The respective obligations of each party to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the following
conditions:
(a) HSR APPROVAL. Any waiting period applicable to the consummation of
the Merger under the HSR Act shall have expired or been terminated, and no
action shall have been instituted by the Department of Justice or Federal
Trade Commission challenging or seeking to enjoin the consummation of this
transaction, which action shall have not been withdrawn or terminated.
(b) STOCKHOLDER APPROVAL. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by (i) the
requisite vote (as described in Section 4.19) of the stockholders of the
Company and (ii) by the requisite vote (as described in Section 5.13) of the
stockholders of Parent, in each case, in accordance with applicable law.
(c) NYSE LISTING. The shares of Parent Common Stock issuable to the
holders of Company Stock pursuant to this Agreement in the Merger shall have
been authorized for listing on the NYSE, upon official notice of issuance.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective under the Securities Act and shall not be the subject of
any stop order or proceeding by the SEC seeking a stop order.
(e) NO ORDER. No Governmental Entity (including a federal or state
court) of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any statute, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent)
which is in effect and which materially restricts, prevents or prohibits
consummation of the Merger or any transaction contemplated by this
Agreement; PROVIDED, HOWEVER, that the parties shall use their reasonable
best efforts to cause any such decree, judgment, injunction or other order
to be vacated or lifted.
(f) APPROVALS. Other than the filing of Merger documents in accordance
with the DGCL, all authorizations, consents, waivers, orders or approvals
of, or declarations or filings with, or expirations of waiting periods
imposed by, any Governmental Entity that are listed on Schedule 8.1(f), or
the failure of which to obtain, make or occur would have a material adverse
effect at or after the Effective Time on
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(i) Parent or (ii) the Surviving Corporation and Comdata, taken as a whole
shall have been obtained, been filed or have occurred. Parent shall have
received all state securities or "blue sky" permits and other authorizations
necessary to issue the shares of Parent Common Stock pursuant to this
Agreement in the Merger.
(g) "POOLING LETTERS." The Company and Parent shall have each received
from Arthur Andersen LLP and KPMG Peat Marwick LLP, respectively, a letter,
dated not earlier than five (5) days prior to the Closing Date, to the
effect that, subject to customary qualifications, the Merger qualifies for
pooling of interests treatment for financial reporting purposes and that
such treatment is in accordance with GAAP.
(h) NO OWNERSHIP CHANGE. Each of Parent and the Company shall have
determined (i) based on the existence (or absence) of filings with the SEC
on Schedules 13D, 13F, 13G (or any similar schedules), that no "ownership
change," within the meaning of Section 382(g) of the Code, shall have
occurred with respect to Parent after the date hereof and (ii) based on the
existence or absence of the aforesaid filings and the number of shares of
Parent Common Stock to be issued in connection with the Merger, that
effecting the Merger will not cause such an ownership change to occur with
respect to Parent.
Section 8.2 CONDITIONS TO OBLIGATIONS OF PARENT AND SUB TO EFFECT THE
MERGER. The obligations of Parent and Sub to effect the Merger shall be subject
to the satisfaction at or prior to the Effective Time of the following
additional conditions, unless waived in writing by Parent:
(a) REPRESENTATIONS AND WARRANTIES. (i) The aggregate effect of all
inaccuracies in the representations and warranties of the Company set forth
in this Agreement does not and will not have a Company Material Adverse
Effect and (ii) the representations and warranties of the Company that are
qualified with reference to a Company Material Adverse Effect or materiality
shall be true and correct and the representations and warranties that are
not so qualified shall be true and correct in all material respects, in each
case as of the date hereof, and, except to the extent such representations
and warranties speak as of an earlier date, as of the Effective Time as
though made at and as of the Effective Time, and Parent shall have received
a certificate signed on behalf of the Company by the chief executive officer
or the chief financial officer of the Company to such effect.
(b) PERFORMANCE OF OBLIGATIONS OF THE COMPANY. Each of the Company and
its Subsidiaries shall have performed in all material respects all
obligations required to be performed by it under this Agreement at or prior
to the Effective Time, and Parent shall have received a certificate signed
on behalf of the Company by the chief executive officer or the chief
financial officer of the Company to such effect.
(c) AFFILIATE LETTERS. Parent shall have received the Affiliate
Letters from each of the Affiliates of the Company, as contemplated in
Section 7.5.
(d) TAX OPINION OF COUNSEL. Parent shall have received (i) an opinion
of Hogan & Hartson, special tax counsel to Parent, in form and substance
reasonably satisfactory to Parent, dated as of the Effective Time,
substantially to the effect that no gain or loss will be recognized by the
Company, Parent or Sub as a result of the Merger and (ii) the opinion
provided for in Section 8.3(d) addressed to Parent, in form and substance
reasonably satisfactory to Parent, dated as of the Effective Time.
(e) LETTERS OF RESIGNATION. Parent and Sub shall have received letters
of resignation addressed to the Company from the members of the Company's
board of directors and letters of resignation addressed to Comdata from the
members of Comdata's board of directors, which resignations shall be
effective as of the Effective Time.
(f) DISSENTING SHARES. The aggregate number of shares of Company
Common Stock into which all Dissenting Shares are convertible shall not
constitute more than 5% of the number of shares of
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Company Common Stock outstanding as of immediately prior to the Effective
Time (calculated assuming full conversion of all then issued and outstanding
shares of Company Preferred Stock but no other dilution).
Section 8.3 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following additional
conditions:
(a) REPRESENTATIONS AND WARRANTIES. (i) The aggregate effect of all
inaccuracies in the representations and warranties of Parent set forth in
this Agreement does not and will not have a Parent Material Adverse Effect
and (ii) the representations and warranties of Parent contained in this
Agreement that are qualified with reference to a Parent Material Adverse
Effect or materiality shall be true and correct and the representations and
warranties that are not so qualified shall be true and correct in all
material respects as of the date hereof, and, except to the extent such
representations and warranties speak as of an earlier date, as of the
Effective Time as though made on and as of the Effective Time, and the
Company shall have received a certificate signed on behalf of Parent by the
chief executive officer or the chief financial officer of Parent to such
effect.
(b) PERFORMANCE OF OBLIGATIONS OF PARENT AND SUB. Each of Parent and
Sub shall have performed in all material respects all obligations required
to be performed by it under this Agreement at or prior to the Effective
Time, and the Company shall have received a certificate signed on behalf of
Parent by the chief executive officer or the chief financial officer of
Parent to such effect.
(c) AFFILIATE LETTERS. The Company shall have received the Affiliate
Letters from the Affiliates of Parent as contemplated in Section 7.5.
(d) TAX OPINION OF COUNSEL. The Company shall have received an opinion
of Reboul, MacMurray, Hewitt, Maynard & Kristol ("Reboul MacMurray") in form
and substance reasonably satisfactory to the Company, dated as of the
Effective Time, substantially to the effect that the Merger will constitute
a reorganization for federal income tax purposes within the meaning of
Section 368(a) of the Code and that accordingly:
(i) No gain or loss will be recognized by the stockholders of the
Company who exchange their Company Stock solely for shares of Parent
Common Stock pursuant to the Merger (except to the extent that cash is
received in lieu of a fractional share interest);
(ii) The aggregate basis of the shares of Parent Common Stock
received by stockholders in the Merger will be the same as the aggregate
basis of the Company Stock surrendered in exchange therefor (reduced by
any amount allocable to a fractional share interest for which cash is
received);
(iii) The holding period of the shares of Parent Common Stock received
by stockholders in the Merger will include the period during which the
shares of Company Stock surrendered in exchange therefor were held,
provided such shares were held as a capital asset at the Effective Time;
and
(iv) No gain or loss will be recognized by the Company, Parent or Sub
as a result of the Merger.
In rendering such opinion Reboul MacMurray may require and rely upon
representations contained in certificates of officers of Parent, Sub and the
Company, certain principal stockholders and others.
ARTICLE IX
TERMINATION
Section 9.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval by the
stockholders of Parent or the Company:
(a) by mutual consent of Parent and the Company;
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(b) by either Parent or the Company, if (i) the Merger shall not have
been consummated before February 29, 1996 or (ii) the approval of the
stockholders of each of Parent and the Company required by Sections 5.15 and
4.18, respectively, shall not have been obtained at a meeting duly convened
therefor or any adjournment thereof (unless, in the case of any such
termination pursuant to this Section 9.1(b), the failure to so consummate
the Merger by such date or to obtain such stockholder approval shall have
been caused by the action or failure to act of the party (or its
Subsidiaries) seeking to terminate this Agreement, which action or failure
to act constitutes a breach of this Agreement);
(c) by either Parent or the Company, if any permanent injunction or
action by any Governmental Entity of competent jurisdiction preventing the
consummation of the Merger shall have become final and nonappealable;
PROVIDED, HOWEVER, that the party seeking to terminate this Agreement
pursuant to this Section 9.1(c) shall have used all reasonable efforts to
remove such injunction or overturn such action;
(d) by Parent, if (i) there has been a breach of any representations or
warranties of the Company set forth herein the effect of which is a Company
Material Adverse Effect, (ii) there has been a breach in any material
respect of any of the covenants or agreements set forth in this Agreement on
the part of the Company, which breach is not curable or, if curable, is not
cured within 30 days after written notice of such breach is given by Parent
to the Company, (iii) the Board of Directors of the Company (x) withdraws or
amends or modifies in a manner adverse to Parent or Sub its recommendation
or approval in respect of this Agreement or the Merger after the Company (or
any of its Subsidiaries or affiliates) has received, or there has been
publicly announced or otherwise made to the Company's stockholders, a bona
fide offer or proposal with respect to an Acquisition Transaction (it being
understood that a press release issued by the Company which merely indicates
the receipt and consideration of an Acquisition Transaction, in accordance
with the proviso to the first sentence of Section 7.2, shall not be deemed
to be such an amendment or modification or an action described in the
parenthetical in the immediately following clause (y)), (y) makes any
recommendation with respect to an Acquisition Transaction (including making
no recommendation or stating an inability to make a recommendation), other
than a recommendation to reject such Acquisition Transaction, or (z) takes
any action that would be prohibited by Section 7.2, or (iv) any corporation,
partnership, person or other entity or group (as defined in Section 13(d)(3)
of the Exchange Act) ("ACQUIRING PERSON") other than Parent, or any
affiliate or Subsidiary of Parent, shall have become the beneficial owner of
more than 15% of the outstanding voting equity of the Company (either on a
primary or a fully diluted basis); PROVIDED, HOWEVER that "Acquiring Person"
shall not include any corporation, partnership, person, other entity or
group which beneficially owns as of the date hereof (either on a primary or
a fully diluted basis) more than 15% of the outstanding voting equity of the
Company (either on a primary or a fully diluted basis) and which has not
after the date hereof increased such ownership percentage by more than an
additional 1% of the outstanding voting equity of the Company (either on a
primary or a fully diluted basis);
(e) by the Company, if (i) there has been a breach of any
representations or warranties of Parent set forth herein the effect of which
is a Parent Material Adverse Effect, (ii) there has been a breach in any
material respect of any of the covenants or agreements set forth in this
Agreement on the part of Parent, which breach is not curable or, if curable,
is not cured within 30 days after written notice of such breach is given by
the Company to Parent or (iii) such termination is necessary to allow the
Company to enter into an Acquisition Transaction that its Board of Directors
has determined in good faith, by a majority vote after consultation with its
financial advisors and based upon the written opinion of outside counsel to
the Company, is more favorable to the stockholders of the Company than the
Merger contemplated by this Agreement (provided that the termination
described in this clause (iii) shall not be effective unless and until the
Company shall have paid to Parent in full the fee and expense reimbursement
described in Section 9.2(b)); and
(f) by Parent, within thirty days of it having determined that the
condition set forth in Section 8.1(h) has become incapable of satisfaction.
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Section 9.2 EFFECT OF TERMINATION.
(a) In the event of termination of this Agreement pursuant to this Article
IX, the Merger shall be deemed abandoned and this Agreement shall forthwith
become void, without liability on the part of any party hereto, except as
provided in this Section 9.2, Section 7.1 and Section 7.12, and except that
nothing herein shall relieve any party from liability for any breach of this
Agreement.
(b) If (x) Parent shall have terminated this Agreement pursuant to Sections
9.1(d)(ii) or 9.1(d)(iii) or (y) either (1) Parent or the Company shall have
terminated this Agreement pursuant to Section 9.1(b) or (2) Parent shall have
terminated this Agreement pursuant to Section 9.1(d)(iv) and, prior to or within
one (1) year after any termination described in this clause (y), the Company (or
any of its Subsidiaries) shall have directly or indirectly entered into a
definitive agreement for, or shall have consummated, an Acquisition Transaction
or (z) the Company shall have terminated this Agreement pursuant to Section
9.1(e)(iii), then, in any of such cases, the Company shall pay Parent (A) a
termination fee of twenty-five million dollars ($25,000,000), plus (B) an
amount, not in excess of two million five hundred thousand dollars ($2,500,000),
equal to Parent's actual, documented out-of-pocket expenses directly
attributable to the negotiation and execution of this Agreement and the
attempted financing and completion of the Debt Tender Offer and the Merger;
PROVIDED, HOWEVER, that no fee or expense reimbursement shall be paid pursuant
to this Section 9.2(b) if Parent shall be in material breach of its obligations
hereunder. Any fees or amounts payable under this Section 9.2(b) shall be paid
in same day funds no later than (i) two business days after a termination
described in clause (x) of this Section 9.2(b), or (ii) concurrently with or
prior to the entering into of the definitive agreement for, or the consummation
of, such Acquisition Transaction, in the case of a termination described in
clause (y) of this Section 9.2(b) or (iii) concurrently with or prior to a
termination described in clause (z) of this Section 9.2(b).
(c) If Parent shall have terminated this Agreement pursuant to Section
9.1(f), then Parent shall, within five business days after such termination,
reimburse the Company for all of its actual, documented out-of-pocket expenses
directly attributable to the negotiation and execution of this Agreement, up to
a maximum reimbursement of two million five hundred thousand dollars
($2,500,000).
ARTICLE X
GENERAL PROVISIONS
Section 10.1 AMENDMENT AND MODIFICATION. At any time prior to the
Effective Time, this Agreement may be amended, modified or supplemented only by
written agreement (referring specifically to this Agreement) of Parent, Sub and
the Company with respect to any of the terms contained herein; PROVIDED,
HOWEVER, that after any approval and adoption of this Agreement by the
stockholders of Parent or the Company, no such amendment, modification or
supplementation shall be made which under applicable law requires the approval
of such stockholders, without the further approval of such stockholders.
Section 10.2 WAIVER. At any time prior to the Effective Time, Parent and
Sub, on the one hand, and the Company, on the other hand, may (i) extend the
time for the performance of any of the obligations or other acts of the other,
(ii) waive any inaccuracies in the representations and warranties of the other
contained herein or in any documents delivered pursuant hereto and (iii) waive
compliance by the other with any of the agreements or conditions contained
herein which may legally be waived. Any such extension or waiver shall be valid
only if set forth in an instrument in writing specifically referring to this
Agreement and signed on behalf of such party.
Section 10.3 SURVIVABILITY; INVESTIGATIONS. The respective representations
and warranties of Parent and the Company contained herein or in any certificates
or other documents delivered prior to or as of the Effective Time (i) shall not
be deemed waived or otherwise affected by any investigation made by any party
hereto and (ii) shall not survive beyond the Effective Time. The covenants and
agreements of the parties hereto (including the Surviving Corporation after the
Merger) shall survive the Effective Time without limitation (except for those
which, by their terms, contemplate a shorter survival period).
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Section 10.4 NOTICES. All notices and other communications hereunder shall
be in writing and shall be delivered personally or by next-day courier or
telecopied with confirmation of receipt, to the parties at the addresses
specified below (or at such other address for a party as shall be specified by
like notice; provided that notices of a change of address shall be effective
only upon receipt thereof). Any such notice shall be effective upon receipt, if
personally delivered or telecopied, or one day after delivery to a courier for
next-day delivery.
(a) If to Parent or Sub, to:
Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55425
Attention: Chief Executive Officer
with copies to:
Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55425
Attention: Office of General Counsel
and
Skadden, Arps, Slate, Meagher & Flom
919 Third Avenue
New York, New York 10022
Attention: Eileen Nugent Simon, Esq.
(b) if to the Company, to:
Comdata Holdings Corporation
5301 Maryland Way
Brentwood, Tennessee 37027
Attention: Chief Executive Officer
with copies to:
Comdata Holdings Corporation
5301 Maryland Way
Brentwood, Tennessee 37027
Attention: General Counsel
and
Reboul, MacMurray, Hewitt, Maynard
& Kristol
45 Rockefeller Plaza
New York, New York 10111
Attention: Robert A. Schwed, Esq.
Section 10.5 DESCRIPTIVE HEADINGS; INTERPRETATION. The headings contained
in this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement. References in this
Agreement to Sections, Schedules, Exhibits or Articles mean a Section, Schedule,
Exhibit or Article of this Agreement unless otherwise indicated. References to
this Agreement shall be
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deemed to include the Exhibits and Schedules hereto, unless the context
otherwise requires. The term "person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, a Governmental Entity or
an unincorporated organization.
Section 10.6 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement (including the
Schedules and other documents and instruments referred to herein), together with
the Voting Agreement and the Confidentiality Agreements, constitute the entire
agreement and supersede all other prior agreements and understandings, both
written and oral, among the parties or any of them, with respect to the subject
matter hereof. This Agreement is not intended to confer upon any person not a
party hereto any rights or remedies hereunder. This Agreement shall not be
assigned by operation of law or otherwise; PROVIDED that Parent or Sub may
assign its rights and obligations hereunder to a direct or indirect subsidiary
of Parent, but no such assignment shall relieve Parent or Sub, as the case may
be, of its obligations hereunder.
Section 10.7 GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware without giving
effect to the provisions thereof relating to conflicts of law.
Section 10.8 SEVERABILITY. In case any one or more of the provisions
contained in this Agreement should be invalid, illegal or unenforceable in any
respect against a party hereto, the validity, legality and enforceability of the
remaining provisions contained herein shall not in any way be affected or
impaired thereby and such invalidity, illegality or unenforceability shall only
apply as to such party in the specific jurisdiction where such judgment shall be
made.
Section 10.9 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREFORE, each of Parent, Sub and the Company has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
CERIDIAN CORPORATION
By: /s/ LAWRENCE PERLMAN
-----------------------------------
Name: Lawrence Perlman
Title: CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
CONVOY ACQUISITION CORP.
By: /s/ JAMES D. MILLER
-----------------------------------
Name: James D. Miller
Title: PRESIDENT
COMDATA HOLDINGS CORPORATION
By: /s/ GEORGE L. MCTAVISH
-----------------------------------
Name: George L. McTavish
Title: CHAIRMAN AND CHIEF
EXECUTIVE OFFICER
A-30
<PAGE>
EXHIBIT A
VOTING AGREEMENT
[Included as Appendix D to Joint Proxy Statement/Prospectus]
<PAGE>
EXHIBIT B-1
FORM OF CERIDIAN AFFILIATE LETTER
, 1995
Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55425
Ladies and Gentlemen:
This letter agreement (this "AGREEMENT") is being delivered in accordance
with Section 7.5(b) of the Agreement and Plan of Merger, dated as of August 23,
1995 (the "MERGER AGREEMENT"), by and among Ceridian Corporation, a Delaware
corporation ("PARENT"), Convoy Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Ceridian ("SUB"), and Comdata Holdings Corporation, a
Delaware corporation (the "COMPANY"). The Merger Agreement provides, among other
things, for the merger of Sub with and into the Company (the "MERGER"), pursuant
to which shares of the common and preferred stock of the Company outstanding
immediately prior to the Effective Time (as defined in the Merger Agreement)
will be converted into shares of Common Stock, par value $.50 per share ("PARENT
COMMON STOCK"), of Parent on the basis described in the Merger Agreement.
The undersigned understands that, because the Merger will be accounted for
using the "pooling-of-interests" method and the undersigned may be deemed to be
an "affiliate" of Parent (as such term is used (i) in paragraphs (c) and (d) of
Rule 145 of the General Rules and Regulations under the Securities Act of 1933,
as amended, or (ii) in and for purposes of Accounting Series, Releases 130 and
135, as amended, of the Securities and Exchange Commission), the shares of
Parent Common Stock or of preferred stock, par value $100 per share ("PARENT
PREFERRED STOCK"), of Parent (or depositary shares representing an interest in
the same), and any options, warrants or other rights exercisable for or
convertible into the same (collectively, "RIGHTS"), which the undersigned holds
may be disposed of only in conformity with the limitations described herein. The
undersigned has been informed that the treatment of the Merger as a
pooling-of-interests for financial accounting purposes is dependent upon the
accuracy of certain of the representations and warranties and the compliance
with certain of the agreements set forth herein. The undersigned further
understands and agrees that the representations, warranties, covenants and
agreements of the undersigned set forth herein are for the benefit of Parent and
the surviving corporation in the Merger and will be relied upon by such entities
and their respective counsel and accountants.
1. The undersigned hereby represents, warrants, covenants and agrees as
follows:
(a) The undersigned has full power to execute this Agreement and to make
the representations, warranties, covenants and agreements herein and to
perform the undersigned's obligations hereunder.
(b) The undersigned is the beneficial or record owner of all (i) the
shares of Parent Common Stock, (ii) the shares of Parent Preferred Stock and
(iii) the Rights indicated immediately below the undersigned's signature and
address on the last page of this Agreement (all such shares and Rights,
including any hereafter acquired, the "SHARES"). Except for the Shares, the
undersigned does not beneficially or of record own any shares of Parent
Common Stock or Parent Preferred Stock or any Rights or other equity
securities of Parent.
(c) The undersigned will not sell, transfer or dispose of (or offer or
agree to sell, transfer or dispose of) any of the Shares or in any other way
reduce the undersigned's risk of ownership or investment in any of the
Shares: (i) in the 30-day period immediately preceding the Effective Time;
or (ii) after the Effective Time, until Parent shall have publicly released
a report including the combined financial results of Parent and the Company
for a period of at least 30 days of combined operations of
i
<PAGE>
Parent and the Company; PROVIDED, HOWEVER, that nothing in this Section 1(c)
will be deemed to prohibit charitable contributions of such securities
without consideration to transferees who agree to all of the restrictions in
this Agreement.
2. The undersigned also understands that stop transfer instructions will be
given to Parent's transfer agent with respect to certificates evidencing the
Shares. Such stop transfer instructions will be promptly rescinded upon the
publication of the financial report referred to in Section 1(c)(ii) above.
3. This Agreement will be binding upon and enforceable against
administrators, executors, representatives, heirs, legatees and devisees of the
undersigned and any pledgees holding the Shares as collateral. If the Merger
Agreement is terminated in accordance with its terms prior to the Effective
Time, this Agreement will thereupon automatically terminate.
Very truly yours,
______________________________________
Name:
Address: _____________________________
______________________________________
______________________________________
Shares owned beneficially or of
record:
______________ total Shares,
consisting of:
______________ shares of Parent Common
Stock;
______________ shares of Parent
Preferred Stock; and
______________ shares of Parent Common
Stock subject to options, warrants or
other rights exercisable within 60
days.
Agreed to and accepted:
CERIDIAN CORPORATION
By:
-----------------------------------
Name:
Title:
ii
<PAGE>
EXHIBIT B-2
FORM OF COMDATA AFFILIATE LETTER
, 1995
Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55425
Comdata Holdings Corporation
5301 Maryland Way
Brentwood, Tennessee 37027
Ladies and Gentlemen:
This letter agreement (this "AGREEMENT") is being delivered in accordance
with Section 7.5(b) of the Agreement and Plan of Merger, dated as of August 23,
1995 (the "MERGER AGREEMENT"), by and among Ceridian Corporation, a Delaware
corporation ("PARENT"), Convoy Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Ceridian ("SUB"), and Comdata Holdings Corporation, a
Delaware corporation (the "COMPANY"). The Merger Agreement provides, among other
things, for the merger of Sub with and into the Company (the "MERGER"), pursuant
to which (i) each share of the Common Stock, par value $.01 per share ("COMPANY
COMMON STOCK"), of the Company and (ii) each share of Preferred Stock, par value
$.01 per share ("COMPANY PREFERRED STOCK" and, together with the Company Common
Stock, the "COMPANY STOCK"), of the Company will be converted into the right to
receive a number of shares of Common Stock, par value $.50 per share ("PARENT
COMMON STOCK"), of Parent on the basis described in the Merger Agreement.
The undersigned understands that as of the date of this letter he, she or it
may be deemed to be an "affiliate" of the Company as such term is (i) used in
paragraphs (c) and (d) of Rule 145 of the General Rules and Regulations (the
"RULES AND REGULATIONS") of the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "SECURITIES ACT"), or (ii)
used in and for purposes of Accounting Series, Releases 130 and 135, as amended,
of the SEC (an "AFFILIATE").
1. The undersigned hereby represents, warrants, covenants and agrees as
follows:
(a) The undersigned has full power to execute this Agreement and to make
the representations, warranties, covenants and agreements herein and to
perform the undersigned's obligations hereunder.
(b) The undersigned is the beneficial or record owner of all (i) the
shares of Company Common Stock, (ii) the shares of Company Preferred Stock
and (iii) the options, warrants or other rights exercisable for or
convertible into shares of Company Stock (collectively, the "RIGHTS")
indicated immediately below the undersigned's signature and address on the
last page of this Agreement (all such shares and Rights, including any
hereafter acquired, the "COMPANY SHARES"). Except for the Company Shares,
the undersigned does not beneficially or of record own any shares of Company
Common Stock or Company Preferred Stock or any Rights or other equity
securities of the Company.
(c) The undersigned will not sell, transfer or otherwise dispose of or
offer or agree to sell, transfer or dispose of or in any other way reduce
the undersigned's risk of ownership or investment in (any of the foregoing,
a "DISPOSITION") any of the shares of Parent Common Stock issued to the
undersigned in the Merger in exchange for the Company Shares (the "PARENT
SHARES") in violation of the Securities Act or the Rules and Regulations.
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(d) The undersigned has carefully read this Agreement and the Merger
Agreement and discussed with the undersigned's counsel or counsel for the
Company the requirements of such documents and other applicable limitations
upon the undersigned's ability to make any Disposition of the Parent Shares.
(e) The undersigned understands that the issuance of Parent Common Stock
pursuant to the Merger has been registered with the SEC under the Securities
Act on a Registration Statement on Form S-4 and that, because at the time
the Merger is submitted to a vote of the stockholders of the Company, the
undersigned may be deemed to be an Affiliate of the Company and the
distribution by the undersigned of any shares of Parent Common Stock has not
been registered under the Securities Act, the undersigned may not make any
Disposition of the Parent Shares unless (i) such Disposition has been
registered under the Securities Act, (ii) such Disposition is made in
conformity with the volume and other limitations of Rule 145 promulgated by
the SEC under the Securities Act, or (iii) Parent has received an opinion of
counsel, which opinion and counsel shall be reasonably acceptable to Parent,
to the effect that such Disposition is otherwise exempt from registration
under the Securities Act.
(f) The undersigned understands that Parent is under no obligation to
register any Disposition of Parent Shares by the undersigned or on the
undersigned's behalf under the Securities Act or to take any other action
necessary in order to make compliance with an exemption from such
registration available to the undersigned.
(g) The undersigned understands that stop transfer instructions will be
given to all transfer agents for the Parent Common Stock and that there will
placed on the certificates evidencing the Parent Shares, or any replacements
or substitutions therefor, a legend stating in substance:
THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A
TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF
1933 APPLIES. THE SHARES REPRESENTED BY THIS CERTIFICATE MAY BE
TRANSFERRED ONLY IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED
AUGUST 23, 1995 BETWEEN THE REGISTERED HOLDER HEREOF AND CERIDIAN
CORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE AT THE PRINCIPAL
OFFICES OF CERIDIAN CORPORATION.
(h) The undersigned also understands that unless a Disposition of the
Parent Shares has been registered under the Securities Act or is made in
conformity with the provisions of Rule 145, Parent reserves the right to put
the following legend on the certificates evidencing any of the Parent Shares
issued to any transferee of the undersigned:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."
(i) It is understood and agreed that the legends set forth in Sections
1(g) and 1(h) above shall be removed by delivery of substitute certificates
without such legend if the undersigned has delivered to Parent an opinion of
counsel, which opinion and counsel shall be reasonably satisfactory to
Parent, or a letter from the staff of the SEC, to the effect that such
legend is not required for purposes of the Rules and Regulations or the
Securities Act.
ii
<PAGE>
2. The undersigned understands that the Merger will be accounted for using
the "pooling-of-interests" method and that such treatment for financial
accounting purposes is dependent upon the accuracy of certain of the
representations and warranties, and the compliance by the undersigned with
certain of the covenants and agreements, set forth herein. Accordingly, the
undersigned further hereby covenants and agrees (in addition to the other
covenants and agreements in this Agreement) that he, she or it will not make any
Disposition: (i) of the Company Shares in the 30-day period immediately
preceding the Effective Time; or (ii) of the Parent Shares after the Effective
Time until Parent shall have publicly released a report including the combined
financial results of Parent and the Company for a period of at least 30 days of
combined operations of Parent and the Company; PROVIDED, HOWEVER, that nothing
in this Section 2 will be deemed to prohibit charitable contributions of such
securities without consideration to transferees who agree to all of the
restrictions in this Agreement. The undersigned understands that stop transfer
instructions will be give to the transfer agents of Parent and the Company in
order to prevent any breach of the covenants and agreements made by the
undersigned in this Section 2, although such stop transfer instructions will be
promptly rescinded upon the publication of the financial report referred to in
clause (ii) of the immediately preceding sentence.
3. The undersigned further understands and agrees that the representations,
warranties, covenants and agreements of the undersigned set forth herein are for
the benefit of Parent, the Company and the surviving corporation in the Merger
and will be relied upon by such entities and their respective counsel and
accountants.
4. This Agreement will be binding upon and enforceable against
administrators, executors, representatives, heirs, legatees and devisees of the
undersigned and any pledgees holding the Company Shares as collateral. If the
Merger Agreement is terminated in accordance with its terms prior to the
Effective Time, this Agreement will thereupon automatically terminate.
Very truly yours,
______________________________________
Name:
Address: _____________________________
______________________________________
______________________________________
Shares owned beneficially or of
record:
______________ total Shares,
consisting of:
______________ shares of Company
Common Stock;
______________ shares of Company
Preferred Stock (Series B);
______________ shares of Company
Preferred Stock (Series C); and
______________ shares of Company
Common Stock subject to options,
warrants or other rights exercisable
within 60 days.
iii
<PAGE>
Agreed to and accepted:
CERIDIAN CORPORATION
By:
-----------------------------------
Name:
Title:
COMDATA HOLDINGS CORPORATION
By:
-----------------------------------
Name:
Title:
iv
<PAGE>
APPENDIX B
[BEAR STEARNS LETTERHEAD]
November 9, 1995
Board of Directors
Ceridian Corporation
8100 34th Avenue South
Minneapolis, Minnesota 55426-1640
Dear Sirs and Madams:
We understand that pursuant to an Agreement and Plan of Merger dated as of
August 23, 1995 (the "Agreement") among Ceridian Corporation ("Ceridian"), its
wholly-owned subsidiary Convoy Acquisition Corp. ("Sub") and Comdata Holdings
Corporation ("Comdata"), Ceridian and Comdata intend to consummate a transaction
in which Sub will merge with and into Comdata (the "Merger"), with Comdata as
the surviving corporation and a wholly-owned subsidiary of Ceridian, and in
which each outstanding share of common stock of Comdata would be converted into
the right to receive 0.570 shares (the "Exchange Ratio") of Ceridian common
stock, and each outstanding share of Comdata Series B and Series C Convertible
Preferred Stock (the "Comdata Preferred Stock") would be converted into the
right to receive a number of shares of Ceridian common stock equal to the
product of the Exchange Ratio and the number of shares of Comdata common stock
into which such share of Comdata Preferred Stock was convertible immediately
prior to the effective time of the Merger. We further understand that the Merger
will be accounted for as a pooling-of-interests as contemplated by the
Agreement.
You have asked us to render our opinion as to whether the Merger is fair,
from a financial point of view, to the stockholders of Ceridian.
In the course of our analysis for rendering this opinion, we have:
1. reviewed the Agreement in substantially the final form;
2. reviewed Ceridian's and Comdata's respective Annual Reports to
Shareholders and Annual Reports on Form 10-K for the years ended December
31, 1992 through 1994, and their respective Quarterly Reports on Form
10-Q for the periods ended March 31 and June 30, 1995.
3. reviewed certain operating and financial information provided to us by
the managements of Ceridian and Comdata relating to their respective
businesses, including internal projections of future financial results
used for planning purposes;
4. met with certain members of Ceridian's senior management to discuss
Ceridian's operations, historical financial statements and future
prospects, as well as their views with respect to the operations,
historical financial statements and future prospects of Comdata, and
their views of the business, operational and strategic benefits,
potential synergies and other implications of the Merger;
5. met with certain members of Comdata's senior management to discuss
Comdata's operations, historical financial statements and future
prospects, as well as their views of the business, operational and
strategic benefits, potential synergies and other implications of the
Merger;
6. reviewed the pro forma financial impact of the Merger on Ceridian;
7. reviewed the historical stock prices and trading volumes of the common
stocks of Ceridian and Comdata;
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<PAGE>
8. reviewed certain publicly available financial information and stock
market performance data of other publicly-held companies which we deemed
generally comparable to Ceridian and to Comdata;
9. reviewed the financial terms of certain other recent acquisitions of
companies which we deemed generally comparable to Comdata; and
10. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In the course of our review, and subject to the following sentence, we have
relied upon and assumed, without independent verification, the accuracy and
completeness of the financial and other information provided to us by Ceridian
and Comdata and the reasonableness of the assumptions made by the managements of
Ceridian and Comdata with respect to their respective projected financial
results and potential synergies which could be achieved upon consummation of the
Merger, and we have not assumed any responsibility for independent verification
of such information and we have further relied upon the assurances of the
management of Ceridian and the management of Comdata that they are unaware of
any facts that would make the information provided to us incomplete or
misleading. With respect to Ceridian's and Comdata's projected financial
results, we have considered a variety of factors that could affect the
achievability of these results and have developed alternative scenarios
reflecting lower results that we have considered in connection with arriving at
the opinion set forth below. In arriving at our opinion, we have not performed
or obtained any independent appraisal of the assets of Ceridian or Comdata nor
have we been furnished with any such appraisals. Our opinion is necessarily
based on the economic, market and other conditions as in effect on, and the
information made available to us as of the date hereof.
We have acted as financial advisor to Ceridian in connection with the Merger
and will receive a fee for such advisory services, including the rendering of
this opinion, payment of a significant portion of which is contingent upon the
consummation of the Merger.
In the ordinary course of our business, we may actively trade the equity
securities of Ceridian and Comdata for our own account and for the accounts of
customers and accordingly, may, at any time, hold a long or short position in
such securities.
Based on and subject to the foregoing, it is our opinion that, as of the
date hereof, the Merger is fair, from a financial point of view, to the
stockholders of Ceridian.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ MICHAEL J. URFIRER
------------------------------------
Managing Director
B-2
<PAGE>
APPENDIX C
[LAZARD FRERES LETTERHEAD]
August 23, 1995
The Board of Directors
Comdata Holdings Corporation
5301 Maryland Way
Brentwood, Tennessee 37027
Dear Members of the Board:
We understand that Comdata Holdings Corporation (the "Company"), Ceridian
Corporation ("Ceridian") and a wholly-owned subsidiary of Ceridian ("Merger
Subsidiary") are entering into an Agreement and Plan of Merger dated as of
August 23, 1995 (the "Agreement"), which provides, among other things, for the
merger of Merger Subsidiary with and into the Company (the "Merger"). As more
fully set forth in the Agreement, as a result of the Merger (i) each share of
Common Stock par value $0.01 per share, of the Company (the "Company Common
Stock") will be converted into .570 shares (the "Exchange Ratio") of Commons
Stock, par value $0.50 per share, of Ceridian (the "Ceridian Common Stock") and
(ii) each share of Preferred Stock, par value $0.01 per share, of the Company
(the "Company Preferred Stock") will be converted into the right to receive a
number of shares of Ceridian Common Stock equal to the product of (x) the
Exchange Ratio and (y) the number of shares of Company Common Stock into which
such share of Company Preferred Stock was convertible as of immediately prior to
the effective time of the Merger.
You have requested our opinion as to the fairness, from a financial point of
view, to the holders of shares of Company Common Stock and Company Preferred
Stock of the Exchange Ratio. In connection with this opinion, we have:
(i) Reviewed the financial terms and conditions of the Agreement.
(ii) Analyzed certain historical business and financial information relating
to the Company and Ceridian;
(iii) Reviewed various financial forecasts and other data provided to us by
the Company and Ceridian relating to their respective businesses;
(iv) Held discussions with members of the senior management of the Company
and Ceridian with respect to the businesses and prospects of the
Company and Ceridian, respectively, the strategic objectives of each,
and possible benefits which might be realized following the Merger;
(v) Reviewed public information with respect to certain other companies in
lines of businesses we believe to be generally comparable in whole or in
part to the businesses of the Company and Ceridian;
(vi) Reviewed the financial terms of certain business combinations involving
companies in lines of businesses we believe to be generally comparable
in whole or in part to those of the Company and Ceridian, and in other
industries generally;
(vii) Reviewed the historical stock prices and trading volumes of the Company
Common Stock and Ceridian Common Stock; and
(viii) Conducted such other financial studies, analyses and investigations as
we deemed appropriate.
We have relied upon the accuracy and completeness of the financial and other
information provided by the Company and Ceridian to, reviewed by or for or
discussed with us or publicly available, and have not assumed any responsibility
for any independent verification of such information or any independent
valuation or appraisal of any of the assets or liabilities of the Company or
Ceridian nor have we been furnished with any such appraisals. With respect to
financial forecasts provided by the Company and Ceridian to,
C-1
<PAGE>
reviewed by or for or discussed with us, we have assumed that they have been
reasonably prepared on bases reflecting the best currently available estimates
and judgements of management of the Company and Ceridian as to the future
financial performance of the Company and Ceridian, respectively. We assume no
responsibility for and express no view as to such forecasts or the assumptions
on which they are based. You have informed us, and we have assumed, that the
Merger will be recorded as a pooling of interests in accordance with generally
accepted accounting principles.
Further, our opinion is necessarily based on economic, monetary, market and
other conditions as in effect on, and the information made available to us as
of, the date hereof and does not address the Company's underlying decision to
effect the Merger or constitute a recommendation to any stockholder of the
Company as to how such stockholder should vote with respect to the Merger.
In rendering our opinion, we have assumed that the Merger will be
consummated on the terms described in the Agreement, without any waiver of any
material terms or conditions by the Company.
In connection with the preparation of this opinion, we have not been
authorized by the Company or the Board of Directors to solicit, nor have we
solicited, third party indications of interest for the acquisition of all or any
part of the Company.
Lazard Freres & Co. LLC is acting as financial advisor to the Company in
connection with the Merger and will receive a fee for our services upon
rendering this opinion.
This letter and the opinion expressed herein are being delivered pursuant to
our engagement by the Company's Board of Directors. It is understood that this
letter may not be disclosed or otherwise referred to without our prior consent,
except as may otherwise be required by law or by a court of competent
jurisdiction.
Based on and subject to the foregoing and such other factors as we deem
relevant, we are of the opinion that, as of the date hereof, the Exchange Ratio
is fair to the holders of the Company Common Stock and the holders of the
Company Preferred Stock from a financial point of view.
Very truly yours,
Lazard Freres & Co. LLC
/s/ Lazard Freres & Co. LLC
--------------------------------------
C-2
<PAGE>
APPENDIX D
VOTING AGREEMENT
VOTING AGREEMENT, dated as of August 23, 1995 (this "AGREEMENT"), among
Ceridian Corporation, a Delaware corporation ("PARENT"), Convoy Acquisition
Corp., a Delaware corporation and a wholly owned subsidiary of Parent ("SUB"),
and each other person and entity set forth on the signature pages hereof (each,
a "STOCKHOLDER" and, collectively, the "STOCKHOLDERS").
WHEREAS, Parent, Sub and Comdata Holdings Corporation, a Delaware
Corporation (the "COMPANY"), concurrently with the execution and delivery of
this Agreement, will enter into an Agreement and Plan of Merger, dated as of the
date hereof (the "MERGER AGREEMENT"), providing for, among other things, the
merger of Sub with and into the Company (the "MERGER");
WHEREAS, as of the date hereof, each Stockholder owns (either beneficially
or of record) (i) the number of shares of Preferred Stock, par value $.01 per
share ("COMPANY PREFERRED STOCK"), of the Company that have been designated as
Series B Convertible Preferred Stock (the "SERIES B PREFERRED") and (ii) the
number of shares of Company Preferred Stock that have been designated as Series
C Convertible Preferred Stock (the "SERIES C PREFERRED"), in each case, set
forth opposite such Stockholder's name on the signature pages hereof (all such
shares, including any shares of Company Preferred Stock which are issued upon
exercise of any options, rights or similar arrangements held by the
Stockholders, and any shares of Company Preferred Stock hereafter acquired
(including as dividends) by the Stockholders being referred to as the "SHARES");
WHEREAS, approval of the Merger requires, among other things, the
affirmative vote of (i) the holders of a majority of the outstanding shares of
capital stock of the Company entitled to vote thereon (a "STOCKHOLDER VOTE OF
ALL CLASSES"), consisting of the shares of the Common Stock, par value $.01 per
share ("COMPANY COMMON STOCK"), of the Company voting together as a single class
with the holders of the Series B Preferred and the Series C Preferred (with such
Series B Preferred and Series C Preferred holders being entitled to one vote for
each share of Company Common Stock into which such shares of Company Preferred
Stock so held would be convertible on the record date set for the vote), (ii)
the holders of a majority of the outstanding shares of Series B Preferred,
voting as a separate class (a "CLASS B VOTE"), and (iii) the holders of a
majority of the outstanding shares of Series C Preferred, voting as a separate
class (a "CLASS C VOTE");
WHEREAS, as a condition to the willingness of Parent and Sub to enter into
the Merger Agreement, Parent and Sub have required that the Stockholders agree,
and in order to induce Parent and Sub to enter into the Merger Agreement, the
Stockholders have agreed, to enter into this Agreement with respect to the
Shares.
NOW THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements contained herein, and intending to be legally bound hereby, the
parties hereto hereby agree as follows:
ARTICLE I
VOTING OF SHARES
Section 1.1 VOTING AGREEMENT. Each Stockholder agrees that, during the
time this Agreement is in effect, at any annual, special or other meeting of
stockholders of the Company (of whatever class or classes), and at any
adjournment or adjournments thereof, and in any action by consent in lieu of a
meeting or otherwise, such Stockholder will vote all of its Shares (i) in favor
of approval and adoption of the Merger Agreement (as amended from time to time),
the Merger and the other transactions contemplated thereby, and (ii) against any
proposals or agreements providing for any recapitalization, merger,
consolidation, sale of assets, reorganization, liquidation or business
combination involving the Company or any of its subsidiaries (other than the
Merger and the Merger Agreement) or any other action or agreement that would
result in a breach of any covenant, representation or warranty or any other
obligation or agreement of the Company
D-1
<PAGE>
under the Merger Agreement or which could result in any of the conditions to the
Company's obligations under the Merger Agreement not being fulfilled. The
provisions of this Section 1.1 shall bind and obligate each Stockholder with
respect to each Class B Vote, each Class C Vote and, subject to the immediately
following sentence, each Stockholder Vote of All Classes. Notwithstanding the
foregoing, the provisions of this Section 1.1 shall not bind or obligate any
Stockholder with respect to a Stockholder Vote of All Classes if, prior to such
vote, the designee of such Stockholder on the Board of Directors of the Company,
in the good faith exercise of his or her fiduciary duty under applicable law as
a director of the Company, shall have withdrawn, amended or modified in a manner
adverse to Parent or Sub his or her recommendation or approval in respect of the
Merger Agreement or the Merger. Each Stockholder acknowledges receipt and review
of a copy of the Merger Agreement.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS
Each Stockholder hereby represents and warrants to each of Parent and Sub as
follows:
Section 2.1 AUTHORITY RELATIVE TO THIS AGREEMENT. Such Stockholder (if it
is a corporation, partnership or other legal entity) is duly organized and
validly existing under the laws of the jurisdiction of its incorporation or
organization. Such Stockholder has all necessary power and authority (corporate
or otherwise) to execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby. The execution
and delivery of this Agreement by such Stockholder and the consummation by such
Stockholder of the transactions contemplated hereby have been duly and validly
authorized by all necessary action (corporate or otherwise) on the part of such
Stockholder, and no other proceedings (corporate or otherwise) on the part of
such Stockholder are necessary to authorize this Agreement or to consummate such
transactions. This Agreement has been duly and validly executed and delivered by
or on behalf of such Stockholder and, assuming this Agreement constitutes a
valid and binding obligation of each of Parent and Sub, constitutes a valid and
binding obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms.
Section 2.2 NO CONFLICT. The execution and delivery of this Agreement by
such Stockholder do not, and the performance of this Agreement by such
Stockholder will not, (i) conflict with or violate the charter, by-laws,
partnership agreement or comparable organizational documents of such Stockholder
(in the case of a Stockholder that is a corporation, partnership or other legal
entity), (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to such Stockholder or by which the Shares owned
by such Stockholder are bound or affected, (iii) result in any breach of or
constitute a default (or an event that with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or encumbrance of any kind on any of the Shares pursuant to, any agreement,
contract, indenture, notice or instrument to which such Stockholder is a party
or by which such Stockholder or the Shares is bound or affected, or (iv) except
for applicable requirements, if any, of the Securities Exchange Act of 1934, as
amended, require on behalf of such Stockholder any filing with or notification
to, or any permit, authorization consent or approval of, any governmental or
regulatory authority, domestic or foreign.
Section 2.3 TITLE TO SHARES. The Shares set forth opposite such
Stockholder's name on the signature pages hereof constitute all of the shares of
Company Preferred Stock owned (either beneficially or of record) by such
Stockholder. Such Shares are owned free and clear of all security interests,
liens, claims, pledges, options, rights of first refusal, agreements, charges,
limitations on voting rights or encumbrances of any kind. Such Stockholder has
not appointed or granted any proxy, which appointment or grant is still
effective, with respect to the Shares.
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<PAGE>
ARTICLE III
COVENANTS OF THE STOCKHOLDERS
Section 3.1 NO INCONSISTENT ARRANGEMENTS. Each Stockholder hereby
covenants and agrees that, except as expressly provided in this Agreement, it
shall not (i) enter into any contract, option or other agreement or
understanding with respect to the voting of the Shares, (ii) grant any proxy,
power-of-attorney or other authorization in or with respect to such Shares,
(iii) deposit such Shares into a voting trust or enter into a voting agreement
or arrangement with respect to such Shares, (iv) fail to provide any
representation with respect to the ownership of its Shares and its intention to
continue to hold such Shares that is requested by the Company or its counsel and
is reasonably necessary for the rendering by such counsel of the opinion
contemplated by Section 8.3(d) of the Merger Agreement or (v) take any other
action that would in any way restrict, limit or interfere with the performance
of its obligations hereunder or the transactions contemplated hereby or in the
Merger Agreement. Notwithstanding the foregoing, in the case of any Stockholder
who is also a Director of the Company, nothing in this Section 3.1 shall be
deemed to deny such Stockholder the benefit, solely in such Stockholder's
capacity as a Director of the Company (and not in such Stockholder's capacity as
owner of its Shares), of the proviso included in Section 7.2 of the Merger
Agreement.
Section 3.2 CONVERSION OF SHARES. Each Stockholder hereby covenants and
agrees that, during the time this Agreement is in effect, it will not convert
any of its Shares into shares of Company Common Stock unless, after giving
effect to such conversion, such Stockholder, together with the other
Stockholders signatory hereto, in the aggregate continue to own at least a
majority of the issued and outstanding shares of the class of Company Preferred
Stock to which the Shares being converted belong.
Section 3.3 TRANSFER OF TITLE. Each Stockholder hereby covenants and
agrees that, during the time this Agreement is in effect, such Stockholder shall
not transfer (including, without limitation, by sale, gift, pledge or other
disposition), or consent to any transfer of record or beneficial ownership of,
any of the Shares unless the transferee of such Shares agrees in writing prior
to any such transfer to be bound by the terms and conditions of this Agreement.
ARTICLE IV
MISCELLANEOUS
Section 4.1 DURATION. This Agreement shall remain in effect until the
earlier to occur of (i) the Effective Time (as defined in the Merger Agreement)
and (ii) the termination of the Merger Agreement, and thereafter this Agreement
shall automatically terminate, without further action by any party hereto.
Section 4.2 SPECIFIC PERFORMANCE. The parties hereto agree that if any of
the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached, irreparable damage would occur, no
adequate remedy at law would exist and damages would be difficult to determine,
and that the parties shall be entitled to specific performance of the terms
hereof, without any requirement for securing or posting any bond, in addition to
any other remedy at law or equity.
Section 4.3 ENTIRE AGREEMENT. This Agreement constitutes the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersedes all prior agreements and understandings, both written and oral, among
the parties hereto with respect to the subject matter hereof.
Section 4.4 AMENDMENT. This Agreement may not be amended except by an
instrument in writing signed by the parties hereto and specifically referencing
this Agreement.
Section 4.5 SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provisions hereof shall
not affect the validity and enforceability of the other provisions hereof. If
any provision of this Agreement, or the application thereof to any person or
entity or any circumstances, is invalid or unenforceable, (i) a suitable and
equitable provision shall be substituted therefor in order to carry out, so far
as may be valid and enforceable, the intent and purpose of such invalid and
unenforceable provision and (ii) the remainder of this Agreement and the
application of such provision
D-3
<PAGE>
to other persons, entities or circumstances shall not be affected by such
invalidity or unenforceability, nor shall such invalidity or unenforceability
affect the validity or enforceability of such provision, or the application
thereof, in any other jurisdiction.
Section 4.6 GOVERNING LAW. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware without giving
effect to the provisions thereof relating to conflicts of law.
Section 4.7 COUNTERPARTS. This Agreement may be executed in two or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective as to any Stockholder when one or more counterparts have
been signed by each of Parent and Sub and such Stockholder and delivered to
Parent and Sub and such Stockholder.
Section 4.8 NOTICES. All notices, requests, claims, demands and other
communications under this Agreement shall be in writing and shall be deemed
given if delivered personally or sent by overnight courier (providing proof of
delivery) to the parties at the addresses specified below (or at such other
address for a party as shall be specified by like notice): (i) if to Parent or
Sub, to its address set forth in Section 10.4 of the Merger Agreement; and (ii)
if to a Stockholder, to the address for such Stockholder set forth opposite such
Stockholder's name on the signature pages hereof.
IN WITNESS WHEREOF, each of the Stockholders, Parent and Sub have caused
this Agreement to be duly executed on the date hereof.
One World Financial Center WELSH, CARSON, ANDERSON
200 Liberty Street, Suite 3601 & STOWE IV, L.P.
New York, New York 10281
By WCAS IV Partners,
General Partner
-- Shares of Series B Preferred Stock By: /s/ PATRICK J. WELSH
-----------------------------------
12,525 Shares of Series C Preferred Name: Patrick J. Welsh
Stock
Title: General Partner
One World Financial Center WELSH, CARSON, ANDERSON
200 Liberty Street, Suite 3601 & STOWE VI, L.P.
New York, New York 10281
By WCAS VI Partners,
General Partner
101,868 Shares of Series B Preferred By: /s/ PATRICK J. WELSH
Stock -----------------------------------
-- Shares of Series C Preferred Stock Name: Patrick J. Welsh
Title: General Partner
One World Financial Center WCAS INFORMATION
200 Liberty Street, Suite 3601 PARTNERS, L.P.
New York, New York 10281
By WCAS INFO Partners,
General Partner
2,038 Shares of Series B Preferred Stock By: /s/ PATRICK J. WELSH
-----------------------------------
-- Shares of Series C Preferred Stock Name: Patrick J. Welsh
Title: General Partner
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<PAGE>
<TABLE>
<S> <C>
One World Financial Center WCAS CAPITAL PARTNERS, L.P.
200 Liberty Street, Suite 3601
New York, New York 10281
By WCAS CP Partners,
General Partner
254,999 Shares of Series B Preferred By: /s/ PATRICK J. WELSH
Stock -----------------------------------
-- Shares of Series C Preferred Stock Name: Patrick J. Welsh
Title: General Partner
535 Madison Avenue CHARTERHOUSE EQUITY PARTNERS, L.P.
28th Floor
New York, NY 10022
By CHUSA EQUITY INVESTORS, L.P.,
General Partner
By CHARTERHOUSE EQUITY, INC.,
General Partner
-- Shares of Series B Preferred Stock By: /s/ PHYLLIS HABERMAN
-----------------------------------
199,462 Shares of Series C Preferred Name: Phyllis Haberman
Stock
Title: Vice President
CERIDIAN CORPORATION
By: /s/ LAWRENCE PERLMAN
-----------------------------------
Name: Lawrence Perlman
Title:Chairman and Chief Executive
Officer
CONVOY ACQUISITION CORP.
By: /s/ JAMES D. MILLER
-----------------------------------
Name: James D. Miller
Title: President
</TABLE>
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<PAGE>
WELSH, CARSON, ANDERSON & STOWE
September 25, 1995
Ceridian Corporation
Convoy Acquisition Corp.
8100 34th Avenue South
Minneapolis, MN 55440-4700
Attention: Mr. Lawrence Perlman
Dear Sirs:
Reference is made to the Voting Agreement dated as of August 23, 1995 (the
"Voting Agreement"), by and among Ceridian Corporation, a Delaware corporation
("Parent"), Convoy Acquisition Corp., a Delaware corporation and a wholly owned
subsidiary of Parent, and certain stockholders of Comdata Holdings Corporation,
a Delaware corporation (the "Company"), including each of the undersigned. Terms
used herein and not otherwise defined herein shall have the meanings assigned
thereto in the Voting Agreement.
This is to confirm our agreement that the Voting Agreement shall apply to
the shares (the "Conversion Shares") of Company Common Stock that may be
received by the undersigned upon the conversion of the Company Preferred Stock
in accordance with paragraph (5) of the Company's Certificate of Designations,
Preferences and Rights of Preferred Stock, which forms a part of the Company's
Restated of Certificate of Incorporation. Accordingly, we hereby agree that the
defined term "Shares" as used in the Voting Agreement, shall include any
Conversion Shares that may be received by the undersigned, but not any other
shares of Company Common Stock held by the undersigned.
Except as provided herein, the Voting Agreement is otherwise in all respects
confirmed.
If the foregoing is in accordance with your understanding please countersign
this letter in the space indicated below.
Very truly yours,
WELSH, CARSON, ANDERSON &
STOWE IV, L.P.
By WCAS IV Partners,
General Partner
By: /s/ PATRICK J. WELSH
-----------------------------------
Name: Patrick J. Welsh
Title: GENERAL PARTNER
WELSH, CARSON, ANDERSON &
STOWE VI, L.P.
By WCAS VI Partners,
General Partner
By:/s/ PATRICK J. WELSH
-----------------------------------
Name: Patrick J. Welsh
Title: GENERAL PARTNER
D-6
<PAGE>
WCAS INFORMATION PARTNERS, L.P.
By WCAS INFO Partners,
General Partner
By:/s/ PATRICK J. WELSH
-----------------------------------
Name: Patrick J. Welsh
Title: GENERAL PARTNER
WCAS CAPITAL PARTNERS, L.P.
By WCAS CP Partners,
General Partner
By:/s/ PATRICK J. WELSH
-----------------------------------
Name: Patrick J. Welsh
Title: GENERAL PARTNER
ACCEPTED AND AGREED BY:
CERIDIAN CORPORATION
By: /s/ JOHN A. HAVEMAN
-----------------------------------
Name: John A. Haveman
Title: VICE PRESIDENT AND SECRETARY
CONVOY ACQUISITION CORP.
By: /s/ JAMES D. MILLER
-----------------------------------
Name: James D. Miller
Title: PRESIDENT
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