<PAGE> 1
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------------
SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
---------------------
COMPUTER LANGUAGE RESEARCH, INC.
(Name of Subject Company)
COMPUTER LANGUAGE RESEARCH, INC.
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(Title of Class of Securities)
205195 10 0
(CUSIP Number of Class of Securities)
---------------------
STEPHEN T. WINN
PRESIDENT AND CHIEF EXECUTIVE OFFICER
COMPUTER LANGUAGE RESEARCH, INC.
2395 MIDWAY ROAD
CARROLLTON, TEXAS 75006
(972) 250-7000
(Name, address and telephone number of person
authorized to receive notice and communications
on behalf of the person(s) filing statement)
With a copy to:
GUY KERR, ESQ.
LOCKE PURNELL RAIN HARRELL
(A PROFESSIONAL CORPORATION)
2200 ROSS AVENUE, SUITE 2200
DALLAS, TEXAS 75201
(214) 740-8000
================================================================================
<PAGE> 2
ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is Computer Language Research, Inc., a
Texas corporation (the "Company"), and the address of the principal executive
office of the Company is 2395 Midway Road, Carrollton, Texas 75006. The title of
the class of equity securities to which this statement relates is the common
stock, par value $.01 per share (the "Common Stock" or the "Shares"), of the
Company.
ITEM 2. TENDER OFFER OF PURCHASER.
This statement relates to the tender offer by Sabre Acquisition, Inc., a
Delaware corporation ("Purchaser"), a wholly owned subsidiary of The Thomson
Corporation, a corporation incorporated under the laws of Ontario, Canada
("Parent"), disclosed in a Tender Offer Statement on Schedule 14D-1, dated
January 16, 1998 (the "Schedule 14D-1"), to purchase all of the issued and
outstanding Shares, at a price of $22.50 per Share, net to the seller in cash
(the "Offer Price"), upon the terms and subject to the conditions set forth in
the Offer to Purchase, dated January 16, 1998 (the "Offer to Purchase"), and the
related Letter of Transmittal (which, together with the Offer to Purchase,
constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of January 12, 1998 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Merger Agreement provides, among other things, that as soon as
practicable after the satisfaction or waiver of the conditions set forth in the
Merger Agreement, Purchaser will be merged with and into the Company (the
"Merger"), and the Company will continue as the surviving corporation (the
"Surviving Corporation"). In the Merger, among other things, each Share (other
than Shares held in the treasury of the Company or owned by Parent, Purchaser or
any direct or indirect wholly owned subsidiary of Parent or the Company and
other than Shares held by shareholders who shall have fully complied with the
statutory dissenters' procedures set forth in the Texas Business Corporation Act
("Texas Law")) will be cancelled and converted automatically into the right to
receive $22.50 in cash or any higher price that may be paid per Share in the
Offer, without interest (the "Merger Consideration"). A copy of the Merger
Agreement is filed herewith as Exhibit 6 and is incorporated herein by
reference.
Concurrently with entering into the Merger Agreement, Parent, Purchaser and
certain shareholders of the Company (the "Majority Shareholders") entered into a
Stock Purchase Agreement, dated as of January 12, 1998 (the "Stock Purchase
Agreement"), pursuant to which, upon the terms and conditions set forth therein,
the Majority Shareholders agreed to validly tender (and not withdraw) pursuant
to the Offer all Shares now or hereafter owned (beneficially or of record) by
the Majority Shareholders and have otherwise agreed to sell to Purchaser all
such Shares at a purchase price per Share equal to $22.50 (or any higher price
that may be paid per Share in the Offer). On January 12, 1998, the Majority
Shareholders owned (either beneficially or of record) 10,786,962 Shares,
constituting approximately 74.6% of the outstanding Shares (or approximately 67%
of the outstanding Shares on a fully diluted basis). The Majority Shareholders
are comprised of Stephen T. Winn, President and Chief Executive Officer and a
director of the Company, and his spouse; David L. Winn and James R. Dunaway,
Jr., directors of the Company, and their respective spouses; Francis W. Winn,
Chairman of the Board, and his spouse; certain trusts and partnerships
controlled by, or for the benefit of, various members of the Winn family; and
certain investment funds (collectively, "Advance Capital") affiliated with
Jeffrey T. Leeds, a director of the Company. Francis W. Winn is the father of
Stephen T. Winn and David L. Winn and the father-in-law of James R. Dunaway, Jr.
As set forth in the Schedule 14D-1, the principal executive offices of
Purchaser are located at Metro Center, One Station Place, Stamford, Connecticut
06902.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of the Company, which is the person filing this
statement, are set forth in Item 1 above.
(b) To the knowledge of the Company, each material contract, agreement,
arrangement or understanding and actual or potential conflict of interest
between the Company or its affiliates and (i) the Company's executive officers,
directors or affiliates or (ii) Parent or Purchaser or their respective
executive officers, directors or affiliates, is described in an information
statement containing the information required by Section 14(f) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and Rule 14f-1
1
<PAGE> 3
promulgated thereunder which information statement is attached as Schedule I
hereto (which information is incorporated herein by reference) or in pages 2
through 20 of the Company's Proxy Statement dated April 1, 1997 and attached
hereto as Exhibit 8 (which information is incorporated herein by reference) or
otherwise set forth in this Schedule 14D-9.
BACKGROUND OF THE OFFER
On May 25th, 1993, the Company and Research Institute of America Group, a
division of Parent ("RIA Group"), entered into a contract pursuant to which the
Company agreed to grant RIA Group a non-exclusive worldwide license to market,
distribute and sublicense certain electronic form systems marketed under the
tradename "E-Form." E-Form is comprised of (i) federal, state and local income
tax forms and instructions (the "Form Libraries") and (ii) certain software (the
"R-Form Engine"), which allows users to display, print and fill-in electronic
forms contained in the Form Libraries. The contract terminates on April 30th,
1998.
From time to time thereafter, representatives of the Company and of RIA
Group would meet or telephone each other to discuss the business relationship
between the two companies.
On August 19th and September 17th, 1997, Stephen T. Winn, President and
Chief Executive Officer of the Company, and Euan C. Menzies, President and Chief
Executive Officer of RIA Group, met in Dallas and had a general discussion about
the tax and accounting software marketplace, including various competitive
factors, and overall market direction. During these meetings, they discussed a
series of joint venture opportunities involving RIA Group and the Company. The
benefits of an acquisition of the Company by RIA Group, however, were not
discussed.
On October 24th, 1997, Mr. Winn and Mr. Menzies met in Dallas to discuss
joint venture opportunities further. During this meeting, a brief discussion
took place with regard to the possible benefits of an acquisition of the Company
by RIA Group.
On October 30th, 1997, Mr. Winn advised the Company's Board of Directors
(the "Board") of his brief discussion with Mr. Menzies.
On November 6th, 1997, Michael S. Harris, General Counsel of Parent, and
representatives of Shearman & Sterling, outside legal counsel to Parent and
Purchaser, spoke by telephone with representatives of Locke Purnell Rain Harrell
(A Professional Corporation) ("Locke Purnell"), outside legal counsel to the
Company, and indicated that Parent had an interest in acquiring 100% of the
Company, but only if it could be done on an exclusive basis and with the binding
commitment of the controlling shareholders to support the transaction. From time
to time thereafter, such counsel, together with representatives of Skadden,
Arps, Slate, Meagher & Flom LLP ("Skadden Arps"), as outside legal counsel to
Mr. Winn and other controlling shareholders, had additional discussions by
telephone concerning Parent's requirements for a possible transaction. During
each conversation, Parent's counsel continued to state that Parent would insist
on an exclusive transaction fully supported by the Company's controlling
shareholders.
On November 12th, 1997, the Board of Directors of Parent held a regularly
scheduled meeting. At this meeting, Mr. Menzies made a presentation regarding a
potential acquisition of the Company. Following further discussion, Parent's
Board of Directors resolved that Parent should acquire the Company, subject to
final approval by at least two directors of Parent of the terms and conditions
of such acquisition, including a final agreement on price and satisfactory
negotiation of transaction related agreements.
On November 13th, 1997, Mr. Menzies spoke with Mr. Winn by telephone and
indicated that RIA Group was interested in entering into exploratory discussions
with the Company regarding the possible acquisition of the Company. Mr. Menzies
and Mr. Winn also discussed a possible range of purchase prices that RIA Group
might be willing to offer to acquire the Company. Finally, Mr. Menzies and Mr.
Winn agreed that RIA Group could commence a financial and legal due diligence
investigation of the Company upon execution of a confidentiality agreement. Mr.
Menzies reiterated Parent's position that Parent would be unwilling to proceed
with a transaction unless it had the full support of the Company's controlling
shareholders.
2
<PAGE> 4
On November 21st, 1997, Parent and the Company executed a confidentiality
agreement.
On November 22nd, 1997, Mr. Menzies and Paul J. Mattison, Senior Vice
President and Chief Financial Officer of RIA Group, met with Mr. Winn and other
representatives of the Company at the Company's offices in Dallas and reviewed
business operations concerning the Company, and the historical and prospective
financial performance of the Company. Representatives of Goldman Sachs & Co.
("Goldman Sachs"), as financial advisors to the Company, were also present at
this meeting.
On November 28th, 1997, Mr. Menzies met with Mr. Winn and representatives
of Goldman Sachs at the Dallas Inter-Continental Hotel to discuss further a
possible acquisition of the Company and the potential range of values.
On November 30th, 1997, the Board met and was briefed by Mr. Winn on his
discussions with Mr. Menzies and the due diligence activities and discussions
with other representatives of the RIA Group. At this meeting, the Board formally
approved the engagement of Goldman Sachs as financial advisors to the Company,
and discussed various matters relating to the possible acquisition by Parent,
including financial information presented by Goldman Sachs.
On December 1st, 1997, Mr. Menzies called Mr. Winn to discuss further the
valuation range. While no agreement was reached with respect to price, Mr. Winn
and Mr. Menzies agreed to continue to pursue the possibility of an acquisition
of the Company by RIA Group. Mr. Menzies and Mr. Winn also agreed that further
financial and legal due diligence meetings were appropriate.
During the period from December 3rd to December 17th, 1997, Mr. Menzies,
Mr. Mattison and other representatives of RIA Group met at various times with
Mr. Winn, M. Brian Healy, Chief Financial Officer and Group Vice President,
Finance and Administration of the Company, and other representatives of the
Company to review the Company's business operations with a view toward reaching
a final conclusion on business valuation. While general discussions took place
during this period regarding business valuation, no further substantive
discussions on pricing occurred during this period.
In addition, on December 3rd and 4th, 1997, Mr. Harris and representatives
from Shearman & Sterling met with Douglas H. Gross, General Counsel of the
Company, and other representatives of the Company in Dallas to discuss legal due
diligence related issues. During the period through December 17th, 1997, Parent
and its legal counsel conducted its legal due diligence investigation of the
Company.
On December 14th, 1997, the Board met to discuss the status of discussions
and negotiations with Parent.
On December 16th and December 17th, 1997, legal counsel to the Company and
the controlling shareholders conducted telephone conference calls with
representatives from Parent and Parent's legal counsel to discuss the
transaction and to negotiate drafts of the Merger Agreement and the Stock
Purchase Agreement.
On December 19th, 1997, legal counsel to the Company and the controlling
shareholders met with representatives from Parent and Parent's legal counsel to
discuss the transaction and to negotiate drafts of the Merger Agreement and the
Stock Purchase Agreement.
On December 19th and 20th, 1997, Mr. Winn and Mr. Menzies met in New York
City to discuss the status of the legal negotiations, significant terms and
conditions of a potential transaction and possible pricing.
On December 23rd, 1997, the Board met to discuss the status of discussions
and negotiations with Parent and to review drafts of the Merger Agreement and
Stock Purchase Agreement. At this meeting, Goldman Sachs updated the financial
information it had previously delivered to the Board.
On December 31st, 1997, Parent's legal counsel and the Company's legal
counsel discussed the latest drafts of the agreements.
On January 2nd, 1998, representatives from the Company, RIA Group, Goldman
Sachs, and legal counsel to the Company, Parent and the controlling shareholders
conducted a telephone conference call to negotiate the Merger Agreement and the
Stock Purchase Agreement and to discuss further the transaction.
3
<PAGE> 5
On January 6th and 7th, 1998, Mr. Winn and Mr. Menzies negotiated on the
telephone the range of possible purchase prices, but remained unable to reach
agreement.
On January 8th, 1998, Mr. Menzies and Mr. Winn met in New York City with
their respective legal and financial advisors to discuss key terms and
conditions of the acquisition, to carry on legal negotiations and to negotiate
the latest drafts of the Merger Agreement and the Stock Purchase Agreement. In
addition, during the evening of January 8th, 1998, Mr. Winn, Mr. Menzies and
Andrew G. Mills, President and Chief Executive Officer of Thomson Financial &
Professional Publishing Group, met over dinner to discuss key terms and
conditions of the acquisition and negotiated further about a potential purchase
price without reaching agreement.
On January 9th, 1998, legal counsel to Parent, the Company and the
controlling shareholders discussed the open issues concerning the agreements.
On January 10th and 11th, 1998, Mr. Winn and Mr. Menzies continued to
negotiate a potential purchase price.
On January 11th, 1998, the Board met to discuss the latest terms of the
transaction and to receive financial and legal advice concerning the
transaction. Subsequent to the Board's meeting, on January 11th, 1998, Mr. Winn
telephoned Mr. Menzies to report that the Board had authorized Mr. Winn to
proceed with final negotiations relating to the transaction, provided that the
price to be paid per Share was at least $22.50.
During the morning of January 12th, 1998, Mr. Menzies and Mr. Winn had a
telephone call in which Mr. Menzies indicated that Parent was prepared to
proceed with final negotiations relating to the transaction on the basis of a
purchase price of $22.50 per Share, subject to satisfactory resolution of all
remaining open issues between the parties. Representatives of the Company, RIA
Group, Shearman & Sterling, Locke Purnell, Skadden Arps and Parent then
conducted several telephone conversations to negotiate the Merger Agreement and
the Stock Purchase Agreement and to resolve all remaining issues.
During the late afternoon of January 12th, 1998, the Board met and, subject
to the Company being able to obtain Parent's agreement to a purchase price of
$22.50 per Share, approved and adopted the Merger Agreement and approved the
Stock Purchase Agreement.
Later that evening, Mr. Menzies, Mr. Winn and their respective advisors
completed negotiations with respect to the Merger Agreement, the Stock Purchase
Agreement and certain related matters. The Merger Agreement was then executed.
The same day, the Majority Shareholders approved and subsequently executed the
Stock Purchase Agreement.
On the morning of January 13th, 1998, Parent and the Company issued a joint
press release announcing the transaction, and on January 16th, 1998, Purchaser
commenced the Offer.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is
filed as an Exhibit to the Schedule 14D-9. Such summary is qualified in its
entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five business
days after the initial public announcement of the Merger Agreement. The
obligation of Purchaser to accept for payment Shares tendered pursuant to the
Offer is subject to the satisfaction of the condition of there being validly
tendered and not withdrawn prior to the expiration of the Offer at least
two-thirds of the outstanding Shares on a fully diluted basis (including,
without limitation, all Shares issuable upon conversion of any convertible
securities or upon the exercise of any options, warrants or rights) (the
"Minimum Condition") and certain other conditions that are described in Section
14 hereof. Purchaser and Parent have agreed that without the prior consent of
the Company Purchaser will not (i) waive the Minimum Condition or reduce the
number of Shares subject to the Offer, (ii) reduce the price per Share payable
in the Offer, (iii) extend the Offer or amend or add to the conditions to the
Offer, (iv) change the form of consideration payable in the Offer, or (v) amend,
add or waive any other term of the
4
<PAGE> 6
Offer in any manner that would adversely affect the Company or its shareholders.
Notwithstanding the foregoing, the Merger Agreement provides that Purchaser (i)
will not terminate and will extend the Offer, up to February 28, 1998 if, at the
initial scheduled expiration of the Offer, or any extension thereof, any of the
conditions to the Offer have not been satisfied or waived by Purchaser (provided
that if the only unsatisfied condition to the Offer is the failure of the
waiting period under the HSR Act to have expired or been terminated, then
Purchaser will extend the Offer, for one or more periods of not more than 10
business days, pursuant to this clause (i) up to May 15, 1998), (ii) will extend
the Offer for any period required by any rule, regulation or interpretation of
the Securities and Exchange Commission (the "Commission") or the staff thereof
applicable to the Offer, and (iii) may, without the consent of the Company,
extend the Offer for an aggregate period of not more than 10 business days
beyond the latest applicable date that would otherwise be permitted under clause
(i) or (ii) of this sentence if, as of such date, all of the conditions to the
Offer are satisfied or waived by Purchaser, but the number of Shares validly
tendered and not withdrawn pursuant to the Offer equals 80% or more, but less
than 90%, of the then outstanding Shares on a fully diluted basis.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with the General Corporation Law of
the State of Delaware ("Delaware Law") and Texas Law, at the effective time of
the Merger (the "Effective Time"), Purchaser will be merged with and into the
Company. As a result of the Merger, the separate corporate existence of
Purchaser will cease and the Company will continue as the Surviving Corporation
and will become a wholly owned subsidiary of Parent. At the Effective Time, each
issued and then outstanding Share (other than any Shares held in the treasury of
the Company, or owned by Purchaser, Parent or any direct or indirect wholly
owned subsidiary of Parent or of the Company, and any Shares which are held by
shareholders who have not voted in favor of the Merger or consented thereto in
writing and who shall have demanded properly in writing appraisal for such
Shares in accordance with Texas Law) will be cancelled and converted
automatically into the right to receive an amount equal to the Merger
Consideration in cash payable, without interest, to the holder of such Share.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of the Company immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement provides that, at the Effective Time, unless otherwise
determined by Parent prior to the Effective Time, the Articles of Incorporation
of the Company will be the Articles of Incorporation of the Surviving
Corporation; provided, however, that, at the Effective Time, the Articles of
Incorporation of the Surviving Corporation will be amended in their entirety to
be substantially identical to Purchaser's Certificate of Incorporation subject
to the directors' and officers' indemnification and insurance provisions
contained in the Merger Agreement. The Merger Agreement also provides that,
subject to the directors' and officers' indemnification and insurance provisions
contained therein, the By-laws of the Company, as in effect immediately prior to
the Effective Time, will be the By-laws of the Surviving Corporation.
Agreements of Parent, Purchaser and the Company. Pursuant to the Merger
Agreement, the Company shall, if required by applicable law in order to
consummate the Merger, duly call, give notice of, convene and hold an annual or
special meeting of its shareholders as soon as practicable following
consummation of the Offer or the purchase by Purchaser of the Shares of the
Majority Shareholders pursuant to the Stock Purchase Agreement, whichever occurs
first, for the purpose of considering and taking action on the Merger Agreement
and the transactions contemplated thereby (the "Shareholders' Meeting"). If
Purchaser acquires at least two-thirds of the outstanding Shares, Purchaser will
have sufficient voting power to approve the Merger, even if no other shareholder
votes in favor of the Merger. UPON CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED
BY THE STOCK PURCHASE AGREEMENT, PARENT AND PURCHASER, BY VIRTUE OF THE
ACQUISITION OF APPROXIMATELY 74.6% OF THE OUTSTANDING SHARES, WILL OWN A NUMBER
OF SHARES SUFFICIENT, EVEN IF NO OTHER SHARES ARE TENDERED IN THE OFFER, TO
CAUSE THE MERGER TO OCCUR WITHOUT THE AFFIRMATIVE VOTE OF ANY OTHER HOLDER OF
SHARES.
The Merger Agreement provides that the Company will, if required by
applicable law, as soon as practicable following either consummation of the
Offer or the purchase by Purchaser of the Shares held by the Majority
Shareholders pursuant to the Stock Purchase Agreement, whichever occurs first,
file with the Commission under the Exchange Act, and use its reasonable best
efforts to have cleared by the Commission, a proxy statement and related proxy
materials (the "Proxy Statement") with respect to the Shareholders'
5
<PAGE> 7
Meeting and will cause the Proxy Statement to be mailed to shareholders of the
Company at the earliest practicable time. The Company has agreed, subject to the
fiduciary duties of the Board under applicable law, to include in the Proxy
Statement the unanimous recommendation of the Board that the shareholders of the
Company approve and adopt the Merger Agreement and the transactions contemplated
thereby and to use its reasonable best efforts to obtain such approval and
adoption. Parent and Purchaser have agreed to cause all Shares then owned by
them and their subsidiaries to be voted in favor of approval and adoption of the
Merger Agreement and the transactions contemplated thereby. The Merger Agreement
provides that, in the event that Purchaser acquires at least 90% of the then
outstanding Shares, Parent, Purchaser and the Company agree, at the request of
Purchaser and subject to certain additional conditions set forth in the Merger
Agreement, to take all necessary and appropriate action to cause the Merger to
become effective as soon as reasonably practicable after such acquisition,
without a meeting of the Company's shareholders, in accordance with Article 5.16
of Texas Law.
Pursuant to the Merger Agreement, the Company has covenanted and agreed
that, between the date of the Merger Agreement and the time at which Purchaser's
designees to the Board represent at least a majority of the number of directors
on the Board (including all vacancies), the businesses of the Company and the
subsidiaries of the Company (collectively, the "Subsidiaries" and each
individually, a "Subsidiary") will be conducted only in, and the Company and the
Subsidiaries will not take any action except in, the ordinary course of business
and in a manner consistent with past practice; and the Company will use its
reasonable best efforts to preserve substantially intact the business
organization of the Company and the Subsidiaries, to keep available the services
of the current officers, employees and consultants of the Company and the
Subsidiaries and to preserve the current relationships of the Company and the
Subsidiaries with customers, suppliers and other persons with which the Company
or any Subsidiary has significant business relations. The Merger Agreement
provides that by way of amplification and not limitation, and except as
contemplated or disclosed therein, neither the Company nor any Subsidiary will,
between the date of the Merger Agreement and the time at which Purchaser's
designees to the Board represent at least a majority of the number of directors
on the Board (including all vacancies), directly or indirectly do any of the
following, without the prior written consent of Parent:
(a) amend or otherwise change its Articles of Incorporation or By-laws
or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any
shares of capital stock of any class of the Company or any Subsidiary, or
any options, warrants, convertible securities or other rights of any kind
to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the
Company or any Subsidiary (except for the issuance of a maximum of
1,646,150 Shares issuable upon exercise of employee stock options
outstanding on the date of the Merger Agreement or as disclosed in the
disclosure schedules to the Merger Agreement (the "Disclosure Schedules")
or otherwise in writing to Parent prior to the date of the Merger
Agreement) or (ii) any assets of the Company or any Subsidiary, except for
transactions in the ordinary course of business and in a manner consistent
with past practice;
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except for regular quarterly dividends on the
Shares declared and paid at times consistent with past practice in an
aggregate amount not in excess of $.10 per Share per quarter;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof or any
material amount of assets, except for such acquisitions which do not exceed
$3,000,000 in the aggregate for all such acquisitions; (ii) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any
6
<PAGE> 8
person, or make any loans or advances, except in the ordinary course of
business and consistent with past practice; (iii) enter into any contract
or agreement other than in the ordinary course of business, consistent with
past practice; (iv) authorize any single capital expenditure which is in
excess of $1,000,000 or capital expenditures which are, in the aggregate,
in excess of $5,000,000 for the Company and the Subsidiaries taken as a
whole; or (v) enter into or amend any contract, agreement, commitment or
arrangement with respect to any matter prohibited by this paragraph (e);
(f) increase the compensation payable or to become payable to its
directors, officers or employees, except for increases in accordance with
past practices in salaries or wages of employees of the Company or any
Subsidiary who are not officers or directors of the Company, or grant any
severance or termination pay to, or enter into any employment or severance
agreement with any director, officer or other employee of the Company or
any Subsidiary, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, except
for payments under the Company's 1997 Annual Incentive Plan (the "1997
Incentive Plan") and the Company's 1997 Officers' Annual Incentive Plan
(the "Officers' Incentive Plan") up to a maximum of $1.8 million and except
in the ordinary course of business consistent with past practices;
(g) except as may be required by a change in the rules relating to
generally accepted accounting principles or if the Company elects early
adoption of AICPA Statement of Position No. 97-2, Software Revenue
Recognition, take any action, other than reasonable and usual actions in
the ordinary course of business and consistent with past practice, with
respect to accounting policies or procedures (including, without
limitation, procedures with respect to the payment of accounts payable and
collection of accounts receivable);
(h) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability except in the
ordinary course of business consistent with past practices;
(i) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of liabilities reflected or
reserved against in the consolidated balance sheet of the Company as at
December 31, 1996, including the notes thereto, or in reports filed by the
Company with the Commission prior to the date of the Merger Agreement or
subsequently incurred in the ordinary course of business and consistent
with past practice;
(j) amend, modify or consent to the termination of any lease, license,
contract or agreement which is material to the Company and its
Subsidiaries, taken as a whole, or amend, modify or consent to the
termination of the Company's or the Subsidiary's rights thereunder, other
than in the ordinary course of business consistent with past practice; or
(k) enter into any lease, license, contract or agreement that would be
material to the Company and its Subsidiaries taken as a whole, other than
in the ordinary course of business consistent with past practice or as
otherwise permitted by the foregoing paragraphs.
Directors and Officers. The Merger Agreement provides that, promptly upon
the purchase by Purchaser of Shares pursuant to the Offer, and from time to time
thereafter, Purchaser will be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board as will give
Purchaser representation on the Board equal to the product of the total number
of directors on the Board (giving effect to the directors elected pursuant to
this sentence), multiplied by the percentage that the aggregate number of Shares
beneficially owned by Purchaser or any affiliate of Purchaser following such
purchase bears to the total number of Shares then outstanding, and the Company
will, at such time, promptly take all actions necessary to cause Purchaser's
designees to be elected as directors of the Company, including increasing the
size of the Board or securing the resignations of incumbent directors, or both.
The Merger Agreement also provides that, at such times, the Company will use its
best efforts to cause persons designated by Purchaser to constitute the same
percentage as persons designated by Purchaser will constitute of the Board of
(i) each committee of the
7
<PAGE> 9
Board, (ii) each board of directors of each domestic Subsidiary and (iii) each
committee of each such board, in each case only to the extent permitted by
applicable law.
The Merger Agreement provides that, following the election of Purchaser's
designees in accordance with the immediately preceding paragraph and prior to
the Effective Time, any amendment of the Merger Agreement or the Articles of
Incorporation or By-laws of the Company, any termination of the Merger Agreement
by the Company, any extension by the Company of the time for the performance of
any of the obligations or other acts of Parent or Purchaser or waiver of any of
the Company's rights thereunder, will require the concurrence of a majority of
those directors of the Company then in office who were neither designated by
Purchaser nor are employees of the Company.
Pursuant to the Merger Agreement, from the date of the Merger Agreement
until the Effective Time, the Company will, and will cause the Subsidiaries and
the officers, directors, employees, auditors and agents of the Company and the
Subsidiaries to, afford the officers, employees and agents of Parent and
Purchaser and persons providing or committing to provide Parent or Purchaser
with financing for the transactions contemplated by the Merger Agreement
reasonable access at all reasonable times to the officers, employees, agents,
properties, offices, plants and other facilities, books and records of the
Company and each Subsidiary, and will furnish Parent and Purchaser and persons
providing or committing to provide Parent and Purchaser with financing for the
transactions contemplated by the Merger Agreement with all financial, operating
and other data and information as Parent or Purchaser, through its officers,
employees or agents, may reasonably request and Parent and Purchaser or other
persons acting on their behalf or for their benefit have agreed to keep such
information confidential, except in certain circumstances.
Acquisition Proposals. The Company has agreed that neither it nor any
Subsidiary will, directly or indirectly, through any officer, director, agent or
otherwise, solicit, initiate or encourage the submission of or accept any
proposal or offer from any person relating to any acquisition or purchase of all
or (other than in the ordinary course of business) any portion of the assets of,
or any equity interest in, the Company or any Subsidiary or any business
combination with the Company or any Subsidiary or participate in any
negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person to do or seek
any of the foregoing. In addition, the Company will immediately cease and cause
to be terminated any existing discussions or negotiations with any parties
conducted prior to the date of the Merger Agreement with respect to any of the
foregoing. Notwithstanding the foregoing, (i) the Company may engage in
discussions or negotiations with a third party who seeks to initiate such
discussions or negotiations or may furnish such third party information
concerning the Company and its Subsidiaries, in each case only in response to a
request for such information or access which was not encouraged, solicited or
initiated by the Company or any of its affiliates, and pursuant to appropriate
confidentiality agreements, (ii) the Board may take and disclose to the
Company's shareholders a position contemplated by Rule 14e-2 promulgated under
the Exchange Act and (iii) following receipt of a proposal or offer from a third
party, the Board may withdraw or modify its recommendation, but in each case
referred to in the foregoing clauses (i) through (iii) only to the extent that
the Board concludes in good faith based upon the advice of the Company's outside
counsel that such action is required in order for the Board to act in a manner
which is consistent with its fiduciary obligations under applicable law. The
Company has also agreed to notify Parent promptly if any such proposal or offer
with any person with respect thereto, is made and, in any such notice to Parent,
to indicate in reasonable detail the identity of the person making such proposal
or offer, and the terms and conditions of such proposal or offer. In connection
with any such proposal or offer, the Company has also agreed not to release any
third party from, or waive any provision of, any confidentiality or standstill
agreement to which the Company is a party.
The Merger Agreement provides that notwithstanding anything in the
paragraph above or any other provision to the contrary in the Merger Agreement,
the Company will not take any action which would render invalid or ineffective,
or otherwise vacate or withdraw, the approval by the Board of the transactions
contemplated by the Merger Agreement and the Stock Purchase Agreement for
purposes of Article 13.03 of Texas Law and will not take any action that would
cause the Company to breach its representation and warranty that the Company has
taken all action necessary to satisfy or render inapplicable the restrictions on
business combinations contained in Article 13.03 of Texas Law.
8
<PAGE> 10
Existing Stock Options. The Merger Agreement provides that, with respect
to employees of the Company or its Subsidiaries who were awarded stock options
(the "Optionees") that were granted by the Company under the Company's 1982
Stock Option Plan (the "1982 Plan") prior to the Effective Time (the "1982
Options"), each such Optionee, as of the Effective Time, shall be vested in
amounts ranging from 60% to 100% of the aggregate 1982 Options awarded to such
Optionee. The vested percentage shall be determined according to the date such
1982 Options were awarded. With respect to Optionees who were granted stock
options under the Company's 1997 Stock Incentive Plan (the "1997 Plan") prior to
the Effective Time (the "1997 Options"), each such Optionee, as of the Effective
Time, will be vested in 60% of the 1997 Options awarded to such Optionee. With
respect to the stock options that were granted by the Company under the 1994
Non-Employee Director Company Plan (the "1994 Plan") prior to the Effective Time
(the "1994 Options"), as of the Effective Time, all 1994 Options will be fully
vested. Each Optionee who holds any vested and unexercised 1982 Options, 1994
Options or 1997 Options as of the Effective Time (the "Vested Options") will
receive from the Company, immediately after the Effective Time, in settlement
and cancellation of each Vested Option, a lump sum amount in cash equal to the
product of (i) the difference between the Merger Consideration and the per share
exercise price of a Vested Option and (ii) the number of shares of Common Stock
subject to such Vested Option. All unvested 1997 Options and 1982 Options will
lapse and become void as of the Effective Time and any obligation express or
implied that the Company shall have incurred with respect to the Conditional
Options (as defined below) will lapse and become void as of the Effective Time.
Furthermore, the Merger Agreement provides that in the event that any amount
provided to any Optionee, pursuant to the accelerated vesting of any of the
Vested Options, constitutes a "parachute payment" within the meaning of Section
280G of the Internal Revenue Code of 1986, as amended (the "Code"), and, such
"parachute payment" would otherwise be subject to the excise tax imposed by
Section 4999 of the Code, the Company will reduce the aggregate number of Vested
Options of such Optionee (such reduction, the "Excess Options") (in such manner
as the Company, in its reasonable discretion, shall deem appropriate) such that
the present value thereof is equal to 2.99 times such Optionee's "base amount"
as defined in Section 280G(b)(3) of the Code. The Excess Options will
immediately lapse and become void.
Conditional Options. Certain employees of the Company, who will be
identified by the Company to Parent in writing prior to the Effective Time, have
been granted stock options that were conditional upon the approval by the Board
and the shareholders of the Company of an amendment to the 1997 Plan (the
"Conditional Options"). The Merger Agreement provides that the Company will pay
each holder of a Conditional Option, immediately after the Effective Time, a
lump sum amount in cash equal to 60% of the product of (i) the Merger
Consideration minus the exercise price per share of Company Common Stock subject
to a Conditional Option and (ii) the number of shares of Company Common Stock
subject to such Conditional Option.
Retention Bonus Plan. The Merger Agreement provides that, on or before the
Effective Time, the Company will adopt a Retention Bonus Plan (the "Retention
Bonus Plan") for employees of the Company. Under the Retention Bonus Plan, the
Company will offer certain employees an incentive not to terminate their
employment with the Company during the period of transition following Parent's
acquisition of the Company. Under the Retention Bonus Plan, the Company will
offer such employees bonuses that will be paid 50% on the first anniversary of
the Effective Time and 50% on the second anniversary of the Effective Time if
they continue to be employed by the Company on such anniversary dates. In
addition, the Retention Bonus Plan will provide bonus payments to any
participant that is terminated by the Company without "cause" or resigns from
his or her employment for "good reason" (as each term is defined in the
Retention Bonus Plan) during the two year period after the Effective Time.
Retention Agreements. In addition to the Retention Bonus Plan, the Merger
Agreement provides that the Company will offer Retention Agreements (the
"Retention Agreements") to Messrs. Stephen T. Winn, Francis W. Winn, M. Brian
Healy and Douglas H. Gross (the "Executives"). The Retention Agreements will
provide for the continued employment of each of the Executives at a stated base
salary and the continued participation in the Company's employee benefit plans.
The Retention Agreements also provide each Executive with severance
payments until December 31, 1999 with respect to Messrs. Francis Winn, Healy and
Gross and until September 30, 2000 with respect to
9
<PAGE> 11
Stephen T. Winn, in the event of termination without "cause" or resignation for
"good reason" prior to the expiration of the term of each such Retention
Agreement (in each case, a "Compensated Termination"), or after termination or
resignation upon the successful completion by any such Executive of the term of
his Retention Agreement. The term of each Retention Agreement, with the
exception of Stephen T. Winn's, will expire December 31, 1998. The term of
Stephen T. Winn's Retention Agreement will expire March 31, 1999.
In addition to salary and severance, Messrs. Healy, Gross and Stephen T.
Winn are entitled to participate in the Retention Bonus Plan and each will
receive a lump sum special bonus (the "Special Bonus") at the end of the term or
upon a Compensated Termination. In the event of a Compensated Termination, each
Executive will receive his salary through the end of the term and severance
payments thereafter. In addition, those Executives who participate in the
Retention Bonus Plan will receive an accelerated payment of bonus amounts under
such plan. Those Executives who have Retention Agreements that include the
Special Bonus will receive such Special Bonus according to the terms of their
respective agreements in the event of a Compensated Termination. However, in
order to be entitled to receive any of the severance or bonus payments in the
event of a Compensated Termination, the Executive must sign a waiver and release
of all employment-related claims against the Company.
Finally, the Retention Agreements include restrictive covenants that
prohibit the dissemination of confidential information by the Executives, as
well as competition and solicitation of employees or customers of the Company
after the Executives' employment with the Company terminates. The Retention
Agreements also require each Executive to agree to assign to the Company all
developments and innovations related to their employment with the Company.
The above information is a summary of the Retention Agreements, copies of
which are filed as an Exhibit to the Schedule 14D-1. Such summary is qualified
in its entirety by reference to the Retention Agreements.
Employee Benefits Matters. The Merger Agreement further provides that
following the Effective Time, Parent will cause the current employees of the
Company to (i) be eligible to participate in the employee benefit plans of a
subsidiary of Parent, the benefits under which, in the aggregate, will be at
least as favorable, as those provided under the Company's employee benefit
plans, (ii) continue to participate in the Company's employee benefit plans as
in effect immediately prior to the Effective Time or (iii) be eligible to
participate in a benefits package that is a combination of (i) and (ii) and is
at least as favorable, in the aggregate, as those provided under the Company's
employee benefit plans, provided that Parent will not be prevented from
terminating the employment of any such employee or modifying or terminating such
plans from time to time and the choice of alternatives (i), (ii) or (iii) shall
be at the sole discretion of Parent. Any group health plan offered to current
employees of Company and their dependents will not exclude coverage on account
of any pre-existing condition, and in determining deductibles and co-payments
under any group health plan of Parent or its subsidiaries such employees and
their dependents will be credited with any deductibles and co-pays accrued
through the Effective Time. For purposes of any length of service requirements,
waiting periods, vesting periods, benefit accruals or differential benefits
based on length of service in any such plan for which an employee of the Company
may be eligible after the Effective Time, Parent will ensure that service by
such employee with the Company will be deemed service with Parent; provided,
however, that no such credit will be given for purposes of any defined benefit
pension plan of Parent or any of its subsidiaries.
1998 Incentive Plan. The Merger Agreement provides that, as soon as
practicable after the Effective Time, Parent will adopt a 1998 incentive bonus
program, which will replace the 1997 Incentive Plan and the Officers' Incentive
Plan, pursuant to which annual bonuses will be calculated according to certain
measures of the performance of the Company, including, without limitation,
annual increases in profit and revenue compared with the preceding year. In
addition, the Merger Agreement provides that, as of the Effective Time, the
Company will take all necessary actions to terminate the 1997 Incentive Plan and
the Officers' Incentive Plan and such plans will be terminated as of the
Effective Time.
Severance. The Merger Agreement provides that, on or before the Effective
Time, the Company will adopt a severance plan for those of its employees who are
at grade level E-16 or above as of the date of the Merger Agreement that will
become effective as of the Effective Time. Such plan will provide for payment of
severance to any of such employees terminated other than for Cause (as defined
in the Retention Bonus Plan)
10
<PAGE> 12
prior to the second anniversary of the Effective Time and to any of such
employees who resign for Good Reason (as defined in the Retention Bonus Plan)
prior to the second anniversary of the Effective Time equal to a minimum of six
months' base salary, plus an additional two weeks' base salary per full year of
tenure with the Company. The maximum severance benefit pursuant to such plan
will equal 12 months' salary. The Merger Agreement provides that on or before
the Effective Time, the Company will offer written agreements to certain
employees of the Company identified to the Purchaser in writing providing for
severance benefits in lieu of participating in the severance plan. The Merger
Agreement provides that on or before the Effective Time, the Company will offer
written agreements to its officers providing that, in the event it is determined
that any payment by the Company or any affiliate to or for the benefit of such
officers (a "Payment") would be subject to the excise tax imposed by Section
4999 of the Code or any interest or penalties are incurred by such officers with
respect to such excise tax (collectively, the "Excise Tax"), then the officers
will be entitled to receive an additional payment (a "Gross-up Payment") in an
amount such that after payment by such officer of all taxes, interest and
penalties, including, without limitation, any income taxes and Excise Tax
imposed upon the Gross-up Payment, the officer retains an amount of the Gross-up
Payment equal to the Excise Tax imposed upon the Payment; provided, however,
that each such agreement will require each officer who is entitled to a Gross-up
Payment to cooperate with a tax advisor of the Company's choice in the
determination of such Gross-up Payment.
D&O Indemnification and Insurance. The Merger Agreement further provides
that the Articles of Incorporation and By-laws of the Surviving Corporation will
contain provisions no less favorable with respect to limitation of liability and
indemnification than are set forth in Article XII of the Articles of
Incorporation and Article 11 of the By-laws of the Company, which provisions
will not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who prior to or at the Effective Time were directors,
officers or employees of the Company or its Subsidiaries.
The Merger Agreement also provides that the Company and, following the
purchase of any Shares by Purchaser or its affiliates pursuant to the Offer or
the Stock Purchase Agreement, Parent will, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective, indemnify
and hold harmless, and, after the Effective Time, Parent and the Surviving
Corporation will, to the fullest extent permitted under applicable law,
indemnify and hold harmless, each present and former director, officer or
employee of the Company and each Subsidiary (collectively, the "Indemnified
Parties") against all costs and expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action or
omission in their capacity as an officer, director or employee, whether
occurring before or after the Effective Time (including, without limitation, the
transactions contemplated by the Merger Agreement and the Stock Purchase
Agreement), for a period of six years after the date of the Merger Agreement.
Without limiting the generality of the foregoing, in the event of any such
claim, action, suit, proceeding or investigation, the Merger Agreement provides
that (i) the Company, the Surviving Corporation or Parent, as the case may be,
will pay as incurred, each Indemnified Party's legal and other expenses
(including costs of investigation and preparation), including the fees and
expenses of counsel selected by the Indemnified Party, which counsel must be
reasonably satisfactory to the Company, the Surviving Corporation or Parent,
promptly after statements therefor are received and (ii) the Company, the
Surviving Corporation and Parent will cooperate in the defense of any such
matter; provided, however, that none of the Company, the Surviving Corporation
or Parent will be liable for any settlement effected without its written consent
(which consent may not be unreasonably withheld); and provided further that none
of the Company, the Surviving Corporation or Parent will be obligated to pay the
fees and expenses of more than one counsel for all Indemnified Parties in any
single action except to the extent that two or more of such Indemnified Parties
have conflicting interests in the outcome of such action; and provided further
that, in the event that any claim for indemnification is asserted or made within
such six-year period, all rights to indemnification in respect of such claim
will continue until the disposition of such claim. The Company, the Surviving
Corporation or the Parent will pay all expenses, including counsel fees and
expenses, that any Indemnified Party may incur in enforcing the indemnity and
other obligations provided for in the Merger Agreement.
11
<PAGE> 13
The Merger Agreement provides that the Surviving Corporation will use its
best efforts to maintain in effect for six years from the Effective Time, if
available, the current directors' and officers' liability insurance policies
maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not materially less favorable) with respect to matters
occurring prior to the Effective Time; provided, however, that in no event will
the Surviving Corporation be required to expend more than an amount per year
equal to 200% of the current annual premiums paid by the Company for such
insurance (which premiums the Company has represented to Parent and Purchaser to
be approximately $139,000 in the aggregate); provided further that the Surviving
Corporation will obtain the maximum coverage obtainable for such 200% amount.
Parent, Purchaser and the Company have also agreed that, in the event the
Company, the Surviving Corporation or Parent or any of their respective
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers all or substantially all of its properties and
assets to any person, then, and in each such case proper provision will be made
so that the successors and assigns of the Company, the Surviving Corporation or
Parent, as the case may be, will assume the foregoing indemnity obligations.
Regulatory Approvals. The Merger Agreement provides that, subject to its
terms and conditions, each of the parties thereto will (i) make promptly its
respective filings, and thereafter make any other required submissions, under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), with respect to the transactions contemplated by the Merger Agreement and
the Stock Purchase Agreement and (ii) use its reasonable best efforts to take,
or cause to be taken, all appropriate action, and to do or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by the Merger
Agreement and the Stock Purchase Agreement, including, without limitation, using
its reasonable best efforts to obtain all licenses, permits (including, without
limitation, the Environmental Permits as therein defined), consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company and the Subsidiaries as are necessary for
the consummation of the transactions contemplated by the Merger Agreement and
the Stock Purchase Agreement and to fulfill the conditions to the Offer and the
Merger. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of the Merger Agreement, the
proper officers and directors of each party to the Merger Agreement are required
to use their reasonable best efforts to take all such action.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company as to the absence of certain changes or events
concerning the Company's business, compliance with law, litigation, employee
benefit plans, labor matters, real property and leases, trademarks, patents,
copyrights and other intellectual property, environmental matters, brokers and
taxes.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions: (i) the Merger
Agreement and the transactions contemplated thereby shall have been approved and
adopted by the affirmative vote of the shareholders of the Company to the extent
required by Texas Law and the Company's Articles of Incorporation; (ii) any
waiting period (and any extension thereof) applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated; (iii) no United
States or Canadian federal, state, provincial or local governmental or
regulatory authority or other agency or commission or court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered any
law, rule, regulation, executive order, decree, injunction or other order
(whether temporary, preliminary or permanent) which is then in effect and has
the effect of making the acquisition of Shares by Parent or Purchaser or any
affiliate of either of them illegal or otherwise restricting, preventing or
prohibiting consummation of the Merger; and (iv) Purchaser or its permitted
assignee shall have purchased a minimum two-thirds of the outstanding Shares (on
a fully diluted basis) pursuant to the Offer, the Stock Purchase Agreement or
otherwise.
12
<PAGE> 14
Termination; Fees and Expenses. The Merger Agreement provides that it may
be terminated and the Merger and the other transactions contemplated by the
Merger Agreement may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval and adoption of the Merger Agreement and
the transactions contemplated by the Merger Agreement by the shareholders of the
Company:
(a) By mutual written consent duly authorized by the Boards of
Directors of Parent, Purchaser and the Company; or
(b) By either Parent, Purchaser or the Company if (i) the Effective
Time has not occurred on or before May 15, 1998; provided, however, that
the right to terminate this Agreement under this provision shall not be
available (A) to any party whose failure to fulfill any obligation under
the Merger Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before such date or (B) if Purchaser has
accepted for payment Shares pursuant to the Offer or has purchased Shares
of the Majority Shareholders pursuant to the Stock Purchase Agreement or
(ii) any United States or Canadian federal, state, provincial or local
court or governmental or regulatory authority of competent jurisdiction has
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action has become final and nonappealable; or
(c) By Parent any time prior to the acceptance of Shares for payment
pursuant to the Offer or the purchase of Shares pursuant to the Stock
Purchase Agreement if due to an occurrence or circumstance that would
result in a failure to satisfy any condition set forth in the Offer,
Purchaser has (i) failed to commence the Offer within 30 days following the
date of the Merger Agreement, (ii) terminated the Offer without having
accepted any Shares for payment thereunder or (iii) failed to pay for
Shares pursuant to the Offer on or prior to February 28, 1998 (unless such
failure shall have been the result of the failure of the waiting period
under the HSR Act to have expired or been terminated in which case such
date shall be May 15, 1998), unless such failure to pay for Shares has been
caused by or resulted from the failure of Parent or Purchaser to perform in
any respect any covenant or agreement of either of them contained in the
Merger Agreement or the Stock Purchase Agreement or the breach by Parent or
Purchaser of any representation or warranty of either of them contained in
the Merger Agreement or the Stock Purchase Agreement; or
(d) By the Company, upon approval of the Board, if Purchaser has (i)
failed to commence the Offer within 30 days following the date of the
Merger Agreement, (ii) unless Purchaser shall have otherwise purchased the
Shares of the Majority Shareholders pursuant to the Stock Purchase
Agreement, terminated the Offer without having accepted any Shares for
payment thereunder or (iii) unless Purchaser shall have otherwise purchased
the Shares of the Majority Shareholders pursuant to the Stock Purchase
Agreement, failed to pay for Shares pursuant to the Offer on or prior to
February 28, 1998 (unless such failure has been the result of the failure
of the waiting period under the HSR Act to have expired or been terminated,
in which case such date shall be May 15, 1998), unless such failure to pay
for Shares has been caused by or resulted from the failure of the Company
to perform in any respect any covenant or agreement of it contained in the
Merger Agreement or the breach by the Company of any representation or
warranty of it contained in the Merger Agreement or the failure of any of
the Majority Shareholders to perform in any respect any covenant or
agreement of any of them contained in the Stock Purchase Agreement or the
breach by any of them of any representation or warranty contained in the
Stock Purchase Agreement; or
(e) By the Company if the Stock Purchase Agreement is terminated
pursuant to its terms or is otherwise amended in a manner adverse to the
Company or its shareholders without the Company's prior written consent.
In the event of the termination of the Merger Agreement, the Merger
Agreement provides that it will forthwith become void and there will be no
liability thereunder on the part of any party thereto except as set forth in
certain provisions of the Merger Agreement related to fees and expenses
described below and under certain other provisions of the Merger Agreement which
survive termination.
13
<PAGE> 15
THE STOCK PURCHASE AGREEMENT
Concurrently with entering into the Merger Agreement, Parent, Purchaser and
the Majority Shareholders entered into the Stock Purchase Agreement pursuant to
which, upon the terms and conditions set forth therein, the Majority
Shareholders agreed to validly tender (and not withdraw) pursuant to the Offer
all Shares now or hereafter owned by the Majority Shareholders and have
otherwise agreed to sell to Purchaser all such Shares at a purchase price per
Share equal to $22.50 (or any higher price that may be paid per Share pursuant
to the Offer). On January 12, 1998, the Majority Shareholders owned (either
beneficially or of record) 10,786,962 Shares, constituting approximately 74.6%
of the outstanding Shares (or approximately 67% of the outstanding Shares on a
fully diluted basis).
UPON CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THE STOCK PURCHASE
AGREEMENT, PARENT AND PURCHASER, BY VIRTUE OF THE ACQUISITION OF APPROXIMATELY
74.6% OF THE OUTSTANDING SHARES, WILL OWN A NUMBER OF SHARES SUFFICIENT, EVEN IF
NO OTHER SHARES ARE TENDERED IN THE OFFER, TO CAUSE THE MERGER TO OCCUR WITHOUT
THE AFFIRMATIVE VOTE OF ANY OTHER HOLDER OF SHARES.
Each of the Majority Shareholders has constituted and appointed Purchaser,
or a nominee of Purchaser, during the term of the Stock Purchase Agreement, as
his, her or its true and lawful attorney and proxy to vote each of the Shares
held by such Majority Shareholder, at every annual, special or adjourned meeting
of the shareholders of the Company, including the right to sign his, her or its
name to any consent, certificate or other document relating to the Company that
the law of the State of Texas may permit or require, (i) in favor of the
approval and adoption of the Merger Agreement and approval of the Merger and the
other transactions contemplated by the Merger Agreement, (ii) against any
proposal for any recapitalization, merger, sale of assets, or other business
combination between the Company and any person or entity (other than the Merger)
or any other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or which could result in any of the conditions to the
Merger Agreement not being fulfilled or which could adversely affect the ability
of the Company to consummate the Merger and the other transactions contemplated
by the Merger Agreement, and (iii) in favor of any other matter relating to the
consummation of the transactions contemplated by the Merger Agreement. Each
Majority Shareholder has further agreed to cause the Shares owned by him, her or
it beneficially or of record to be voted in accordance with the foregoing.
Each Majority Shareholder has agreed not to offer or agree to sell,
transfer, tender, assign, hypothecate or otherwise dispose of or create or
permit to exist any encumbrance (other than any encumbrance that will be
terminated prior to or concurrently with the closing) on the Shares now owned or
that may hereafter be acquired by such Majority Shareholder at any time.
Each Majority Shareholder has agreed not to, directly or indirectly,
through any officer, director, agent or otherwise, so long as the Stock Purchase
Agreement shall remain in effect, solicit, initiate, encourage the submission of
or accept any proposal or offer from any individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the Exchange
Act), trust, association or entity or government, political subdivision, agency
or instrumentality of a government (collectively other than Purchaser and any
affiliate of Purchaser, a "Person") relating to (i) any acquisition or purchase
of all or any of the Shares held by the Majority Shareholders or (ii) any
acquisition or purchase of all or (other than in the ordinary course of
business) any portion of the assets of, or any equity interest in, the Company
or any business combination with the Company or participate in any negotiations
regarding, or furnish to any Person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in or facilitate
or encourage, any effort or attempt by any Person to do or seek any of the
foregoing. Each Majority Shareholder has agreed to notify Purchaser promptly if
any such proposal or offer, or any inquiry or contact with any Person with
respect thereto, is made and will, in any such notice to Purchaser, indicate in
reasonable detail the identity of the Person making such proposal, offer,
inquiry or contact and the terms and conditions of such proposal, offer, inquiry
or contact. Notwithstanding the foregoing, the actions of any Majority
Shareholder who is a director or officer of the Company, solely in his or her
capacity as a director or officer, shall be governed by the Merger Agreement and
not the Stock Purchase Agreement.
14
<PAGE> 16
The Stock Purchase Agreement provides that, for a period of four years
after the consummation of the transactions contemplated thereby (the "Restricted
Period"), no Majority Shareholder (other than Advance Capital, it being
expressly agreed that the non-competition provisions shall not apply to Advance
Capital) will engage (other than on behalf of the Surviving Corporation or the
Company or their respective subsidiaries), directly or indirectly, in the Tax
and Accounting Software Business (as defined below) anywhere in the world or,
without the prior written consent of Parent, directly or indirectly, own an
interest in, manage, operate, join, control, lend money or render financial or
other assistance (other than customary professional courtesies afforded to
members of the business community) to or participate in or be connected with, as
an officer, employee, partner, shareholder, consultant, advisor or other similar
capacity, any person (other than the Surviving Corporation or the Company or
their respective subsidiaries) that engages in the Tax and Accounting Software
Business; provided, however, that ownership of securities having no more than
five percent of the outstanding voting power of any competitor which are listed
on any national securities exchange or traded actively in the national
over-the-counter market shall not be deemed to be in violation of such
restriction so long as the person owning such securities has no other connection
or relationship with such competitor that would not be permitted by the Stock
Purchase Agreement. "Tax and Accounting Software Business" means (x) the
business of developing, designing, publishing, marketing and distributing (i)
tax compliance software and services for tax and accounting professionals within
corporations, banks, government agencies and accounting firms; (ii) accounting
and practice management software and services marketed primarily to accounting
firms; and (iii) other tax and accounting software products and services which
are under development by the Company as of the closing of the transactions
contemplated by the Stock Purchase Agreement; and (y) the business of the
Company's Rent Roll, Inc. subsidiary as of the closing of the transactions
contemplated by the Stock Purchase Agreement.
As a separate and independent covenant, each Majority Shareholder (other
than Advance Capital) has agreed with Purchaser that, during the Restricted
Period (other than on behalf of the Surviving Corporation or the Company or
their respective subsidiaries), such Majority Shareholder will not in any way,
directly or indirectly, for the purpose of conducting or engaging in the Tax and
Accounting Software Business, call upon, solicit, advise or otherwise do, or
attempt to do, business with any customers of the Surviving Corporation, the
Company or any Subsidiary with whom the Surviving Corporation, the Company, any
Subsidiary or such Majority Shareholder had any dealings during the two year
period prior to the first day of the Restricted Period, or take away or
interfere or attempt to interfere with any customer, trade, business or
patronage of the Surviving Corporation, the Company or any Subsidiary.
In addition, as a separate and independent covenant, each Majority
Shareholder (other than Advance Capital) has agreed with Purchaser that, during
the Restricted Period, such Majority Shareholder will not, in any way, directly
or indirectly, hire, attempt to hire, interfere with or attempt to interfere
with any officers, employees, representatives, consultants or agents of the
Surviving Corporation, the Company or any Subsidiary or any former officer,
employee, representative, consultant or agent of the Surviving Corporation, the
Company or any Subsidiary who resigned or was terminated within the prior six
month period (other than an employee whose employment was terminated by the
Surviving Corporation, the Company or any Subsidiary without Cause, or who
resigned from his or her employment for Good Reason, as such terms are defined
in the Retention Bonus Plan), or induce or attempt to induce any of them to
leave the employ of the Surviving Corporation, the Company or any Subsidiary or
violate the terms of their contracts, or any arrangements, with the Surviving
Corporation, the Company or any Subsidiary.
The obligation of the Majority Shareholders and Purchaser to consummate the
purchase and sale of the Shares under the Stock Purchase Agreement is subject to
the satisfaction of the following conditions: (a) any applicable waiting periods
(and any extension thereof) under the HSR Act with respect to the purchase and
sale of the Shares pursuant to the Stock Purchase Agreement shall have expired
or been terminated and (b) no preliminary or permanent injunction or law, rule,
regulation, order, decree or ruling issued by any United States or Canadian
federal, state, provincial or local court or governmental or regulatory
authority of competent jurisdiction prohibiting the purchase and sale of the
Shares pursuant to the Stock Purchase Agreement shall be in effect. The
obligation of Purchaser to consummate the purchase of the Shares pursuant to the
Stock Purchase Agreement is further subject to the satisfaction of the following
conditions: (a) the
15
<PAGE> 17
representations and warranties of the Company in the Merger Agreement and of the
Majority Shareholders in the Stock Purchase Agreement that are qualified as to
materiality shall have been true and correct and such representations and
warranties that are not so qualified shall have been true and correct in all
material respects, in each case as of the date of the Stock Purchase Agreement,
except in the case of any representation and warranty that speaks as of a
particular date, which shall be true and correct or true and correct in all
material respects, as applicable, as of such date, (b) the Company shall have
performed in all material respects its obligations, and complied in all material
respects with its covenants and agreements, under the Merger Agreement, (c) the
Majority Shareholders shall have performed in all material respects their
obligations, and complied in all material respects with their covenants and
agreements, under the Stock Purchase Agreement, (d) each of the conditions to
the Offer shall have been satisfied or waived by Purchaser, (e) either Purchaser
shall have accepted the Shares for payment pursuant to the Offer or the Offer
shall have expired or been terminated without the purchase of any Shares
pursuant thereto and (f) the Merger Agreement shall not have been terminated.
The obligation of the Majority Shareholders to consummate the sale of the Shares
pursuant to the Stock Purchase Agreement is further subject to the satisfaction
of the following condition: the Merger Agreement shall not have been terminated
pursuant to the termination provisions of the Merger Agreement.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) RECOMMENDATION OF THE BOARD
The Board has unanimously approved the Merger Agreement, the Offer, the
Merger and the other transactions contemplated by the Merger Agreement and the
Stock Purchase Agreement and has determined that the Offer and the Merger are
fair to and in the best interests of the Company's shareholders, and unanimously
recommends that the Company's shareholders accept the Offer and tender their
Shares in the Offer.
A letter to the Company's shareholders communicating the Board's
recommendation and a press release announcing the execution of the Merger
Agreement are filed herewith as Exhibits 3 and 4, respectively, and are
incorporated herein by reference.
(b) REASONS FOR THE BOARD'S RECOMMENDATION
In reaching the determination and recommendation described in paragraph (a)
above, the Board considered a number of factors, including the following:
(1) The requirement by Parent, as a condition to Parent's willingness
to agree to acquire the Company, that the Majority Shareholders enter into
a binding agreement for the sale of their Shares; and the stated desire of
the Majority Shareholders to proceed with the sale of their Shares to
Purchaser pursuant to the Stock Purchase Agreement.
(2) The financial condition and results of operations of the Company.
(3) The projected financial results, prospects and strategic
objectives of the Company, as well as the risks involved in achieving those
results, prospects and objectives in the tax and accounting software and
services industry.
(4) The fact that the $22.50 per Share to be received by the Company's
shareholders in both the Offer and Merger represents a substantial premium
(63.6%) over the closing market price of $13.75 per Share on January 12,
1998 (the last trading day prior to the Board's approval of the transaction
referred to in paragraph (a) of this Item 4); and the fact that the $22.50
per Share to be received by the Company's shareholders in both the Offer
and Merger represents a substantial premium (120.4%) over the five-year
weighted average market price per Share.
(5) Developments relating to the consolidation in the tax and
accounting software and services industry.
16
<PAGE> 18
(6) The Board's view, after consultation with management and Goldman
Sachs, regarding the likelihood of the existence of other viable buyers on
terms as favorable as those in the Offer and the Merger.
(7) Presentations to the Board by Goldman Sachs and the oral opinion
of Goldman Sachs (subsequently confirmed in writing) that, as of January
12, 1998, the $22.50 per Share in cash to be received by the holders of
Shares in the Offer and the Merger is fair from a financial point of view
to such holders. The full text of the written opinion of Goldman Sachs,
which sets forth assumptions made, procedures followed, matters considered
and limits on the review undertaken, is attached as Exhibit 5 to this
statement and is incorporated herein by reference. THE COMPANY'S
SHAREHOLDERS ARE URGED TO READ THIS OPINION IN ITS ENTIRETY.
(8) The availability of appraisal rights under Articles 5.11 - 5.13 of
Texas Law for dissenting Shares.
(9) The terms and conditions of the Merger Agreement and the Stock
Purchase Agreement and the course of the negotiations resulting in the
execution thereof.
(10) The likelihood that the proposed acquisition would be
consummated, including the likelihood of obtaining the regulatory approvals
required pursuant to, and satisfying the other conditions to, the Offer and
the Merger contained in the Merger Agreement, the experience, reputation
and financial condition of the Parent and the risks to the Company if the
acquisition were not consummated.
(11) The recommendation of the Company's management with respect to
the proposed transaction.
The members of the Board evaluated the factors listed above in light of
their knowledge of the business and operations of the Company and their business
judgment. In view of the wide variety of factors considered in connection with
its evaluation of the Offer and the Merger, the Board did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination. The
Board recognized that Purchaser, by virtue of the acquisition of the Shares of
the Majority Shareholders pursuant to the Stock Purchase Agreement, will have
sufficient voting power to approve the Merger without the affirmative vote of
any other shareholder of the Company. While consummation of the Offer would
result in the remaining shareholders of the Company receiving a premium for
their Shares over the trading prices of the Shares prior to the announcement of
the Offer and the Merger, it would eliminate any opportunity for the
shareholders of the Company other than Parent to participate in the potential
future growth prospects of the Company. The Board, however, believed that the
value of such potential future growth was reflected in the Offer Price to be
paid and also recognized that there can be no assurance of growth, if any, to be
attained by the Company in the future.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
Pursuant to a letter agreement dated November 30, 1997 (the "Engagement
Letter"), the Company engaged Goldman Sachs to undertake a study to enable it to
render its opinion with respect to the cash consideration to be received for
each Share in connection with the Offer and the Merger. Pursuant to the terms of
the Engagement Letter, the Company has agreed to pay Goldman Sachs a transaction
fee equal to 1% of the aggregate consideration paid, if a transaction or series
of transactions resulting in the purchase of 50% or more of the outstanding
Shares or the assets (based on the book value thereof) is accomplished. The
Company has agreed to reimburse Goldman Sachs for its reasonable out-of-pocket
expenses, including attorney's fees, and to indemnify Goldman Sachs against
certain liabilities, including certain liabilities under the federal securities
laws.
Pursuant to a letter agreement dated November 30, 1997, certain members of
the Winn Family (as defined below), including Francis W. Winn, Nancy K. Winn,
Stephen T. Winn, David L. Winn, James R. Dunaway, Jr., and Carol Winn Dunaway,
individually and on behalf of their respective spouses and any trusts,
partnerships, limited partnerships or other entities (other than the Company) in
which they or any member of their immediate family holds an interest
(collectively, the "Winn Family"), agreed to reimburse
17
<PAGE> 19
the Company for any payments the Company is obligated to make to Goldman Sachs
pursuant to the Engagement Letter if any person within the Winn Family sells or
agrees to sell all or any portion of their respective Shares in one or a series
of transactions requiring the Company to make payments to or for the benefit of
Goldman Sachs pursuant to the Engagement Letter and the Company's shareholders
other than the Winn Family are not provided the opportunity to sell the same
portion of their Shares for the same (or greater) per share consideration prior
to or at the same time (or within 90 days following such time).
Except as disclosed herein, neither the Company nor any person acting on
its behalf has employed, retained or compensated any person to make
solicitations or recommendations to the Company's shareholders with respect to
the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) To the best of the Company's knowledge, no transactions in the Shares
have been effected during the past 60 days by the Company or by any executive
officer, director, affiliate or subsidiary of the Company.
(b) To the best of the Company's knowledge, all of its executive officers,
directors, affiliates and subsidiaries currently intend to tender pursuant to
the Offer all Shares held of record or beneficially owned by them other than
Shares issuable upon exercise of stock options and Shares, if any, which if
tendered could cause such persons to incur liability under the provisions of
Section 16(b) of the Exchange Act.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result in
(i) an extraordinary transaction, such as a merger or reorganization, involving
the Company or any subsidiary of the Company; (ii) a purchase, sale or transfer
of a material amount of assets by the Company or any subsidiary of the Company;
(iii) a tender offer for or other acquisition of securities by or of the
Company; or (iv) any material change in the present capitalization or dividend
policy of the Company.
(b) Except as described in Item 3(b) and Item 4 above (the provisions of
which are hereby incorporated by reference), there are no transactions, board
resolutions, agreements in principle or signed contracts in response to the
Offer which relate to or would result in one or more of the matters referred to
in paragraph (a) of this Item 7.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
The State of Texas recently enacted Part Thirteen (Articles 13.01 et seq.)
of Texas Law (the "Business Combination Law") which has application to "issuing
public corporations" formed under Texas Law, such as the Company. The Business
Combination Law imposes a three-year moratorium on certain business combination
transactions between an issuing public corporation and an "affiliated
shareholder" (generally, a beneficial owner of 20% or more of the then
outstanding voting shares of the issuing public corporation) or any affiliate or
associate of the affiliated shareholder unless (i) the proposed business
combination, or the purchase or acquisition of voting shares on the date such
person became an affiliated shareholder (the "share acquisition date"), was
approved by the board of directors of the issuing public corporation prior to
the affiliated shareholder's share acquisition date or (ii) the proposed
business combination is approved by the affirmative vote of at least two-thirds
of the outstanding voting shares (excluding the shares owned by the affiliated
shareholder and its affiliates and associates) at a meeting of shareholders (and
not by written consent) duly called for that purpose not less than six months
after the affiliated shareholder's share acquisition date. Application of the
Business Combination Law is subject to a number of exceptions.
Because the transactions contemplated by the Merger Agreement and the Stock
Purchase Agreement have been unanimously approved by the Board, the restrictions
under the Business Combination Law will not affect the Offer or the Merger or
the transactions contemplated by the Stock Purchase Agreement. The Business
Combination Law will apply to the Company for so long as it has (i) 100 or more
shareholders of
18
<PAGE> 20
record, (ii) any class of voting securities registered under Exchange Act or
(iii) any class of voting securities qualified for trading in a national market
system, but not thereafter.
The Business Combination Law also permits a corporation's board of
directors, when considering the best interests of the corporation, to consider
the long-term as well as the short-term interests of the corporation and its
shareholders, including the possibility that those interests may be best served
by the continued independence of the corporation.
The Information Statement attached as Schedule I hereto is being furnished
in connection with the possible designation by Purchaser, pursuant to the Merger
Agreement, of certain persons to be appointed to the Board other than at a
meeting of the Company's shareholders.
References are hereby made to the Offer to Purchase and the related Letter
of Transmittal, copies of which are filed herewith as Exhibits 1 and 2,
respectively, and are incorporated herein by reference.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
<TABLE>
<S> <C>
Exhibit 1 -- Offer to Purchase.+
Exhibit 2 -- Letter of Transmittal.+
Exhibit 3 -- Letter to Shareholders.*+
Exhibit 4 -- Joint Press Release issued by Computer Language Research,
Inc. and The Thomson Corporation on January 13, 1998
(incorporated by reference to the Company's Current
Report on Form 8-K filed on January 15, 1998).
Exhibit 5 -- Opinion of Goldman, Sachs & Co. dated January 12, 1998.*+
Exhibit 6 -- Agreement and Plan of Merger dated as of January 12,
1998, among Computer Language Research, Inc., The Thomson
Corporation and Sabre Acquisition, Inc. (incorporated by
reference to the Company's Current Report on Form 8-K
filed on January 15, 1998).
Exhibit 7 -- Stock Purchase Agreement, dated as of January 12, 1998,
among The Thomson Corporation, Sabre Acquisition, Inc.
and certain shareholders of Computer Language Research,
Inc. (incorporated by reference to the Company's Current
Report on Form 8-K filed on January 15, 1998).
Exhibit 8 -- Pages 2 through 20 of the Company's Proxy Statement dated
April 1, 1997 relating to its annual meeting of
shareholders.+
</TABLE>
- ---------------
* Included in copies of Schedule 14D-9 mailed to shareholders.
+ Filed herewith.
19
<PAGE> 21
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: January 16, 1998.
COMPUTER LANGUAGE RESEARCH, INC.
By: /s/ STEPHEN T. WINN
----------------------------------
Name: Stephen T. Winn
Title: President and Chief
Executive Officer
20
<PAGE> 22
SCHEDULE I
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE
SECURITIES EXCHANGE ACT OF 1934 AND
RULE 14F-1 THEREUNDER
GENERAL
This Information Statement is being mailed on or about January 16, 1998 as
part of the Solicitation/ Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Computer Language Research, Inc., a Texas corporation (the
"Company"), to the holders of record of shares of common stock, par value $.01
per share, of the Company (the "Common Stock" or the "Shares"). You are
receiving this Information Statement in connection with the possible election of
persons designated by Purchaser (as defined below) to the Board of Directors of
the Company (the "Board").
On January 12, 1998, the Company, The Thomson Corporation, a corporation
incorporated under the laws of Ontario, Canada ("Parent"), and Sabre
Acquisition, Inc., a Delaware corporation and a wholly owned subsidiary of
Parent ("Purchaser"), entered into an Agreement and Plan of Merger (the "Merger
Agreement") pursuant to which (i) Purchaser will commence a tender offer (the
"Offer") for all of the outstanding Shares at a price of $22.50 per Share, net
to the seller in cash, without interest thereon, and (ii) Purchaser will be
merged with and into the Company (the "Merger"). As a result of the Offer and
the Merger, Parent will own all of the outstanding capital stock of the Company.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of Shares pursuant to the Offer, and from time to time thereafter, Purchaser
shall be entitled to designate such number of directors (the "Purchaser
Designees") on the Board as will give Purchaser representation proportionate to
its ownership interest. The Merger Agreement requires the Company to take such
action as Purchaser may request to cause the Purchaser Designees to be elected
to the Board under the circumstances described therein. The Merger Agreement
provides that the Company will use its best efforts to cause persons designated
by Purchaser to constitute the same percentage as such persons designated by
Purchaser will constitute of the Board of each committee of the Board, and each
board of directors, and each committee thereof, of each domestic subsidiary, in
each case only to the extent permitted by applicable law. This Information
Statement is required by Section 14(f) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Rule 14f-1 promulgated thereunder. See
"Right to Designate Directors; The Purchaser Designees."
You are urged to read this Information Statement carefully. You are not,
however, required to take any action in connection with this Information
Statement. Capitalized terms used herein and not otherwise defined shall have
the meaning set forth in the Schedule 14D-9.
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by Parent. The Company assumes
no responsibility for the accuracy or completeness of such information.
The Shares are the only class of voting securities of the Company
outstanding. Each Share has one vote. As of January 12, 1998, there were
14,463,844 Shares outstanding. The Board currently consists of nine members with
no vacancies. Each director holds office until such director's successor is
elected and qualified or until such director's earlier resignation or removal.
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
The Merger Agreement provides that, subject to applicable law, immediately
upon the purchase of Shares by Purchaser pursuant to the Offer, Purchaser will
be entitled to designate such number of directors, rounded up to the next whole
number, on the Board as is equal to the product of the total number of directors
on the Board multiplied by the percentage that the aggregate number of Shares
beneficially owned by Purchaser or any of its affiliates bears to the total
number of Shares then outstanding. The Company has
I-1
<PAGE> 23
agreed to promptly take all action to cause the Purchaser Designees to be so
elected, including, if necessary, increasing the size of the Board or seeking
the resignations of one or more existing directors. The Company has also agreed,
subject to applicable law, to use its best efforts to cause persons designated
by Purchaser to constitute the same percentage as is on the Board of (i) each
committee of the Board, (ii) each board of directors of each domestic subsidiary
of the Company and (iii) each committee of each such board.
Notwithstanding the foregoing, the Merger Agreement provides that,
following the election of the Purchaser Designees in accordance with the
foregoing and prior to the Effective Time (as defined in the Merger Agreement),
any amendment of the Merger Agreement or the Articles of Incorporation or
By-laws of the Company, any termination of the Merger Agreement by the Company,
any extension by the Company of the time for the performance of any of the
obligations or other acts of Parent or Purchaser or waiver of any of the
Company's rights thereunder, will require the concurrence of a majority of those
directors of the Company then in office who were neither designated by Purchaser
nor are employees of the Company.
The Purchaser Designees will be selected by Purchaser from among the
individuals listed below. Each of the following individuals has consented to
serve as a director of the Company if appointed or elected. None of the
following individuals owns any Shares, other than Mr. Stephen T. Winn. In
addition, none of the following individuals is a director of, or holds any
position with, the Company, other than Mr. Stephen T. Winn. The following table
sets forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments and business addresses thereof for the past five years of
Purchaser's Designees to the Board. Unless otherwise indicated, each occupation
set forth opposite an individual's name refers to employment with Parent. For
information regarding Stephen T. Winn, see "Directors of the Company."
<TABLE>
<CAPTION>
NAME, AGE AND PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS DURING THE PAST FIVE YEARS AND BUSINESS ADDRESS THEREOF
------------------------ -------------------------------------------------------------------
<S> <C>
Richard J. Harrington, 51.................... Director of Parent since September 1993. President and CEO of
The Thomson Corporation Parent since October 1997. Executive Vice-President of Parent
One Station Place -- Metro Center from September 1993 to October 1997. President and Chief
Stamford, Connecticut 06902 Executive Officer, Thomson Newspapers Group, Metro Center, One
Citizen of United States Station Place, Stamford, Connecticut 06902, from July 1993 to
October 1997. President and Chief Executive Officer, Thomson
Professional Publishing, Metro Center, One Station Place,
Stamford, Connecticut 06902, from June 1989 to July 1993.
Nigel R. Harrison, 48........................ Director of Parent since June 1989. Chief Financial Officer of
The Thomson Corporation Parent since July 1984. Executive Vice-President of Parent since
One Station Place -- Metro Center June 1989.
Stamford, Connecticut 06902
Citizen of Great Britain
Andrew G. Mills, 45.......................... Director and Executive Vice President of Parent since January 1995.
Thomson Financial & Professional President and Chief Executive Officer of Thomson Financial &
Publishing Group Professional Publishing Group, 22 Pittsburgh Street, Boston,
22 Pittsburgh Street Massachusetts, 02210, since May 1994. Chairman of Massachusetts
Boston, Massachusetts 02210 Technology Development Corporation, 149 State Street, Boston,
Citizen of Great Britain Massachusetts 02109, since 1990.
</TABLE>
I-2
<PAGE> 24
<TABLE>
<CAPTION>
NAME, AGE AND PRESENT PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL POSITIONS HELD
CURRENT BUSINESS ADDRESS DURING THE PAST FIVE YEARS AND BUSINESS ADDRESS THEREOF
------------------------ -------------------------------------------------------------------
<S> <C>
Robert Daleo, 49............................. Executive Vice-President, Finance and Business Development of
The Thomson Corporation Parent since November 1997. Senior Vice President, Finance and
One Station Place -- Metro Center Business Development of Parent from January 1997 to October 1997.
Stamford, CT 06902 Senior Vice President and Chief Operating Officer, Thomson
Citizen of Canada Newspapers, One Station Place, Metro Center, Stamford, CT 06902,
from January 1996 to December 1997. Senior Vice President and
Chief Financial Officer, Thomson Newspapers, from December 1994
to December 1995. Senior Vice President and General Manager,
Sweets Group, McGraw-Hill Company, 1221 Avenue of the Americas,
New York, New York 10020, until November 1994.
Robert C. Hall, 66........................... Vice-President of Parent since January 1995. President and CEO of
The Thomson Corporation Thomson Information/Publishing Group, One Station Place, Metro
One Station Place -- Metro Center Center, Stamford, CT 06902, from 1993 to January 1995. Director
Stamford, CT 06902 of the Advanta Corporation, Welch and McLean Roads, Spring House,
Citizen of Canada PA, since 1994. Director of Advanta Partners, Welch and McLean
Roads, Spring House, PA, since 1994.
Joseph J.G.M. Vermeer, 51.................... Vice-President; Director of Taxes of Parent since January 1995.
The Thomson Corporation Partner in Peat Marwick Thorne, 40 King Street West, Toronto,
One Station Place -- Metro Center Ontario, Canada, from 1977 to December 31, 1994.
Stamford, CT 06902
Citizen of Canada
Michael S. Harris, 48........................ President and Director of Purchaser since January 1998. Assistant
The Thomson Corporation Secretary of Parent since July 1993. Vice President and General
One Station Place -- Metro Center Counsel of Thomson Holdings Inc. ("THI"), Metro Center, One
Stamford, CT 06902 Station Place, Stamford, CT 06902, since June 1993. Assistant
Citizen of United States Secretary and Assistant General Counsel of THI from May 1989 to
June 1993.
Euan C. Menzies, 36.......................... President and Chief Executive of Research Institute of America
Research Institute of America Group Group, 395 Hudson Street, New York, NY 10014, since 1993. Vice
395 Hudson Street President and Chief Financial Officer of Thomson Professional
New York, New York 10014 Publishing Group, One Station Place, Stamford, CT 06902, from
Citizen of Great Britain 1989 to 1993.
Stephen T. Winn, 51.......................... See "Directors of the Company."
</TABLE>
DIRECTORS OF THE COMPANY
Set forth below is certain information with respect to the current
directors of the Company as of December 31, 1997:
Francis W. Winn, 80, the founder of the Company and a director since 1969,
served as its Chairman of the Board and President from February 1969 until May
1977, and continues to serve as Chairman of the Board. Prior to founding the
Company, Mr. Winn was employed by various petroleum or petroleum-related
companies in research management. Mr. Winn is the father of Stephen T. Winn and
Dr. David L. Winn, and the father-in-law of James R. Dunaway, Jr., all directors
of the Company.
Stephen T. Winn, 51, has served as a director since 1969, and as President
and Chief Executive Officer since May 1977. Mr. Winn served as Executive Vice
President from 1971 until his election as President in
I-3
<PAGE> 25
1977. Mr. Winn was selected as a Sloan Fellow at Stanford University in 1980 and
holds an M.M.S. Degree in Management Science from Stanford. He has served as a
member of the Stanford University Sloan Advisory Board, American Business
Conference and the American Electronics Association, a trustee for the St.
Mark's School of Texas and is an executive board member of the Circle Ten
Council of the Boy Scouts of America.
David L. Winn, M.D., FAAFP, 41, a director since 1987, previously served as
a director from 1977 to 1984. Currently, Dr. Winn practices primary care
medicine in Cedar Park, Texas, is a medical director of Hill Country Medical
Ministries and is a founder of Firestorm Productions, a producer of multi-media
entertainment software published through Virgin Interactive. Dr. Winn founded
Paperless Office Practice in 1996, a developer of electronic medical records
which are distributed by pharmaceutical sales representatives to primary care
medical offices across the United States.
James R. Dunaway, Jr., 49, a director since 1982, is the founder and owner
of Dunaway Associates, Inc., Engineers-Planners of Fort Worth, Texas and
Phoenix, Arizona. Since 1981, Mr. Dunaway has been an active real estate
investor and developer in the Dallas/Fort Worth area. Mr. Dunaway is a
registered Professional Engineer and Registered Professional Land Surveyor in
the State of Texas. He is a member of the Company's Compensation Committee.
Merle J. Volding, 74, a director since 1989, formerly served as a director
and consultant to BancTec, Inc., a provider of integrated financial transaction
processing systems, applications software, and support services, where he served
as Chairman of the Board and Chief Executive Officer from 1974 until 1986. He is
Chairman of the Company's Compensation Committee and a member of its Audit
Committee.
Max D. Hopper, 63, a director since August 1994, served at AMR
Corporation -- an air transportation company and provider of information
services to the travel and transportation industry -- as senior vice president
from 1985 through January 1995 and as chairman of The SABRE Group from April
1993 through January 1995. After retiring from AMR, Mr. Hopper founded Max D.
Hopper Associates, a consulting firm specializing in creating benefits from the
strategic use of advanced information technologies. He serves on the boards of
The Gartner Group, VTEL Corporation, Scopus Technology Corporation, USDATA
Corporation, Payless Cashways, Inc., Metrocall, Inc. and Worldtalk Corporation.
He is Chairman of the Company's Audit Committee and a member of its Compensation
Committee.
Jeffrey T. Leeds, 42, was elected as a director of the Company on February
27, 1997. Mr. Leeds is a founder and Principal of Advance Capital Management,
LLC, a private equity firm located in New York. Mr. Leeds also serves as
President of Leeds Group Inc., an investment banking firm also located in New
York. Mr. Leeds presently serves as a director of The Edison Project, a
for-profit education company that operates public schools under contracts with
states and local school districts, and The World Resources Institute, a
not-for-profit Washington based research group. Mr. Leeds served as a law clerk
to the Hon. William J. Brennan, Jr. of the Supreme Court of the United States in
1985-86. Prior to his clerkship, he worked in the corporate department of the
New York law firm of Cravath, Swaine & Moore. He is a member of the Company's
Compensation and Audit Committees. Pursuant to a Stockholders Agreement dated as
of January 22, 1997, by and between, inter alia, Advance Capital Partners, L.P.,
and Advance Capital Offshore Partners, L.P. (collectively, "Advance Capital") on
the one hand, and Stephen T. Winn, Carol Winn Dunaway, Dr. David L. Winn and
Winn Family, Ltd. (collectively, the "Winn Stockholders") on the other, the Winn
Stockholders have agreed to vote all of the remaining shares of capital stock of
the Company owned of record or beneficially by them so as to cause the election
of Mr. Leeds (or if Mr. Leeds is unable to serve as a director, another
individual designated by Advance Capital and acceptable to the majority of the
Winn Stockholders) to the Board, so long as Advance Capital shall own at least
200,000 of certain purchased shares. The Stockholders Agreement also provides
that the Winn Stockholders will vote all of the remaining shares of capital
stock of the Company owned of record or beneficially by them so as to cause (i)
the removal from the Board (with or without cause) of any director designated by
Advance Capital, upon Advance Capital's written request for such removal, and
(ii) any vacancy on the Board, resulting from any director designated by Advance
Capital for any reason ceasing to serve as a member of the Board, to be filled
by a representative designated by Advance Capital (which representative must be
reasonably acceptable to the Winn Stockholders).
I-4
<PAGE> 26
Walter V. Smiley, Jr., 60, was elected as a director of the Company on May
1, 1997. Mr. Smiley currently owns and is president of Smiley Investment
Company, a venture capital firm based in Little Rock, Arkansas. Mr. Smiley
served from 1968 until 1989 as Chairman of the Board of Directors and from 1968
until 1985 as Chief Executive Officer of Systematics, Inc., the predecessor of
ALLTELL Information Service, Inc., an Arkansas based company which provides data
processing services to financial institutions throughout the United States and
abroad. Mr. Smiley is also a director of Acxiom Corporation, Software Recording
Corporation and Southern Development Bancorporation. He holds a master's degree
in business administration and a bachelor's degree in industrial management from
the University of Arkansas. He is a member of the Company's Compensation and
Audit Committees.
Preston M. Geren, III, 45, was elected as a director of the Company on
October 30, 1997. Mr. Geren, a former member of the U.S. House of
Representatives for the 12th District of Texas, also serves as Senior Vice
President and director of Public Strategies, Inc., an Austin-based management
consulting company. Prior to his service in Congress, Mr. Geren practiced law
and was involved in a variety of business ventures. In his early career, Mr.
Geren served as executive assistant to U.S. Senator Lloyd Bentsen. The recipient
of an honorary Ph.D. from the University of North Texas Health Science Center,
Mr. Geren currently serves on the boards of directors of Union Pacific
Resources, Inc. and Overton Bank and Trust, as well as a variety of additional
civic and community organizations. He is a member of the Company's Compensation
and Audit Committees.
EXECUTIVE OFFICERS OF THE COMPANY
The following table sets forth certain information with respect to the
current executive officers of the Company as of December 31, 1997:
<TABLE>
<CAPTION>
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
<S> <C> <C>
Francis W. Winn........................... 80 Chairman of the Board
Stephen T. Winn........................... 51 President and Chief Executive Officer
Charles A. Cappiccille.................... 51 Group Vice President, Bank Group
James J. Charles.......................... 51 Group Vice President, Core Technology
Robert H. Dilworth........................ 51 Vice President, Business Development and
Investor Relations
Douglas H. Gross.......................... 54 Vice President, Secretary and General Counsel
G. Allen Harris........................... 47 Group Vice President, Corporate Group
M. Brian Healy............................ 54 Group Vice President, Finance and
Administration, and Chief Financial Officer
Charles W. Hill........................... 58 Controller and Treasurer
William T. Lynch.......................... 51 Group Vice President, Accounting Group
</TABLE>
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board meets on a regularly scheduled basis to review significant
developments affecting the Company and to act on matters requiring Board
approval. It also holds special meetings, including telephonic meetings, between
scheduled meetings when the need arises. The Board held eleven meetings during
the 1997 fiscal year. During such period and during their terms of office, each
nominee who was a director during the 1997 fiscal year participated in at least
75% of the aggregate of all Board meetings and all applicable committee
meetings.
The Board has established standing Audit and Compensation Committees whose
functions and the number of meetings held during the 1997 fiscal year are
described below. The members of these Committees have been identified above
under the heading "Directors of the Company." The Board does not have a
Nominating Committee; rather, the Board functions as a committee of the whole to
nominate candidates for Board membership.
I-5
<PAGE> 27
Audit Committee. The Audit Committee recommends to the Board the
appointment of independent auditors for the Company and monitors the performance
of such auditors; reviews and approves the scope of the annual audit; reviews
with the independent auditors in February of each year the results of the audit
for the prior fiscal year before the earnings report for such fiscal year is
released publicly; reviews and evaluates with management quarterly financial
statements; reviews with management the scope and adequacy of internal
accounting controls; reviews and evaluates the objectivity, effectiveness and
resources of the internal audit function; evaluates problem areas having a
potential financial impact on the Company which may be brought to its attention
by management, the independent auditors, or the Board and reviews certain public
financial reporting documents of the Company. The members of the Audit Committee
confer privately with the independent auditors. The Audit Committee met three
times during the 1997 fiscal year.
Compensation Committee. The Compensation Committee has responsibility to
review and approve executive compensation plans and packages. The Compensation
Committee met five times during the 1997 fiscal year.
Compensation of Directors. During 1997, each non-employee director received
a $1,000 per month retainer. Audit and Compensation Committee members received
$250 per month for serving on each committee. Non-employee directors were also
paid $1,000 per day for each day of attendance at Board meetings and were
reimbursed for their out-of-pocket expenses in attending meetings. Non-employee
directors participate in the Computer Language Research, Inc., Non-Employee
Directors' 1994 Stock Option Plan, pursuant to which options in the indicated
amounts were granted to Messrs. Leeds (10,000), Smiley (7,500), Geren (7,500),
Hopper (2,500), Volding (2,500) and Dunaway (2,500) and to Dr. Winn (2,500)
during fiscal year 1997.
BENEFICIAL OWNERSHIP OF COMMON STOCK BY PRINCIPAL SHAREHOLDERS,
DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table sets forth information as of December 31, 1997,
regarding the beneficial ownership of the Company's Common Stock by (i) each
person known by the Company to own more than 5% of the outstanding shares of
Common Stock, (ii) each director and nominee for director and named executive
officer and (iii) all directors and named executive officers of the Company as a
group. For purposes of the table, including the footnotes thereto, the
beneficial ownership of shares of Common Stock is being reported as required
under applicable securities laws and interpretations and may not be reflective
of state law ownership interests. The persons named in the table have sole
voting and investment power with respect to all shares of Common Stock owned by
them, except as noted.
<TABLE>
<CAPTION>
NUMBER OF % OF
NAME ADDRESS SHARES CLASS
---- ------- ---------- -----
<S> <C> <C> <C>
Francis W. Winn*....................... 2395 Midway Road 400,300(1) 2.80%
Carrollton, Texas 75006
Stephen T. Winn*....................... 2395 Midway Road 5,026,762(2) 34.61%
Carrollton, Texas 75006
David L. Winn*......................... 190 Buttercup Creek Blvd. 4,886,312(3) 33.77%
Cedar Park, Texas 78613
James R. Dunaway, Jr.*................. 1501 Merrimac Circle 5,012,912(4) 34.64%
Ft. Worth, Texas 76107
Carol Winn Dunaway..................... 1501 Merrimac Circle 5,012,912(5) 34.64%
Ft. Worth, Texas 76107
Winn Family, Ltd....................... c/o Stephen T. Winn, Mgr. 1,438,462(6) 9.95%
A Texas Limited Partnership 2395 Midway Road
Carrollton, Texas 75006
Jeffrey T. Leeds*...................... 401,930(7) 2.78%
Merle J. Volding*...................... 6,000(8) **
Max Dean Hopper*....................... 6,000(8) **
Walter V. Smiley*...................... 0 **
</TABLE>
I-6
<PAGE> 28
<TABLE>
<CAPTION>
NUMBER OF % OF
NAME ADDRESS SHARES CLASS
---- ------- ---------- -----
<S> <C> <C> <C>
Preston M. Geren, III*................. 0 **
William T. Lynch....................... 65,500(8) **
G. Allen Harris........................ 46,000(8) **
M. Brian Healy......................... 30,000(8) **
Lynn J. Finlinson...................... 0 **
All directors and named executive
officers as a group (13 persons)..... 11,014,392(9) 75.30%
</TABLE>
- ---------------
* Director
** Less than 1%
(1) Includes 250,000 shares directly owned by Nancy K. Winn, Mr. Winn's wife, as
to all of which shares Mr. Winn disclaims beneficial ownership; 78,300
shares held as tenants-in-common with Mrs. Winn; and 37,500 shares held as
joint tenants with Mrs. Winn.
(2) Includes 589,180 shares owned by a family limited partnership, of which an
entity controlled by Stephen T. Winn is the sole general partner; and
1,438,462 shares held by Winn Family, Ltd., a limited partnership of which
Mr. Winn is a general partner. Mr. Winn disclaims beneficial ownership of
the shares held by such limited partnerships except to the extent of his
pecuniary interest therein. Also includes 696,150 shares owned by a family
trust of which Mr. Winn is co-trustee. The co-trustees have equally shared
power to vote and/or dispose of the trust assets including the Common Stock
of the Company. Mr. Winn disclaims beneficial ownership of the shares held
by such trust except to the extent of his pecuniary interest therein.
Includes 299,050 shares held by the Francis W. Winn Grandchildren's Trust of
which Mr. Winn is a co-trustee. Mr. Winn disclaims beneficial ownership of
the shares held by such trust. Includes 60,000 shares subject to presently
exercisable options held by Mr. Winn.
(3) Includes 342,500 shares owned by a family trust, of which Dr. David L. Winn
is the sole trustee; 97,250 shares owned by trusts for Dr. Winn's children,
of which he is the sole trustee; and 151,150 shares directly owned by Dr.
Winn's wife, as to all of which shares Dr. Winn disclaims beneficial
ownership. Includes 1,438,462 shares held by Winn Family, Ltd., a limited
partnership of which Dr. Winn is a general partner. Dr. Winn disclaims
beneficial ownership of the shares held by such limited partnership except
to the extent of his pecuniary interest therein. Also includes 696,150
shares held by a family trust of which Dr. Winn is co-trustee. The
co-trustees have equally shared power to vote and/or dispose of the trust
assets including the Common Stock of the Company. Dr. Winn disclaims
beneficial ownership of the shares held by such trust except to the extent
of his pecuniary interest therein. Includes 299,050 shares held by the
Francis W. Winn Grandchildren's Trust of which Dr. Winn is a co-trustee. Dr.
Winn disclaims beneficial ownership of the shares held by such trust. Also
includes 6,000 shares subject to presently exercisable options held by Dr.
Winn.
(4) Includes 267,500 shares owned by a family trust of which Carol Winn Dunaway,
Mr. Dunaway's wife, is the sole trustee; 1,438,462 shares owned by Winn
Family, Ltd., a limited partnership of which Mrs. Dunaway is a general
partner; 299,050 shares held by a trust, of which Mrs. Dunaway is a
co-trustee; and 1,900,000 shares directly owned by Mrs. Dunaway, as to all
of which shares Mr. Dunaway disclaims beneficial ownership. Includes 379,100
shares owned by the Turtle Creek Group, Ltd., a limited partnership of which
Mr. Dunaway is a general partner. Mr. Dunaway disclaims beneficial ownership
of the shares held by such limited partnership except to the extent of his
pecuniary interest therein. Includes 696,150 shares held by a family trust
of which Mrs. Dunaway is co-trustee. The co-trustees have equally shared
power to vote and/or dispose of the trust assets including the Common Stock
of the Company. Mr. Dunaway disclaims beneficial ownership of the shares
held by such trust except to the extent of his pecuniary interest therein.
Also includes 6,000 shares subject to presently exercisable options held by
Mr. Dunaway.
(5) Includes 267,500 shares owned by a family trust, of which Mrs. Dunaway is
the sole trustee; 26,650 shares directly owned by James R. Dunaway, Jr.,
Mrs. Dunaway's husband; and 6,000 presently
I-7
<PAGE> 29
exercisable options held by Mr. Dunaway, as to all of which shares and
options Mrs. Dunaway disclaims beneficial ownership. Includes 1,438,462
shares owned by Winn Family, Ltd., a limited partnership of which Mrs.
Dunaway is a general partner and 379,100 shares owned by the Turtle Creek
Group, Ltd., a limited partnership of which Mrs. Dunaway is a general
partner. Mrs. Dunaway disclaims beneficial ownership of the shares held by
such limited partnerships except to the extent of her pecuniary interest
therein. Also includes 696,150 shares held by a family trust of which Mrs.
Dunaway is co-trustee. The co-trustees have equally shared power to vote
and/or dispose of the trust assets including the Common Stock of the
Company. Mrs. Dunaway disclaims beneficial ownership of the shares held by
such trust except to the extent of her pecuniary interest therein. Includes
299,050 shares held by the Francis W. Winn Grandchildren's Trust of which
Mrs. Dunaway is a co-trustee. Mrs. Dunaway disclaims beneficial ownership of
the shares held by such trust.
(6) Winn Family, Ltd., was organized on May 11, 1994. Limited partners are
Francis W. Winn and Nancy K. Winn. The general partners are Stephen T. Winn,
Manager, Carol Winn Dunaway and Dr. David L. Winn. The general partners have
equally shared power to vote and/or dispose of the partnership assets
including the Common Stock of the Company.
(7) Includes 400,000 shares owned by limited partnerships. Mr. Leeds is a
principal and member of an entity that is the ultimate parent entity of
these limited partnerships. Mr. Leeds disclaims beneficial ownership of
these securities except to the extent of his pecuniary interest therein.
Includes 1,500 shares subject to presently exercisable options held by Mr.
Leeds.
(8) Includes 6,000, 6,000, 6,250, 46,000 and 25,000 presently exercisable
options held by Messrs. Volding, Hopper, Lynch, Harris and Healy,
respectively.
(9) Includes 6,810,342 shares owned by persons and entities other than the
directors and named executive officers as described in footnotes (1)-(8)
above, and as to which shares such directors and named executive officers
disclaim beneficial ownership; and 162,750 shares subject to presently
exercisable options held by the directors and named executive officers
(including Mr. Stephen T. Winn).
I-8
<PAGE> 30
EXECUTIVE COMPENSATION
The federal government mandates that this Information Statement set forth
certain information regarding the compensation of all individuals who served as
the Company's Chief Executive Officer during the last completed fiscal year and
the other four most highly compensated executive officers who were serving as
executive officers at the end of the Company's last completed fiscal year and
one additional individual for whom disclosure would have been provided pursuant
to Item 402 of Regulation S-K but for the fact that the individual was not
serving as an executive officer of the Company at the end of the last completed
fiscal year.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ------------------------ -------
-------------------------------------- RESTRICTED SECURITIES
OTHER STOCK UNDERLYING LTIP ALL OTHER
NAME AND SALARY BONUS ANNUAL AWARD(S) OPTIONS/ PAYOUTS COMPENSATION
PRINCIPAL POSITION YEAR ($)(1) ($)(2) COMPENSATION($)(3) ($)(4) SAR'S(4)(#) ($)(4) ($)(3)(6)
- ------------------------- ---- ------- ------- ------------------ ---------- ----------- ------- ------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen T. Winn.......... 1997 337,500 0 0 N/A 175,000 N/A 2,663
President/CEO 1996 324,000 0 0 N/A 0 N/A 11,496
1995 316,488 252,890 0 N/A 0 N/A 4,822
Francis W. Winn.......... 1997 225,000 0 0 N/A 0 N/A 2,826
Founder and Chairman 1996 225,000 0 0 N/A 0 N/A 4,951
of the Board 1995 225,000 0 0 N/A 0 N/A 4,951
William T. Lynch......... 1997 188,752 0 0 N/A 50,000 N/A 8,000
Group Vice President, 1996 182,500 54,750 0 N/A 0 N/A 11,623
Accounting Tax Group 1995 166,669 108,190 0 N/A 5,000 N/A 15,441
G. Allen Harris.......... 1997 207,502 0 0 N/A 50,000 N/A 36,811
Group Vice President, 1996 196,250 0 0 N/A 25,000 N/A 44,476
Corporate Tax Group 1995 166,832 50,000 0 N/A 10,000 N/A 107,034
M. Brian Healy........... 1997 178,748 0 0 N/A 20,000 N/A 7,767
Group Vice President, 1996 172,500 14,231 0 N/A 0 N/A 10,701
Finance &
Administration 1995 167,500 78,062 0 N/A 5,000 N/A 7,941
Lynn J. Finlinson(5)..... 1997 181,093 0 0 N/A 0 N/A 176,400
President, 1996 179,500 0 0 N/A 30,000 N/A 86,745
Rent Roll, Inc. 1995 94,250 272,620 0 N/A 20,000 N/A 2,610
</TABLE>
- ---------------
(1) Includes amounts of base salary deferred at the election of the executive
pursuant to the Company's 401(k) Plan, a defined contribution plan.
(2) The 1997 bonus was not calculable through the latest practicable date for
inclusion in this Information Statement. Pursuant to the instructions to
Regulation S-K, Item 402(b)(2)(iii)(B), such non-calculable amounts will be
disclosed in the subsequent fiscal year in the appropriate column for the
fiscal year in which earned.
(3) Pursuant to the Commission's rules, amounts for perquisites and other
personal benefits for fiscal years ended after December 15, 1992, which do
not exceed the lesser of $50,000 or ten percent of the named executive
officer's salary and bonus, are not required to be disclosed.
(4) During fiscal year 1997, the Company did not maintain stock appreciation
rights, restricted stock or long-term incentive plans.
(5) Mr. Finlinson was an employee of the Company between June 17, 1995 and April
14, 1997.
(6) Amounts in this column consist of, where applicable, the following amounts
for each of the named executive officers for each fiscal year shown: amounts
contributed by the Company pursuant to the Company's 401(k) Plan (which are
vested as shown), group life insurance premiums, Achievers' Club
I-9
<PAGE> 31
participation, special bonuses or President's Awards, payments pursuant to a
non-compete agreement, relocation expenses, and termination payments pursuant to
an employment agreement:
<TABLE>
<CAPTION>
SPECIAL
GROUP LIFE ACHIEVERS' BONUS/ PAYMENTS FOR
401(K) PLAN INSURANCE CLUB PRESIDENT'S NON- COMPETE(1)
YEAR CONTRIBUTION PREMIUMS PARTICIPATION AWARD RELOCATION(2)
---- ------------ ---------- ------------- ----------- --------------
<S> <C> <C> <C> <C> <C> <C>
Stephen T. Winn.................. 1997 2,375 288 0 0 0
1996 4,500 174 6,822 0 0
1995 4,500 145 177 0 0
Francis W. Winn.................. 1997 2,375 451 0 0 0
1996 4,500 451 0 0 0
1995 4,500 451 0 0 0
William T. Lynch................. 1997 2,375 288 5,337 0 0
1996 4,500 174 6,949 0 0
1995 4,500 174 3,567 7,200 0
G. Allen Harris.................. 1997 2,375 174 5,879 0 28,383(2)
1996 1,800 174 6,516 0 35,986(2)
1995 900 174 3,552 0 102,408(2)
M. Brian Healy................... 1997 2,375 288 5,104 0 0
1996 4,500 288 5,913 0 0
1995 4,500 288 3,153 0 0
Lynn J. Finlinson................ 1997 0 0 0 0 176,400(1)
1996 900 136 709 25,000 60,000(1)
1995 2,610 0 0 0 250,000(1)
</TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options to
purchase Common Stock granted in 1997 to the six executive officers named in the
Summary Compensation Table.
<TABLE>
<CAPTION>
PERCENTAGE OF POTENTIAL REALIZABLE VALUE AT
NUMBER OF TOTAL OPTIONS ASSUMED ANNUAL RATES OF STOCK
SECURITIES GRANTED TO PRICE APPRECIATION FOR OPTION
UNDERLYING EMPLOYEES IN EXERCISE OR TERM(2)(3)
OPTIONS FISCAL BASE PRICE EXPIRATION -------------------------------
NAME GRANTED(#) YEAR(1) ($/SHARE) DATE 0%($) 5%($) 10%($)
- ------------------- ---------- ------------- ----------- ---------- ------- ------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Stephen T. Winn.... 125,000 15% $6.1875 2/27/07 773,438 500,929 1,319,459
50,000 $6.1875 7/31/07 178,125 200,372 527,784
Francis W. Winn.... 0 N/A N/A N/A N/A N/A N/A
William T. Lynch... 25,000 4.29% $6.1875 2/27/07 154,688 100,186 263,892
25,000 $6.1875 7/31/07 89,063 100,186 263,892
G. Allen Harris.... 50,000 4.29% $6.1875 7/31/07 178,125 200,372 527,784
M. Brian Healy..... 20,000 1.71% $6.1875 2/27/07 123,750 80,149 211,114
Lynn J.
Finlinson........ 0 N/A N/A N/A N/A N/A N/A
</TABLE>
- ---------------
(1) In the fiscal year ending December 31, 1997, 112 employees received stock
options. Excludes options that were granted to certain employees conditional
upon the approval of the Board and the shareholders of the Company of an
amendment to the 1997 Plan.
(2) The amounts set forth reflect the potential realizable value of the options
granted at assumed annual rates of stock appreciation of 0%, 5% and 10%
through the expiration date of the options. The use of 0%, 5% and 10% is
pursuant to Commission requirements and is not intended by the Company to
forecast possible future appreciation.
(3) Does not give effect to the treatment of options under the Merger Agreement.
See Item 3 of the Schedule 14D-9 accompanying this Information Statement.
I-10
<PAGE> 32
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth certain information concerning the exercise
in fiscal year 1997 of options to purchase Common Stock by the six executive
officers named in the Summary Compensation Table and the unexercised options to
purchase Common Stock held by such individuals at December 31, 1997.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR- IN-THE-MONEY OPTIONS AT
END(1) FISCAL YEAR-END(1)(2)
SHARES (#) ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
- ------------------------------ ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen T. Winn............... 100,000 706,000 60,000 190,000 518,750 1,423,438
Francis W. Winn............... 0 0 0 0 0 0
William T. Lynch.............. 4,250 30,813 6,250 53,000 48,406 401,875
G. Allen Harris............... 100,000 706,200 46,000 79,000 191,000 457,125
M. Brian Healy................ 5,000 38,750 25,000 25,000 191,875 177,500
Lynn J. Finlinson............. 0 0 0 0 0 0
</TABLE>
- ---------------
(1) Does not give effect to the treatment of options under the Merger Agreement.
See Item 3 of the Schedule 14D-9 accompanying this Information Statement.
(2) Calculated by multiplying the number of shares by the difference between the
fair market value of the Common Stock underlying the options at December 31,
1997 ($14.00 per share) and the relevant exercise price(s) of the options.
Note: In addition to the tables set forth above, the federal rules under which
this Information Statement was prepared provide for a Long-Term Incentive Plan
Awards Table and a Pension Plan Table. These tables do not appear in this
Information Statement because the Company did not during fiscal 1997 maintain
any long-term incentive plan nor any defined benefit or actuarial pension plan.
I-11
<PAGE> 33
EMPLOYMENT CONTRACTS
On June 16, 1995, the Company and Mr. Lynn J. Finlinson entered into a
written arrangement whereby Mr. Finlinson became a Vice President of the Company
and President of its wholly owned Rent Roll, Inc. subsidiary. In addition to his
salary, Mr. Finlinson was paid a signing bonus of $250,000 pursuant to the
arrangement. The arrangement entitled Mr. Finlinson to participate in the 1989
Annual Incentive Plan, pursuant to which he was eligible to achieve a maximum
bonus of 60% of his base salary. Mr. Finlinson was also granted the option,
pursuant to the 1982 Stock Option Plan, as amended, to purchase 20,000 shares of
Common Stock at 100% of the fair market value of the stock on the date of the
grant. Finally, the arrangement made Mr. Finlinson eligible to receive a bonus
based upon the performance of the Company's real estate software business during
the term of the arrangement. Pursuant to the arrangement, Mr. Finlinson would
not be entitled to any payment, except for compensation earned by him prior to
his termination, in the event of his termination for cause, as that term is
defined in the arrangement. In the event of termination for any reason other
than for cause, the Company's principal obligation was to pay Mr. Finlinson an
amount equal to three months' salary, less required withholdings. Mr. Finlinson
agreed that he would not compete with the Company for a period of 24 months
following the month in which he was discharged by the Company, or for a period
of 36 months following the month in which he voluntarily resigned his employment
with the Company. While the agreement provided that the Company would pay Mr.
Finlinson a total of $300,000, payable in five consecutive annual installments,
accruing interest on the unpaid balance at 6% per annum, and while the first and
second payments were made to Mr. Finlinson during calendar years 1995 and 1996,
the Company and Mr. Finlinson agreed by letter dated February 7, 1997, that the
Company would prepay the remaining balance of the consideration for Mr.
Finlinson's agreement not to compete, an amount equal to $127,909.84,
representing the then current balance of the obligation discounted at 2% less
any required withholding, plus accrued interest of $6,568.77 on the unpaid
balance of $180,000 from July 1, 1996 through February 7, 1997. This arrangement
was deemed to be in the best interests of the Company by its Chief Financial
Officer. Effective as of April 18, 1997, Mr. Finlinson's employment was
terminated; the terms and conditions of his severance were set forth in a
Severance Agreement and Employee Release In Full Of All Claims, dated April 22,
1997 (the "Severance Agreement"). Pursuant to the terms of the Severance
Agreement, Rent Roll, Inc. agreed to pay to Mr. Finlinson the sum of $125,000 in
settlement of any and all claims he might have with respect to his former
employment arrangement. In exchange for such payment, Mr. Finlinson agreed to a
final settlement and complete release of all such claims and to maintain the
confidentiality of the terms of the Severance Agreement.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act and the disclosure requirements of Item
405 of Regulation S-K require the Company's officers and directors, and persons
who own more than 10% of a registered class of the Company's equity securities,
to file reports of ownership and changes in ownership with the Commission and
Nasdaq. Officers, directors and greater than 10% shareholders are required by
Commission regulation to furnish the Company with copies of all Section 16(a)
forms they file. With respect to 1997, based solely on the review of the copies
of such forms furnished to the Company, the Company believes that to date all
Section 16(a) filing requirements applicable to its greater than 10% beneficial
owners, directors and officers were complied with, except for two Form 4s
relating to three transactions which were not timely filed by Mr. Stephen T.
Winn and one Form 4 relating to two transactions which was not timely filed by
Dr. David L. Winn.
I-12
<PAGE> 1
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
COMPUTER LANGUAGE RESEARCH, INC.
AT
$22.50 NET PER SHARE
BY
SABRE ACQUISITION, INC.,
A WHOLLY OWNED SUBSIDIARY OF
THE THOMSON CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME, ON FRIDAY, FEBRUARY 13, 1998, UNLESS THE OFFER IS EXTENDED.
THE BOARD OF DIRECTORS OF THE COMPANY HAS UNANIMOUSLY APPROVED THE OFFER AND
DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS DEFINED HEREIN) IS FAIR TO,
AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE COMPANY AND RECOMMENDS
THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE
OFFER.
------------------------
THE THOMSON CORPORATION AND SABRE ACQUISITION, INC. ("PURCHASER") HAVE
ENTERED INTO A STOCK PURCHASE AGREEMENT WITH CERTAIN SHAREHOLDERS WHO OWN AN
AGGREGATE OF APPROXIMATELY 74.6% OF THE OUTSTANDING SHARES OF THE COMPANY'S
COMMON STOCK, PURSUANT TO WHICH, AMONG OTHER THINGS, SUCH SHAREHOLDERS HAVE
AGREED TO VALIDLY TENDER (AND NOT WITHDRAW) ALL SUCH SHARES PURSUANT TO THE
OFFER AND HAVE OTHERWISE AGREED TO SELL TO PURCHASER ALL SUCH SHARES AT A PRICE
OF $22.50 PER SHARE.
------------------------
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST TWO-
THIRDS OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS (INCLUDING, WITHOUT
LIMITATION, ALL SHARES ISSUABLE UPON CONVERSION OF ANY CONVERTIBLE SECURITIES OR
UPON THE EXERCISE OF ANY OPTIONS, WARRANTS OR RIGHTS) AND (ii) THE EXPIRATION OR
TERMINATION OF THE APPLICABLE WAITING PERIOD UNDER THE HART-SCOTT-RODINO
ANTITRUST IMPROVEMENTS ACT OF 1976, AS AMENDED.
------------------------
IMPORTANT
Any shareholder desiring to tender all or any portion of such shareholder's
shares of common stock, par value $0.01 per share (the "Shares"), of the Company
should either (1) complete and sign the Letter of Transmittal (or a facsimile
thereof) in accordance with the instructions in the Letter of Transmittal, mail
or deliver it and any other required documents to the Depositary and either
deliver the certificate(s) evidencing tendered Shares or deliver such Shares
pursuant to the procedure for book-entry transfer set forth in Section 3 or (2)
request such shareholder's broker, dealer, commercial bank, trust company or
other nominee to effect the transaction for such shareholder. Any shareholder
whose Shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee if such shareholder desires to tender such
Shares.
A shareholder who desires to tender Shares and whose certificates evidencing
such Shares are not immediately available, or who cannot comply with the
procedure for book-entry transfer on a timely basis, may tender such Shares by
following the procedure for guaranteed delivery set forth in Section 3.
Questions or requests for assistance may be directed to the Information
Agent at its address and telephone number set forth on the back cover of this
Offer to Purchase. Additional copies of this Offer to Purchase, the Letter of
Transmittal and the Notice of Guaranteed Delivery may be obtained from the
Information Agent or from brokers, dealers, commercial banks or trust companies.
------------------------
January 16, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
INTRODUCTION............................................................................ 1
1. Terms of the Offer; Expiration Date............................................... 3
2. Acceptance for Payment and Payment for Shares..................................... 4
3. Procedures for Accepting the Offer and Tendering Shares........................... 5
4. Withdrawal Rights................................................................. 7
5. Certain Federal Income Tax Consequences........................................... 8
6. Price Range of Shares; Dividends.................................................. 9
7. Certain Information Concerning the Company........................................ 9
8. Certain Information Concerning Purchaser and Parent............................... 12
9. Financing of the Offer and the Merger............................................. 13
10. Background of the Offer; Contacts with the Company; the Merger Agreement and the
Stock Purchase Agreement........................................................ 13
11. Purpose of the Offer; Plans for the Company After the Offer and the Merger........ 27
12. Dividends and Distributions....................................................... 29
13. Effect of the Offer on the Market for the Shares; Nasdaq Quotation Listing and
Exchange Act Registration....................................................... 30
14. Certain Conditions of the Offer................................................... 30
15. Certain Legal Matters and Regulatory Approvals.................................... 32
16. Fees and Expenses................................................................. 34
17. Miscellaneous..................................................................... 34
Schedule I. Directors and Executive Officers of Parent and Purchaser................... I-1
Schedule II. Articles 5.11-5.13 of the Texas Business Corporation Act................... II-1
</TABLE>
i
<PAGE> 3
To the Holders of Common Stock of
Computer Language Research, Inc.:
INTRODUCTION
Sabre Acquisition, Inc., a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of The Thomson Corporation, a corporation organized under the
laws of Ontario, Canada ("Parent"), hereby offers to purchase all outstanding
shares of common stock, par value $0.01 per share (the "Shares"), of Computer
Language Research, Inc., a Texas corporation (the "Company"), at a purchase
price of $22.50 per Share, net to the seller in cash, upon the terms and subject
to the conditions set forth in this Offer to Purchase and in the related Letter
of Transmittal (which together constitute the "Offer"). See Section 8 for
additional information concerning Parent and Purchaser.
Tendering shareholders will not be obligated to pay brokerage fees or
commissions or, except as otherwise provided in Instruction 6 of the Letter of
Transmittal, stock transfer taxes with respect to the purchase of Shares by
Purchaser pursuant to the Offer. However, any tendering shareholder or other
payee who fails to complete and sign the Substitute Form W-9 that is included in
the Letter of Transmittal may be subject to a required back-up U.S. federal
income tax withholding of 31% of the gross proceeds payable to such holder or
other payee pursuant to the Offer. See Section 5. Purchaser will pay all charges
and expenses of ChaseMellon Shareholder Services L.L.C. (the "Depositary") and
Innisfree M&A Incorporated (the "Information Agent") incurred in connection with
the Offer. See Section 16.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "BOARD") HAS UNANIMOUSLY
APPROVED THE OFFER AND DETERMINED THAT EACH OF THE OFFER AND THE MERGER (AS
DEFINED BELOW) IS FAIR TO, AND IN THE BEST INTERESTS OF, THE SHAREHOLDERS OF THE
COMPANY AND RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR
SHARES PURSUANT TO THE OFFER.
PARENT AND PURCHASER HAVE ENTERED INTO A STOCK PURCHASE AGREEMENT WITH
CERTAIN SHAREHOLDERS WHO OWN AN AGGREGATE OF APPROXIMATELY 74.6% OF THE
OUTSTANDING SHARES, PURSUANT TO WHICH, AMONG OTHER THINGS, SUCH SHAREHOLDERS
HAVE AGREED TO VALIDLY TENDER (AND NOT WITHDRAW) ALL SUCH SHARES PURSUANT TO THE
OFFER AND HAVE OTHERWISE AGREED TO SELL TO PURCHASER ALL SUCH SHARES AT A PRICE
OF $22.50 PER SHARE.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, (i) THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER AT LEAST
TWO-THIRDS OF THE OUTSTANDING SHARES ON A FULLY DILUTED BASIS (INCLUDING,
WITHOUT LIMITATION, ALL SHARES ISSUABLE UPON CONVERSION OF ANY CONVERTIBLE
SECURITIES OR UPON THE EXERCISE OF ANY OPTIONS, WARRANTS OR RIGHTS) (THE
"MINIMUM CONDITION") AND (ii) THE EXPIRATION OR TERMINATION OF THE APPLICABLE
WAITING PERIOD UNDER THE HART-SCOTT-RODINO ANTITRUST IMPROVEMENTS ACT OF 1976,
AS AMENDED (THE "HSR ACT"). THE OFFER IS ALSO SUBJECT TO CERTAIN OTHER
CONDITIONS CONTAINED IN THIS OFFER TO PURCHASE. SEE SECTIONS 1 AND 14, WHICH SET
FORTH IN FULL THE CONDITIONS TO THE OFFER.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of January 12, 1998 (the "Merger Agreement"), among Parent, Purchaser and the
Company. The Merger Agreement provides among other things, that as soon as
practicable after the purchase of Shares pursuant to the Offer and the
satisfaction of the other conditions set forth in the Merger Agreement and in
accordance with the relevant provisions of the General Corporation Law of the
State of Delaware ("Delaware Law") and the Texas Business Corporation Act
("Texas Law"), Purchaser will be merged with and into the Company (the
"Merger"). Following consummation of the Merger, the Company will continue as
the surviving corporation (the "Surviving Corporation") and will become a wholly
owned subsidiary of Parent. At the effective time of the Merger (the "Effective
Time"), each Share issued and outstanding immediately prior to the Effective
<PAGE> 4
Time (other than Shares held in the treasury of the Company or owned by
Purchaser, Parent or any direct or indirect wholly owned subsidiary of Parent or
of the Company, and other than Shares held by shareholders who shall have fully
complied with the statutory dissenter's procedures set forth in Texas Law) will
be cancelled and converted automatically into the right to receive $22.50 in
cash, or any higher price that may be paid per Share in the Offer, without
interest (the "Merger Consideration"). Shareholders who fully comply with the
statutory dissenter's procedures set forth in Texas Law, the relevant portions
of which are attached to this Offer to Purchase as Schedule II, will be entitled
to receive, in connection with the Merger, cash for the fair value of their
Shares as determined pursuant to the procedures prescribed by Texas Law. The
Merger Agreement is more fully described in Section 10.
Concurrently with entering into the Merger Agreement, Parent, Purchaser and
certain shareholders of the Company (the "Majority Shareholders") entered into a
Stock Purchase Agreement, dated as of January 12, 1998 (the "Stock Purchase
Agreement"), pursuant to which, upon the terms and conditions set forth therein,
the Majority Shareholders agreed to validly tender (and not withdraw) pursuant
to the Offer all Shares now or hereafter owned (beneficially or of record) by
the Majority Shareholders and have otherwise agreed to sell to Purchaser all
such Shares at a purchase price per Share equal to $22.50 (or any higher price
that may be paid per Share in the Offer). See Section 10. On January 12, 1998,
the Majority Shareholders owned (either beneficially or of record) 10,786,962
Shares, constituting approximately 74.6% of the outstanding Shares (or
approximately 67% of the outstanding Shares on a fully diluted basis). The Stock
Purchase Agreement is more fully described in Section 10. The Majority
Shareholders are comprised of Stephen T. Winn, President and Chief Executive
Officer and a director of the Company, and his spouse; David L. Winn and James
R. Dunaway, Jr., directors of the Company, and their respective spouses; Francis
W. Winn, Chairman of the Board, and his spouse; certain trusts and partnerships
controlled by, or for the benefit of, various members of the Winn family; and
certain investment funds (collectively, "Advance Capital") affiliated with
Jeffrey T. Leeds, a director of the Company. Francis W. Winn is the father of
Stephen T. Winn and David L. Winn and the father-in-law of James R. Dunaway, Jr.
The Merger Agreement provides that, promptly upon the purchase by Purchaser
of Shares pursuant to the Offer and from time to time thereafter, Purchaser
shall be entitled to designate up to such number of directors, rounded up to the
next whole number, on the Board as will give Purchaser representation on the
Board equal to the product of the total number of directors on the Board
multiplied by the percentage that the aggregate number of Shares beneficially
owned by Purchaser or any affiliate following such purchase bears to the total
number of Shares then outstanding. In the Merger Agreement, the Company has
agreed to take all actions necessary to cause Purchaser's designees to be
elected as directors of the Company, including increasing the size of the Board
or securing the resignations of incumbent directors or both.
The consummation of the Merger is subject to the satisfaction or waiver of
certain conditions, including, if required under Texas Law, the approval and
adoption of the Merger Agreement by the requisite vote of the shareholders of
the Company. See Section 11. Under the Company's Articles of Incorporation and
Texas Law, the affirmative vote of the holders of at least two-thirds of the
outstanding Shares is required to approve and adopt the Merger Agreement and the
Merger. Consequently, if Purchaser acquires (pursuant to the Offer, the Stock
Purchase Agreement or otherwise) at least two-thirds of the outstanding Shares,
Purchaser will have sufficient voting power to approve and adopt the Merger
Agreement and the Merger without the vote of any other shareholder. UPON
CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THE STOCK PURCHASE AGREEMENT,
PARENT AND PURCHASER, BY VIRTUE OF THE ACQUISITION OF APPROXIMATELY 74.6% OF THE
OUTSTANDING SHARES, WILL OWN A NUMBER OF SHARES SUFFICIENT, EVEN IF NO OTHER
SHARES ARE TENDERED IN THE OFFER, TO CAUSE THE MERGER TO OCCUR WITHOUT THE
AFFIRMATIVE VOTE OF ANY OTHER HOLDER OF SHARES. SEE SECTIONS 10 AND 11. IN
ADDITION, THE MINIMUM CONDITION WILL BE SATISFIED AT SUCH TIME AS THE MAJORITY
SHAREHOLDERS TENDER INTO THE OFFER ALL SHARES HELD BY THE MAJORITY SHAREHOLDERS
AS REQUIRED BY THE STOCK PURCHASE AGREEMENT.
Under Texas Law and Delaware Law, if Purchaser acquires, pursuant to the
Offer, the Stock Purchase Agreement or otherwise, at least 90% of the then
outstanding Shares, Purchaser will be able to approve and adopt the Merger
Agreement and the transactions contemplated thereby, including the Merger,
without a vote of the Company's shareholders. In such event, Parent, Purchaser
and the Company have agreed to take, at the request of Purchaser, all necessary
and appropriate action to cause the Merger to become effective as soon as
2
<PAGE> 5
reasonably practicable after such acquisition, without a meeting of the
Company's shareholders. If, however, Purchaser does not acquire at least 90% of
the then outstanding Shares pursuant to the Offer, the Stock Purchase Agreement
or otherwise and a vote of the Company's shareholders is required under Delaware
Law and Texas Law, a significantly longer period of time will be required to
effect the Merger. See Section 11.
The Company has advised Purchaser that as of January 12, 1998, 14,463,844
Shares were issued and outstanding, 1,646,150 Shares were reserved for future
issuance pursuant to employee stock options ("Options") and 810,019 Shares were
held in the treasury of the Company. As a result, as of such date, the Minimum
Condition would be satisfied if Purchaser acquired 10,740,000 Shares.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH SHOULD BE READ BEFORE ANY DECISION IS MADE WITH
RESPECT TO THE OFFER.
1. TERMS OF THE OFFER; EXPIRATION DATE. Upon the terms and subject to the
conditions of the Offer (including, if the Offer is extended or amended, the
terms and conditions of such extension or amendment), Purchaser will accept for
payment and pay for all Shares validly tendered prior to the Expiration Date (as
hereinafter defined) and not withdrawn as permitted by Section 4. The term
"Expiration Date" means 12:00 midnight, New York City time, on Friday, February
13, 1998, unless and until Purchaser, subject to the terms and conditions of the
Merger Agreement, shall have extended the period during which the Offer is open,
in which event the term "Expiration Date" shall mean the latest time and date at
which the Offer, as so extended by Purchaser, shall expire.
Purchaser expressly reserves the right, in its sole discretion (but subject
to the terms and conditions of the Merger Agreement), at any time and from time
to time, to extend for any reason the period of time during which the Offer is
open, including the occurrence of any of the conditions specified in Section 14,
by giving oral or written notice of such extension to the Depositary. During any
such extension, all Shares previously tendered and not withdrawn will remain
subject to the Offer, subject to the rights of a tendering shareholder to
withdraw his Shares. See Section 4.
Subject to the applicable regulations of the Commission, Purchaser also
expressly reserves the right, in its sole discretion (but subject to the terms
and conditions of the Merger Agreement), at any time and from time to time, (i)
to delay acceptance for payment of, or, regardless of whether such Shares were
theretofore accepted for payment, payment for, any Shares pending receipt of any
regulatory approval specified in Section 15, (ii) to terminate the Offer and not
accept for payment any Shares upon the occurrence of any of the conditions
specified in Section 14, (iii) to increase the price per Share payable in the
Offer and to modify other terms of the Offer and (iv) to waive any condition or
otherwise amend the Offer in any respect, by giving oral or written notice of
such delay, termination, waiver or amendment to the Depositary and by making a
public announcement thereof. The Merger Agreement provides that, without the
prior consent of the Company, Purchaser will not (i) waive the Minimum Condition
or reduce the number of Shares subject to the Offer, (ii) reduce the price per
Share payable in the Offer, (iii) extend the Offer or amend or add to the
conditions to the Offer, (iv) change the form of consideration payable in the
Offer, or (v) amend, add or waive any other term of the Offer in any manner that
would adversely affect the Company or its shareholders. Notwithstanding the
foregoing, the Merger Agreement provides that Purchaser (i) will not terminate
and will extend the Offer, up to February 28, 1998 if, at the initial scheduled
expiration of the Offer, or any extension thereof, any of the conditions to the
Offer have not been satisfied or waived by Purchaser (provided that if the only
unsatisfied condition to the Offer is the failure of the waiting period under
the HSR Act to have expired or been terminated, then Purchaser will extend the
Offer, for one or more periods of not more than 10 business days, pursuant to
this clause (i) up to May 15, 1998), (ii) will extend the Offer for any period
required by any rule, regulation or interpretation of the Commission or the
staff thereof applicable to the Offer, and (iii) may, without the consent of the
Company, extend the Offer for an aggregate period of not more than 10 business
days beyond the latest applicable date that would otherwise be permitted under
clause (i) or (ii) of this sentence if, as of such date, all of the conditions
to the Offer are satisfied or waived by Purchaser, but the number of Shares
validly tendered and not withdrawn pursuant to the Offer equals 80% or more, but
less than 90%, of the then outstanding Shares on a fully diluted basis.
Purchaser acknowledges that
3
<PAGE> 6
(i) Rule 14(e)-1(c) under the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), requires Purchaser to pay the consideration offered or return
the Shares tendered promptly after termination or withdrawal of the Offer and
(ii) Purchaser may not delay the payment of, or payment for (except as provided
in clause (i) of the first sentence of this paragraph), any Shares upon the
occurrence of any of the conditions specified in Section 14 without extending
the period of time during which the Offer is open.
Any such extension, delay, termination, waiver or amendment will be
followed as promptly as practicable by public announcement thereof, such
announcement in the case of an extension to be made no later than 9:00 a.m., New
York City time, on the next business day after the previously scheduled
Expiration Date. Subject to applicable law (including Rules 14d-4(c) and
14d-6(d) under the Exchange Act, which require that material changes be promptly
disseminated to shareholders in a manner reasonably designed to inform them of
such changes) and without limiting the manner in which Purchaser may choose to
make any public announcement, Purchaser shall have no obligation to publish,
advertise or otherwise communicate any such public announcement other than by
issuing a press release to the Dow Jones News Service and making appropriate
filings with the Commission.
If Purchaser makes a material change in the terms of the Offer or the
information concerning the Offer, or if it waives a material condition of the
Offer, Purchaser will extend the Offer to the extent required by Rules 14d-4(c)
and 14d-6(d) under the Exchange Act.
Subject to the terms of the Merger Agreement, if, prior to the Expiration
Date, Purchaser should decide to decrease the number of Shares being sought or
to increase or decrease the consideration being offered in the Offer, such
decrease in the number of Shares being sought or such increase or decrease in
the consideration being offered will be applicable to all shareholders whose
Shares are accepted for payment pursuant to the Offer and, if at the time notice
of any such decrease in the number of Shares being sought or such increase or
decrease in the consideration being offered is first published, sent or given to
holders of such Shares, the Offer is scheduled to expire at any time earlier
than the period ending on the tenth business day from and including the date
that such notice is first so published, sent or given, the Offer will be
extended at least until the expiration of such ten business day period. For
purposes of the Offer, a "business day" means any day other than a Saturday,
Sunday or federal holiday and consists of the time period from 12:01 a.m.
through 12:00 midnight, New York City time.
The Company has provided Purchaser with the Company's shareholder list and
security position listings for the purpose of disseminating the Offer to holders
of Shares. This Offer to Purchase and the related Letter of Transmittal will be
mailed to record holders of Shares whose names appear on the Company's
shareholder list and will be furnished, for subsequent transmittal to beneficial
owners of Shares, to brokers, dealers, commercial banks, trust companies and
similar persons whose names, or the names of whose nominees, appear on the
shareholder list or, if applicable, who are listed as participants in a clearing
agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and
subject to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment), Purchaser
will accept for payment, and will pay for, all Shares validly tendered prior to
the Expiration Date and not properly withdrawn promptly after the later to occur
of (i) the Expiration Date, (ii) the expiration or termination of any applicable
waiting periods under the HSR Act, and (iii) the satisfaction or waiver of the
conditions to the Offer set forth in Section 14. Subject to applicable rules of
the Commission and the terms of the Merger Agreement. Purchaser expressly
reserves the right to delay acceptance for payment of, or payment for, Shares
pending receipt of any regulatory approvals specified in Section 15 or in order
to comply in whole or in part with any other applicable law.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i) the
certificates evidencing such Shares (the "Share Certificates") or timely
confirmation (a "Book-Entry Confirmation") of the book-entry transfer of such
Shares into the Depositary's account at The Depository Trust Company (the
"Book-Entry Transfer Facility"), pursuant to the procedures set forth in Section
3, (ii) the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees or an Agent's
4
<PAGE> 7
Message, as defined below, in connection with the book-entry transfer and (iii)
any other documents required under the Letter of Transmittal.
The term "Agent's Message" means a message, transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of the
Book-Entry Confirmation which states that the Book-Entry Transfer Facility has
received an express acknowledgment from the participant in the Book-Entry
Transfer Facility tendering the Shares which are the subject of the Book-Entry
Confirmation, that such participant has received and agrees to be bound by the
terms of the Letter of Transmittal and that the Company may enforce such
agreement against such participant.
On January 13, 1998, Parent filed with the Federal Trade Commission (the
"FTC") and the Antitrust Division of the Department of Justice (the "Antitrust
Division") a Premerger Notification and Report Form under the HSR Act with
respect to the Offer and the Stock Purchase Agreement. Accordingly, it is
anticipated that the waiting period under the HSR Act applicable to the Offer
and to the Stock Purchase Agreement will expire at 11:59 p.m., New York City
time, on January 28, 1998. Prior to the expiration or termination of such
waiting period, the FTC or the Antitrust Division may extend such waiting period
by requesting additional information from Parent or the Company with respect to
the Offer, or from Parent or the Majority Shareholders with respect to the Stock
Purchase Agreement. If such a request is made, the waiting period will expire at
11:59 p.m., New York City time, on the tenth calendar day after substantial
compliance by Parent with such a request. Thereafter, the waiting period may be
extended only by court order. The waiting period under the HSR Act may be
terminated prior to its expiration by the FTC and the Antitrust Division. Parent
has requested early termination of the waiting period, although there can be no
assurance that this request will be granted. See Section 15 for additional
information regarding the HSR Act.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment (and thereby purchased) Shares validly tendered and not properly
withdrawn as, if and when Purchaser gives oral or written notice to the
Depositary of Purchaser's acceptance for payment of such Shares pursuant to the
Offer. Upon the terms and subject to the conditions of the Offer, payment for
Shares accepted for payment pursuant to the Offer will be made by deposit of the
purchase price therefor with the Depositary, which will act as agent for
tendering shareholders for the purpose of receiving payments from Purchaser and
transmitting such payments to tendering shareholders whose Shares have been
accepted for payment. UNDER NO CIRCUMSTANCES WILL INTEREST ON THE PURCHASE PRICE
FOR SHARES BE PAID, REGARDLESS OF ANY DELAY IN MAKING SUCH PAYMENT.
If any tendered Shares are not accepted for payment for any reason pursuant
to the terms and conditions of the Offer, or if Share Certificates are submitted
evidencing more Shares than are tendered, Share Certificates evidencing
unpurchased Shares will be returned, without expense to the tendering
shareholder (or, in the case of Shares tendered by book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility pursuant to the
procedure set forth in Section 3, such Shares will be credited to an account
maintained at the Book-Entry Transfer Facility), as promptly as practicable
following the expiration or termination of the Offer.
Purchaser reserves the right to transfer or assign, in whole or from time
to time in part, to one or more of its affiliates, the right to purchase all or
any portion of the Shares tendered pursuant to the Offer, but any such transfer
or assignment will not relieve Purchaser of its obligations under the Offer and
will in no way prejudice the rights of tendering shareholders to receive payment
for Shares validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURES FOR ACCEPTING THE OFFER AND TENDERING SHARES. In order for
a holder of Shares validly to tender Shares pursuant to the Offer, the Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed,
together with any required signature guarantees (or, in the case of a book-entry
transfer, an Agent's Message in lieu of the Letter of Transmittal) and any other
documents required by the Letter of Transmittal, must be received by the
Depositary at one of its addresses set forth on the back cover of this Offer to
Purchase and either (i) the Share Certificates evidencing tendered Shares must
be received by the Depositary at such address or such Shares must be tendered
pursuant to the procedure for book-entry transfer described below and a
Book-Entry Confirmation must be received by the Depositary (including an Agent's
Message if the tendering shareholder has not delivered a Letter of Transmittal),
in each case prior to the
5
<PAGE> 8
Expiration Date, or (ii) the tendering shareholder must comply with the
guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF SHARE CERTIFICATES AND ALL OTHER REQUIRED
DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY TRANSFER FACILITY, IS AT
THE OPTION AND RISK OF THE TENDERING SHAREHOLDER, AND THE DELIVERY WILL BE
DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY
MAIL, REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS
RECOMMENDED. IN ALL CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY
DELIVERY.
Book-Entry Transfer. The Depositary will establish accounts with respect
to the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any financial
institution that is a participant in the system of the Book-Entry Transfer
Facility may make a book-entry delivery of Shares by causing the Book-Entry
Transfer Facility to transfer such Shares into the Depositary's account at the
Book-Entry Transfer Facility in accordance with the Book-Entry Transfer
Facility's procedures for such transfer. However, although delivery of Shares
may be effected through book-entry transfer at the Book-Entry Transfer Facility,
the Letter of Transmittal (or a facsimile thereof), properly completed and duly
executed, together with any required signature guarantees (or an Agent's Message
in lieu of the Letter of Transmittal) and any other required documents, must, in
any case, be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase prior to the Expiration Date, or the
tendering shareholder must comply with the guaranteed delivery procedure
described below. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER FACILITY DOES
NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member of the Medallion Signature Guarantee
Program or by any other "eligible guarantor institution," as such term is
defined in Rule 17Ad-15 under the Exchange Act (each of the foregoing being
referred to as an "Eligible Institution"), except in cases where Shares are
tendered (i) by a registered holder of Shares who has not completed either the
box entitled "Special Payment Instructions" or the box entitled "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution. If a Share Certificate is registered in the name of a
person other than the signer of the Letter of Transmittal, or if payment is to
be made, or a Share Certificate not accepted for payment or not tendered is to
be returned, to a person other than the registered holder(s), then the Share
Certificate must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name(s) of the registered holder(s) appear on
the Share Certificate, with the signature(s) on such Share Certificate or stock
powers guaranteed by an Eligible Institution. See Instructions 1 and 5 of the
Letter of Transmittal.
Guaranteed Delivery. If a shareholder desires to tender Shares pursuant to
the Offer and such shareholder's Share Certificates evidencing such Shares are
not immediately available or such shareholder cannot deliver the Share
Certificates and all other required documents to the Depositary prior to the
Expiration Date, or such shareholder cannot complete the procedure for delivery
by book-entry transfer on a timely basis, such Shares may nevertheless be
tendered, provided that all the following conditions are satisfied:
(i) such tender is made by or through an Eligible Institution;
(ii) a properly completed and duly executed Notice of Guaranteed
Delivery, substantially in the form made available by Purchaser, is
received prior to the Expiration Date by the Depositary as provided below;
and
(iii) the Share Certificates (or a Book-Entry Confirmation) evidencing
all tendered Shares, in proper form for transfer, in each case together
with the Letter of Transmittal (or a facsimile thereof), properly completed
and duly executed, with any required signature guarantees (or, in the case
of a book-entry transfer, an Agent's Message), and any other documents
required by the Letter of Transmittal are received by the Depositary within
three Nasdaq National Market ("Nasdaq") trading days after the date of
execution of such Notice of Guaranteed Delivery.
6
<PAGE> 9
The Notice of Guaranteed Delivery may be delivered by hand or mail or
transmitted by telegram, telex or facsimile transmission to the Depositary and
must include a guarantee by an Eligible Institution in the form set forth in the
form of Notice of Guaranteed Delivery made available by Purchaser.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of the
Share Certificates evidencing such Shares, or a Book-Entry Confirmation of the
delivery of such Shares, and the Letter of Transmittal (or a facsimile thereof),
properly completed and duly executed, with any required signature guarantees
(or, in the case of a book-entry transfer, an Agent's Message), and any other
documents required by the Letter of Transmittal.
Determination of Validity. ALL QUESTIONS AS TO THE VALIDITY, FORM,
ELIGIBILITY (INCLUDING TIME OF RECEIPT) AND ACCEPTANCE FOR PAYMENT OF ANY TENDER
OF SHARES WILL BE DETERMINED BY PURCHASER IN ITS SOLE DISCRETION, WHICH
DETERMINATION SHALL BE FINAL AND BINDING ON ALL PARTIES. Purchaser reserves the
absolute right to reject any and all tenders determined by it not to be in
proper form or the acceptance for payment of which may, in the opinion of its
counsel, be unlawful. Purchaser also reserves the absolute right to waive any
condition of the Offer or any defect or irregularity, in the tender of any
Shares of any particular shareholder, whether or not similar defects or
irregularities are waived in the case of other shareholders. NO TENDER OF SHARES
WILL BE DEEMED TO HAVE BEEN VALIDLY MADE UNTIL ALL DEFECTS AND IRREGULARITIES
HAVE BEEN CURED OR WAIVED. NONE OF PURCHASER, PARENT, THE DEPOSITARY, THE
INFORMATION AGENT OR ANY OTHER PERSON WILL BE UNDER ANY DUTY TO GIVE
NOTIFICATION OF ANY DEFECTS OR IRREGULARITIES IN TENDERS OR INCUR ANY LIABILITY
FOR FAILURE TO GIVE ANY SUCH NOTIFICATION. Purchaser's interpretation of the
terms and conditions of the Offer (including the Letter of Transmittal and the
instructions thereto) will be final and binding.
Other Requirements. By executing the Letter of Transmittal as set forth
above, a tendering shareholder irrevocably appoints designees of Purchaser as
such shareholder's proxies, each with full power of substitution, in the manner
set forth in the Letter of Transmittal, to the full extent of such shareholder's
rights with respect to the Shares tendered by such shareholder and accepted for
payment by Purchaser (and with respect to any and all other Shares or other
securities issued or issuable in respect of such Shares on or after January 12,
1998). All such proxies shall be considered coupled with an interest in the
tendered Shares. Such appointment will be effective when, and only to the extent
that, Purchaser accepts such Shares for payment. Upon such acceptance for
payment, all prior proxies given by such shareholder with respect to such Shares
(and such other Shares and securities) will be revoked without further action,
and no subsequent proxies may be given nor any subsequent written consent
executed by such shareholder (and, if given or executed, will not be deemed to
be effective) with respect thereto. The designees of Purchaser will, with
respect to the Shares for which the appointment is effective, be empowered to
exercise all voting and other rights of such shareholder as they in their sole
discretion may deem proper at any annual or special meeting of the Company's
shareholders or any adjournment or postponement thereof, by written consent in
lieu of any such meeting or otherwise. Purchaser reserves the right to require
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's payment for such Shares, Purchaser must be able to exercise full
voting rights with respect to such Shares (and such other Shares and
securities).
The acceptance for payment by Purchaser of Shares pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering shareholder and Purchaser upon the terms and subject to the conditions
of the Offer.
TO PREVENT BACKUP FEDERAL INCOME TAX WITHHOLDING WITH RESPECT TO PAYMENT TO
CERTAIN SHAREHOLDERS OF THE PURCHASE PRICE OF SHARES PURCHASED PURSUANT TO THE
OFFER, EACH SUCH SHAREHOLDER MUST PROVIDE THE DEPOSITARY WITH SUCH SHAREHOLDER'S
CORRECT TAXPAYER IDENTIFICATION NUMBER AND CERTIFY THAT SUCH SHAREHOLDER IS NOT
SUBJECT TO BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE
FORM W-9 IN THE LETTER OF TRANSMITTAL. IF BACKUP WITHHOLDING APPLIES WITH
RESPECT TO A SHAREHOLDER, THE DEPOSITARY IS REQUIRED TO WITHHOLD 31% OF ANY
PAYMENTS MADE TO SUCH SHAREHOLDER. SEE INSTRUCTION 10 OF THE LETTER OF
TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Tenders of Shares made pursuant to the Offer are
irrevocable except that such Shares may be withdrawn at any time prior to the
Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after Monday, March 16,
7
<PAGE> 10
1998. If Purchaser extends the Offer, is delayed in its acceptance for payment
of Shares or is unable to accept Shares for payment pursuant to the Offer for
any reason, then, without prejudice to Purchaser's rights under the Offer, the
Depositary may, nevertheless, on behalf of Purchaser, retain tendered Shares,
and such Shares may not be withdrawn except to the extent that tendering
shareholders are entitled to withdrawal rights as described in this Section 4.
Any such delay will be by an extension of the Offer to the extent required by
law.
For a withdrawal to be effective, a written, telegraphic, telex or
facsimile transmission notice of withdrawal must be timely received by the
Depositary at one of its addresses set forth on the back cover page of this
Offer to Purchase. Any such notice of withdrawal must specify the name of the
person who tendered the Shares to be withdrawn, the number of Shares to be
withdrawn and the name of the registered holder of such Shares, if different
from that of the person who tendered such Shares. If Share Certificates
evidencing Shares to be withdrawn have been delivered or otherwise identified to
the Depositary, then, prior to the physical release of such Share Certificates,
the serial numbers shown on such Share Certificates must be submitted to the
Depositary and the signature(s) on the notice of withdrawal must be guaranteed
by an Eligible Institution, unless such Shares have been tendered for the
account of an Eligible Institution. If Shares have been tendered pursuant to the
procedure for book-entry transfer as set forth in Section 3, any notice of
withdrawal must specify the name and number of the account at the Book-Entry
Transfer Facility to be credited with the withdrawn Shares, in which case a
notice of withdrawal will be effective if delivered to the Depositary by any
method of delivery described in the first sentence of this paragraph.
ALL QUESTIONS AS TO THE FORM AND VALIDITY (INCLUDING TIME OF RECEIPT) OF
ANY NOTICE OF WITHDRAWAL WILL BE DETERMINED BY PURCHASER, IN ITS SOLE
DISCRETION, WHOSE DETERMINATION WILL BE FINAL AND BINDING. NO WITHDRAWAL OF
SHARES SHALL BE DEEMED TO HAVE BEEN PROPERLY MADE UNTIL ALL DEFECTS AND
IRREGULARITIES HAVE BEEN CURED OR WAIVED. NONE OF PURCHASER, PARENT, THE
DEPOSITARY, THE INFORMATION AGENT OR ANY OTHER PERSON WILL BE UNDER ANY DUTY TO
GIVE NOTIFICATION OF ANY DEFECTS OR IRREGULARITIES IN ANY NOTICE OF WITHDRAWAL
OR INCUR ANY LIABILITY FOR FAILURE TO GIVE ANY SUCH NOTIFICATION.
Any Shares properly withdrawn will thereafter be deemed not to have been
validly tendered for purposes of the Offer. However, withdrawn Shares may be
re-tendered at any time prior to the Expiration Date by following one of the
procedures described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The following is a summary of
the principal federal income tax consequences of the Offer and the Merger to
holders whose Shares are purchased pursuant to the Offer or whose Shares are
converted into the right to receive cash in the Merger (whether upon receipt of
the Merger Consideration or pursuant to the proper exercise of dissenter's
rights). The discussion applies only to holders of Shares in whose hands Shares
are capital assets, and may not apply to Shares received pursuant to the
exercise of employee stock options or otherwise as compensation, or to holders
of Shares who are not citizens or residents of the United States of America.
THE TAX DISCUSSION SET FORTH BELOW IS INCLUDED FOR GENERAL INFORMATION
PURPOSES ONLY AND IS BASED UPON PRESENT LAW. BECAUSE INDIVIDUAL CIRCUMSTANCES
MAY DIFFER, EACH HOLDER OF SHARES SHOULD CONSULT SUCH HOLDER'S OWN TAX ADVISOR
TO DETERMINE THE APPLICABILITY OF THE RULES DISCUSSED TO SUCH SHAREHOLDER AND
THE PARTICULAR TAX EFFECTS OF THE OFFER AND THE MERGER, INCLUDING THE
APPLICATION AND EFFECT OF STATE, LOCAL AND OTHER TAX LAWS.
The receipt of the offer price and the receipt of cash pursuant to the
Merger (whether as Merger Consideration or pursuant to the proper exercise of
dissenter's rights) will be a taxable transaction for federal income tax
purposes (and also may be a taxable transaction under applicable state, local
and other income tax laws). In general, for federal income tax purposes, a
holder of Shares will recognize gain or loss equal to the difference between
such holder's adjusted tax basis in the Shares sold pursuant to the Offer or
converted to cash in the Merger and the amount of cash received therefor. Gain
or loss must be determined separately for each block of Shares (i.e., Shares
acquired at the same cost in a single transaction) sold pursuant to the Offer or
converted to cash in the Merger. Such gain or loss will be capital gain or loss.
Under recently enacted legislation, individual holders will be subject to tax on
the net amount of such gain at a maximum rate of
8
<PAGE> 11
(i) 28%, provided that the shares were held for more than one year but not more
than 18 months, and (ii) 20% provided that the shares were held for more than 18
months. Special rules (and generally lower maximum rates) apply to individuals
in lower tax brackets.
Payments in connection with the Offer or the Merger may be subject to
backup withholding at a 31% rate. Backup withholding generally applies if a
shareholder (i) fails to furnish such shareholder's social security number or
taxpayer identification number ("TIN"), (ii) furnishes an incorrect TIN, (iii)
fails properly to report interest or dividends or (iv) under certain
circumstances, fails to provide a certified statement, signed under penalties of
perjury, that the TIN provided is such shareholder's correct number and that
such shareholder is not subject to backup withholding. Backup withholding is not
an additional tax but merely an advance payment, which may be refunded to the
extent it results in an overpayment of tax. Certain persons, including
corporations and financial institutions generally, are exempt from backup
withholding. Certain penalties apply for failure to furnish correct information
and for failure to include the reportable payments in income. Each shareholder
should consult with such shareholder's own tax advisor as to such shareholder's
qualifications for exemption from withholding and the procedure for obtaining
such exemption.
6. PRICE RANGE OF SHARES; DIVIDENDS. The Shares are listed and
principally traded on Nasdaq. The following table sets forth, for the quarters
indicated, the high and low sales prices per Share on Nasdaq as reported by the
Dow Jones News Service and the amount of cash dividends paid or declared per
Share according to published financial sources.
<TABLE>
<CAPTION>
HIGH LOW DIVIDENDS
------ ------ ---------
<S> <C> <C> <C>
1995:
First Quarter................................................. 12.000 7.500 0.100
Second Quarter................................................ 10.500 7.250 0.100
Third Quarter................................................. 12.375 9.250 0.100
Fourth Quarter................................................ 15.000 11.250 0.100
1996:
First Quarter................................................. 17.500 13.250 0.100
Second Quarter................................................ 17.000 12.000 0.100
Third Quarter................................................. 13.000 9.500 0.100
Fourth Quarter................................................ 13.000 9.500 0.100
1997:
First Quarter................................................. 14.750 10.500 0.100
Second Quarter................................................ 11.875 8.250 0.100
Third Quarter................................................. 12.500 9.500 0.100
Fourth Quarter................................................ 14.250 10.500 0.100
1998:
First Quarter (through January 15, 1998)...................... 22.500 13.000 0.000
</TABLE>
On January 12, 1998, the last full trading day prior to the announcement of
the execution of the Merger Agreement and of Purchaser's intention to commence
the Offer, the closing price per Share as reported on Nasdaq was $13.75. On
January 15, 1998, the last full trading day prior to the commencement of the
Offer, the closing price per Share as reported on Nasdaq was $22.125. As of
January 12, 1998, the approximate number of holders of record of the Shares was
401.
SHAREHOLDERS ARE URGED TO OBTAIN A CURRENT MARKET QUOTATION FOR THE SHARES.
7. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set
forth herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been furnished by the Company or
has been taken from or based upon publicly available documents and records on
file with the Commission and other public sources. Neither Purchaser nor Parent
assumes any responsibility for the accuracy or completeness of the information
concerning the Company furnished by the Company or contained in such documents
and records or for any failure by the Company to disclose events which may have
9
<PAGE> 12
occurred or may affect the significance or accuracy of any such information but
which are unknown to Purchaser or Parent.
General. The Company is a Texas corporation with its principal executive
offices located at 2395 Midway Road, Carrollton, Texas 75006. The Company was
founded in 1964 and incorporated in Texas in 1969. In May 1983, the Company made
its initial public offering of common stock, which trades on Nasdaq under the
symbol "CLRI". In its beginning, the Company's primary business was federal
individual income tax returns for tax preparers as a computer service bureau.
Since that time, the Company has expanded its product offerings to include
almost every type of tax return. Over the past few years, the Company has
evolved into a business application software company expanding well beyond
providing the original tax automation systems upon which the Company was
founded.
Financial Information. Set forth below is certain selected consolidated
financial information relating to the Company and its subsidiaries (the
"Subsidiaries" and each individually, a "Subsidiary") which has been excerpted
or derived from the audited financial statements contained in the Company's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996 (the
"Form 10-K") and the unaudited financial statements contained in the Company's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1997 (the
"Form 10-Q"). More comprehensive financial information is included in the Form
10-K, the Form 10-Q and other documents filed by the Company with the
Commission. The summary financial information that follows is qualified in its
entirety by reference to such reports and other documents, including the
financial statements and related notes contained therein. Such reports and other
documents may be examined and copies may be obtained from the offices of the
Commission in the manner set forth below.
The financial information for the nine-month periods ended September 30,
1997 and 1996 has not been audited and, in the opinion of management of the
Company, reflects all adjustments (consisting of normal recurring adjustments)
which are necessary for a fair presentation of such information. Results for the
nine-month periods are not necessarily indicative of results for the full year.
10
<PAGE> 13
COMPUTER LANGUAGE RESEARCH, INC.
SELECTED CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED NINE MONTHS ENDED
DECEMBER 31 SEPTEMBER 30
--------------------------------- -------------------
1996 1995 1994 1997 1996
-------- -------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenues............................. $129,243 $110,703 $99,068 $97,799 $90,167
Operating Income.................. 1,105 7,832 17,112 2,727 (2,607)
Income from Continuing Operations
before Income Taxes............. 1,540 9,123 18,117 3,054 (2,201)
Net Income........................ 1,041 11,655 11,343 2,031 (1,431)
BALANCE SHEET DATA:
Current Assets....................... 35,074 43,933 42,254 27,893 29,316
Total Assets......................... 98,937 99,060 84,093 91,057 95,831
Current Liabilities.................. 30,341 28,099 21,126 24,601 28,148
Long-Term Debt, including Current
Portion........................... 938 1,687 -- 375 1,125
Shareholders' Equity................. 62,002 65,549 58,319 60,972 60,912
PER SHARE DATA:
Earnings per Share from Continuing
Operations........................ 0.07 0.48 0.77 0.14 (0.10)
Earnings (Loss) per Share from
Discontinued Operations........... -- 0.33 0.02 0.14 (0.10)
Earnings per Share................... 0.07 0.81 0.79 0.14 (0.10)
Weighted Average Number of Common and
Common Equivalent Shares
Outstanding....................... 14,564 14,434 14,280 14,477 14,207
</TABLE>
In connection with Parent's review of the Company and in the course of the
negotiations between the Company and Parent described in Section 10, the Company
provided Parent with certain business and financial information which Parent and
Purchaser believe is not publicly available. This information includes
projections of the operating performance of the Company for the four years
ending December 31, 1997, 1998, 1999 and 2000. The projections were prepared on
a stand alone basis without regard to the transactions contemplated by the
Merger Agreement.
<TABLE>
<CAPTION>
YEARS ENDING DECEMBER 31
-----------------------------------------------
1997 1998 1999 2000
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues................................ $139,309 $158,223 $177,569 $203,770
Operating Profit........................ 6,839 13,221 21,771 40,377
Net Income.............................. 4,501 8,309 13,829 25,911
</TABLE>
THESE PROJECTIONS ARE BASED ON ESTIMATES AND ASSUMPTIONS THAT ARE
INHERENTLY SUBJECT TO SIGNIFICANT TECHNOLOGICAL, ECONOMIC AND COMPETITIVE
UNCERTAINTIES AND CONTINGENCIES, ALL OF WHICH ARE DIFFICULT TO PREDICT AND MANY
OF WHICH ARE BEYOND THE COMPANY'S CONTROL. ACCORDINGLY, THERE CAN BE NO
ASSURANCE THAT THE PROJECTED RESULTS WOULD BE REALIZED OR THAT ACTUAL RESULTS
WOULD NOT BE SIGNIFICANTLY HIGHER OR LOWER THAN THOSE SET FORTH ABOVE. IN
ADDITION, THESE PROJECTIONS WERE NOT PREPARED WITH A VIEW TO PUBLIC DISCLOSURE
OR COMPLIANCE WITH THE PUBLISHED GUIDELINES OF THE COMMISSION OR THE GUIDELINES
ESTABLISHED BY THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS REGARDING
PROJECTIONS AND FORECASTS AND ARE INCLUDED IN THIS OFFER TO PURCHASE ONLY
BECAUSE SUCH INFORMATION WAS MADE AVAILABLE TO PARENT BY THE COMPANY. NONE OF
PARENT, PURCHASER, THE COMPANY OR ANY OTHER PARTY ASSUMES ANY RESPONSIBILITY FOR
THE ACCURACY OR VALIDITY OF THE FOREGOING PROJECTIONS. THE INCLUSION OF THE
FOREGOING PROJECTIONS SHOULD NOT BE REGARDED AS AN INDICATION THAT
11
<PAGE> 14
PARENT, PURCHASER, THE COMPANY OR ANY OTHER PERSON WHO RECEIVED SUCH INFORMATION
CONSIDERS IT AN ACCURATE PREDICTION OF FUTURE EVENTS, AND PARENT HAS NOT RELIED
ON THEM AS SUCH.
The Shares are registered under the Exchange Act. Accordingly, the Company
is subject to the informational filing requirements of the Exchange Act and, in
accordance therewith, is required to file periodic reports, proxy statements and
other information with the Commission relating to its business, financial
condition and other matters. Information as of particular dates concerning the
Company's directors and officers, their remuneration, stock options granted to
them, the principal holders of the Company's securities and any material
interest of such persons in transactions with the Company is required to be
disclosed in proxy statements distributed to the Company's shareholders and
filed with the Commission. Such reports, proxy statements and other information
should be available for inspection at the public reference facilities maintained
by the Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C.
20549, and also should be available for inspection at the Commission's regional
offices located at the Northwestern Atrium Center, 500 West Madison Street,
Suite 1400, Chicago, Illinois 60661-2511 and 7 World Trade Center, 13th Floor,
New York, New York 10048. Copies of such materials may also be obtained by mail,
upon payment of the Commission's customary fees, by writing to its principal
office at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549.
8. CERTAIN INFORMATION CONCERNING PURCHASER AND PARENT. Purchaser is a
newly incorporated Delaware corporation organized in connection with the Offer
and the Merger and has not carried on any activities other than in connection
with the Offer and the Merger. The principal offices of Purchaser are located at
Metro Center, One Station Place, Stamford, Connecticut 06902. Purchaser is a
wholly owned subsidiary of Parent.
Until immediately prior to the time that Purchaser will purchase Shares
pursuant to the Offer, it is not anticipated that Purchaser will have any
significant assets or liabilities or engage in activities other than those
incident to its formation and capitalization and the transactions contemplated
by the Offer and the Merger. Because Purchaser is newly formed and has minimal
assets and capitalization, no meaningful financial information regarding
Purchaser is available.
Parent is a corporation organized under the laws of Ontario, Canada. Its
principal offices are located at Suite 2706, P.O. Box 24, 66 Wellington Street
West, Toronto, Ontario, M5K 1A1, Canada. The principal activity of Parent is
specialized information and publishing (IP) worldwide. In addition, Parent has
important interests in newspaper publishing in North America, and in leisure and
travel in the United Kingdom and in Sweden. Parent is currently comprised of
four business groups: Thomson Corporation Publishing International (TCPI) and
Thomson Financial & Professional Publishing Group (TFPPG), Parent's two IP
business groups, and Thomson Newspapers (TN) and Thomson Travel Group (TTG). The
common stock of Parent is listed for trading on the Toronto Stock Exchange,
Montreal Stock Exchange and the London Stock Exchange.
The name, citizenship, business address, principal occupation or
employment, and five-year employment history for each of the directors and
executive officers of Purchaser and Parent and certain other information are set
forth in Schedule I hereto.
Based upon the consolidated financial statements of Parent for the fiscal
year ended December 31, 1996, contained in the Parent's 1996 Annual Report (the
"Parent Financial Statements"), Parent had (i) at December 31, 1996,
consolidated total assets of U.S. $13.173 billion, consolidated total
liabilities of U.S. $8.526 billion and consolidated shareholders' equity of U.S.
$4.647 billion and (ii) for the fiscal year ended December 31, 1996,
consolidated sales of U.S. $7.723 billion and net earnings of U.S. $569 million.
More comprehensive financial information is included in the Parent Financial
Statements. The summary of such financial information included above is
qualified in its entirety by reference to the Parent Financial Statements, a
copy of which has been filed as an exhibit to the Tender Offer Statement on
Schedule 14D-1/13D (the "Schedule 14D-1") filed by Purchaser and Parent with the
Commission in connection with the Offer.
Except as described in this Offer to Purchase, (i) none of Purchaser,
Parent nor, to the best knowledge of Purchaser and Parent, any of the persons
listed in Schedule I to this Offer to Purchase or any associate or
12
<PAGE> 15
majority-owned subsidiary of Purchaser, Parent or any of the persons so listed
beneficially owns or has any right to acquire, directly or indirectly, any
Shares and (ii) none of Purchaser, Parent nor, to the best knowledge of
Purchaser and Parent, any of the persons or entities referred to above nor any
director, executive officer or subsidiary of any of the foregoing has effected
any transaction in the Shares during the past 60 days.
Except as provided in the Merger Agreement and the Stock Purchase Agreement
and as otherwise described in this Offer to Purchase, none of Purchaser, Parent
nor, to the best knowledge of Purchaser and Parent, any of the persons listed in
Schedule I to this Offer to Purchase has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or voting of
such securities, finder's fees, joint ventures, loan or option arrangements,
puts or calls, guaranties of loans, guaranties against loss, guarantees of
profits, division of profits or loss or the giving or withholding of proxies.
Except as set forth in this Offer to Purchase, since January 1, 1994 neither
Purchaser nor Parent nor, to the best knowledge of Purchaser and Parent, any of
the persons listed on Schedule I hereto has had any business relationship or
transaction with the Company or any of its executive officers, directors or
affiliates that is required to be reported under the rules and regulations of
the Commission applicable to the Offer. Except as set forth in this Offer to
Purchase, since January 1, 1994, there have been no contacts, negotiations or
transactions between any of Purchaser, Parent, or any of their respective
subsidiaries or, to the best knowledge of Purchaser and Parent, any of the
persons listed in Schedule I to this Offer to Purchase, on the one hand, and the
Company or its affiliates, on the other hand, concerning a merger, consolidation
or acquisition, tender offer or other acquisition of securities, an election of
directors or a sale or other transfer of a material amount of assets.
9. FINANCING OF THE OFFER AND THE MERGER. The total amount of funds
required by Purchaser to consummate the Offer and the Merger and to pay related
fees and expenses is estimated to be approximately $345,000,000. Purchaser will
obtain all of such funds from Parent or its affiliates. Parent and its
affiliates will provide such funds from existing resources.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY; THE MERGER
AGREEMENT AND STOCK PURCHASE AGREEMENT.
On May 25th, 1993, the Company and Research Institute of America Group, a
division of Parent ("RIA Group"), entered into a contract pursuant to which the
Company agreed to grant RIA Group a non-exclusive worldwide license to market,
distribute and sublicense certain electronic form systems marketed under the
tradename "E-Form." E-Form is comprised of (i) federal, state and local income
tax forms and instructions (the "Form Libraries") and (ii) the R-Form Engine,
which allows users to display, print and fill-in electronic forms contained in
the Form Libraries. The contract terminates on April 30th, 1998.
From time to time thereafter, representatives of the Company and of RIA
Group would meet or telephone each other to discuss the business relationship
between the two companies.
On August 19th and September 17th, 1997, Stephen T. Winn, President and
Chief Executive Officer of the Company, and Euan C. Menzies, President and Chief
Executive Officer of RIA Group, met in Dallas and had a general discussion about
the tax and accounting software marketplace, including various competitive
factors, and overall market direction. During these meetings, they discussed a
series of joint venture opportunities involving RIA Group and the Company. The
benefits of an acquisition of the Company by RIA Group, however, were not
discussed.
On October 24th, 1997, Mr. Winn and Mr. Menzies met in Dallas to discuss
joint venture opportunities further. During this meeting, a brief discussion
took place with regard to the possible benefits of an acquisition of the Company
by RIA Group.
On October 30th, 1997, Mr. Winn advised the Company's Board of Directors of
his brief discussion with Mr. Menzies.
On November 6th, 1997, Michael S. Harris, General Counsel of Parent, and
representatives of Shearman & Sterling, outside legal counsel to Parent and
Purchaser, spoke by telephone with representatives of Locke
13
<PAGE> 16
Purnell Rain Harrell (A Professional Corporation) ("Locke Purnell"), outside
legal counsel to the Company, and indicated that Parent had an interest in
acquiring 100% of the Company, but only if it could be done on an exclusive
basis and with the binding commitment of the controlling shareholders to support
the transaction. From time to time thereafter, such counsel, together with
representatives of Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden Arps"), as
outside legal counsel to Mr. Winn and other controlling shareholders, had
additional discussions by telephone concerning Parent's requirements for a
possible transaction. During each conversation, Parent's counsel continued to
state that Parent would insist on an exclusive transaction fully supported by
the Company's controlling shareholders.
On November 12th, 1997, the Board of Directors of Parent held a regularly
scheduled meeting. At this meeting, Mr. Menzies made a presentation regarding a
potential acquisition of the Company. Following further discussion, Parent's
Board of Directors resolved that Parent should acquire the Company, subject to
final approval by at least two directors of Parent of the terms and conditions
of such acquisition, including a final agreement on price and satisfactory
negotiation of transaction related agreements.
On November 13th, 1997, Mr. Menzies spoke with Mr. Winn by telephone and
indicated that RIA Group was interested in entering into exploratory discussions
with the Company regarding the possible acquisition of the Company. Mr. Menzies
and Mr. Winn also discussed a possible range of purchase prices that RIA Group
might be willing to offer to acquire the Company. Finally, Mr. Menzies and Mr.
Winn agreed that RIA Group could commence a financial and legal due diligence
investigation of the Company upon execution of a confidentiality agreement. Mr.
Menzies reiterated Parent's position that Parent would be unwilling to proceed
with a transaction unless it had the full support of the Company's controlling
shareholders.
On November 21st, 1997, Parent and the Company executed a confidentiality
agreement.
On November 22nd, 1997, Mr. Menzies and Paul J. Mattison, Senior Vice
President and Chief Financial Officer of RIA Group, met with Mr. Winn and other
representatives of the Company at the Company's offices in Dallas and reviewed
business operations concerning the Company, and the historical and prospective
financial performance of the Company. Representatives of Goldman Sachs & Co.
("Goldman"), as financial advisors to the Company, were also present at this
meeting.
On November 28th, 1997, Mr. Menzies met with Mr. Winn and representatives
of Goldman at the Dallas Inter-Continental Hotel to discuss further a possible
acquisition of the Company and the potential range of values.
On December 1st, 1997, Mr. Menzies called Mr. Winn to discuss further the
valuation range. While no agreement was reached with respect to price, Mr. Winn
and Mr. Menzies agreed to continue to pursue the possibility of an acquisition
of the Company by RIA Group. Mr. Menzies and Mr. Winn also agreed that further
financial and legal due diligence meetings were appropriate.
During the period from December 3rd to December 17th, 1997, Mr. Menzies,
Mr. Mattison and other representatives of RIA Group met at various times with
Mr. Winn, M. Brian Healy, Chief Financial Officer and Group Vice President,
Finance and Administration of the Company, and other representatives of the
Company to review the Company's business operations with a view toward reaching
a final conclusion on business valuation. While general discussions took place
during this period regarding business valuation, no further substantive
discussions on pricing occurred during this period.
In addition, on December 3rd and 4th, 1997, Mr. Harris and representatives
from Shearman & Sterling met with Douglas H. Gross, General Counsel of the
Company, and other representatives of the Company in Dallas to discuss legal due
diligence related issues. During the period through December 17th, 1997, Parent
and its legal counsel conducted its legal due diligence investigation of the
Company.
On December 16th and December 17th, 1997, legal counsel to the Company and
the controlling shareholders conducted telephone conference calls with
representatives from Parent and Parent's legal counsel to discuss the
transaction and to negotiate drafts of the Merger Agreement and the Stock
Purchase Agreement.
14
<PAGE> 17
On December 19th, 1997, legal counsel to the Company and the controlling
shareholders met with representatives from Parent and Parent's legal counsel to
discuss the transaction and to negotiate drafts of the Merger Agreement and the
Stock Purchase Agreement.
On December 19th and 20th, 1997, Mr. Winn and Mr. Menzies met in New York
City to discuss the status of the legal negotiations, significant terms and
conditions of a potential transaction and possible pricing.
On December 31st, 1997, Parent's legal counsel and the Company's legal
counsel discussed the latest drafts of the agreements.
On January 2nd, 1998, representatives from the Company, RIA Group, Goldman,
and legal counsel to the Company, Parent and the controlling shareholders
conducted a telephone conference call to negotiate the Merger Agreement and the
Stock Purchase Agreement and to discuss further the transaction.
On January 6th and 7th, 1998, Mr. Winn and Mr. Menzies negotiated on the
telephone the range of possible purchase prices, but remained unable to reach
agreement.
On January 8th, 1998, Mr. Menzies and Mr. Winn met in New York City with
their respective legal and financial advisors to discuss key terms and
conditions of the acquisition, to carry on legal negotiations and to negotiate
the latest drafts of the Merger Agreement and the Stock Purchase Agreement. In
addition, during the evening of January 8th, 1998, Mr. Winn, Mr. Menzies and
Andrew G. Mills, President and Chief Executive Officer of Thomson Financial &
Professional Publishing Group, met over dinner to discuss key terms and
conditions of the acquisition and negotiated further about a potential purchase
price without reaching agreement.
On January 9th, 1998, legal counsel to Parent, the Company and the
controlling shareholders discussed the open issues concerning the agreements.
On January 10th and 11th, 1998, Mr. Winn and Mr. Menzies continued to
negotiate a potential purchase price.
On January 11th, 1998, the Board of Directors of the Company met to discuss
the latest terms of the transaction and to receive financial and legal advice
concerning the transaction. Subsequent to the Company's Board of Directors'
meeting, on January 11th, 1998, Mr. Winn telephoned Mr. Menzies to report that
the Board of Directors had authorized Mr. Winn to proceed with final
negotiations relating to the transaction, provided that the price to be paid per
Share was at least $22.50.
During the morning of January 12th, 1998, Mr. Menzies and Mr. Winn had a
telephone call in which Mr. Menzies indicated that Parent was prepared to
proceed with final negotiations relating to the transaction on the basis of a
purchase price of $22.50 per Share, subject to satisfactory resolution of all
remaining open issues between the parties. Representatives of the Company, RIA
Group, Shearman & Sterling, Locke Purnell, Skadden Arps and Parent then
conducted several telephone conversations to negotiate the Merger Agreement and
the Stock Purchase Agreement and to resolve all remaining issues.
During the late afternoon of January 12th, 1998, the Board of Directors of
the Company met and, subject to the Company being able to obtain Parent's
agreement to a purchase price of $22.50 per Share, approved and adopted the
Merger Agreement and approved the Stock Purchase Agreement.
Later that evening, Mr. Menzies, Mr. Winn and their respective advisors
completed negotiations with respect to the Merger Agreement, the Stock Purchase
Agreement and certain related matters. The Merger Agreement was then executed.
The same day, the Majority Shareholders approved and subsequently executed the
Stock Purchase Agreement.
On the morning of January 13th, 1998, Parent and the Company issued a joint
press release announcing the transaction, and on January 16th, 1998, Purchaser
commenced the Offer.
15
<PAGE> 18
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is
filed as an Exhibit to the Schedule 14D-1. Such summary is qualified in its
entirety by reference to the Merger Agreement.
The Offer. The Merger Agreement provides for the commencement of the Offer
as promptly as reasonably practicable, but in no event later than five business
days after the initial public announcement of the Merger Agreement. The
obligation of Purchaser to accept for payment Shares tendered pursuant to the
Offer is subject to the satisfaction of the Minimum Condition and certain other
conditions that are described in Section 14 hereof. Purchaser and Parent have
agreed that without the prior consent of the Company Purchaser will not (i)
waive the Minimum Condition or reduce the number of Shares subject to the Offer,
(ii) reduce the price per Share payable in the Offer, (iii) extend the Offer or
amend or add to the conditions to the Offer, (iv) change the form of
consideration payable in the Offer, or (v) amend, add or waive any other term of
the Offer in any manner that would adversely affect the Company or its
shareholders. Notwithstanding the foregoing, the Merger Agreement provides that
Purchaser (i) will not terminate and will extend the Offer, up to February 28,
1998 if, at the initial scheduled expiration of the Offer, or any extension
thereof, any of the conditions to the Offer have not been satisfied or waived by
Purchaser (provided that if the only unsatisfied condition to the Offer is the
failure of the waiting period under the HSR Act to have expired or been
terminated, then Purchaser will extend the Offer, for one or more periods of not
more than 10 business days, pursuant to this clause (i) up to May 15, 1998),
(ii) will extend the Offer for any period required by any rule, regulation or
interpretation of the Commission or the staff thereof applicable to the Offer,
and (iii) may, without the consent of the Company, extend the Offer for an
aggregate period of not more than 10 business days beyond the latest applicable
date that would otherwise be permitted under clause (i) or (ii) of this sentence
if, as of such date, all of the conditions to the Offer are satisfied or waived
by Purchaser, but the number of Shares validly tendered and not withdrawn
pursuant to the Offer equals 80% or more, but less than 90%, of the then
outstanding Shares on a fully diluted basis.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Delaware Law and Texas Law, at
the Effective Time, Purchaser will be merged with and into the Company. As a
result of the Merger, the separate corporate existence of Purchaser will cease
and the Company will continue as the Surviving Corporation and will become a
wholly owned Subsidiary of Parent. At the Effective Time, each issued and then
outstanding Share (other than any Shares held in the treasury of the Company, or
owned by Purchaser, Parent or any direct or indirect wholly owned subsidiary of
Parent or of the Company, and any Shares which are held by shareholders who have
not voted in favor of the Merger or consented thereto in writing and who shall
have demanded properly in writing appraisal for such Shares in accordance with
Texas Law) will be cancelled and converted automatically into the right to
receive an amount equal to the Merger Consideration in cash payable, without
interest, to the holder of such Share.
The Merger Agreement provides that the directors of Purchaser immediately
prior to the Effective Time will be the initial directors of the Surviving
Corporation and that the officers of the Company immediately prior to the
Effective Time will be the initial officers of the Surviving Corporation. The
Merger Agreement provides that, at the Effective Time, unless otherwise
determined by Parent prior to the Effective Time, the Articles of Incorporation
of Company will be the Articles of Incorporation of the Surviving Corporation;
provided, however, that, at the Effective Time, the Articles of Incorporation of
the Surviving Corporation will be amended in their entirety to be substantially
identical to Purchaser's Certificate of Incorporation subject to the directors'
and officers' indemnification and insurance provisions contained in the Merger
Agreement. The Merger Agreement also provides that, subject to the directors'
and officers' indemnification and insurance provisions contained therein, the
By-laws of the Company, as in effect immediately prior to the Effective Time,
will be the By-laws of the Surviving Corporation.
Agreements of Parent, Purchaser and the Company. Pursuant to the Merger
Agreement, the Company shall, if required by applicable law in order to
consummate the Merger, duly call, give notice of, convene and hold an annual or
special meeting of its shareholders as soon as practicable following
consummation of the Offer or the purchase by Purchaser of the Shares of the
Majority Shareholders pursuant to the Stock Purchase
16
<PAGE> 19
Agreement, whichever occurs first, for the purpose of considering and taking
action on the Merger Agreement and the transactions contemplated thereby (the
"Shareholders' Meeting"). If Purchaser acquires at least two-thirds of the
majority of the outstanding Shares, Purchaser will have sufficient voting power
to approve the Merger, even if no other shareholder votes in favor of the
Merger. UPON CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THE STOCK PURCHASE
AGREEMENT, PARENT AND PURCHASER, BY VIRTUE OF THE ACQUISITION OF APPROXIMATELY
74.6% OF THE OUTSTANDING SHARES, WILL OWN A NUMBER OF SHARES SUFFICIENT, EVEN IF
NO OTHER SHARES ARE TENDERED IN THE OFFER, TO CAUSE THE MERGER TO OCCUR WITHOUT
THE AFFIRMATIVE VOTE OF ANY OTHER HOLDER OF SHARES. SEE SECTION 11.
The Merger Agreement provides that the Company will, if required by
applicable law, as soon as practicable following either consummation of the
Offer or the purchase by Purchaser of the Shares held by the Majority
Shareholders pursuant to the Stock Purchase Agreement, whichever occurs first,
file with the Commission under the Exchange Act, and use its reasonable best
efforts to have cleared by the Commission, a proxy statement and related proxy
materials (the "Proxy Statement") with respect to the Shareholders' Meeting and
will cause the Proxy Statement to be mailed to shareholders of the Company at
the earliest practicable time. The Company has agreed, subject to the fiduciary
duties of the Board under applicable law, to include in the Proxy Statement the
unanimous recommendation of the Board that the shareholders of the Company
approve and adopt the Merger Agreement and the transactions contemplated thereby
and to use its reasonable best efforts to obtain such approval and adoption.
Parent and Purchaser have agreed to cause all Shares then owned by them and
their subsidiaries to be voted in favor of approval and adoption of the Merger
Agreement and the transactions contemplated thereby. The Merger Agreement
provides that, in the event that Purchaser acquires at least 90% of the then
outstanding Shares, Parent, Purchaser and the Company agree, at the request of
Purchaser and subject to certain additional conditions set forth in the Merger
Agreement, to take all necessary and appropriate action to cause the Merger to
become effective as soon as reasonably practicable after such acquisition,
without a meeting of the Company's shareholders, in accordance with Article 5.16
of Texas Law.
Pursuant to the Merger Agreement, the Company has covenanted and agreed
that, between the date of the Merger Agreement and the time at which Purchaser's
designees to the Board represent at least a majority of the number of directors
on the Board (including all vacancies), the businesses of the Company and its
Subsidiaries will be conducted only in, and the Company and the Subsidiaries
will not take any action except in, the ordinary course of business and in a
manner consistent with past practice; and the Company will use its reasonable
best efforts to preserve substantially intact the business organization of the
Company and the Subsidiaries, to keep available the services of the current
officers, employees and consultants of the Company and the Subsidiaries and to
preserve the current relationships of the Company and the Subsidiaries with
customers, suppliers and other persons with which the Company or any Subsidiary
has significant business relations. The Merger Agreement provides that by way of
amplification and not limitation, and except as contemplated or disclosed
therein, neither the Company nor any Subsidiary will, between the date of the
Merger Agreement and the time at which Purchaser's designees to the Board
represent at least a majority of the number of directors on the Board (including
all vacancies), directly or indirectly do any of the following, without the
prior written consent of Parent:
(a) amend or otherwise change its Articles of Incorporation or By-laws
or equivalent organizational documents;
(b) issue, sell, pledge, dispose of, grant, encumber, or authorize the
issuance, sale, pledge, disposition, grant or encumbrance of, (i) any
shares of capital stock of any class of the Company or any Subsidiary, or
any options, warrants, convertible securities or other rights of any kind
to acquire any shares of such capital stock, or any other ownership
interest (including, without limitation, any phantom interest), of the
Company or any Subsidiary (except for the issuance of a maximum of
1,646,150 Shares issuable upon exercise of employee stock options
outstanding on the date of the Merger Agreement or as disclosed in the
disclosure schedules to the Merger Agreement (the "Disclosure Schedules")
or otherwise in writing to Parent prior to the date of the Merger
Agreement) or (ii) any assets of the Company or any Subsidiary, except for
transactions in the ordinary course of business and in a manner consistent
with past practice;
17
<PAGE> 20
(c) declare, set aside, make or pay any dividend or other
distribution, payable in cash, stock, property or otherwise, with respect
to any of its capital stock, except for regular quarterly dividends on the
Shares declared and paid at times consistent with past practice in an
aggregate amount not in excess of $.10 per Share per quarter;
(d) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
(e) (i) acquire (including, without limitation, by merger,
consolidation, or acquisition of stock or assets) any corporation,
partnership, other business organization or any division thereof or any
material amount of assets, except for such acquisitions which do not exceed
$3,000,000 in the aggregate for all such acquisitions; (ii) incur any
indebtedness for borrowed money or issue any debt securities or assume,
guarantee or endorse, or otherwise as an accommodation become responsible
for, the obligations of any person, or make any loans or advances, except
in the ordinary course of business and consistent with past practice; (iii)
enter into any contract or agreement other than in the ordinary course of
business, consistent with past practice; (iv) authorize any single capital
expenditure which is in excess of $1,000,000 or capital expenditures which
are, in the aggregate, in excess of $5,000,000 for the Company and the
Subsidiaries taken as a whole; or (v) enter into or amend any contract,
agreement, commitment or arrangement with respect to any matter prohibited
by this paragraph (e);
(f) increase the compensation payable or to become payable to its
directors, officers or employees, except for increases in accordance with
past practices in salaries or wages of employees of the Company or any
Subsidiary who are not officers or directors of the Company, or grant any
severance or termination pay to, or enter into any employment or severance
agreement with any director, officer or other employee of the Company or
any Subsidiary, or establish, adopt, enter into or amend any collective
bargaining, bonus, profit sharing, thrift, compensation, stock option,
restricted stock, pension, retirement, deferred compensation, employment,
termination, severance or other plan, agreement, trust, fund, policy or
arrangement for the benefit of any director, officer or employee, except
for payments under the Company's 1997 Annual Incentive Plan (the "1997
Incentive Plan") and the Company's 1997 Officers' Annual Incentive Plan
(the "Officers' Incentive Plan") up to a maximum of $1.8 million and except
in the ordinary course of business consistent with past practices;
(g) except as may be required by a change in the rules relating to
generally accepted accounting principles or if the Company elects early
adoption of AICPA Statement of Position No. 97-2, Software Revenue
Recognition, take any action, other than reasonable and usual actions in
the ordinary course of business and consistent with past practice, with
respect to accounting policies or procedures (including, without
limitation, procedures with respect to the payment of accounts payable and
collection of accounts receivable);
(h) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability except in the
ordinary course of business consistent with past practices;
(i) pay, discharge or satisfy any claim, liability or obligation
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of liabilities reflected or
reserved against in the consolidated balance sheet of the Company as at
December 31, 1996, including the notes thereto, or in reports filed by the
Company with the Commission prior to the date of the Merger Agreement or
subsequently incurred in the ordinary course of business and consistent
with past practice;
(j) amend, modify or consent to the termination of any lease, license,
contract or agreement which is material to the Company and its
Subsidiaries, taken as a whole, or amend, modify or consent to the
termination of the Company's or the Subsidiary's rights thereunder, other
than in the ordinary course of business consistent with past practice; or
(k) enter into any lease, license, contract or agreement that would be
material to the Company and its Subsidiaries taken as a whole, other than
in the ordinary course of business consistent with past practice or as
otherwise permitted by the foregoing paragraphs.
18
<PAGE> 21
Directors and Officers. The Merger Agreement provides that, promptly upon
the purchase by Purchaser of Shares pursuant to the Offer, and from time to time
thereafter, Purchaser will be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board as will give
Purchaser representation on the Board equal to the product of the total number
of directors on the Board (giving effect to the directors elected pursuant to
this sentence), multiplied by the percentage that the aggregate number of Shares
beneficially owned by Purchaser or any affiliate of Purchaser following such
purchase bears to the total number of Shares then outstanding, and the Company
will, at such time, promptly take all actions necessary to cause Purchaser's
designees to be elected as directors of the Company, including increasing the
size of the Board or securing the resignations of incumbent directors, or both.
The Merger Agreement also provides that, at such times, the Company will use its
best efforts to cause persons designated by Purchaser to constitute the same
percentage as persons designated by Purchaser will constitute of the Board of
(i) each committee of the Board, (ii) each board of directors of each domestic
Subsidiary and (iii) each committee of each such board, in each case only to the
extent permitted by applicable law.
The Merger Agreement provides that, following the election of Purchaser's
designees in accordance with the immediately preceding paragraph and prior to
the Effective Time, any amendment of the Merger Agreement or the Articles of
Incorporation or By-laws of the Company, any termination of the Merger Agreement
by the Company, any extension by the Company of the time for the performance of
any of the obligations or other acts of Parent or Purchaser or waiver of any of
the Company's rights thereunder, will require the concurrence of a majority of
those directors of the Company then in office who were neither designated by
Purchaser nor are employees of the Company.
Pursuant to the Merger Agreement, from the date of the Merger Agreement
until the Effective Time, the Company will, and will cause the Subsidiaries and
the officers, directors, employees, auditors and agents of the Company and the
Subsidiaries to, afford the officers, employees and agents of Parent and
Purchaser and persons providing or committing to provide Parent or Purchaser
with financing for the transactions contemplated by the Merger Agreement
reasonable access at all reasonable times to the officers, employees, agents,
properties, offices, plants and other facilities, books and records of the
Company and each Subsidiary, and will furnish Parent and Purchaser and persons
providing or committing to provide Parent and Purchaser with financing for the
transactions contemplated by the Merger Agreement with all financial, operating
and other data and information as Parent or Purchaser, through its officers,
employees or agents, may reasonably request and Parent and Purchaser or other
persons acting on their behalf or for their benefit have agreed to keep such
information confidential, except in certain circumstances.
Acquisition Proposals. The Company has agreed that neither it nor any
Subsidiary will, directly or indirectly, through any officer, director, agent or
otherwise, solicit, initiate or encourage the submission of or accept any
proposal or offer from any person relating to any acquisition or purchase of all
or (other than in the ordinary course of business) any portion of the assets of,
or any equity interest in, the Company or any Subsidiary or any business
combination with the Company or any Subsidiary or participate in any
negotiations regarding, or furnish to any other person any information with
respect to, or otherwise cooperate in any way with, or assist or participate in,
facilitate or encourage, any effort or attempt by any other person to do or seek
any of the foregoing. In addition, the Company will immediately cease and cause
to be terminated any existing discussions or negotiations with any parties
conducted prior to the date of the Merger Agreement with respect to any of the
foregoing. Notwithstanding the foregoing, (i) the Company may engage in
discussions or negotiations with a third party who seeks to initiate such
discussions or negotiations or may furnish such third party information
concerning the Company and its Subsidiaries, in each case only in response to a
request for such information or access which was not encouraged, solicited or
initiated by the Company or any of its affiliates, and pursuant to appropriate
confidentiality agreements, (ii) the Board may take and disclose to the
Company's shareholders a position contemplated by Rule 14e-2 promulgated under
the Exchange Act and (iii) following receipt of a proposal or offer from a third
party, the Board may withdraw or modify its recommendation, but in each case
referred to in the foregoing clauses (i) through (iii) only to the extent that
the Board concludes in good faith based upon the advice of the Company's outside
counsel that such action is required in order for the Board to act in a manner
which is consistent with its fiduciary obligations under applicable law. The
Company has also agreed to notify Parent promptly if any such proposal or offer
with any
19
<PAGE> 22
person with respect thereto, is made and, in any such notice to Parent, to
indicate in reasonable detail the identity of the person making such proposal or
offer, and the terms and conditions of such proposal or offer. In connection
with any such proposal or offer, the Company has also agreed not to release any
third party from, or waive any provision of, any confidentiality or standstill
agreement to which the Company is a party.
The Merger Agreement provides that notwithstanding anything in the
paragraph above or any other provision to the contrary in the Merger Agreement,
the Company will not take any action which would render invalid or ineffective,
or otherwise vacate or withdraw, the approval by the Board of the transactions
contemplated by the Merger Agreement and the Stock Purchase Agreement for
purposes of Article 13.03 of Texas Law and will not take any action that would
cause the Company to breach its representation and warranty that the Company has
taken all action necessary to satisfy or render inapplicable the restrictions on
business combinations contained in Article 13.03 of Texas Law.
Existing Stock Options. The Merger Agreement provides that, with respect
to employees of the Company or its Subsidiaries who were awarded stock options
(the "Optionees") that were granted by the Company under the Company's 1982
Stock Option Plan (the "1982 Plan") prior to the Effective Time (the "1982
Options"), each such Optionee, as of the Effective Time, shall be vested in
amounts ranging from 60% to 100% of the aggregate 1982 Options awarded to such
Optionee. The vested percentage shall be determined according to the date such
1982 Options were awarded. With respect to Optionees who were granted stock
options under the Company's 1997 Stock Incentive Plan (the "1997 Plan") prior to
the Effective Time (the "1997 Options"), each such Optionee, as of the Effective
Time, will be vested in 60% of the 1997 Options awarded to such Optionee. With
respect to the stock options that were granted by the Company under the 1994
Non-Employee Director Company Plan (the "1994 Plan") prior to the Effective Time
(the "1994 Options"), as of the Effective Time, all 1994 Options will be fully
vested. Each Optionee who holds any vested and unexercised 1982 Options, 1994
Options or 1997 Options as of the Effective Time (the "Vested Options") will
receive from the Company, immediately after the Effective Time, in settlement
and cancellation of each Vested Option, a lump sum amount in cash equal to the
product of (i) the difference between the Merger Consideration and the per share
exercise price of a Vested Option and (ii) the number of shares of Company
Common Stock subject to such Vested Option. All unvested 1997 Options and 1982
Options will lapse and become void as of the Effective Time and any obligation
express or implied that the Company shall have incurred with respect to the
Conditional Options (as defined below) will lapse and become void as of the
Effective Time. Furthermore, the Merger Agreement provides that in the event
that any amount provided to any Optionee, pursuant to the accelerated vesting of
any of the Vested Options, constitutes a "parachute payment" within the meaning
of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"),
and, such "parachute payment" would otherwise be subject to the excise tax
imposed by Section 4999 of the Code, the Company will reduce the aggregate
number of Vested Options of such Optionee (such reduction, the "Excess Options")
(in such manner as the Company, in its reasonable discretion, shall deem
appropriate) such that the present value thereof is equal to 2.99 times such
Optionee's "base amount" as defined in Section 280G(b)(3) of the Code. The
Excess Options will immediately lapse and become void.
Conditional Options. Certain employees of the Company, who will be
identified by the Company to Parent in writing prior to the Effective Time, have
been granted stock options that were conditional upon the approval by the Board
and the shareholders of the Company of an amendment to the 1997 Plan (the
"Conditional Options"). The Merger Agreement provides that the Company will pay
each holder of a Conditional Option, immediately after the Effective Time, a
lump sum amount in cash equal to 60% of the product of (i) the Merger
Consideration minus the exercise price per share of Company Common Stock subject
to a Conditional Option and (ii) the number of shares of Company Common Stock
subject to such Conditional Option.
Retention Bonus Plan. The Merger Agreement provides that, on or before the
Effective Time, the Company will adopt a Retention Bonus Plan (the "Retention
Bonus Plan") for employees of the Company. Under the Retention Bonus Plan, the
Company will offer certain employees an incentive not to terminate their
employment with the Company during the period of transition following Parent's
acquisition of the Company. Under the Retention Bonus Plan, the Company will
offer such employees bonuses that will be paid 50% on the
20
<PAGE> 23
first anniversary of the Effective Time and 50% on the second anniversary of the
Effective Time if they continue to be employed by the Company on such
anniversary dates. In addition, the Retention Bonus Plan will provide bonus
payments to any participant that is terminated by the Company without "cause" or
resigns from his or her employment for "good reason" (as each term is defined in
the Retention Bonus Plan) during the two year period after the Effective Time.
Retention Agreements. In addition to the Retention Bonus Plan, the Merger
Agreement provides that the Company will offer Retention Agreements (the
"Retention Agreements") to Messrs. Stephen T. Winn, Francis W. Winn, M. Brian
Healy and Douglas H. Gross (the "Executives"). The Retention Agreements will
provide for the continued employment of each of the Executives at a stated base
salary and the continued participation in the Company's employee benefit plans.
The Retention Agreements also provide each Executive with severance
payments until December 31, 1999 with respect to Messrs. Francis Winn, Healy and
Gross and until September 30, 2000 with respect to Stephen T. Winn, in the event
of termination without "cause" or resignation for "good reason" prior to the
expiration of the term of each such Retention Agreement (in each case, a
"Compensated Termination"), or after termination or resignation upon the
successful completion by any such Executive of the term of his Retention
Agreement. The term of each Retention Agreement, with the exception of Stephen
T. Winn's, will expire December 31, 1998. The term of Stephen T. Winn's
Retention Agreement will expire March 31, 1999.
In addition to salary and severance, Messrs. Healy, Gross and Stephen T.
Winn are entitled to participate in the Retention Bonus Plan and each will
receive a lump sum special bonus (the "Special Bonus") at the end of the term or
upon a Compensated Termination. In the event of a Compensated Termination, each
Executive will receive his salary through the end of the term and severance
payments thereafter. In addition, those Executive who participate in the
Retention Bonus Plan will receive an accelerated payment of bonus amounts under
such plan. Those Executives who have Retention Agreements that include the
Special Bonus will receive such Special Bonus according to the terms of their
respective agreements in the event of a Compensated Termination. However, in
order to be entitled to receive any of the severance or bonus payments in the
event of a Compensated Termination, the Executive must sign a waiver and release
of all employment-related claims against the Company.
Finally, the Retention Agreements include restrictive covenants that
prohibit the dissemination of confidential information by the Executives, as
well as competition and solicitation of employees or customers of the Company
after the Executives' employment with the Company terminates. The Retention
Agreements also require each Executive to agree to assign to the Company all
developments and innovations related to their employment with the Company.
The above information is a summary of the Retention Agreements, copies of
which are filed as an Exhibit to the Schedule 14D-1. Such summary is qualified
in its entirety by reference to the Retention Agreements.
Employee Benefits Matters. The Merger Agreement further provides that
following the Effective Time, Parent will cause the current employees of the
Company to (i) be eligible to participate in the employee benefit plans of a
subsidiary of Parent, the benefits under which, in the aggregate, will be at
least as favorable, as those provided under the Company's employee benefit
Plans, (ii) continue to participate in the Company's employee benefit plans as
in effect immediately prior to the Effective Time or (iii) be eligible to
participate in a benefits package that is a combination of (i) and (ii) and is
at least as favorable, in the aggregate, as those provided under the Company's
employee benefit plans, provided that Parent will not be prevented from
terminating the employment of any such employee or modifying or terminating such
plans from time to time and the choice of alternatives (i), (ii) or (iii) shall
be at the sole discretion of Parent. Any group health plan offered to current
employees of Company and their dependents will not exclude coverage on account
of any pre-existing condition, and in determining deductibles and co-payments
under any group health plan of Parent or its subsidiaries such employees and
their dependents will be credited with any deductibles and co-pays accrued
through the Effective Time. For purposes of any length of service requirements,
waiting periods, vesting periods, benefit accruals or differential benefits
based on length of service in any such plan for which an employee of the Company
may be eligible after the Effective Time, Parent will ensure that service by
such
21
<PAGE> 24
employee with the Company will be deemed service with Parent; provided, however,
that no such credit will be given for purposes of any defined benefit pension
plan of Parent or any of its subsidiaries.
1998 Incentive Plan. The Merger Agreement provides that, as soon as
practicable after the Effective Time, Parent will adopt a 1998 incentive bonus
program, which will replace the 1997 Incentive Plan and the Officers' Incentive
Plan, pursuant to which annual bonuses will be calculated according to certain
measures of the performance of the Company, including, without limitation,
annual increases in profit and revenue compared with the preceding year. In
addition, the Merger Agreement provides that, as of the Effective Time, the
Company will take all necessary actions to terminate the 1997 Incentive Plan and
the Officers' Incentive Plan and such plans will be terminated as of the
Effective Time.
Severance. The Merger Agreement provides that, on or before the Effective
Time, the Company will adopt a severance plan for those of its employees who are
at grade level E-16 or above as of the date of the Merger Agreement that will
become effective as of the Effective Time. Such plan will provide for payment of
severance to any of such employees terminated other than for Cause (as defined
in the Retention Bonus Plan) prior to the second anniversary of the Effective
Time and to any of such employees who resign for Good Reason (as defined in the
Retention Bonus Plan) prior to the second anniversary of the Effective Time
equal to a minimum of six months' base salary, plus an additional two weeks'
base salary per full year of tenure with the Company. The maximum severance
benefit pursuant to such plan will equal 12 months' salary. The Merger Agreement
provides that on or before the Effective Time, the Company will offer written
agreements to certain employees of the Company identified to the Purchaser in
writing providing for severance benefits in lieu of participating in the
severance plan. The Merger Agreement provides that on or before the Effective
Time, the Company will offer written agreements to its officers providing that,
in the event it is determined that any payment by the Company or any affiliate
to or for the benefit of such officers (a "Payment") would be subject to the
excise tax imposed by Section 4999 of the Code or any interest or penalties are
incurred by such officers with respect to such excise tax (collectively, the
"Excise Tax"), then the officers will be entitled to receive an additional
payment (a "Gross-up Payment") in an amount such that after payment by such
officer of all taxes, interest and penalties, including, without limitation, any
income taxes and Excise Tax imposed upon the Gross-up Payment, the officer
retains an amount of the Gross-up Payment equal to the Excise Tax imposed upon
the Payment; provided, however, that each such agreement will require each
officer who is entitled to a Gross-up Payment to cooperate with a tax advisor of
the Company's choice in the determination of such Gross-up Payment.
D&O Indemnification and Insurance. The Merger Agreement further provides
that the Articles of Incorporation and By-laws of the Surviving Corporation will
contain provisions no less favorable with respect to limitation of liability and
indemnification than are set forth in Article XII of the Articles of
Incorporation and Article 11 of the By-laws of the Company, which provisions
will not be amended, repealed or otherwise modified for a period of six years
from the Effective Time in any manner that would adversely affect the rights
thereunder of individuals who prior to or at the Effective Time were directors,
officers or employees of the Company or its Subsidiaries.
The Merger Agreement also provides that the Company and, following the
purchase of any Shares by Purchaser or its affiliates pursuant to the Offer or
the Stock Purchase Agreement, Parent will, to the fullest extent permitted under
applicable law and regardless of whether the Merger becomes effective, indemnify
and hold harmless, and, after the Effective Time, Parent and the Surviving
Corporation will, to the fullest extent permitted under applicable law,
indemnify and hold harmless, each present and former director, officer or
employee of the Company and each Subsidiary (collectively, the "Indemnified
Parties") against all costs and expenses (including attorneys' fees), judgments,
fines, losses, claims, damages, liabilities and amounts paid in settlement in
connection with any claim, action, suit, proceeding or investigation (whether
arising before or after the Effective Time), whether civil, criminal,
administrative or investigative, arising out of or pertaining to any action or
omission in their capacity as an officer, director or employee, whether
occurring before or after the Effective Time (including, without limitation, the
transactions contemplated by the Merger Agreement and the Stock Purchase
Agreement), for a period of six years after the date of the Merger Agreement.
Without limiting the generality of the foregoing, in the event of any such
claim, action, suit, proceeding or investigation, the Merger Agreement provides
that (i) the Company, the Surviving Corporation or Parent, as
22
<PAGE> 25
the case may be, will pay as incurred, each Indemnified Party's legal and other
expenses (including costs of investigation and preparation), including the fees
and expenses of counsel selected by the Indemnified Party, which counsel must be
reasonably satisfactory to the Company, the Surviving Corporation or Parent,
promptly after statements therefor are received and (ii) the Company, the
Surviving Corporation and Parent will cooperate in the defense of any such
matter; provided, however, that none of the Company, the Surviving Corporation
or Parent will be liable for any settlement effected without its written consent
(which consent may not be unreasonably withheld); and provided further that none
of the Company, the Surviving Corporation or Parent will be obligated to pay the
fees and expenses of more than one counsel for all Indemnified Parties in any
single action except to the extent that two or more of such Indemnified Parties
have conflicting interests in the outcome of such action; and provided further
that, in the event that any claim for indemnification is asserted or made within
such six-year period, all rights to indemnification in respect of such claim
will continue until the disposition of such claim. The Company, the Surviving
Corporation or the Parent will pay all expenses, including counsel fees and
expenses, that any Indemnified Party may incur in enforcing the indemnity and
other obligations provided for in the Merger Agreement.
The Merger Agreement provides that the Surviving Corporation will use its
best efforts to maintain in effect for six years from the Effective Time, if
available, the current directors' and officers' liability insurance policies
maintained by the Company (provided that the Surviving Corporation may
substitute therefor policies of at least the same coverage containing terms and
conditions which are not materially less favorable) with respect to matters
occurring prior to the Effective Time; provided, however, that in no event will
the Surviving Corporation be required to expend more than an amount per year
equal to 200% of the current annual premiums paid by the Company for such
insurance (which premiums the Company has represented to Parent and Purchaser to
be approximately $139,000 in the aggregate); provided further that the Surviving
Corporation will obtain the maximum coverage obtainable for such 200% amount.
Parent, Purchaser and the Company have also agreed that, in the event the
Company, the Surviving Corporation or Parent or any of their respective
successors or assigns (i) consolidates with or merges into any other person and
is not the continuing or surviving corporation or entity of such consolidation
or merger or (ii) transfers all or substantially all of its properties and
assets to any person, then, and in each such case proper provision will be made
so that the successors and assigns of the Company, the Surviving Corporation or
Parent, as the case may be, will assume the foregoing indemnity obligations.
Regulatory Approvals. The Merger Agreement provides that, subject to its
terms and conditions, each of the parties thereto will (i) make promptly its
respective filings, and thereafter make any other required submissions, under
the HSR Act with respect to the transactions contemplated by the Merger
Agreement and the Stock Purchase Agreement and (ii) use its reasonable best
efforts to take, or cause to be taken, all appropriate action, and to do or
cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by the Merger Agreement and the Stock Purchase Agreement,
including, without limitation, using its reasonable best efforts to obtain all
licenses, permits (including, without limitation, the Environmental Permits as
therein defined), consents, approvals, authorizations, qualifications and orders
of governmental authorities and parties to contracts with the Company and the
Subsidiaries as are necessary for the consummation of the transactions
contemplated by the Merger Agreement and the Stock Purchase Agreement and to
fulfill the conditions to the Offer and the Merger. In case at any time after
the Effective Time any further action is necessary or desirable to carry out the
purposes of the Merger Agreement, the proper officers and directors of each
party to the Merger Agreement are required to use their reasonable best efforts
to take all such action.
Representations and Warranties. The Merger Agreement contains various
customary representations and warranties of the parties thereto, including
representations by the Company as to the absence of certain changes or events
concerning the Company's business, compliance with law, litigation, employee
benefit plans, labor matters, real property and leases, trademarks, patents,
copyrights and other intellectual property, environmental matters, brokers and
taxes.
Conditions to the Merger. Under the Merger Agreement, the respective
obligations of each party to effect the Merger are subject to the satisfaction
at or prior to the Effective Time of the following conditions:
23
<PAGE> 26
(i) the Merger Agreement and the transactions contemplated thereby shall have
been approved and adopted by the affirmative vote of the shareholders of the
Company to the extent required by Texas Law and the Company's Articles of
Incorporation; (ii) any waiting period (and any extension thereof) applicable to
the consummation of the Merger under the HSR Act shall have expired or been
terminated; (iii) no United States or Canadian federal, state, provincial or
local governmental or regulatory authority or other agency or commission or
court of competent jurisdiction shall have enacted, issued, promulgated,
enforced or entered any law, rule, regulation, executive order, decree,
injunction or other order (whether temporary, preliminary or permanent) which is
then in effect and has the effect of making the acquisition of Shares by Parent
or Purchaser or any affiliate of either of them illegal or otherwise
restricting, preventing or prohibiting consummation of the Merger; and (iv)
Purchaser or its permitted assignee shall have purchased a minimum two-thirds of
the outstanding Shares (on a fully diluted basis) pursuant to the Offer, the
Stock Purchase Agreement or otherwise.
Termination; Fees and Expenses. The Merger Agreement provides that it may
be terminated and the Merger and the other transactions contemplated by the
Merger Agreement may be abandoned at any time prior to the Effective Time,
notwithstanding any requisite approval and adoption of the Merger Agreement and
the transactions contemplated by the Merger Agreement by the shareholders of the
Company:
(a) By mutual written consent duly authorized by the Boards of
Directors of Parent, Purchaser and the Company; or
(b) By either Parent, Purchaser or the Company if (i) the Effective
Time has not occurred on or before May 15, 1998; provided, however, that
the right to terminate this Agreement under this provision shall not be
available (A) to any party whose failure to fulfill any obligation under
the Merger Agreement has been the cause of, or resulted in, the failure of
the Effective Time to occur on or before such date or (B) if Purchaser has
accepted for payment Shares pursuant to the Offer or has purchased Shares
of the Majority Shareholders pursuant to the Stock Purchase Agreement or
(ii) any United States or Canadian federal, state, provincial or local
court or governmental or regulatory authority of competent jurisdiction has
issued an order, decree or ruling or taken any other action restraining,
enjoining or otherwise prohibiting the Merger and such order, decree,
ruling or other action has become final and nonappealable; or
(c) By Parent any time prior to the acceptance of Shares for payment
pursuant to the Offer or the purchase of Shares pursuant to the Stock
Purchase Agreement if due to an occurrence or circumstance that would
result in a failure to satisfy any condition set forth in Section 14,
Purchaser has (i) failed to commence the Offer within 30 days following the
date of the Merger Agreement, (ii) terminated the Offer without having
accepted any Shares for payment thereunder or (iii) failed to pay for
Shares pursuant to the Offer on or prior to February 28, 1998 (unless such
failure shall have been the result of the failure of the waiting period
under the HSR Act to have expired or been terminated in which case such
date shall be May 15, 1998), unless such failure to pay for Shares has been
caused by or resulted from the failure of Parent or Purchaser to perform in
any respect any covenant or agreement of either of them contained in the
Merger Agreement or the Stock Purchase Agreement or the breach by Parent or
Purchaser of any representation or warranty of either of them contained in
the Merger Agreement or the Stock Purchase Agreement; or
(d) By the Company, upon approval of the Board, if Purchaser has (i)
failed to commence the Offer within 30 days following the date of the
Merger Agreement, (ii) unless Purchaser shall have otherwise purchased the
Shares of the Majority Shareholders pursuant to the Stock Purchase
Agreement, terminated the Offer without having accepted any Shares for
payment thereunder or (iii) unless Purchaser shall have otherwise purchased
the Shares of the Majority Shareholders pursuant to the Stock Purchase
Agreement, failed to pay for Shares pursuant to the Offer on or prior to
February 28, 1998 (unless such failure has been the result of the failure
of the waiting period under the HSR Act to have expired or been terminated,
in which case such date shall be May 15, 1998), unless such failure to pay
for Shares has been caused by or resulted from the failure of the Company
to perform in any respect any covenant or agreement of it contained in the
Merger Agreement or the breach by the Company of any
24
<PAGE> 27
representation or warranty of it contained in the Merger Agreement or the
failure of any of the Majority Shareholders to perform in any respect any
covenant or agreement of any of them contained in the Stock Purchase
Agreement or the breach by any of them of any representation or warranty
contained in the Stock Purchase Agreement; or
(e) By the Company if the Stock Purchase Agreement is terminated
pursuant to its terms or is otherwise amended in a manner adverse to the
Company or its shareholders without the Company's prior written consent.
In the event of the termination of the Merger Agreement, the Merger
Agreement provides that it will forthwith become void and there will be no
liability thereunder on the part of any party thereto except as set forth in
certain provisions of the Merger Agreement related to fees and expenses
described below and under certain other provisions of the Merger Agreement which
survive termination.
THE STOCK PURCHASE AGREEMENT
Concurrently with entering into the Merger Agreement, Parent, Purchaser and
the Majority Shareholders entered into the Stock Purchase Agreement pursuant to
which, upon the terms and conditions set forth therein, the Majority
Shareholders agreed to validly tender (and not withdraw) pursuant to the Offer
all Shares now or hereafter owned by the Majority Shareholders and have
otherwise agreed to sell to Purchaser all such Shares at a purchase price per
Share equal to $22.50 (or any higher price that may be paid per Share pursuant
to the Offer). On January 12, 1998, the Majority Shareholders owned (either
beneficially or of record) 10,786,962 Shares, constituting approximately 74.6%
of the outstanding Shares (or approximately 67% of the outstanding Shares on a
fully diluted basis).
UPON CONSUMMATION OF THE TRANSACTIONS CONTEMPLATED BY THE STOCK PURCHASE
AGREEMENT, PARENT AND PURCHASER, BY VIRTUE OF THE ACQUISITION OF APPROXIMATELY
74.6% OF THE OUTSTANDING SHARES, WILL OWN A NUMBER OF SHARES SUFFICIENT, EVEN IF
NO OTHER SHARES ARE TENDERED IN THE OFFER, TO CAUSE THE MERGER TO OCCUR WITHOUT
THE AFFIRMATIVE VOTE OF ANY OTHER HOLDER OF SHARES. SEE SECTION 11.
Each of the Majority Shareholders has constituted and appointed Purchaser,
or a nominee of Purchaser, during the term of the Stock Purchase Agreement, as
his, her or its true and lawful attorney and proxy to vote each of the Shares
held by such Majority Shareholder, at every annual, special or adjourned meeting
of the shareholders of the Company, including the right to sign his, her or its
name to any consent, certificate or other document relating to the Company that
the law of the State of Texas may permit or require, (i) in favor of the
approval and adoption of the Merger Agreement and approval of the Merger and the
other transactions contemplated by the Merger Agreement, (ii) against any
proposal for any recapitalization, merger, sale of assets, or other business
combination between the Company and any person or entity (other than the Merger)
or any other action or agreement that would result in a breach of any covenant,
representation or warranty or any other obligation or agreement of the Company
under the Merger Agreement or which could result in any of the conditions to the
Merger Agreement not being fulfilled or which could adversely affect the ability
of the Company to consummate the Merger and the other transactions contemplated
by the Merger Agreement, and (iii) in favor of any other matter relating to the
consummation of the transactions contemplated by the Merger Agreement. Each
Majority Shareholder has further agreed to cause the Shares owned by him, her or
it beneficially or of record to be voted in accordance with the foregoing.
Each Majority Shareholder has agreed not to offer or agree to sell,
transfer, tender, assign, hypothecate or otherwise dispose of or create or
permit to exist any encumbrance (other than any encumbrance that will be
terminated prior to or concurrently with the closing) on the Shares now owned or
that may hereafter be acquired by such Majority Shareholder at any time.
Each Majority Shareholder has agreed not to, directly or indirectly,
through any officer, director, agent or otherwise, so long as the Stock Purchase
Agreement shall remain in effect, solicit, initiate, encourage the submission of
or accept any proposal or offer from any individual, corporation, partnership,
limited partnership, limited liability company, syndicate, person (including,
without limitation, a "person" as defined in Section 13(d)(3) of the Exchange
Act), trust, association or entity or government, political subdivision,
25
<PAGE> 28
agency or instrumentality of a government (collectively other than Purchaser and
any affiliate of Purchaser, a "Person") relating to (i) any acquisition or
purchase of all or any of the Shares held by the Majority Shareholders or (ii)
any acquisition or purchase of all or (other than in the ordinary course of
business) any portion of the assets of, or any equity interest in, the Company
or any business combination with the Company or participate in any negotiations
regarding, or furnish to any Person any information with respect to, or
otherwise cooperate in any way with, or assist or participate in or facilitate
or encourage, any effort or attempt by any Person to do or seek any of the
foregoing. Each Majority Shareholder has agreed to notify Purchaser promptly if
any such proposal or offer, or any inquiry or contact with any Person with
respect thereto, is made and will, in any such notice to Purchaser, indicate in
reasonable detail the identity of the Person making such proposal, offer,
inquiry or contact and the terms and conditions of such proposal, offer, inquiry
or contact. Notwithstanding the foregoing, the actions of any Majority
Shareholder who is a director or officer of the Company, solely in his or her
capacity as a director or officer, shall be governed by the Merger Agreement and
not the Stock Purchase Agreement.
The Stock Purchase Agreement provides that, for a period of four years
after the consummation of the transactions contemplated thereby (the "Restricted
Period"), no Majority Shareholder (other than Advance Capital, it being
expressly agreed that the non-competition provisions shall not apply to Advance
Capital) will engage (other than on behalf of the Surviving Corporation or the
Company or their respective subsidiaries), directly or indirectly, in the Tax
and Accounting Software Business (as defined below) anywhere in the world or,
without the prior written consent of Parent, directly or indirectly, own an
interest in, manage, operate, join, control, lend money or render financial or
other assistance (other than customary professional courtesies afforded to
members of the business community) to or participate in or be connected with, as
an officer, employee, partner, shareholder, consultant, advisor or other similar
capacity, any person (other than the Surviving Corporation or the Company or
their respective subsidiaries) that engages in the Tax and Accounting Software
Business; provided, however, that ownership of securities having no more than
five percent of the outstanding voting power of any competitor which are listed
on any national securities exchange or traded actively in the national
over-the-counter market shall not be deemed to be in violation of such
restriction so long as the person owning such securities has no other connection
or relationship with such competitor that would not be permitted by the Stock
Purchase Agreement. "Tax and Accounting Software Business" means (x) the
business of developing, designing, publishing, marketing and distributing (i)
tax compliance software and services for tax and accounting professionals within
corporations, banks, government agencies and accounting firms; (ii) accounting
and practice management software and services marketed primarily to accounting
firms; and (iii) other tax and accounting software products and services which
are under development by the Company as of the closing of the transactions
contemplated by the Stock Purchase Agreement; and (y) the business of the
Company's Rent Roll, Inc. subsidiary as of the closing of the transactions
contemplated by the Stock Purchase Agreement.
As a separate and independent covenant, each Majority Shareholder (other
than Advance Capital) has agreed with Purchaser that, during the Restricted
Period (other than on behalf of the Surviving Corporation or the Company or
their respective subsidiaries), such Majority Shareholder will not in any way,
directly or indirectly, for the purpose of conducting or engaging in the Tax and
Accounting Software Business, call upon, solicit, advise or otherwise do, or
attempt to do, business with any customers of the Surviving Corporation, the
Company or any Subsidiary with whom the Surviving Corporation, the Company, any
Subsidiary or such Majority Shareholder had any dealings during the two year
period prior to the first day of the Restricted Period, or take away or
interfere or attempt to interfere with any customer, trade, business or
patronage of the Surviving Corporation, the Company or any Subsidiary.
In addition, as a separate and independent covenant, each Majority
Shareholder (other than Advance Capital) has agreed with Purchaser that, during
the Restricted Period, such Majority Shareholder will not, in any way, directly
or indirectly, hire, attempt to hire, interfere with or attempt to interfere
with any officers, employees, representatives, consultants or agents of the
Surviving Corporation, the Company or any Subsidiary or any former officer,
employee, representative, consultant or agent of the Surviving Corporation, the
Company or any Subsidiary who resigned or was terminated within the prior six
month period (other than an employee whose employment was terminated by the
Surviving Corporation, the Company or any
26
<PAGE> 29
Subsidiary without Cause, or who resigned from his or her employment for Good
Reason, as such terms are defined in the Retention Bonus Plan), or induce or
attempt to induce any of them to leave the employ of the Surviving Corporation,
the Company or any Subsidiary or violate the terms of their contracts, or any
arrangements, with the Surviving Corporation, the Company or any Subsidiary.
The obligation of the Majority Shareholders and Purchaser to consummate the
purchase and sale of the Shares under the Stock Purchase Agreement is subject to
the satisfaction of the following conditions: (a) any applicable waiting periods
(and any extension thereof) under the HSR Act with respect to the purchase and
sale of the Shares pursuant to the Stock Purchase Agreement shall have expired
or been terminated and (b) no preliminary or permanent injunction or law, rule,
regulation, order, decree or ruling issued by any United States or Canadian
federal, state, provincial or local court or governmental or regulatory
authority of competent jurisdiction prohibiting the purchase and sale of the
Shares pursuant to the Stock Purchase Agreement shall be in effect. The
obligation of Purchaser to consummate the purchase of the Shares pursuant to the
Stock Purchase Agreement is further subject to the satisfaction of the following
conditions: (a) the representations and warranties of the Company in the Merger
Agreement and of the Majority Shareholders in the Stock Purchase Agreement that
are qualified as to materiality shall have been true and correct and such
representations and warranties that are not so qualified shall have been true
and correct in all material respects, in each case as of the date of the Stock
Purchase Agreement, except in the case of any representation and warranty that
speaks as of a particular date, which shall be true and correct or true and
correct in all material respects, as applicable, as of such date, (b) the
Company shall have performed in all material respects its obligations, and
complied in all material respects with its covenants and agreements, under the
Merger Agreement, (c) the Majority Shareholders shall have performed in all
material respects their obligations, and complied in all material respects with
their covenants and agreements, under the Stock Purchase Agreement, (d) each of
the conditions to the Offer shall have been satisfied or waived by Purchaser,
(e) either Purchaser shall have accepted the Shares for payment pursuant to the
Offer or the Offer shall have expired or been terminated without the purchase of
any Shares pursuant thereto and (f) the Merger Agreement shall not have been
terminated. The obligation of the Majority Shareholders to consummate the sale
of the Shares pursuant to the Stock Purchase Agreement is further subject to the
satisfaction of the following condition: the Merger Agreement shall not have
been terminated pursuant to the termination provisions of the Merger Agreement.
11. PURPOSE OF THE OFFER; PLANS FOR THE COMPANY AFTER THE OFFER AND THE
MERGER.
Purpose of the Offer. The purpose of the Offer and the Merger is for
Parent to acquire control of, and the entire equity interest in, the Company.
The purpose of the Merger is for Parent to acquire all Shares not purchased
pursuant to the Offer and the Stock Purchase Agreement. Upon consummation of the
Merger, the Company will become a wholly owned subsidiary of Parent. The Offer
is being made pursuant to the Merger Agreement.
Under Texas Law, the approval of the Board and the affirmative vote of the
holders of two-thirds of the outstanding Shares are required to approve and
adopt the Merger Agreement and the transactions contemplated thereby, including
the Merger. The Board of Directors of the Company has unanimously approved and
adopted the Merger Agreement and the transactions contemplated thereby, and,
unless the Merger is consummated pursuant to the short-form merger provisions
under Delaware Law and Texas Law described below, the only remaining required
corporate action of the Company is the approval and adoption of the Merger
Agreement and the transactions contemplated thereby by the affirmative vote of
the holders of two-thirds of the outstanding Shares. Accordingly, if the Minimum
Condition is satisfied, Purchaser will have sufficient voting power to cause the
approval and adoption of the Merger Agreement and the transactions contemplated
thereby without the affirmative vote of any other Shareholder. UPON CONSUMMATION
OF THE TRANSACTIONS CONTEMPLATED BY THE STOCK PURCHASE AGREEMENT, PARENT AND
PURCHASER, BY VIRTUE OF THE ACQUISITION OF APPROXIMATELY 74.6% OF THE
OUTSTANDING SHARES, WILL OWN A NUMBER OF SHARES SUFFICIENT, EVEN IF NO OTHER
SHARES ARE TENDERED IN THE OFFER, TO CAUSE THE MERGER TO OCCUR WITHOUT THE
AFFIRMATIVE VOTE OF ANY OTHER HOLDER OF SHARES. SEE SECTION 10.
27
<PAGE> 30
In the Merger Agreement, the Company has agreed to take all action
necessary to convene a meeting of its Shareholders as soon as practicable after
the consummation of the Offer for the purpose of considering and taking action
on the Merger Agreement and the transactions contemplated thereby, if such
action is required by Texas Law. Parent and Purchaser have agreed that all
Shares owned by them and their subsidiaries will be voted in favor of the Merger
Agreement and the transactions contemplated thereby.
If Purchaser purchases Shares pursuant to the Offer, the Merger Agreement
provides that Purchaser will be entitled to designate representatives to serve
on the Board in proportion to Purchaser's ownership of Shares following such
purchase. See Section 10. Purchaser expects that such representation would
permit Purchaser to exert substantial influence over the Company's conduct of
its business and operations.
Under Texas Law and Delaware Law, if Purchaser acquires, pursuant to the
Offer and the Stock Purchase Agreement or otherwise, at least 90% of the
outstanding Shares, Purchaser will be able to approve the Merger without a vote
of the Company's shareholders. In such event, Parent, Purchaser and the Company
have agreed in the Merger Agreement to take, at the request of Purchaser, all
necessary and appropriate action to cause the Merger to become effective as soon
as reasonably practicable after such acquisition, without a meeting of the
Company's shareholders. If, however, Purchaser does not acquire at least 90% of
the outstanding Shares pursuant to the Offer and the Stock Purchase Agreement or
otherwise and a vote of the Company's shareholders is required a significantly
longer period of time would be required to effect the Merger.
Rights of the Shareholders in the transactions. No dissenters' rights are
available in connection with the Offer. However, persons who continue to hold
Shares following completion of the Offer will have the right to dissent to the
Merger in accordance with Articles 5.11 through 5.13 of Texas Law in lieu of
receiving the consideration proposed under the Merger Agreement. If the
statutory procedures are complied with and the Merger is consummated, dissenting
holders would be entitled to receive cash equal to a judicial determination of
the "fair value" of the Shares as determined by appraisal. See Schedule II
setting forth Articles 5.11 through 5.13 of Texas Law. Such "fair value" is
determined as of the day immediately preceding the shareholders' meeting at
which the Merger is approved (excluding any appreciation or depreciation in
anticipation of the Merger). In addition, dissenting shareholders may be
entitled to receive payment of interest beginning 91 days from the date of
consummation of the Merger to the date of such judicial determination on the
amount determined to be the fair value of their Shares. Any such judicial
determination of the fair value of the Shares could be based upon considerations
other than or in addition to the price per Share in the Offer, the Merger
Consideration and the market value of the Shares, including asset values, the
investment value of the Shares and any other valuation considerations generally
accepted in the investment community. The value so determined for dissenting
Shares could be more or less than the price per Share in the Offer or the Merger
Consideration, and payment of such consideration would take place subsequent to
payment pursuant to the Offer or the Merger.
Texas Law provides that, in the absence of fraud in the transaction, the
statutory dissenters' rights remedy provided under Texas Law to a shareholder
objecting to the Merger is the exclusive remedy for the recovery of the value of
such shareholder's Shares or for money damages to such shareholder with respect
to the Merger. If the Company complies with the requirements of Article 5.12 of
Texas Law, any shareholder who fails to comply with the requirements of that
Article shall not be entitled to bring suit for the recovery of the value of
such shareholder's Shares or for money damages to the shareholder with respect
to the Merger.
The statutory procedures regarding the exercise of dissenters' rights will
be included in the proxy statement sent to holders of Shares for the
shareholders' meeting to be held to approve the Merger. Holders of Shares who
seek to assert their dissenters' rights must follow the statutory procedures
precisely. Failure to follow any of the statutory procedures may result in a
termination or waiver of such rights.
The Commission has adopted Rule 13e-3 under the Exchange Act which is
applicable to certain "going private" transactions and which may under certain
circumstances be applicable to the Merger or another business combination
following the purchase of Shares pursuant to the Offer in which Purchaser seeks
to acquire the remaining Shares not held by it. Purchaser believes, however,
that Rule 13e-3 will not be applicable to the Merger. Rule 13e-3 requires, among
other things, that certain financial information
28
<PAGE> 31
concerning the Company and certain information relating to the fairness of the
proposed transaction and the consideration offered to minority Shareholders in
such transaction be filed with the Commission and disclosed to Shareholders
prior to consummation of the transaction.
Plans for the Company. It is expected that, initially following the
Merger, the business and operations of the Company will, except as set forth in
this Offer to Purchase, be continued by the Company substantially as they are
currently being conducted, except that Parent intends to manage the Company as
part of the RIA Group. Parent will continue to evaluate the business and
operations of the Company during the pendency of the Offer and after the
consummation of the Offer and the Merger, and will take such actions as it deems
appropriate under the circumstances then existing. Parent intends to seek
additional information about the Company during this period. Thereafter, Parent
intends to review such information as part of a comprehensive review of the
Company's business, operations, capitalization and management with a view to
optimizing exploitation of the Company's potential in conjunction with Parent's
businesses. It is expected that the business and operations of the Company would
form an important part of Parent's future business plans. Notwithstanding the
foregoing, Parent intends to review the business of Rent Roll, Inc.and will then
take all appropriate action it deems necessary including, without limitation,
the disposition of Rent Roll, Inc. of some or substantially all of its
businesses or assets.
Except as indicated in this Offer to Purchase, Parent does not have any
present plans or proposals which relate to or would result in an extraordinary
corporate transaction, such as a merger, reorganization or liquidation,
involving the Company or any Subsidiary, a sale or transfer of a material amount
of assets of the Company or any Subsidiary or any material change in the
Company's capitalization or dividend policy or any other material changes in the
Company's corporate structure or business, or the composition of the Board or
the Company's management.
12. DIVIDENDS AND DISTRIBUTIONS. The Merger Agreement provides that the
Company shall not, between the date of the Merger Agreement and the Effective
Time, without the prior written consent of Parent, (a) issue, sell, pledge,
dispose of, grant, encumber (i) any shares of capital stock of any class of the
Company or any Subsidiary or any options, warrants, convertible securities or
other rights of any kind to acquire any shares of such capital stock, or any
other ownership interest (including, without limitation, any phantom interest),
of the Company or any Subsidiary (except for the issuance of a maximum of
1,646,150 Shares issuable upon exercise of employee stock options outstanding on
the date of the Merger Agreement or as disclosed in the Disclosure Schedules or
otherwise in writing to Parent prior to the date of the Merger Agreement) or
(ii) any assets of the Company or any Subsidiary, except for transactions in the
ordinary course of business and in a manner consistent with past practice or (b)
reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire,
directly or indirectly, any of its capital stock. See Section 10. If, however,
the Company should, during the pendency of the Offer, (i) reclassify, combine,
split, subdivide or redeem, purchase or otherwise change the Shares or its
capitalization, (ii) acquire or otherwise cause a reduction in the number of
outstanding Shares or (iii) issue or sell any additional Shares, shares of any
other class or series of capital stock, other voting securities or any
securities convertible into, or options, rights, or warrants, conditional or
otherwise, to acquire, any of the foregoing, then, without prejudice to
Purchaser's rights under Section 14, Purchaser may (subject to the provisions of
the Merger Agreement) make such adjustments to the purchase price and other
terms of the Offer (including the number and type of securities to be purchased)
as it deems appropriate to reflect such split, combination or other change.
If, on or after January 12, 1998, the Company should declare or pay any
dividend on the Shares or make any other distribution (including the issuance of
additional shares of capital stock pursuant to a stock dividend or stock split,
the issuance of other securities or the issuance of rights for the purchase of
any securities) with respect to the Shares that is payable or distributable to
Shareholders of record on a date prior to the transfer to the name of Purchaser
or its nominee or transferee on the Company's stock transfer records of the
Shares purchased pursuant to the Offer other than regular quarterly dividends on
the Shares declared and paid at times consistent with past practice and in an
amount not in excess of $0.10 per Share, then, without prejudice to Purchaser's
rights under Section 14, (i) the purchase price per Share payable by Purchaser
pursuant to the Offer will be reduced (subject to the Merger Agreement) to the
extent any such dividend or distribution is payable in cash and (ii) any
non-cash dividend, distribution or right shall be received and held by the
29
<PAGE> 32
tendering Shareholder for the account of Purchaser and will be required to be
promptly remitted and transferred by each tendering Shareholder to the
Depositary for the account of Purchaser, accompanied by appropriate
documentation of transfer. Pending such remittance and subject to applicable
law, Purchaser will be entitled to all the rights and privileges as owner of any
such non-cash dividend, distribution or right and may withhold the entire
purchase price or deduct from the purchase price the amount or value thereof, as
determined by Purchaser in its sole discretion.
13. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; NASDAQ QUOTATION
LISTING AND EXCHANGE ACT REGISTRATION. The purchase of Shares by Purchaser
pursuant to the Offer will reduce the number of Shares that might otherwise
trade publicly and will reduce the number of holders of Shares, which could
adversely affect the liquidity and market value of the remaining Shares held by
the public.
Parent intends to cause the delisting of the Shares by Nasdaq following
consummation of the Offer.
Depending upon the number of Shares purchased pursuant to the Offer, the
Shares may no longer meet the standards for continued listing on Nasdaq.
According to Nasdaq's published guidelines, the Shares would not be eligible to
be included for listing if, among other things, the number of Shares publicly
held falls below 100,000, the number of holders of Shares falls below 300 or the
market value of such publicly held Shares is not at least $200,000. If, as a
result of the purchase of Shares pursuant to the Offer, the Merger, the Stock
Purchase Agreement or otherwise, the Shares no longer meet the requirements of
Nasdaq for continued listing, the listing of the Shares will be discontinued. In
such event, the market for the Shares would be adversely affected. In the event
the Shares were no longer eligible for listing on Nasdaq, quotations might still
be available from other sources. The extent of the public market for the Shares
and the availability of such quotations would, however, depend upon the number
of holders of such Shares remaining at such time, the interest in maintaining a
market in such Shares on the part of securities firms, the possible termination
of registration of such Shares under the Exchange Act as described below and
other factors.
The Shares are currently "margin securities", as such term is defined under
the rules of the Board of Governors of the Federal Reserve System (the "Federal
Reserve Board"), which has the effect, among other things, of allowing brokers
to extend credit on the collateral of such securities. Depending upon factors
similar to those described above regarding listing and market quotations,
following the Offer it is possible that the Shares might no longer constitute
"margin securities" for purposes of the margin regulations of the Federal
Reserve Board, in which event such Shares could no longer be used as collateral
for loans made by brokers.
The Shares are currently registered under the Exchange Act. Such
registration may be terminated upon application by the Company to the Commission
if the Shares are not listed on a national securities exchange and there are
fewer than 300 recordholders. The termination of the registration of the Shares
under the Exchange Act would substantially reduce the information required to be
furnished by the Company to holders of Shares and to the Commission and would
make certain provisions of the Exchange Act, such as the short-swing profit
recovery provisions of Section 16(b), the requirement of furnishing a proxy
statement in connection with shareholders' meetings and the requirements of Rule
13e-3 under the Exchange Act with respect to the "going private" transactions,
no longer applicable to the Shares. In addition, "affiliates" of the Company and
persons holding "restricted securities" of the Company may be deprived of the
ability to dispose of such securities pursuant to Rule 144 promulgated under the
Securities Act of 1933, as amended. If registration of the Shares under the
Exchange Act were terminated, the Shares would no longer be "margin securities"
or be eligible for Nasdaq reporting. Purchaser currently intends to seek to
cause the Company to terminate the registration of the Shares under the Exchange
Act as soon as practicable after consummation of the Offer if the requirements
for termination of registration are met.
14. CERTAIN CONDITIONS OF THE OFFER. Notwithstanding any other provision
of the Offer, but subject to the terms of the Merger Agreement, Purchaser shall
not be required to accept for payment or pay for any Shares tendered pursuant to
the Offer, and may terminate or amend the Offer and may postpone the acceptance
for payment of and payment for Shares tendered, if (i) the Minimum Condition
shall not have been satisfied, (ii) any applicable waiting period under the HSR
Act shall not have expired or been terminated
30
<PAGE> 33
prior to the expiration of the Offer, or (iii) at any time on or after the date
of the Merger Agreement, and prior to the acceptance for payment of Shares, any
of the following conditions shall exist:
(a) there shall have been instituted or be pending any action or
proceeding, before any United States or Canadian federal, state, provincial
or local court or governmental, administrative or regulatory authority or
agency of competent jurisdiction, which is reasonably likely (i) to make
illegal or otherwise directly or indirectly prohibit the making of the
Offer, the acceptance for payment of, or payment for, any Shares by Parent,
Purchaser or any other affiliate of Parent, the purchase of Shares pursuant
to the Stock Purchase Agreement, or the consummation of the Merger, or to
require the Company, Parent, Purchaser or any other affiliate of Parent to
pay, as a result of the transactions contemplated by the Merger Agreement
and the Stock Purchase Agreement, damages that would be material to the
Company and its Subsidiaries, taken as a whole; (ii) to prohibit or limit
materially and adversely the ownership or operation by the Company, Parent
or any of their subsidiaries of all or any material portion of the business
or assets of the Company and its Subsidiaries, taken as a whole, or Parent
and its subsidiaries, taken as a whole, or to compel the Company, Parent or
any of their subsidiaries to dispose of or hold separate all or any
material portion of the business or assets of the Company and its
Subsidiaries, taken as a whole, or Parent and its subsidiaries, taken as a
whole, in any case as a result of the transactions contemplated by the
Merger Agreement or the Stock Purchase Agreement; (iii) to impose or
confirm limitations on the ability of Parent, Purchaser or any other
affiliate of Parent to exercise effectively full rights of ownership of any
Shares, including, without limitation, the right to vote any Shares
acquired by Purchaser pursuant to the Offer, the Stock Purchase Agreement
or otherwise on all matters properly presented to the Company's
shareholders, including, without limitation, the approval and adoption of
the Merger Agreement and the transactions contemplated by the Merger
Agreement and the Stock Purchase Agreement; or (iv) to require divestiture
by Parent, Purchaser or any other affiliate of Parent of any Shares;
(b) there shall have been issued any preliminary or permanent
injunction or law, rule, regulation, order, decree or ruling by any United
States or Canadian federal, state, provincial or local court or
governmental or regulatory authority of competent jurisdiction resulting,
directly or indirectly, in any of the consequences referred to in clauses
(i) through (iv) of paragraph (a) above;
(c) any representation or warranty of the Company in the Merger
Agreement or of any of the Majority Shareholders in the Stock Purchase
Agreement which is qualified as to materiality shall not have been true and
correct or any such representation or warranty that is not so qualified
shall not have been true and correct in any material respect, in each case
as of the date of the Merger Agreement, except in the case of any
representation or warranty that speaks as of a particular date, which shall
have been true and correct or true and correct in all material respects, as
applicable, as of such date;
(d) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement or any Majority Shareholder shall have failed to perform
in any material respect any obligation or to comply in any material respect
with any agreement or covenant of such Majority Shareholder to be performed
by him, her or it under the Stock Purchase Agreement;
(e) the Merger Agreement shall have been terminated in accordance with
its terms;
(f) Purchaser and the Company shall have mutually agreed that
Purchaser shall terminate the Offer or postpone the acceptance for payment
of or payment for Shares thereunder; or
(g) there shall have occurred after the date of the Merger Agreement
any events or circumstances which, individually or in the aggregate, result
in a material adverse change in the business, results of operations (on an
annualized basis), financial condition or assets of the Company and the
Subsidiaries taken as a whole, other than any change constituting or
relating to any of the following: (i) the United States economy or
securities markets in general, (ii) the Merger Agreement or the
transactions contemplated thereby or the announcement thereof, or (iii) the
tax compliance or accounting software businesses generally and not
specifically relating to the Company and the Subsidiaries; provided, that
31
<PAGE> 34
Purchaser shall give the Company advance written notice of any intention by
Purchaser to assert the nonsatisfaction of the condition set forth in this
paragraph, which notice shall describe in reasonable detail the basis for
Purchaser's belief that such condition has not been satisfied; and
provided, further, that if any such material adverse change is capable of
being cured through the exercise by the Company of its reasonable best
efforts and for so long as the Company continues to use such reasonable
best efforts to cure such material adverse change, the Purchaser shall not
terminate the Offer under this paragraph or exercise any related right to
terminate the Merger Agreement;
which, in the reasonable judgment of Purchaser in any such case, and regardless
of the circumstances (including any action or inaction by Parent or any of its
affiliates other than a material breach of the Merger Agreement by Parent or
Purchaser) giving rise to any such condition, makes it inadvisable to proceed
with such acceptance for payment or payment.
The foregoing conditions are for the sole benefit of Purchaser and Parent
and may be asserted by Purchaser or Parent regardless of the circumstances
giving rise to any such condition or, subject to the terms of the Merger
Agreement, may be waived by Purchaser or Parent in whole or in part at any time
and from time to time in their sole discretion. The failure by Parent or
Purchaser at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right; the waiver of any such right with respect to
particular facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances; and each such right shall be
deemed an ongoing right that may be asserted at any time and from time to time.
15. CERTAIN LEGAL MATTERS AND REGULATORY APPROVALS.
General. Based upon its examination of publicly available information with
respect to the Company and the review of certain information furnished by the
Company to Parent and discussions of representatives of Parent with
representatives of the Company during Parent's investigation of the Company (see
Section 10), neither Purchaser nor Parent is aware of any license or other
regulatory permit that appears to be material to the business of the Company and
the Subsidiaries, taken as a whole, which might be adversely affected by the
acquisition of Shares by Purchaser pursuant to the Offer or the Stock Purchase
Agreement or, except as set forth below, of any approval or other action by any
domestic (federal or state) or foreign governmental, administrative or
regulatory authority or agency which would be required prior to the acquisition
of Shares by Purchaser pursuant to the Offer or the Stock Purchase Agreement.
Should any such approval or other action be required, it is Purchaser's present
intention to seek such approval or action. Purchaser does not currently intend,
however, to delay the purchase of Shares tendered pursuant to the Offer pending
the outcome of any such action or the receipt of any such approval (subject to
Purchaser's right to decline to purchase Shares if any of the conditions in
Section 14 shall not be satisfied). There can be no assurance that any such
approval or other action, if needed, would be obtained without substantial
conditions or that adverse consequences might not result to the business of the
Company, Purchaser or Parent or that certain parts of the businesses of the
Company, Purchaser or Parent might not have to be disposed of or held separate
or other substantial conditions complied with in order to obtain such approval
or other action or in the event that such approval was not obtained or such
other action was not taken. Purchaser's obligation under the Offer to accept for
payment and pay for Shares is subject to certain conditions, including
conditions relating to the legal matters discussed in this Section 15. See
Section 14.
State Takeover Laws. A number of states have adopted laws and regulations
applicable to attempts to acquire securities of corporations which are
incorporated, or have substantial assets, shareholders, principal executive
offices or principal places of business, or whose business operations otherwise
have substantial economic effects, in such states. In Edgar v. MITE Corp., the
Supreme Court of the United States invalidated on constitutional grounds the
Illinois Business Takeover Statute, which, as a matter of state securities law,
made takeovers of corporations meeting certain requirements more difficult.
However, in 1987 in CTS Corp. v. Dynamics Corp. of America, the Supreme Court
held that the State of Indiana may, as a matter of corporate law and, in
particular, with respect to those aspects of corporate law concerning corporate
governance, constitutionally disqualify a potential acquiror from voting on the
affairs of a target corporation without the prior approval of the remaining
shareholders. The state law before the Supreme Court was by its
32
<PAGE> 35
terms applicable only to corporations that had a substantial number of
shareholders in the state and were incorporated there.
The State of Texas recently enacted Part Thirteen (Articles 13.01 et seq.)
of Texas Law (the "Business Combination Law") which has application to "issuing
public corporations" formed under Texas Law, such as the Company. The Business
Combination Law imposes a three-year moratorium on certain business combination
transactions between an issuing public corporation and an "affiliated
shareholder" (generally, a beneficial owner of 20% or more of the then
outstanding voting shares of the issuing public corporation) or any affiliate or
associate of the affiliated shareholder unless (i) the proposed business
combination, or the purchase or acquisition of voting shares on the date such
person became an affiliated shareholder (the "share acquisition date"), was
approved by the board of directors of the issuing public corporation prior to
the affiliated shareholder's share acquisition date or (ii) the proposed
business combination is approved by the affirmative vote of at least two-thirds
of the outstanding voting shares (excluding the shares owned by the affiliated
shareholder and its affiliates and associates) at a meeting of shareholders (and
not by written consent) duly called for that purpose not less than six months
after the affiliated shareholder's share acquisition date. Application of the
Business Combination Law is subject to a number of exceptions.
Because the transactions contemplated by the Merger Agreement and the Stock
Purchase Agreement have been unanimously approved by the Board, the restrictions
under the Business Combination Law will not affect the Offer or the Merger or
the transactions contemplated by the Stock Purchase Agreement. The Business
Combination Law will apply to the Company for so long as it has (i) 100 or more
shareholders of record, (ii) any class of voting securities registered under
Exchange Act or (iii) any class of voting securities qualified for trading in a
national market system, but not thereafter.
The Business Combination Law also permits a corporation's board of
directors, when considering the best interests of the corporation, to consider
the long-term as well as the short-term interests of the corporation and its
shareholders, including the possibility that those interests may be best served
by the continued independence of the corporation.
Purchaser conducts business in a number of states throughout the United
States, some of which have enacted takeover laws. Purchaser does not know
whether any of these laws will, by their terms, apply to the Offer or the Merger
and has not complied with any such laws. Should any person seek to apply any
state takeover law, Purchaser will take such action as then appears desirable,
which may include challenging the validity or applicability of any such statute
in appropriate court proceedings. In the event it is asserted that one or more
state takeover laws are applicable to the Offer or the Merger, and an
appropriate court does not determine that it is inapplicable or invalid as
applied to the Offer or the Merger, Purchaser might be required to file certain
information with, or receive approvals from, the relevant state authorities. In
addition, if enjoined, Purchaser might be unable to accept for payment any
Shares tendered pursuant to the Offer, or be delayed in continuing or
consummating the Offer and the Merger. In such case, Purchaser may not be
obligated to accept for payment any Shares tendered. See Section 14.
Antitrust. Under the HSR Act and the rules that have been promulgated
thereunder by the FTC, certain acquisition transactions may not be consummated
unless certain information has been furnished to the Antitrust Division and the
FTC and certain waiting period requirements have been satisfied. The acquisition
of Shares by Purchaser pursuant to the Offer and the Stock Purchase Agreement
are subject to such requirements. See Section 2.
Pursuant to the HSR Act, on or about January 13, 1998, Parent filed a
Premerger Notification and Report Form in connection with the purchase of Shares
pursuant to the Offer and the Stock Purchase Agreement with the Antitrust
Division and the FTC. Under the provisions of the HSR Act applicable to the
Offer and the Stock Purchase Agreement, the purchase of Shares pursuant to the
Offer or the Stock Purchase Agreement may not be consummated until the
expiration of a 15 calendar day waiting period following the filing by Parent.
Accordingly, the waiting period under the HSR Act applicable to the purchase of
Shares pursuant to the Offer or the Stock Purchase Agreement will expire at
11:59 p.m., New York City time, on January 28, 1998, unless such waiting period
is earlier terminated by the FTC and the Antitrust Division or extended by a
request from the FTC or the Antitrust Division for additional information or
documentary
33
<PAGE> 36
material prior to the expiration of the waiting period. Pursuant to the HSR Act,
Parent has requested early termination of the waiting period applicable to the
Offer and the Stock Purchase Agreement. There can be no assurance, however, that
the 15-day HSR Act waiting period will be terminated early. If either the FTC or
the Antitrust Division were to request additional information or documentary
material from Parent with respect to the Offer or the Stock Purchase Agreement,
the waiting period with respect to the Offer or the Stock Purchase Agreement
would expire at 11:59 p.m., New York City time, on the tenth calendar day after
the date of substantial compliance by Parent with such request. Thereafter, the
waiting period could be extended only by court order. If the acquisition of
Shares is delayed pursuant to a request by the FTC or the Antitrust Division for
additional information or documentary material pursuant to the HSR Act, the
Offer, pursuant to the Merger Agreement, shall be extended up to May 15, 1998
and may, thereafter, be further extended and, in any event, the purchase of and
payment for Shares will be deferred until 10 days after the request is
substantially complied with, unless the extended period expires on or before the
date when the initial 15-day period would otherwise have expired, or unless the
waiting period is sooner terminated by the FTC and the Antitrust Division. Only
one extension of such waiting period pursuant to a request for additional
information is authorized by the HSR Act and the rules promulgated thereunder,
except by court order. Any such extension of the waiting period will not give
rise to any withdrawal rights not otherwise provided for by applicable law. See
Section 4. It is a condition to the Offer that the waiting period applicable
under the HSR Act to the Offer or the Stock Purchase Agreement expire or be
terminated. See Section 2 and Section 14.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the proposed acquisition of Shares by
Purchaser pursuant to the Offer or the Stock Purchase Agreement. At any time
before or after the purchase of Shares pursuant to the Offer or the Stock
Purchase Agreement by Purchaser, the FTC or the Antitrust Division could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the purchase of Shares pursuant to
the Offer or the Stock Purchase Agreement or seeking the divestiture of Shares
purchased by Purchaser or the divestiture of substantial assets of Parent, the
Company or their respective subsidiaries. Private parties and state attorneys
general may also bring legal action under federal or state antitrust laws under
certain circumstances. Based upon an examination of information available to
Parent relating to the businesses in which Parent, the Company and their
respective subsidiaries are engaged, Parent and Purchaser believe that the Offer
will not violate the antitrust laws. Nevertheless, there can be no assurance
that a challenge to the Offer or the Stock Purchase Agreement on antitrust
grounds will not be made or, if such a challenge is made, what the result would
be. See Section 14 for certain conditions to the Offer, including conditions
with respect to litigation.
16. FEES AND EXPENSES. Except as set forth below, Purchaser will not pay
any fees or commissions to any broker, dealer or other person for soliciting
tenders of Shares pursuant to the Offer.
Purchaser and Parent have retained Innisfree M&A Incorporated, as the
Information Agent, and ChaseMellon Shareholder Services L.L.C., as the
Depositary, in connection with the Offer. The Information Agent may contact
holders of Shares by mail, telephone, telex, telecopy, telegraph and personal
interview and may request banks, brokers, dealers and other nominee shareholders
to forward materials relating to the Offer to beneficial owners.
As compensation for acting as Information Agent in connection with the
Offer, the Information Agent will be paid reasonable and customary compensation
for its services and will also be reimbursed for certain out-of-pocket expenses
and may be indemnified against certain liabilities and expenses in connection
with the Offer, including certain liabilities under the federal securities laws.
Purchaser will pay the Depositary reasonable and customary compensation for its
services in connection with the Offer, plus reimbursement for out-of-pocket
expenses, and will indemnify the Depositary against certain liabilities and
expenses in connection therewith, including under federal securities laws.
Brokers, dealers, commercial banks and trust companies will be reimbursed by
Purchaser for customary handling and mailing expenses incurred by them in
forwarding material to their customers.
17. MISCELLANEOUS. The Offer is being made solely by this Offer to
Purchase and the related Letter of Transmittal and is being made to all holders
of Shares. Purchaser is not aware of any jurisdiction where the
34
<PAGE> 37
making of the Offer is prohibited by any administrative or judicial action
pursuant to any valid state statute. If Purchaser becomes aware of any valid
state statute prohibiting the making of the Offer or the acceptance of Shares
pursuant thereto, Purchaser will make a good faith effort to comply with any
such state statute. If, after such good faith effort, Purchaser cannot comply
with any such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made on
behalf of Purchaser by one or more registered brokers or dealers licensed under
the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER OR THE COMPANY NOT CONTAINED IN THIS OFFER
TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED.
Pursuant to Rule 14d-3 of the General Rules and Regulations under the
Exchange Act, Parent and Purchaser have filed with the Securities and Exchange
Commission (the "Commission") the Schedule 14D-1, together with exhibits,
furnishing certain additional information with respect to the Offer. The
Schedule 14D-1 and any amendments thereto, including exhibits, may be inspected
at, and copies may be obtained from, the same places and in the same manner as
set forth in Section 7 (except that they will not be available at the regional
offices of the Commission).
SABRE ACQUISITION, INC.
January 16, 1998
35
<PAGE> 38
SCHEDULE I
DIRECTORS AND EXECUTIVE OFFICERS OF
PARENT AND PURCHASER
1. Directors and Executive Officers of Parent. The following table sets
forth the name, current business address, citizenship and present principal
occupation or employment, and material occupations, positions, offices or
employments and business addresses thereof for the past five years of each
director and executive officer of Parent. Except for W. Michael Brown, who is a
citizen of both Great Britain and the United States, Alan M. Lewis, who is a
citizen of Canada, Great Britain and South Africa, Paul Brett, Nigel R.
Harrison, David J. Hulland, Martin B. Jones and Andrew G. Mills who are citizens
of Great Britain and Richard J. Harrington who is a citizen of the United
States, each such person is a citizen of Canada. Unless otherwise indicated,
each occupation set forth opposite an individual's name refers to employment
with Parent.
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME, AGE AND DURING THE PAST FIVE YEARS AND
CURRENT BUSINESS ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------- ------------------------------------------------------
<S> <C>
Kenneth R. Thomson, 74............... Chairman of Parent since July 1978. Director of Parent
The Woodbridge Company Limited since July 1976. Chairman of the Woodbridge Company
65 Queen Street West Limited, 65 Queen Street West, Toronto, Ontario, M5H
Toronto, Ontario M5H 2M8 2M8, Canada, since March 1979. Director of the
Canada Woodbridge Company Limited since, August 1956.
John A. Tory, 67..................... Deputy Chairman of Parent from February 1978 to
The Woodbridge Company Limited December 31, 1997. Director of Parent since February
65 Queen Street West 1978. Director of Abitibi Consolidated, Inc., 207
Toronto, Ontario M5H 2M8 Queens Quay West, Toronto, Ontario, M5J 2P5, Canada,
Canada since September 1965. Director of Rogers
Communications Inc., 40 King Street West, Toronto,
Ontario, M5H 3Y2, Canada, since December 1979.
Director, Sun Life Insurance Company of Canada, 150
King Street West, Toronto, Ontario, M5H 1J9, Canada,
from December 1971 to 1994. Director and President
of the Woodbridge Company Limited, 65 Queen Street
West, Toronto, Ontario, M5H 2M8, Canada, since
October 1967 and March 1979, respectively. Director
of Hudson's Bay Company, 401 Bay Street, Toronto,
Ontario M5H 2Y4, Canada, since May 1979. Deputy
Chairman and Director of Markborough Properties
Inc., One Dundas Street West, Suite 2800, Toronto,
Ontario M5G 2J2, Canada, since September 1989.
Director of The Thomson Corporation PLC, First
Floor, the Quandrangle, 180 Wardour Street, W1A 4YG,
England, since December 1977. Director of the Royal
Bank of Canada, 200 King Street West, Toronto,
Ontario M5H 1CA, Canada, since March 1971.
</TABLE>
I-1
<PAGE> 39
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME, AGE AND DURING THE PAST FIVE YEARS AND
CURRENT BUSINESS ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------- ------------------------------------------------------
<S> <C>
W. Michael Brown, 62................. Director of Parent since July 1978. Deputy Chairman of
The Thomson Corporation Parent since October 1997. President of Parent from
Metro Center December 1984 to October 1997. Director of Hudson's
One Station Place Bay Company, 401 Bay Street, Toronto, Ontario, M5H
Stamford, Connecticut 06902 2Y4, Canada, since 1985. Director of Southwestern
Area Commerce and Industry Association, One Landmark
Square, Stamford, Connecticut 06901, from November
1994 to July 1997. Director of Markborough
Properties Inc., One Dundas Street West, Suite 2800,
Toronto, Ontario, M5H 2Y4, Canada, from April 1990
to June 1997.
Ronald D. Barbaro, 66................ Director of Parent since May 1993. Director, Clairvest
Clairvest Group Inc. Group Inc., Suite 1700, 22 St. Clair Avenue East,
Suite 1700 Toronto, Ontario, M4V 2S3, Canada, since September
22 St. Clair Avenue East 1994. Director of Equifax Canada, 7171 Jean Talon
Toronto, Ontario M4V 2S3 East, Anjou, Quebec, H1M 3N2, Canada, since June
Canada 1997. Director of ChoicePoint, Inc., 1000 Alderman
Drive, Alpharetta, Georgia 30005, since July 1997.
Director of Prudential of America Life Insurance
Company of Canada ("PALI"), c/o Prudential of
America Insurance Co. (Canada), 200 Consilium Place,
Scarborough, Ontario, M1H 3E6, Canada, since January
1991. Chairman of PALI from 1992 to January 1997.
President of Prudential Insurance Company of
America, Inc., 260 Madison Avenue, Second Floor, New
York, New York 10116, from 1990 to 1993. President
of Worldwide Operations Prudential Insurance Company
of America-Canada from 1985 to 1990. Director of
Equifax Inc., 1600 Peachtree Street, N.W., Atlanta,
Georgia 30309, from April 1992 to July 1997.
Director, Canbra Foods Ltd., P.O. Box 99, 2415 2nd
Avenue "A" North, Lethbridge, Alberta, T1J 3Y4,
Canada, since July 1988; interim-Chairman since
March 1996; Chairman since March 1997. Director,
Consoltex Group Inc., 8555 TransCanada Highway,
Ville Saint-Laurent, Quebec, H4S 1Z6, Canada, since
May 1997. Director, Flow International Corporation,
2300 - 64th Avenue South, Kent, Washington 98032,
since 1995. Chairman, Natraceuticals Inc., 8290
Woodbine Avenue, Markham, Ontario, L3R 9W9, Canada,
since February 1997. Director, Signature Security
Group Inc., 26 - 28 Market Street, Sydney, NSW,
Australia, since March 1997. Director, VoxCom
Incorporated, #102,4209 - 99 Street, Edmonton,
Alberta, T6E 5V7, Canada, since December 1996.
Director, O'Donnell Investment Management Corp.,
4100 Yonge Street, Suite 601, Toronto, Ontario, M2P
2B5, Canada, since April 1997.
</TABLE>
I-2
<PAGE> 40
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME, AGE AND DURING THE PAST FIVE YEARS AND
CURRENT BUSINESS ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------- ------------------------------------------------------
<S> <C>
Paul Brett, 53....................... Director of Parent since June 1989. Executive Vice
Thomas Travel Group President of Parent since June 1989. Chairman and
Britannia House Chief Executive Officer of Thomson Travel Group,
Airport Approach Road Britannia House, Airport Approach Road, London Luton
London Luton Airport Airport, Luton, Bedfordshire, LU2 9ND, England,
Luton, Bedfordshire LU2 9ND since March 1989.
England
V. Maureen Kempston Darkes, 49....... Director of Parent since May 1996. President and
General Motors of Canada Limited General Manager, General Motors of Canada Limited
1908 Colonel Sam Drive ("GMCL"), 1908 Colonel Sam Drive, Oshawa, Ontario,
Oshawa, Ontario L1H8T7 L1H 8T7, Canada. Director of GMCL since August 1991.
Canada Vice President of GMCL from August 1991 to July
1994. Director, CN Rail, 935 de la Gauchetiere
Street West, Montreal, Quebec, Canada, since March
1995. Director of Noranda, Inc., 181 Bay Street,
Suite 1400, Toronto, Ontario, Canada, since January
1998.
William J. DesLauries, 67............ Director of Parent since July 1978. Partner in Tory,
Tory, Tory, DesLauries & Binnington Tory, DesLauries & Binnington, Suite 3000, Aetna
Aetna Tower, Suite 3000 Tower, P.O. Box 270, Toronto-Dominion Centre,
P.O. Box 270 Toronto, Ontario M5K 1N2, Canada, since July 1963.
Toronto-Dominion Centre
Toronto, Ontario M5K 1N2
Canada
John F. Fraser, 67................... Director of Parent since June 1989. Chairman of Air
Russel Metals, Inc. Canada, 355 Portage Avenue, Room 500, Winnipeg,
Suite 600 Manitoba, R3B 2C3, Canada, since August 1996.
One Lombard Place Director of Air Canada since 1989. Vice Chairman of
Winnipeg, Manitoba R3B OX3 Russel Metals, Inc., Suite 600, One Lombard Place,
Canada Winnipeg, Manitoba, R3B OX3, Canada, since May 1995.
Chairman of Russel Metals, Inc. from May 1992 to May
1995. Chairman and Chief Executive Officer of Russel
Metals, Inc. from May 1991 to May 1992. President
and Chief Executive Officer of Russel Metals, Inc.
from May 1978 to May 1991. Director, America West
Airlines, Inc., 4000 East Sky Harbor Boulevard,
Phoenix, Arizona 85034, since August 1994. Director,
Bank of Montreal, First Bank Tower, First Canadian
Place, Toronto, Ontario, M5X 1A1, Canada, since
January 1985. Director, Centra Gas Manitoba Inc.,
444 St. Mary Avenue, Winnipeg, Manitoba, R3C 3T7,
Canada, since February 1985. Director, International
Comfort Products Corporation, 501 Corporate Centre
Drive, Suite 200, Franklin, TN 37067, from May 1985
to April 1990 and June 1992 to present. Director,
Manitoba Telecom, Services, Inc., 489 Empress
Street, Winnipeg, Manitoba, R3C 3V6, Canada, since
May 1997. Director, Shell Canada Limited, 400-4th
Avenue S.W., Calgary, Alberta, T2P 0J4, Canada,
since April 1990.
</TABLE>
I-3
<PAGE> 41
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME, AGE AND DURING THE PAST FIVE YEARS AND
CURRENT BUSINESS ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------- ------------------------------------------------------
<S> <C>
Richard J. Harrington, 51............ Director of Parent since September 1993. President and
The Thomson Corporation Chief Executive Officer of Parent since October 1997.
Metro Center Executive Vice-President of Parent from September
One Station Place 1993 to October 1997. President and Chief Executive
Stamford, Connecticut 06902 Officer, Thomson Newspapers Group, Metro Center, One
Station Place, Stamford, Connecticut 06902, from
July 1993 to October 1997. President and Chief
Executive Officer, Thomson Professional Publishing,
Metro Center, One Station Place, Stamford,
Connecticut 06902, from June 1989 to July 1993.
Nigel R. Harrison, 48................ Director of Parent since June 1989. Chief Financial
The Thomson Corporation Officer of Parent since July 1984. Executive
Metro Center Vice-President of Parent since June 1989.
One Station Place
Stamford, Connecticut 06902
Mark D. Knight, 54................... Director of Parent since June 1989. Senior
The Thomson Corporation PLC Vice-President of Parent since July 1984. Secretary of
The Quadrangle, First Floor Parent since July 1978.
180 Wardour Street
London W1A 4YG
England
C. Edward Medland, 69................ Director of Parent since July 1978. President of
Beauwood Investments, Inc. Beauwood Investments, Inc., 121 King Street West,
121 King Street West, Suite 2525 Suite 2525, Toronto, Ontario, M5H 3T9, Canada, since
Toronto, Ontario M5H 3T9 July 1988. Director of The Seagram Company, 1430
Canada Peel Street, Montreal, Quebec, H3A 1S9, Canada,
since November 1973. Director of Abitibi
Consolidated Inc., 800 Boulevard Rene Levesque West,
Montreal, Quebec, H3B 1Y9, Canada, since April 1978.
Director of Teleglobe, Inc., 1000 de la Gauchetiere
Street West, Suite 1500, Montreal, Quebec, H3B 4X5,
Canada, since May 1992. Director of Canada Trust
Financial Services, Inc., Canada Trust Tower, 161
Bay Street, Toronto, Ontario, M5J 2S1, Canada, since
March 1989. Director of Premium Income Corporation,
121 King Street West, 26th Floor, Toronto, Ontario,
M5H 3T9, Canada, since October 1996. Chairman of
Ontario Teachers' Pension Plan Board ("OTPPB"), 5650
Yonge Street, Toronto, Ontario M2M 4H5, Canada,
since January 1996. Director of OTPPB since January
1990. Director of Quorum Growth, Inc., Sun Life
Tower, 150 King Street West, Toronto, Ontario, M5H
1J9, Canada, from October 1992 to February 1996.
Director of Canadian Tire Corporation, 2180 Yonge
Street, Toronto, Ontario, M3S 2B9, Canada, from May
1988 to May 1996.
</TABLE>
I-4
<PAGE> 42
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME, AGE AND DURING THE PAST FIVE YEARS AND
CURRENT BUSINESS ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------- ------------------------------------------------------
<S> <C>
Andrew G. Mills, 45.................. Director and Executive Vice President of Parent since
Thomson Financial & Professional January 1995. President and Chief Executive Officer
Publishing Group of Thomson Financial & Professional Publishing
22 Pittsburgh Street Group, 22 Pittsburgh Street, Boston, Massachusetts,
Boston, Massachusetts 02210 02210, since May 1994. Chairman of Massachusetts
Technology Development Corporation, 149 State
Street, Boston, Massachusetts 02109, since 1990.
Vance K. Opperman, 54................ Director of Parent since September 1996. President and
Key Investments Inc. Chief Executive Officer of Key Investments Inc., 601
601 Second Avenue South Second Avenue South, Suite 5200, Minneapolis, MN
Suite 5200 55402, since October 1996. Director, Chief Executive
Minneapolis, MN 55402 Officer and General Counsel, MSP Communications,
Inc. since December 1996. President and Chief
Operating Officer of West Publishing Company
("West") between 1993 and 1996. General Counsel of
West prior to 1993. Served on West's Board of
Directors from 1992 to 1996.
David K.R. Thomson, 40............... Director of Parent since April 1988. Deputy Chairman
The Woodbridge Company Limited of the Woodbridge Company Limited, 65 Queen Street
65 Queen Street West West, Toronto, Ontario, M5H 2M8, Canada, since June
Toronto, Ontario M5H 2M8 1990.
Canada
Richard M. Thomson, 64............... Director of Parent since October 1984. Chairman and
Toronto-Dominion Bank Chief Executive Officer of the Toronto Dominion Bank,
Toronto-Dominion Bank Tower, 11th Floor, Toronto-Dominion Bank Tower, Toronto,
11th Floor Ontario M5K 1A2, Canada, since May 1978.
Toronto, Ontario M5K 1A2
Canada
Peter J. Thomson, 32................. Director of Parent since January 1995. Deputy Chairman
The Woodbridge Company Limited of The Woodbridge Company Limited, 65 Queen Street
65 Queen Street West West, Toronto, M5H 2M8, Canada, since November 1993.
Toronto M5H 2M8
Canada
David J. Hulland, 47................. Vice-President of Parent since May 1993. Group
The Thomson Corporation Controller of Parent since December 1984.
Metro Center
One Station Place --
Stamford, Connecticut 06902
Robert J. Jachino, 63................ Vice President of Parent since May 1992. President and
Markborough Development Chief Executive Officer of Markborough Development,
Metro Center Metro Center, One Station Place, Stamford,
One Station Place -- Connecticut 06902, since September 1995. President
Stamford, Connecticut 06902 and Chief Executive Officer, Thomson
Information/Publishing Group, Metro Center, One
Station Place, Stamford, Connecticut 06902, from May
1984 to January 1991. Director of Howe Sportsdata,
Inc., 14 Fish Pier Road, Boston, Massachusetts
02210, since November 1992. Chairman of Perc, Inc.,
107 Perkins Road, Greenwich, Connecticut 06830,
since January 1992.
</TABLE>
I-5
<PAGE> 43
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME, AGE AND DURING THE PAST FIVE YEARS AND
CURRENT BUSINESS ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------- ------------------------------------------------------
<S> <C>
Martin B. Jones, 46.................. Vice President of Parent since May 1993. Group
The Thomson Corporation Treasurer of Parent since December 1984.
The Quadrangle, First Floor
180 Wardour Street
London WIA 4YG
England
Alan M. Lewis, 60.................... Treasurer of Parent since May 1979.
The Thomson Corporation
Suite 2706
P.O. Box 24
66 Wellington Street West
Toronto, Ontario M5K 1A1
Canada
Robert Daleo, 49..................... Executive Vice-President, Finance and Business
The Thomson Corporation Development of Parent since November 1997. Senior Vice
Metro Center President, Finance and Business Development of
One Station Place -- Parent from January 1997 to October 1997. Senior
Stamford, CT 06902 Vice President and Chief Operating Officer, Thomson
Newspapers, Metro Center, One Station Place,
Stamford, CT 06902, from January 1996 to December
1997. Senior Vice President and Chief Financial
Officer, Thomson Newspapers, from December 1994 to
December 1995. Senior Vice President and General
Manager, Sweets Group, McGraw-Hill Company, 1221
Avenue of the Americas, New York, New York 10020,
until November 1994.
Robert C. Hall, 66................... Vice-President of Parent since January 1995. President
The Thomson Corporation and Chief Executive Officer of Thomson Information &
Metro Center Publishing Group, Metro Center, One Station Place,
One Station Place -- Stamford, CT 06902, from 1993 to January 1995.
Stamford, CT 06902 Director of the Advanta Corporation, Welch and
McLean Roads, Spring House, PA, since 1994. Director
of Advanta Partners, Welch and McLean Roads, Spring
House, PA, since 1994.
Joseph J.G.M. Vermeer, 51............ Vice-President and Director of Taxes of Parent since
The Thomson Corporation January 1995. Partner in Peat Marwick Thorne, 40 King
Metro Center Street West, Toronto, Ontario, Canada, from 1977 to
One Station Place -- December 31, 1994.
Stamford, CT 06902
</TABLE>
2. Directors and Executive Officers of Purchaser. The following table
sets forth the name, age, current business address, citizenship and present
principal occupation or employment, and material occupations, positions, offices
or employments and business addresses thereof for the past five years of each
director and executive officer of Purchaser. Michael S. Harris is a citizen of
the United States and Nigel R. Harrison is a citizen of Great Britain. Unless
otherwise indicated, the current business address of each person is Sabre
Acquisition, Inc., Metro Center, One Station Place, Stamford, Connecticut 06902.
Each occupation set forth opposite an individual's name, refers to employment
with Purchaser.
I-6
<PAGE> 44
<TABLE>
<CAPTION>
PRESENT PRINCIPAL OCCUPATION OR
EMPLOYMENT; MATERIAL POSITIONS HELD
NAME, AGE AND DURING THE PAST FIVE YEARS AND
CURRENT BUSINESS ADDRESS BUSINESS ADDRESSES THEREOF
- ------------------------------------- ------------------------------------------------------
<S> <C>
Michael S. Harris, 48................ President and Director of Purchaser since January
The Thomson Corporation 1998. Assistant Secretary of Parent since July 1993.
Metro Center Vice President and General Counsel of Thomson
One Station Place -- Holdings Inc. ("THI"), Metro Center, One Station
Stamford, CT 06902 Place, Stamford, CT 06902, since June 1993.
Assistant Secretary and Assistant General Counsel of
THI from May 1989 to June 1993.
Nigel R. Harrison, 48................ Vice President, Secretary and Treasurer of Purchaser
since January 1998. See Parent, above.
</TABLE>
I-7
<PAGE> 45
SCHEDULE II
Texas Business Corporation Act
Articles 5.11-5.13
Dissenter's Rights
ART. 5.11. RIGHTS OF DISSENTING SHAREHOLDERS IN THE EVENT OF CERTAIN CORPORATE
ACTIONS
A. Any shareholder of a domestic corporation shall have the right to
dissent from any of the following corporate actions:
(1) Any plan of merger to which the corporation is a party if
shareholder approval is required by Article 5.03 or 5.16 of this Act and
the shareholder holds shares of a class or series that was entitled to vote
thereon as a class or otherwise;
(2) Any sale, lease, exchange or other disposition (not including any
pledge, mortgage, deed of trust or trust indenture unless otherwise
provided in the articles of incorporation) of all, or substantially all,
the property and assets, with or without good will, of a corporation if
special authorization of the shareholders is required by this Act and the
shareholders hold shares of a class or series that was entitled to vote
thereon as a class or otherwise; or
(3) Any plan of exchange pursuant to Article 5.02 of this Act in which
the shares of the corporation of the class or series held by the
shareholder are to be acquired.
B. Notwithstanding the provisions of Section A of this Article, a
shareholder shall not have the right to dissent from any plan of merger in which
there is a single surviving or new domestic or foreign corporation, or from any
plan of exchange, if:
(1) the shares held by the shareholder are part of a class or series,
shares of which are on the record date fixed to determine the shareholders
entitled to vote on the plan of merger or plan of exchange:
(a) listed on a national securities exchange;
(b) listed on Nasdaq National Market (or successor quotation
system) or designated as a national market security on an interdealer
quotation system by the National Association of Securities Dealers,
Inc., or successor entity; or
(c) held of record by not less than 2,000 holders;
(2) the shareholder is not required by the terms of the plan of merger
or plan of exchange to accept for the shareholder's shares any
consideration that is different than the consideration (other than cash in
lieu of fractional shares that the shareholder would otherwise be entitled
to receive) to be provided to any other holder of shares of the same class
or series of shares held by such shareholder; and
(3) the shareholder is not required by the terms of the plan of merger
or the plan of exchange to accept for the shareholder's shares any
consideration other than:
(a) shares of a domestic or foreign corporation that, immediately
after the effective time of the merger or exchange will be part of a
class or series of shares of which are:
(i) listed, or authorized for listing upon official notice of
issuance, on a national securities exchange;
(ii) approved for quotation as a national market security on an
interdealer quotation system by the National Association of
Securities Dealers, Inc., or successor entity; or
(iii) held of record by not less than 2,000 holders;
(b) cash in lieu of fractional shares otherwise entitled to be
received, or
II-1
<PAGE> 46
(c) any combination of the securities and cash described in
subdivisions (a) and (b) of this Subsection.
ART. 5.12. PROCEDURE FOR DISSENT BY SHAREHOLDERS AS TO SAID CORPORATE ACTIONS
A. Any shareholder of any domestic corporation who has the right to
dissent from any of the corporate actions referred to in Article 5.11 of this
Act may exercise that right to dissent only by complying with the following
procedures:
(1) (a) With respect to proposed corporate action that is submitted to
a vote of shareholders at a meeting, the shareholder shall file with the
corporation, prior to the meeting, a written objection to the action,
setting out that the shareholder's right to dissent will be exercised if
the action is effective and giving the shareholder's address, to which
notice thereof shall be delivered or mailed in that event. If the action is
effected and the shareholder shall not have voted in favor of the action,
the corporation, in the case of action other than a merger, or the
surviving or new corporation (foreign or domestic) or other entity that is
liable to discharge the shareholder's right of dissent, in the case of a
merger, shall, within ten (10) days after the action is effected, deliver
or mail to the shareholder written notice that the action has been
effected, and the shareholder may, within ten (10) days from the delivery
or mailing of the notice, make written demand on the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may
be, for payment of the fair value of the shareholder's shares. The fair
value of the shares shall be the value thereof as of the day immediately
preceding the meeting, excluding any appreciation or depreciation in
anticipation of the proposed action. The demand shall state the number and
class of the shares owned by the shareholder and the fair value of the
shares as estimated by the shareholder. Any shareholder failing to make
demand within the ten (10) day period shall be bound by the action.
(b) With respect to proposed corporate action that is approved
pursuant to Section A of Article 9.10 of this Act, the corporation, in the
case of action other than a merger, and the surviving or new corporation
(foreign or domestic) or other entity that is liable to discharge the
shareholder's right of dissent, in the case of a merger, shall, within ten
(10) days after the date the action is effected, mail to each shareholder
of record as of the effective date of the action notice of the fact and
date of the action and that the shareholder may exercise the shareholder's
right to dissent from the action. The notice shall be accompanied by a copy
of this Article and any articles or documents filed by the corporation with
the Secretary of State to effect the action. If the shareholder shall not
have consented to the taking of the action, the shareholder may, within
twenty (20) days after the mailing of this notice, make written demand on
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, for payment of the fair value of the
shareholder's shares. The fair value of the shares shall be the value
thereof as of the date the written consent authorizing the action was
delivered to the corporation pursuant to Section A of Article 9.10 of this
Act, excluding any appreciation or depreciation in anticipation of the
action. The demand shall state the number and class of shares owned by the
dissenting shareholder and the fair value of the shares as estimated by the
shareholder. Any shareholder failing to make demand within the twenty (20)
day period shall be bound by the action.
(2) Within twenty (20) days after receipt by the existing, surviving,
or new corporation (foreign or domestic) or other entity, as the case may
be, of a demand for payment made by a dissenting shareholder in accordance
with Subsection (1) of this Section, the corporation (foreign or domestic)
or other entity shall deliver or mail to the shareholder a written notice
that shall either set out that the corporation (foreign or domestic) or
other entity accepts the amount claimed in the demand and agrees to pay
that amount within ninety (90) days after the date on which the action was
effected, and, in the case of shares represented by certificates, upon the
surrender of the certificates duly endorsed, or shall contain an estimate
by the corporation (foreign or domestic) or other entity of the fair value
of the shares, together with an offer to pay the amount of that estimate
within ninety (90) days after the date on which the action was effected,
upon receipt of notice within sixty (60) days after that date from the
shareholder that the shareholder agrees to accept that amount and, in the
case of shares represented by certificates, upon the surrender of the
certificates duly endorsed.
II-2
<PAGE> 47
(3) If, within sixty (60) days after the date on which the corporate
action was effected, the value of the shares is agreed upon between the
shareholder and the existing, surviving, or new corporation (foreign or
domestic) or other entity, as the case may be, payment for the shares shall
be made within ninety (90) days after the date on which the action was
effected and, in the case of shares represented by certificates, upon
surrender of the certificates duly endorsed. Upon payment of the agreed
value, the shareholder shall cease to have any interest in the shares or in
the corporation.
B. If, within the period of sixty (60) days after the date on which the
corporate action was effected, the shareholder and the existing, surviving, or
new corporation (foreign or domestic) or other entity, as the case may be, do
not so agree, then the shareholder or the corporation (foreign or domestic) or
other entity may, within sixty (60) days after the expiration of the sixty (60)
day period, file a petition in any court of competent jurisdiction in the county
in which the principal office of the domestic corporation is located, asking for
a finding and determination of the fair value of the shareholder's shares. Upon
the filing of any such petition by the shareholder, service of a copy thereof
shall be made upon the corporation (foreign or domestic) or other entity, which
shall, within ten (10) days after service, file in the office of the clerk of
the court in which the petition was filed a list containing the names and
addresses of all shareholders of the domestic corporation who have demanded
payment for their shares and with whom agreements as to the value of their
shares have not been reached by the corporation (foreign or domestic) or other
entity. If the petition shall be filed by the corporation (foreign or domestic)
or other entity, the petition shall be accompanied by such a list. The clerk of
the court shall give notice of the time and place fixed for the hearing of the
petition by registered mail to the corporation (foreign or domestic) or other
entity and to the shareholders named on the list at the addresses therein
stated. The forms of the notices by mail shall be approved by the court. All
shareholders thus notified and the corporation (foreign or domestic) or other
entity shall thereafter be bound by the final judgment of the court.
C. After the hearing of the petition, the court shall determine the
shareholders who have complied with the provisions of this Article and have
become entitled to the valuation of and payment for their shares, and shall
appoint one or more qualified appraisers to determine that value. The appraisers
shall have power to examine any of the books and records of the corporation the
shares of which they are charged with the duty of valuing, and they shall make a
determination of the fair value of the shares upon such investigation as to them
may seem proper. The appraisers shall also afford a reasonable opportunity to
the parties interested to submit to them pertinent evidence as to the value of
the shares. The appraisers shall also have such power and authority as may be
conferred on Masters in Chancery by the Rules of Civil Procedure or by the order
of their appointment.
D. The appraisers shall determine the fair value of the shares of the
shareholders adjudged by the court to be entitled to payment for their shares
and shall file their report of that value in the office of the clerk of the
court. Notice of the filing of the report shall be given by the clerk to the
parties in interest. The report shall be subject to exceptions to be heard
before the court both upon the law and the facts. The court shall by its
judgment determine the fair value of the shares of the shareholders entitled to
payment for their shares and shall direct the payment of that value by the
existing, surviving, or new corporation (foreign or domestic) or other entity,
together with interest thereon, beginning ninety-one (91) days after the date on
which the applicable corporate action from which the shareholder elected to
dissent was effected to the date of such judgment, to the shareholders entitled
to payment. The judgment shall be payable to the holders of uncertificated
shares immediately but to the holders of shares represented by certificates only
upon, and simultaneously with, the surrender to the existing, surviving, or new
corporation (foreign or domestic) or other entity, as the case may be, of duly
endorsed certificates for those shares. Upon payment of the judgment, the
dissenting shareholders shall cease to have any interest in those shares or in
the corporation. The court shall allow the appraisers a reasonable fee as court
costs, and all court costs shall be allotted between the parties in the manner
that the court determines to be fair and equitable.
E. Shares acquired by the existing, surviving, or new corporation (foreign
or domestic) or other entity, as the case may be, pursuant to the payment of the
agreed value of the shares or pursuant to payment of the judgment entered for
the value of the shares, as provided in this Article 5.12, shall, in the case of
a merger, be
II-3
<PAGE> 48
treated as provided in the plan of merger and, in all other cases, may be held
and disposed of by the corporation as in the case of other treasury shares.
F. The provisions of this Article 5.12 shall not apply to a merger if, on
the date of the filing of the articles of merger, the surviving corporation is
the owner of all the outstanding shares of the other corporations, domestic or
foreign, that are parties to the merger.
G. In the absence of fraud in the transaction, the remedy provided by this
Article 5.12 to a shareholder objection to any corporate action referred to in
Article 5.11 of this Act is the exclusive remedy for the recovery of the value
of his shares or money damages to the shareholder with respect to the action. If
the existing, surviving, or new corporation (foreign or domestic) or other
entity, as the case may be, complies with the requirements of this Article 5.12,
any shareholder who fails to comply with the requirements of this Article 5.12
shall not be entitled to bring suit for the recovery of the value of his shares
or money damages to the shareholder with respect to the action.
ART. 5.13. PROVISIONS AFFECTING REMEDIES OF DISSENTING SHAREHOLDERS
A. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act shall not thereafter be entitled to
vote or exercise any other rights of a shareholder except the right to receive
payment for his shares pursuant to the provisions of those articles and the
right to maintain an appropriate action to obtain relief on the ground that the
corporate action would be or was fraudulent, and the respective shares for which
payment has been demanded shall not thereafter be considered outstanding for the
purposes of any subsequent vote of shareholders.
B. Upon receiving a demand for payment from any dissenting shareholder,
the corporation shall make an appropriate notation thereof in its shareholder
records. Within twenty (20) days after demanding payment for his shares in
accordance with either Article 5.12 or 5.16 of this Act, each holder of
certificates representing shares so demanding payment shall submit such
certificates to the corporation for notation thereon that such demand has been
made. The failure of holders of certificated shares to do so shall, at the
option of the corporation, terminate such shareholder's rights under Articles
5.12 and 5.16 of this Act unless a court of competent jurisdiction for good and
sufficient cause shown shall otherwise direct. If uncertificated shares for
which payment has been demanded or shares represented by a certificate on which
notation has been so made shall be transferred, any new certificate issued
therefor shall bear similar notation together with the name of the original
dissenting holder of such shares and a transferee of such shares shall acquire
by such transfer no rights in the corporation other than those which the
original dissenting shareholder had after making demand for payment of the fair
value thereof.
C. Any shareholder who has demanded payment for his shares in accordance
with either Article 5.12 or 5.16 of this Act may withdraw such demand at any
time before payment for his shares or before any petition has been filed
pursuant to Article 5.12 or 5.16 of this Act asking for a finding and
determination of the fair value of such shares, but no such demand may be
withdrawn after such payment has been made or, unless the corporation shall
consent thereto, after any such petition has been filed. If, however, such
demand shall be withdrawn as hereinbefore provided, or if pursuant to Section B
of this Article the corporation shall terminate the shareholder's rights under
Article 5.12 or 5.16 of this Act, as the case may be, or if no petition asking
for a finding and determination of fair value of such shares by a court shall
have been filed within the time provided in Article 5.12 or 5.16 of this Act, as
the case may be, or if after the hearing of a petition filed pursuant to Article
5.12 or 5.16, the court shall determine that such shareholder is not entitled to
the relief provided by those articles, then, in any such case, such shareholder
and all persons claiming under him shall be conclusively presumed to have
approved and ratified the corporate action from which he dissented and shall be
bound thereby, the right of such shareholder to be paid the fair value of his
shares shall cease, and his status as a shareholder shall be restored without
prejudice to any corporate proceedings which may have been taken during the
interim, and such shareholder shall be entitled to receive any dividends or
other distributions made to shareholders in the interim.
II-4
<PAGE> 49
Facsimiles of the Letter of Transmittal, properly completed and duly
executed, will be accepted. The Letter of Transmittal and certificates
evidencing Shares and any other required documents should be sent or delivered
by each shareholder or his broker, dealer, commercial bank, trust company or
other nominee to the Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
Post Office Box 3305 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail Drop -- Reorg. New York, NY 10271
Attn: Reorganization Dept. Ridgefield Park, NJ 07660 Attn: Reorganization Dept.
</TABLE>
By Facsimile: (201) 329-8936
Confirm by Telephone: (201) 296-4860
Other Information:
Questions or requests for assistance may be directed to the Information
Agent at the address and telephone number listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent. A shareholder may also
contact brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
The Information Agent for the Offer is:
[INSFREE LOGO]
501 Madison Avenue
New York, New York 10022
(212) 750-5833
Call Toll Free: (888) 750-5834
<PAGE> 1
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
COMPUTER LANGUAGE RESEARCH, INC.
PURSUANT TO THE OFFER TO PURCHASE
DATED JANUARY 16, 1998
OF
SABRE ACQUISITION, INC.,
A WHOLLY OWNED SUBSIDIARY OF
THE THOMSON CORPORATION
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK CITY
TIME,
ON FRIDAY, FEBRUARY 13, 1998, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
Post Office Box 3305 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail Drop -- Reorg. New York, NY 10271
Attn: Reorganization Dept. Ridgefield Park, NJ 07660 Attn: Reorganization Dept.
</TABLE>
By Facsimile: (201) 329-8936
Confirm by Telephone: (201) 296-4860
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS, OR TRANSMISSION OF
INSTRUCTIONS VIA A FACSIMILE NUMBER, OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders either if
certificates evidencing Shares (as defined below) are to be forwarded herewith
or if delivery of Shares is to be made by book-entry transfer to the
Depositary's account at The Depository Trust Company ("DTC" or the "Book-Entry
Transfer Facility") pursuant to the book-entry transfer procedure described in
"Section 3. Procedures for Accepting the Offer and Tendering Shares" of the
Offer to Purchase (as defined below). DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY
TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
A shareholder who desires to tender Shares and whose certificates
evidencing such Shares ("Share Certificates") are not immediately available, or
who cannot deliver their Share Certificates and all other documents required
hereby to the Depositary prior to the Expiration Date (as defined in "Section 1.
Terms of the Offer; Expiration Date" of the Offer to Purchase) or who cannot
comply with the procedure for delivery by book-entry transfer on a timely basis,
may tender such Shares by following the procedure for guaranteed delivery set
forth in "Section 3. Procedures for Accepting the Offer and Tendering Shares" of
the Offer to Purchase. See Instruction 2.
<PAGE> 2
[ ] CHECK HERE IF SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER TO THE
DEPOSITARY'S ACCOUNT AT DTC AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ___________________________________________
Account Number __________________________________________________________
Transaction Code Number _________________________________________________
[ ] CHECK HERE IF SHARES ARE BEING TENDERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s) _________________________________________
Window Ticket No. (if any) ______________________________________________
Date of Execution of Notice of Guaranteed Delivery ______________________
Name of Institution which Guaranteed Delivery ___________________________
If delivery is by book-entry transfer, give the following:
DTC Account Number ______________________________________________________
Transaction Code Number _________________________________________________
- --------------------------------------------------------------------------------
DESCRIPTION OF SHARES TENDERED
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S)
(PLEASE FILL IN, IF BLANK, EXACTLY AS NAME(S) APPEAR(S) SHARE CERTIFICATE(S) AND SHARE(S) TENDERED
ON SHARE CERTIFICATE(S)) (ATTACH ADDITIONAL LIST, IF NECESSARY)
------------------------------------------------------------------------------------------------------------------------------
TOTAL NUMBER OF NUMBER OF
SHARE CERTIFICATE SHARES EVIDENCED BY SHARES
NUMBER(S)* SHARE CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
---------------------------------------------------------------
TOTAL SHARES
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by shareholders delivering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced by
each Share Certificate delivered to the Depositary are being tendered
hereby. See Instruction 4.
================================================================================
NOTE: SIGNATURES MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Sabre Acquisition, Inc., a Delaware
corporation ("Purchaser") and a wholly owned subsidiary of The Thomson
Corporation, a corporation organized under the laws of Ontario, Canada
("Parent"), the above-described shares of Common Stock, par value $0.01 per
share, of Computer Language Research, Inc., a Texas corporation (the "Company")
(all shares of such Common Stock from time to time outstanding being,
collectively, the "Shares") pursuant to Purchaser's offer to purchase all
Shares, at $22.50 per Share, net to the seller in cash, upon the terms and
subject to the conditions set forth in the Offer to Purchase, dated January 16,
1998 (the "Offer to Purchase"), receipt of which is hereby acknowledged, and in
this Letter of Transmittal (which, together with any amendments or supplements
thereto, collectively constitute the "Offer"). The undersigned understands that
Purchaser reserves the right to transfer or assign, in whole or from time to
time in part, to one or more of its affiliates, the right to purchase all or any
portion of the Shares tendered pursuant to the Offer.
2
<PAGE> 3
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith, in accordance with the terms of the Offer, the undersigned
hereby sells, assigns and transfers to, or upon the order of, Purchaser all
right, title and interest in and to all the Shares that are being tendered
hereby and all dividends, distributions (including, without limitation,
distributions of additional Shares) and rights declared, paid or distributed in
respect of such Shares on or after January 12, 1998 (collectively,
"Distributions") and irrevocably appoints the Depositary the true and lawful
agent and attorney-in-fact of the undersigned with respect to such Shares and
all Distributions, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
Share Certificates evidencing such Shares and all Distributions, or transfer
ownership of such Shares and all Distributions on the account books maintained
by the Book-Entry Transfer Facility, together, in either case, with all
accompanying evidences of transfer and authenticity, to or upon the order of
Purchaser, (ii) present such Shares and all Distributions for transfer on the
books of the Company and (iii) receive all benefits and otherwise exercise all
rights of beneficial ownership of such Shares and all Distributions, all in
accordance with the terms of the Offer.
The undersigned hereby irrevocably appoints Michael S. Harris, Nigel R.
Harrison and Edward A. Friedland and each of them, as the attorneys and proxies
of the undersigned, each with full power of substitution, to vote in such manner
as each such attorney and proxy or his substitute shall, in his sole discretion,
deem proper and otherwise act (by written consent or otherwise) with respect to
all the Shares tendered hereby which have been accepted for payment by Purchaser
prior to the time of such vote or other action and all Shares and other
securities issued in Distributions in respect of such Shares, which the
undersigned is entitled to vote at any meeting of shareholders of the Company
(whether annual or special and whether or not an adjourned or postponed meeting)
or consent in lieu of any such meeting or otherwise. This proxy and power of
attorney is coupled with an interest in the Shares tendered hereby, is
irrevocable and is granted in consideration of, and is effective upon, the
acceptance for payment of such Shares by Purchaser in accordance with other
terms of the Offer. Such acceptance for payment shall revoke all other proxies
and powers of attorney granted by the undersigned at any time with respect to
such Shares (and all Shares and other securities issued in Distributions in
respect of such Shares), and no subsequent proxy or power of attorney shall be
given or written consent executed (and if given or executed, shall not be
effective) by the undersigned with respect thereto. The undersigned understands
that, in order for Shares to be deemed validly tendered, immediately upon
Purchaser's acceptance of such Shares for payment, Purchaser must be able to
exercise full voting and other rights with respect to such Shares, including,
without limitation, voting at any meeting of the Company's shareholders then
scheduled.
The undersigned hereby represents and warrants that the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby and all Distributions, that when such Shares are accepted for
payment by Purchaser, Purchaser will acquire good, marketable and unencumbered
title thereto and to all Distributions, free and clear of all liens,
restriction, charges and encumbrances, and that none of such Shares and
Distributions will be subject to any adverse claim. The undersigned, upon
request, shall execute and deliver all additional documents deemed by the
Depositary or Purchaser to be necessary or desirable to complete the sale,
assignment and transfer of the Shares tendered hereby and all Distributions. In
addition, the undersigned shall remit and transfer promptly to the Depositary
for the account of Purchaser all Distributions in respect of the Shares tendered
hereby, accompanied by appropriate documentation of transfer, and pending such
remittance and transfer or appropriate assurance thereof, Purchaser shall be
entitled to all rights and privileges as owner of each such Distribution and may
withhold the entire purchase price of the Shares tendered hereby, or deduct from
such purchaser price, the amount or value of such Distribution as determined by
Purchaser in its sole discretion.
No authority herein conferred or agreed to be conferred shall be affected
by, and all such authority shall survive, the death or incapacity of the
undersigned. All obligations of the undersigned hereunder shall be binding upon
the heirs, personal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable.
The undersigned understands that tenders of Shares pursuant to any one of
the procedures described in "Section 3. Procedures for Accepting the Offer and
Tendering Shares" in the Offer to Purchase and in the instructions hereto will
constitute the undersigned's acceptance of the terms and conditions of the
Offer. Purchaser's acceptance of such Shares for payment will constitute a
binding agreement between the undersigned and Purchaser upon the terms and
subject to the conditions of the Offer.
3
<PAGE> 4
Unless otherwise indicated herein in the box entitled "Special Payment
Instructions", please issue the check for the purchase price of all Shares
purchased, and return all Share Certificates evidencing Shares not purchased or
not tendered in the name(s) of the registered holder(s) appearing above under
"Description of Shares Tendered". Similarly, unless otherwise indicated in the
box entitled "Special Delivery Instructions", please mail the check for the
purchase price of all Shares purchased and all Share Certificates evidencing
Shares not tendered or not purchased (and accompanying documents, as
appropriate) to the address(es) of the registered holder(s) appearing above
under "Description of Shares Tendered". In the event that the boxes entitled
"Special Payment Instructions" and "Special Delivery Instructions" are both
completed, please issue the check for the purchase price of all Shares purchased
and return all Share Certificates evidencing Shares not purchased or not
tendered in the name(s) of, and mail such check and Share Certificates to, the
person(s) so indicated. Unless otherwise indicated herein in the box entitled
"Special Payment Instructions", please credit any Shares tendered hereby and
delivered by book-entry transfer, but which are not purchased by crediting the
account at DTC. The undersigned recognizes that Purchaser has no obligation,
pursuant to the Special Payment Instructions, to transfer any Shares from the
name of the registered holder(s) thereof if Purchaser does not purchase any of
the Shares tendered hereby.
4
<PAGE> 5
------------------------------------------------------------
SPECIAL PAYMENT INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares or
Share Certificates evidencing Shares not tendered or not purchased are to
be issued in the name of someone other than the undersigned, or if Shares
tendered hereby and delivered by book-entry transfer which are not
purchased are to be returned by credit to an account at the Book-Entry
Transfer Facility other than that designated above.
Issue [ ] Check [ ] Share Certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
[ ] Credit Shares delivered by book-entry transfer and not purchased to
the account set forth below:
Check appropriate Box:
[ ] DTC
Account Number:
----------------------------------------
============================================================
SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if the check for the purchase price of Shares
purchased or Share Certificates evidencing Shares not tendered or not
purchased are to be mailed to someone other than the undersigned, or the
undersigned at an address other than that shown under "Description of
Shares Tendered".
Mail [ ] Check [ ] Share Certificate(s) to:
Name:
----------------------------------------------------
(PLEASE PRINT)
Address:
--------------------------------------------------
------------------------------------------------------------
(ZIP CODE)
------------------------------------------------------------
TAXPAYER IDENTIFICATION OR SOCIAL SECURITY NUMBER
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
------------------------------------------------------------
5
<PAGE> 6
IMPORTANT
SHAREHOLDERS: SIGN HERE
(PLEASE COMPLETE SUBSTITUTE FORM W-9 ON REVERSE)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SIGNATURE(S) OF HOLDER(S)
Dated: ---------------------------------------------, 199-
(Must be signed by registered holder(s) exactly as name(s) appear(s) on Share
Certificates or on a security position listing by a person(s) authorized to
become registered holder(s) by certificates and documents transmitted herewith.
If signature is by a trustee, executor, administrator, guardian,
attorney-in-fact, officer of a corporation or other person acting in a fiduciary
or representative capacity, please provide the following information and see
Instruction 5).
Name(s):
------------------------------------------------------------------------
PLEASE PRINT
Capacity (full title):
----------------------------------------------------------
Address:
------------------------------------------------------------------------
INCLUDE ZIP CODE
Area Code and Telephone No.:
---------------------------------------------------
Taxpayer Identification or Social Security No.:
_______________________________
(SEE SUBSTITUTE FORM W-9 ON REVERSE SIDE)
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTIONS 1 AND 5)
FOR USE BY FINANCIAL INSTITUTION ONLY.
FINANCIAL INSTITUTIONS: PLACE MEDALLION
GUARANTEE IN SPACE BELOW.
6
<PAGE> 7
INSTRUCTIONS
FORMING PARTY OF THE TERMS AND CONDITIONS OF THE OFFER
1. Guarantee of Signatures. All signatures on this Letter of Transmittal
must be guaranteed by a firm which is a member of the Medallion Signature
Guarantee Program, or by any other "eligible guarantor institution," as such
term is defined in Rule 17Ad-5 promulgated under the Securities Exchange Act of
1934, as amended (each of the foregoing being referred to as an "Eligible
Institution") unless (i) this Letter of Transmittal is signed by the registered
holder(s) of the Shares (which term, for purposes of this document, shall
include any participant in the Book-Entry Transfer Facility whose name appears
on a security position listing as the owner of Shares) tendered hereby and such
holder(s) has (have) completed neither the box entitled "Special Payment
Instructions" nor the box entitled "Special Delivery Instructions" on the
reverse hereof or (ii) such Shares are tendered for the account of an Eligible
Institution. See Instruction 5.
2. Delivery of Letter of Transmittal and Share Certificates. This Letter
of Transmittal is to be used either if Share Certificates are to be forwarded
herewith or if Shares are to be delivered by book-entry transfer pursuant to the
procedure set forth in "Section 3. Procedures for Accepting the Offer and
Tendering Shares" of the Offer to Purchase. Share Certificates evidencing all
physically tendered Shares, or a confirmation of a book-entry transfer into the
Depositary's account at the Book-Entry Transfer Facility of all Shares delivered
by book-entry transfer as well as a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth on the reverse hereof prior to the Expiration Date (as
defined in "Section 1. Terms of the Offer; Expiration Date" of the Offer to
Purchase). If Share Certificates are forwarded to the Depositary in multiple
deliveries, a properly completed and duly executed Letter of Transmittal must
accompany each such delivery. Shareholders whose Share Certificates are not
immediately available, who cannot deliver their Share Certificates and all other
required documents to the Depositary prior to the Expiration Date or who cannot
complete the procedure for delivery by book-entry transfer on a timely basis may
tender their Shares pursuant to the guaranteed delivery procedure described in
"Section 3. Procedures for Accepting the Offer and Tendering Shares" of the
Offer to Purchase. Pursuant to such procedure: (i) such tender must be made by
or through an Eligible Institution; (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form made available by
Purchaser, must be received by the Depositary prior to the Expiration Date; and
(iii) the Share Certificates evidencing all physically delivered Shares in
proper form for transfer by delivery, or a confirmation of a book-entry transfer
into the Depositary's account at the Book-Entry Transfer Facility of all Shares
delivered by book-entry transfer, in each case together with a Letter of
Transmittal (or a facsimile thereof), properly completed and duly executed, with
any required signature guarantees (or, in the case of a book-entry transfer, an
Agent's Message (as defined in "Section 3. Procedures for Accepting the Offer
and Tendering Shares" of the Offer to Purchase)), and any other documents
required by this Letter of Transmittal, must be received by the Depositary
within three Nasdaq National Market ("Nasdaq") trading days after the date of
execution of such Notice of Guaranteed Delivery, all as described in "Section 3.
Procedure for Accepting the Offer and Tendering Shares" of the Offer to
Purchase.
The method of delivery of this Letter of Transmittal, Share Certificates
and all other required documents, including delivery through the Book-Entry
Transfer Facility, is at the option and risk of the tendering shareholder, and
the delivery will be deemed made only when actually received by the Depositary.
If delivery is by mail, registered mail with return receipt requested, properly
insured, is recommended. In all cases, sufficient time should be allowed to
ensure timely delivery.
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. By execution of this Letter of Transmittal
(or a facsimile hereof), all tendering shareholders waive any right to receive
any notice of the acceptance of their Shares for payment.
3. Inadequate Space. If the space provided herein under "Description of
Shares Tendered" is inadequate, the Share Certificate numbers, the number of
Shares evidenced by such Share Certificates and the number of Shares tendered
should be listed on a separate schedule and attached hereto.
4. Partial Tenders (not applicable to shareholders who tender by
book-entry transfer). If fewer than all the Shares evidenced by any Share
Certificate delivered to the Depositary herewith are to be tendered hereby, fill
in the number of Shares which are to be tendered in the box entitled "Number of
Shares Tendered". In such cases, new Share Certificate(s) evidencing the
remainder of the Shares that were evidenced by the Share Certificates delivered
to the
7
<PAGE> 8
Depositary herewith will be sent to the person(s) signing this Letter of
Transmittal, unless otherwise provided in the box entitled "Special Delivery
Instructions" on the reverse hereof, as soon as practicable after the expiration
or termination of the Offer. All Shares evidenced by Share Certificates
delivered to the Depositary will be deemed to have been tendered unless
otherwise indicated.
5. Signatures on Letter of Transmittal; Stock Powers and Endorsements. If
this Letter of Transmittal is signed by the registered holder(s) of the Shares
tendered hereby, the signature(s) must correspond with the name(s) as written on
the face of the Share Certificates evidencing such Shares without alteration,
enlargement or any other change whatsoever.
If any Share tendered hereby is owned of record by two or more persons, all
such persons must sign this Letter of Transmittal.
If any of the Shares tendered hereby are registered in the names of
different holders, it will be necessary to complete, sign and submit as many
separate Letters of Transmittal as there are different registrations of such
Shares.
If this Letter of Transmittal is signed by the registered holder(s) of the
Shares tendered hereby, no endorsements of Share Certificates or separate stock
powers are required, unless payment is to be made to, or Share Certificates
evidencing Shares not tendered or not purchased are to be issued in the name of,
a person other than the registered holder(s), in which case, the Share
Certificate(s) evidencing the Shares tendered hereby must be endorsed or
accompanied by appropriate stock powers, in either case signed exactly as the
name(s) of the registered holder(s) appear(s) on such Share Certificate(s).
Signatures on such Share Certificate(s) and stock powers must be guaranteed by
an Eligible Institution.
If this Letter of Transmittal is signed by a person other than the
registered holder(s) of the Shares tendered hereby, the Share Certificate(s)
evidencing the Shares tendered hereby must be endorsed or accompanied by
appropriate stock powers, in either case signed exactly as the name(s) of the
registered holder(s) appear(s) on such Share Certificate(s). Signatures on such
Share Certificate(s) and stock powers must be guaranteed by an Eligible
Institution.
If this Letter of Transmittal or any Share Certificate or stock power is
signed by a trustee, executor, administrator,
guardian, attorney-in-fact, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person should so indicate when
signing, and proper evidence satisfactory to Purchaser of such person's
authority so to act must be submitted.
6. Stock Transfer Taxes. Except as otherwise provided in this Instruction
6, Purchaser will pay all stock transfer taxes with respect to the sale and
transfer of any Shares to it or its order pursuant to the Offer. If, however,
payment of the purchase price of any Shares purchased is to be made to, or Share
Certificate(s) evidencing Shares not tendered or not purchased are to be issued
in the name of, a person other than the registered holder(s), the amount of any
stock transfer taxes (whether imposed on the registered holder(s), such other
person or otherwise) payable on account of the transfer to such other person
will be deducted from the purchase price of such Shares purchased, unless
evidence satisfactory to Purchaser of the payment of such taxes, or exemption
therefrom, is submitted. Except as provided in this Instruction 6, it will not
be necessary for transfer tax stamps to be affixed to the Share Certificates
evidencing the Shares tendered hereby.
7. Special Payment and Delivery Instructions. If a check for the purchase
price of any Shares tendered hereby is to be issued, or Share Certificate(s)
evidencing Shares not tendered or not purchased are to be issued, in the name of
a person other than the person(s) signing this Letter of Transmittal or if such
check or any such Share Certificate is to be sent to someone other than the
person(s) signing this Letter of Transmittal or to the person(s) signing this
Letter of Transmittal but at an address other than that shown in the box
entitled "Description of Shares Tendered" on the reverse hereof, the appropriate
boxes on the reverse of this Letter of Transmittal must be completed.
Shareholders delivering Shares tendered hereby by book-entry transfer may
request that Shares not purchased be credited to such account maintained at DTC
as such shareholder may designate in the box entitled "Special Payment
Instructions" on the reverse hereof. If no such instructions are given, all such
Shares not purchased will be returned by crediting the account at DTC designated
on the reverse hereof as the account from which such Shares were delivered.
8. Questions and Requests for Assistance or Additional Copies. Questions
and requests for assistance may be directed to the Information Agent at its
addresses or telephone numbers set forth below. Additional copies of the Offer
to Purchase, this Letter of Transmittal and the Notice of Guaranteed Delivery
may be obtained from the Information Agent or from brokers, dealers, commercial
banks or trust companies.
8
<PAGE> 9
9. Substitute Form W-9. Each tendering shareholder is required to provide
the Depositary with a correct Taxpayer Identification Number ("TIN") on the
Substitute Form W-9 which is provided under "Important Tax Information" below,
and to certify, under penalty of perjury, that such number is correct and that
such shareholder is not subject to backup withholding of federal income tax. If
a tendering shareholder has been notified by the Internal Revenue Service that
such shareholder is subject to backup withholding, such shareholder must cross
out item (2) of the Certification box of the Substitute Form W-9, unless such
shareholder has since been notified by the Internal Revenue Service that such
shareholder is no longer subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the tendering shareholder to
31% federal income tax withholding on the payment of the purchase price of all
Shares purchased from such shareholder. If the tendering shareholder has not
been issued a TIN and has applied for one or intends to apply for one in the
near future, such shareholder should write "Applied For" in the space provided
for the TIN in Part I of the Substitute Form W-9, and sign and date the
Substitute Form W-9. If "Applied For" is written in Part I and the Depositary is
not provided with a TIN within 60 days, the Depositary will withhold 31% on all
payments of the purchase price to such shareholder until a TIN is provided to
the Depositary.
IMPORTANT: THIS LETTER OF TRANSMITTAL OR FACSIMILE HEREOF, PROPERLY
COMPLETED AND DULY EXECUTED (TOGETHER WITH ANY REQUIRED SIGNATURE GUARANTEES
(OR, IN THE CASE OF A BOOK-ENTRY TRANSFER, AN AGENT'S MESSAGE) AND SHARE
CERTIFICATES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER REQUIRED
DOCUMENTS) OR A PROPERLY COMPLETED AND DULY EXECUTED NOTICE OF GUARANTEED
DELIVERY MUST BE RECEIVED BY THE DEPOSITARY PRIOR TO THE EXPIRATION DATE (AS
DEFINED IN THE OFFER TO PURCHASE).
9
<PAGE> 10
IMPORTANT TAX INFORMATION
Under the federal income tax law, a shareholder whose tendered Shares are
accepted for payment is required by law to provide the Depositary (as payer)
with such shareholder's correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is such shareholder's social security
number. If the Depositary is not provided with the correct TIN, the shareholder
may be subject to a $50 penalty imposed by the Internal Revenue Service and
payments that are made to such shareholder with respect to Shares purchased
pursuant to the Offer may be subject to backup withholding of 31%. In addition,
if a shareholder makes a false statement that results in no imposition of backup
withholding, and there was no reasonable basis for making such statement, a $500
penalty may also be imposed by the Internal Revenue Service.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to these backup withholding and reporting
requirements. In order for a foreign individual to qualify as an exempt
recipient, such individual must submit a statement (Internal Revenue Service
Form W-8), signed under penalties of perjury, attesting to such individual's
exempt status. Forms of such statements can be obtained from the Depositary. See
the enclosed Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9 for additional instructions. A shareholder should consult
his or her tax advisor as to such shareholder's qualification for exemption from
backup withholding and the procedure for obtaining such exemption.
If backup withholding applies, the Depositary is required to withhold 31%
of any payments made to the shareholder. Backup withholding is not an additional
tax. Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained from the Internal Revenue Service.
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder
with respect to Shares purchased pursuant to the Offer, the shareholder is
required to notify the Depositary of such shareholder's correct TIN by
completing the form below certifying that the TIN provided on Substitute Form
W-9 is correct (or that such shareholder is awaiting a TIN), and that (i) such
shareholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of a failure to report all interest or
dividends or (ii) the Internal Revenue Service has notified such shareholder
that such shareholder is no longer subject to backup withholding.
WHAT NUMBER TO GIVE THE DEPOSITARY
The shareholder is required to give the Depositary the social security
number or employer identification number of the record holder of the Shares
tendered hereby. If the Shares are in more than one name or are not in the name
of the actual owner, consult the enclosed Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9 for additional guidance on
which number to report. If the tendering shareholder has not been issued a TIN
and has applied for a number or intends to apply for a number in the near
future, the shareholder should write "Applied For" in the space provided for the
TIN in Part I, and sign and date the Substitute Form W-9. If "Applied For" is
written in Part I and the Depositary is not provided with a TIN within 60 days,
the Depositary will withhold 31% of all payments of the purchase price to such
shareholder until a TIN is provided to the Depositary.
10
<PAGE> 11
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES L.L.C.
<TABLE>
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
SUBSTITUTE PART 1 -- Taxpayer Identification -------------------------------
FORM W-9 Number -- For all accounts, enter Social Security Number
your taxpayer identification number OR
in the box at right. (For most Employer Identification
individuals, this is your social Number
security number. If you do not have (If awaiting TIN write
a number, see Obtaining a Number in "Applied For")
the enclosed Guidelines.) Certify by
signing and dating below. Note: If
the account is in more than one
name, see the chart in the enclosed
Guidelines to determine which number
to give the payer.
----------------------------------------------------------------------
Payer's Request for Taxpayer PART II -- For Payees Exempt from Backup Withholding, see the
Identification Number (TIN) enclosed Guidelines and complete as instructed therein.
- --------------------------------------------------------------------------------------------------------
CERTIFICATION -- Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification Number (or I am waiting for a
number to be issued to me), and
(2) I am not subject to backup withholding either because I have not been notified by the Internal
Revenue Service (the "IRS") that I am subject to backup withholding as a result of failure to
report all interest or dividends, or the IRS has notified me that I am no longer subject to backup
withholding.
CERTIFICATE INSTRUCTIONS -- You must cross out item (2) above if you have been notified by the IRS that
you are subject to backup withholding because of underreporting interest or dividends on your tax
return. However, if after being notified by the IRS that you were subject to backup withholding you
received another notification from the IRS that you are no longer subject to backup withholding, do not
cross out item (2). (Also see instructions in the enclosed Guidelines.)
- --------------------------------------------------------------------------------------------------------
SIGNATURE DATE , 199
- --------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN BACKUP WITHHOLDING
OF 31% OF ANY PAYMENTS MADE TO YOU PURSUANT TO THIS OFFER. PLEASE REVIEW
THE ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
11
<PAGE> 12
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES L.L.C.
<TABLE>
<S> <C> <C>
By Mail: By Overnight Courier: By Hand:
Post Office Box 3305 85 Challenger Road 120 Broadway, 13th Floor
South Hackensack, NJ 07606 Mail Drop -- Reorg. New York, NY 10271
Attn: Reorganization Dept. Ridgefield Park, NJ 07660 Attn: Reorganization Dept.
</TABLE>
By Facsimile: (201) 329-8936
Confirm by Telephone: (201) 296-4860
Questions or requests for assistance may be directed to the Information
Agent at the address and telephone number listed below. Additional copies of
this Offer to Purchase, the Letter of Transmittal and the Notice of Guaranteed
Delivery may be obtained from the Information Agent. A shareholder may also
contact brokers, dealers, commercial banks or trust companies for assistance
concerning the Offer.
The Information Agent for the Offer is:
[INNISFREE LOGO]
501 Madison Avenue, 20th Floor
New York, New York 10022
(212) 750-5833
or
Call Toll Free: (888) 750-5834
12
<PAGE> 1
EXHIBIT 3
[LETTERHEAD]
January 16, 1998
Dear Shareholder:
I am pleased to inform you that Computer Language Research, Inc. (the
"Company") has entered into a merger agreement with The Thomson Corporation
("Thomson") and its wholly owned subsidiary Sabre Acquisition, Inc. ("Sabre")
that provides for the acquisition of the Company by Thomson. Pursuant to such
agreement, Sabre has today commenced a tender offer to purchase all of the
outstanding shares of Common Stock of the Company at $22.50 per share, net to
the seller, in cash, without interest. The tender offer will be followed by a
merger of the Company and Sabre in which any remaining shares of Common Stock
will be converted into the right to receive $22.50 per share in cash, without
interest. The Company will continue as the surviving corporation as a wholly
owned subsidiary of Thomson.
AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY
APPROVED THE MERGER AGREEMENT, THE TENDER OFFER AND THE MERGER AND DETERMINED
THAT THE TENDER OFFER AND MERGER ARE FAIR TO, AND IN THE BEST INTERESTS OF, THE
COMPANY AND ITS SHAREHOLDERS. ACCORDINGLY, THE BOARD OF DIRECTORS UNANIMOUSLY
RECOMMENDS THAT SHAREHOLDERS ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT
TO THE OFFER.
In arriving at its determination and recommendation, the Board of Directors
gave careful consideration to a number of factors that are described in the
attached Schedule 14D-9, including the written opinion, dated January 12, 1998,
of Goldman, Sachs & Co., the Company's financial advisor, that, based upon and
subject to the matters set forth therein as of such date, the $22.50 per share
in cash to be received by the shareholders of the Company in the tender offer
and the merger was fair from a financial point of view to such shareholders. In
addition, certain shareholders of the Company have agreed to tender an aggregate
of approximately 74.6% of the outstanding shares of Common Stock of the Company
in the tender offer.
Additional information with respect to the Board of Director's decision and
the transaction is contained in the attached Schedule 14D-9 and I urge you to
consider this information carefully.
In addition to the attached Schedule 14D-9 relating to the offer, also
enclosed is the Offer to Purchase, dated January 16, 1998, of Sabre, together
with related materials, including a Letter of Transmittal, to be used for
tendering your shares of Company Common Stock. These documents set forth the
terms and conditions of the offer and the merger and provide instructions as to
how to tender your shares. I urge you to read the enclosed material carefully.
Your Board of Directors and I greatly appreciate your continued support and
encouragement.
On behalf of the Board of Directors,
Stephen T. Winn, President and
Chief Executive Officer
<PAGE> 1
[GOLDMAN, SACHS & CO. LETTERHEAD]
PERSONAL AND CONFIDENTIAL
- -------------------------
January 12, 1998
Board of Directors
Computer Language Research, Inc.
2395 Midway Road
Carrollton, TX 75006
Gentlemen:
You have requested our opinion as to the fairness from a financial point of
view to the holders of the outstanding shares of Common Stock, par value $0.01
per share (the "Shares"), of Computer Language Research, Inc. (the "Company")
of the $22.50 per Share in cash proposed to be paid by The Thomson Corporation
("Thomson") in the Tender Offer and the Merger (as defined below) pursuant to
the Agreement and Plan of Merger, dated as of January 12, 1998, among Thomson,
Sabre Acquisition, Inc., a wholly-owned subsidiary of Thomson ("Sabre"), and
the Company (the "Agreement"). The Agreement provides for a tender offer for
all of the Shares (the "Tender Offer") pursuant to which Sabre will pay $22.50
per Share in cash for each Share accepted. The Agreement further provides that
upon the terms and subject to the conditions in the Agreement, Sabre will be
merged with and into the Company (the "Merger") and each outstanding Share
(other than Shares already owned by Sabre, Thomson or any direct or indirect
wholly-owned subsidiary of Thomson) will be converted into the right to receive
$22.50 in cash.
Goldman, Sachs & Co., as part of its investment banking business, is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, competitive
biddings, secondary distributions of listed and unlisted securities, private
placements and valuations for estate, corporate and other purposes. We are
familiar with the Company having acted as its financial advisor in connection
with, and having participated in certain of the negotiations leading to, the
Agreement.
In connection with this opinion, we have reviewed, among other things, the
Agreement; the Stock Purchase Agreement, dated as of January 12, 1998, among
Thomson, Sabre, and certain stockholders of the Company. Annual Reports to
Stockholders and Annual Reports on Form 10-K of the Company for the five years
ended December 31, 1996; certain interim reports to stockholders and Quarterly
Reports on Form 10-Q of the Company; certain other communications from the
Company to its stockholders; and certain internal financial analyses and
forecasts for the Company prepared by its management. We also have held
discussions with members of the senior management of the Company regarding its
past and current business operations, financial condition and future prospects.
In addition, we have reviewed the reported price and trading activity for the
Shares, compared certain
<PAGE> 2
Computer Language Research, Inc.
January 12, 1998
Page Two
financial and stock market information for the Company with similar information
for certain other companies the securities of which are publicly traded,
reviewed the financial terms of certain recent business combinations in the tax
and accounting software and services industry specifically and in other
industries generally and performed such other studies and analyses as we
considered appropriate.
We have relied upon the accuracy and completeness of all of the financial and
other information reviewed by us and have assumed such accuracy and completeness
for purposes of rendering this opinion. In addition, we have not made an
independent evaluation or appraisal of the assets and liabilities of the Company
or any of its subsidiaries and we have not been furnished with any such
evaluation or appraisal. We were not authorized to solicit, and did not solicit,
interest from other parties with respect to an acquisition of or other business
combination with the Company. Our advisory services and the opinion expressed
herein are provided for the information and assistance of the Board of Directors
of the Company in connection with its consideration of the transaction
contemplated by the Agreement and such opinion does not constitute a
recommendation as to whether or not any holder of Shares should tender such
Shares in connection with such transaction.
Based upon and subject to the foregoing and based upon such other matters as we
consider relevant, it is our opinion that as of the date hereof the $22.50 per
Share in cash to be received by the holders of Shares in the Tender Offer and
the Merger is fair from a financial point of view to such holders.
Very truly yours,
[GOLDMAN, SACHS & CO. LOGO]
GOLDMAN, SACHS & CO.
<PAGE> 1
EXHIBIT 8
BACKGROUND AND BUSINESS EXPERIENCE OF NOMINEES
Francis W. Winn, 79, the founder of the Corporation and a director since
1969, served as its Chairman of the Board and President from February, 1969
until May, 1977, and continues to serve as Chairman of the Board. Prior to
founding the Corporation, Mr. Winn was employed by various petroleum or
petroleum-related companies in research management. Mr. Winn is the father of
Stephen T. Winn and Dr. David L. Winn, and the father-in-law of James R.
Dunaway, Jr., all directors of the Corporation.
Stephen T. Winn, 50, has served as a director since 1969, and as President
and Chief Executive Officer since May, 1977. Mr. Winn served as Executive Vice
President from 1971 until his election as President in 1977. Mr. Winn was
selected as a Sloan Fellow at Stanford University in 1980 and holds an M.M.S.
Degree in Management Science from Stanford. He has served as a member of the
Stanford University Sloan Advisory Board, American Business Conference and the
American Electronics Association, and is an executive board member of the
Circle Ten Council of the Boy Scouts of America and a trustee for the St.
Mark's School of Texas.
David L. Winn, M.D., FAAFP, 40, a director since 1987, previously served
as a director from 1977 to 1984. Currently, Dr. Winn practices primary care
medicine in Cedar Park, Texas, is a medical director of Hill Country Medical
Ministries and is a founder of Firestorm Productions, a producer of multi-media
entertainment software published through Virgin Interactive. Dr. Winn founded
Paperless Office Practice in 1996, a developer of electronic medical records
which are distributed by pharmaceutical sales representatives to primary care
medical offices across the United States.
James R. Dunaway, Jr., 48, a director since 1982, is the founder and owner
of Dunaway Associates, Inc., Engineers-Planners of Fort Worth, Texas and
Phoenix, Arizona. Since 1981, Mr. Dunaway has been an active real estate
investor and developer in the Dallas/Fort Worth area. Mr. Dunaway is a
registered Professional Engineer and Registered Professional Land Surveyor in
the State of Texas. He is a member of the Corporation's Compensation Committee.
Merle J. Volding, 73, a director since 1989, currently serves as a
director and consultant to BancTec, Inc., a provider of integrated financial
transaction processing systems, applications software, and support services,
where he served as a director, Chairman of the Board, and Chief Executive
Officer from 1974 until 1986. He is Chairman of the Corporation's Compensation
Committee and a member of its Audit Committee.
Max D. Hopper, 62, a director since August 1994, served at AMR Corporation
- -- an air transportation company and provider of information services to the
travel and transportation industry -- as senior vice president from 1985
through January 1995 and as chairman of The SABRE Group from April 1993 through
January 1995. After retiring from AMR, Mr. Hopper founded Max D. Hopper
Associates, a consulting firm specializing in creating benefits from the
strategic use of advanced information technologies. He serves on the boards of
Gartner Group, VTEL Corporation, Centura Software Corporation, Scopus
Technology, USDATA Corporation, BBN Corporation and Worldtalk Corporation. He
is Chairman of the Corporation's Audit Committee and a member of its
Compensation Committee.
Jeffrey T. Leeds, 41, was elected as a director of the Corporation on
February 27, 1997. Mr. Leeds is a founder and Principal of Advance Capital
Management, LLC, a private equity firm located in New York. Mr. Leeds also
serves as President of Leeds Group Inc., an investment banking firm also
located in New York. Mr. Leeds presently serves as a director of The Edison
Project, a for-profit education company that operates public schools under
contracts with states and local school districts, and The World Resources
Institute, a not-for-profit Washington based research group. Mr. Leeds served
as a law clerk to the Hon. William J. Brennan, Jr. of the Supreme Court of the
United States in
<PAGE> 2
1985-86. Prior to his clerkship, he worked in the corporate department of the
New York law firm of Cravath, Swaine & Moore. He is a member of the
Corporation's Compensation and Audit Committees. Pursuant to a Stockholders
Agreement dated as of January 22, 1997, by and between, inter alia, Advance
Capital Partners, L.P., and Advance Capital Offshore Partners, L.P.
(collectively, the "Purchasers"), on the one hand, and Stephen T. Winn, Carol
Winn Dunaway, Dr. David L. Winn and Winn Family, Ltd. (collectively, the
"Selling Stockholders") on the other, the Selling Stockholders have agreed to
vote all of the remaining shares of capital stock of the Corporation owned of
record or beneficially by them so as to cause the election of Mr. Leeds (or if
Mr. Leeds is unable to serve as a director, another individual designated by
the Purchasers and acceptable to the majority of the Selling Stockholders) to
the Corporation's Board, so long as the Purchasers shall own at least 200,000
of certain purchased shares. The Stockholders Agreement also provides that the
Selling Stockholders will vote all of the remaining shares of capital stock of
the Corporation owned of record or beneficially by them so as to cause (i) the
removal from the Board (with or without cause) of any Purchaser-designated
director, upon the Purchasers' written request for such removal, and (ii) any
vacancy on the Board, resulting from any Purchaser designated director for any
reason ceasing to serve as a member of the Corporation's Board, to be filled by
a representative designated by the Purchasers (which representative must be
reasonably acceptable to the Selling Stockholders).
Walter V. Smiley, Jr., 59, has been nominated for a seat on the Board of
Directors. Mr. Smiley currently owns and is president of Smiley Investment
Company, a consulting and venture capital firm based in Little Rock, Arkansas.
Mr. Smiley served from 1968 until 1989 as Chairman of the Board of Directors
and from 1968 until 1985 as Chief Executive Officer of Systematics, Inc., the
predecessor of ALLTELL Information Service, Inc., an Arkansas based company
which provides data processing services to financial institutions throughout
the United States and abroad. Mr. Smiley is also a director of Acxiom
Corporation, Software Recording Corporation and Southern Development
Bancorporation. He holds a master's degree in business administration and a
bachelor's degree in industrial management from the University of Arkansas.
PROPOSAL TWO -- APPROVAL OF THE COMPUTER LANGUAGE RESEARCH, INC.
1997 STOCK INCENTIVE PLAN
On February 27, 1997, the Corporation's Board of Directors unanimously
adopted the Computer Language Research, Inc. 1997 Stock Incentive Plan (the
"Corporation's Plan") and the Rent Roll, Inc. 1997 Stock Incentive Plan (the
"Rent Roll Plan") (the Corporation's Plan and the Rent Roll Plan are referred
to sometimes hereinafter individually as the "Plan" and collectively as the
"Plans") with the condition that the Plans be submitted to the Corporation's
shareholders for approval. The provisions of the Plans are substantially
identical and are generally summarized below, as are the material differences
between the Plans. This description is qualified in its entirety by reference
to the provisions of the Plans, copies of which are attached to this Proxy
Statement as Exhibit A and Exhibit B. The Corporation intends that the Plans
and their operation comply with the provisions of Rule 16b-3 of the Securities
Exchange Act of 1934, as amended (the "1934 Act").
Rent Roll, Inc. ("Rent Roll") is a wholly owned subsidiary of the
Corporation. For purposes of the summary of the Plans, the Corporation or Rent
Roll, as the case may be, shall be referred to as the "Plan Sponsor," and the
Corporation's Common Stock or Rent Roll's common stock, as the case may be,
shall be referred to as "Plan Sponsor's Common Stock."
PURPOSE
The purpose of the Plans is to enable the Corporation and Rent Roll, Inc.
to attract and retain key executives and other key employees; motivate
participating employees, by means of appropriate incentives, to achieve
long-range goals; provide incentive compensation opportunities that are
competitive with those of other public corporations; and further identify the
interests of eligible employees with those of the Plan Sponsor's other
2
<PAGE> 3
shareholders through compensation alternatives based on the Plan Sponsor's
Common Stock, and thereby promote the long-term financial interest of the Plan
Sponsor, including the growth in value of the Plan Sponsor's equity and
enhancement of long-term shareholder growth.
PARTICIPATION
Persons who are regular, full-time employees of the Plan Sponsor or one or
more of its subsidiaries and are either officers of or, in the opinion of the
Compensation Committee, hold key positions in or for the Plan Sponsor or any
subsidiary are eligible to participate in the Plan. Approximately 95 employees
of the Corporation are eligible to participate in the Corporation's Plan and
approximately 18 employees of Rent Roll are eligible to participate in the Rent
Roll Plan.
SHARES AVAILABLE
The Corporation's Plan provides that a maximum of 1,000,000 shares of the
Corporation's Common Stock, and the Rent Roll Plan provides that a maximum of
2,000,000 shares of Rent Roll common stock, par value $.01 per share, subject
to adjustment as provided in the Plans, are available for the grant of options,
restricted shares and rights granted without accompanying options. Shares
subject to options which cease to be subject to purchase under the Plans, any
restricted shares which are forfeited to the Plan Sponsor and any right issued
without accompanying options which terminates or expires without being
exercised would again be available for subsequent awards under the Plans to the
extent permitted by the Internal Revenue Code of 1986, as amended (the "Code")
or other applicable law.
The maximum number of shares of the Plan Sponsor's Common Stock with
respect to which incentive stock options, non-qualified stock options and
restricted shares may be granted in any one year to any single employee shall
not exceed 500,000.
ADMINISTRATION
The Plans are to be administered, construed and interpreted by the
Compensation Committee of the Board of Directors of the Corporation (the
"Compensation Committee"). With respect to persons subject to Section 16 of the
1934 Act, the Plans are intended to comply with all applicable conditions of
Rule 16b-3 or its successors under the 1934 Act. The Compensation Committee has
authority to grant options; to determine the exercise price and term of, the
class or classes of shares of the Plan Sponsor's Common Stock and the number of
shares to be covered by, each option, and the employees whom and the time or
times at which options shall be granted; to designate options as incentive or
non-qualified options and determine which options shall be accompanied by
rights; to grant rights without accompanying options; to determine the
employees to whom and time or times at which such rights shall be granted and
the exercise price, term and number of shares of the Plan Sponsor's Common
Stock covered by any deemed option corresponding thereto; to grant restricted
shares and performance units and determine the term of the restricted period
and other conditions applicable thereto, the employees to whom and the time or
times at which such restricted shares or performance units shall be granted and
the number of restricted shares or performance units to be covered by such
grant. The Compensation Committee is authorized to interpret the Plans;
prescribe, amend and rescind rules and regulations relating to the Plans;
determine the terms and provisions of any agreements entered into in connection
with awards under the Plans; and make all other determinations deemed necessary
or advisable for the administration of the Plans.
In determining employees to whom awards are granted and the amount, type,
terms and conditions of each award, the Compensation Committee must take into
account the nature of the employee's duties, present and potential
contributions to the growth and success of the Plan Sponsor and such other
factors as the Compensation Committee deems relevant in accomplishing the
purposes of the Plans.
3
<PAGE> 4
Each option, right, restricted share or performance unit award will be
evidenced by a written agreement containing such restrictions, terms and
conditions as the Compensation Committee may require.
AWARDS
The Plans provide for five types of awards: (i) incentive stock options;
(ii) non-qualified stock options; (iii) restricted shares; (iv) stock
appreciation rights, either granted in tandem with options or without
accompanying options; and (v) performance units valued based upon the long-term
performance of the Plan Sponsor.
STOCK OPTIONS
The Plans authorize the award of both incentive stock options and
non-qualified stock options. Only employees of the Plan Sponsor or any
subsidiary are entitled to receive awards of incentive stock options. The term
of an option granted under the Plans may not exceed ten (10) years. If the
holder of an incentive stock option owns the Plan Sponsor's Common Stock
possessing more than ten percent (10%) of the combined voting power of all
classes of stock of the Plan Sponsor or any subsidiary, the term of such
incentive stock option may not exceed five (5) years. The exercise price of
each option will be determined by the Compensation Committee; provided,
however, that with respect to an incentive stock option, the exercise price may
not be less than one hundred percent (100%) of the fair market value per share
as of the date of grant (the closing price of such common stock on such date as
reported on the National Market System of the National Association of
Securities Dealers, Inc. Automated Quotation System or, if none, the fair
market value of such common stock as determined in good faith by the board of
directors by applying generally recognized principles of valuing securities)
(the "Fair Market Value") or one hundred ten percent (110%) of such Fair Market
Value if the holder owns the Plan Sponsor's Common Stock possessing more than
ten percent (10%) of the combined voting power of all classes of stock of the
Plan Sponsor or any subsidiary.
An option becomes exercisable in such amounts and upon such events as the
Compensation Committee may determine. An option will become one hundred percent
(100%) vested at the earliest of the employee's retirement from active
employment at or after age 60 (the "Retirement Age") or the employee's death or
disability. The Compensation Committee may also accelerate the exercisability
of the whole or any part of an option. An option may be exercised at any time
as to any shares of the Plan Sponsor's Common Stock as to which the option has
become exercisable; provided, however, that an option may not be exercised at
any time as to less than one hundred shares (or less than the number of shares
of the Plan Sponsor's Common Stock as to which the option is then exercisable,
if less than one hundred (100) shares). With respect to incentive stock
options, the aggregate Fair Market Value of all the Plan Sponsor's Common Stock
(determined at the time the option is awarded) subject to incentive stock
options which become exercisable for the first time by an individual during any
calendar year (under all plans of the Corporation and its subsidiaries) may not
exceed $100,000. No incentive stock option may be exercised unless the holder
is then an employee of the Plan Sponsor or any parent or subsidiary
corporation.
Upon exercise of an option, the holder of an option may pay for both the
option exercise price of the shares and any taxes attributable to such exercise
in cash, through delivery of shares of the Plan Sponsor's Common Stock, through
the surrender of vested options or any combination thereof. An option holder
may also satisfy his or her tax obligations in connection with the exercise of
an option by irrevocably electing to have the Plan Sponsor withhold from the
shares that would otherwise be received, a number of shares having a Fair
Market Value equal to the amount necessary to satisfy the Plan Sponsor's tax
withholding obligations respecting the option exercise. A holder of a
non-qualified stock option may also pay for both the option exercise price of
the shares and any withholding taxes by delivery to the Plan Sponsor of the
sales proceeds resulting from a broker's sale of shares respecting such option.
4
<PAGE> 5
RIGHTS
The Plans authorize the award of a stock appreciation right as a primary
right or an additional right. A primary right is awarded alone, without a
corresponding option. An additional right is a right awarded in connection with
an option. An additional right may be granted either at the time the option is
granted or, in the case of non-qualified stock options, thereafter at any time
prior to the exercise, termination or expiration of such option. An additional
right is subject to the same terms and conditions as the related option and is
exercisable only to the extent the related option is exercisable.
Upon the exercise of a primary right, an employee will receive a payment
equal to the difference between the Fair Market Value of a share of the Plan
Sponsor's Common Stock on the exercise date and the exercise price. An employee
may elect for payment to be made in the form of cash, shares of the Plan
Sponsor's Common Stock or a combination thereof. No payment will be required
from an employee upon exercise of a primary right.
Upon the exercise of an additional right, an employee will receive a cash
payment equal to the product of (i) the difference between the Fair Market
Value of a share of the Plan Sponsor's Common Stock on the exercise date and
the exercise price and (ii) a percentage factor (between 10%-100%) as
determined by the Compensation Committee or a formula established by the
Compensation Committee. If no percentage factor or formula is specified at the
time an additional right is granted, the percentage factor will be one hundred
percent (100%).
If neither the right nor, in the case of an additional right with a
related option, the related option is exercised before the end of the day on
which the right ceases to be exercisable, the right will be deemed exercised as
of such date and, subject to applicable withholding taxes, a cash payment in
the amount described above will be paid to the employee.
RESTRICTED SHARES
Restricted share awards are grants of the Plan Sponsor's Common Stock made
to employees subject to a required period of employment following the award
(the "Restricted Period") and any other conditions prescribed by the
Compensation Committee. An employee will become the holder of shares of the
Plan Sponsor's Common Stock free of all restrictions if the employee completes
the Restricted Period and satisfies any other conditions; otherwise, the shares
will be forfeited. Unless otherwise provided in the agreement under which a
restricted share award is made, all restrictions terminate with respect to all
restricted shares upon the event of a "business combination" or the employee's
death, disability or retirement from active employment at the Retirement Age.
Under the Plans, the Restricted Period may not be more than ten (10) years. The
employee will have the right to vote the restricted shares and the right to
receive cash dividends on the shares. Stock dividends on the restricted shares
will be subject to the same terms and conditions as such restricted shares. The
employee may not sell, transfer, assign, pledge or otherwise encumber or
dispose of restricted shares during the Restricted Period and until any other
conditions prescribed by the Compensation Committee have been satisfied.
PERFORMANCE UNITS
Performance units are awards granted to employees who may receive a value
for the units at the end of a performance period established by the
Compensation Committee if performance measures established by the Compensation
Committee at the beginning of the performance period are met. Although the
performance measures will be determined by the Compensation Committee at the
time of the award of performance units, they may be subject to later revision
as the Compensation Committee deems appropriate to reflect significant events.
Under the Plans, the performance period may not be shorter than two (2) years
nor longer than ten (10) years as determined by the Compensation Committee.
When the performance measures for a performance period have been met, a cash
award equal to the value of the performance units granted to an employee will
be made. An employee immediately forfeits all performance units if the employee
ceases to be an employee prior to the end of the performance period for any
reason other than death, disability or retirement at or after the Retirement
Age. An employee whose employment terminates by reason of retirement on or
after the Retirement Age, disability or death will be eligible to receive a
cash award equal to the value of his performance units if the performance
measures are met.
5
<PAGE> 6
TERMINATION; RETIREMENT
Termination for any Reason. If the employment of an employee to whom an
option or right has been granted under the Plans terminates for any reason, the
employee will have a period of ninety (90) days following such termination of
employment in which to exercise any incentive stock options that are then
vested and a period of twelve (12) months following such termination of
employment in which to exercise any non-qualified stock options or rights that
are then vested. Any outstanding options or rights at the end of such periods
will terminate and be forfeited as to any unexercised portion thereof. Unless
otherwise provided in an employee's written agreement, the unvested portion of
any option or right will be forfeited on the date an employee ceases to be an
employee of the Corporation or any subsidiary thereof.
Termination for Cause. Any agreement evidencing any option, right,
restricted stock or performance unit award may provide for more restricted
periods of exercise or for forfeiture of awards if an employee's employment
terminates for cause or by reason of a voluntary termination and the employee
accepts employment with a competitor of the Corporation or any subsidiary or
solicits or employs any employee of the Corporation or any subsidiary for the
benefit of another business entity within one (1) year after such voluntary
termination.
Retirement. If the employment of an employee to whom an option or right
has been granted under the Plans terminates employment at or after the
Retirement Age, the employee will have a period of ninety (90) days following
such termination of employment in which to exercise any incentive stock options
and a period of twelve (12) months following such termination of employment in
which to exercise any non-qualified stock options or rights. Any outstanding
options or rights at the end of such periods will terminate and be forfeited as
to any unexercised portion thereof.
Death or Disability. If an employee to whom an option or right has been
granted shall die or become disabled while employed by the Corporation or any
parent or subsidiary corporation, such option or right may be exercised by the
employee, his legal guardian, legatees, personal representatives or
distributees at any time within twelve (12) months thereafter, but in no event
later than the date the option or right terminates.
TRANSFERABILITY
Incentive stock options and performance units are not transferable other
than by will or the laws of descent and distribution. Non-qualified stock
options and rights may be transferred by the holder to members of the holder's
immediate family, trusts created for the benefit of such immediate family
members and partnerships in which such immediate family members are the only
partners, provided that no consideration is provided for the transfer.
ADJUSTMENTS
In the event of any change in the outstanding shares of the Plan Sponsor's
Common Stock by reason of any stock dividend, split-up, recapitalization,
merger, consolidation, combination, exchange of shares, separation,
reorganization, liquidation or the like, the number and classes of shares
available under the Plan, the terms and number of shares of the Plan Sponsor's
Common Stock or other securities available and/or the purchase price of a share
of the Plan Sponsor's Common Stock or other securities available under any
outstanding option, right restricted stock or performance unit will be adjusted
by the Compensation Committee as appropriate to prevent dilution or
enlargement.
AMENDMENT
The board of directors of the Plan Sponsor may amend, suspend or terminate
the Plan at any time; provided, that an amendment will be subject to
shareholder approval if such approval is required by Rule 16b-3 of the 1934
Act, the Code or
6
<PAGE> 7
the rules of any securities exchange or market system on which securities of
the Plan Sponsor or a parent corporation are listed or admitted to trading. The
board of directors of the Plan Sponsor may not, without shareholder approval,
increase the maximum number of shares of the Plan Sponsor's Common Stock which
may be issued in the form of incentive stock options under the Plan or change
the designation of the employees or class of employees eligible to receive
incentive stock options. The board of directors of the Plan Sponsor may
delegate its authority respecting the foregoing to the Compensation Committee,
which may exercise the authority of the Board of Directors subject to requisite
shareholder approval. No suspension, termination, modification or amendment of
the Plans may, without the consent of a holder, adversely affect the rights of
such holder with respect to any outstanding award.
BUSINESS COMBINATIONS
Unless an employee's written agreement provides otherwise, in the event of
a "business combination," then with respect to each option, right, restricted
share and performance unit outstanding immediately prior to the consummation of
such transaction, if provision is not otherwise made in writing in connection
with such transaction for the substitution of securities of another corporation
and without the necessity of any action by the board of directors, (i) each
option shall terminate, but the holder of any outstanding option will be
entitled to purchase the number of shares that are then vested and exercisable;
(ii) each right shall terminate, but the holder of any primary right will be
entitled to exercise such right to the extent the related deemed option is
exercisable and the holder of any additional right will be entitled to receive
the full amount of cash he or she would have been entitled to receive if the
related option had been exercised to such extent, to the extent that such
additional right is then vested; (iii) all restrictions on any shares of
restricted stock outstanding immediately prior to the consummation of such
transaction shall lapse; and (iv) each performance unit will terminate, but the
recipient of any performance unit will be entitled to receive the then vested
value under such performance unit. The unexercised portion of any option or
right will be deemed canceled and terminated as of the effective date of such
transaction. A "business combination" is defined to include a merger or
consolidation of the Plan Sponsor in which the Plan Sponsor is not the
surviving corporation; a dissolution of the Plan Sponsor; a transfer of all or
substantially all of the assets of the Plan Sponsor; any person or group (other
than the Corporation, Francis W. Winn, Stephen T. Winn or a trustee or
Fiduciary holding securities under an employee benefit plan of the Plan
Sponsor) becoming the beneficial owner, directly or indirectly, of securities
of the Plan Sponsor representing twenty percent (20%) or more of the combined
voting power of the Plan Sponsor's then outstanding securities; or during any
period of two (2) consecutive years beginning on or after June 1, 1996,
individuals who at the beginning of the period constituted the board of
directors of the Plan Sponsor cease for any reason to constitute at least a
majority of the board of directors then in office.
FEDERAL INCOME TAX CONSEQUENCES
Non-Qualified Stock Options. The grant of a non-qualified stock option
does not result in taxable income to the holder of such an option or in a
deduction by the Plan Sponsor. The tax consequences are determined generally at
the time the optionee exercises the non-qualified stock option. Upon the
exercise of a non-qualified stock option, the optionee generally recognizes
ordinary income in an amount equal to the difference between the Fair Market
Value of the Plan Sponsor's Common Stock on the date of exercise and the
exercise price of the option. The Plan Sponsor is entitled to a deduction in an
amount equal to the amount that was includable in the optionee's gross income.
Incentive Stock Options. Under current law, the holder of an option will
not recognize taxable income on the grant or exercise of an incentive stock
option. If the holder of an option is subject to the alternative minimum tax,
the exercise of an incentive stock option results in an increase in the
holder's alternative minimum taxable income equal to the excess of the fair
market value of the shares at the time of exercise over the exercise price. If
the shares of
7
<PAGE> 8
the Plan Sponsor's Common Stock acquired through the exercise of an incentive
stock option are held by an optionee through the later of (i) two years from
the date of the grant of the option or (ii) one year after the transfer of such
shares to the optionee pursuant to the exercise, the amount received by the
optionee upon the sale or other disposition of such shares in excess of the
optionee's tax basis in such shares will be taxable to such optionee as a
long-term capital gain in the year of such sale or disposition. An optionee's
tax basis in the shares of the Plan Sponsor's Common Stock acquired pursuant to
the exercise of an incentive stock option will be equal to the exercise price
of such options.
If the shares of the Plan Sponsor's Common Stock acquired through the
exercise of an incentive stock option are disposed of prior to the expiration
of the two-year or one-year holding periods, an amount equal to the difference
between (i) the lesser of (a) the amount realized on the sale or exchange, and
(b) the Fair Market Value of the shares on the date the option was exercised,
and (ii) the exercise price of the option relating to the shares sold or
exchanged will be taxable to the optionee as ordinary income in the year of
such disposition. In addition, if the amount realized from the sale or exchange
is greater than the Fair Market Value of the shares on the date the incentive
stock option was exercised, the optionee will also recognize gain in an amount
equal to such difference. This gain will be characterized as long-term or
short-term capital gain, depending upon the holding period of such shares.
The grant or exercise of an incentive stock option will not result in any
federal income tax consequences to the Plan Sponsor. However, if the Plan
Sponsor's Common Stock acquired through the exercise of an incentive stock
option is disposed of by the optionee prior to the expiration of the two-year
or one-year holding periods described above, the Plan Sponsor will be allowed a
deduction equal to the amount of income includable in the optionee's gross
income as a result of the disposition.
Restricted Shares. An employee normally will not realize taxable income
and the Plan Sponsor will not be entitled to a deduction upon the grant of
restricted shares. When the shares are no longer subject to a substantial risk
of forfeiture, the employee will realize taxable ordinary income in an amount
equal to the Fair Market Value of such shares at such time, and the Plan
Sponsor will be entitled to a deduction in the same amount. An employee may
make a special tax election which affects the timing and measurement of income
recognized in connection with the grant of restricted shares, and the Plan
Sponsor's deduction. Dividends received by an employee on restricted shares
during the restricted period are generally taxable to the employee as ordinary
income and will be deducted by the Plan Sponsor.
Performance Units. An employee receiving an award of a performance unit
will not realize taxable income until the performance unit is paid, in an
amount equal to the amount of cash received or the Fair Market Value of shares
received in payment, and the Plan Sponsor will be entitled to a corresponding
deduction at such time.
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF THE
CORPORATION VOTE FOR THE ADOPTION OF THE CORPORATION'S PLAN.
PROPOSAL THREE -- APPROVAL OF THE
RENT ROLL, INC. 1997 STOCK INCENTIVE PLAN
The Rent Roll Plan provides for the award of incentive stock options,
non-qualified stock options, restricted shares, stock appreciation rights
(either granted in tandem with options or without accompanying options) and
performance units to key executives and key employees of Rent Roll or one or
more of its subsidiaries. The material terms of the Rent Roll Plan are
summarized above under "Proposal Two -- Approval of the Computer Language
Research, Inc. 1997 Stock Incentive Plan."
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT THE SHAREHOLDERS OF THE
CORPORATION VOTE FOR THE ADOPTION OF THE RENT ROLL PLAN.
8
<PAGE> 9
BOARD OF DIRECTORS AND COMMITTEES OF THE BOARD
The Board of Directors meets on a regularly scheduled basis to review
significant developments affecting the Corporation and to act on matters
requiring Board approval. It also holds special meetings, including telephonic
meetings, between scheduled meetings when the need arises. The Board of
Directors held six meetings during the 1996 fiscal year. During such period and
during their terms of office, each nominee who was a Director during the 1996
fiscal year participated in at least 75% of the aggregate of all Board meetings
and all applicable committee meetings.
The Board of Directors has established standing Audit and Compensation
Committees whose functions and the number of meetings held during the 1996
fiscal year are described below. The members of these Committees have been
identified above under the heading Background and Business Experience of
Nominees. The Board of Directors does not have a Nominating Committee; rather,
the Board functions as a committee of the whole to nominate candidates for
Board membership.
Audit Committee. The Audit Committee recommends to the Board of Directors
the appointment of independent auditors for the Corporation and monitors the
performance of such auditors; reviews and approves the scope of the annual
audit; reviews with the independent auditors in February of each year the
results of the audit for the prior fiscal year before the earnings report for
such fiscal year is released publicly; reviews and evaluates with management
quarterly financial statements; reviews with management the scope and adequacy
of internal accounting controls; reviews and evaluates the objectivity,
effectiveness and resources of the internal audit function; evaluates problem
areas having a potential financial impact on the Corporation which may be
brought to its attention by management, the independent auditors, or the Board
of Directors and reviews certain public financial reporting documents of the
Corporation. The members of the Audit Committee confer privately with the
independent auditors. The Audit Committee met twice during the 1996 fiscal
year.
Compensation Committee. As described more fully in the Report of the
Compensation Committee on Executive Compensation, the Compensation Committee
has responsibility to review and approve executive compensation plans and
packages. The Compensation Committee met four times during the 1996 fiscal
year.
Compensation of Directors. During 1996, each non-employee director
received a $1,000 per month retainer. Audit and Compensation Committee members
received $250 per month for serving on each committee. Non-employee directors
were also paid $1,000 per day for each day of attendance at Board meetings and
were reimbursed for their out-of-pocket expenses in attending meetings.
Non-employee directors participate in the Computer Language Research, Inc.,
Non-Employee Directors' 1994 Stock Option Plan, pursuant to which, options in
the indicated amounts were granted to Messrs. Hopper (2,500), Volding (2,500)
and Dunaway (2,500) and to Dr. Winn (2,500) during fiscal year 1996.
BENEFICIAL OWNERSHIP OF COMMON STOCK BY PRINCIPAL SHAREHOLDERS,
DIRECTORS AND NAMED EXECUTIVE OFFICERS
The following table sets forth information as of February 12, 1997,
regarding the beneficial ownership of the Corporation's Common Stock by (i)
each person known by the Corporation to own more than 5% of the outstanding
shares of Common Stock, (ii) each director and nominee for director and named
executive officer and (iii) all directors and named executive officers of the
Corporation as a group. For purposes of the table, including the footnotes
thereto, the beneficial ownership of shares of Common Stock is being reported
as required under applicable securities laws and interpretations and may not be
reflective of state law ownership interests. The persons named in the table
have sole voting and investment power with respect to all shares of Common
Stock owned by them, except as noted.
9
<PAGE> 10
<TABLE>
<CAPTION>
NUMBER OF % OF
NAME ADDRESS SHARES CLASS
---- ------- ---------- ------
<S> <C> <C>
Francis W. Winn* 2395 Midway Road 400,300(1) 2.80%
Carrollton, Texas 75006
Stephen T. Winn* 2395 Midway Road 4,741,712(2) 33.89%
Carrollton, Texas 75006
David L. Winn* 190 Buttercup Creek Blvd. 4,634,762(3) 32.46%
Cedar Park, Texas 78613
James R. Dunaway, Jr.* 1501 Merrimac Circle 4,711,362(4) 33.00%
Ft. Worth, Texas 76107
Carol Winn Dunaway 1501 Merrimac Circle 4,711,362(5) 33.00%
Ft. Worth, Texas 76107
Winn Family, Ltd. c/o Stephen T. Winn, Mgr. 1,438,462(6) 10.08%
A Texas Limited Partnership 2395 Midway Road
Carrollton, Texas 75006
Jeffrey T. Leeds* 400,430(7) 2.81%
Merle J. Volding* 3,500(8) **
Max Dean Hopper* 3,500(8) **
Walter V. Smiley* 0 **
E. Dean Liles 0 **
Lynn J. Finlinson 4,000(8) **
William T. Lynch 5,250(8) **
G. Allen Harris 31,000(8) **
All directors and named executive 10,666,592(9) 73.70%
officers as a group (12 persons)
</TABLE>
- - ---------------
* Director or Nominee
** Less than 1%
(1) Includes 250,000 shares directly owned by Nancy K. Winn, Mr. Winn's wife,
as to all of which shares Mr. Winn disclaims beneficial ownership; 78,300
shares held as tenants-in-common with Mrs. Winn and 37,500 shares held as
joint tenants with Mrs. Winn.
(2) Includes 589,180 shares owned by a family limited partnership, of which an
entity controlled by Stephen T. Winn is the sole general partner; and
1,438,462 shares held by Winn Family Ltd., a limited partnership of which
Mr. Winn is a general partner. Mr. Winn disclaims beneficial ownership of
the shares held by such limited partnerships except to the extent of his
pecuniary interest therein. Also includes 696,150 shares owned by a family
trust of which Mr. Winn is co-trustee. The co-trustees have equally shared
power to vote and/or dispose of the trust assets including the Common Stock
of the Corporation. Mr. Winn disclaims beneficial ownership of the
shares held by such trust except to the extent of his pecuniary interest
therein. Includes 145,000 shares subject to presently exercisable options
held by Mr. Winn.
(3) Includes 342,500 shares owned by a family trust, of which Dr. David L. Winn
is the sole trustee; 97,250 shares owned by trusts for Dr. Winn's children,
of which he is the sole trustee; and 151,150 shares directly owned by Dr.
Winn's wife, as to all of which shares Dr. Winn disclaims beneficial
ownership. Includes 1,438,462 shares held by Winn Family Ltd., a limited
partnership of which Dr. Winn is a general partner. Dr. Winn disclaims
beneficial ownership of the shares held by such limited partnership except
to the extent of his pecuniary interest therein. Also includes 696,150
shares held by a family trust of which Dr. Winn is co-trustee. The
co-trustees have equally shared power to vote and/or dispose of the trust
assets including the Common Stock of the Corporation. Dr. Winn disclaims
beneficial ownership of the shares held by such trust except to the extent
of his pecuniary interest therein. Includes 3,500 shares subject to
presently exercisable options held by Dr. Winn.
10
<PAGE> 11
(4) Includes 267,500 shares owned by a family trust of which Carol Winn
Dunaway, Mr. Dunaway's wife, is the sole trustee; 1,438,462 shares owned by
Winn Family, Ltd., a limited partnership of which Mrs. Dunaway is a general
partner; and 1,900,000 shares directly owned by Mrs. Dunaway, as to all of
which shares Mr. Dunaway disclaims beneficial ownership. Includes 379,100
shares owned by the Turtle Creek Group, Ltd., a limited partnership of
which Mr. Dunaway is a general partner. Mr. Dunaway disclaims beneficial
ownership of the shares held by such limited partnership except to the
extent of his pecuniary interest therein. Includes 696,150 shares held by a
family trust of which Mrs. Dunaway is co-trustee. The co-trustees have
equally shared power to vote and/or dispose of the trust assets including
the Common Stock of the Corporation. Mr. Dunaway disclaims beneficial
ownership of the shares held by such trust except to the extent of his
pecuniary interest therein. Also includes 3,500 shares subject to
presently exercisable options held by Mr. Dunaway.
(5) Includes 267,500 shares owned by a family trust, of which Mrs. Dunaway is
the sole trustee; 26,650 shares directly owned by James R. Dunaway, Jr.,
Mrs. Dunaway's husband; and 3,500 presently exercisable options held by Mr.
Dunaway, as to all of which shares and options Mrs. Dunaway disclaims
beneficial ownership. Includes 1,438,462 shares owned by Winn Family Ltd.,
a limited partnership of which Mrs. Dunaway is a general partner and
379,100 shares owned by the Turtle Creek Group, Ltd., a limited partnership
of which Mrs. Dunaway is a general partner. Mrs. Dunaway disclaims
beneficial ownership of the shares held by such limited partnerships except
to the extent of her pecuniary interest therein. Also includes 696,150
shares held by a family trust of which Mrs. Dunaway is co-trustee. The
co-trustees have equally shared power to vote and/or dispose of the trust
assets including the Common Stock of the Corporation. Mrs. Dunaway
disclaims beneficial ownership of the shares held by such trust except to
the extent of her pecuniary interest therein.
(6) Winn Family, Ltd., was organized on May 11, 1994. Limited partners are
Francis W. Winn and Nancy K. Winn. The general partners are Stephen T.
Winn, Manager, Carol Winn Dunaway and Dr. David L. Winn. The general
partners have equally shared power to vote and/or dispose of the
partnership assets including the Common Stock of the Corporation.
(7) Includes 400,000 shares owned by limited partnerships. Mr. Leeds is a
principal and member of an entity that is the ultimate parent entity of
these limited partnerships. Mr. Leeds disclaims beneficial ownership of
these securities except to the extent of his pecuniary interest therein.
(8) Includes 3,500, 3,500, 4,000, 5,250 and 31,000 presently exercisable
options held by Messrs. Volding, Hopper, Finlinson, Lynch, and Harris,
respectively.
(9) Includes 6,511,292 shares owned by persons and entities other than the
directors and named executive officers as described in footnotes (1)-(8)
above, and as to which shares such directors and named executive officers
disclaim beneficial ownership; and 199,250 shares subject to presently
exercisable options held by the directors and named executive officers
(including Mr. Stephen T. Winn).
EXECUTIVE COMPENSATION
The federal government mandates that the Corporation's Proxy Statement set
forth certain information regarding the compensation of all individuals who
served as the Corporation's Chief Executive Officer during the last completed
fiscal year and the other four most highly compensated executive officers who
were serving as executive officers at the end of the Corporation's last
completed fiscal year and one additional individual for whom disclosure would
have been provided pursuant to Item 402 of Regulation S-K but for the fact that
the individual was not serving as an executive officer of the Corporation at
the end of the last completed fiscal year. There are individuals in the employ
of the Corporation who are not executive officers but who had higher fiscal
1996 compensation than some of the named executive officers other than the
Chief Executive Officer.
11
<PAGE> 12
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
---------------------------------
AWARDS PAYOUTS
ANNUAL COMPENSATION ----------------------- -------
---------------------------------- SECURITIES
OTHER RESTRICTED UNDERLYING
ANNUAL STOCK OPTIONS/ LTIP ALL OTHER
NAME AND SALARY BONUS COMPEN- AWARD(S) SAR'S(4) PAYOUTS COMPEN-
PRINCIPAL POSITION YEAR ($)(1) ($)(2) SATION($)(3) ($)(4) (#) ($)(4) SATION($)(3)(7)
------------------ ---- -------- -------- ------------ ---------- ---------- ------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Stephen T. Winn 1996 324,000 0 0 N/A 0 N/A 11,496
President/CEO 1995 316,488 252,890 0 N/A 25,000 N/A 4,822
1994 300,008 300,008 0 N/A 0 N/A 4,091
Francis W. Winn 1996 225,000 0 0 N/A 0 N/A 4,951
Founder and Chairman 1995 225,000 0 0 N/A 0 N/A 4,951
of the Board 1994 225,000 0 0 N/A 0 N/A 2,701
E. Dean Liles(5) 1996 64,998 0 0 N/A 0 N/A 199,578
President 1995 254,988 116,527 0 N/A 25,000 N/A 7,916
Fast-Tax Division 1994 244,992 181,294 0 N/A 0 N/A 7,298
Lynn J. Finlinson(6) 1996 179,500 0 0 N/A 30,000 N/A 86,745
President 1995 94,250 272,620 0 N/A 20,000 N/A 2,610
Rent Roll, Inc. 1994 N/A N/A N/A N/A N/A N/A N/A
William T. Lynch 1996 182,500 38,325 0 N/A 0 N/A 11,623
Group Vice Pres. 1995 166,669 108,190 0 N/A 5,000 N/A 15,641
Accounting Tax Group 1994 155,004 93,653 0 N/A 0 N/A 6,818
G. Allen Harris 1996 196,250 0 0 N/A 25,000 N/A 44,476
Group Vice Pres. 1995 166,832 50,000 0 N/A 10,000 N/A 110,634
Corporate Tax Group 1994 155,004 93,653 0 N/A 40,000 N/A 44,141
</TABLE>
- - ---------------
(1) Includes amounts of base salary deferred at the election of the executive
pursuant to the Corporation's 401(k) Plan, a defined contribution plan.
(2) Does not include certain additional future payments which may be payable to
Messrs. Finlinson, Lynch, and Harris pursuant to the individual performance
component of the Corporation's 1989 Annual Incentive Plan. The full 1996
individual performance portion was not calculable through the latest
practicable date for inclusion in this Proxy Statement. Pursuant to the
instructions to Reg. S-K, Item 402(b)(2)(iii)(B), such non-calculable
amounts will be disclosed in the subsequent fiscal year in the appropriate
column for the fiscal year in which earned. The maximum additional amount
that could be distributed is as follows: Lynn J. Finlinson $28,720, William
T. Lynch $29,200, and G. Allen Harris $31,400; the minimum amount in all
cases could be zero.
(3) Pursuant to the Securities and Exchange Commission's rules, amounts for
perquisites and other personal benefits for fiscal years ended after
December 15, 1992, which do not exceed the lesser of $50,000 or ten percent
of the named executive officer's salary and bonus, are not required to be
disclosed.
(4) During fiscal year 1996, the Corporation did not maintain stock
appreciation rights, restricted stock or long-term incentive plans.
(5) Mr. Liles was an employee of the Corporation between August 3, 1993 and
March 31, 1996.
(6) Mr. Finlinson joined the Corporation on June 17, 1995.
12
<PAGE> 13
(7) Amounts in this column consist of, where applicable, the following amounts
for each of the named executive officers for each fiscal year shown:
amounts contributed by the Corporation pursuant to the Corporation's 401(k)
Plan (which are vested as shown), group life insurance premiums, Achievers
Club participation, special bonuses or President's Awards, payments
pursuant to a non-compete agreement, relocation expenses, and termination
payments pursuant to an employment agreement:
<TABLE>
<CAPTION>
SPECIAL PAYMENTS FOR
GROUP LIFE ACHIEVERS BONUS/ (1) NON-COMPETE
401(K) PLAN INSURANCE CLUB PRESIDENT'S (2) RELOCATION
YEAR CONTRIBUTION PREMIUMS PARTICIPATION AWARD (3) TERMINATION
---- ------------- ---------- -------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Stephen T. Winn 1996 4,500 174 6,822 0 0
1995 4,500 145 177 0 0
1994 2,245 174 1,672 0 0
Francis W. Winn 1996 4,500 451 0 0 0
1995 4,500 451 0 0 0
1994 2,250 451 0 0 0
E. Dean Liles 1996 4,500 84 0 0 (3) 194,954
1995 4,500 288 3,128 0 0
1994 2,250 288 4,760 0 0
Lynn J. Finlinson 1996 900 136 709 25,000 (1) 60,000
1995 2,610 0 0 0 (1) 250,000
1994 N/A N/A N/A N/A N/A
William T. Lynch 1996 4,500 174 6,949 0 0
1995 4,500 174 3,567 7,200 0
1994 1,554 174 4,415 0 0
G. Allen Harris 1996 1,800 174 6,516 0 (2) 35,986
1995 900 174 3,552 0 (2) 102,408
1994 0 174 4,436 15,000 (2) 22,977
</TABLE>
OPTION/SAR(1) GRANTS IN LAST FISCAL YEAR
The following table sets forth certain information concerning options to
purchase Common Stock granted in 1996 to the six executive officers named in
the Summary Compensation Table.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
NUMBER OF PERCENTAGE OF RATES OF STOCK PRICE
SECURITIES TOTAL OPTIONS EXERCISE OR APPRECIATION FOR
UNDERLYING GRANTED TO BASE PRICE OPTION TERM(5)
OPTIONS EMPLOYEES IN ($/SHARE) EXPIRATION --------------------
NAME GRANTED(#)(2) FISCAL YEAR(3) (4) DATE 5%($) 10%($)
---- ------------- -------------- ----------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Stephen T. Winn 0 N/A N/A N/A N/A N/A
Francis W. Winn 0 N/A N/A N/A N/A N/A
E. Dean Liles 0 N/A N/A N/A N/A N/A
Lynn J. Finlinson 30,000 18.75% 16.000 12/31/02 163,246 370,349
William T. Lynch 0 N/A N/A N/A N/A N/A
G. Allen Harris 25,000 15.60% 15.625 12/31/02 132,850 301,391
</TABLE>
- - ---------------
(1) During fiscal year 1996, the Corporation did not maintain a stock
appreciation rights plan.
(2) During the five-year period following the grant, options are subject to
exercise only in cumulative installments of 20% per year, so that they are
subject to exercise in full only upon the expiration of five years
following
13
<PAGE> 14
the first of the month next following the date of grant. Options may be
exercised only while the holder is employed by the Corporation and up to
three months thereafter in the case of retirement and up to 12 months
thereafter in the case of disability. An option is subject to exercise by
an employee's estate for 12 months after the death of the employee.
Granted, but unvested, options are not subject to "change in control"
protection.
(3) In the 1996 fiscal year ending December 31, 1996, twelve employees received
stock options.
(4) The price for shares to be purchased under the granted options is the fair
market value of the Corporation's Common Stock on the date of the grant
(fair market value being the mean between the "bid" and "ask" at closing on
the day of grant). Payment for shares purchased is made upon the exercise
of the option and may be paid to the Corporation either in cash or, at the
discretion of the Compensation Committee of the Board of Directors, by
delivery of shares of the Corporation's Common Stock having a fair market
value on the date of exercise equal to the option price, or by a
combination of cash and the delivery of such shares.
(5) The amounts set forth reflect the potential realizable value of the options
granted at assumed annual rates of stock appreciation of 5% and 10% through
December 31, 2002, the expiration date of the options. The use of 5% and
10% is pursuant to Securities and Exchange Commission requirements and is
not intended by the Corporation to forecast possible future appreciation.
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION/SAR VALUES
The following table sets forth certain information concerning the exercise
in fiscal year 1996 of options to purchase Common Stock by the six executive
officers named in the Summary Compensation Table and the unexercised options to
purchase Common Stock held by such individuals at December 31, 1996.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED IN-
UNDERLYING UNEXERCISED THE-MONEY OPTIONS AT
OPTIONS AT FISCAL YEAR-END FISCAL YEAR-END(1)
SHARES (#) ($)
ACQUIRED ON VALUE --------------------------- ---------------------------
EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
NAME (#) ($) (#) (#) ($) ($)
---- ----------- -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Stephen T. Winn.......... 0 0 135,000 40,000 916,825 142,500
Francis W. Winn.......... 0 0 0 0 0 0
E. Dean Liles............ 32,000 302,538 0 0 0 0
Lynn J. Finlinson........ 0 0 4,000 46,000 2,500 10,000
William T. Lynch......... 8,000 83,623 1,000 12,500 625 57,750
G. Allen Harris.......... 0 0 18,000 57,000 39,250 62,000
</TABLE>
- - ---------------
(1) Calculated by multiplying the number of shares by the difference between
the fair market value of the Common Stock underlying the options at
December 31, 1996 ($10.875 per share) and the relevant exercise price(s) of
the options.
Note: In addition to the tables set forth above, the federal rules under which
the Corporation's Proxy Statement was prepared provide for a Long-Term
Incentive Plan Awards Table and a Pension Plan Table. These tables do not
appear in this Proxy Statement because the Corporation did not during fiscal
1996 maintain any long-term incentive plan nor any defined benefit or actuarial
pension plan.
14
<PAGE> 15
EMPLOYMENT CONTRACTS
On August 3, 1993, the Corporation and Mr. E. Dean Liles entered into an
arrangement whereby Mr. Liles became President of the Corporation's Fast-Tax
Division, reporting directly to the Corporation's President, and, on March 31,
1996, such arrangement terminated. In consideration of his employment by the
Corporation and payments by the Corporation of severance (equal to twelve
months of his base salary as of February 1, 1996, less any required
withholdings), Mr. Liles has agreed that he will not compete with the
Corporation for a period of 18 months after termination of his employment.
On June 17, 1995, the Corporation and Mr. Lynn J. Finlinson entered into a
written arrangement whereby Mr. Finlinson became a Vice President of the
Corporation and President of its wholly owned Rent Roll, Inc. subsidiary. In
addition to his salary, Mr. Finlinson was paid a signing bonus of $250,000
pursuant to the arrangement. The arrangement entitles Mr. Finlinson to
participate in the 1989 Annual Incentive Plan, pursuant to which he would be
eligible to achieve a maximum bonus of 60% of his base salary. Mr. Finlinson
was also granted the option, pursuant to the 1982 Stock Option Plan, as
amended, to purchase 20,000 shares of the Corporation's stock at 100% of the
fair market value of the stock on the date of the grant. Finally, the
arrangement makes Mr. Finlinson eligible to receive a bonus based upon the
performance of the Corporation's real estate software business during the term
of the arrangement. Pursuant to the arrangement, Mr. Finlinson would not be
entitled to any payment in the event of his termination for cause, as that term
is defined in the arrangement. In the event of termination for any reason other
than for cause, the Corporation's sole obligation is to pay Mr. Finlinson an
amount equal to three months salary, less required withholdings. Mr. Finlinson
has agreed that he will not compete with the Corporation for a period of 24
months following the month in which he is discharged by the Corporation, or for
a period of 36 months following the month in which he voluntarily resigns his
employment with the Corporation. While the agreement provided that the
Corporation would pay Mr. Finlinson a total of $300,000, payable in five
consecutive annual installments, accruing interest on the unpaid balance at 6%
per annum, and while the first and second payments were made to Mr. Finlinson
during calendar years 1995 and 1996, the Corporation and Mr. Finlinson agreed
by letter dated February 7, 1997, that the Corporation would prepay the
remaining balance of the consideration for Mr. Finlinson's agreement not to
compete, an amount equal to $127,909.84, representing the then current balance
of the obligation discounted at 2% less any required withholding, plus accrued
interest of $6,568.77 on the unpaid balance of $180,000 from July 1, 1996
through February 7, 1997. This arrangement was deemed to be in the best
interests of the Corporation by its Chief Financial Officer.
REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION
This Report of the Compensation Committee of the Board of Directors shall
not be deemed incorporated by reference by any general statement incorporating
by reference this Proxy Statement into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934, except to the extent that
Computer Language Research, Inc. specifically incorporates this information by
reference, and it shall not otherwise be deemed filed under such Acts nor be
deemed to be solicitation material.
STATEMENT OF POLICY RELATING TO COMPENSATION OF SENIOR EXECUTIVES
As administered by the Compensation Committee of the Board of Directors,
the compensation of the Corporation's senior executives, including the named
executive officers whose compensation is detailed in this Proxy Statement, is a
function of several considerations.
A substantial portion of the total annual compensation of each senior
executive must be contingent upon the performance of the Corporation (or a
sub-part) against certain standards as well as upon the individual contribution
of each officer.
15
<PAGE> 16
Thus, the Compensation Committee makes reference to such factors as
the following: total return to shareholders (including dividend payments and
stock price appreciation); performance of the Corporation in the marketplace
vis-a-vis its competitors; financial performance of the Corporation (including
net profits and earnings per share); the quality and timeliness of the
Corporation's products and services; maintenance of a reasonably skilled
workforce which is not in excess of that needed to produce the Corporation's
products in a timely fashion; maintenance of technological parity with the
Corporation's competitors; and certain confidential and/or subjective factors.
The Committee does not assign any particular weight to any single factor. The
Committee believes identifying the confidential factors would adversely affect
the Corporation.
Also considered by the Committee in its administration of the
Corporation's executive compensation are prevailing executive compensation
levels among public software and other technology corporations.
ADMINISTRATION
The Compensation Committee directly determines the compensation of the
President and Chief Executive Officer and all senior management personnel
reporting directly to the President, including the named executive officers
whose compensation is detailed in this Proxy Statement. The Compensation
Committee also sets overall compensation (including bonus and stock option
compensation) policies for the Corporation and its wholly owned subsidiaries.
It is the intention of the Compensation Committee to assess, on an annual
basis, the effectiveness of the Corporation's compensation program for senior
executives according to the factors set forth in the Statement of Policy. The
most recent such assessment occurred when a consultant from a national
compensation consulting firm presented a written Executive Compensation
Analysis to the Committee at its February 27, 1997, regular meeting. This
analysis included a review of base salary, actual total cash compensation (base
salary plus average actual bonuses over the last three years), target total
cash compensation (base salary plus target annual incentive), actual total
direct compensation (actual base salary plus average actual bonuses over the
last three fiscal years plus average stock option grants over the last five
years), and target total direct compensation (actual base salary plus target
bonuses plus average option grants over the last five years). The analysis
utilized executive compensation survey data from over forty technology
companies located throughout the United States; regression analysis was used in
the analysis to predict base salary levels at various revenue levels. The
analysis showed that the Corporation's compensation of those of its executive
officers who report directly to the President was, overall, 3% above the 50th
percentile and 16% below the 75th percentile. The consultant also performed a
proxy statement analysis for the top five positions in a select group of public
software corporations which are similar in gross revenues to the Corporation.
The proxy statement analysis showed the Corporation's compensation of those of
its executive officers who report directly to the President to be approximately
14% above market at the 50th percentile and 1% below market at the 75th
percentile.
COMPONENTS OF SENIOR EXECUTIVE COMPENSATION
The Corporation has purposely limited the number of components in the
compensation program for senior executives to base salary, performance bonus,
stock options and an executive group life insurance program. In addition to
these components, there are several standard benefit plans available to all
employees of the Corporation. In addition, the named executive officers are
eligible for participation in the Corporation's Achievers Club incentive
program which is not available to all employees of the Corporation.
16
<PAGE> 17
BASE SALARY
In order to attract and retain competent and experienced senior
executives, the Compensation Committee seeks to maintain base salaries which
are competitive with comparable software and technology companies, taking into
account the responsibilities being undertaken by and the experience of an
executive, in addition to various confidential and/or subjective
considerations. The Committee does not attempt to mechanically set salaries so
as to correspond to the high, median or low end of survey data or to any
particular percentile. As noted above, the most recent review of the
appropriateness of base salary levels for senior executives was made by the
Compensation Committee in February, 1997, in consultation with an outside
adviser from a national compensation consulting firm. The Committee was
satisfied that the Corporation was neither overpaying nor underpaying its
senior executives.
In determining base salary for senior executives, the Compensation
Committee also takes into consideration the fact that the executives may be
eligible to participate in the Corporation's benefit plans, which include a
group health plan, group life insurance plan, long-term disability insurance
plan, a Section 401(k) plan and a stock option plan. In addition, the Committee
takes into consideration the fact that the Corporation does not maintain a
pension plan, a restricted stock plan, a supplemental retirement benefit plan,
a retirees' health plan, or a short-term disability insurance plan.
With respect to the base salary granted to the President and Chief
Executive Officer at its April 30, 1996, regular meeting, the Compensation
Committee took into account, in addition to various subjective considerations,
a comparison of base salaries of chief executive officers of other comparable
software companies, the overall success of the Corporation during 1995 in
meeting the factors set forth above in the Statement of Policy, the longevity
of the President's service to the Corporation and his professional lifetime of
experience in the tax compliance business, as well as the assessment by the
Compensation Committee of the President's individual performance.
When it adopted a resolution relating to an increase, effective July
1, 1996, in the base salary of the President and Chief Executive Officer from
$318,000 to $330,000, at its April 30, 1996, regular meeting, the Committee
took into consideration, in no particular order and with no particular weight,
that: the Corporation's earnings grew 3% from $11,300,000 in fiscal 1994 to
$11,600,000 in fiscal 1995; the Corporation's earnings per share increased 3%
from $0.79 per share in fiscal 1994 to $0.81 per share in fiscal 1995; the
Corporation was able to maintain its quarterly dividend at $0.10 per share
during fiscal 1995; and the Corporation's Common Stock closed at $16.50 on
April 23, 1996, as compared to $7.38 on April 24, 1995, a 124% increase. In
addition, with regard to the salary adjustment for the President, the Committee
evaluated the overall success of the Corporation during fiscal 1995 in meeting
the factors set forth above in the Statement of Policy.
The Compensation Committee evaluates recommendations for annual salary
adjustments to the base salaries of those executives reporting directly to the
President. The Chairman of the Board does not receive an annual adjustment. The
Committee, at its April 30, 1996, regular meeting, approved merit increases,
effective July 1, 1996, for those named executive officers (other than the
President, the Chairman of the Board and the President -- Fast-Tax Division)
whose compensation is detailed in this Proxy Statement averaging 3.89% of their
then-current base salaries. When it adopted resolutions relating to these merit
increases for the named executive officers, in addition to various confidential
and/or subjective factors, the Committee took into consideration, in no
particular order and with no particular weight, the same factors as set forth
in the immediately preceding paragraph. The Committee did not establish the
relative importance of each factor. With regard to the executives whose
compensation is detailed in this Proxy Statement, the Committee also considered
such factors as overall success of each executive's group in meeting its annual
objectives; managing to or bettering annual operating and capital budgets;
undertaking new responsibilities; maintaining proper financial, budgetary,
legal and procedural controls; reducing headcount and other overhead; and the
executive's contribution to the overall governance and management of the
Corporation. In reviewing the individual performance of the senior executives
whose compensation is detailed in this Proxy Statement (other than the
President), the Compensation Committee takes into account the views of the
President.
17
<PAGE> 18
BONUS
The Corporation's 1989 Annual Incentive Plan (the "AIP"), which provides
an opportunity for participating employees, including the named executive
officers whose compensation is detailed in this Proxy Statement, to earn cash
bonuses, was devised with the assistance of a leading compensation consulting
firm. For fiscal 1996, awards under the AIP to the senior executives whose
compensation is detailed in this Proxy Statement were based on one or more
schedules setting forth certain levels of "Pretax Profit" or "Profit
Contribution". The schedules are established each year by the Compensation
Committee, through the exercise of subjective business judgment, taking into
account the Corporation's business plan for the forthcoming year. Except for
the President, there is a component of the AIP for individual performance.
The Chairman of the Board does not receive awards under the AIP.
For fiscal 1996, the award to the President under the AIP was based solely
on corporate performance against a schedule of "Pre-Tax Profit" for the entire
Corporation. For fiscal 1996, the award to the President under the AIP was 0%
of his base salary as compared to a possible range of 0% to 100% of base
salary.
For fiscal 1996, the AIP award to the President -- Rent Roll, Inc. was
governed by the following: 80% of bonus was based on the performance of the
real estate management software group and 20% of bonus was based on individual
performance. As of the last practicable date for the inclusion of data in this
Proxy Statement, the 1996 award to the President -- Rent Roll, Inc. under the
AIP was 0% of his base salary as compared to a possible range of 0% to 60% of
base salary. The President -- Rent Roll, Inc., also received a special cash
bonus of $25,000 on April 30, 1996 to reflect his outstanding performance in
attracting a fine senior management team.
For fiscal 1996, the AIP award to the Group Vice President -- Accounting
Tax Group was governed by the following: 30% of bonus was based on overall
financial performance of the Fast-Tax Business Unit, 50% was based on the
financial performance of the Accounting Tax Group and 20% of bonus was based on
individual performance. As of the last practicable date for the inclusion of
data in this Proxy Statement, the 1996 award to the Group Vice President --
Accounting Tax Group under the AIP was 21% of his base salary as compared to a
possible range of 0% to 80% of base salary.
For fiscal 1996, the AIP award to the Group Vice President -- Corporate
Tax Group was governed by the following: 30% of bonus was based on overall
financial performance of the Fast-Tax Business Unit, 50% was based on the
financial performance of the Corporate Tax Group and 20% of bonus was based on
individual performance. As of the last practicable date for the inclusion of
data in this Proxy Statement, the 1996 award to the Group Vice President --
Corporate Tax Group under the AIP was 0% of his base salary as compared to a
possible range of 0% to 80% of base salary.
The President -- Fast-Tax Division did not receive an AIP award for 1996.
The President -- Rent Roll, Inc., the Group Vice President -- Accounting
Tax Group and the Group Vice President -- Corporate Tax Group are eligible for
additional AIP awards attributable to the individual performance component of
their 1996 AIP bonus structure, the actual awards of which will be based on
events occurring in 1997 subsequent to the date of this Proxy Statement. These
additional awards can range from 0% to 16% of base salary for each of these
individuals. The maximum dollar amount of the additional AIP award for each of
these individuals is set forth in footnote 2 to the "Summary Compensation
Table" in this Proxy Statement.
While the Compensation Committee continues to believe that an annual
performance bonus plan is an important incentive to management to operate the
business of the Corporation in a manner which will lead to the accomplishment
of the factors noted in the Statement of Policy set forth at the beginning of
this report, the Committee has decided to review, during fiscal 1997, the
existing AIP toward the possible end of making significant revisions thereto.
18
<PAGE> 19
STOCK OPTIONS
In fiscal year 1996, the Compensation Committee made limited use of the
1982 Stock Option Plan as an incentive to senior management. At its February
22, 1996, and April 30, 1996, regular meetings, the Compensation Committee
granted to the named executive officers the options shown in the "Options/SAR
Grants in Last Fiscal Year" table in this Proxy Statement. When it adopted
resolutions relating to grants of stock options for those named executive
officers, in addition to various subjective factors and the performance factors
as noted above in the section of this report dealing with base salary, the
Committee took into consideration the facts that G. Allen Harris had previously
received grants for a total for 50,000 stock options and that Lynn Finlinson
had previously received grants for a total of 20,000 stock options. The
Committee did not establish the relative importance of each factor.
At its April 30, 1996, regular meeting, the Compensation Committee
received a report from the Secretary of the Corporation recommending that the
Corporation cease granting options pursuant to the 1982 Stock Option Plan and
that such Plan, which had been in effect for 15 years without significant
amendment, be replaced with a more up-to-date plan. The Committee accepted this
recommendation and the President of the Corporation proceeded to draft a new
plan which, after extensive discussion, has been accepted by the Committee. The
proposed plan is being submitted to a vote of the Corporation's shareholders at
the Annual Meeting of the Corporation's shareholders on May 1, 1997. The
proposed plan is described in detail in the portion of this Proxy Statement
dealing with Proposal Two. The full text of the proposed plan is attached to
this Proxy Statement as Exhibit A.
The Committee believes that the purpose of stock options for senior
executives is to align their interests with those of the shareholders of the
Corporation and to create shareholder value. The proposed plan and the
accompanying option agreements, which the Committee has approved for awards of
options during 1997, are designed to ensure that a high level of shareholder
gain precedes any potential gain to optionees, including the named executive
officers whose compensation is detailed in this Proxy Statement. For example,
while the Compensation Committee has decided that, while the option exercise
price is to be one half of fair market value on the date of grant, for there to
be any vesting sooner than nine years after the date of grant, the
Corporation's stock must reach, and maintain for a period of 120 calendar days,
a target price exceeded for only a few days during the past decade. For there
to be full vesting prior to nine years, the Corporation's stock would need to
reach, and maintain for a period of 120 calendar days, a target price in excess
of 240% of that existing on the date of this Report. The Compensation Committee
has also decided that, even if these rigorous vesting-before-nine-years
thresholds are met, the option agreements will contain a one-year-from-date-of-
grant prohibition against exercise and a provision requiring that one half of
the shares purchased be restricted shares. The Corporation may elect to
repurchase the restricted shares for a purchase price equal to the exercise
price, if the optionee's employment terminates for any reason during a one year
period after the date of original exercise. Such election must be made during a
period of sixty days from the date of the optionee's termination. Another
example of the Compensation Committee's determination to ensure that
stockholder gain be a prerequisite to optionee gain is a provision in the Plan
terminating all unvested options immediately prior to a change in control
transaction unless the Compensation Committee shall deem it to be in the best
interests of the shareholders to provide otherwise and the use of
"non-qualified" (within the meaning of Section 422 of the Code) options which
are most tax efficient for the Corporation.
While the President of the Corporation is a major shareholder of the
Corporation (see the table relating to Beneficial Ownership of Common Stock by
Principal Shareholders, Directors and Named Executive Officers appearing above
in this Proxy Statement), regardless of any grants to him under a stock option
plan, the Committee believes that option grants for additional shares will
serve as a performance incentive to the President.
COMPENSATION COMMITTEE OF COMPUTER LANGUAGE RESEARCH, INC.
February 27, 1997
Merle J. Volding, Chairman
James R. Dunaway, Jr.
Max D. Hopper
Jeffrey T. Leeds
19
