SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K/A
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
April 22, 1996
Date of Report (Date of earliest event reported)
AMDAHL CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-7713 94-1728548
--------------- ----------- -------------------
(State of (Commission (I.R.S. Employer
incorporation) file no.) Identification No.)
1250 East Arques Avenue
Sunnyvale, California 94088-3470
--------------------------------------------------
(Address of principal executive offices)(Zip code)
Registrant's telephone number: (408) 746-6000
Not Applicable
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION
AND EXHIBITS.
(a) FINANCIAL STATEMENTS OF BUSINESS ACQUIRED
<PAGE>
(1)
TRECOM Business
Systems, Inc.
Financial Statements
December 31, 1995 and 1994
<PAGE>
PRICE WATERHOUSE LLP
February 16, 1996
To the Board of Directors and Stockholders of
TRECOM Business Systems, Inc.
In our opinion, the accompanying balance sheets and the related
statements of operations and retained earnings and of cash flows
present fairly, in all material respects, the financial position
of TRECOM Business Systems, Inc. ("the Company") at December 31,
1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally
accepted accounting principles. These financial statements are
the responsibility of the Company's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ Price Waterhouse LLP
<PAGE>
<TABLE>
<CAPTION>
TRECOM Business Systems, Inc.
Balance Sheets
December 31,
1995 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,800,785 $ 198,637
Trade accounts receivable, less allowance for
doubtful accounts of $250,000 and $100,000 in
1995 and 1994, respectively 34,203,540 21,193,784
Other accounts receivable 1,092,817 475,124
Prepaid expenses 331,596 351,920
Prepaid income taxes (Note 5) - 134,543
Deferred income taxes (Note 5) 1,774,935 676,421
------------ ------------
Total current assets 39,203,673 23,030,429
Fixed assets - net (Note 2) 4,248,678 2,798,817
------------ ------------
Total assets $ 43,452,351 $ 25,829,246
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and short-term
borrowings (Note 3) $ 12,550,558 $ 7,423,158
Accounts payable and accrued expenses (Note 4) 13,528,364 9,516,429
Income taxes payable (Note 5) 1,136,135 -
Deferred revenue (Note 1) 1,823,000 1,483,000
------------ ------------
Total current liabilities 29,038,057 18,422,587
Notes payable (Note 3) - 225,000
Deferred income taxes (Note 5) 160,588 10,073
------------ ------------
Total liabilities 29,198,645 18,657,660
------------ ------------
Stockholders' equity:
Common stock, $0.01 par value; 1,500,000
shares authorized; 520,000 shares issued
and outstanding in 1995 and 1994 5,200 5,200
Class A stock, $0.01 par value; 1,500,000
shares authorized; 684,909 and 622,934 shares
issued and outstanding in 1995 and
1994, respectively 6,849 6,229
Capital in excess of par value 1,116,018 718,009
Retained earnings 13,125,639 6,442,148
------------ ------------
Total stockholders' equity 14,253,706 7,171,586
------------ ------------
Total liabilities and stockholders' equity $ 43,452,351 $ 25,829,246
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRECOM Business Systems, Inc.
Statement of Operations and Retained Earnings
Year Ended December 31,
1995 1994
<S> <C> <C>
Revenue from services $ 133,796,870 $ 87,408,028
Revenue from reimbursable expenses 5,538,178 1,723,201
------------ ------------
Total revenues 139,335,048 89,131,229
------------ ------------
Cost of services 82,485,270 52,880,491
Direct reimbursable expenses 4,520,891 1,737,721
------------ ------------
Total cost of sales 87,006,161 54,618,212
------------ ------------
Gross margin 52,328,887 34,513,017
------------ ------------
Selling, general and administrative expenses 37,221,367 26,934,184
Nondirect labor costs 2,498,437 1,934,752
Interest expense 1,147,725 603,342
------------ ------------
40,867,529 29,472,278
------------ ------------
Income before taxes 11,461,358 5,040,739
Provision for income taxes (Note 5) 4,777,867 2,281,811
------------ ------------
Net income 6,683,491 2,758,928
Retained earnings at beginning of year 6,442,148 3,683,220
------------ ------------
Retained earnings at end of year $ 13,125,639 $ 6,442,148
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRECOM Business Systems, Inc.
Statement of Cash Flows
Year Ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,683,491 $ 2,758,928
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 1,244,707 754,503
Changes in assets and liabilities
Increase in trade accounts receivable (13,009,756) (6,311,370)
Increase in other accounts receivable (617,693) (270,594)
Decrease (increase) in prepaid expenses 20,324 (189,520)
Decrease (increase) in prepaid income taxes 134,543 (134,543)
Increase in deferred income taxes (947,999) (150,000)
Increase in accounts payable and
accrued expenses 3,681,935 2,451,919
Increase (decrease) in income taxes payable 1,136,135 (380,200)
Increase in deferred revenue 340,000 716,000
------------ ------------
Net cash used in operating activities (1,334,313) (754,877)
------------ ------------
Cash flows from investing activities:
Fixed assets additions, net (2,364,568) (1,805,028)
------------ ------------
Net cash used in investing activities (2,364,568) (1,805,028)
------------ ------------
Cash flows from financing activities:
Receipts of short-term borrowings, net 5,100,000 1,906,070
Sale of Class A stock 215,593 245,903
Repurchase of Class A stock (14,564) (22,732)
------------ ------------
Net cash provided by financing activities 5,301,029 2,129,241
------------ ------------
Net increase (decrease) in cash and
cash equivalents 1,602,148 (430,664)
Cash and cash equivalents- beginning of year 198,637 629,301
------------ ------------
Cash and cash equivalents- end of year $ 1,800,785 $ 198,637
============ ============
Supplemental disclosure:
Interest paid $ 1,076,725 $ 615,307
============ ============
Taxes paid $ 4,455,188 $ 2,946,554
============ ============
Noncash financing activities:
During 1995 and 1994 the Company exchanged 31,500 and 24,334 shares of Class A stock at
$6.27 and $3.86 per share for notes payable totalling $197,600 and $93,930,
respectively.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1995 and 1994
1. Nature of Business and Significant Accounting Policies
The Company
TRECOM Business Systems, Inc. (the Company), a Delaware
company, was incorporated and commenced operations on
January 16, 1985. The Company's business is to provide
computer consulting services, information systems
outsourcing services, and custom software services to
entities located primarily in the eastern United States.
Fixed Assets
Fixed assets are carried at cost. Depreciation and
amortization are determined using accelerated methods over
the estimated useful lives of the assets or, in the case of
leasehold improvements, straight-line over the shorter of
the estimated useful life of the improvements or the
remaining term of the respective leases.
Revenue Recognition
Revenues are recognized, using the percentage of completion
method, as the services are performed. Labor costs of
consultants incurred in providing services to customers are
recorded as cost of services. Labor costs incurred for
consultants not assigned to customer projects are recorded
as nondirect labor costs. Direct reimbursable expenses are
billable to customers when incurred.
Deferred revenue at December 31, 1995 and 1994 represents
billings to customers under fixed price contracts which have
not been earned by the Company under its revenue recognition
policy.
Cash Flows
For purposes of preparing its Statement of Cash Flows, the
Company's cash and cash equivalents are defined as cash and
overnight deposits, and investments with an original
maturity of less than three months.
Income Taxes
Deferred tax liabilities or assets reflect the impact of
temporary differences between amounts of assets and
liabilities for financial and tax reporting. Such amounts
are subsequently adjusted, as appropriate, to reflect
changes in tax rates expected to be in effect when the
temporary differences reverse. A valuation allowance is
established for any deferred tax asset for which realization
is not likely.
Use of Estimates
The preparation of financial statements in accordance with
generally accepted accounting principles requires the use of
estimates by management, primarily in the area of bad debt
reserves, deferred income taxes, medical self-insurance
reserves and certain other reserves.
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1995 and 1994
2. Fixed Assets
Fixed assets are comprised of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Leasehold improvements $ 1,258,003 $ 728,749
Furniture and fixtures 2,107,797 1,453,266
Computers and office equipment 4,723,389 3,212,606
----------- -----------
8,089,189 5,394,621
Less: Accumulated depreciation
and amortization 3,840,511 2,595,804
----------- -----------
$ 4,248,678 $ 2,798,817
=========== ===========
</TABLE>
3. Short-Term and Long-Term Borrowings
Short-term and long-term borrowings are comprised of the
following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Borrowings under line of
credit arrangements $ 12,100,000 $ 7,000,000
Notes payable to stockholders
maturing at various dates
through December 1996 and
bearing rates of interest of
9% and 10% 450,558 423,158
----------- -----------
12,550,558 7,423,158
Notes payable to stockholders
maturing in January and
March 1996 and bearing rates
of interest of 9% and 10% - 225,000
----------- -----------
$ 12,550,558 $ 7,648,158
============ ===========
</TABLE>
Borrowings under line of credit arrangements represent
borrowings by the Company from Morgan Guaranty Trust Company
of New York ("Morgan") and PNC Bank ("PNC") at December 31,
1995 and 1994 under aggregate line of credit facilities of
$20,000,000 and $10,000,000 at December 31, 1995 and 1994,
respectively. The Morgan borrowings bear interest at the
prime interest rate (8.5% at December 31, 1995) plus one
half of 1%. The PNC borrowings bear interest at LIBOR
(5.44% at December 31, 1995) plus 2% and are due up to one
year from the date of the borrowings, at which time the
Company must repay or refinance the borrowings. The
borrowings are collateralized by the accounts receivable of
the Company and are supported by the personal guarantees of
two of the Company's stockholders. The borrowings are
senior to the notes payable to stockholders. The Company
paid commitment fees of $62,500 in 1995 to revise the Lines
of credit.
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1995 and 1994
The line of credit facilities require the Company to
maintain certain financial ratios and restricts the payment
of dividends to stockholders. At December 31, 1995, the
Company was in compliance with the various covenants and
requirements under its line of credit agreements. The Morgan
and PNC line of credit facilities expire on May 1, 1997 and
May 31, 1997, respectively, at which time the Company plans
on extending or refinancing the debt.
4. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the
following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Accrued employees' compensation,
related withholdings and
benefits $ 9,657,359 $ 8,512,688
Agency fees for the hire of
personnel 254,018 258,685
Accounts payable 2,349,423 530,628
Other 1,267,564 214,428
----------- -----------
$ 13,528,364 $ 9,516,429
=========== ===========
</TABLE>
The Company sponsors a savings plan for eligible employees.
The cost of the savings plan amounted to $675,000 and
$496,000 in 1995 and 1994, respectively.
5. Income Taxes
The components of the income tax expense for the years ended
December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Current - Federal $ 4,430,071 $ 1,757,450
Current - State 1,295,795 674,361
Deferred- Federal (743,140) (108,000)
Deferred- State (204,859) (42,000)
----------- -----------
$ 4,777,867 $ 2,281,811
=========== ===========
</TABLE>
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1995 and 1994
Deferred tax assets (liabilities) arise due to the
recognition of income and expense items for tax purposes in
periods which differ from those used for financial statement
purposes. The Company has recorded at full value those
deferred tax assets which are expected to be realized. At
December 31, 1995 and 1994, deferred tax assets and
liabilities are comprised of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Current deferred tax asset:
Accrued vacation $ 855,386 $ 633,421
Book asset writeoffs 577,060 -
Other reserves 234,989 -
Bad debt reserve 107,500 43,000
----------- -----------
1,774,935 676,421
Noncurrent deferred tax liability:
Depreciation (160,588) (10,073)
----------- -----------
Net deferred tax asset $ 1,614,347 $ 666,348
=========== ===========
</TABLE>
A reconciliation of the income tax expense on income per the
U.S. federal statutory rate to the reported income tax
expense follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
U.S. federal statutory rate
applied to pretax income $ 3,908,323 $ 1,713,851
State income tax, net of
federal benefit 694,879 445,078
Non-deductible meal and other
entertainment expenses 169,688 127,131
Other 4,977 (4,249)
----------- -----------
Net deferred tax asset $ 4,777,867 $ 2,281,811
=========== ===========
</TABLE>
<PAGE>
6. Capital
The following stock transactions occurred during 1995 and 1994:
<TABLE>
<CAPTION>
Class A
Common Stock Nonvoting Stock Paid in
Par Par Excess of
Shares Value Shares Value Par Value
<S> <C> <C> <C> <C> <C>
Beginning balance January 1, 1994 520,000 $ 5,200 565,350 $ 5,654 $ 495,413
Sale of Class A nonvoting stock at
$3.886 per share - - 63,284 632 245,271
Repurchase of Class A nonvoting stock
at $3.988 per share (originally sold
at $.0509 per share) - - (5,700) (57) (22,675)
------- ------- ------- ------- ---------
Ending balance December 31, 1994 520,000 $ 5,200 622,934 $ 6,229 $ 718,009
======= ======= ======= ======= ==========
Sale of Class A nonvoting stock at
$6.439 per share - $ - 64,075 $ 641 $ 412,552
Repurchase of Class A nonvoting stock
at $6.935 per share (originally sold
at $1.157 per share) - - (2,100) (21) (14,543)
------- -------- ------- ------- ----------
Ending balance at December 31, 1995 520,000 $ 5,200 684,909 $ 6,849 $1,116,018
======= ======== ======= ======= ==========
</TABLE>
<PAGE>
Class A nonvoting stock is cancelled upon repurchase. No
dividends can be paid on Class A nonvoting stock, which can
be held only by employees of the Company. If employees are
terminated, the Company has the option to repurchase their
shares at the greater of the current net book value amount
or the original amount at which the shares were purchased by
the employee.
7. Significant Business
The Company operates under various projects, both long and
short term, with a number of customers. At times, one or two
customers constitute a significant portion of revenue and
income recorded by the Company in a given year. Future
revenue is predicated upon renewal of such projects or the
attainment of significant new projects.
As of and for the year ended December 31, 1995, three
customers accounted for 51% and 52% of the Company's sales
and accounts receivable. As of and for the year ended
December 31, 1994, two customers accounted for 33% and 36%
of the Company's sales and accounts receivable. These
customers operate primarily in the telecommunications
industry.
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1995 and 1994
8. Commitments
The Company leases its office space under noncancellable
operating lease agreements. Future minimum rental payments
under such leases are as follows:
1996 $ 2,644,000
1997 2,595,000
1998 2,035,000
1999 901,000
2000 267,000
------------
$ 8,442,000
============
Total rental expense for the years ended December 31, 1995
and 1994 aggregated $2,446,932 and $1,503,349, respectively.
The Company is contingently liable under outstanding letters
of credit aggregating approximately $131,000.
<PAGE>
(2)
TRECOM Business Systems, Inc.
Financial Statements
March 31, 1996 and 1995
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to the Securities and Exchange Commission rules and
regulations. The following financial statements should be read
in conjunction with Trecom Business Systems, Inc.'s (Trecom's)
audited financial statements and related notes for the periods
ended December 31, 1995 and December 31, 1994.
The results of operations for the three months ended March 31,
1996 are not necessarily indicative of results for the entire
year ending December 31, 1996.
<TABLE>
<CAPTION>
TRECOM Business Systems, Inc.
Balance Sheet
(Unaudited)
March 31, 1996
<S> <C>
Assets
Current assets:
Cash and cash equivalents $ 731,442
Trade accounts receivable, less allowance for
doubtful accounts of $425,000 38,189,955
Other accounts receivable 1,053,071
Prepaid expenses 263,054
Prepaid income taxes 2,901,118
Deferred income taxes 2,021,967
------------
Total current assets 45,160,607
Fixed assets - net 4,079,145
------------
Total assets $ 49,239,752
============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and short-term
borrowings $ 15,350,558
Accounts payable and accrued expenses 15,806,068
Deferred revenue 2,444,386
------------
Total current liabilities 33,601,012
Deferred income taxes 159,576
------------
Total liabilities 33,760,588
------------
Stockholders' equity:
Common stock, $0.01 par value; 1,500,000
shares authorized; 520,000 shares issued
and outstanding at March 31, 1996 5,200
Class A stock, $0.01 par value; 1,500,000
shares authorized; 755,549 shares issued
and outstanding at March 31, 1996 7,555
Capital in excess of par value 8,389,820
Retained earnings 7,076,589
------------
Total stockholders' equity 15,479,164
------------
Total liabilities and stockholders' equity $ 49,239,752
============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRECOM Business Systems, Inc.
Statements of Operations
(Unaudited)
Three Months Ended March 31,
1996 1995
<S> <C> <C>
Revenue from services $ 37,346,949 $ 28,467,984
Revenue from reimbursable expenses 501,222 1,217,040
------------ ------------
Total revenues 37,848,171 29,685,024
------------ ------------
Cost of services 23,446,849 17,201,166
Direct reimbursable expenses 368,425 1,210,383
------------ ------------
Total cost of sales 23,815,274 18,411,549
------------ ------------
Gross margin 14,032,897 11,273,475
------------ ------------
Selling, general and administrative expenses 14,228,692 7,791,267
Compensation charge related to stock purchases 6,438,837 -
Nondirect labor costs 1,646,290 1,049,226
Interest expense 307,679 235,953
------------ ------------
22,621,498 9,076,446
------------ ------------
Income (loss) before taxes (8,588,601) 2,197,029
Provision for (benefit from) income taxes (2,539,552) 1,020,932
------------ ------------
Net income(loss) $ (6,049,049) $ 1,176,097
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRECOM Business Systems, Inc.
Statement of Cash Flows
(Unaudited)
Three Months Ended March 31,
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $ (6,049,049) $ 1,176,097
Adjustments to reconcile net income (net loss)
to net cash provided by operating activities:
Depreciation and amortization 437,659 275,609
Compensation expense related to stock
purchases 6,438,837 -
Changes in assets and liabilities:
Increase in trade accounts receivable (3,986,415) (7,250,443)
Decrease (increase) in other accounts
receivable 39,746 (313,866)
Decrease in prepaid expenses 68,542 56,993
(Increase) decrease in prepaid income taxes (2,901,118) 134,543
Increase in deferred income taxes (248,044) -
Increase (decrease) in accounts payable and
accrued expenses 2,277,704 (14,363)
(Decrease) increase in income taxes payable (1,136,135) 825,347
Increase in deferred revenue 621,386 1,159,753
------------ ------------
Net cash used in operating activities (4,436,887) (3,950,330)
------------ ------------
Cash flows from investing activities:
Fixed assets additions, net (268,126) (674,243)
------------ ------------
Net cash used in investing activities (268,126) (674,243)
------------ ------------
Cash flows from financing activities:
Receipts of short-term borrowings, net 2,800,000 4,869,042
Sale of Class A stock 835,670 -
Repurchase of Class A stock - (1,643)
------------ ------------
Net cash provided by financing activities 3,635,670 4,867,399
------------ ------------
Net (decrease) increase in cash and
cash equivalents (1,069,343) 242,826
Cash and cash equivalents- beginning of period 1,800,785 198,637
------------ ------------
Cash and cash equivalents- end of period $ 731,442 $ 441,463
============ ============
Supplemental disclosure:
Interest paid $ 281,336 $ 163,825
============ ============
Taxes paid $ 1,691,146 $ 38,679
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
March 31, 1996 and 1995
SUBSEQUENT EVENT - ACQUISITION
On April 22, 1996 Amdahl Corporation (Amdahl) completed the
acquisition of Trecom, pursuant to an Agreement and Plan of
Merger dated April 2, 1996, with the result that Trecom became a
wholly owned subsidiary of Amdahl (the "Merger"). Upon
consummation of the Merger, each outstanding share of Trecom
Common Stock, par value $.01 per share, and Trecom Class A
Non-Voting Stock, par value $.01 per share, was converted into
the right to receive (a) $102.98 in cash, payable as follows:
(i) $51.85 which was paid in April 1996 (the "April 1996
Payment") and (ii) $51.13 which is due to be paid, without
interest, in April 1997 (the "April 1997 Payment") and (b) up to
an additional $1.57, all or part of which will become payable in
the event that Trecom achieves certain financial goals in the one
year period ending March 31, 1997 (the "Contingent Payment").
Approximately $54 million of the April 1997 Payment and the
Contingent Payment have been secured by a letter of credit issued
by Fleet National Bank.
In April 1996 Amdahl also paid down approximately $15 million of
Trecom's outstanding debt.
COMPENSATION CHARGE
In the first quarter of 1996 Trecom incurred a non-recurring,
non-cash compensation charge of $6,438,837, which represented the
difference between the purchase price and the fair market value
of Trecom stock purchased by employees in the first quarter of
1996. <PAGE>
(b) PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma combined financial statements
give effect to the Merger under the purchase method of
accounting. The pro forma combined balance sheet assumes the
Merger took place on March 29, 1996 and combines Amdahl's
unaudited consolidated balance sheet with Trecom's unaudited
balance sheet at that date. The pro forma combined statements
of operations assume that the Merger took place as of the
beginning of each of the periods presented and combine Amdahl's
consolidated statement of operations for the year ended
December 29, 1995 and Amdahl's unaudited consolidated statement
of operations for the three months ended March 29, 1996 with
the statement of operations of Trecom for the year ended
December 31, 1995 and the unaudited statement of operations of
Trecom for the three months ended March 31, 1996.
The charge of $20,700,000 resulting from purchased engineering
and development costs has been reflected in stockholders'
equity in the pro forma combined balance sheet at March 29,
1996. This same charge has been excluded from the pro forma
combined statements of operations for the year ended December
29, 1995 and the three months ended March 29, 1996.
The pro forma information is presented for illustrative
purposes only and is not necessarily indicative of operating
results or financial position that would have occurred if the
Merger had been consummated as of the dates indicated, nor is
it necessarily indicative of future operating results or
financial position.
These pro forma combined financial statements should be read in
conjunction with the historical consolidated financial
statements and the related notes of Amdahl, which were
previously reported in Amdahl's 1995 Annual Report to
Stockholders and Amdahl's Quarterly Report on Form 10-Q for the
fiscal quarter ended March 29, 1996, and of Trecom (see Item
7(a)).
<PAGE>
<TABLE>
<CAPTION>
AMDAHL AND TRECOM PRO FORMA COMBINED BALANCE SHEET
MARCH 29, 1996
(In thousands)
(Unaudited)
Historical Historical Pro Forma Pro Forma
Amdahl Trecom Adjustments Combined
---------- ---------- ----------------- ---------
<S> <C> <C> <C> <C>
Assets
Current Assets:
Cash and cash equivalents $ 172,518 $ 731 $ $ 173,249
Short-term investments 390,279 - (135,792)(a)(b) 254,487
Restricted cash and investments - - 54,304 (b) 54,304
Receivables, net 274,693 39,244 313,937
Inventories 270,680 - 270,680
Prepaid expenses and deferred
tax assets 84,150 5,186 89,336
---------- ---------- ---------- ---------
Total current assets 1,192,320 45,161 (81,488) 1,155,993
---------- ---------- ---------- ----------
Long-term receivables and other
assets 30,142 - 30,142
Property and equipment 1,027,696 8,357 (4,278)(d) 1,031,775
Less - accumulated depreciation
and amortization 746,811 4,278 (4,278)(d) 746,811
---------- ---------- ---------- ----------
Property and equipment, net 280,885 4,079 - 284,964
Excess of cost over net assets
acquired, net 105,669 - 93,642 (d) 199,311
---------- ---------- ---------- ----------
$ 1,609,016 $ 49,240 $ 12,154 $1,670,410
========== ========== ========== ==========
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and short-term
debt $ 22,275 $ 15,351 $ (15,351)(a) 22,275
Short-term debt - stockholder
(Fujitsu Limited) 80,000 - 80,000
Accounts payable 99,656 3,270 102,926
Accounts payable - stockholder
(Fujitsu Limited) 24,646 - 24,646
Acquisition price payable - - 62,084 (c) 62,084
Accrued liabilities 398,685 14,980 1,600 (d) 415,265
---------- ---------- ---------- ----------
Total current liabilities 625,262 33,601 48,333 707,196
Long-term liabilities 41,903 - 41,903
Deferred income taxes 49,726 160 49,886
Stockholders' equity 892,125 15,479 (36,179)(d) 871,425
---------- ---------- ---------- ----------
$ 1,609,016 $ 49,240 $ 12,154 $1,670,410
========== ========== ========== ==========
See accompanying notes to the pro forma combined financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMDAHL AND TRECOM PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 29, 1995
(In thousands, except per share data)
(Unaudited)
Historical Historical Pro Forma Pro Forma
Amdahl Trecom Adjustments Combined
---------- ---------- ----------------- ---------
<S> <C> <C> <C> <C>
Revenues
Equipment sales $ 803,567 $ - $ $ 803,567
Service, software and other 712,821 139,335 852,156
---------- ---------- ---------- ----------
1,516,388 139,335 1,655,723
---------- ---------- ---------- ----------
Cost of Revenues
Equipment sales 540,541 - 540,541
Service, software and other 419,046 87,006 506,052
---------- ---------- ---------- ----------
959,587 87,006 1,046,593
---------- ---------- ---------- ----------
Gross margin 556,801 52,329 609,130
---------- ---------- ---------- ----------
Operating Expenses
Engineering and development 149,610 - 149,610
Marketing, general and
administrative 370,771 39,720 3,715 (e) 414,206
Purchased in-process
engineering and development 27,296 - 27,296
---------- ---------- ---------- ----------
547,677 39,720 3,715 591,112
---------- ---------- ---------- ----------
Income from operations 9,124 12,609 (3,715) 18,018
---------- ---------- ---------- ----------
Interest
Income 51,334 - (4,911)(f) 46,423
Expense (10,481) (1,148) (2,763)(g) (14,392)
---------- ---------- ---------- ----------
40,853 (1,148) (7,674) 32,031
---------- ---------- ---------- ----------
Income before provision
for income taxes 49,977 11,461 (11,389) 50,049
Provision for income taxes 21,450 4,778 (3,146)(h) 23,082
---------- ---------- ---------- ----------
Net income $28,527 $ 6,683 $ (8,243) $ 26,967
========== ========== ========== ==========
Earnings per share $ 0.24 $ 0.22
Shares used to compute per
share data 120,383,000 120,383,000
See accompanying notes to the pro forma combined financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
AMDAHL AND TRECOM PRO FORMA COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 29, 1996
(In thousands except per share data)
(Unaudited)
Historical Historical Pro Forma Pro Forma
Amdahl Trecom Adjustments Combined
---------- ---------- ----------------- ---------
<S> <C> <C> <C> <C>
Revenues
Equipment sales $ 94,464 $ - $ $ 94,464
Service, software and other 222,564 37,347 259,911
---------- ---------- ---------- ----------
317,028 37,347 354,375
---------- ---------- ---------- ----------
Cost of Revenues
Equipment sales 85,584 - 85,584
Service, software and other 158,862 23,314 182,176
---------- ---------- ---------- ----------
244,446 23,314 267,760
---------- ---------- ---------- ----------
Gross margin 72,582 14,033 86,615
---------- ---------- ---------- ----------
Operating Expenses
Engineering and development 30,563 - 30,563
Marketing, general and
administrative 96,353 22,316 (1,165)(e) 117,504
---------- ---------- ---------- ----------
126,916 22,316 (1,165) 148,067
---------- ---------- ---------- ----------
Income (loss) from operations (54,334) (8,283) 1,165 (61,452)
---------- ---------- ---------- ----------
Interest
Income 8,396 3 (1,101)(f) 7,298
Expense (2,216) (308) (511)(g) (3,035)
---------- ---------- ---------- ----------
6,180 (305) (1,612) 4,263
---------- ---------- ---------- ----------
Income before provision for
(benefit from) income taxes (48,154) (8,588) (447) (57,189)
Provision for (benefit from)
income taxes (9,631) (2,539) 200 (h) (11,970)
---------- ---------- ---------- ----------
Net income $ (38,523) $ (6,049) $ (647) $ (45,219)
========== ========== ========== ==========
Loss per share $ (0.32) $ (0.38)
Shares used to compute per
share data 119,566,000 119,566,000
See accompanying notes to the pro forma combined financial statements.
</TABLE>
<PAGE>
AMDAHL AND TRECOM
NOTES TO PRO FORMA COMBINED FINANCIAL STATEMENTS
(Unaudited)
(a) Represents cash and investments used on the acquisition date
to fund the first acquisition payment, which aggregated
approximately $66 million, and the paydown of Trecom's
outstanding debt of approximately $15 million.
(b) Reclassification of restricted cash and investments, to be
used for paying a portion of the second acquisition payment and
Contingent Payment (if contingency is removed.)
(c) Represents the present value of the second acquisition
payment, due one year from the date of the acquisition. The
Contingent Payment is not included in this amount.
(d) Estimated valuation adjustments of Trecom assets and
liabilities resulting from the preliminary allocation of the
purchase price, elimination of stockholders' equity and the
$20,700,000 charge taken at the time of acquisition for purchased
engineering and development expenses. The aggregate purchase
price (including acquisition costs and excluding the Contingent
Payment) is estimated to be approximately $130 million.
(e) Reversal of acquisition expenses of approximately $2,100,000
(investment banker charges) recorded by Trecom in their
historical statement of operations for the three months ended
March 31, 1996, net of amortization of the excess of cost over
net assets acquired assuming the acquisition had taken place on
the first day of the period presented. Excess of cost over net
assets acquired is being amortized by the straight-line method
over twenty-five years.
(f) Reduction of interest income due to the use of cash and
investments to fund the acquisition and to pay down Trecom's
outstanding debt.
(g) Imputed interest expense associated with the acquisition
price payable, net of the reduction of interest expense
associated with the paydown of Trecom's debt at the date of
acquisition.
(h) Income tax effects of pro forma adjustments computed using
the combined federal and state statutory rate of 41%.
<PAGE>
(c) EXHIBITS.
Item Description
---- -----------
*2 Agreement and Plan of Merger dated April 2, 1996.
4 Restated Certificate of Incorporation of Trecom
Business Systems, Inc.
*Filed herewith
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this amendment to this
report to be signed on its behalf by the undersigned thereunto
duly authorized.
AMDAHL CORPORATION
Date: July 3, 1996 By: /s/ Ernest B. Thompson
------------ -----------------------
Ernest B. Thompson
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
Item Description
---- -----------
2 Agreement and Plan of Merger dated April 2, 1996.
Exhibit 2
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is
entered into as of April 2, 1996 by and between Amdahl
Corporation ("Amdahl"), a Delaware corporation, Amdahl
Acquisition Corporation, a Delaware corporation ("Newco"), Trecom
Business Systems, Inc., a Delaware corporation ("Trecom") and the
stockholders of Trecom whose names appear on the signature page
hereof ("Stockholders).
A. The Board of Directors of Amdahl has approved, and the Board
of Directors of Trecom has approved and deemed it advisable
and in the best interests of Trecom and its stockholders to
consummate, the acquisition of Trecom by Amdahl by means of
a merger (the "Merger") of Newco with and into Trecom,
wherein each issued and outstanding share of Common Stock or
Class A Non-Voting Stock of Trecom (together the "Trecom
Stock") not owned directly or indirectly by Amdahl, Newco or
any direct or indirect wholly-owned subsidiary of Amdahl,
except shares of Trecom Stock held by holders who comply
with the provisions of the Delaware law regarding the right
of stockholders to dissent from the Merger and require
appraisal of their shares of Trecom Stock, will be converted
into the right to receive $102.98 per share, in cash,
without interest, plus up to an additional $1.57 per share
in cash, without interest, in the event that Trecom achieves
certain financial goals in the one year period following the
Closing Date (as hereinafter defined).
B. Trecom, the Stockholders, Amdahl and Newco desire to make
certain representations, warranties, covenants and
agreements in connection with the transactions contemplated
hereby.
NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained
herein, the parties hereto hereby agree as follows:
1. The Merger. Upon the terms and subject to the conditions
hereof, and in accordance with the General Corporation Law of the
State of Delaware, as amended (the "DGCL"), Newco shall be merged
with and into Trecom at the Effective Time (as hereinafter
defined). Following the Merger, the separate corporate existence
of Newco shall cease and Trecom shall continue as the surviving
corporation (the "Surviving Corporation") and shall succeed to
and assume all the rights and obligations of Newco in accordance
with the DGCL.
1.1 Effective Time. The Merger shall become effective when
a certificate of merger (the "Certificate of Merger"),
executed in accordance with the relevant provisions of the
DGCL is accepted for filing by the Secretary of State of the
State of Delaware (the "Secretary of State"). When used in
this Agreement, the term "Effective Time" shall mean the
later of the date and time at which the Certificate of
Merger is accepted for filing by the Secretary of State or
such later time established by the Certificate of Merger.
The filing of the Certificate of Merger shall be made as
soon as reasonably practicable after the first business day
following the day on which the last to be fulfilled or
waived of the conditions set forth in Sections 7 (Conditions
to Obligations of Trecom and the Stockholders) and 8
(Conditions to the Obligations of Amdahl and Newco) shall be
fulfilled or waived in accordance herewith; provided that
the Certificate of Merger shall not be filed prior to April
1, 1996.
1.2 Effects of the Merger. The Merger shall have the
effects set forth in the DGCL.
1.3 Governing Documents. The Certificate of Incorporation
of Newco, as in effect immediately prior to the Effective
Time, shall be amended by the Certificate of Merger to
change the name of Newco to "Trecom Business Systems, Inc."
and, as so amended, the Certificate of Incorporation and the
Bylaws of Newco shall be the Certificate of Incorporation
and Bylaws of the Surviving Corporation until thereafter
changed or amended as provided therein or by applicable law.
1.4 Directors and Officers. The directors and officers of
Newco at the Effective Time shall, from and after the
Effective Time, be the initial directors and officers
(holding the same titles and positions) of the Surviving
Corporation until their successors have been duly elected or
appointed and qualified or until their earlier death,
resignation or removal, in accordance with the Surviving
Corporation's Certificate of Incorporation and Bylaws.
1.5 The Closing. Subject to the terms and conditions of
this Agreement, the closing of the transactions contemplated
by this Agreement (the "Closing") shall take place at the
principal offices of Amdahl Corporation located at 1250 East
Arques Avenue, Sunnyvale, California at 10:00 p.m. local
time, as soon as practicable after, but no later than the
first business day following, the Effective Time, or at such
other time, date or place as Trecom and Amdahl may agree.
The date on which such Closing occurs is hereinafter
referred to as the "Closing Date".
2. Effect of the Merger on Securities of Trecom and Newco.
2.1 Newco Stock. At the Effective Time, each share of the
common stock of Newco outstanding immediately prior to the
Effective Time shall be converted into and become one (1)
fully paid and nonassessable, issued and outstanding share
of common stock, par value $.01 per share, of the Surviving
Corporation, and each certificate theretofore representing
any such shares shall, without any action on the part of the
holder thereof, be deemed to represent the same number of
shares of the Surviving Corporation.
2.2 Trecom Common and Class A Non-Voting Stock.
2.2.1 Conversion of Outstanding Trecom Stock.
Subject to the provisions of this Section 2.2 (Trecom
Common and Class A Non-Voting Stock), at the Effective
Time, each issued and outstanding share of Trecom Stock
shall be converted into a right to receive $102.98 in
cash (payable in installments as set forth in Section
2.2.3 (Surrender of Certificates; Payment of Merger
Consideration), without interest, plus a contingent
right to receive up to an additional $1.57 per share,
in cash, without interest, in the event that Trecom
achieves those financial goals identified on Exhibit A
attached hereto in the one year period following the
Closing Date (taken together, the "Merger
Consideration"). All such shares of Trecom Stock, when
so converted, shall cease to be outstanding and shall
be canceled and retired and shall cease to exist, and
each holder of a certificate or certificates (the
"Certificates") representing any such shares of Trecom
Stock shall thereafter cease to have any rights with
respect thereto, except the right to receive the Merger
Consideration.
2.2.2 Appraisal Rights. Notwithstanding any
provision of this Agreement to the contrary shares of
Trecom Stock which are issued and outstanding
immediately prior to the Effective Time and which are
held by holders of such shares of Trecom Stock who have
properly exercised appraisal rights with respect
thereto in accordance with Section 262 of the DGCL (the
"Dissenting Shares") will not be exchangeable for the
right to receive the Merger Consideration, and the
holders of such shares of Trecom Stock will be entitled
to receive payment of the appraised value of such
shares of Trecom Stock in accordance with the
provisions of such Section 262 unless and until such
holders shall fail to perfect or shall effectively
withdraw or shall have lost their rights to appraisal
and payment under the DGCL. If, after the Effective
Time, any such holder fails to perfect or effectively
withdraws or loses such right, such shares of Trecom
Stock will thereupon be treated as if they had been
converted into and have become exchangeable for, at the
Effective Time, the right to receive the Merger
Consideration, without any interest thereon. Trecom
will give Amdahl prompt notice of any demands received
by Trecom for appraisals of shares of Trecom Stock.
Trecom shall not, except with the prior written consent
of Amdahl, make any payment with respect to any demands
for appraisal or offer to settle or settle any such
demands.
2.2.3 Surrender of Certificates; Payment of Merger
Consideration.
a. Prior to the Effective Time, Amdahl shall
appoint a bank or trust company to act as
paying agent hereunder, bank or trust company
which shall be reasonably acceptable to
Trecom (the "Paying Agent") for the payment
of the Merger Consideration. All fees and
expenses of the Paying Agent shall be borne
by Amdahl
b. Amdahl shall take all steps necessary to
provide the Paying Agent with cash in amounts
necessary to pay the Merger Consideration,
when and as such amounts are needed by the
Paying Agent.
C. The Paying Agent shall mail to each holder of
record of Trecom Stock (a) a letter of
transmittal (which shall specify that
delivery shall be effected, and risk of loss
and title to the Certificates shall pass,
only upon delivery of such Certificates to
the Paying Agent and shall be in such form
and have such other reasonable provisions as
Amdahl shall specify, which shall not be
inconsistent with the terms of this
Agreement), and (b) instructions for the use
thereof in effecting the surrender of the
Certificates in exchange for the Merger
Consideration. After the Effective Time and
after surrender of a Certificate for
cancellation to the Paying Agent, together
with such letter of transmittal, duly
executed, and such other documents as may be
reasonably required by the Paying Agent, the
Merger Consideration owed to such holder of
such Certificate shall be paid by the Paying
Agent as follows: (i) $51.85 per share will,
at Amdahl's option, be sent by wire transfer
per such holder's instructions on the Closing
date or will be otherwise available at the
Closing and, if not claimed at the Closing,
mailed to such holder via U.S. mail,
overnight delivery service, or personal
delivery, at Amdahl's option, to the address
shown on Trecom's stockholder list (or such
other address requested by such stockholder
in writing to Amdahl), (ii) $51.13 per share
will, at Amdahl's option, be sent by wire
transfer per such holder's instructions or
mailed to such holder via U.S. mail,
overnight delivery service, or personal
delivery, at Amdahl's option, to the address
shown on Trecom's stockholder list (or such
other address requested by such stockholder
in writing to Amdahl) on the first
anniversary date of the Closing Date and
(iii) up to $1.57 per share will, at Amdahl's
option, be sent by wire transfer per such
holder's instructions or mailed within the
earlier of: (A) five (5) business days
following the availability of financial data
covering the one year period ending March 31,
1997 or (B) May 1, 1997, subject to the
satisfaction of certain conditions as set
forth on Exhibit A hereto. If payment is to
be made to a person other than the person in
whose name the Certificate so surrendered is
registered, it shall be a condition of
payment that such Certificate shall be
properly endorsed or otherwise in proper form
for transfer and that the person requesting
such payment shall pay any transfer or other
taxes required by reason of the transfer of
such Certificate or establish to the
satisfaction of the Surviving Corporation
that such tax has been paid or is not
applicable. Until surrendered as
contemplated by this Section, each
Certificate (other than Certificates
representing Dissenting Shares) shall be
deemed at any time after the Effective Time
to represent only the right to receive upon
such surrender the amount of Merger
Consideration, into which the shares of
Trecom Stock theretofore represented by such
Certificate shall have been converted
pursuant to Section 2.2.1 (Conversion of
Outstanding Trecom Stock). The parties
acknowledge and understand that
notwithstanding the provisions of this
Section 2.2.3, for tax purposes the character
of the payment made by Amdahl to Trecom
stockholders pursuant to subsections (ii) and
(iii) above will be determined in accordance
with the requirements of Internal Revenue
Code Section 453A.
2.2.4 Additional Rules for Payment. Amdahl shall
have the right to make reasonable additional rules, not
inconsistent with the terms of this Agreement,
governing the payment of cash for shares of Trecom
Stock converted into the right to receive the Merger
Consideration.
2.2.5 Abandoned Property. None of Amdahl, Trecom,
Newco or the Surviving Corporation or any other person
shall be liable to any former holder of shares of
Trecom Stock for any amount properly delivered to a
public official pursuant to applicable abandoned
property, escheat or similar laws.
2.2.6 Lost Certificates. In the event that any
Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the
person claiming such Certificate to be lost, stolen or
destroyed and, if required by Amdahl, the posting by
such person of a bond in such reasonable amount as
Amdahl may direct as indemnity against any claim that
may be made against it with respect to such
Certificate, the Merger Consideration deliverable in
respect thereof pursuant to this Agreement will be
issued in exchange therefor.
2.2.7 Closing of Transfer Books. At or after the
Effective Time, there shall be no transfers on the
stock transfer books of Trecom of the shares of Trecom
Stock which were outstanding immediately prior to the
Effective Time. If, after the Effective Time,
Certificates are presented to the Surviving
Corporation, they shall be canceled and exchanged for
the Merger Consideration deliverable in respect thereof
pursuant to this Agreement in accordance with the
procedures set forth in this Section 2.
2.2.8 No Further Ownership Rights in Trecom Stock.
From and after the Effective Time, the holders of
shares of Trecom Stock which were outstanding
immediately prior to the Effective Time shall cease to
have any rights with respect to such shares of Trecom
Stock except as otherwise provided in this Agreement or
by applicable law. All cash paid upon surrender of
Certificates in accordance with the terms hereof shall
be deemed to have been issued in full satisfaction of
all rights pertaining to the shares of Trecom Stock.
3. Representations and Warranties of Trecom and The Principal
Stockholders. Trecom and Francis J. Casagrande, Emanuel Arturi
and S. Russell Powell (the "Principal Stockholders") hereby
jointly and severally represent and warrant that, except as set
forth on the Schedule of Exceptions delivered to Amdahl herewith
as Schedule 3.0 (whenever a representation or warranty made in
this Section 3 is limited to "the knowledge of Trecom or the
Principal Stockholders," "Trecom's or the Principal Stockholders'
knowledge" or other words having similar effect, knowledge shall
mean the actual knowledge of any individual Principal Stockholder
or the Chairman of the Board, the President, any corporate Vice
President, or any of the four divisional Presidents of Trecom
after due inquiry of the responsible officers or employees within
Trecom.):
3.1 Corporate Organization and Good Standing. Trecom is a
corporation duly organized, validly existing, and in good
standing under the laws of its state of incorporation, has
the corporate power and authority to own, operate, and lease
its properties and to carry on its business as now conducted
and is qualified as a foreign corporation in each
jurisdiction in which a failure to be so qualified would
reasonably be expected to have a material adverse effect on
the current or ongoing business, operations or financial
condition of Trecom.
3.2 Power and Authority and Validity.
3.2.1 Trecom and each of the Principal Stockholders
has the right, power and authority to enter into and
perform its obligations under this Agreement. Trecom's
execution, delivery and performance of this Agreement
and the consummation of the transactions contemplated
hereby, have been duly and validly authorized by all
necessary corporate action on the part of Trecom,
subject to approval of the Merger by the holders of the
Common Stock of Trecom.
3.2.2 No filing, authorization or approval with or
by any governmental entity, is necessary to enable
Trecom and the Principal Stockholders to enter into,
and to perform their respective obligations under, this
Agreement, except for (i) the filing of the Certificate
of Merger with the Secretary of State and appropriate
documents with the relevant authorities of other states
in which Trecom is qualified to do business, (ii) such
filings and approvals as may be required under the
Hart-Scott-Rodino Antitrust Improvements Act of 1976,
as amended ("HSR Act"), (iii) such filings and
approvals as may be required by applicable state
securities laws or state takeover laws or (iv) such
other authorizations and approvals with or by any
governmental entity, the failure to make or obtain
which would not have a material adverse effect on the
ability of Trecom, Amdahl or Newco to consummate the
transactions contemplated hereby.
3.2.3 This Agreement has been duly executed and
delivered by Trecom and the Principal Stockholders and
is the valid and binding obligation of Trecom and the
Principal Stockholders, enforceable against Trecom and
the Principal Stockholders in accordance with its
terms, except as to the effect, if any, of (a)
applicable bankruptcy, insolvency, moratorium and other
similar laws affecting the rights of creditors
generally and (b) rules of law governing specific
performance, injunctive relief and other equitable
remedies.
3.3. Capitalization.
3.3.1 The authorized capital stock of Trecom
consists of 1,500,000 shares of Common Stock, $.01 par
value, of which 520,000 shares are issued and
outstanding and 1,500,000 shares of Class A Non-Voting
Stock, $.01 par value, of which 755,549 shares are
issued and outstanding.
3.3.2. All issued and outstanding shares of stock of
Trecom have been duly authorized and validly issued,
are fully paid and nonassessable, and have been
offered, issued, sold and delivered by Trecom in
compliance with all registration or qualification
requirements (or applicable exemptions therefrom) of
applicable federal and state securities laws. There
are no options, warrants, calls, commitments,
conversion privileges or preemptive or other rights or
agreements outstanding to purchase any of the
authorized but unissued capital stock of Trecom or any
securities convertible into or exchangeable for shares
of stock of Trecom or obligating Trecom to grant,
extend or enter into any such option, warrant, call,
right, commitment, conversion privilege or other right
or agreement, and there is no liability for dividends
accrued but unpaid. There are no voting agreements,
rights of first refusal or other restrictions (other
than normal restrictions on transfer under applicable
federal and state securities laws) applicable to any of
the outstanding securities of Trecom. Trecom is not
under any obligation to register under the Securities
Act of 1933, as amended (the "Securities Act") any of
its presently outstanding securities or any securities
that may be subsequently issued.
3.4 Subsidiaries. Trecom does not have any subsidiaries or
any ownership interest, direct or indirect, in any
corporation, partnership, joint venture or other business
entity.
3.5 No Violation of Certificate, Bylaws or Existing
Agreements. Neither the execution and delivery of this
Agreement by Trecom and the Principal Stockholders nor the
performance by Trecom and the Principal Stockholders of
their respective obligations pursuant hereto, will conflict
with, or (with or without notice or lapse of time, or both)
result in a termination, breach, impairment or violation of
(a) any provision of the Certificate of Incorporation or
Bylaws of Trecom, as currently in effect, (b) any
instrument, license or contract to which any Principal
Stockholder or Trecom is a party or by which any Principal
Stockholder or Trecom is bound, except for such violations
which in the aggregate would not be material to any party
thereto or (c) subject to obtaining the filing,
authorizations and approvals referred to in subsection
3.2.2, any federal, state, local or foreign judgment, writ,
decree, order, statute, rule or regulation applicable to any
Principal Stockholder, Trecom or their respective assets or
properties, except for such violations which in the
aggregate would not be material to such Principal
Stockholder or Trecom, as the case may be. The consummation
of the transaction contemplated hereby will not require the
consent of any third party, except for such consents, the
failure of which to obtain, would not have a material
adverse effect on the current or ongoing business,
operations or financial condition of Trecom and which would
not have a material adverse effect on the ability of Trecom,
or the Stockholders to consummate the transactions
contemplated hereby.
3.6 Litigation. There is no action, proceeding, claim or
investigation pending against any Principal Stockholder,
Trecom, or any of Trecom's officers or directors (in their
capacities as such) before any court or administrative
agency that, if determined adversely to such Principal
Stockholder, Trecom, or Trecom officer or director may
reasonably be expected to have a material adverse effect on
the current or ongoing business, operations or financial
condition of Trecom or seeks to prevent or enjoin any of the
transactions contemplated hereby, nor, to Trecom's or the
Principal Stockholders' knowledge, has any such action,
proceeding, claim or investigation been threatened, nor
does Trecom or any Principal Stockholder have a reasonable
belief that there is any basis therefor. Amdahl and Newco
acknowledge that no representation or warranty is made by
Trecom or the Principal Stockholders in this Agreement with
respect to any claims by employees, consultants or agents of
Trecom arising out of or relating to repetitive stress
injuries, CRT radiation or similar workplace injuries
generally affecting individuals working in Trecom's
industry.
3.7. Taxes. Trecom has (i) filed in a timely manner all
federal, state, local and foreign tax returns required to be
filed, which returns correctly reflect in all material
respects the tax liabilities required to be reflected
thereon, except if such failure to timely file such return
would not have a material adverse effect on the current or
ongoing business, operations or financial condition of
Trecom (ii) timely paid all taxes required to be paid in
respect of all periods for which returns have been filed,
except for the payment of taxes, the nonpayment of which
would not have a material adverse effect on the business,
operations or prospects of Trecom (iii) established in
accordance with its normal accounting policies and
procedures adequate aggregate accruals or reserves for the
payment of all taxes payable in respect of the periods
subsequent to the periods covered by the most recently filed
tax returns, (iv) made all necessary estimated tax payments,
except if the nonpayment thereof would not have a material
adverse effect on the current or ongoing business,
operations or financial condition of Trecom and (v) no
material liability for taxes in excess of the amount so paid
or accruals or reserves so established. To the knowledge
of Trecom and the Principal Stockholders, no deficiencies
for any tax have been threatened claimed, proposed or
assessed. Trecom has never been a member of an affiliated
group filing consolidated returns. For the purposes of this
Agreement the terms "tax" and "taxes" include all federal,
state, local and foreign income, gains, franchise, excise,
property, sales, use, employment, license, payroll,
occupation, recording, value added or transfer taxes, or
other similar governmental charges (whether payable directly
or by withholding), and, with respect to such taxes, any
estimated tax, interest and penalties and additions to tax.
3.8 Trecom Company Financial Statements. Trecom has
delivered to Amdahl as Exhibit 3.8 the audited balance
sheets of Trecom as of December 31, 1993, 1994 and 1995
together with the notes thereto (the latter referred to as
the "1995 Balance Sheet"), income statement and statement of
cash flows for the years then ended together with the notes
thereto (collectively the "Financial Statements"). The
Financial Statements (a) are in accordance with the books
and records of Trecom, (b) fairly present the financial
condition of Trecom at the date therein indicated and the
results of operations for the period therein specified and
(c) have been prepared in accordance with generally accepted
accounting principles applied on a consistent basis. Trecom
has no material debt, liability or obligation of any nature,
whether accrued, absolute, contingent or otherwise, except
for (i) those set forth or adequately provided for in the
1995 Balance Sheet (ii) contractual obligations and (iii)
those that may have been incurred after the date of the
Financial Statements in the ordinary course of business,
consistent with past practice and that are not material in
amount either individually or collectively.
3.9 Certain Material Agreements. As of the date of
execution of this Agreement, Trecom is not a party or
subject to any of the following oral or written agreements:
(a) Contract providing for payments by or to Trecom in
an aggregate amount of $2 million or more;
(b) Any employment or severance agreement with any
director, officer or other employee of Trecom;
(c) License agreement as licensor or licensee (except
for non-exclusive shrink-wrap software licenses granted
from a third party to Trecom in the ordinary course of
business);
(d) Agreement for the purchase, sale or lease of real
property;
(e) Agreement for the purchase, sale or lease of
personal property requiring payments by or to Trecom in an
aggregate amount of $500,000 or more;
(f) Joint venture contract or arrangement or any other
agreement that involves a sharing of profits with other
persons;
(g) Instrument evidencing indebtedness for borrowed
money by way of direct loan, sale of debt securities,
purchase money obligation, conditional sale, guarantee or
otherwise, except for indebtedness incurred in the ordinary
course of business, and except as disclosed in the Financial
Statements; or
(h) Contract containing covenants purporting to limit
Trecom's freedom to compete in any line of business in any
geographic area.
All agreements, contracts, plans, leases, instruments,
arrangements, licenses and commitments listed in the
Schedule of Exceptions identified to this Section 3.9
(herein, collectively, the "Material Agreements") are valid,
binding, in full force and effect, and enforceable against
the other party thereto in all material respects in
accordance with their terms, except as to the effect, if
any, of (a) applicable bankruptcy and other similar laws
affecting the rights of creditors generally and (b) rules of
law governing specific performance, injunctive relief and
other equitable remedies. Trecom is not, nor, to the
knowledge of Trecom or the Principal Stockholders, is any
other party thereto, in breach or default under the terms of
the Material Agreements, which breach or default may
reasonably be expected to have a material adverse effect on
the current or ongoing business, operations or financial
condition of Trecom. The closing of the transaction
contemplated by this Agreement will not entitle any third
party to terminate any Material Agreement or otherwise
modify or affect Trecom's or such third party's rights and
obligations thereunder.
3.10 Title to Assets. Trecom has good title to all of its
assets as shown on the 1995 Balance Sheet, free and clear of
all liens, charges, restrictions or encumbrances (other than
for taxes not yet due and payable) except such liens,
charges, restrictions and encumbrances, the existence of
which would not, individually or in the aggregate, have a
material adverse effect on the current or ongoing business,
operations or financial condition of Trecom. All machinery,
equipment, tools and other personal property included in
such properties is in good condition and repair, normal wear
and tear excepted, except for such failures to maintain or
repair that individually or in the aggregate would not have
a material adverse effect on the current or ongoing
business, operations or financial condition of Trecom and
all leases of real or personal property to which Trecom is a
party are fully effective except such leases of personal
property, the non-effectiveness of which would not,
individually or the aggregate, have a material adverse
effect on the current or ongoing business, operation or
financial condition of Trecom, and, subject to the terms
thereof, afford Trecom peaceful and undisturbed possession
of the subject matter of the lease. During the five-year
period prior to the date of this Agreement, Trecom has not
received any written notice that it is in violation of any
zoning, building, safety or environmental ordinance,
regulation or requirement or other law or regulation
applicable to the operation of owned or leased properties,
the violation of which would have a material adverse effect
on the current or ongoing business, operations or financial
condition of Trecom. Schedule 3.10 identifies each parcel
of real property owned or leased by Trecom.
3.11 Absence of Certain Changes. To the knowledge of Trecom
and the Principal Stockholders, since the date of the 1995
Balance Sheet, there has not been with respect to Trecom:
(a) any change in the financial condition, properties,
assets, liabilities, business, prospects or operations
thereof which change by itself or in conjunction with all
other such changes, whether or not arising in the ordinary
course of business, has a material adverse effect thereon or
which change has not resulted from factors generally
effecting Trecom's industry or from general economic
conditions;
(b) any material change in any method of accounting or
accounting practice of Trecom;
(c) any change to Trecom's certificate of
incorporation or bylaws;
(d) any notes or accounts receivable or portions
thereof, which are material individually or in the
aggregate, written off as uncollectible;
(e) any contingent liability incurred thereby as
guarantor (other than indemnification provisions included in
customer contracts in the ordinary course of business
consistent with past practices) with respect to the
obligations of others, other than contingent liabilities
which individually or in the aggregate would not have a
material adverse effect on the current or ongoing business,
operations or financial condition of Trecom;
(f) any mortgage, encumbrance or lien placed (and not
created by operation of law) on any of the properties
thereof;
(g) any obligation or liability of Trecom to pay a
third party in excess of $500,000 individually or in the
aggregate incurred thereby;
(h) any purchase or sale or other disposition, or any
agreement or other arrangement for the purchase, sale or
other disposition, of any of the properties or assets
thereof other than in the ordinary course of business,
except such transactions that would not, individually or in
the aggregate, have a material adverse effect on the current
or ongoing business, operations or financial condition of
Trecom;
(i) any damage, destruction or loss, whether or not
covered by insurance, materially adversely affecting the
properties, assets or business of Trecom;
(j) any declaration, setting aside or payment of any
dividend on, or the making of any other distribution in
respect of, the capital stock thereof; any split,
combination or recapitalization of the capital stock thereof
or any direct or indirect redemption, purchase or other
acquisition of the capital stock thereof;
(k) any labor dispute or claim of unfair labor
practices, any change in the compensation payable or to
become payable to any of its officers, employees or agents,
any bonus payment or arrangement made to or with any of such
officers, employees or agents other than in the ordinary
course of business, or any change in any compensation
(except for normal salary increases consistent with past
practices not to exceed $10,000 per person per year) or
benefit plan;
(l) any change with respect to the management,
supervisory thereof or other key personnel thereof with an
annual base salary of $100,000 or more;
(m) any payment of a liability, discharge of a lien
relating to a liability or obligation in excess of $500,000,
which lien or liability was not either shown on the 1995
Balance Sheet or incurred or created in the ordinary course
of business thereafter; or
(n) any obligation or liability incurred thereby to
any of its officers, directors or stockholders, or any loans
or advances made thereby to any of its officers, directors
or stockholders, except normal compensation and expense
allowances payable to officers.
3.12 Intellectual Property. Except for and subject to such
exceptions as will not, individually or in the aggregate,
have a material adverse effect on the current or ongoing
business, operations or financial condition of Trecom, (i)
Trecom owns, or has the right to use, sell or license all
material Intellectual Property Rights (as defined below)
reasonably required for the conduct of its business as
presently conducted or reasonably anticipated to be
conducted (such Intellectual Property Rights being
hereinafter collectively referred to as the "Trecom IP
Rights") and such rights to use, sell or license are
reasonably sufficient for such conduct of its business as
presently conducted and as reasonably anticipated to be
conducted, (ii) none of the current activities of Trecom
impermissibly infringes upon or otherwise violates any
Intellectual Property Rights owned by any other person, and
(iii) no person is challenging the existence of, or
impermissibly infringing upon, any Trecom IP Right. There
are no royalties, honoraria, fees or other payments payable
by Trecom to any person by reason of the ownership, use,
license, sale or disposition of the Trecom IP Rights (other
than as set forth in the Trecom IP Rights Agreements listed
in Schedule 3.12(a)). Trecom has taken reasonable and
practicable steps designed to safeguard and maintain the
secrecy and confidentiality of, and its proprietary rights
in, all material Trecom IP Rights. All officers, employees
and consultants of Trecom have executed and delivered to
Trecom an agreement regarding the protection of proprietary
information and the assignment to Trecom (or to a Trecom
customer to the extent that Trecom has similarly assigned
rights to such customer) of all Intellectual Property Rights
arising from the services performed for Trecom. Schedule
3.12(b) contains a list of all applications, registrations,
filings and other formal actions made or taken pursuant to
federal, state and foreign laws by Trecom to perfect or
protect its interest in Trecom IP Rights, including, without
limitation, all patents, patent applications, copyrights,
copyright applications, trademarks, trademark applications
and service marks. As used herein, the term "Intellectual
Property Rights" shall mean patents, patent applications,
patent rights, copyrights, copyright applications,
trademarks, trademark applications, trade names, service
marks, service mark licenses, trade secrets, including
customer lists, proprietary processes and formulae, all
source and object code, algorithms, architecture, structure,
display screens, layouts, inventions, development tools and
all documentation and media constituting, describing or
relating to the above, including, without limitation,
manuals, memoranda and records.
3.13 Compliance with Laws. Trecom has complied, or prior to
the Closing Date will have complied, and is or will be at
the Closing Date in full compliance, in all material
respects with all applicable laws, ordinances, regulations
and rules (collectively, "Applicable Laws"), excluding all
Applicable Laws relating to environmental protection, ERISA,
as hereinafter defined, and Taxes, with respect to which the
Principal Stockholders make certain representations
elsewhere in this Agreement, and all orders, writs,
injunctions, awards, judgments and decrees applicable to it
or to the assets properties and business thereof, the
violation of which would have a material adverse effect upon
the current or ongoing business, operations or financial
condition of Trecom. Trecom has received and maintained all
permits and approvals from, and has made all filings with,
all government agencies and authorities, that are reasonably
necessary in connection with its present business, except
where the failure to have obtained and maintained any permit
or approval or to have made any filing would not reasonably
be expected to have a material adverse effect on the current
or ongoing business, operations or financial condition of
Trecom.
3.14 Employees; ERISA and Other Compliance.
3.14.1. Except as set forth in Schedule 3.14.1,
Trecom does not have any written employment contracts
or consulting agreements currently in effect that are
not terminable at will (other than agreements with the
sole purpose of providing for the confidentiality of
proprietary information or assignment of inventions).
No outstanding loan by Trecom to any person currently
or formerly in the employ or service of Trecom is in an
amount in excess of $65,000, and all such outstanding
loans do not exceed $250,000 in the aggregate.
3.14.2 Schedule 3.14.2 identifies (i) each "employee
benefit plan," as defined Section 3(3) of the Employee
Retirement Income Security Act of 1974, as amended
("ERISA"), and (ii) all other written or formal plans
or agreements involving direct or indirect compensation
or benefits ( excluding any employment agreements
entered into between Trecom and any employee thereof
and disclosed on the Schedule of Exceptions, workers'
compensation, unemployment compensation and other
government-mandated programs); and (iii) all other
severance or similar contracts, arrangements (written
or oral) providing for insurance coverage (including
self-insurance arrangements), vacation benefits,
severance benefits, hospitalization benefits, medical,
dental and vision care benefits, retirement benefits,
deferred compensation, profit-sharing, bonuses, stock
options, stock purchase, phantom stock, stock
appreciation or other forms of incentive compensation
or post-retirement insurance compensation or benefits
for employees, consultants or directors entered into,
concurrently maintained or maintained within the last 3
years, contributed to or entered into by Trecom under
which Trecom or any ERISA Affiliate (as defined below)
thereof has any present or future obligation or
liability (collectively, the "Trecom Employee Plans").
For purposes of this Section, "ERISA Affiliate" shall
mean any entity which is a member of (A) a "controlled
group of corporations," as defined in Section 414(b) of
the Internal Revenue Code of 1986, as amended (the
"Code"), (B) a group of entities under "common
control," as defined in Section 414(c) of the Code, or
(C) an "affiliated service group," as defined in
Section 414(m) of the Code, or treasury regulations
promulgated under Section 414(i) of the Code, any of
which includes Trecom. Copies of all Trecom Employee
Plans (and, if applicable, related trust agreements and
insurance contracts) and all amendments thereto and
written interpretations thereof (including summary plan
descriptions) and the three most recent annual reports
(Form 5500, including, if applicable, Schedule B
thereto) prepared in connection with any such Trecom
Employee Plan have been delivered to Amdahl. All
Trecom Employee Plans which individually or
collectively would constitute an "employee pension
benefit plan," as defined in Section 3(2) of ERISA
(collectively, the "Trecom Pension Plans"), are
identified as such in Schedule 3.14.2. All
contributions due from Trecom with respect to any of
the Trecom Employee Plans have been made as required
under ERISA or have been accrued on Trecom's financial
statements as of December 31, 1995. Each Trecom
Employee Plan has been maintained substantially in
compliance with its terms and with the requirements
prescribed by any and all statutes, orders, rules and
regulations, including, without limitation, ERISA and
the Code, which are applicable to such Trecom Employee
Plans. With respect to each Trecom Employee Plan
subject to ERISA, Trecom has prepared in good faith and
timely filed all requisite governmental reports (which
were true and correct in all material respects as of
the date filed) and has properly and timely filed and
distributed or posted all notices and reports to
employees required to be filed, distributed or posted
with respect to each such Trecom Employee Plan. No
suit, administrative proceeding, action or other
litigation has been brought, or to the knowledge of
Trecom or the Principal Stockholders, is threatened,
against or with respect to any such Trecom Employee
Plan, including any audit or inquiry by the Internal
Revenue Service or the United States Department of
Labor.
3.14.3 No Trecom Pension Plan constitutes, or has
since the enactment of ERISA constituted, a
"multiemployer plan," as defined in Section 3(37) of
ERISA. No Trecom Pension Plans are subject to Title IV
of ERISA or Section 412 of the Code. No "prohibited
transaction," as defined in Section 406 of ERISA or
Section 4975 of the Code, has occurred with respect to
any Trecom Employee Plan which is covered by Title I of
ERISA which would result in a liability in excess of
$500,000 to Trecom, taken as a whole, excluding
transactions effected pursuant to a statutory or
administrative exemption. Nothing done or omitted to
be done and no transaction or holding of any asset
under or in connection with any Trecom Employee Plan
has or will make Trecom or any officer or director of a
Trecom Company subject to any liability in excess of
$500,000 under Title I of ERISA or liable for any tax
or penalty pursuant to Section 4972, 4975, 4976 or 4979
of the Code or Section 502 of ERISA in excess of
$100,000.
3.14.4 Any Trecom Pension Plan intended to be
qualified under Section 401(a) of the Code has either
obtained from the Internal Revenue Service a favorable
determination letter as to its qualified status under
the Code, including all amendments to the Code effected
by the Tax Reform Act of 1986 and subsequent
legislation, or Trecom has applied to the Internal
Revenue Service for such a determination letter prior
to the expiration of the requisite period under
applicable Treasury Regulations or Internal Revenue
Service pronouncements in which to apply for such
determination letter and to make any amendments
necessary to obtain a favorable determination. Trecom
has also furnished Amdahl with the most recent Internal
Revenue Service determination letter issued with
respect to each such Trecom Pension Plan, and nothing
has occurred since the issuance of each such letter
which could reasonably be expected to cause the loss of
the tax-qualified status of any Trecom Pension Plan
subject to Code Section 401(a).
3.14.5. There has been no amendment to, written
interpretation or announcement (whether or not written)
by Trecom relating to, or change in employee
participation or coverage under, any Trecom Employee
Plan that would increase by more than $100,000 per year
the expense of maintaining such Trecom Employee Plan
above the level of the expense incurred in respect
thereof for the fiscal year ended December 31, 1995.
3.14.6. Trecom has provided, or will have provided
prior to the Closing, to individuals entitled thereto
all notices and coverage required to have been provided
as of such date pursuant to Section 4980B of the Code
and the Consolidated Omnibus Budget Reconciliation Act
of 1985, as amended ("COBRA"), with respect to any
"qualifying event" (as defined in Section 4980B(f)(3)
of the Code) occurring prior to and including the
Closing Date, except such failures to provide notices
and coverage that would, individually or in the
aggregate, not have a material adverse effect on the
current or ongoing business, operations or financial
condition of Trecom and no tax in excess of $100,000
payable on account of Section 4980B of the Code has
been incurred with respect to any current or former
employees (or their beneficiaries) of Trecom. Trecom
has complied with all applicable requirements of the
Family Medical Leave Act of 1993 and the regulations
thereunder, except for such failures to comply that
would not individually or in the aggregate, have a
material adverse effect on the current or ongoing
business. operations or financial condition of Trecom.
3.14.7 No benefit payable or which may become
payable by Trecom pursuant to any Trecom Employee Plan
or as a result of or arising under this Agreement shall
constitute an "excess parachute payment" (as defined in
Section 280G(b)(1) of the Code) which is subject to the
imposition of an excise Tax under Section 4999 of the
Code or which would not be deductible by reason of
Section 280G of the Code.
3.14.8. Trecom is in compliance in all material
respects with all applicable laws, agreements and
contracts relating to employment, employment practices,
wages, hours, and terms and conditions of employment,
including, but not limited to, employee compensation
matters, except where the failure to comply would not
reasonably be expected to have a material adverse
effect on the current or ongoing business, operations
or financial condition of Trecom.
3.14.9. To the knowledge of Trecom and the Principal
Stockholders, no employee of Trecom is in violation of
any term of any employment contract, patent or
confidential information disclosure agreement,
noncompetition agreement, or any other similar contract
or agreement with Trecom, or any restrictive covenant
relating to the right of any such employee to be
employed by Trecom or to use trade secrets or
proprietary information of others, except such
violations which individually or in the aggregate would
not have a material adverse effect on the current or
ongoing business, operations or financial condition of
Trecom.
3.14.10. A list of employees, officers and
consultants, as of December 31, 1995 and their current
salary as of December 31, 1995 has been delivered to
Amdahl.
3.14.11. Trecom is not a party to any (a) agreement
with any executive officer or other key employee
thereof the benefits of which are contingent, or the
terms of which are materially altered, upon the
occurrence of a transaction involving Trecom in the
nature of the transaction contemplated by this
Agreement, or (b) plan, including, without
limitation, any stock option plan, stock appreciation
rights plan or stock purchase plan, any of the benefits
of which will be accelerated, by the occurrence of the
transaction contemplated by this Agreement or the value
of any of the benefits of which will be calculated on
the basis of the transaction contemplated by this
Agreement. The closing of the transaction contemplated
by this Agreement will not entitle any current or
former employee or other service provider of Trecom or
any other ERISA Affiliate to severance benefits or any
other payment except as set forth in this Agreement.
3.15 Corporate Documents. Trecom and the Principal
Stockholders have made available to Amdahl for examination
all documents and information listed in the Schedule of
Exceptions or other schedules or exhibits called for by this
Agreement or which have otherwise been requested by Amdahl
or its legal counsel, including, without limitation, the
following: (a) copies of the Certificate of Incorporation
and Bylaws of Trecom as currently in effect; (b) the minute
books of Trecom containing all records of all proceedings,
consents, actions and meetings of the stockholders, the
board of directors and any committees thereof; (c) the stock
ledger and journal of Trecom reflecting all stock issuances
and transfers; and (d) all permits, orders, and consents
issued by any regulatory agency with respect to Trecom, or
any securities of Trecom, and all applications for such
permits, orders, and consents and has afforded to Amdahl
complete access to its properties, assets, officers and
documents.
3.16. No Brokers. Neither the Principal Stockholders
nor Trecom is obligated for the payment of fees or expenses
of any investment banker (other than Trecom's obligation to
J.P. Morgan Securities, Inc. as set forth in the engagement
letter attached as Exhibit 3.16), broker or finder in
connection with the origin, negotiation or execution of this
Agreement or in connection with the transaction contemplated
hereby.
3.17. Insurance. Trecom maintains and at all times
during the prior three years has maintained fire and
casualty, general liability, business interruption, and
product liability insurance in at least the amounts set
forth on Schedule 3.17, which coverage is in effect as of
the Closing Date.
3.18. Environmental Matters.
3.18.1. To the knowledge of Trecom and the Principal
Stockholders there have been no and Trecom has not
received written notice of any, presence, disposals or
releases of Hazardous Materials (as defined below) on,
from or under any of the properties or facilities
currently or formerly leased or occupied by Trecom, the
clean up or remediation of which is required by Trecom
under any environmental laws. For purposes of this
Agreement, the terms "disposal", "release" and
"threatened release" have the definitions assigned
thereto by the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, 42 U.S.C. Section 9601
et seq., as amended ("CERCLA"). For the purposes of
this Section, "Hazardous Materials" means any hazardous
or toxic substance, material or waste which is or
becomes prior to the Closing regulated under, or
defined as a "hazardous substance," "pollutant,"
"contaminant," "toxic chemical," "hazardous material,"
"toxic substance" or "hazardous chemical" under (i)
CERCLA; (ii) the Emergency Planning and Community
Right-to-Know Act, 42 U.S.C. Section 11001 et seq.;
(iii) the Hazardous Materials Transportation Act, 49
U.S.C. Section 1801, et seq.; (iv) the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq.; (v) the
Occupational Safety and Health Act of 1970, 29 U.S.C.
Section 651 et seq.; (vi) regulations promulgated under
any of the above statutes; or (vii) any applicable
state or local statute, ordinance, rule or regulation
that has a scope or purpose similar to those identified
above.
3.18.2. To the knowledge of Trecom and the Principal
Stockholders none of, and Trecom has not received
written notice that, the properties or facilities of
Trecom is in violation of any applicable federal, state
or local law, ordinance, regulation (including permit
requirements) or order relating to the industrial
hygiene or environmental conditions on, under or about
such properties or facilities, including but not
limited to, soil and ground water condition. To the
knowledge of Trecom and the Stockholders during the
time that Trecom has owned or leased its respective
properties and facilities, neither Trecom nor any third
party, has used, generated, manufactured or stored on,
under or about such properties or facilities or
transported to or from such properties or facilities
any Hazardous Materials except of such use, generation,
manufacture or storage would not reasonably be expected
to have a material adverse effect on the current or
ongoing business, operations or financial condition of
Trecom.
3.18.3. To the knowledge of Trecom and the Principal
Stockholders during the time that Trecom has leased its
properties and facilities, there has been no written
claim made or litigation, proceeding or administrative
action brought or threatened against Trecom, or any
settlement reached by Trecom with, any party or parties
alleging or involving the presence, disposal, release
or threatened release of any Hazardous Materials on,
from or under any of such premises which, in the case
of claims, litigation, proceedings and administrative
actions, if adversely determined would have a material
adverse effect on the current or ongoing business,
operations or financial condition of Trecom.
3.19. Certain Transactions and Agreements. To the
knowledge of Trecom or the Principal Stockholders, none of
the officers or directors of Trecom, nor any "affiliate" or
"associate" (as such terms are defined in the rules and
regulations promulgated under the Securities Act) of Trecom,
has any direct or indirect ownership interest in any firm or
corporation that competes with Trecom (except with respect
to any interest in less than one percent of the stock of any
corporation whose stock is publicly traded). None of such
persons is directly or indirectly interested in any contract
or informal arrangement with Trecom, except for normal
compensation (including benefits and other arrangements) for
services as an officer, director or employee thereof. None
of such persons has any interest in any property, real or
personal, tangible or intangible, including inventions,
patents, copyrights, trademarks or trade names or any trade
secrets, used in or pertaining to the business of Trecom,
except for such interests that would not individually or in
the aggregate have a material adverse effect on the current
or ongoing business, operations or financial condition of
Trecom.
3.20. Material Misstatements or Omissions. Neither this
Agreement, its exhibits and schedules, nor any of the
certificates or documents to be delivered by Trecom or any
Principal Stockholder under this Agreement, taken together,
contains (or when furnished will contain) any untrue
statement of a material fact or omits to state any material
fact necessary in order to make the statements contained
herein and therein, in light of the circumstances under
which such statements were made, not misleading.
3.21. Representations Exclusive. Except for the
representations and warranties contained herein and the
representations and warranties given or made by Trecom or
the Principal Stockholders in any exhibit or schedule
hereto, any officers certificate, the list of officers
employees, officers and consultants delivered pursuant to
Section 3.14.10 or the Schedule of Exceptions delivered by
or on behalf of Trecom or the Principal Stockholders
pursuant hereto, none of Trecom or the Principal
Stockholders makes any representation or warranty express or
implied on behalf of Trecom or any Principal Stockholder or
their respective businesses or assets.
3.22. Opinion of Financial Advisor. Prior to Closing,
Trecom shall have received the opinion of J.P. Morgan
Securities, Inc. to the effect that, as of the date hereof,
the Merger Consideration to be received by the holders of
shares of Trecom Stock is fair from a financial point of
view to such holders.
3.23. Not Aware of Inaccuracy in Amdahl or Newco
Representations or Warranties. Trecom and the Stockholders
are not aware of any inaccuracy in the representations and
warranties given or made, or as of the Closing Date any
breach of covenant or inaccuracy in the representations and
warranties given or made, by Amdahl or Newco herein or in
any exhibit or schedule hereto, or any officers certificate
delivered by or on behalf of Amdahl or Newco pursuant hereto
that would cause Trecom or any Stockholder to exercise its
right under Section 7.1 (Conditions to Obligations of Trecom
and the Stockholders: Accuracy of Representations and
Warranties) to terminate this Agreement and abandon the
Merger.
4. Representations and Warranties of Amdahl and Newco. Amdahl
and Newco hereby jointly and severally represent and warrant to
Trecom and the Principal Stockholders that the following
statements are true, accurate and correct (whenever a
representation or warranty made in this Agreement is limited "to
the knowledge of Amdahl" or other words having similar effect,
knowledge shall mean the actual knowledge of the Chief Executive
Officer, Chief Financial Officer or Vice President of Human
Resources of Amdahl and the President or Chief Executive Officer
of DMR Group Inc., a wholly owned subsidiary of Amdahl, after due
inquiry of the responsible officers or employees within Amdahl):
4.1. Corporate Organization and Good Standing. Each of
Amdahl and Newco is a corporation duly organized, validly
existing, and in good standing under the laws of its state
of incorporation.
4.2. Power and Authority and Validity.
4.2.1. Amdahl and Newco each has the right,
corporate power and authority to enter into and perform
its obligations under this Agreement. Amdahl's and
Newco's execution, delivery and performance of this
Agreement and the consummation of the transactions
contemplated hereby, have been duly and validly
authorized by Amdahl and Newco by all necessary
corporate action.
4.2.2. No filing, authorization or approval with or
by any governmental entity, is necessary to enable
Amdahl to enter into, and to perform its obligations
under, this Agreement, except for (i) compliance with
the provisions of the Securities Exchange Act of 1934,
as amended, (ii) the filing of the Certificate of
Merger with the Secretary of State and appropriate
documents with the relevant authorities of other states
in which Amdahl or Newco is qualified to do business,
(iii) such filings and approvals as may be required
under the HSR Act or (iv) such filings and approvals as
may be required by applicable state securities laws or
state takeover laws.
4.2.3. This Agreement has been duly executed by
Amdahl and Newco. This Agreement including without
limitation the obligation to pay the Merger
Consideration, is the valid and binding obligation of
Amdahl and Newco, respectively, enforceable against
Amdahl and Newco, respectively, in accordance with its
terms, except as to the effect, if any, of (a)
applicable bankruptcy and other similar laws affecting
the rights of creditors generally and (b) rules of law
governing specific performance, injunctive relief and
other equitable remedies.
4.3. No Violation of Certificate, Bylaws or Existing
Agreements. Neither the execution and delivery of this
Agreement by Amdahl and Newco nor the performance by Amdahl
of their respective obligations pursuant hereto, will
conflict with, or (with or without notice or lapse of time,
or both) result in a termination, breach, impairment or
violation of (a) any provision of the Certificate of
Incorporation or Bylaws of Amdahl or Newco, respectively, as
currently in effect or (b) any instrument, license or
contract to which Amdahl or Newco is a party or by which
Amdahl or Newco is bound, except for such violations which
in the aggregate would not be material to Amdahl or Newco as
the case may be.
4.4. No Brokers. Amdahl and Newco are not obligated for the
payment of fees or expenses of any investment banker (other
than Morgan Stanley & Co. Inc.), broker or finder in
connection with the origin, negotiation or execution of this
Agreement or in connection with the transaction contemplated
hereby.
4.5. Litigation. There is no action, proceeding, claim or
investigation pending against Amdahl or Newco that seeks to
prevent or enjoin any of the transactions contemplated
hereby nor to Amdahl's or Newco's knowledge has any such
action, proceeding, claim, or investigation been threatened
nor does Amdahl or Newco have a reasonable belief that there
is any basis therefor.
4.6. Financing. Amdahl and Newco possess, or have access
to, sufficient funds to enable them to acquire all issued
and outstanding shares of Trecom Stock on a fully diluted
basis and to pay all fees expenses payable by Amdahl and
Newco related to the transactions contemplated by the
Agreement.
4.7. Material Misstatements or Omissions. Neither this
Agreement, its exhibits and schedules, nor any of the
certificates or documents to be delivered by Amdahl or Newco
under this Agreement, taken together, contains (or when
furnished will contain) any untrue statement of a material
fact or omits to state any material fact necessary in order
to make the statements contained herein and therein, in
light of the circumstances under which such statements were
made, not misleading.
4.8. Not Aware of Inaccuracy in Trecom or Stockholders
Representations or Warranties. Amdahl is not aware of any
inaccuracy in the representations and warranties given or
made, or as of the Closing Date any breach of covenant or
inaccuracy in the representations and warranties given or
made, by Trecom or the Principal Stockholders herein or in
any exhibit or schedule hereto, or any officers certificate,
the list of officers employees, officers and consultants
delivered pursuant to Section 3.14.10 or the Schedule of
Exceptions delivered by or on behalf of Trecom or the
Principal Stockholders pursuant hereto that would cause
Amdahl to exercise its right under Section 8.1 (Conditions
to Obligations of Amdahl and Newco: Accuracy of
Representations and Warranties) to terminate this Agreement
and abandon the Merger.
5. Trecom's and the Stockholders' Pre-Closing Covenants.
During the period from the date of this Agreement until the
Closing, Trecom and each Stockholder covenants and agrees as
follows:
5.1. Advice of Changes. Trecom and each Principal
Stockholder will promptly advise Amdahl in writing (a) of
any event occurring subsequent to the date of this Agreement
that would render any representation or warranty of Trecom
and the Principal Stockholders contained in this Agreement,
if made on or as of the date of such event or the Closing
Date, untrue or inaccurate in any material respect and (b)
of any material adverse change in the business of Trecom.
5.2. Maintenance of Business and Relationships. Trecom
will, and the Stockholders in their capacities as officers
and directors will cause Trecom to, use reasonable
commercial efforts to carry on and preserve its business and
its relationships with customers, suppliers, officers,
employees and contractors and others in substantially the
same manner as it has prior to the date hereof. If Trecom
or any Stockholder becomes aware of a material deterioration
in the relationship with any of Trecom's top 15 customers,
or any key supplier, corporate officer, key employee or key
contractor, it will promptly bring such information to the
attention of Amdahl in writing and, if requested by Amdahl,
will exert its reasonable commercial efforts to restore the
relationship.
5.3. Conduct of Business in Ordinary Course. Trecom will,
and the Stockholders in their capacities as officers and
directors will cause Trecom to, conduct its business in the
ordinary and usual course, consistent with past practice,
and will not, without the prior written consent of Amdahl,
which consent shall not be unreasonably withheld or delayed:
(a) borrow any money in excess of $500,000, in any
single transaction or cumulatively, other than solely for
the purpose of paying payroll expenses in the ordinary
course of business consistent with past practices;
(b) enter into any transaction not in the ordinary
course of business;
(c) encumber or permit to be encumbered any of its
assets except in the ordinary course of its business
consistent with past practice (including encumberances
incurred in connection with the borrowing of money solely
for the purpose of paying payroll expenses) and to an extent
which is not material;
(d) dispose of any of its assets except in the
ordinary course of business consistent with past practice;
(e) enter into any material lease or contract for the
purchase or sale of any property, real or personal, except
in the ordinary course of business consistent with past
practice;
(f) fail to maintain its material equipment and other
material assets in good working condition and repair
according to the standards it has maintained to the date of
this Agreement, subject only to ordinary wear and tear;
(g) pay any bonus, increased salary or special
remuneration to any officer, employee or individual
consultant (except for normal salary increases consistent
with past practices not to exceed $10,000 per year and
except pursuant to existing arrangements previously
disclosed to and approved in writing by Amdahl) or enter
into any new employment or consulting agreement with any
such person;
(h) change accounting methods;
(i) declare, set aside or pay any cash or stock
dividend or other distribution in respect of capital stock,
or redeem or otherwise acquire any of its capital stock;
(j) amend or terminate any written contract, agreement
or license to which it is a party except those amended or
terminated in the ordinary course of business, consistent
with past practice, and which amendments or termination
would not, individually or in the aggregate, have a material
adverse effect on the business, operations or prospects of
Trecom;
(k) lend any amount to any person or entity other than
(i) advances for travel and expenses which are incurred in
the ordinary course of business consistent with past
practice, not material in amount and documented by receipts
for the claimed amounts or (ii) any loans pursuant to the
Trecom 401(k) Plan or (iii) payroll advances in individual
amounts of $2,500 or less, provided that the aggregate
amount of all such advances shall not exceed $25,000.
(l) guarantee or act as a surety for any obligation
(except for the endorsement of checks and other negotiable
instruments and indemnification obligations contained in
customer contracts in the ordinary course of business,
consistent with past practice), or payment under which or
pursuant to which would, individually or in the aggregate,
have a material adverse effect on the business, operations
or prospects of Trecom;
(m) waive or release any material right or claim
except in the ordinary course of business, consistent with
past practice;
(n) issue or sell any shares of its capital stock of
any class, or any other of its securities, or issue or
increase any warrants, obligations, subscriptions, options,
convertible securities, or other commitments to issue shares
of capital stock, or accelerate the vesting of any
outstanding option or other security;
(o) split or combine the outstanding shares of its
capital stock of any class or enter into any
recapitalization affecting the number of outstanding shares
of its capital stock of any class or affecting any other of
its securities;
(p) merge, consolidate or reorganize with, or acquire
any entity;
(q) amend its Certificate of Incorporation or Bylaws;
(r) license any of its technology or intellectual
property, other than in the ordinary course of business and
consistent with past practice;
(s) agree to any audit assessment by any tax authority
or file any federal or state income or franchise tax return
unless copies of such returns have been delivered to Amdahl
for its review prior to signing;
(t) change any insurance coverage or issue any
certificates of insurance other than in the ordinary course
of business and consistent with past practice; or
(u) agree to do any of the things described in this
Section 5.3.
5.4. Regulatory Approvals. Trecom and the Stockholders, in
their capacities as officers and directors of Trecom, will
execute and file, or join in the execution and filing, of
any application or other document that may be necessary in
order to obtain the authorization, approval or consent of
any governmental body, federal, state, local or foreign,
which may be reasonably required, or which Amdahl may
reasonably request, in connection with the consummation of
the transactions contemplated by this Agreement, including
all filings and other required submissions under the HSR
Act. Trecom and the Stockholders will use their reasonable
commercial efforts to obtain all such authorizations,
approvals and consents.
5.5. No Other Negotiations. Neither Trecom nor any
Stockholder will, and each Stockholder in his or her
capacity as an officer or director of Trecom will cause
Trecom not to, and no Stockholder will authorize or instruct
any officer, director, employee or affiliate of the
Stockholder or Trecom, or any other person, on behalf of the
Stockholder or Trecom directly or indirectly, solicit or
encourage any offer from any party or consider any inquiries
or proposals received from any other party, participate in
any negotiations regarding, or furnish to any person any
information with respect to, or otherwise cooperate with,
facilitate or encourage any effort or attempt by any person
(other than Amdahl), concerning the possible acquisition or
disposition of all or any substantial portion of the
business assets or capital stock of Trecom by merger, sale
or any other means or any other strategic type of investment
by a third party (collectively, "Participate in
Negotiations"). Notwithstanding the foregoing, the Board
of Directors of Trecom may furnish or cause to be furnished
information and may participate in such discussions and
negotiations directly or through its representatives if such
Board of Directors determines in good faith, based on the
advice of outside legal counsel (which advice need not be
set forth in a written legal opinion) that, it is required
by its fiduciary duties to furnish such information and
participate in such discussions and negotiations. Nothing
in this Section 5.5 shall relieve any Stockholder of his or
her obligations pursuant to Section 5.9.2 (Voting
Agreement).
5.6. Access to Information. Until the Closing, Trecom will,
and the Stockholders in their capacities as officers and
directors of Trecom will cause Trecom to, upon reasonable
notice, allow Amdahl and its agents reasonable access to the
files, books, records, personnel and offices of Trecom,
including, without limitation, any and all information
relating to Trecom's taxes, commitments, contracts, leases,
licenses, and real, personal and intangible property and
financial condition. Trecom will, and the Stockholders in
their capacities as officers and directors of Trecom will
cause Trecom to, cause the accountants of Trecom to
cooperate with Amdahl and its agents in making available all
financial information reasonably requested, including
without limitation the right to examine all working papers
pertaining to all financial statements prepared or audited
by such accountants. All information provided by Trecom or
its advisors pursuant to this Section 5.6 shall be subject
to applicable confidentiality and similar agreements between
Amdahl and Trecom.
5.7. Satisfaction of Conditions Precedent. Trecom and the
Stockholders will use reasonable commercial efforts to
satisfy or cause to be satisfied all the conditions
precedent which are set forth in Section 8 (Conditions to
Obligations of Amdahl and Newco), and to cause the
transactions contemplated by this Agreement to be
consummated, and, without limiting the generality of the
foregoing, to obtain all consents and authorizations of
third parties and to make all filings with, and give all
notices to, third parties that may be necessary or
reasonably required on their part in order to effect the
transactions contemplated hereby.
5.8. Blue Sky Laws. Trecom and the Stockholders will take
such steps as may be necessary to comply with the securities
and Blue Sky laws of all jurisdictions which are applicable
in connection with the transactions contemplated hereby.
5.9. Stockholder Approval. Trecom will, and the
Stockholders in their capacities as officers and directors
will cause Trecom to, take all action necessary in
accordance with applicable law and its Certificate of
Incorporation and Bylaws to convene a meeting of its
stockholders or to solicit written consents in lieu thereof
(including mailing the Proxy or Information Statement (as
defined in Section 5.11 (Proxy or Information Statement)),
as promptly as practicable to consider and vote upon the
approval of this Agreement and the Merger.
5.9.1. Board Recommendation of Approval. The Board
of Directors of Trecom shall recommend such approval,
provided that the Board of Directors of Trecom may fail
to make such recommendation (or withdraw or modify such
recommendation) if such Board of Directors, based on
the advice of outside legal counsel (which advice need
not be set forth in a written legal opinion),
determines that the making of such recommendation would
constitute a breach of fiduciary duties of such
directors under applicable law.
5.9.2. Voting Agreement.
a. Vote In Favor of Merger. Each of the
Stockholders, in their capacities as
stockholders of Trecom, agrees that during
the time this Agreement is in effect, such
Stockholder shall promptly execute and return
to Trecom any written consent in lieu of a
meeting solicited to approve this Agreement
and the Merger and shall attend in person or
by proxy any meeting of stockholders convened
to consider, and shall vote to approve, this
Agreement and the Merger.
b. Vote against Other Proposals. Further, each
such Stockholders agrees that during the time
this Agreement is in effect, at any meeting
of the stockholders of Trecom, however
called, and in any action by consent of the
stockholders of Trecom, such Stockholder
shall vote all shares held by such
Stockholder against any proposal for any
recapitalization, merger (other than the
Merger), sale of assets or other business
combination between Trecom and any person or
entity (other than Amdahl or Newco) or any
other action or agreement that would result
in a breach of any covenant, representation
or warranty or other obligation or agreement
of Trecom hereunder or which would result in
any of the conditions set forth in Sections 7
(Conditions to Obligations of Trecom and the
Shareholders) and 8 (Conditions to
Obligations of Amdahl and Newco) not being
fulfilled.
C. Proxy. Each Stockholder, by this Agreement,
with respect to those shares of Trecom Stock
that such Stockholder now owns of record or
that may hereafter be acquired by such
Stockholder at any time prior to the
Effective Time, does hereby constitute and
appoint Amdahl or any nominee of Amdahl, with
full power of substitution, from the date
hereof to the earlier to occur of the
termination of this Agreement or the
Effective Time, as its true and lawful
attorney and proxy (its "Proxy"), for and in
its name, place and stead, to demand that the
Secretary of Trecom call a special meeting of
the stockholders of Trecom for the purpose of
considering any action related to this
Agreement and to vote each of such shares of
Trecom Stock as its Proxy, at every annual,
special or adjourned meeting of the
stockholders of Trecom solely for the purpose
of ensuring compliance by such Stockholder
with his obligations under Section 5.9.2
(Voting Agreement), including the right to
sign its name (as stockholder) to any
consent, certificate or other document
relating to Trecom that the law of the State
of Delaware may permit or require:
(i) in favor of the Merger and this
Agreement (as amended from time to time); and
(ii) against any proposal for any
recapitalization, merger (other than the
Merger), sale of assets or other business
combination between Trecom and any person or
entity (other than Amdahl or Newco) or any
other action or agreement that would result
in a breach of any covenant, representation
or warranty or other obligation or agreement
of Trecom hereunder or which would result in
any of the conditions set forth in Sections 7
(Conditions to Obligations of Trecom and the
Shareholders) and 8 (Conditions to
Obligations of Amdahl and Newco) not being
fulfilled.
Notwithstanding the foregoing, the Proxy
granted by any Stockholder shall not be
effective unless and until such Stockholder
fails to (i) execute and return to Trecom
within five (5) business days of receipt any
written consent solicited by Trecom, or
otherwise vote to approve, this Agreement and
the Merger or (ii) vote against any proposal
for any recapitalization, merger (other than
the Merger), sale of assets or other business
combination between Trecom and any person or
entity (other than Amdahl or Newco) or vote
against any other action or agreement that
would result in a breach of any covenant,
representation or warranty or other
obligation or agreement of Trecom hereunder
or which would result in any of the
conditions set forth in Sections 7
(Conditions to Obligations of Trecom and the
Shareholders) and 8 (Conditions to
Obligations of Amdahl and Newco) not being
fulfilled. Further, Amdahl or its nominee
may not exercise its rights under the Proxy
if, at the time of such exercise, Amdahl or
Newco are in material breach of any
representation, warranty or covenant
contained herein or in any exhibit or
schedule hereto, or any officers certificate
delivered by or on behalf of Amdahl or Newco
pursuant hereto
THIS PROXY AND POWER OF ATTORNEY IS
IRREVOCABLE AND COUPLED WITH AN INTEREST.
d. Further Assurances. Each Stockholder shall
perform such further acts and execute such
further documents and instruments as may
reasonably be required to carry into effect
the intents and purposes of this Section 5.9.
5.10. No Disposition or Encumbrance of Shares. Each
Stockholder hereby covenants and agrees that, from the date
hereof to the earlier to occur of the termination of this
Agreement or the Effective Time, he or she shall not, and
shall not offer or agree to, sell, transfer, tender, assign,
hypothecate or otherwise dispose of, or create or permit to
exist any pledge, lien, security interest, mortgage, charge,
claim, equity, option, proxy, voting restriction, right of
first refusal, limitation on disposition, adverse claim of
ownership or use or encumbrance of any kind on any shares of
Trecom Stock now owned or that may hereafter be acquired by
such Stockholder at any time prior to the Effective Time,
other than such transfers as may take place by operation of
law upon the death of a Stockholder or by judicial order.
5.11. Proxy or Information Statement. Trecom shall, and
the Stockholders in their capacities as officers and
directors will cause Trecom to, prepare and, if required,
file under all applicable state securities or "blue sky"
laws or state takeover laws as soon as practicable a form of
the proxy statement or information statement (the "Proxy or
Information Statement") to be mailed to the holders of
Trecom Stock in connection with the meeting of such holders
in connection with, or solicitation of approval by written
consent of, the Merger, which Proxy or Information Statement
shall be in form and substance reasonably satisfactory to
Amdahl. If, at any time prior to the approval of this
Agreement by Trecom's stockholders there shall occur any
event that in the judgment of Trecom's Board of Directors
based on the advice of outside legal counsel (which advice
need not be set forth in the written legal opinion) should
be set forth in an amendment or supplement to the Proxy or
Information Statement, Trecom will prepare and mail to its
stockholders such an amendment or supplement. Trecom agrees
that the Proxy or Information Statement and each amendment
or supplement thereto at the time of mailing thereof, and at
all times prior to approval by the stockholders of the
Merger, will not include an untrue statement of material
fact or omit 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. Amdahl and Newco shall cooperate with Trecom
and shall furnish Trecom with all information concerning
such party as may be reasonably requested by Trecom in
connection with the preparation of the Proxy or Information
Statement. Amdahl and Newco agree that the information
provided to Trecom in connection with Trecom's preparation
of the Proxy or Information Statement will not, at the time
provided, include an untrue statement of material fact or
omit 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.
Amdahl shall promptly notify Trecom of any changes in the
information so provided to Trecom, or the occurrence of any
event necessary to be reported in order to ensure that the
information supplied to Trecom, at all times prior to the
approval by the stockholders of the Merger, does not include
an ununtrue statement of material fact or omit 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.
6. Amdahl and Newco Pre-Closing Covenants. During the period
from the date of this Agreement until the Closing, each of Amdahl
and Newco covenants and agrees as follows:
6.1. Advice of Changes. Amdahl will promptly advise Trecom
in writing (a) of any event occurring subsequent to the date
of this Agreement that would render any representation or
warranty of Amdahl or Newco contained in this Agreement, if
made on or as of the date of such event or the Closing Date,
untrue or inaccurate in any material respect and (b) of any
material adverse change in the business, operations or
financial condition of Amdahl.
6.2. Regulatory Approvals. Amdahl and Newco will execute
and file, or join in the execution and filing, of any
application or other document that may be necessary in order
to obtain the authorization, approval or consent of any
governmental body, federal, state, local or foreign, which
may be reasonably required, or which Trecom or the
Stockholders may reasonably request, in connection with the
consummation of the transactions contemplated by this
Agreement, including all filings and other submissions under
the HSR Act. Amdahl will use its reasonable commercial
efforts to obtain all such authorizations, approvals and
consents.
6.3. Satisfaction of Conditions Precedent. Amdahl and Newco
will use their reasonable commercial efforts to satisfy or
cause to be satisfied all the conditions precedent which are
set forth in Section 7 (Conditions to Obligations of Trecom
and the Stockholders), and Amdahl and Newco will use their
reasonable commercial efforts to cause the transactions
contemplated by this Agreement to be consummated, and,
without limiting the generality of the foregoing, to obtain
all consents and authorizations of third parties and to make
all filings with, and give all notices to, third parties
that may be necessary or reasonably required on its part in
order to effect the transactions contemplated hereby.
6.4. Blue Sky Laws. Amdahl will use its reasonable
commercial efforts to assist Trecom and the Stockholders to
the extent necessary to comply with the securities and Blue
Sky laws of all jurisdictions which are applicable in
connection with the transactions contemplated hereby.
6.5. D&O Insurance. For a period of four years from and
after the Closing Date, Amdahl shall or shall cause the
Surviving Corporation to indemnify, and advance expenses in
connection with proceedings that may be subject to
indemnification, to the persons serving as corporate
officers and directors of Trecom on the Closing Date with
respect to liabilities and claims (and related expenses)
made against such persons resulting from their service as
such prior to the Closing Date in accordance with and
subject to the requirements, limitations and other
provisions of the Surviving Corporation's Certificate of
Incorporation and Bylaws in effect after the Effective Time
and applicable provisions of law to the same extent as the
Surviving Corporation is obligated thereunder to indemnify
and advance expenses to its own officers and directors with
respect to similar liabilities and claims made against them
relating to their service for the Surviving Corporation.
6.5.1. For a period of four years after the Closing
Date, Amdahl shall cause the Surviving
Corporation to maintain Trecom's existing
directors' and officers' liability insurance
policy (or a policy providing comparable
coverage) covering (i) persons who are
currently covered by such insurance for the
costs set forth above arising in connection
with events prior to the Closing Date and
(ii) all corporate officers and directors of
Trecom for service in such capacity with the
Surviving Corporation.
6.5.2. Any party seeking to make a claim for
indemnification under this Section 6.5 shall
notify Amdahl promptly after learning of any
claim, action, suit or proceeding or
investigations described above, provided that
the failure to provide such notice shall not
affect Amdahl's or the surviving
Corporation's obligations hereunder except to
the extent that the failure to give such
notice actually and materially prejudices the
rights of Amdahl or the Surviving
Corporation).
6.6. Delivery of Letter of Credit. At the Closing, Amdahl
will deliver an irrevocable standby letter of credit in
the face amount of $52,979,182 (the "Letter of Credit")
issued by a bank reasonably acceptable to the Principal
Stockholders and related agreements. The Letter of
Credit and all related agreements shall be in form and
substance reasonably satisfactory to the Principal
Stockholders.
7. Conditions to Obligations of Trecom and the Stockholders.
Trecom's and the Stockholders' obligations hereunder are subject
to the fulfillment or satisfaction, on and as of the Closing, of
each of the following conditions (any one of which may be waived
by Trecom and the Stockholders, but only in a writing signed by
Trecom and the Stockholders):
7.1. Accuracy of Representations and Warranties. The
representations and warranties of Amdahl and Newco set forth
in Section 4 (Representations and Warranties of Amdahl)
shall be true and accurate in every material respect on and
as of the Closing with the same force and effect as if they
had been made at the Closing, and Trecom and the Principal
Stockholders shall receive a certificate to such effect
executed by Amdahl's Chief Financial Officer.
7.2. Covenants. Amdahl and Newco shall have performed and
complied in all material respects with all of its covenants
contained in Section 6 (Amdahl Pre-Closing Covenants) and
Section 9 (Covenants to be Performed at Closing) on or
before the Closing, and the Principal Stockholders shall
receive a certificate to such effect signed by Amdahl's
Chief Financial Officer.
7.3. Trecom Stockholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved,
in the manner required by applicable law or applicable
regulations of any regulatory body, as the case may be, by
the holders of the issued and outstanding shares of Common
Stock of Trecom.
7.4. Compliance with Law. There shall be no order, decree,
or ruling by any court or governmental agency or threat
thereof, or any other fact or circumstance, which would
prohibit or render illegal the transactions contemplated by
this Agreement.
7.5. Governmental Consents. There shall have been obtained
at or prior to the Closing Date such permits or
authorizations, and there shall have been taken such other
action (including the expiration or early termination of the
requisite waiting periods under the HSR Act), as may be
required to consummate the transactions contemplated hereby
by any regulatory authority having jurisdiction over the
parties and the actions herein proposed to be taken,
including but not limited to requirements under applicable
federal and state securities laws.
7.6. Filing of Certificate of Merger. The Certificate of
Merger relating to the transaction described herein shall
have been filed, and accepted for filing by, the Secretary
of State.
7.7. Opinion of Amdahl's and Newco's Counsel. Trecom and
the Principal Stockholders shall have received from counsel
to Amdahl and Newco, an opinion in form and substance
reasonably satisfactory to Trecom and the Principal
Stockholders, regarding, among other things, the
enforceability of this Agreement against Amdahl and the
Letter of Credit against the issuer, subject to customary
exceptions.
8. Conditions to Obligations of Amdahl and Newco. Amdahl's and
Newco's obligations hereunder are subject to the fulfillment or
satisfaction, on and as of the execution of this Agreement and
the Closing, of each of the following conditions (any one of
which may be waived by Amdahl and Newco, but only in a writing
signed by Amdahl and Newco):
8.1. Accuracy of Representations and Warranties. The
representations and warranties of Trecom and the Principal
Stockholders set forth in Section 3 (Representations and
Warranties of Trecom and the Principal Stockholders) shall
be true and accurate in every material respect on and as of
the Closing with the same force and effect as if they had
been made at the Closing, and Amdahl shall receive a
certificate to such effect executed by Trecom's President
and Chief Financial Officer.
8.2. Covenants. Trecom and the Stockholders shall have
performed and complied in all material respects with all of
their covenants contained in Section 5 (Trecom's and the
Stockholders' Pre-Closing Covenants) on or before the
Closing, and Amdahl shall receive a certificate to such
effect executed by Trecom's President and Chief Financial
Officer.
8.3. Trecom Stockholder Approval. This Agreement and the
transactions contemplated hereby shall have been approved,
in the manner required by applicable law or applicable
regulations of any regulatory body, as the case may be, by
the holders of the issued and outstanding shares of Common
Stock of Trecom. Holders of not more than 5% of the Trecom
Stock shall have exercised appraisal rights with respect
thereto in accordance with Section 262 of the DGCL.
8.4. Absence of Material Adverse Change. There shall not
have been, in the reasonable judgment of Amdahl, any
material adverse change in the business, operations or
financial condition of Trecom since the date hereof, except
any change resulting from factors affecting Trecom's
industry generally or that are caused by general economic
conditions.
8.5. Compliance with Law. There shall be no order, decree,
or ruling by any court or governmental agency or threat
thereof, or any other fact or circumstance, which would
prohibit or render illegal the transactions contemplated by
this Agreement.
8.6. Governmental Consents. There shall have been obtained
at or prior to the Closing Date such permits or
authorizations, and there shall have been taken such other
action (including the expiration or early termination of the
requisite waiting period under the HSR Act ), as may be
required to consummate the transactions contemplated hereby
by any regulatory authority having jurisdiction over the
parties and the actions herein proposed to be taken,
including but not limited to requirements under applicable
federal and state securities laws.
8.7. Opinion of the Trecom's Counsel. Amdahl shall have
received from counsel to Trecom, an opinion in form and
substance reasonably satisfactory to Amdahl, regarding,
among other things, the matters set forth on Exhibit 8.7.
8.8. Employment Agreements. Each of the following
individuals shall have entered into employment agreements
(which employment agreement shall include non-competition
and non-solicitation covenants) with Trecom in form and
substance mutually agreed to between Amdahl and Trecom as of
the date hereof: Emanuel Arturi, Salvatore Recupero, Robert
J. Sargenti, Shailendra Jain and Peter W. Gibson. In
addition, Francis J. Casagrande shall have entered into a
consulting agreement (which consulting agreement shall
include non-competition and non-solicitation covenants) with
Trecom in form and substance mutually agreed to between
Amdahl and Trecom as of the date hereof.
8.9. Withholding Agreements. Each of the stockholders of
Trecom named on Schedule 8.9 shall have executed and
delivered to Amdahl and agreement substantially in the form
attached as Exhibit 8.9 hereto, which agreement shall permit
Amdahl to withhold from the Merger Consideration payable to
each such stockholder hereunder, and remit to Trecom, an
amount equal to Trecom's tax withholding obligation with
respect to Trecom Stock issued to such stockholders in 1996.
8.10. Consents. Amdahl shall have received duly
executed copies of all material third-party consents,
approvals, assignments, waivers, authorizations or officers
certificates contemplated by this Agreement or the Schedule
of Exceptions or reasonably deemed necessary by Amdahl to
provide for the continuation in full force and effect of any
and all material contracts and leases of Trecom and for
Amdahl to consummate the transactions contemplated hereby in
form and substance reasonably satisfactory to Amdahl.
8.11. No Litigation. No litigation or proceeding shall
be threatened or pending for the purpose or with the
probable effect of enjoining or preventing the consummation
of any of the transactions contemplated by this Agreement,
or which could be reasonably expected to have a material
adverse effect on the current, ongoing or future business,
operations or financial condition of Trecom.
8.12. FIRPTA. Amdahl, as agent for the stockholders of
Trecom, shall have received a properly executed Foreign
Investment and Real Property Tax Act of 1908 ("FIRPTA")
Notification Letter, in form and substance satisfactory to
Amdahl, which states that shares of Trecom do not constitute
"United States real property interests" under Section 897(c)
of the Internal Revenue Code of 1986, as amended, for
purposes of satisfying Amdahl's obligations under Treasury
Regulation Section 1.1445-2(c)(3).
8.13. Filing of Certificate of Merger. The Certificate
of Merger relating to the transaction described herein shall
have been filed, and accepted for filing by, the Secretary
of State.
8.14. Rescission Offers. All offers by Trecom to
rescind the sale of its stock shall have been completed in
accordance with applicable law.
9. Covenants to be Performed at the Closing.
9.1. Stockholder Loans. On the Closing Date, Amdahl will
(i) pay the outstanding principal amount of the loans
listed on Schedule 6.6 hereto, together with accrued
interest thereon and (ii) provide to the holder of such
loan the written release of subordination agreements in
form and substance reasonably satisfactory to such
individuals of PNC Bank National Association (as
successor in interest to Chemical Bank New Jersey,
National Association) and Morgan Guaranty & Trust
Company of New York to the payment of such loan.
9.2. Release of Guarantee. On or prior to the Closing Date,
Amdahl shall provide to Frances J. Casagrande and S.
Russell Powell a release in form and substance
reasonably satisfactory to such individuals from PNC
Bank National Association (as successor in interest to
Chemical Bank New Jersey, National Association) and
Morgan Guaranty & Trust Company of New York pursuant to
which such individuals shall be released from all
obligations as guarantors of debt of Trecom to PNC Bank
National Association (as successor in interest to
Chemical Bank New Jersey, National Association) and
Morgan Guaranty & Trust Company of New York and all
related security agreements shall be terminated.
10. Termination of Agreement.
10.1. Termination by Mutual Consent. This Agreement may
be terminated and the Merger may be abandoned at any time
prior to the Effective Time by the mutual written consent of
each of the parties hereto.
10.2. Termination by Amdahl or Trecom. This Agreement
may be terminated and the Merger may be abandoned by action
of the Board of Directors of either Amdahl or Trecom if the
Merger shall not have been consummated by May 1, 1996,
provided that the terminating party shall not have breached
in any material respect its obligations under this Agreement
in any manner that shall have substantially contributed to
the failure to consummate the Merger by May 1, 1996.
Without limiting the generality of the foregoing, (i) in the
event that the conditions set forth in Section 8.3 (Trecom
Stockholder Approval), 8.6 (Governmental Consents), 8.8
(Employment Agreements), 8.9 (Withholding Agreements) or
8.14 (Rescission Offers) have not been satisfied, Trecom and
the Stockholders shall be deemed to have substantially
contributed to the failure to consummate the Merger and
shall have no right to terminate this Agreement and abandon
the Merger pursuant to this Section 10.2 until such
conditions have been satisfied and (ii) in the event that
the condition set forth in Section 7.5 (Government Consents)
shall have not been satisfied, Amdahl and Newco shall be
deemed to have substantially contributed to the failure to
consummate the Merger and shall have no right to terminate
this Agreement and abandon the Merger pursuant to this
Section 10.2 until such condition has been satisfied;
provided that on or after July1, 1996 Trecom shall not be
deemed to have substantially contributed to the failure to
consummate the Merger by virtue of the failure of the
condition set forth in Section 8.9 (Withholding Agreements)
to have been satisfied and may terminate and abandon the
Merger pursuant to this Section 10.2 so long as it is not
otherwise in breach in any material respect its obligations
under this Agreement or has not otherwise substantially
contributed to the failure to consummate the Merger.
10.3. Termination for Breach. This Agreement may be
terminated and the Merger may be abandoned at any time prior
to the Effective Time by Amdahl and Newco if there has been
a non-performance or breach by Trecom which has or would
reasonably be expected to have resulted in a failure of
condition under Section 8 (Conditions to Obligations of
Amdahl and Newco), which non-performance or breach is not
curable or, if curable, is not cured within 30 days after
written notice of such non-performance or breach is given by
Amdahl to Trecom. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective
Time by Trecom if there has been a non-performance or breach
by Amdahl or Newco which has or would reasonably be expected
to have resulted in a failure of condition under Section 7
(Conditions to Obligations of Trecom and the Stockholders),
and which non-performance or breach is not curable or, if
curable, is not cured within 30 days after written notice
of such non-performance or breach is given by Trecom to
Amdahl.
10.4. Termination Fee.
10.4.1 Payable to Amdahl. If Amdahl and Newco in
their reasonable commercial judgment choose
to terminate the Agreement and abandon the
Merger primarily as a result of (i) a
condition to the obligations of Amdahl and
Newco as set forth in Sections 7.1 (Accuracy
of Representations and Warranties) or 7.2
(Covenants) not being satisfied or fulfilled
or (ii) Trecom or any Stockholder breaching
any of its obligations contained in Section 5
(Trecom and the Stockholders' Pre-Closing
Covenants), and Amdahl and Newco are not in
material breach of any of its covenants and
agreements set forth herein, Trecom will (a)
within 30 days after the submission of any
relevant statements to Trecom, reimburse
Amdahl for up to $1 million of reasonable
out-of-pocket expenses and fees (including,
without limitation, fees and expenses payable
to counsel, accountants and advisors to
Amdahl) incurred by Amdahl or on its behalf
in connection with this Agreement and (b)
within ten business days after notice from
Amdahl, pay to Amdahl a fee of $1 million.
10.4.2. Payable to Trecom. If Trecom and the
Stockholders in their reasonable commercial
judgment choose to terminate the Agreement
and abandon the Merger primarily as a result
of (i) a condition to the obligations of
Trecom and the Stockholders as set forth in
Sections 8.1 (Accuracy of Representations and
Warranties), 8.2 (Covenants) or the first
sentence of 8.3 (Trecom Stockholder Approval)
not being satisfied or fulfilled or (ii)
Amdahl or Newco breaching any of its
obligations contained in Section 6 (Amdahl
and Newco Pre-Closing Covenants), and Trecom
or Stockholders are not in material breach of
any of its covenants and agreements set forth
herein, Amdahl will (a) within 30 days after
the submission of any relevant statements to
Amdahl, reimburse Trecom for up to $1 million
of reasonable out-of-pocket expenses and fees
(including, without limitation, fees and
expenses payable to counsel, accountants and
advisors to Trecom) incurred by Trecom or on
its behalf in connection with this Agreement
and (b) within ten business days after notice
from Trecom, pay to Trecom a fee of $1
million.
10.5. Topping Fee.
10.5.1. Termination as a Result of Alternative
Transaction. If Amdahl and Newco in their reasonable
commercial judgment, choose to terminate the Agreement
and abandon the Merger primarily as a result of an
alternative transaction in which a third party is
proposing, offering or has agreed to acquire (whether
by way of stock purchase, merger, purchase of assets or
other business combination or similar transaction) more
than 50% of the business or assets of Trecom or any
number of shares of Trecom Stock which would result in
the condition set forth in Section 8.3 (Trecom
Stockholder Approval) not being satisfied in any way
and (a) which is at a price or having a cash equivalent
value greater than the per share Merger Consideration
hereunder or (b) which the board of directors of Trecom
determines in good faith, based on the advice of
outside legal counsel, it is required by its fiduciary
duties to not recommend approval by the stockholders of
the Merger based on advice of outside financial
advisors that such alternative transaction is
financially more favorable to the stockholders of
Trecom than the Merger, Trecom shall pay to Amdahl (i)
a topping fee of $4.5 million within ten business days
after consummation of any such alternative transaction
by Trecom or its and (ii) within 30 days after the
submission of any relevant statements to Trecom,
reimburse Amdahl for up to $1 million of reasonable
out-of-pocket expenses and fees (including, without
limitation, fees and expenses payable to counsel,
accountants and advisors to Amdahl) incurred by Amdahl
or on its behalf in connection with this Agreement
stockholders; provided that no such topping fee or
expenses shall be payable under this Section 10.5.1
unless and until such alternative transaction is
consummated.
10.5.2. Alternative Transaction Completed After
Termination. If Amdahl and Newco in their reasonable
commercial judgment choose to terminate the Agreement
and abandon the Merger primarily as a result of
conditions or events which give rise to an obligation
by Trecom to pay a Termination Fee to pursuant to
Section 10.4.1 (Termination Fee: Payable to Amdahl) and
if, within six months of such termination or
abandonment more than 50% of the business, assets or
voting stock of Trecom is acquired (whether by way of
stock purchase, merger, purchase of assets or other
business combination or similar transaction) by any
third party, Trecom shall pay to Amdahl (i) an amount
equal to $4.5 million within ten business days after
consummation of any such alternative transaction by
Trecom or its stockholders and (ii) within 30 days
after the submission of any relevant statements to
Trecom, reimburse Amdahl for up to $1 million of
reasonable out-of-pocket expenses and fees (including,
without limitation, fees and expenses payable to
counsel, accountants and advisors to Amdahl) incurred
by Amdahl or on its behalf in connection with this
Agreement.
10.5.3. No Termination Fee Payable if Topping Fee is
Payable. If a fee is payable pursuant to this Section
10.5, no fee shall be payable pursuant to Section
10.4.1 (Termination Fee: Payable to Amdahl) and any fee
previously paid pursuant to Section 10.4.1 shall be
deducted from any fee payable pursuant to this Section
10.5.
10.6. Certain Continuing Obligations. Following any
termination of this Agreement pursuant to this 10, the
parties hereto will continue to perform their respective
obligations under Sections 10.4 (Termination Fee), 10.5
(Topping Fee), 10.6 (Certain Continuing Obligations, 13
(Public Announcements) and 14 (Miscellaneous) hereof, and
under any confidentiality agreement in effect at the time of
such termination, but will not be required to continue to
perform their other covenants under this Agreement.
11. Survival of Representations and Warranties.
11.1. The Principal Stockholders' Representations. The
representations and warranties of Trecom and the Principal
Stockholders set forth herein and in any exhibit or schedule
hereto, any officers certificate, the list of officers
employees, officers and consultants delivered pursuant to
Section 3.14.10 or the Schedule of Exceptions delivered by
or on behalf of Trecom or the Principal Stockholders
pursuant hereto will terminate on the earlier of the
termination of this Agreement in accordance with its terms
or two (2) years from the Closing.
11.2. Amdahl's and Newco's Representations. The
representations and warranties of Amdahl and Newco set forth
herein and in any exhibit or schedule or any officers
certificate delivered by or on behalf of Amdahl or Newco
pursuant hereto will terminate on the earlier of the
termination of this Agreement in accordance with its terms
or two (2) years from the Closing.
11.3. Effect of Expiration of Representations. A party
will have liabilities and obligations for Damages (as
defined in Section 11 (Indemnification and Liability)) only
with respect to claims submitted or notice of claims
provided during the time period of survivability of the
specific representation or warranty as set forth herein.
Notwithstanding the expiration date of the representations
and warranties set forth herein, if a party shall notify the
other party with respect to the submission of a claim during
the time of survivability of such representation or warranty
in accordance with Section 12.4 (Method of Asserting
Claims), the other party's indemnification obligation with
respect to such damages shall continue beyond such time of
survivability
12. Indemnification and Liability.
12.1. Principal Stockholders Agreement to Indemnify.
From and after the Closing Date, the Principal Stockholders
will, jointly and severally, indemnify, reimburse and hold
harmless Amdahl and its parents, subsidiaries, affiliated
corporations, officers, directors, agents and employees
(hereinafter referred to individually as an "Amdahl
Affiliate" and collectively as "Amdahl Affiliates"), from
and against any and all claims, demands, actions, causes of
actions, judgments, losses, damages, liabilities
assessments, costs and expenses including, without
limitation, interest, penalties and reasonable legal fees,
net of any recoveries under insurance policies, indemnities
or contributions from third parties asserted against,
imposed upon, or incurred or suffered (hereinafter referred
to as "Damages"); by Amdahl or any Amdahl Affiliate as a
result of, arising out of or in connection with any
inaccuracy in or breach of or default in connection with any
of the representations, warranties and covenants given or
made by Trecom or the Principal Stockholders in this
Agreement, or in any exhibit or schedule hereto, any
officers certificate, the list of officers employees,
officers and consultants delivered pursuant to Section
3.14.10 or the Schedule of Exceptions delivered by or on
behalf of Trecom or the Principal Stockholders pursuant
hereto; provided, however, that notwithstanding the joint
and several nature of the Principal Stockholder obligations,
no Principal Stockholder shall be liable under this Section
12.1 for more than one third of any liability ultimately
determined to be due from the Principal Stockholders under
this Section 12.1.
12.1.1. The Principal Stockholders will not be liable
for the first one hundred twenty five
thousand ($125,000) of Damages that would
otherwise be subject to their indemnity
obligation as set forth in Section 12.1.
12.1.2. The aggregate liability of the Principal
Stockholders pursuant to this Section 12.1
for all Damages subject to their indemnity
obligation as set forth in Section 12.1 shall
be limited to 10% of the aggregate Merger
Consideration.
12.2. Amdahl Agreement to Indemnify. From and after the
closing date, Amdahl will indemnify, reimburse and hold
harmless each Principal Stockholder from and against any and
all Damages asserted against, imposed upon, or incurred or
suffered by such Principal Stockholder as a result of,
arising out of or in connection with any inaccuracy in or
breach of or default in connection with any of the
representations, warranties and covenants given or made by
Amdahl and Newco in this Agreement, or in any exhibit or
schedule hereto or any officers certificate delivered by or
on behalf of Amdahl and Newco pursuant hereto.
12.2.1. Amdahl will not be liable for the first one
hundred twenty five thousand ($125,000) of
Damages that would otherwise be subject to
its indemnity obligation as set forth in
Section 12.2.
12.2.2. The aggregate liability of Amdahl pursuant to
this Section 12.2 for all Damages subject to
its indemnity obligation as set forth in
Section 12.2 shall be limited to 10% of the
aggregate Merger Consideration (other than
for failure to pay the Merger Consideration.
12.3. Sole and Exclusive Remedy. The indemnification
provided in this Section 12 shall be the sole and exclusive
remedy for money Damages by Amdahl, Newco, any Amdahl
Affiliate, Trecom or any Principal Stockholder as a result
of, arising out of or in connection with any inaccuracy in
or breach of or default in connection with any of the
representations, warranties and covenants given or made
under this Agreement or any exhibit or schedule hereto, any
officers certificate, the list of officers employees,
officers and consultants delivered pursuant to Section
3.14.10 or the Schedule of Exceptions delivered by or on
behalf of any party pursuant hereto and each party hereby
irrevocably waives any other remedy for money damages which
it may seek hereunder; provided that the provisions of this
section 12 shall not (i) apply to any claim or cause of
action relating to the termination of this Agreement under
Section 10 (Termination of Agreement), in which case the
sole and exclusive remedy for money damages shall be as set
forth in Section 10, (ii) apply to any claim or cause of
action based on a theory of fraud or willful misconduct, or
(iii) preclude any party from seeking specific performance,
injunctive relief or any other remedies not providing for
payment of monetary damages.
12.4. Method of Asserting Claims. As used herein, an
"Indemnified Party" shall refer to Amdahl and all Amdahl
Affiliates or any Principal Stockholder, as applicable and
the "Indemnifying Party" shall refer to the party or parties
hereto obligated to indemnify such Indemnified Parties.
12.4.1. Third Party Claims. In the event that any of
the Indemnified Parties is made a defendant in or party
to any action or proceeding, judicial or
administrative, instituted by any third party for the
liability or the costs or expenses of which are Damages
that are a result of, arising out of or in connection
with any inaccuracy in or breach of or default in
connection with any of the representations, warranties
and covenants given or made the Indemnifying Parties
(any such third party action or proceeding being
referred to as a "Claim"), such Indemnified Party shall
give the Indemnifying Party prompt notice thereof which
notice shall include information as to when an answer
to such Claim is due to be filed. The failure to give
such notice shall not affect any Indemnified Party's
ability to seek reimbursement except to the extent the
failure to give such notice actually and materially
prejudices the rights of the Indemnifying Party. The
Indemnifying Party shall be entitled to contest and
defend such Claim on the Indemnified Party's behalf;
provided, that the Indemnifying Party diligently
contests and defends such Claim. Notice of the
intention so to contest and defend shall be given by
the Indemnifying Party to the Indemnified Party within
20 business days after the Indemnified Party's notice
of such Claim (but, in all events, at least five
business days prior to the date that an answer to such
Claim is due to be filed, or, if the Indemnified
Party's notice of Claim is delivered to Indemnifying
Party less than six days prior to the date that an
answer to such Claim is due to be filed, notice of
intention to contest and defend shall be given by the
Indemnifying Party no later than such time as is
halfway between the time of delivery of notice of Claim
and the time that an answer to such Claim is due to be
filed.). Such contest and defense shall be conducted
by reputable attorneys employed by the Indemnifying
Party and consented to by the Indemnified Party, which
consent will not be unreasonably withheld. The
Indemnified Party shall be entitled at any time, at its
own cost and expense (which expense shall not
constitute Damages unless the Indemnified Party
reasonably determines that the Indemnifying Party is
not adequately representing or, because of a conflict
of interest, may not adequately represent, any
interests of the Indemnified Parties, and only to the
extent that such expenses are reasonable), to
participate in such contest and defense and to be
represented by attorneys of its or their own choosing.
If the Indemnified Party elects to participate in such
defense, the Indemnified Party will cooperate with the
Indemnifying Party in the conduct of such defense.
Neither the Indemnified Party nor the Indemnifying
Party may concede, settle or compromise any Claim
without the consent of the other party, which consents
will not be unreasonably withheld.
12.4.2. Direct Damages. In the event that any
Indemnified Party suffers Damages that are a result of,
arising out of or in connection with any inaccuracy in
or breach of or default in connection with any of the
representations, warranties and covenants given or made
by the Indemnifying Parties, other than as a result of
a Third Party Claim provided for in Section 12.3.1
(Third Party Claims), such Indemnified Party shall
promptly notify the Indemnifying Party of such Damage
and shall request reimbursement therefor.
12.5. Setoff Against Payment of Purchase Price. In the
event that Amdahl or any Amdahl Affiliate, as an Indemnified
Party, shall be entitled to be paid any amount under Section
12.1 prior to the first anniversary date of the Closing, a
notice advising the Principal Stockholders of such
entitlement shall be sent to each Principal Stockholder as
soon as practicable. In the event that a Principal
Stockholder, in good faith, disputes its obligation to
indemnify Amdahl and/or Newco under this Section 12, such
Principal Stockholder shall, within ten (10) business days
of receipt of such notice from Amdahl sent notice of such
dispute to Amdahl. Within five (5) business days of receipt
of such notice of dispute, Amdahl shall place all setoff
amounts relating to the Merger Consideration due such
Principal Stockholder in an interest bearing savings
account, or other low-risk, short term investment, pending
resolution of such dispute, at which time the prevailing
party shall be paid all such amounts, plus interest accrued
since the date of deposit. The Principal Stockholders
jointly and severally agree that the full amount of such
claim (to the extent resolved) may be set off against
amounts owed to such Principal Stockholders in payment of
the Merger Consideration. Notwithstanding the joint and
several nature of the obligation, any such setoff shall be
effected by Amdahl equally as to each of the Principal
Stockholders.
13. Public Announcements. Amdahl and Trecom shall consult with
one another before issuing any press release or otherwise making
any public statements with respect to this Agreement or any
transaction contemplated hereby and shall not issue any such
press release or make any such public statement prior to
consultation, except as may be required by law or any listing
agreement with a national securities exchange to which Amdahl is
a party.
14. Miscellaneous.
14.1. Governing Law. The internal laws of the State of
Delaware (irrespective of its choice of law principles) will
govern the validity of this Agreement, the construction of
its terms, and the interpretation and enforcement of the
rights and duties of the parties hereto.
14.2. Assignment; Binding Upon Successors and Assigns.
Neither party hereto may assign any of its rights or
obligations hereunder without the prior written consent of
the other party hereto. This Agreement will be binding upon
and inure to the benefit of the parties hereto and their
respective successors and permitted assigns.
14.3. Severability. If any provision of this Agreement,
or the application thereof, will for any reason and to any
extent be invalid or unenforceable, the remainder of this
Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to
effect the intent of the parties hereto. The parties
further agree to replace such void and unenforceable
provision of this Agreement with a valid and enforceable
provision that will achieve, to the extent possible, the
economic, business and other purposes of the void or
unenforceable provision.
14.4. Counterparts. This Agreement may be executed in
any number of counterparts, each of which will be an
original as regards any party whose signature appears
thereon and all of which together will constitute one and
the same instrument.
14.5. Other Remedies. Except as otherwise provided
herein, any and all remedies herein expressly conferred upon
a party will be deemed cumulative with and not exclusive of
any other remedy conferred hereby or by law on such party,
and the exercise of any one remedy will not preclude the
exercise of any other.
14.6. Amendment and Waivers. Any term or provision of
this Agreement may be amended, and the observance of any
term of this Agreement may be waived (either generally or in
a particular instance and either retroactively or
prospectively) only by a writing signed by the party to be
bound thereby. The waiver by a party of any breach hereof
or default in the performance hereof will not be deemed to
constitute a waiver of any other default or any succeeding
breach or default.
14.7. Expenses. Each party will bear its respective
expenses and legal fees incurred with respect to this
Agreement, and the transactions contemplated hereby.
14.8. Notices. Any Notice or other communication
required or permitted to be given under this Agreement will
be in writing, will be delivered personally, by confirmed
facsimile, by overnight courier or by registered or
certified mail, postage prepaid and will be deemed given
upon personal delivery or receipt of facsimile, one day
after delivery to overnight courier or three days after
deposit in the mails, to the following addresses:
<PAGE>
If to Amdahl: If to the Trecom:
Amdahl Corporation Trecom Business Systems Inc.
1250 East Arques Avenue 333 Thornall Street
P.O. Box 3470 Edison, NJ 08837-2246
Sunnyvale, CA 94088-3470 Attn: President
Attn: Chief Financial Officer
with a copy to: with a copy to:
Amdahl Legal Department Sills Cummis Zuckerman Radin
1250 East Arques Avenue, Tischman Epstein & Gross, P.A.
m/s 109
P.O. Box 3470 One Riverfront Plaza
Sunnyvale, CA 94088-3470 Newark, NJ 07102-5400
If to Thomas G. Burke: If to F.J. Casagrande:
4607 Stonehedge Road 51 Calvert Avenue West
Edison, NJ 08820 Edison, NJ 08820
If to Jerome Casagrande: If to Joseph Casagrande:
c/o F.J. Casagrande 712 Whitenack Court
51 Calvert Avenue West Neshanic Station, NJ 08853
Edison, NJ 08820
If to Gregory Casagrande: If to Julie Casagrande:
c/o F.J. Casagrande c/o F.J. Casagrande
51 Calvert Avenue West 51 Calvert Avenue West
Edison, NJ 08820 Edison, NJ 08820
If to Gertrud Levy: If to Gertrud Levy
254 University Way In Trust for Diana Levy
Paramus, NJ 07652 254 University Way
Paramus, NJ 07652
If to Gertrud Levy If to J. Levy
In Trust for Susan Levy 254 University Way
254 University Way Paramus, NJ 07652
Paramus, NJ 07652
If to Elaine Martin; If to Gregory William Powell:
c/o F.J. Casagrande c/o S. Russell Powell
51 Calvert Avenue West 81 Durand Road
Edison, NJ 08820 Maplewood, NJ 07040
If to S. Russell Powell: If to Scott Andrew Powell
81 Durand Road c/o S. Russell Powell
Maplewood, NJ 07040 81 Durand Road
Maplewood, NJ 07040
If to Stephen Russell
Powell III: If to Emanuel Arturi:
c/o S. Russell Powell: Porte Liberte
81 Durand Road 203-51 West Shearwater Court
Maplewood, NJ 07040 Jersey City, NJ 07305
or to such other address as a party may have furnished to the
other parties in writing pursuant to this Section.
14.9. Construction of Agreement. This Agreement has
been negotiated by the respective parties hereto and their
attorneys and the language hereof will not be construed for
or against either party. A reference to a Section, exhibit
or schedule will mean a Section in, or exhibit or schedule
to, this Agreement unless otherwise explicitly set forth.
The titles and headings herein are for reference purposes
only and will not in any manner limit the construction of
this Agreement which will be considered as a whole.
14.10. No Joint Venture. Nothing contained in this
Agreement will be deemed or construed as creating a joint
venture or partnership between any of the parties hereto.
No party is by virtue of this Agreement authorized as an
agent, employee or legal representative of any other party.
No party will have the power to control the activities and
operations of any other and their status is, and at all
times, will continue to be, that of independent contractors
with respect to each other. No party will have any power or
authority to bind or commit any other. No party will hold
itself out as having any authority or relationship in
contravention of this Section.
14.11. Further Assurances. Each party agrees to
cooperate fully with the other party and to execute such
further instruments, documents and agreements and to give
such further written assurances as may be reasonably
requested by any other party to evidence and reflect the
transactions described herein and contemplated hereby and to
carry into effect the intents and purposes of this
Agreement.
14.12. Absence of Third Party Beneficiary Rights. No
provisions of this Agreement are intended, nor will be
interpreted, to provide or create any third party
beneficiary rights (other than the third beneficiary rights
created in favor of Amdahl Affiliates pursuant to Section 12
(Indemnification and Liability) and third party rights
created in favor of the holders of Trecom Stock to receive
the Merger Consideration pursuant hereto) or any other
rights of any kind in any client, customer, affiliate,
stockholder, partner or any party hereto or any other person
or entity unless specifically provided otherwise herein,
and, except as so provided, all provisions hereof will be
personal solely between the parties to this Agreement.
14.13. Entire Agreement. This Agreement and the exhibits
and schedules hereto constitute the entire understanding and
agreement of the parties hereto with respect to the subject
matter hereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions,
express or implied, written or oral, between the parties
with respect hereto other than the letters between the
parties dated December 5, 1995 and February 28, 1995
regarding confidential materials and the Mutual
Confidentiality Agreement dated concurrently herewith. The
express terms hereof control and supersede any course of
performance or usage of the trade inconsistent with any of
the terms hereof.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first above written.
AMDAHL CORPORATION TRECOM BUSINESS SYSTEMS, INC.
By: /s/Bruc J.Ryan By: /s/ Francis J. Casagrande
--------------------- ------------------------
Print Name:Bruce J. Ryan Print Name: Francis J. Casagrande
---------------- -------------------
Title: EVP & CFO Title: Chairman
--------------------- ------------------------
AMDAHL ACQUISITION CORPORATION
By: /s/ Bruce J. Ryan
---------------------
Print Name: Bruce J. Ryan
----------------
Title: EVP & CFO
---------------------
THE STOCKHOLDERS
/s/ Thomas G. Burke /s/ F.J. Casagrande
- ---------------------- -------------------------
Thomas G. Burke F.J. Casagrande
/s/F.J. Casagrande /s/ F.J. Casagrande
- ---------------------- -------------------------
Gregory Casagrande by Jerome Casagrande by
F.J. Casagrande under F.J. Casagrande under
Power of Attorney Power of Attorney
/s/F.J. Casagrande /s/ F.J. Casagrande
- ---------------------- -------------------------
Joseph Casagrande by Julie Casagrande by
F.J. Casagrande under F.J. Casagrande under
Power of Attorney Power of Attorney
/s/ Joseph Levy /s/ Joseph Levy
- ---------------------- ------------------------
Gertrud C. Levy by Bertrud C. Levy in Trust
Joseph Levy under for Diana Levy by Joseph
Power of Attorney Levy under Power of Attorney
/s/ Joseph Levy /s/ Joseph Levy
- ---------------------- ------------------------
Gertrud C. Levy Joseph Levy
In Trust for Susan Levy
by Joseph Levy under
Power of Attorney
/s/ F.J. Casagrande /s/ S. Russell Powell
- ---------------------- ------------------------
Elaine Martin by Gregory William Powell by
F.J. Casagrande under S. Russell Powell under
Power of Attorney Power of Attorney
/s/ S. Russell Powell /s/ S. Russell Powell
- ---------------------- ------------------------
S. Russell Powell Scott Andrew Powell by
S. Russell Powell under
Power of Attorney
/s/ S. Russell Powell /s/ Emanuel Arturi
- ---------------------- ------------------------
Stephen Russell Emanuel Arturi
Powell III by
S. Russell Powell
under Power of Attorney
<PAGE>
<TABLE>
<CAPTION>
Exhibit A
Revenue EBIT
Actual Actual Performance Performance Performance
Revenue EBIT % Bonus $ Bonus $
-----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Upper Limit $227,580,000 $22,734,000 20 $1,000,000 $1,000,000
$225,683,500 $22,544,550 19 $975,000 $975,000
$223,787,000 $22,355,100 18 $950,000 $950,000
$221,890,500 $22,165,650 17 $925,000 $925,000
$219,944,000 $21,976,200 16 $900,000 $900,000
$218,097,500 $21,786,750 15 $875,000 $875,000
$216,201,000 $21,597,300 14 $850,000 $850,000
$214,304,500 $21,407,850 13 $825,000 $825,000
$212,408,000 $21,218,400 12 $800,000 $800,000
$210,511,500 $21,028,950 11 $775,000 $775,000
$208,615,000 $20,839,500 10 $750,000 $750,000
$206,718,500 $20,650,050 9 $725,000 $725,000
$204,822,000 $20,460,600 8 $700,000 $700,000
$202,925,500 $20,271,150 7 $675,000 $675,000
$201,029,000 $20,081,700 6 $650,000 $650,000
$199,132,500 $19,892,250 5 $625,000 $625,000
$197,236,000 $19,702,800 4 $600,000 $600,000
$195,339,500 $19,513,350 3 $575,000 $575,000
$193,443,000 $19,323,900 2 $550,000 $550,000
$191,546,500 $19,134,450 1 $525,000 $525,000
Plan $189,650,000 $18,945,000 0 $500,000 $500,000
$187,753,500 $18,755,550 -1 $475,000 $475,000
$185,857,000 $18,566,100 -2 $450,000 $450,000
$183,960,500 $18,376,650 -3 $425,000 $425,000
$182,064,000 $18,187,200 -4 $400,000 $400,000
$180,167,500 $17,997,750 -5 $375,000 $375,000
$178,271,000 $17,808,300 -6 $350,000 $350,000
$176,374,500 $17,618,850 -7 $325,000 $325,000
$174,478,000 $17,429,400 -8 $300,000 $300,000
$172,581,500 $17,239,950 -9 $275,000 $275,000
$170,685,000 $17,050,500 -10 $250,000 $250,000
$168,788,500 $16,861,050 -11 $225,000 $225,000
$166,892,000 $16,671,600 -12 $200,000 $200,000
$164,995,500 $16,482,150 -13 $175,000 $175,000
$163,099,000 $16,292,700 -14 $150,000 $150,000
$161,202,500 $16,103,250 -15 $125,000 $125,000
$159,306,000 $15,913,800 -16 $100,000 $100,000
$157,409,500 $15,724,350 -17 $75,000 $75,000
$155,513,000 $15,534,900 -18 $50,000 $50,000
$153,616,500 $15,345,450 -19 $25,000 $25,000
Lower Limit $151,720,000 $15,156,000 -20 $0 $0
Note:
The Performance period is defined as the twelve months ending March 31, 1997. The Revenue
Plan is $189,650,000 and EBIT is $18,945,000 for this period.
Performance for Revenue and Operating Margin are determined independently. Performance is
calculated based upon + or - 20% of actual results compared to the planned revenue and
EBIT. Meeting planned revenue and EBIT results in a $500,000 performance incentive for
revenue and a $500,000 performance incentive for EBIT.
Revenue will include all elements currently reported as such in Trecom's audited financial
statements as well as any future revised elements which are consistent with Trecom's
business. The merger may give rise to revenue opportunities with Amdahl and its
subsidiaries and it is intended that such revenue be included in the performance
measurement. If revenue is to be double counted on Trecom books and another Line of
Business, it must first be approved by the Amdahl CFO.
Trecom's earnings before interest and taxes, EBIT, will be calculated exclusive of costs
which have been incurred in connection with the merger. These costs would include
abnormal travel, increased compensation and other costs which would not have been incurred
were Trecom to continue operating as an independent entity. Costs which Trecom could have
avoided through continuation as an independent entity would also be excluded from the
calculation of EBIT.
</TABLE>
<PAGE>
Exhibit 3.8
Financial Statements
Attached are the audited financial statements of TRECOM as of
December 31 1993, 1994 and 1995. These financial statements and
notes fairly present the financial condition of TRECOM at the
date therein indicated and the results of the operations for the
period therein specified and have been prepared in accordance
with generally accepted accounting principles applied on a
consistent basis.
The books and records of TRECOM are not in accordance with these
statements as some accounts are reclassified by the auditors and
these reclassifications are not considered materially significant
by TRECOM to warrant such treatment during interim periods.
In the ordinary course of business during 1996 short term debt at
PNC has increased by $2 million over the level at December 31,
1995. Total debt has fluctuated within a range of $12.6 million
to $17.2 million during 1996.
<PAGE>
TRECOM Business
Systems, Inc.
Financial Statements
December 31, 1995 and 1994
<PAGE>
PRICE WATERHOUSE LLP
February 16, 1996
To the Board of Directors and Stockholders of
TRECOM Business Systems, Inc.
In our opinion, the accompanying balance sheets and the related
statements of operations and retained earnings and of cash flows
present fairly, in all material respects, the financial position
of TRECOM Business Systems, Inc. ("the Company") at December 31,
1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally
accepted accounting principles. These financial statements are
the responsibility of the Company's management; our
responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these
statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting
principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the
opinion expressed above.
/s/ Price Waterhouse LLP
<PAGE>
<TABLE>
<CAPTION>
TRECOM Business Systems, Inc.
Balance Sheets
December 31,
1995 1994
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents $ 1,800,785 $ 198,637
Trade accounts receivable, less allowance for
doubtful accounts of $250,000 and $100,000 in
1995 and 1994, respectively 34,203,540 21,193,784
Other accounts receivable 1,092,817 475,124
Prepaid expenses 331,596 351,920
Prepaid income taxes (Note 5) - 134,543
Deferred income taxes (Note 5) 1,774,935 676,421
----------- -----------
Total current assets 39,203,673 23,030,429
Fixed assets - net (Note 2) 4,248,678 2,798,817
----------- -----------
Total assets $ 43,452,351 $ 25,829,246
============ ============
Liabilities and Stockholders' Equity
Current liabilities:
Notes payable and short-term
borrowings (Note 3) $ 12,550,558 $ 7,423,158
Accounts payable and accrued expenses (Note 4) 13,528,364 9,516,429
Income taxes payable (Note 5) 1,136,135 -
Deferred revenue (Note 1) 1,823,000 1,483,000
----------- ----------
Total current liabilities 29,038,057 18,422,587
Notes payable (Note 3) - 225,000
Deferred income taxes (Note 5) 160,588 10,073
----------- ----------
Total liabilities 29,198,645 18,657,660
----------- ----------
Stockholders' equity:
Common stock, $0.01 par value; 1,500,000
shares authorized; 520,000 shares issued
and outstanding in 1995 and 1994 5,200 5,200
Class A stock, $0.01 par value; 1,500,000
shares authorized; 684,909 and 622,934 shares
issued and outstanding in 1995 and
1994, respectively 6,849 6,229
Capital in excess of par value 1,116,018 718,009
Retained earnings 13,125,639 6,442,148
----------- ----------
Total stockholders' equity 14,253,706 7,171,586
----------- ----------
Total liabilities and stockholders' equity $ 43,452,351 $ 25,829,246
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
TRECOM Business Systems, Inc.
Statement of Operations and Retained Earnings
<TABLE>
<CAPTION>
Year Ended December 31,
1995 1994
<S> <C> <C>
Revenue from services $ 133,796,870 $ 87,408,028
Revenue from reimbursable expenses 5,538,178 1,723,201
------------ -----------
Total revenues 139,335,048 89,131,229
------------ -----------
Cost of services 82,485,270 52,880,491
Direct reimbursable expenses 4,520,891 1,737,721
------------ -----------
Total cost of sales 87,006,161 54,618,212
------------ -----------
Gross margin 52,328,887 34,513,017
------------ -----------
Selling, general and administrative expenses 37,221,367 26,934,184
Nondirect labor costs 2,498,437 1,934,752
Interest expense 1,147,725 603,342
----------- -----------
40,867,529 29,472,278
------------ -----------
Income before taxes 11,461,358 5,040,739
Provision for income taxes (Note 5) 4,777,867 2,281,811
------------ -----------
Net income 6,683,491 2,758,928
Retained earnings at beginning of year 6,442,148 3,683,220
------------ -----------
Retained earnings at end of year $ 13,125,639 $6,442,148
============ ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRECOM Business Systems, Inc.
Statement of Cash Flows
Year Ended December 31,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net income $6,683,491 $ 2758,928
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 1,244,707 754,503
Changes in assets and liabilities
Increase in trade accounts receivable (13,009,756) (6,311,370)
Increase in other accounts receivable (617,693) (270,594)
Decrease (increase) in prepaid expenses 20,324 (189,520)
Decrease (increase) in prepaid income taxes 134,543 (134,543)
Increase in deferred income taxes (947,999) (150,000)
Increase in accounts payable and
accrued expenses 3,681,935 2,451,919
Increase (decrease) in income taxes payable 1,136,135 (380,200)
Increase in deferred revenue 340,000 716,000
--------- ---------
Net cash used in operating activities (1,334,313) (754,877)
----------- ---------
Cash flows from investing activities:
Fixed assets additions, net (2,364,568) (1,805,028)
----------- -----------
Net cash used in investing activities (2,364,568) (1,805,028)
----------- -----------
Cash flows from financing activities:
Receipts of short-term borrowings, net 5,100,000 1,906,070
Sale of Class A stock 215,593 245,903
Repurchase of Class A stock (14,564) (22,732)
---------- ---------
Net cash provided by financing activities 5,301,029 2,129,241
---------- ---------
Net increase (decrease) in cash and
cash equivalents 1,602,148 (430,664)
Cash and cash equivalents- beginning of year 198,637 629,301
--------- ---------
Cash and cash equivalents- end of year $ 1,800,785 $ 198,637
=========== =========
Supplemental disclosure:
Interest paid $ 1,076,725 $ 615,307
=========== =========
Taxes paid $4,455,188 $2,946,554
=========== ==========
Noncash financing activities:
During 1995 and 1994 the Company exchanged 31,500 and 24,334 shares of Class A stock at
$6.27 and $3.86 per share for notes payable totalling $197,600 and $93,930,
respectively.
See accompanying notes to financial statements.
</TABLE>
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1995 and 1994
1. Nature of Business and Significant Accounting Policies
The Company
TRECOM Business Systems, Inc. (the Company, a Delaware
company, was incorporated and commenced operations on
January 16, 1985. The Company's business is to provide
computer consulting services, information systems
outsourcing services, and custom software services to
entities located primarily in the eastern United States.
Fixed Assets
Fixed assets are carried at cost. Depreciation and
amortization are determined using accelerated methods over
the estimated useful lives of the assets or, in the case of
leasehold improvements, straight-line over the shorter of
the estimated useful life of the improvements or the
remaining term of the respective leases.
Revenue Recognition
Revenues are recognized, using the percentage of completion
method, as the services are performed. Labor costs of
consultants incurred in providing services to customers are
recorded as cost of services. Labor costs incurred for
consultants not assigned to customer projects are recorded
as nondirect labor costs. Direct reimbursable expenses are
billable to customers when incurred.
Deferred revenue at December 31, 1995 and 1994 represents
billings to customers under fixed price contracts which have
not been earned by the Company under its revenue recognition
policy.
Cash Flows
For purposes of preparing its Statement of Cash Flows, the
Company's cash and cash equivalents are defined as cash and
overnight deposits, and investments with an original
maturity of less than three months.
Income Taxes
Deferred tax liabilities or assets reflect the impact of
temporary differences between amounts of assets and
liabilities for financial and tax reporting. Such amounts
are subsequently adjusted, as appropriate, to reflect
changes in tax rates expected to be in effect when the
temporary differences reverse. A valuation allowance is
established for any deferred tax asset for which realization
is not likely.
Use of Estimates
The preparation of financial statements in accordance with
generally accepted accounting principles requires the use of
estimates by management, primarily in the area of bad debt
reserves, deferred income taxes, medical self-insurance
reserves and certain other reserves.
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1995 and 1994
2. Fixed Assets
Fixed assets are comprised of the following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Leasehold improvements $ 1,258,003 $ 728,749
Furniture and fixtures 2,107,797 1,453,266
Computers and office equipment 4,723,389 3,212,606
---------- ---------
8,089,189 5,394,621
Less: Accumulated depreciation
and amortization 3,840,511 2,595,804
----------- ---------
$ 4,248,678 $ 2,798,817
=========== ===========
</TABLE>
3. Short-Term and Long-Term Borrowings
Short-term and long-term borrowings are comprised of the
following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Borrowings under line of
credit arrangements $ 12,100,000 $ 7,000,000
Notes payable to stockholders
maturing at various dates
through December 1996 and
bearing rates of interest of 9%
9% and 10% 450,558 423,158
---------- ---------
12,550,558 7,423,158
Notes payable to stockholders
maturing in January and March
March 1996 and bearing rates
of interest of 9% and 10% - 225,000
---------- ---------
$ 12,550,558 $ 7,648,158
============ ===========
</TABLE>
Borrowings under line of credit arrangements represent
borrowings by the Company from Morgan Guaranty Trust Company
of New York ("Morgan") and PNC Bank ("PNC") at December 31,
1995 and 1994 under aggregate line of credit facilities of
$20,000,000 and $10,000,000 at December 31 1995 and 1994,
respectively. The Morgan borrowings bear interest at the
prime interest rate (8.5% at December 31 1995) plus one half
of 1%. The PNC borrowings bear interest at LIBOR (5.44% at
December 31, 1995) plus 2% and are due up to one year from
the date of the borrowings, at which time the Company must
repay or refinance the borrowings. The borrowings are
collateralized by the accounts receivable of the Company and
are supported by the personal guarantees of two of the
Company's stockholders. The borrowings are senior to the
notes payable to stockholders. The Company paid commitment
fees of $62,500 in 1995 to revise the Lines of credit.
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1995 and 1994
The line of credit facilities require the Company to
maintain certain financial ratios and restricts the payment
of dividends to stockholders. At December 31, 1995, the
Company was in compliance with the various covenants and
requirements under its line of credit agreements. The Morgan
and PNC line of credit facilities expire on May 1, 1997 and
May 31, 1997, respectively, at which time the Company plans
on extending or refinancing the debt.
4. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the
following:
<TABLE>
<CAPTION>
December 31,
1995 1994
<S> <C> <C>
Accrued employees' compensation,
related withholdings and
benefits $ 9,657,359 $ 8,512,688
Agency fees for the hire of
personnel 254,018 258,685
Accounts payable 2,349,423 530,628
Other 1,267,564 214,428
----------- ----------
$ 13,528,364 $ 9,516,429
============ ===========
</TABLE>
The Company sponsors a savings plan for eligible employees.
The cost of the savings plan amounted to $675,000 and
$496,000 in 1995 and 1994, respectively.
5. Income Taxes
The components of the income tax expense for the years ended
December 31, 1995 and 1994 are summarized as follows:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Current - Federal $ 4,430,071 $ 1,757,450
Current - State 1,295,795 674,361
Deferred- Federal (743,140) (108,000)
Deferred- State (204,859) (42,000)
----------- -----------
$ 4,777,867 $ 2,281,811
=========== ===========
</TABLE>
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1995 and 1994
Deferred tax assets (liabilities) arise due to the
recognition of income and expense items for tax purposes in
periods which differ from those used for financial statement
purposes. The Company has recorded at full value those
deferred tax assets which are expected to be realized. At
December 31, 1995 and 1994, deferred tax assets and
liabilities are comprised of the following:
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Current deferred tax asset:
Accrued vacation $ 855,386 $ 633,421
Book asset writeoffs 577,060 -
Other reserves 234,989 -
Bad debt reserve 107,500 43,000
--------- --------
1,774,935 676,421
Noncurrent deferred tax liability:
Depreciation (160,588) (10,073)
----------- ---------
Net deferred tax asset $ 1,614,347 $ 666,348
=========== =========
</TABLE>
Differences between the Company's effective tax rate and the
U.S. Federal and State statutory rates are due to the
limitation of certain meal and entertainment expenses as
required by the Tax Reform Act of 1986.
6. Capital
<PAGE>
<TABLE>
<CAPTION>
The following stock transactions occurred during 1995 and 1994:
Class A
Common Stock Nonvoting Stock Paid in
Par Par Excess of
Shares Value Shares Value Par Value
<C> <C> <C> <C> <C>
Beginning balance January 1, 199 520,000 $ 5,200 565,350 $ 5,654 $ 495,413
Sale of Class A nonvoting stock at
$3.886 per share - - 63,284 632 245,271
Repurchase of Class A nonvoting stock
at $3.988 per share (originally sold
at $.0509 per share) - - (5,700) (57) (22,675)
-------- ------- ------- ------- --------
Ending balance December 31, 1994 520,000 $ 5,200 622,934 $ 6,229 $ 718,009
======== ======= ======= ======= ========
Sale of Class A nonvoting stock at
$6.439 per share - $ - 64,075 $ 641 $ 412,552
Repurchase of Class A nonvoting stock
at $6.935 per share (originally sold
at $1.157 per share) - - (2,100) (21) (14,543)
-------- ------- ------- -------- --------
Ending balance at December 31, 1995 520,000 $ 5,200 684,909 $6,849 $1,116,018
========= ======== ======= ======= =========
</TABLE>
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1995 and 1994
Class A nonvoting stock is cancelled upon repurchase. No
dividends can be paid on Class A nonvoting stock, which can
be held only by employees of the Company. If employees are
terminated, the Company has the option to repurchase their
shares at the greater of the current net book value amount
or the original amount at which the shares were purchased by
the employee.
7. Significant Business
The Company operates under various projects, both long and
short term, with a number of customers. At times, one or two
customers constitute a significant portion of revenue and
income recorded by the Company in a given year. Future
revenue is predicated upon renewal of such projects or the
attainment of significant new projects.
As of and for the year ended December 31, 1995, three
customers accounted for 51% and 52% of the Company's sales
and accounts receivable. As of and for the year ended
December 31, 1994, two customers accounted for 33% and 36%
of the Company's sales and accounts receivable. These
customers operate primarily in the telecommunications
industry.
8. Commitments
The Company leases its office space under noncancellable
operating lease agreements. Future minimum rental payments
under such leases are as follows:
1996 $2,644,000
1997 2,595,000
1998 2,035,000
1999 901,000
2000 267,000
----------
$8,442,000
==========
Total rental expense for the years ended December 31, 1995
and 1994 aggregated $2,446,932 and $ 1,503,349,
respectively.
The Company is contingently liable under outstanding letters
of credit aggregating approximately $131,000.
<PAGE>
TRECOM Business
Systems, Inc.
Financial Statements
December 31, 1994 and 1993
<PAGE>
PRICE WATERHOUSE LLP
February 21, 1995
To the Board of Directors and Stockholders of
TRECOM Business Systems, Inc.
In our opinion, the accompanying balance sheets and the related
statements of operations and retained earnings and of cash flows
present fairly, in all material respects, the financial position
of TRECOM Business Systems, Inc. at December 31, 1994 and 1993,
and the results of its operations and its cash flows for the
years then ended in conformity with generally accepted accounting
principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the
overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed
above.
/s/ Price Waterhouse LLP
<PAGE>
<TABLE>
<CAPTION>
TRECOM Business Systems, Inc.
Balance Sheets
December 31,
1994 1993
<S> <C> <C>
Assets
Current assets
Cash and cash equivalents $ 198,637 $ 629,301
Trade accounts receivable, less allowance for
doubtful accounts of $100,000 in
1994 and 1993 21,193,784 14,882,414
Other accounts receivable 475,124 204,530
Prepaid expenses 351,920 162,400
Prepaid income taxes (Note 5) 134,543 -
Deferred taxes 676,421 526,421
----------- -----------
Total current assets 23,030,429 16,405,066
Fixed assets - net (Note 2) 2,798,817 1,748,292
----------- -----------
Total assets $25,829,246 $18,153,358
============ ============
Liabilities and Stockholders' Equity
Current liabilities
Notes payable and short-term
borrowings (Note 3) $ 7,423,158 $ 5,517,088
Accounts payable and accrued expenses (Note 4) 9,516,429 7,064,510
Income taxes payable (Note 5) - 380,200
Deferred revenue 1,483,000 767,000
----------- ----------
Total current liabilities 18,422,587 13,728,798
Notes payable (Note 3) 225,000 225,000
Deferred taxes (Note 5) 10,073 10,073
----------- ----------
Total liabilities 18,657,660 13,963,871
----------- ----------
Stockholders' equity:
Common stock, $0.01 par value; 1,500,000
shares authorized; 520,000 shares issued
in 1994 and 1993 5,200 5,200
Class A stock, $0.01 par value; 1,500,000
shares authorized; 622,934 and 565,350 shares
issued in 1994 and 1993, respectively 6,229 5,654
Capital in excess of par value 718,009 495,413
Retained earnings 6,442,148 3,683,220
----------- ----------
Total stockholders' equity 7,171,586 4,189,487
----------- ----------
Total liabilities and stockholders' equity $ 25,829,246 $ 18,153,358
============ ============
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRECOM Business Systems, Inc.
Statement of Operations and Retained Earnings
Year Ended December 31,
1994 1993
<S> <C> <C>
Revenue from services $ 87,408,028 $ 63,695,229
Revenue from reimbursable expenses 1,723,201 626,581
------------ -----------
Total revenues 89,131,229 64,321,810
------------ -----------
Cost of services 52,880,491 41,534,354
Direct reimbursable expenses 1,737,721 614,931
------------ -----------
Total cost of sales 54,618,212 42,149,285
------------ -----------
Gross margin 34,513,017 22,172,525
------------ -----------
Selling, general and administrative expenses 26,934,184 17,818,129
Nondirect labor costs 1,934,752 1,683,547
Interest expense 603,342 379,234
----------- -----------
29,472,278 19,880,910
------------ -----------
Income before taxes 5,040,739 2,291,615
Provision for income taxes (Note 5) 2,281,811 1,020,734
------------ -----------
Net income 2,758,928 1,270,881
Retained earnings at beginning of year 3,683,220 2,412,339
------------ -----------
Retained earnings at end of year $6,442,148 $3,683,220
============ ===========
See accompanying notes to financial statements.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
TRECOM Business Systems, Inc.
Statement of Cash Flows
Year Ended December 31,
1994 1993
<S> <C> <C>
Cash flows from operating activities
Net income $2,758,928 $ 1,270,881
Adjustments to reconcile net income to
net cash provided by operating activities
Depreciation and amortization 754,503 457,548
Changes in assets and liabilities
Increase in trade accounts receivable (6,311,370) (6,702,893)
Increase in other accounts receivable (270,594) (13,728)
(Increase) decrease in prepaid expenses (189,520) 27,424
Increase in prepaid income taxes (134,543) -
(Increase) decrease in deferred taxes (150,000) 7,000
Increase in accounts payable and
accrued expenses 2,451,919 2,520,501
(Decrease) increase in income taxes payable (380,200) 342,551
Increase in deferred revenue 716,000 767,000
----------- ----------
Net cash used in operating activities (754,877) (1,323,716)
----------- -----------
Cash flows from investing activities
Fixed assets additions, net (1,805,028) (1,502,074)
---------- -----------
Net cash used in investing activities (1,805,028) (1,502,074)
---------- ----------
Cash flows from financing activities
Receipts of short-term borrowings, net 1,906,070 2,657,056
Sale of Class A stock 245,903 81,113
Repurchase of Class A stock (22,732) (8,922)
--------- ----------
Net cash provided by financing activities 2,129,241 2,729,247
---------- ----------
Net decrease in cash and cash equivalents (430,664) (96,543)
Cash and cash equivalents- beginning of year 629,301 725,844
--------- ----------
Cash and cash equivalents- end of year $ 198,637 $629,301
========= =========
Supplemental Disclosure
Interest paid $615,307 $346,986
======== ========
Taxes paid $2,946,554 $681,843
========== ========
Noncash financing activities:
During 1994 and 1993, the Company exchanged 24,334 and 16,000 shares of Class A stock at
$3.86 and $2.684 per share for notes payable totalling $93,930 and $42,944, respectively
See accompanying notes to financial statements.
</TABLE>
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1994 and 1993
1. Nature of Business and Significant Accounting Policies
The Company
TRECOM Business Systems, Inc. (the Company), a Delaware
company, was incorporated and commenced operations on
January 16, 1985. The Company's business is to provide
computer consulting services and custom software services.
Fixed Assets
Fixed assets are carried at cost. Depreciation and
amortization are determined using the straight-line method
or accelerated methods over the estimated useful lives of
the assets or, in the case of leasehold improvements, over
the remaining term of the respective leases, if shorter.
Revenue Recognition
Revenue is recognized as the services are performed. Labor
costs of consultants incurred in providing services to
customers are recorded as cost of services. Labor costs
incurred for consultants not assigned to customer projects
are recorded as nondirect labor costs. Direct reimbursable
expenses are billable to customers when incurred.
Deferred revenue at December 31, 1994 and 1993 represents
billings to customers under fixed price contracts that have
not been earned by the Company under its revenue recognition
policy.
Cash Flows
For purposes of preparing its Statement of Cash Flows, the
Company's cash and cash equivalents are defined as cash and
overnight deposits.
Income Taxes
Income taxes are based on the asset and liability approach
embodied in FASB Statement No. 109 - "Accounting for Income
Taxes" (FASB No. 109). Under FASB No. 109, deferred tax
liabilities or assets reflect the impact of temporary
differences between amounts of assets and liabilities for
financial and tax reporting. Such amounts are subsequently
adjusted, as appropriate, to reflect changes in tax rates
expected to be in effect when the temporary differences
reverse. A valuation allowance is established for any
deferred tax asset for which realization is not likely.
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1994 and 1993
2. Fixed Assets
Fixed assets are comprised of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Leasehold improvements $728,749 $611,390
Furniture and fixtures 1,453,266 1,223,925
Computers and office equipment 3,212,606 1,754,278
---------- ---------
5,394,621 3,589,593
Less: Accumulated depreciation
and amortization 2,595,804 1,841,301
----------- ---------
$2,798,817 $1,748,292
=========== ===========
</TABLE>
3. Short-Term and Long-Term Borrowings
Short-term and long-term borrowings are comprised of the
following:
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Borrowings under line of
credit arrangements $7,000,000 $5,000,000
Notes payable to stockholders
maturing at various dates
through December 1995 and
bearing rates of interest
of 9% and 10% 423,158 517,088
---------- ---------
7,423,158 5,517,088
Notes payable to stockholders
maturing in January and
March 1996 and bearing rates
of interest of 9% and 10% 225,000 225,000
---------- ---------
$7,648,158 $5,742,088
============ ===========
</TABLE>
Borrowings under line of credit arrangements represent
borrowings by the Company from Morgan Guaranty Trust Company
of New York ("Morgan") and Chemical Bank of New Jersey
("Chemical") at December 31, 1994, and from Morgan at
December 31, 1993 under aggregate line of credit facilities
of $10,000,000 and $8,000,000 at December 31 1994 and 1993,
respectively. The Morgan borrowings bear interest at the
prime interest rate (approximately 8.5% at December 31,
1994) plus one half of 1%. The Chemical borrowings bear
interest at LIBOR (approximately 6.8125% at December 31,
1994) plus 2%. The borrowings are collateralized by the
accounts receivable of the Company and are supported by the
personal guarantees of two of the Company's stockholders.
The borrowings are senior to the notes payable to
stockholders. The Company paid commitment fees of $41,000
in 1994 to revise the lines of credit.
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31,1994 and 1993
The line of credit facilities require the Company to
maintain certain financial ratios and restricts the payment
of dividends. At December 31, 1994, the Company was in
compliance with the various covenants and requirements under
its line of credit agreements. The Morgan and Chemical line
of credit facilities expire on May 1, 1995 and May 31, 1995,
respectively, at which time the Company plans on extending
or refinancing the debt.
4. Accounts Payable and Accrued Expenses
Accounts payable and accrued expenses consist of the
following:
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Accrued employees' compensation,
related withholdings and
benefits $8,512,688 $5,941,971
Agency fees for the hire of
personnel 258,685 119,670
Accounts payable 530,628 739,282
Other 214,428 263,587
----------- ----------
$9,516,429 $7,064,510
============ ===========
</TABLE>
The Company sponsors a savings plan for eligible employees.
The cost of the savings plan amounted to $496,000 and
$375,000 in 1994 and 1993, respectively.
5. Income Taxes
The components of the income tax expense for the years ended
December 31, 1994 and 1993 are summarized as follows:
<TABLE>
<CAPTION>
1994 1993
<S> <C> <C>
Current - Federal $1,757,450 $702,445
Current - State 674,361 304,662
Deferred- Federal (108,000) 5,000
Deferred- State (42,000) 8,627
----------- -----------
$2,281,811 $1,020,734
=========== ===========
</TABLE>
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31,1994 and 1993
Deferred tax assets (liabilities) arise due to the
recognition of income and expense items for tax purposes in
periods which differ from those used for financial statement
purposes. For purposes of assigning a value to deferred tax
assets, SFAS 109 prescribes that assets which are more
likely to be realized than not are recorded at full value.
For purposes of making this judgement, the Company has
recorded at full value those deferred tax assets which are
expected to be realized through December 31, 1995. At
December 31, 1994 and 1993, the deferred tax asset is
comprised of the following:
<TABLE>
<CAPTION>
December 31,
1994 1993
<S> <C> <C>
Current deferred tax asset
Accrued vacation $633,421 $483,421
Bad debt reserve 43,000 43,000
--------- --------
676,421 526,421
Noncurrent deferred tax asset
(liability)
Depreciation (10,073) (10,073)
----------- ---------
Net deferred tax asset $666,348 $516,348
=========== =========
</TABLE>
Differences between taxable income and income for financial
statement purposes result from the recognition of certain
income and expense items for tax purposes in periods which
differ from those used for financial statement purposes.
Such differences relate principally to certain reserves and
accruals recognized in different periods. In addition,
differences between the Company's effective tax rate and the
U.S. Federal and State statutory rates is due to the
disallowance of certain meal and entertainment expenses as
required by the Tax Reform Act of 1986.
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1994 and 1993
6. Capital
The following stock transactions occurred during 1994 and 1993:
<TABLE>
<CAPTION>
Class A
Common Stock Nonvoting Stock Paid in
Par Par Excess of
Shares Value Shares Value Par Value
<S> <C> <C> <C> <C> <C>
Beginning balance at January 1, 1993 520,000 $ 5,200 537,650 $ 5,377 $ 423,499
Sale of Class A nonvoting stock at
$2.690 per share - - 30,150 302 80,811
Repurchase of Class A nonvoting stock
at $3.642 per share (originally sold
at $2.202 per share) - - (2,450) (25) (8,897)
-------- ------- ------- ------- --------
Ending balance at December 31, 1993 520,000 $ 5,200 565,350 $ 5,654 $ 495,413
======== ======= ======= ======= ========
Sale of Class A nonvoting stock at
$3.886 per share - $ - 63,284 $ 632 $ 245,271
Repurchase of Class A nonvoting stock
at $3.988 per share (originally sold
at $0.509 per share) - - (5,700) (57) (22,675)
-------- ------- ------- -------- --------
Ending balance at December 31, 1994 520,000 $ 5,200 622,934 $6,229 $718,009
========= ======== ======= ======= ========
</TABLE>
<PAGE>
The Class A nonvoting stock was cancelled upon repurchase.
No dividends can be paid on Class A stock, which can be held
only by employees of the Company. If an employee is
terminated, the Company may repurchase their shares at the
greater of the current net book value amount or the original
amount at which the shares were purchased by the employee.
7. Significant Business
The Company operates under various projects, both long and
short term, with a number of customers. At times, one or two
customers constitute a significant portion of revenue and
income recorded by the Company in a given year. Future
revenue is predicated upon renewal of such projects or the
attainment of significant new projects.
8. Commitments
The Company leases its office space under noncancellable
operating lease agreements. Future minimum rental payments
under such leases are as follows:
1995 $1,577,000
1996 1,600,000
1997 1,587,000
1998 1,127,000
1999 371,000
Remainder 10,000
----------
$6,272,000
==========
<PAGE>
TRECOM Business Systems, Inc.
Notes to Financial Statements
December 31, 1994 and 1993
Total rental expense for the years ended December 31, 1994
and 1993 aggregated $1,503,349 and $1,181,100, respectively.
The Company is contingently liable under outstanding letters
of credit aggregating approximately $131,000.
<PAGE>
Exhibit 3.16
Investment Banker Fees
Attached is a copy of the agreement between Trecom and J.P.
Morgan Securities, Inc.<PAGE>
February 16, 1995
Trecom Business System Inc.
333 Thornwall Street
Edison, NJ 08837-2246
Attention: Francis J. Casagrande
Chairman
Gentlemen:
This letter confirms our understanding (the "Agreement") that
Trecom Business Systems Inc. (together with its subsidiaries and
affiliates, the "Company") has engaged J.P. Morgan Securities
Inc. ("J.P. Morgan") to act as the Company's exclusive financial
advisor with respect to any sale, merger, consolidation, or any
other business combination, in one or a series of transactions,
involving all or a substantial amount of the stock, assets, or
business of the Company by another person not controlling,
controlled by, or under common control with the Company (the
"Transaction").
As discussed, we propose to undertake certain services on your
behalf, including to the extent requested by you: (i) assisting
you in preparing an offering memorandum describing the Company,
its operations, historical performance, and future prospects,
(ii) identifying and contacting selected qualified acquirors
acceptable to you, (iii) arranging for potential acquirors to
conduct business investigations, and (iv) assisting you in
negotiating the financial aspects of any proposed Transaction.
J.P. Morgan shall have no authority to execute an agreement on
behalf of the Company or bind the Company in any manner
whatsoever, it being fully understood that the acceptance of any
proposal or proposals shall be solely in the Company's absolute
discretion. In addition, J.P. Morgan will not approach any
qualified or potential acquiror without the Company's prior
approval. Furthermore, all Company confidential and proprietary
data including but not limited to identification of clients and
their billing histories and identification of the Company's key
employees shall not be communicated to a potential or qualified
acquiror, except pursuant to a confidentiality and nondisclosure
agreement approved by the Company. J.P. Morgan shall not approach
or contact either Martin Marietta Corporation or Nippon Electric
Corporation or either of their respective affiliates,
subsidiaries or joint ventures with respect to any proposed
Transaction.
As compensation for the services to be rendered hereunder by J.P.
Morgan, the Company agrees to pay J.P. Morgan (i) an engagement
fee (the "Engagement Fee") of $175,000, payable promptly upon
execution of this Agreement, and (ii) a "Success Fee" in an
amount equal to 1.50% of the Transaction Value (as hereinafter
defined), less any amount paid by the Company pursuant to clause
(i). Such fee shall be payable with respect to each Transaction
in cash upon consummation of such Transaction.
For purposes of this Agreement, "Transaction Value" means the
aggregate amount of consideration received by the Company and/or
its stockholders (treating any shares issuable upon exercise of
options, warrants, or other rights of conversion as outstanding)
in any Transaction, plus the amount of any debt securities or
other liabilities assumed, redeemed, or remaining outstanding or
equity securities redeemed or remaining outstanding in connection
with any Transaction, plus, without duplication, the value of any
securities, cash, or other assets distributed to stockholders of
the Company. Transaction Value shall not include (i) assumption
of working capital debt obligations, other short term borrowings,
as well as loans to stockholders, accounts payable, releases from
guarantees, or deferred obligations incurred in the ordinary
course of business; (ii) consulting or employment agreements for
the Company's employees in connection with the Transaction,
except for any consulting or employment agreement entered into
with any of Francis J. Casagrande, S. Russell Powell, and Emanuel
Arturi in connection with the Transaction which provides for
compensation to such employee in amounts and value in excess of
the then normal compensation levels for such employee including
benefits and issuance of restricted stock, stock options or
warrants. If more than one Transaction is consummated, a Success
Fee shall be payable with respect to each such Transaction in
cash upon consummation thereof and the amount of the Success Fee
payable in respect of each Transaction after the first shall be
equal to the Success Fee that would have been payable for a
Transaction having a Transaction Value equal to the aggregate
Transaction Value of such Transaction plus all Transactions
previously consummated, less the aggregate amount of all Success
Fees previously paid.
For purposes of this Agreement, a Transaction shall be deemed to
have been consummated upon the earliest of any of the following
events to occur: (a) the acquisition by another person of
substantially all of the outstanding common stock of, or voting
power in, the Company calculated on a fully-diluted basis; (b) a
merger or consolidation of the Company with another person not
controlling, controlled by, or under common control with the
Company; and (c) the acquisition by another person not
controlling, controlled by, or under common control with the
Company of substantially all of the assets of the Company.
If the consideration or other value received in any Transaction
is paid in whole or in part in the form of securities, the value
of such securities, for purposes of calculating the Success Fee,
shall be the fair market value thereof, as the parties hereto
shall mutually agree, on the day prior to the consummation of the
Transaction; provided, however, that if such securities consist
of securities with an existing public trading market, the value
thereof shall be determined by the last sales price for such
securities on the last trading day thereof prior to such
consummation. If all or a portion of the consideration is related
to or contingent upon the future earnings or operations of the
Company, the portion of J.P. Morgan's compensation relating
thereto shall be negotiated between the Company and J.P. Morgan
and shall be paid at the time the Transaction is consummated.
In the event a Transaction is not consummated for any reason
whatsoever, including but not limited to willful refusal or
failure to close by the Company or its stockholders, J.P. Morgan
agrees to absorb its own expenses and will charge no fee to the
Company or its stockholders in connection with this Agreement or
any Transaction, except for the Engagement Fee and reimbursement
of expenses as set out in second next succeeding paragraph below.
The Company agrees to provide J.P. Morgan all financial and other
information requested by it for the purpose of its assignment
hereunder. In performing its services hereunder, J.P. Morgan
shall be entitled to rely upon and assume, without independent
verification, the accuracy and completeness of all information
that is publicly available and of all information that has been
furnished to it by the Company or otherwise reviewed by J.P.
Morgan, and J.P. Morgan shall not assume any responsibility nor
have any liability therefore. J.P. Morgan shall have no
obligation to conduct any valuation or appraisal of any assets or
liabilities. For the execution of its assignment, J.P. Morgan
shall establish a team of qualified individuals from appropriate
specialty areas within J.P. Morgan & Co. Incorporated, including
Morgan Guaranty Trust Company of New York. Any financial advice
rendered by J.P. Morgan pursuant to this Agreement may not be
disclosed publicly in any manner without J.P. Morgan's prior
written approval and will be treated by the Company as
confidential. Any financial or other information provided to J.P.
Morgan by the Company shall be used only in furtherance of J.P.
Morgan's duties hereunder and may not be disclosed publicly in
any manner or used for any other purpose by J.P. Morgan without
the Company's prior written approval and will be treated as
confidential by J.P. Morgan.
In order to coordinate our efforts with respect to possible
Transactions, during the period of our engagement hereunder
neither the Company nor any representative thereof (other than
J.P. Morgan) will initiate discussions regarding a Transaction
except through J.P. Morgan. If the Company or its management
receives an inquiry regarding a Transaction, they will promptly
advise J.P. Morgan of such inquiry in order that J.P. Morgan may
evaluate the person making such inquiry and its interest and
assist the Company in any resulting negotiations.
The Company agrees to reimburse J.P. Morgan promptly upon request
from time to time for all expenses (including, without
limitation, travel, communication, and document production
expenses, and the fees and disbursements of counsel) incurred by
J.P. Morgan in performing its engagement hereunder, whether or
not a Transaction is consummated, but not exceeding $15,000 in
the aggregate during the term of this Agreement, without the
Company's approval. The Company also agrees to indemnify J.P.
Morgan and certain other entities and persons as set forth on
Schedule I attached hereto.
It is understood that if the Company completes a transaction in
lieu of any Transaction for which J.P. Morgan is entitled to
compensation pursuant to this Agreement, J.P. Morgan and the
Company will negotiate in good faith appropriate compensation for
J.P. Morgan in an amount to be mutually agreed upon, which will
take into account, among other things, the results obtained and
the custom and practice among investment bankers acting in
similar transactions.
J.P. Morgan recognizes and acknowledges that any trade secrets,
information of a private, internal or confidential nature and any
private processes, all as they may exist from time to time, which
are identified as such in writing, are valuable, special and
unique assets of the Company, access to and knowledge of which
are essential to the performance of J.P. Morgan's duties
hereunder. J.P. Morgan will not, during or after the term of this
Agreement, disclose such secrets, information or processes, in
whole or in part to any person, firm, corporation, association or
entity for any reason or purpose whatsoever, nor shall J.P.
Morgan make use of them in whole or in part for J.P. Morgan's own
purpose of for the benefit of any person, firm, corporation or
other entity (except the Company) under any circumstances,
whether during or after the term of this Agreement. Upon
termination of this Agreement, J.P. Morgan shall return to the
Company, without copying or duplicating, all written or graphic
confidential, private or trade secret material furnished by the
Company, or the Company's representatives, or the Company's
consultants, to J.P. Morgan in furtherance of the purposes of
this Agreement.
This Agreement will extend for nine (9) months from the date
hereof and shall renew automatically thereafter on a month-to-
month basis unless either party is given written notice to other
that it desires to terminate this Agreement with or without
cause. No such termination will affect (i) J.P. Morgan's rights
to receive fees accrued prior to such termination or to receive
reimbursement of its expenses as set above, (ii) the rights of
J.P. Morgan or any other Indemnified Person (as defined in
Schedule I hereto) to receive indemnification or contribution, or
(iii) either party's confidentially obligations here under. In
addition, if at any time prior to the expiration of 180 days
after any such termination by the Company or expiration of this
Agreement, a Transaction involving a party with which "meaningful
discussions" regarding a proposed Transaction were held during
the term of this Agreement is consummated, J.P. Morgan will be
entitled to payment in full of the Success Fee. Otherwise, J.P.
Morgan shall not be entitled to any fees, other compensation, or
reimbursement except for payment of the Engagement Fee,
reimbursement of expenses, and indemnification, all as
specifically set out in previous provisions of this Agreement.
The fact that potential acquiror has signed a confidentiality
agreement on terms and conditions acceptable to the Company and
that a first meeting has occurred between the Company's
management designees and such potential acquiror's designees with
respect to a proposed Transaction shall be deemed "meaningful
discussions" for the purposes of this paragraph.
This letter shall be governed by, and construed in accordance
with, the laws of the State of New York without regard to the
principle of conflicts of law, and many be amended, modified or
supplemented only by written instrument by the parties hereto,
referring to this letter and stating it is intended to be an
amendment, modification or supplement. No course of dealing, or
other conduct, or custom shall be deemed to alter or vary the
terms of this Agreement.
If the foregoing correctly set forth the agreement between the
Company and J.P. Morgan, please sign and return the enclosed copy
of this Agreement, whereupon it shall become our binding
agreement.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ Michael W. Sweto
-------------------------------
Name: Michael W. Szeto
Title: Managing Director
Accepted as of the
date first above written:
By: /s/Francis J. Casagrande
-------------------------------
Name: Frances J. Casagrande
Title: Chairman
<PAGE>
SCHEDULE I
Trecom Business Systems Inc. (the "Company"), the client referred
to in the attached agreement (the "Agreement"), agrees to
indemnify and hold harmless J.P. Morgan Securities Inc. ("J.P.
Morgan") and its affiliates, and the respective directors,
officers, agents, and employees of J.P. Morgan and its affiliates
and each other entity or person, if any, controlling J.P. Morgan
or any of its affiliates (J.P. Morgan and each such entity or
person being referred to as an "Indemnified Person") from and
against any losses, claims, demands, damages, or liabilities (or
actions or proceedings in respect thereof) of any kind relating
to or arising out of activities performed or services furnished
pursuant to the Agreement, the transactions contemplated thereby
or J.P. Morgan's role in connection therewith, and to reimburse
J.P. Morgan and any other Indemnified Person for all expenses
(including, without limitation, fees and disbursements of
counsel) incurred by J.P. Morgan or any such other Indemnified
Person in connection with investigating, preparing, or defending
any investigative, administrative, judicial, or regulatory
proceeding in any jurisdiction, whether or not in connection with
pending or threatened litigation to which J.P. Morgan (or any
other Indemnified Person) or the Company or any of its
securityholders is a party, in each case as such expenses are
incurred or paid. The Company will not, however, be responsible
for any such losses, claims, demands, damages, liabilities, or
expenses of any Indemnified person that are determined by final
and nonappealable judgment of a court of competent jurisdiction
to have resulted primarily from actions taken or omitted to be
taken by such Indemnified Person in bad faith or from such
Indemnified Person's gross negligence or willful misconduct. The
Company also agrees that no Indemnified Person shall have any
liability (whether direct or indirect, in contract, tort or
otherwise) to the Company or any of its securityholders for or in
connection with the Agreement, any transactions contemplated
thereby or J.P. Morgan's role in connection therewith, except for
any such liability for losses, claims, demands, damages,
liabilities or expenses incurred by the Company that are
determined by final and nonappealable judgment of a court of
competent jurisdiction to have resulted primarily from actions
taken or omitted to be taken by such Indemnified Person in bad
faith or from such Indemnified Person's gross negligence or
willful misconduct.
Upon receipt by an Indemnified Person of actual notice of a
claim, action or proceeding against such Indemnified Person in
respect of which indemnity may be sought hereunder, such
Indemnified Person shall promptly notify the Company with respect
thereto. In addition, an Indemnified Person shall promptly notify
the Company after any action is commenced (by way of service with
a summons or other legal process giving information as to the
nature and basis of the claim) against such Indemnified Person.
In any event, failure to notify the Company shall not relieve the
Company from any liability which the Company may have on account
of this indemnity or otherwise, except to the extent the Company
shall have been materially prejudiced by such failure. The
Company will, if requested by any Indemnified Person, assume the
defense of any litigation or proceeding in respect of which
indemnity may be sought hereunder, including the employment of
counsel reasonably satisfactory to J.P. Morgan and the payment of
the fees and expenses of such counsel, in which event, except as
provided below, the Company shall not be liable for the fees and
expenses of any other counsel retained by any Indemnified Person
in connection with such litigation or proceeding. In any such
litigation or proceeding the defense of which the Company shall
have so assumed, any Indemnified Person shall have the right to
participate in such litigation or proceeding and to retain its
own counsel, but the fees and expenses of such counsel shall be
at the expense of such Indemnified Person unless (i) the Company
and such Indemnified Person shall have mutually agreed in writing
to the retention of such counsel, or (ii) the named parties to
any such litigation or proceeding (including any impleaded
parties) include the Company and such Indemnified Person and
representation of both parties by the same counsel would, in the
opinion of counsel to such Indemnified Person, be inappropriate
due to actual or potential differing interests between the
Company and such Indemnified Person. The Company shall not be
liable for any settlement of any litigation or proceeding
effected without its written consent, but if settled with such
consent or if there be a final judgment for the plaintiff, the
Company agrees to indemnify the Indemnified Person from and
against any loss or liability by reason of such settlement or
judgment. The Company will not settle any claim, action or
proceeding in respect of which indemnity may be sought hereunder,
whether or not any Indemnified Person is an actual or potential
party to such claim, action or proceeding, without J.P. Morgan's
written consent, which shall not be unreasonably withheld.
If the foregoing indemnification is for any reason unavailable to
an Indemnified Person (other than by reason of the terms hereof),
the Company shall contribute to the losses, claims, demands,
damages, liabilities and expenses referred to herein that are
paid or payable by such Indemnified Person in such proportion as
is appropriate to reflect the relative economic interests of the
Company and its securityholders, on the one hand, and of J.P.
Morgan, on the other hand, in the transactions contemplated by
the Agreement (whether or not consummated) and any other relevant
equitable considerations. For purposes of this paragraph, the
relative interests of the Company and its securityholders, on the
one hand, and J.P. Morgan, on the other hand, in the transactions
contemplated by the Agreement shall be deemed to be in the same
proportion as (a) the total value paid or received or
contemplated to be paid or received by the Company or the
Company's securityholders, as the case may be, in the
transactions contemplated by the Agreement (whether or not any
such transaction is consummated), bears to (b) the fees paid or
to be paid to J.P. Morgan under the Agreement.
The provisions contained in this Schedule I shall be in addition
to any liability which the Company may otherwise have to J.P.
Morgan, shall be governed by the laws of the State of New York,
and shall remain operative and in full force and effect
regardless of the expiration or any termination of the Agreement
or of J.P. Morgan's engagement thereunder.
<PAGE>
March 28, 1996
Trecom Business Systems Inc.
333 Thornall Street
Edison, NJ 08837-2246
Attention: Francis J. Casagrande
Chairman
Ladies and Gentlemen:
Reference is made to the letter agreement between us dated
February 16, 1995 (the "Engagement Letter") pursuant to which
J.P. Morgan Securities Inc. was retained by Trecom Business
Systems Inc. (the "Company") to render certain financial advisory
services to the Company. Unless otherwise defined herein,
capitalized terms used herein have the meanings assigned to those
terms in the Engagement Letter.
While J.P. Morgan shall continue to perform its services as set
forth in the Engagement Letter, J.P. Morgan understands that the
Company wishes to engage J.P. Morgan to provide additional
services as set forth below. This letter will confirm the basis
upon which J.P. Morgan's services under the Engagement Letter
will be expanded.
As discussed, J.P. Morgan shall undertake certain additional
services on the Company's behalf, including to the extent
requested by the Company, delivering an opinion to the Board of
Directors of the Company as to the fairness to the Company's
stockholders from a financial point of view of the consideration
to be received by the Company in any proposed Transaction (the
"Opinion"). The Opinion shall be in such customary form and with
such assumptions and qualifications as determined appropriate by
J.P. Morgan.
Nothing contained in this letter shall affect the obligations of
the Company under the Engagement Letter (i) to reimburse J.P.
Morgan for its expenses (including, without limitation, travel,
communication, and document production expenses, and the fees and
disbursements of counsel), (ii) to indemnify J.P. Morgan and
certain other entities and persons as set forth in the Engagement
Letter, and (iii) not to disclose publicly in any manner any
financial advice rendered by J.P. Morgan pursuant to the
Engagement Letter, all of which obligations shall survive the
termination of J.P. Morgan's engagement thereunder, as modified
herein. The provisions of the Engagement Letter relating to
jurisdiction shall apply to this letter. Except as modified
hereby, the Engagement Letter (including Schedule I thereto) is
reaffirmed in all respects, and all references herein to this
Agreement shall mean the Engagement Letter (including Schedule I
thereto), as modified hereby.
If the foregoing correctly sets forth the agreement between the
Company and J.P. Morgan, please sign and return the enclosed copy
of this letter, where upon it shall become a binding agreement to
be governed by New York law.
Very truly yours,
J.P. MORGAN SECURITIES INC.
By: /s/ Michael W. Szeto
--------------------------
Name: Michael W. Szeto
Title: Managing Director
Accepted and Agreed:
TRECOM BUSINESS SYSTEMS INC.
By: /s/Francis J. Casagrande
-------------------------------
Name: Francis J. Casagrande
Title: Chairman
<PAGE>
Exhibit 8.7
Tiger Legal Opinion
1. Trecom has been duly incorporated and organized, and is
validly existing in good standing, under the laws of the
State of Delaware. Trecom has the corporate power and
authority to enter into and perform the Merger Agreement, to
own and operate its properties and assets and to carry on
its business as currently conducted.
2. To the best of our knowledge, Trecom does not presently own
or control, directly or indirectly, any interest in any
other corporation, partnership, trust, joint venture,
association or other entity, except as may be disclosed in
the Schedule of Exceptions attached to the Merger Agreement.
3. Trecom is duly qualified to do business as a foreign
corporation in good standing in all jurisdictions in which
it is required to be qualified to carry on intrastate
business as is currently conducted by Trecom.
4. The capitalization of Trecom immediately prior to the
Closing consists of the following: (a) 1,500,000 shares of
Common Stock, $.01 par value, of which 520,000 shares are
issued and outstanding and 1,500,000 shares of Class A Non-
Voting Stock, $.01 par value, of which 751,549 are issued
and outstanding.
5. There are no preemptive rights or any options, warrants,
conversion privileges or other rights (or agreements for any
such rights) outstanding to acquire any of Trecom's
securities.
6. The Certificate of Incorporation has been duly adopted by
all necessary corporate action on the part of Trecom, its
Board of Directors and stockholders and, to our knowledge,
has not been amended. The Merger Agreement has been duly
authorized by all necessary corporate action on the part of
Trecom and has been duly executed and delivered by Trecom.
The Merger Agreement constitutes a valid and binding
obligation of Trecom enforceable against Trecom in
accordance with its terms.
7. The execution and delivery of the Merger Agreement by Trecom
and the performance by Trecom of its obligations thereunder
do not conflict with or result in a violation of Trecom's
Certificate of Incorporation or By-Laws or, to the best of
our knowledge, any judgment, order, decree of any court or
arbitrator to which Trecom is a party or is subject, or any
law, regulation or rule to which Trecom is subject, and, to
the best of our knowledge, do not conflict with and will not
constitute a material breach by Trecom of, or constitute a
default by Trecom under, any material agreement of Trecom.
8. To the best of our knowledge, there is no suit, action,
proceeding or investigation pending or threatened against
Trecom before any court or administrative agency that would
reasonably be expected to result, either individually or in
the aggregate, in any material adverse change in the
business, prospects, financial condition or assets of Trecom
or in any material liability of Trecom.
9. All approvals, consents or authorizations of and filings
with any federal, New Jersey or Delaware governmental
authority required on the part of Trecom in order to enable
Trecom to execute, deliver and perform its obligations under
the Merger Agreement have been made.
<PAGE>
Exhibit 8.9
WITHHOLDING AGREEMENT
This Agreement is made and executed by , (the
"Stockholder") a holder of Class A Common Stock of Trecom
Business Systems, Inc., a Delaware corporation ("Trecom") in
favor of Amdahl Corporation, a Delaware corporation ("Amdahl")
and Trecom .
WHEREAS, in 1996 the Stockholder purchased shares of Class A
Common Stock of Trecom at a per share purchase price of $11.83.
WHEREAS, Section 83 of the Internal Revenue Code of 1986, as
amended, provides that the difference between the fair market
value of stock issued to employees and the price paid by such
employees (the "Compensation Element") shall be deemed
compensation income.
WHEREAS, on April , 1996, Amdahl and Trecom executed an
Agreement and Plan of Merger (the "Merger Agreement") pursuant to
which Amdahl agreed that, subject to satisfaction of certain
conditions, Amdahl would acquire Trecom via a merger in which
each share of Trecom Common Stock would be converted into a right
to receive $102.98 per share plus additional consideration
dependent upon Trecom's financial performance in the one year
period following the Closing Date (the "Merger").
WHEREAS, it is a condition to Amdahl's obligation to close
the Merger that Stockholder execute this Withholding Agreement to
provide for the payment of income and employment withholding
taxes due on the Compensation Element.
THEREFORE, in consideration of Amdahl's agreement, subject
to certain other conditions as set forth in the Merger Agreement,
to close the Merger and other good and valuable consideration,
Stockholder agrees as follows:
1. Stockholder purchased an aggregate of shares of
Trecom Class A Common Stock and the aggregate amount of the
Compensation Element related to such shares is $ .
2. Stockholder hereby authorizes Amdahl to retain from the
Merger Consideration due such Stockholder under the Merger
Agreement upon the closing of the Merger, on behalf of
Trecom and for the sole purpose of satisfying income and
employment tax withholding obligations relating to the
Compensation Element of the shares of Trecom Class A Common
Stock purchased by such Stockholder, all amounts necessary
to satisfy such income and employment tax withholding
obligations, including obligations relating to federal
income tax, state income tax, FICA and medicare.
IN WITNESS WHEREOF, the undersigned has hereunder executed
this Agreement as of the date first written above.
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