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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C.
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(d)(4) OF
THE SECURITIES EXCHANGE ACT OF 1934
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SCS/COMPUTE, INC.
(NAME OF SUBJECT COMPANY)
SCS/COMPUTE, INC.
(NAME OF PERSON(S) FILING STATEMENT)
COMMON STOCK, PAR VALUE $.10 PER SHARE
(TITLE OF CLASS OF SECURITIES)
784030 10 8
(CUSIP NUMBER OF CLASS OF SECURITIES)
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SCS/COMPUTE, INC.
2252 WELSCH INDUSTRIAL COURT
ST. LOUIS, MISSOURI 63146
ATTENTION: ROBERT W. NOLAN, SR.
(314) 997-7766
(NAME, ADDRESS, AND TELEPHONE NUMBER OF PERSON AUTHORIZED TO
RECEIVE NOTICES AND COMMUNICATIONS ON BEHALF OF
THE PERSON(S) FILING STATEMENT)
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WITH A COPY TO
JOHN R. SHORT, ESQ.
PEPER, MARTIN, JENSEN, MAICHEL AND HETLAGE
TWENTY-FOURTH FLOOR
720 OLIVE STREET
ST. LOUIS, MISSOURI 63101
(314) 421-3850
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is SCS/Compute, Inc., a Delaware
corporation (the "Company"). The address of the principal executive offices of
the Company is 2252 Welsch Industrial Court, St. Louis, Missouri 63146. The
title of the class of equity securities to which this Statement relates is the
common stock, par value $.10 per share, of the Company (the "Common Stock").
ITEM 2. TENDER OFFER OF THE BIDDER
The Statement relates to the tender offer by SCS Subsidiary, Inc., a
Delaware corporation ("Purchaser") and a direct wholly owned subsidiary of
Thomson U. S. Holdings Inc., a Delaware corporation ("Parent") and an indirect
wholly owned subsidiary of The Thomson Corporation, a corporation organized
under the laws of Ontario, Canada, disclosed in a Tender Offer Statement on
Schedule 14D-1 (the "Schedule 14D-1), dated December 27, 1995, to purchase all
outstanding shares of Common Stock, other than 1,082,570 shares owned directly
by Robert W. Nolan, Sr., which shares are the subject of a stock purchase
agreement between Purchaser and Mr. Nolan, Sr., at a price of $6.75 per share
(such amount, or any greater amount per Share paid pursuant to the Offer, being
hereafter referred to as the "Per Share Amount"), net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to Purchase
dated December 27, 1995 (the "Offer to Purchase") and the related Letter of
Transmittal (which together constitute the "Offer").
The Offer is being made pursuant to the Agreement and Plan of Merger, dated
as of December 19, 1995, (the "Merger Agreement"), among Parent, Purchaser and
the Company. The Merger Agreement provides that, among other things, as promptly
as practicable after the consummation of the Offer and satisfaction or waiver of
the conditions to the Merger, Purchaser will be merged with and into the Company
(the "Merger") and the Company will continue as the surviving corporation (the
"Surviving Corporation"). A copy of the Merger Agreement is attached hereto as
Exhibit 2 and incorporated herein by reference.
According to the Schedule 14D-1, the principal executive offices of
Purchaser and Parent 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 SCS/Compute, Inc., 2252 Welsch Industrial Court, St. Louis,
Missouri 63146.
(b) Each material contract, agreement, arrangement and understanding
between the Company or its affiliates and (i) its executive officers, directors
or affiliates or (ii) Purchaser, Parent and their executive officers, directors
or affiliates, is described in the Company's Information Statement set forth on
Schedule I hereto or set forth below.
STOCK OPTIONS AND WARRANTS
The Company maintains the SCS/Compute, Inc. Stock Option Plan (the "Plan")
which provides for the grant of stock options (the "Options"). As of December
15, 1995, options for 130,000 shares of Common Stock were outstanding. Pursuant
to action by the Board of Directors of the Company on December 14, 1995, all
outstanding options not then exercisable were vested as of that date. The
Company has no outstanding warrants and has never issued stock appreciation
rights.
Pursuant to the terms of the Merger Agreement, all outstanding stock
options that are outstanding at the time the Merger becomes effective, whether
or not then exercisable, will be canceled, and each holder of such canceled
Option will be entitled to receive from Purchaser, in consideration for the
cancellation of such Option, an amount in cash equal to the product of (i) the
number of shares previously subject to such Option and (ii) the excess, if any,
of the Per Share Amount over the exercise price per share of such Option.
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INCENTIVE COMPENSATION PLAN AND CONTINGENT BONUS PAYMENTS
In order to retain and motivate key employees, the Company's Board of
Directors adopted an incentive compensation plan (the "Incentive Plan") on July
14, 1986. The Incentive Plan is designed to provide additional performance
incentives to the Company's executive officers. Under the Incentive Plan
effective for the fiscal year ended January 31, 1995, each participant received
a bonus based on a percentage of pre-tax, pre-executive bonus profits of the
Company. Amounts earned under the Incentive Plan for the year ended January 31,
1995 are included under the caption "Bonus" in the Summary Compensation Table in
the Information Statement attached hereto as Schedule I. A similar Incentive
Plan is in effect for the fiscal year ending January 31, 1996.
At the meeting of the Board of Directors on December 14, 1995, the Board,
in recognition of the efforts of the principal executive officers in the
operation of the Company and the financial benefit to the shareholders of the
Offer and Merger and in lieu of long term compensation packages, awarded (with
employee directors abstaining as to resolutions in which they had an interest)
the principal executive officers of the Company bonuses of $575,000 in the
aggregate, the payment of which is subject to the completion of the Offer and
the Merger.
EMPLOYMENT AGREEMENT AND CONSULTING AGREEMENT
The following is a summary of the form of Employment Agreement to be
entered into by the Company and Robert W. Nolan, Sr., President and Chief
Executive Officer of the Company, a copy of which is filed as an exhibit to this
Schedule 14D-9 and of the form of Consulting Agreement which is attached to the
Employment Agreement as an exhibit. Such summary is qualified in its entirety by
reference to the Employment Agreement and the Consulting Agreement.
As of the Effective Time of the Merger Agreement, the Company will enter
into an Employment Agreement and a Consulting Agreement with Mr. Nolan. The
Employment Agreement has a term of five years, subject to earlier termination
and the Consulting Agreement has a term of three years to commence upon the
earlier of expiration of the term of the Employment Agreement or termination of
Mr. Nolan's employment thereunder. Under the Employment Agreement, Mr. Nolan
will receive an initial annual salary of $260,000 which will be increased each
year to reflect any increase in the consumer price index for all urban consumers
in the St. Louis, Missouri area for the prior calendar year. Mr. Nolan will be
eligible for two types of incentive compensation, the amounts of which will be
based on Company performance: (i) an annual bonus payable each year during the
term of the Employment Agreement, and (ii) a long-term incentive payment
("LTIP") payable in the third, fourth and fifth years of the Employment
Agreement. Neither incentive payment will be payable unless certain levels of
Company performance are reached. Eligibility for further incentive payments
ceases upon termination of the Employment Agreement, except as provided below.
The Employment Agreement may be terminated by either party for any reason at any
time prior to its expiration. If Mr. Nolan resigns during the first two years of
the term or is terminated at any time for cause, he will receive no severance
payments. If he resigns during the third, fourth or fifth years of the term, Mr.
Nolan will be entitled to continue to receive, as severance, his then base
salary for one year following the date of resignation. If the Employment
Agreement is terminated by reason of Mr. Nolan's death or disability or if the
Company terminates his employment either without cause or for failure of the
Company to meet minimum financial performance standards, he will be entitled to
continue to receive, as severance, his then base salary for two years from the
date of termination. In addition, if termination is by reason of death or
disability or is without cause, Mr. Nolan shall be entitled to receive the
annual bonus amount he would have received for the year in which the termination
occurs based on the approved budget for such year. Further, if such termination
by reason of death or disability or without cause occurs in the second or third
year of the term, he will be entitled to receive a pro-rated portion of any LTIP
he would have been entitled to receive in the third year based on the approved
budget for the third year and if the termination occurs in the fourth or fifth
year of the term, he will be entitled to the full LTIP he would have been
entitled to receive in the year of termination based on the approved budget for
such year. The Consulting Agreement, the term of which follows that of the
Employment Agreement, provides for a total fee of $1,050,000, payable monthly
over the three year term at an initial
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annual rate of $400,000 which will decrease to $250,000 in the final year of the
term. For two years from the termination date of the Employment Agreement, Mr.
Nolan has agreed not to compete with the Company and for three years from the
termination of the Employment Agreement Mr. Nolan, Sr. has agreed not to solicit
or hire any of its employees (excluding Robert W. Nolan, Jr.) and consultants.
Mr. Nolan has also agreed to protect the status of all confidential information
relating to the Company.
INDEMNIFICATION UNDER DELAWARE LAW
AND THE COMPANY'S CHARTER
The Company is a Delaware Corporation. Reference is made to Section 145 of
the Delaware General Corporation Law (the "Delaware Law), which provides that a
corporation may indemnify any person who is, or is threatened to be made, a
party to any threatened, pending or completed legal action, suit or proceeding,
whether civil, criminal, administrative or investigative (other than an action
by or in the right of such corporation), by reason of the fact that such person
is or was an officer, director, employee or agent of such corporation, or is or
was serving at the request of such corporation as a director, officer, employee
or agent of another corporation or enterprise. The indemnity may include
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by the indemnified person in
connection with such action, suit or proceeding, provided such officer,
director, employee or agent acted in good faith and in a manner he reasonably
believed to be in or not opposed to the corporation's best interests and, for
criminal proceedings, had no reasonable cause to believe that his conduct was
unlawful. A Delaware corporation may indemnify officers and directors in an
action by or in the right of the corporation under the same conditions, except
that no indemnification is permitted without judicial approval if the officer or
director is adjudged to be liable to the corporation. Where an officer or
director is successful on the merits or otherwise in the defense of any action
referred to above, the corporation must indemnify him against the expenses that
such officer or director actually and reasonably incurred.
Reference is also made to Section 102(b)(7) of the Delaware Law, which
enables a corporation in its original certificate of incorporation or an
amendment thereto to eliminate or limit the personal liability of a director to
the corporation or its stockholders, for violations of the director's fiduciary
duty, except (i) for any breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii)
pursuant to Section 174 of the Delaware Law (providing for liability of
directors for unlawful payment of dividends or unlawful stock purchases or
redemptions) or (iv) for any transaction from which a director derived an
improper personal benefit.
Article XI of the Certificate of Incorporation of the Company provides
that, except under certain circumstances, directors of the Company shall not be
liable to the Company or its stockholders for monetary damages for breach of
fiduciary duties as a director.
Article VII of the Company's Restated By-Laws provides that the Company
shall indemnify any officer or director to the fullest extent permitted by the
General Corporation Law of the State of Delaware for liability and expense
incurred by such officer or director as a result of any action, or threatened
action arising out of activities performed as directors or officers of the
Company and may indemnify any person who is, was or has agreed to become an
employee or agent of the Company or is, was or has agreed to serve at the
request of the Company as an employee or agent of another corporation or
enterprise.
The Merger Agreement provides that the By-laws of the Surviving Corporation
shall contain provisions no less favorable with respect to indemnification,
advancement of expenses and related matters than are set forth in Article VII of
the By-laws of the Company as in affect on the date of the Merger Agreement,
which provisions shall not be amended, repealed or otherwise modified for a
period of three years from the Effective Time in any manner that would adversely
affect the rights thereunder of individuals who at the Effective Time were
directors, officers, employees, fiduciaries or agents of the Company, unless
such modification shall be required by law.
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The Merger Agreement also provides that the Company shall, 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,
the Surviving Corporation shall, to the fullest extent permitted under
applicable law, indemnify and hold harmless, each present and former director,
officer, employee, fiduciary and agent of the Company (collectively, the
"Indemnified Parties") against all costs and expenses (including attorneys'
fees), judgments, fines, losses, claims, damages, liabilities and settlement
amounts paid 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 his or her capacity as an officer, director,
employee, fiduciary or agent of the Company, whether occurring before or after
the Effective Time, for a period of three years after the date of the Merger
Agreement. In the event of any such claim, action, suit, proceeding or
investigation, the Merger Agreement provides that (i) the Company or the
Surviving Corporation, as the case may be, shall pay the reasonable fees and
expenses of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to the Company or the Surviving Corporation, promptly
after statements therefor are received and (ii) the Company and the Surviving
Corporation shall cooperate in the defense of any such matter; provided,
however, that neither the Company nor the Surviving Corporation shall be liable
for any settlement effected without its written consent (which consent may not
be unreasonably withheld); and provided, further, that neither the Company nor
the Surviving Corporation shall 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 shall 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
three-year period, all rights to indemnification in respect of such claim shall
continue until the disposition of such claim.
Parent, Purchaser and the Company have also agreed that in the event the
Company or the Surviving Corporation or any of their respective successors or
assigns (i) consolidates with or merges into any other person and shall not be
the continuing or surviving corporation or entity of such consolidation or
merger or (ii) transfers all or substantially all of its properties and assets
to any person, then and in each such case, proper provision shall be made so
that the successors and assigns of the Company or the Surviving Corporation, as
the case may be, or at Parent's option, Parent, shall assume the foregoing
indemnity obligations.
THE MERGER AGREEMENT
The following is a summary of the Merger Agreement, a copy of which is
filed as an Exhibit to this 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 Purchaser's intention to commence
the Offer. 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 of the Offer to
Purchase. Purchaser and Parent have agreed that no change in the Offer may be
made which decreases the price per Share payable in the Offer, which reduces the
maximum number of Shares to be purchased in the Offer or which imposes
conditions to the Offer in addition to those set forth in Section 14 of the
Offer to Purchase.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof, and in accordance with Delaware Law, at the Effective
Time, Purchaser shall 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 direct, wholly
owned subsidiary of Parent. Upon consummation of the Merger, each issued and
then outstanding Share (other than any Shares owned by Purchaser, Parent or any
direct or indirect wholly owned subsidiary of Parent or of the Company
immediately prior to the Effective Time and any Shares which are held by
stockholders 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 Delaware Law) shall be cancelled or converted
automatically into the right
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to receive an amount equal to $6.75 per Share or any greater amount per Share
paid pursuant to the Offer (such amount, the "Per Share Amount") in cash.
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 Certificate of
Incorporation of Purchaser will be the Certificate of Incorporation of the
Surviving Corporation; provided, however, that, at the Effective Time, Article I
of the Certificate of Incorporation of the Surviving Corporation will be amended
to read as follows: "The name of the corporation is SCS/Compute, Inc." The
Merger Agreement also provides that the By-laws of Purchaser, 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, in accordance with applicable law and the
Company's Certificate of Incorporation and By-laws, duly call, give notice of,
convene and hold a special meeting of its stockholders as soon as practicable
following consummation of the Offer for the purpose of considering and taking
action on the Merger Agreement and the transactions contemplated thereby (the
"Stockholders' Meeting"). If Purchaser acquires at least a majority of the
outstanding Shares, Purchaser will have sufficient voting power to approve the
Merger, even if no other stockholder votes in favor of the Merger.
The Merger Agreement provides that the Company shall, as soon as
practicable following consummation of the Offer, file with the Securities and
Exchange Commission (the "Commission") under the Exchange Act, and use its best
efforts to have cleared by the Commission, a proxy statement and related proxy
materials (the "Proxy Statement") with respect to the Stockholders' Meeting and
shall cause the Proxy Statement to be mailed to stockholders of the Company at
the earliest practicable time. The Company has agreed, subject to its fiduciary
duties under applicable law as advised by counsel, to include in the Proxy
Statement the recommendation of the Board that the stockholders of the Company
approve and adopt the Merger Agreement and the transactions contemplated thereby
and to use its 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 shall
acquire at least 90 percent of the then outstanding Shares, all necessary and
appropriate action shall be taken to cause the Merger to become effective as
soon as reasonably practicable after such acquisition, without a meeting of the
Company's stockholders, in accordance with Delaware Law.
Pursuant to the Merger Agreement, the Company has covenanted and agreed
that, between the date of the Merger Agreement and the Effective Time, unless
Parent shall otherwise agree in writing, the business of the Company shall be
conducted only in, and the Company shall not take any action except in, the
ordinary course of business and in a manner consistent with past practice; and
the Company shall use its best efforts to preserve substantially intact the
business organization of the Company, to keep available the services of the
current officers, employees and consultants of the Company and to preserve the
current relationships of the Company with customers, suppliers and other persons
with which the Company has significant business relations. The Merger Agreement
provides that by way of amplification and not limitation, and except as
contemplated therein, the Company shall not between the date of the Merger
Agreement and the Effective Time, directly or indirectly do, or propose to do,
any of the following, without the prior written consent of Parent: (a) amend or
otherwise change its Certificate of Incorporation or By-laws; (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 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 (except for the issuance of a maximum of 130,000 Shares issuable
pursuant to Options outstanding on the date of the Merger Agreement) or (ii) any
assets of the Company, except for sales in the ordinary course of business and
in a manner consistent with past practice;
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(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;
(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, (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 commitment
which is in excess of $50,000 or capital expenditures which are, in the
aggregate, in excess of $100,000 for the Company, or (v) enter into or amend any
contract, agreement, commitment or arrangement with respect to any of the
foregoing matters; (f) increase the compensation payable or to become payable to
its officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of the Company who are not officers
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 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; (g) 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; (i) settle or compromise any pending or threatened
suit, action or claim which is material or which relates to the transactions
contemplated by the Merger Agreement; (j) 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 balance sheet of the Company as at January
31, 1995 or subsequently incurred in the ordinary course of business and
consistent with past practice; (k) sell, assign, transfer, license, sublicense,
pledge or otherwise encumber any of the Company's Intellectual Property (as
defined in the Merger Agreement); or (l) announce an intention, commit or agree
to do any of the foregoing.
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 shall 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 shall, 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 shall use its best efforts to cause persons
designated by Purchaser to constitute the same percentage as persons designated
by Purchaser shall constitute of the Board of each committee of the Board, in
each case only to the extent permitted by applicable law. Until the earlier of
(i) the time Purchaser acquires a majority of the then outstanding Shares on a
fully diluted basis and (ii) the Effective Time, the Company has agreed to use
its best efforts to ensure that all the members of the Board and each committee
of the Board as of the date of the Merger Agreement who are not employees of the
Company shall remain members of the Board and of such committees.
The Merger Agreement provides that following the election or appointment 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
Certificate 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
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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, until the Effective Time, the Company
shall, and shall cause the officers, directors, employees, auditors and agents
of the Company to, afford the officers, employees and agents of Parent and
Purchaser complete access at all reasonable times to the officers, employees,
agents, properties, offices, plants and other facilities, books and records of
the Company, and shall furnish Parent and Purchaser 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
have agreed to keep such information confidential in accordance with the Mutual
Nondisclosure Agreement dated October 10, 1995 between the Company and RIA Inc.
The Merger Agreement provides that the Company shall not, directly or
indirectly, through any officer, director, agent or otherwise, solicit, initiate
or encourage the submission of 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 business combination with the Company 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; provided, however, that nothing contained in this paragraph shall
prohibit the Board from responding to any unsolicited proposal made in writing
to acquire the Company pursuant to a merger, consolidation, share exchange,
business combination or other similar transaction or to acquire all or
substantially all of the assets of the Company, to the extent the Board, after
consultation with independent counsel, determines in good faith that such action
is required for the Board to comply with its fiduciary duty to stockholders
imposed by Delaware Law. The Merger Agreement requires the Company immediately
to cease and cause to be terminated all existing discussions or negotiations
with any parties conducted prior to the date of the Merger Agreement with
respect to any of the foregoing. The Company has also agreed to notify Parent
promptly if any such proposal or offer, or any inquiry or contact 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,
offer, inquiry or contact and the terms and conditions of such proposal, offer,
inquiry or contact. 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.
Pursuant to the Merger Agreement, Parent intends that, for a period of one
year immediately following the Effective Time, it shall, or shall cause the
Surviving Corporation to, continue to maintain employee benefit and welfare
plans, programs, contracts, agreements, policies and executive incentives and
perquisites, other than equity-based plans, for the benefit of active and
retired employees of the Company or the Surviving Corporation which in the
aggregate provide benefits that are no less favorable to employees than the
benefits provided to such active and retired employees on the date of the Merger
Agreement.
The Merger Agreement provides that, subject to its terms and conditions,
each of the parties thereto shall (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 (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, including, without
limitation, using its reasonable best efforts to obtain all licenses, permits
(including, without limitation, environmental permits), consents, approvals,
authorizations, qualifications and orders of governmental authorities and
parties to contracts with the Company as are necessary for the consummation of
such transactions 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
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changes or events concerning the Company's business, compliance with law,
litigation, employee benefit plans, labor matters, trademarks, patents and
copyrights, environmental matters, material contracts, brokers, opinions from
financial advisors 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: (a) the Merger
Agreement and the transactions contemplated thereby shall have been approved and
adopted by the affirmative vote of the stockholders of the Company to the extent
required by Delaware Law and the Company's Certificate of Incorporation; (b) any
waiting period (and any extension thereof) applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated; (c) no foreign,
United States or state 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
transactions contemplated by the Merger Agreement; and (d) Purchaser or its
permitted assignee shall have purchased all Shares validly tendered and not
withdrawn pursuant to the Offer; provided, however, that this condition shall
not be applicable to the obligations of Parent or Purchaser if, in breach of the
Merger Agreement or the terms of the Offer, Purchaser fails to purchase any
Shares validly tendered and not withdrawn pursuant to the Offer.
Termination; Fees and Expenses. The Merger Agreement provides that it may
be terminated and the Merger and the other Transactions may be abandoned at any
time prior to the Effective Time, notwithstanding any requisite approval and
adoption of the Merger Agreement and such transactions by the stockholders of
the Company: (a) by mutual written consent duly authorized by the Boards of
Directors of Parent, Purchaser and the Company; (b) by either Parent, Purchaser
or the Company if (i) the Effective Time shall not have occurred on or before
March 31, 1996; provided, however, that the right to terminate the Merger
Agreement shall not be available 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 (ii) any court
of competent jurisdiction in the United States or other United States
governmental authority shall have 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 shall have become final and nonappealable;
(c) by Parent if (i) due to an occurrence or circumstance that would result in a
failure to satisfy any condition set forth in Section 14 of the Offer to
Purchase, Purchaser shall have (A) failed to commence the Offer within 30 days
following the date of the Merger Agreement, (B) terminated the Offer without
having accepted any Shares for payment thereunder, or (C) failed to pay for
Shares pursuant to the Offer within 60 days following the commencement of the
Offer, unless such failure to pay for Shares shall have been caused by or
resulted from the failure of Parent or Purchaser to perform in any material
respect any material covenant or agreement of either of them contained in the
Merger Agreement or the material breach by Parent or Purchaser of any material
representation or warranty of either of them contained in the Merger Agreement
or (ii) prior to the purchase of Shares pursuant to the Offer, the Board or any
committee thereof shall have withdrawn or modified in a manner adverse to
Purchaser or Parent its approval or recommendation of the Offer, the Merger
Agreement, the Merger or any other Transaction or shall have recommended another
merger, consolidation, business combination with, or acquisition of, the Company
or its assets or another tender offer for Shares, or shall have resolved to do
any of the foregoing; or (d) by the Company, upon approval of the Board, if (i)
Purchaser shall have (A) failed to commence the Offer within 30 days following
the date of the Merger Agreement, (B) terminated the Offer without having
accepted any Shares for payment thereunder or (C) failed to pay for Shares
pursuant to the Offer within 60 days following the commencement of the Offer,
unless such failure to pay for Shares shall have been caused by or resulted from
the failure of the Company to perform in any material respect any material
covenant or agreement of it contained in the Merger Agreement or the material
breach by the Company of any material representation or warranty of it contained
in the Merger Agreement or (ii) prior to the purchase of Shares pursuant to the
Offer, the Board shall have withdrawn or modified in a manner adverse to
Purchaser or Parent its approval or recommendation of the Offer, the Merger
Agreement or the Merger in order to approve the execution by the Company of a
definitive agreement providing for the acquisition of the Company or its assets
or a merger or other business
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combination or in order to approve a tender offer or exchange offer for Shares
by a third party, in either case, as determined by the Board in the exercise of
its good faith judgment and after consultation with its legal counsel and
financial advisors, on terms more favorable to the Company's stockholders than
the Offer and the Merger taken together; provided, however, that such
termination shall not be effective until the Company has made payment to Parent
of the Fee (as hereinafter defined) required to be paid pursuant to the Merger
Agreement and has deposited with a mutually acceptable escrow agent $500,000 for
reimbursement to Parent and Purchaser of Expenses (as hereinafter defined).
In the event of the termination of the Merger Agreement, the Merger
Agreement provides that it shall forthwith become void and there shall be no
liability thereunder on the part of any party thereto except under the
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 Merger Agreement provides that in the event that (a) any person shall
have commenced a tender or exchange offer for 10% or more (or which, assuming
the maximum amount of securities which could be purchased, would result in any
person beneficially owning 10% or more) of the then outstanding Shares or
otherwise for the direct or indirect acquisition of the Company or all or
substantially all of its assets for per Share consideration having a value
greater than the Per Share Amount (a "Competing Proposal") and (i) the Board
does not recommend against the Competing Proposal, (ii) the Offer shall have
remained open for at least 20 business days, (iii) the Minimum Condition shall
not have been satisfied, and (iv) this Agreement shall have been terminated
pursuant to the provisions described above; or (b) the Merger Agreement is
terminated (i) pursuant to the provisions described in clause (c)(ii) or clause
(d)(ii) of the second preceding paragraph; then, in any such event, the Company
shall pay Parent promptly (but in no event later than one business day after the
first of such events shall have occurred) a fee of $1,000,000 (the "Fee"), which
amount shall be payable in immediately available funds, plus all Expenses up to
$500,000 in the aggregate. The term "Expenses" shall mean all out-of-pocket
expenses and fees of each of Parent, Purchaser and their respective shareholders
and affiliates (including, without limitation, fees and expenses payable to all
banks, investment banking firms, other financial institutions and other persons
and their respective agents and counsel for arranging, committing to provide or
providing any financing for the Transactions or structuring the Transactions and
all fees of counsel, accountants, experts and consultants to Parent and
Purchaser, and all printing and advertising expenses and all costs and expenses
incurred by or on behalf of Parent and Purchaser in connection with the
collection under and enforcement of the preceding paragraph) actually incurred
or accrued by either of them or on their behalf in connection with such
transactions, including, without limitation, the financing thereof, and actually
incurred or accrued by banks, investment banking firms, other financial
institutions and other persons and assumed by Parent or Purchaser in connection
with the negotiation, preparation, execution and performance of the Merger
Agreement, the structuring and financing of such transactions, and any financing
commitments or agreements relating thereto. Except as set forth in this
paragraph, all costs and expenses incurred in connection with the Merger
Agreement and such transactions shall be paid by the party incurring such
expenses, whether or not such transactions are consummated.
ITEM 4. THE SOLICITATION OR RECOMMENDATION
RECOMMENDATION OF THE BOARD OF DIRECTORS. The Board of Directors (with Mr.
Robert W. Nolan, Sr. not participating solely because of his interest in the
transaction) unanimously approved the Merger Agreement and the transactions
contemplated thereby and determined that each of the Offer and Merger is fair
to, and in the best interests of, the stockholders of the Company. The Board
(again with Mr. Robert W. Nolan, Sr. not participating solely because of his
interest in the transaction) unanimously recommends that all holders of Shares
accept the Offer and tender their Shares pursuant to the Offer.
BACKGROUND OF THE OFFER
In April of 1995, Robert W. Nolan Sr., President and Chief Executive
Officer of the Company, Theodore Schroeder, Vice President, Sales and Marketing
for the Company and Euan Menzies, the then President and Chief Executive Officer
of Research Institute of America Inc. ("RIA Inc."), an indirect wholly owned
subsidiary of Parent, had a brief telephone conversation regarding the market
for tax and accounting software
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and the positioning of their respective companies in such market. On May 1,
Stephen Wahrlich, Vice President of Business Development for RIA Inc., met with
Mr. Nolan and engaged in a general discussion of the marketplace, including
various competitive factors and general market direction.
On October 3, Messrs. Wahrlich, Ronald Aylward, Chairman of Aylward and
Associates, a business consultant to the Company, Nolan and David Shea, Senior
Vice President of Business Development for the Research Institute of America
Group ("RIAG"), one of several businesses comprising TF&PPG, met at the main
offices of RIA, Inc. in New York City. At this meeting, further discussion about
the market for tax and accounting software, the Company's vision and
philosophies and potential joint working relationships between the Company and
RIAG took place. In anticipation of further discussions, the Company and RIA
Inc. entered into a Mutual Nondisclosure Agreement dated as of October 10, 1995
(the "Nondisclosure Agreement") regarding any confidential information
concerning the operations of their respective businesses that might be
discussed.
On October 20, Messrs. Menzies (now President and Chief Executive Officer
of RIAG), Shea, Wahrlich, Nolan Sr., Aylward, Robert Nolan, Jr., Vice President
Operations and Product Development, Schroeder and Charles Wilson, Executive Vice
President, Treasurer and Secretary of the Company met at the main offices of the
Company in St. Louis, Missouri. At the meeting, executives of the Company
presented their vision for future growth of the market for tax and accounting
software and plans for the Company's future. The group discussed whether those
plans were consistent with the vision of RIAG and whether the pursuit of a
possible business relationship between the companies would be fruitful. At the
conclusion of this meeting, Messrs. Menzies, Nolan Sr., Shea, Wahrlich and
Aylward met separately to discuss further the possibilities of a closer working
relationship between the Company and RIAG.
On October 25, Mr. Menzies telephoned Mr. Nolan Sr. to indicate that RIAG
was interested in entering into exploratory discussions with the Company
regarding the acquisition of the Company and to discuss the potential range of
purchase prices that RIAG might be willing to offer to acquire the Company.
On October 26, Messrs. Menzies and Shea initiated a conference call with
Messrs. Nolan Sr. and Wilson to further discuss a possible acquisition of the
Company and a potential range of values for the Company.
On November 10, Messrs. Nolan Sr. and Aylward for the Company and Messrs.
Shea and Menzies of RIAG met to discuss a potential acquisition price. Numerous
meetings were held during the day and the parties agreed to perform further work
and analysis regarding the operations of the Company.
On November 12, Mr. Shea met with Messrs. Nolan Sr. and Wilson at the main
offices of the Company in St. Louis, Missouri and discussed the operations of
the Company, past and current financial performance and projections for
operations for the current year.
On November 15, Messrs. Menzies and Nolan Sr. met at the offices of the
Company and continued their discussions concerning the operations of the Company
and a possible acquisition of the Company by RIAG.
On November 28, Messrs. Menzies, Shea, Nolan Sr., Wilson, Aylward and
representatives from Peper, Martin, Jensen, Maichel and Hetlage ("Peper") and
Price Waterhouse, legal counsel and auditors, respectively, for the Company, met
at the offices of Price Waterhouse in St. Louis to discuss the process and
schedule for pursuing a possible merger between RIAG and the Company.
On December 1, 4 and 5 various representatives of the parties met in St.
Louis and Seattle, Washington to discuss further the operations of the Company.
On December 7, Messrs. Menzies, Shea, Nolan Sr., Wilson, Schroeder, Nolan,
Jr., Aylward, and representatives of Peper and legal and human resources
advisers for RIAG met at the offices of Peper to discuss the operations of the
business and steps necessary to pursue a merger between RIAG and the Company,
including a possible tender offer for substantially all the outstanding Shares
of the Company.
Subsequent to the December 7 meeting, drafts of agreements with respect to
the proposed transaction were prepared by Shearman & Sterling, outside counsel
for the Purchaser.
Subsequent to the receipt of these drafts agreements between December 8 and
December 15, numerous meetings were held in person and by telephone between
Messrs. Menzies, Shea, Nolan Sr., Wilson and representatives of Peper regarding
the terms of a possible merger and the form and content of the draft agreements.
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On December 14, 1995, a special committee of the Board of Directors (the
"Special Committee") of the Company was formed, consisting of Messrs. Robert C.
Chlebowski and Irwin M. Jarett, Ph.D., the non-employee directors of the
Company. At a meeting held on December 14, 1995, the Special Committee discussed
the proposed merger and voted unanimously to recommend to the Board that the
Board approve the merger of the Company and Purchaser, subject to resolution of
the remaining business and legal issues in the draft Merger Agreement.
On December 14, the members of the Board of Directors of the Company met at
the offices of Peper in St. Louis to discuss the proposed merger. Late in the
afternoon at this meeting, the Board unanimously (with Mr. Nolan, Sr. not
participating solely because of his interest in the transaction) voted to
approve the merger of the Company and Purchaser, subject to resolution of the
remaining business and legal issues in the draft Merger Agreement.
From December 14 through December 19, representatives of the parties and
their respective counsels continued to work to finalize the terms of the Merger
Agreement and the Stock Purchase Agreement.
Late in the evening on December 19, the Merger Agreement and the Stock
Purchase Agreement were executed. On the morning of December 20, the Company
issued a press release to announce publicly the transaction.
REASONS FOR THE BOARD'S CONCLUSIONS
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that all stockholders tender their Shares pursuant to the
Offer, the Board considered a number of factors including, without limitation,
the following:
(i) the terms and conditions of the Offer and the Merger Agreement;
(ii) various presentations by management of the Company at Board
meetings held on and before December 14, 1995 regarding the historical
financial performance and condition of the Company, including the prospects
if the Company were to remain independent and the various uncertainties
associated with those prospects and current industry, economic and market
conditions;
(iii) the prospects for obtaining additional financing for the
proposed activities of the Company in pursuit of its business objectives
such as making acquisitions, including the difficulty of accessing the
public capital markets at the present time based on the Company's recent
financial history;
(iv) the business and strategic objectives of the Company, and the
attendant risks involved in achieving these objectives, including the
continued expansion and development of the product line to correctly
position the Company's product offerings in a rapidly changing
technological environment;
(v) the risk, through the potential inability of the Company to
maintain adequate product development and market penetration, of decreasing
the value of the Company to a potential single acquiror interested in the
Company as a whole;
(vi) the relative attractiveness of the Company to other potential
acquirors in view of the strategic and synergistic nature of the proposed
combination with Thomson U. S. Holdings Inc., including the extent and
nature of other contacts with potential acquirors during the past year;
(vii) the relationship of the Offer price to historical market price
of the Shares over the last two years, including that the $6.75 per share
Offer price represents a premium of over 150% over the closing price for
the shares of $2 5/8 on December 13, 1995 (the day immediately preceding
the consideration of the proposed merger of the Company with the Purchaser
by the Board);
(viii) the financial and valuation analyses presented to the Board by
Fister & Associates, Inc. ("Fister"), financial advisor to the Company, at
the Board Meeting on December 14, 1995, including the market prices and
financial data relating to other companies engaged in businesses considered
comparable to the Company, and the prices and premiums paid in recent
selected acquisitions of companies considered by Fister to be comparable to
that of the Company;
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(ix) the opinion of Fister that the consideration to be received by
the stockholders of the Company, pursuant to the Offer and the Merger, is
fair to the Company's stockholders from a financial point of view. A
written opinion (the "Opinion") by Fister dated December 19, 1995, which
sets forth a description of the factors considered, the assumptions made
and the scope of review undertaken, is attached as Exhibit 4 and is
incorporated by reference herein. STOCKHOLDERS ARE URGED TO READ THE
OPINION CAREFULLY AND IN ITS ENTIRETY.
(x) the approval of the Per Share Amount by a Special Committee of the
Board consisting of the independent directors and the recommendation of the
Special Committee that the Board approve the Merger Agreement and recommend
that all shareholders tender their shares in response to the Offer;
(xi) the likelihood that the proposed merger would be consummated,
including the experience, reputation and financial condition of Parent;
(xii) the effect of the transaction on the Company's relationships
with its employees and customers;
(xiii) the fact that pursuant to the Merger Agreement the Company is
not prohibited from responding to any unsolicited proposal made in writing
to acquire the Company pursuant to a merger, consolidation, share exchange,
business combination, or other similar transaction or to acquire all or
substantially all of the assets of the Company, to the extent the Board,
after consultation with independent legal counsel, determines in good faith
that such action is in the best interest of its stockholders and consistent
with the Board's fiduciary duty to the Company's stockholders under
Delaware Law; and
(xiv) the termination provisions of the Merger Agreement, which were a
condition to Parent's proposal, providing that Parent could be entitled to
a fee of $1 million and reimbursement of expenses up to $500,000 upon the
termination of the Merger Agreement under certain circumstances.
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, if it purchases a sufficient number of Shares
to satisfy the Minimum Condition, will have sufficient voting power to approve
the Merger without the affirmative vote of any other stockholder of the Company.
While consummation of the Offer would result in the remaining stockholders 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 stockholders of the Company other than Parent to
participate in the potential future growth prospects of the company. The Board,
however, believed that this 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.
OPINION OF FINANCIAL ADVISOR
Fister was retained by the Company to provide an evaluation of the
fairness, from a financial point of view, to the Company's stockholders of the
consideration to be received in the Offer and the Merger.
On December 14, 1995, in connection with the evaluation of the proposed
terms of the Offer, the Merger and the Merger Agreement by the Special Committee
and the Board, Fister made a presentation to the Board with respect to the
results of the valuation study conducted by Fister. At that time, Fister
reviewed the information and financial data described below with the Board and
rendered its oral opinion as of that date that the proposed consideration to be
offered to the Company's stockholders in the Offer and the Merger was fair from
a financial point of view to the stockholders of the Company. A copy of Fister's
written opinion dated December 19, 1995, which sets forth assumptions made,
matters considered and limitations of the review undertaken by Fister is
attached as Exhibit 4 to this Schedule 14D-9 and is incorporated herein by
reference. Stockholders are urged to read the opinion carefully and in its
entirety.
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No limitations were imposed by the Company or its Board on the scope of
Fister's investigation or the procedures to be followed by Fister in rendering
the Opinion, except that Fister did not solicit any proposals from any third
party with respect to a purchase of all or a part of the Company's business.
Fister was not requested to and did not make any recommendation to the Board as
to the form or amount of consideration to be offered to the Company's
stockholders in the Offer or the Merger, which was determined through
negotiations between the Company and Parent. In arriving at the Opinion, Fister
did not ascribe a specific range of values to the Company, but made its
determination as to the fairness, from a financial point of view, of the
consideration to be received by the Company's stockholders in the Offer and the
Merger on the basis of the financial and comparative analyses described below.
The Opinion is directed solely to the Board and is not intended to be and does
not constitute a recommendation to any Company stockholder as to whether to
accept the consideration to be offered to such stockholder in connection with
the Offer or the Merger. The Opinion does not in any manner address the
Company's underlying business decision to proceed with or effect the Offer or
the Merger.
In arriving at the Opinion, Fister reviewed and analyzed: (1) publicly
available information concerning the Company which Fister believed to be
relevant to its inquiry, including its Form 10-K dated January 31, 1995, and its
Form 10-Q dated October 31, 1995; (2) financial and operating information with
respect to the business, operations, and prospects of the Company furnished to
it by the Company (including, without limitations, projections for the fiscal
years 1995-2000 prepared by management of the Company); (3) a trading history of
the Company's common stock and comparison of that trading history with those of
other companies which it deemed relevant; (4) a comparison of the historical
financial results and present financial condition of the Company with other
companies it deemed relevant; (5) an analysis of the computer software and
services industries; and (6) an analysis of sale transactions in the software
industry during 1995. In addition, Fister had discussions with management of the
Company concerning its business, operations, assets, financial condition and
prospects and undertook such other studies, analyses, and investigations as it
deemed appropriate.
In arriving at the Opinion, Fister assumed and relied upon the accuracy and
completeness of the financial and other information used by it without assuming
any responsibility for independent verification of such information and further
relied upon the assurances of management of the Company that they were not aware
of any facts that would make any such information inaccurate or misleading. For
the purpose of its analysis, Fister also reviewed the financial projections of
the Company which, upon advice of the Company, Fister assumed were reasonably
prepared on a basis reflecting the best then available estimates and judgments
of the management of the Company as to the future financial performance of the
Company. In arriving at the Opinion, Fister did not conduct a physical
inspection of the properties and facilities of the Company and did not make nor
obtain any evaluations or appraisals of the assets or liabilities of the
Company. The Opinion was necessarily based upon market, economic and other
conditions as they existed on, and could be evaluated as of, the date of the
presentation to the Board of Directors of the Company.
The following paragraphs summarize the financial and comparative analysis
performed by Fister and presented to the Board in connection with the December
14, 1995 oral opinion. The summary does not represent a complete description of
the analyses and studies conducted by Fister. The information presented below is
based on the financial condition of the Company as of a date or dates shortly
before the December 14, 1995 meeting of the Board of Directors of the Company.
(A) COMPARABLE MARKET VALUE AND TRANSACTION ANALYSIS. Fister analyzed the
valuations accorded other companies in the software industry on the basis of
recent acquisitions and the market price of publicly traded companies. Weighting
the results of these analyses, Fister developed a range of values for the common
stock of the Company, taking into account the repayment of the debt and the
redemption of (but not the conversion of) the Company's outstanding shares of
Series A Preferred Stock and certain other expenses.
Fister developed three separate representative valuations for the Company
as described below.
(1) Transactions in which both parties were public companies. This analysis
was performed by selecting other companies involved in domestic merger or
acquisition transactions in 1995 according to the following criteria: (i) both
companies were publicly traded, (ii) the acquired company was classified under
the Standard
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Industry Code ("SIC") as either Prepackaged Computer Software (SIC 7372) or
Computers, Peripheral Equipment & Software (SIC 5045), and (iii) where each of
the ratios of the price to earnings, book value, and cash flow was greater than
zero. Seven transactions were selected on the basis of these criteria: (i)
Platinum Technology Inc. and Altai, Inc., (ii) Computer Associates
International, Inc. and Legent Corp., (iii) IBM Corp. and Lotus Development
Corp., (iv) Mentor Graphics Corp. and Microtec Research Group, (v) Sybase Inc.
and Powersoft Corp., (vi) Platinum Technology Inc. and Trinzic Corp., and (vii)
Silicon Graphics and Wavefront Technologies Inc. After determining the
price/earnings and price/book ratios for each of these transactions, Fister
applied the resulting ratios to the financial measures of the Company's
performance. Fister averaged the highest and lowest of the valuations calculated
in this manner to obtain a representative valuation.
(2) Transactions in which at least one party was a public company. This
analysis was performed by selecting other companies involved in domestic merger
or acquisition transactions in 1995 according to the following criteria: (i) the
acquiror was a publicly traded company and the acquiree was either publicly
traded or private, (ii) the acquired company was classified under the Standard
Industry Code ("SIC") as either Prepackaged Computer Software (SIC 7372) or
Computers, Peripheral Equipment & Software (SIC 5045), and (iii) where each of
the ratios of the price to earnings, book value, and cash flow was greater than
zero. Thirteen transactions were selected on the basis of these criteria. After
determining the price/earnings and price/book ratios for each of these
transactions, Fister applied the resulting ratios to the financial measures of
the Company's performance. Fister selected those transactions believed to be
comparable to the present transaction and utilized the (a) the price/earnings
ratio and the price/book value ratio, and (b) the price/earnings ratio alone to
obtain representative valuations.
(3) Valuation of Representative Publicly Traded Companies. Fister used the
Value Line Computer Software and Services Industry Report (the "Report") as
representative of the current market valuation for companies believed to be
comparable to the Company. After determining the price/ earnings and price/book
value ratio for these companies, Fister determined valuations of the Company
utilizing (a) the price/earnings ratio and the price/book ratio, and (b) the
price/earnings ratio alone. Fister computed an average of the valuations using
(a) all companies in the Report (8 companies) and (b) only those companies in
the Report with revenues less than $500 million per year (3 companies).
Fister utilized each of these representative valuations and weighted each
according to its judgment as to the validity of that procedure in establishing
an objective valuation of the Company's common stock in the current business
situation of the Company given its financial performance and competitive
position together with current market and economic conditions as they existed on
the date of the Opinion. On the basis of these analyses, Fister determined an
estimated comparable market value for the Company using (a) the figures
developed in each of the three analyses described above using the price/earnings
and price/book ratios, and (b) the figures developed in each of the three
analyses described above using the price/earnings ratio alone. After deducting
the amount of debt owed by the Company, the cost to redeem the Company's
outstanding shares of Series A Preferred Stock, and certain other expenses,
Fister calculated the value of the Company's common stock to be in the range of
$2.94 to $4.36 per share.
(B) DISCOUNTED CASH FLOW ANALYSIS. Fister considered using a discounted
cash flow analysis to analyze the current value to a financial buyer of a
business activity. However, Fister determined not to use a discounted cash flow
analysis because the operating history of the Company in the software business
was, in its judgment, insufficient to provide a reliable basis for the
projections and estimates required for a such an analysis.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial and comparative analysis
and the application of those methods to the particular circumstances. In
arriving at the Opinion, Fister did not attribute any particular weight to any
analysis or factor considered by it, but rather made qualitative judgments as to
the significance and relevancy of each analysis and factor. Accordingly, Fister
believes that the analyses must be considered as a whole and that considering
selected portions of its analyses and of the factors considered by it, without
considering all analyses and factors, could create an incomplete or misleading
view of the process underlying the Opinion. Fister made
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<PAGE> 16
certain assumptions as to industry performance, general business and economic
conditions, and other matters that are beyond the Company's control. Any
estimates contained in these analyses relating to the value of businesses do not
purport to be appraisals or to reflect the prices at which businesses actually
may be sold.
Fister is a private investment banking firm and is regularly engaged in the
valuation of businesses and securities in connection with mergers, acquisitions,
underwriting, private placements and valuations for corporate, estate, and other
purposes.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company retained Fister to act as its financial advisor with respect to
Merger and the transactions contemplated in the Merger Agreement, and to provide
an analysis and opinion as to the fairness, from a financial standpoint, of the
consideration to be received by shareholders. Pursuant to a letter agreement
dated December 5, 1995 between the Company and Fister, the Company will pay
Fister a fee of approximately $10,000.
Except as disclosed herein, neither the Company nor any person acting on
its behalf currently intends to employ, retain, or compensate any other person
to make solicitations or recommendations to security holders on its behalf
concerning the Offer or the Merger.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
THE STOCK PURCHASE AGREEMENT
(a) The following is a summary of the Stock Purchase Agreement, a copy of
which is filed as an Exhibit to this Schedule 14D-9. Such summary is qualified
in its entirety by reference to the Stock Purchase Agreement.
Parent, Purchaser and Robert W. Nolan, Sr. (the "Stockholder") have entered
into the Stock Purchase Agreement pursuant to which the Stockholder has agreed
to sell to the Purchaser 1,082,570 Shares at a per Share price equal to the per
Share price payable in the Offer. In addition, the Stockholder has appointed
Purchaser, or any nominee of Purchaser, during the term of the Stock Purchase
Agreement as his attorney and proxy to vote each of the Shares subject to such
agreement (i) in favor of the Merger Agreement and the transactions contemplated
thereby, (ii) against any other proposal for the acquisition of the Company or
its assets or a merger or other business combination of the Company with any
third party, and (iii) against any other proposal that would, or is reasonably
likely to, result in any of the conditions to Purchaser's obligations under the
Merger Agreement not being fulfilled.
In addition, the Stockholder has agreed not to (i) take any action or omit
to take any action that is inconsistent with compliance by the Company with the
terms of the Merger Agreement and (ii) without the prior written consent of
Purchaser, (x) sell, tender pursuant to the Offer or any other tender offer,
pledge, encumber, assign, transfer, exchange or otherwise dispose of, or enter
into any contract, option or other arrangement or understanding with respect to
the sale, tender, pledge, encumbrance, assignment, transfer, exchange or
disposition of, any of his Shares; (y) acquire any additional shares of Company
Common Stock or warrants, options or other rights to purchase any Shares; or (z)
grant any proxies (other than pursuant to the Stock Purchase Agreement) with
respect to his Shares, deposit any of his Shares into a voting trust or enter
into a voting agreement with respect to any of his Shares.
The obligations of the Stockholder and Purchaser to consummate the purchase
and sale contemplated by the Stock Purchase Agreement are subject to (i) any
waiting periods under the HSR Act applicable to the purchase of the Shares
having been expired or terminated, (ii) there being no preliminary or permanent
injunction or other order by any court of competent jurisdiction prohibiting or
otherwise restraining such purchase and sale, (iii) the Stockholder having
continued to be employed as Chief Executive Officer of the Company with duties
and responsibilities comparable to the duties and responsibilities he has
performed in the past and having entered into an employment agreement (described
below) with the Company substantially in the form attached as an exhibit to the
Stock Purchase Agreement, (iv) no event or events shall have occurred
15
<PAGE> 17
or be reasonably likely to occur which have, or could reasonably be expected to
have, a Material Adverse Effect (as defined in the Stock Purchase Agreement) on
the Company, and (v) all conditions to Purchaser's obligations to accept for
payment the Shares tendered pursuant to the Offer having been satisfied.
The Stock Purchase Agreement contains various customary representations and
warranties of the parties thereto, including a representation by the Stockholder
that all of the representations and warranties of the Company in the Merger
Agreement are true, complete and correct.
The Stock Purchase Agreement provides that the Stockholder shall indemnify
Parent and any subsidiary or affiliate of Parent, and any director, officer or
employee of the foregoing, against and hold each of them harmless from all
losses arising out of the breach of any representation or warranty or of any
covenant or agreement of the Stockholder contained in the Stock Purchase
Agreement. The Stock Purchase Agreement also provides that Parent and Purchaser,
jointly and severally, shall indemnify the Stockholder against and hold the
Stockholder harmless from all losses arising out of the breach of certain
representations and warranties and of any covenant or agreement of Parent or
Purchaser contained in the Stock Purchase Agreement. The maximum amount of loss
which may be recovered by Parent from the Stockholder is an amount equal to the
aggregate price paid to the Stockholder for his Shares, except that for a breach
of his representation that the Company's representations and warranties
contained in the Merger Agreement are true, complete and correct the maximum
amount is $2,000,000. The maximum amount of loss which may be recovered by the
Stockholder from Parent and Purchaser is an amount equal to the aggregate
purchase price paid to the Stockholder for his Shares.
(b) To the best of the Company's knowledge, to the extent permitted by
applicable securities laws, rules or regulations, each executive officer,
director, and affiliate of the Company (other than Mr. Robert W. Nolan, Sr., who
is selling his shares to the Purchaser pursuant to the Stock Purchase Agreement
as described in subsection (a) hereof) currently intends to tender all Shares
over which he or she has sole dispositive power to Purchaser pursuant to the
Offer.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTION BY SUBJECT COMPANY
(a) 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; (ii) a purchase, sale or
transfer of a material amount of assets by 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 Items 3(b) or 4 above, there are no
transactions, Board resolutions, agreements in principle or signed contracts in
response to the Offer that relate to or would result in one or more of the
events referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The Information Statement attached on Schedule I hereto is being furnished
in connection with the possible designation by the Purchaser, pursuant to the
Merger Agreement, of certain persons to be appointed to the Board other than at
a meeting of the Company's stockholders.
16
<PAGE> 18
ITEM 9. MATERIAL TO FILED AS EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT NO.
- ------------
<S> <C> <C>
Exhibit 1 -- Letter to Stockholders of the Company dated December 27, 1995.*
Exhibit 2 -- Agreement and Plan of Merger, dated as of December 19, 1995, among Thomson U. S.
Holdings, Inc., SCS Subsidiary, Inc., and SCS/Compute, Inc.
Exhibit 3 -- Engagement Letter dated December 5, 1995 between the Company and Fister &
Associates, Inc.
Exhibit 4 -- Opinion of Fister & Associates, Inc. dated December 19, 1995.*
Exhibit 6 -- Stock Purchase Agreement dated as of December 19, 1995
Exhibit 7 -- Form of Employment Agreement between Robert W. Nolan, Sr. and the Company,
including, as an exhibit thereto, the form of Consulting Agreement between
Robert W. Nolan, Sr. and the Company.
Exhibit 8 -- Mutual Nondisclosure Agreement dated October 10, 1995 between the Company and
RIA Inc.
Exhibit 9 -- Press Release issued by the Company, dated December 20, 1995
</TABLE>
- ---------------
* Included in Schedule 14D-9 mailed to stockholders.
17
<PAGE> 19
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.
SCS/Compute, Inc.
/s/ ROBERT W. NOLAN, SR.
Dated: December 27, 1995 --------------------------------------
Robert W. Nolan, Sr.
Chairman of the Board and
Chief Executive Officer
18
<PAGE> 20
SCHEDULE I
SCS/COMPUTE, INC.
2252 Welsch Industrial Court
Saint Louis, Missouri 63146
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
NO VOTE OR OTHER ACTION OF THE COMPANY'S STOCKHOLDERS IS REQUIRED IN
CONNECTION WITH THIS INFORMATION STATEMENT. NO PROXIES ARE BEING SOLICITED AND
YOU ARE REQUESTED NOT TO SEND THE COMPANY A PROXY.
This Information Statement is being mailed on or about December 27, 1995 as
a part of the Company's Solicitation/Recommendation Statement on Schedule 14D-9
(the "Schedule 14D-9") to the holders of record of the Shares at the close of
business on or about December 15, 1995. You are receiving this Information
Statement in connection with the possible election of persons designated by the
Purchaser to a majority of the seats on the Board of Directors of the Company.
The Merger Agreement requires the Company to use its reasonable best efforts to
cause the Purchaser Designees (as defined below) to be elected to the Board of
Directors under the circumstances described therein. This Information Statement
is required by Section 14(f) of the Exchange Act and Rule 14f-1 thereunder. See
"Board of Directors and Executive Officers 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. Capitalized terms used herein and not
otherwise defined herein shall have the meaning set forth in the Schedule 14D-9.
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on
December 27, 1995. The Offer is scheduled to expire at midnight, New York City
time, on Thursday, January 25, 1996 unless the Offer is extended.
Following the election of the Purchaser Designees and prior to the
consummation of the Merger, any amendment of the Merger Agreement or the
Certificate 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 the acts of Parent or the Purchaser
or waiver of any of the Company's rights thereunder shall require the
concurrence of a majority of the directors of the Company who are neither (i)
designees of the Purchaser nor (ii) employees of the Company.
The information contained in this Information Statement concerning the
Purchaser and the Purchaser Designees has been furnished to the Company by the
Purchaser, and the Company assumes no responsibility for the accuracy or
completeness of such information.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The shares of Common Stock, par value $.10 per share (the "Shares") are the
only class of voting securities of the Company outstanding. Each Share is
entitled to one vote. As of December 19, 1995 there were 2,571,977 Shares
outstanding. The Board of Directors currently consists of four members. Each
director holds office until such director's successor is elected and qualified
or until such director's earlier resignation or removal.
19
<PAGE> 21
RIGHT TO DESIGNATE DIRECTORS; THE PURCHASER DESIGNEES
Pursuant to the Merger Agreement, promptly upon the purchase by the
Purchaser of Shares pursuant to the Offer or the Stock Purchase Agreement, and
from time to time thereafter, the Purchaser shall be entitled to designate up to
such number of directors (the "Purchaser Designees"), rounded up to the next
whole number, on the Company's Board of Directors as shall give the Purchaser
representation 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 the Purchaser or any affiliate of the Purchaser bears to the total
number of Shares then outstanding, and the Company shall, at such time, promptly
take all actions necessary to cause the Purchaser Designees to be elected as
directors of the Company, including increasing the size of the Board or securing
(to the extent possible) the resignations of incumbent directors or both. At
such times, the Company shall use its reasonable best efforts to cause persons
designated by the Purchaser to constitute the same percentage as persons
designated by the Purchaser shall constitute of the Board of each committee of
the Board, in each case only to the extent permitted by applicable law.
Notwithstanding the foregoing, until the earlier of (i) the election or
appointment of the Purchaser's Designees to the Board and (ii) the Effective
Time, the Company shall use its reasonable best efforts to ensure that all of
the members of the Board of Directors and each committee of the Board of
Directors as of the date of the Merger Agreement who are not employees of the
Company shall remain members of the Board and of such committees.
The Purchaser has informed the Company that each of W. Michael Brown, Nigel
R. Harrison, Andrew G. Mills and David J. Hulland have consented to act as a
director. The information on Schedule I to Purchaser's Offer to Purchase with
respect to Messrs. Brown, Harrison, Mills and Hulland, a copy of which is being
mailed to the Company's stockholders together with this Schedule 14D-9, is
incorporated herein by reference.
It is expected that the Purchaser Designees may assume office at any time
following the purchase by the Purchaser of a majority of the Shares pursuant to
the Offer, which purchase cannot be earlier than midnight January 25, 1996, and
that, upon assuming office, the Purchaser Designees will thereafter constitute
at least a majority of the Board.
CURRENT DIRECTORS
The current directors of the Company are as follows:
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION AND BUSINESS OR PROFESSIONAL DIRECTOR
NAME AND AGE EXPERIENCE DURING THE PAST FIVE YEARS SINCE
- ------------------------------ ------------------------------------------------- --------
<S> <C> <C>
Robert C. Chlebowski, 47...... President, St. Louis Leasing Corporation 1993
Irwin M. Jarett, Ph. D., 65... Chief Executive Officer, Graphic M*I*S, L.P. 1993
Robert W. Nolan, Jr., 30...... Vice President Operations and Product 1993
Development, SCS/Compute, Inc.
Robert W. Nolan, Sr., 52...... Chairman, President and Chief Executive Officer, 1981
SCS/Compute, Inc.
</TABLE>
ROBERT A. CHLEBOWSKI is the President of St. Louis Leasing Corporation, a
computer leasing concern, a position he has held since 1986. He was named St.
Louis' Entrepreneur of the Year in 1992 by Ernst & Young, Merrill Lynch and Inc.
Magazine. He began his career in the leasing industry as a regional marketing
representative in 1978 for OPM Leasing. Mr. Chlebowski was appointed an
independent director of the Company on July 1, 1993, and has served in that
capacity since then. His present term expires in 1997. He is also a director of
Innovative Controls Systems, Inc. and Event Technologies.
DR. IRWIN M. JARETT earned a Ph.D. in Accounting and Management from
Louisiana State University and is co-founder and Chief Executive Officer of
Graphic M*I*S ("GMIS"), a Chicago-based software development and system
consulting firm, a position he has held since 1984. He is an internationally
known authority in computer graphics with 37 years of experience in accounting,
computers and information systems
20
<PAGE> 22
consulting and is the author of Financial Reporting Using Computer Graphics
published in 1993 by John Wiley and Sons. Dr. Jarett was appointed as an
independent director of the Company on October 7, 1993 and has served in that
capacity since that time. His present term expires in 1998.
ROBERT W. NOLAN, JR. has been employed by the Company since 1987. He served
in various marketing and sales positions from 1987 to 1989. Mr. Nolan, Jr. was
appointed Director of Eastern Division Operations in 1990 and was appointed Vice
President of Operations in May 1991, and Vice President of Product Development
in January 1993. He became a Director of the Company in March of 1993. His
present term expires in 1996. Mr. Nolan, Jr. is the son of Mr. Nolan, Sr.
ROBERT W. NOLAN, SR., a certified public accountant and co-founder of the
Company, has served as a Director of the Company since its formation in February
1981. Since April 1990, Mr. Nolan has served as the Chairman of the Board of
Directors. He is also serving as the Company's Chief Executive Officer, a
position he has held since September 1989. In past years, Mr. Nolan has served
as Treasurer of the Company and in 1992 resumed the duties of President, a
position he previously held from 1981 to 1990. He was re-elected as a director
for a three-year term at the Company's Annual Meeting held on June 29, 1994,
therefore, his present term expires in 1997.
BOARD COMMITTEES
The Board has established two permanent committees of the Board, the Audit
Committee and the Compensation Committee. The Board does not have a Nominating
Committee and the entire Board performs the function of a nominating committee.
The Audit Committee, composed of Mr. Chlebowski and Dr. Jarett, recommends
the appointment of a firm of independent public accountants to act as
independent auditor for the Company and reviews with the firm approved by the
shareholders auditing arrangements, scope of examination, the results of the
audit, the fees, and any problems identified in the system of internal
accounting controls. The Audit Committee met one time during fiscal 1994 and one
time thus far in fiscal 1995.
The Compensation Committee, composed of Mr. Nolan, Sr., Mr. Chlebowski and
Dr. Jarett, makes recommendations to the Board regarding salaries of officers
(including employee directors), administers the Company's Stock Option Plan and
in that capacity grants options subject to approval by the Board, reviews
salaries of key employees, and generally reviews and recommends any compensation
program affecting officers and key employees. The Compensation Committee met
twice during fiscal 1994 and five times thus far in fiscal 1995.
ATTENDANCE AT MEETINGS
During fiscal 1994 the Board of Directors held eight meetings, including
both regularly scheduled meetings and special meetings. All directors of the
Company attended more than 75% of the aggregate of all Board meetings and all
meetings of Committees of which they were members.
DIRECTORS' FEES
Each member of the Board of Directors who is not a Company employee
receives $1,500 per quarter for his services as a director and $600 for each
Board of Directors meeting attended. Additionally, such persons receive $300 for
each committee meeting attended which is not on the same day as a Board meeting
and $120 for each committee meeting attended which is on the same day as a Board
meeting. The Company pays the travel expenses of directors who are required to
travel to Board and Committee meetings.
21
<PAGE> 23
OFFICERS OF THE COMPANY
The following table provides certain information with respect to the
officers of the Company other than Robert W. Nolan, Sr. and Robert W. Nolan,
Jr., whose respective ages and business experience are described above under the
caption "Current Directors." Officers are appointed annually by the Board of
Directors to serve until their successors are elected and qualify.
<TABLE>
<CAPTION>
NAME AGE OFFICE AND TITLE
- ----------------------------------------- --- -----------------------------------------
<S> <C> <C>
Charles G. Wilson........................ 46 Executive Vice President, Treasurer, and
Secretary
Theodore W. Schroeder.................... 49 Vice President Sales & Marketing
Michael J. Hagenhoff..................... 50 Vice President
</TABLE>
CHARLES G. WILSON, a certified public accountant, has been the Company's
Executive Vice President since May 1990, and Secretary and Treasurer since
October 1989. He was the Vice President -- Finance from 1982 to 1990 and
Controller from 1981 to 1982.
THEODORE W. SCHROEDER joined the Company in August 1992, as Vice President
of Sales and Marketing. From November 1991 to July 1992, Mr. Schroeder held a
senior level marketing position with Electronic Data Systems of Dallas, Texas.
In July 1989, McDonnell Douglas Systems Integration Company appointed him
executive in charge of all worldwide marketing activities. Prior to that, Mr.
Schroeder held a variety of executive sales positions in the technology and
software fields.
MICHAEL J. HAGENHOFF was appointed a Vice President of the Company in March
1988. He served as Vice President of Corporate Mortgage Relocation, a division
of Citicorp Mortgage Inc. from 1986 to 1988. From 1968 to 1986, Mr. Hagenhoff
held various sales and sales management positions for Xerox Corporation and
Citicorp Mortgage.
CERTAIN TRANSACTIONS
The Board of Directors adopted (with Mr. Nolan, Sr. abstaining) a long term
incentive plan (the "LTIP") for Robert W. Nolan, Sr. at the meeting of the Board
of Directors on July 31, 1995. The LTIP was to have been in effect for years
starting February 1, 1995. Under the LTIP, "Stock Price" was defined as the
greater of the mean of the bid and ask price of the Company's Stock on the last
day of the fiscal year and the average price of the daily last sale for the
period February 1 to March 15 following the end of that fiscal year. The LTIP
provides for payment to Mr. Nolan, Sr. of $60,000 in each instance that the
Stock Price exceeds $3.00, $3.50 and $4.00 for the fiscal years ending January
31, 1996, 1997, and 1998 respectively. As described in the next paragraph, on
December 14, 1995, the Board awarded a bonus of $125,000 to Mr. Nolan, Sr. in
lieu of any payments under the LTIP.
At a meeting of the Board of Directors on December 14, 1995, the Board
(with employee directors abstaining as to resolutions in which they had an
interest) awarded bonuses to certain of the executive officers of the Company,
the payment of which is subject to the completion of the Offer and the Merger
described in the Schedule 14D-9 filed by the Company with the Securities and
Exchange Commission. The payees and amounts of such bonuses are as follows: Mr.
Robert W. Nolan, Sr. $125,000; Mr. Robert W. Nolan, Jr. $150,000; Mr. Theodore
W. Schroeder $150,000; and Mr. Charles G. Wilson $150,000.
The Board of Directors of the Company also approved (with employee
directors abstaining as to resolutions in which they had an interest) the
vesting of all options to acquire the Common Stock of the Company then
outstanding but not exercisable. The number of shares covered by the such
options and the holders thereof are as follows: Mr. Robert W. Nolan, Sr. 16,000
shares; Mr. Robert W. Nolan, Jr. 13,333 shares; Mr. Theodore W. Schroeder 13,333
shares, and Mr. Charles G. Wilson 13,333 shares. The options accelerated by this
action of the Board on December 14, 1995, would otherwise have become vested and
exercisable in the years 1996 and 1997.
22
<PAGE> 24
BENEFICIAL OWNERSHIP OF STOCK
The following table and accompanying footnotes set forth information as of
December 20, 1995 regarding all persons known to the Company to be the
beneficial owners of more than five percent of the Common Stock of the Company.
Also set forth is information regarding beneficial ownership of the common Stock
of the Company by the executive officers listed in the Summary Compensation
Table and by all executive officers and directors of the Company as a group.
Except as noted below, the owners have sole voting and investment power with
respect to such shares.
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENTAGE
- ---------------------------------------------------------------- ---------------- ----------
<S> <C> <C>
Robert W. Nolan, Sr............................................. 1,159,170(1) 44.04%
2252 Welsch Industrial Court
St. Louis, Missouri 63146
Nationwide Financial Services, Inc.............................. 188,100(2) 7.31%
One Nationwide Plaza
Columbus, Ohio 43216
Principal Mutual Life Insurance Company......................... (3) (3)
55 High Street
Des Moines, IA 50392-0800
Charles G. Wilson............................................... 51,250(4) 1.97%
Theodore W. Schroeder........................................... 25,000(5) 0.96%
Robert W. Nolan, Jr............................................. 29,300(6) 1.13%
All executive officers and directors as a group (6 persons)..... 1,265,820(7) 46.85%
</TABLE>
Notes:
(1) Includes 60,000 shares which Mr. Nolan, Sr. has exercisable options to
purchase. Includes 16,600 shares held by Mr. Nolan, Sr.'s wife as trustee
under various trusts for their children over which Mr. Nolan, Sr. is deemed
to share voting and investing power but, with respect to which Mr. Nolan,
Sr. disclaims beneficial ownership.
(2) Based on information contained in Amendment No. 2 to Schedule 13D filed
March 12, 1990. Nationwide Financial Services, Inc. is the registered
investment advisor to the record owners of these shares, Nationwide
Separate Account Trust -- Common Stock Fund, and Nationwide Investing
Foundation -- Nationwide Growth Fund which owns 43,100 and 145,000 shares,
respectively. Each such other entity, and Nationwide Financial Services,
Inc., disclaims beneficial ownership of the shares owned of record as
described above.
(3) On April 30, 1994, the Company converted $3.5 million in outstanding
principal balance on its senior secured note with the Principal Mutual Life
Insurance Company (the "Principal") to 100,000 shares of its Series A
Cumulative Preferred Stock (the "Preferred Shares"). The Preferred Shares
carry liquidation and dividend preference over Common Stock, are redeemable
at a premium by the Company until July 1, 1999, and are convertible at any
time by the Principal into 33% of the then outstanding shares of the
Company's common stock. No redemption or conversion has occurred since the
issuance of the Preferred Shares.
(4) Includes 16,250 shares owned by Mr. Wilson and his wife over which he shares
voting and investment power. Includes 5,000 shares owned by Mr. Wilson's
minor children under the Missouri Uniform Gifts to Minors Act. Includes
30,000 shares which Mr. Wilson has exercisable options to purchase.
(5) Includes 20,000 shares which Mr. Schroeder has exercisable options to
purchase. Includes 5,000 shares over which Mr. Schroeder and his wife share
voting and investment power.
(6) Incudes 20,000 shares which Mr. Nolan, Jr. has exercisable options to
purchase. Includes 2,000 shares owned by Mr. Nolan, Jr. and his wife over
which he shares voting and investment power.
23
<PAGE> 25
(7) In addition to those shares designated as beneficially owned by the
directors and executive officers named in the table above, the amount
includes 1,000 shares owned by Robert A. Chlebowski and 100 shares owned by
Dr. Irwin M. Jarett. Mr. Chlebowski and Dr. Jarett are directors who are
not employees of the Company.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During fiscal 1994 and from February 1, 1995 to the present date, Robert W.
Nolan, Sr., Chairman of the Board of Directors, President and Chief Executive
Officer of the Company served on the Compensation Committee of the Board of
Directors.
At May 3, 1995, the Company had advances due from Mr. Nolan, Sr. totaling
$130,974, consisting of a salary advance of $75,000, and other outstanding
advances of $55,974 to companies that were owned by Mr. Nolan, Sr. Mr. Nolan,
Sr. has executed a promissory note in favor of the Company for the outstanding
advances bearing interest at the applicable federal rate maturing on May 15,
1998. No principal payments were made or required to be made through the date of
this Information Statement.
In November 1994, Mr. Nolan, Sr. accepted an invitation to sit on the Board
of Directors of St. Louis Leasing Corporation. Mr. Chlebowski, who is the
chairman of the Company's Compensation Committee, is the president of St. Louis
Leasing Corporation. The Board of Directors of St. Louis Leasing Corporation is
responsible for setting the compensation package for Mr. Chlebowski. Mr. Nolan,
Sr. resigned from the Board of Directors of St. Louis Leasing Corporation on
November 14, 1995.
During fiscal year 1993, the Company entered into a three-year agreement
with GMIS, whereby software developed by GMIS was merged with software developed
by the Company and jointly marketed. Dr. Jarett, a director of the Company, is
co-founder and Chief Executive Officer of GMIS. During fiscal 1994, the Company
paid to GMIS $70,984 pursuant to the terms of the contract. The Board of
Directors of the Company has determined that the contract is immaterial to the
Company, Dr. Jarett, and GMIS, and therefore, does not interfere with Dr.
Jarett's ability to serve as an independent director of the Company.
On January 31, 1994, the Company established an unsecured $1,000,000
line-of-credit bearing an interest rate of 11.75% per annum and maturing on June
1, 1994 with St. Louis Leasing Corporation. The president of St. Louis Leasing
Corporation, Robert A. Chlebowski, is also a director of the Company. This
life-of-credit has been periodically renewed. As of January 31, 1995, and as of
the date of this Information Statement the Company had no outstanding draws on
the line-of-credit.
During the fiscal year beginning February 1, 1995, the Company has entered
into operating leases for computer equipment in the approximate amount of
$60,000 with St. Louis Leasing Corporation, bringing the total of such leases to
an approximate amount of $84,000. These operating leases are entered into in the
normal course of business and at competitive interest rates. Mr. Chlebowski,
President of St. Louis Leasing Corporation, is a director of the Company and
Chairman of the Compensation Committee.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
SCS/Compute, Inc. believes that executive compensation should be linked to
individual and Company performance, and the value delivered to shareholders. The
Company has developed an incentive pay program which provides competitive
compensation for its executive officers and other key employees, with both
short-term and long-term compensation based on Company performance and related
shareholder value.
During fiscal 1992, the Company employed TPF&C, a Towers Perrin Company, to
make a study on executive compensation and present the results of their study to
the Compensation Committee. The TPF&C report was examined, and the Committee
attempted to identify software competitors similar to SCS/Compute, Inc. and
determine the range and nature of compensation provided to management of those
companies. Based thereon, a compensation package was specifically designed for
Robert W. Nolan, Sr. and was adopted effective July 1, 1992. At the time of
adoption of Mr. Nolan, Sr.'s compensation package, the Compensation Committee
consisted of two independent directors and Mr. Nolan, Sr. Mr. Nolan, Sr.
abstained from voting on the adoption of his compensation package.
24
<PAGE> 26
The Committee believes that stock options are an effective long-term
instrument because they focus management's attention on total stockholder return
through share price appreciation. To this end, the Committee recommended, and
the Board approved, the grant of stock options to the executive officers of the
Company during the year ended January 31, 1995 (see "Option Grants in Last
Fiscal Year"). Options were granted to each executive officer based upon
individual and company performance during the fiscal year ended January 31, 1995
as of the date of grant.
In order to retain and motivate key employees, the Company's Board of
Directors adopted an Incentive Compensation Plan (the "Incentive Plan") on July
14, 1986. The Incentive Plan is designed to provide additional performance
incentives to the Company's executive officers. Under the Incentive Plan
effective for fiscal 1994, each participant was eligible to receive a bonus
based upon percentage of the pre-tax, pre-executive bonus profits of the
Company. Amounts earned under the Incentive Plan for the year ended January 31,
1995 are included under the caption "Bonus" in the Summary Compensation Table.
COMPENSATION COMMITTEE
Robert A. Chlebowski, Chairman
Dr. Irwin M. Jarett
Robert W. Nolan, Sr.
SUMMARY COMPENSATION TABLE
The table below shows information concerning the annual and long-term
compensation for services in all capacities to the Company for the past three
fiscal years paid to the chief executive officer and the other executive
officers of the Company whose total annual salary and bonus for fiscal 1994
exceeded $100,000.
<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
--------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
FISCAL COMPENSATION UNDERLYING COMPENSATION
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS (1) OPTIONS (2)
- ----------------------------------- ------ ------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
($) ($) ($) (#) ($)
Robert W. Nolan, Sr................ 1994 250,008 78,523 19,335 24,000 1,806
Chairman, President and 1993 250,008 0 19,000 0 1,841
Chief Executive Officer 1992 227,083 0 29,080 36,000 2,927
Charles G. Wilson.................. 1994 127,917 27,579 0 20,000 1,530
Executive Vice President, 1993 125,000 0 0 0 1,400
Secretary and Treasurer 1992 118,750 0 5,400 0 2,507
Theodore W. Schroeder.............. 1994(3) 118,747 36,829 0 20,000 573
Vice President 1993 109,992 0 0 0 574
Sales & Marketing 1992 50,413 0 0 0 126
Robert W. Nolan, Jr................ 1994 86,250 27,579 0 20,000 589
V.P. Operations and 1993 74,000 0 0 0 523
Product Development 1992 69,000 0 0 0 992
</TABLE>
Notes:
(1) Includes auto allowance paid as follows: Mr. Nolan, Sr., $8,100 in 1992; Mr.
Wilson, $5,400 in 1992. Includes professional fees associated with personal
tax planning and compliance paid by the Company on behalf of Mr. Nolan,
Sr., $19,335 in 1994, $19,000 in 1993 and $20,980 in 1992.
(2) In fiscal 1994, includes Company matching contributions to the SCS/Compute,
Inc. 401(k) Plan as follows: Mr. Nolan, Sr., $915; Mr. Wilson, $913; Mr.
Nolan, Jr., $180. In fiscal year 1994, includes life insurance premiums
paid under the Company's employee benefit plans as follows: Mr. Nolan, Sr.,
$891; Mr. Wilson, $617; Mr. Schroeder, $573; Mr. Nolan, Jr., $409.
(3) Mr. Schroeder joined the Company on August 17, 1992.
25
<PAGE> 27
STOCK OPTIONS
OPTION GRANTS IN LAST FISCAL YEAR
The table below shows information concerning the grants of stock options
pursuant to the SCS/Compute, Inc. Stock Option Plan (the "Plan") during fiscal
1994 to the named executive officers. No Stock Appreciation Rights have ever
been granted by the Company.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
- ---------------------------------------------------------------------------------------- ANNUAL RATES OF
PERCENT OF STOCK PRICE
NUMBER OF TOTAL APPRECIATION
SECURITIES OPTIONS FOR OPTION
UNDERLYING GRANTED TO TERM**
OPTIONS EMPLOYEES EXERCISE OR ----------------
GRANTED IN FISCAL BASE PRICE EXPIRATION 5% 10%
NAME (#)* YEAR ($/SH) DATE ($) ($)
- -------------------------------- ---------- ---------- ----------- ---------- ------ ------
<S> <C> <C> <C> <C> <C> <C>
Robert W. Nolan, Sr............. 24,000 28.57% 2.80 5/16/99 18,566 41,026
Charles G. Wilson............... 20,000 23.81% 2.80 5/16/99 15,472 34,189
Theodore W. Schroeder........... 20,000 23.81% 2.80 5/16/99 15,472 34,189
Robert W. Nolan, Jr............. 20,000 23.81% 2.80 5/16/99 15,472 34,189
</TABLE>
Notes:
* The options granted to the above executive officers were the only options
granted under the Plan during fiscal 1994. The options granted become
exercisable on May 16, 1995, May 16, 1996, and May 16, 1997 in equal
increments.
** The dollar amounts under these columns are the result of calculations at the
5% and 10% rates set by the Securities and Exchange Commission, and
therefore are not intended to forecast possible future appreciation, if
any, of the stock price of the Company. The Company did not use an
alternative formula for a grant date valuation, as the Company is not aware
of any formula which will determine with reasonable accuracy a present
value based on future unknown factors.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR-END OPTION VALUES
The table below shows information concerning the fiscal year-end value of
unexercised stock options on January 31, 1995 held by each of the named
executive officers. No stock options were exercised during the year ended
January 31, 1995.
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT FISCAL YEAR END IN-THE-MONEY OPTIONS AT
(#)* FISCAL YEAR END ($)**
----------------------------- ------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ----------------------------------------- ----------- ------------- ----------- --------------
<S> <C> <C> <C> <C>
Robert W. Nolan, Sr...................... 30,000 30,000 0 0
Charles G. Wilson........................ 10,000 20,000 1,250 0
Theodore W. Schroeder.................... 0 20,000 0 0
Robert W. Nolan, Jr...................... 0 20,000 0 0
</TABLE>
* Under the terms of the Company's Stock Option Plan, the Compensation
Committee retains discretion, subject to plan limits, to modify the terms
of outstanding options and to reprice the options.
** Represents the difference between the closing price of the Company's Common
Stock on January 31, 1995 as reported on the NASDAQ SmallCap Market and the
exercise price of the options, multiplied by the number of underlying
securities. No options held by Messrs. Nolan, Sr., Schroeder or Nolan, Jr.,
were in-the-money on January 31, 1995.
26
<PAGE> 28
STOCK PRICE PERFORMANCE CHART GRAPH
Set forth below is a line graph comparing the cumulative total shareholder
return on the Company's Common Stock, based on the market price of the Common
Stock, with the cumulative total return of companies on the NASDAQ Stock Market
Index of U. S. Companies and the cumulative total return of companies on the
NASDAQ Computer & Data Processing Services Stock Index.
SCS/COMPUTE, INC STOCK PRICE PERFORMANCE
<TABLE>
<CAPTION>
Measurement Period SCS/Compute, Inc. NASDAQ U.S. NASDAQ Computer & DP
<S> <C> <C> <C>
1/31/90 100 100 100
1/31/91 33 104 137
1/31/92 88 168 236
1/31/93 83 179 249
1/31/94 45 204 266
1/31/95 35 195 300
</TABLE>
Assumes $100 invested on January 31, 1990 in SCS/Compute, Inc., NASDAQ
Index and NASDAQ Computer and Data Processing Index. No dividends have been paid
on the Common Stock during the five year period covered by the SCS/Compute, Inc.
Stock Price Performance Graph.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's directors and executive officers and any persons holding more
than ten percent of the Company's Common Stock are required by Section 16 of the
Securities Exchange Act of 1934 to report their initial ownership of the
Company's Common Stock and any subsequent changes in that ownership to the
Securities and Exchange Commission. Specific due dates for these reports have
been established and the Company is required to disclose in the Statement any
failure to file by these dates. To the Company's knowledge, all these filing
requirements were satisfied in fiscal 1994.
27
<PAGE> 29
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION PAGE
- ------------ ------------------------------------------------------------------------------- ----
<S> <C> <C> <C>
Exhibit 1 -- Letter to Stockholders of the Company dated December 27, 1995.*
Exhibit 2 -- Agreement and Plan of Merger, dated as of December 19, 1995, among Thomson
U. S. Holdings, Inc., SCS Subsidiary, Inc., and SCS/Compute, Inc.
Exhibit 3 -- Engagement Letter dated December 5, 1995 between the Company and Fister &
Associates, Inc.
Exhibit 4 -- Opinion of Fister & Associates, Inc. dated December 19, 1995.*
Exhibit 6 -- Stock Purchase Agreement dated as of December 19, 1995
Exhibit 7 -- Form of Employment Agreement between Robert W. Nolan, Sr. and the Company,
including, as an exhibit thereto, the form of Consulting Agreement between
Robert W. Nolan, Sr. and the Company.
Exhibit 8 -- Mutual Nondisclosure Agreement dated October 10, 1995 between the Company
and RIA Inc.
Exhibit 9 -- Press Release issued by the Company, dated December 20, 1995
</TABLE>
- ---------------
* Included in Schedule 14D-9 mailed to stockholders.
<PAGE> 1
[SCS/COMPUTE(R) LETTERHEAD]
December 27, 1995
To Our Stockholders:
I am pleased to inform you that on December 19, 1995, SCS/Compute, Inc.
entered into an Agreement and Plan of Merger (the "Merger") with Thomson U.S.
Holdings Inc., an indirect wholly owned subsidiary of The Thomson Corporation,
and SCS Subsidiary, Inc., a direct wholly owned subsidiary of Thomson U.S.
Holdings Inc., pursuant to which SCS Subsidiary, Inc. has commenced a cash
tender offer to purchase all of the outstanding shares of SCS/Compute, Inc.,
for $6.75 per share in cash. Under the Merger Agreement, the tender offer will
be followed by a Merger in which any remaining shares of SCS's Common Stock
will be converted into the right to receive $6.75 per share in cash, without
interest.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY (WITH ONE DIRECTOR NOT
PARTICIPATING) DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTEREST OF THE COMPANY AND ITS STOCKHOLDERS, HAS UNANIMOUSLY APPROVED THE
OFFER AND THE MERGER, AND UNANIMOUSLY RECOMMENDS THAT COMPANY STOCKHOLDERS
ACCEPT THE OFFER AND TENDER THEIR SHARES PURSUANT TO THE OFFER.
In arriving at its recommendation, the Board of Directors gave careful
consideration to a number of factors, which are described in the attached
Schedule 14D-9 that is being filed today with the Securities and Exchange
Commission. These factors include, among other things, the opinion of Fister &
Associates, Inc., the Company's financial advisor, that the consideration to be
received by the holders of the Company's Common Stock in the tender offer and
the Merger is fair to such holders from a financial point of view.
In addition to the attached Schedule 14D-9 relating to the tender
offer, also enclosed is the Offer to Purchase, dated December 27, 1995, of SCS
Subsidiary, Inc., together with related materials to be used for tendering your
Shares. These documents set forth the terms and conditions of the tender offer
and the Merger and provide instructions as to how to tender your Shares. I urge
you to read the enclosed materials carefully and consider all of the factors
set forth therein before making your decision with respect to the tender offer.
Sincerely,
/s/ Robert W. Nolan
- -----------------------------
Robert W. Nolan
Chairman of the Board and
Chief Executive Officer
<PAGE> 1
AGREEMENT AND PLAN OF MERGER
Among
THOMSON U.S. HOLDINGS INC.,
SCS SUBSIDIARY, INC.
and
SCS/COMPUTE, INC.
Dated as of December 19, 1995
<PAGE> 2
Glossary of Defined Terms
<TABLE>
<CAPTION>
Defined Term Location of Definition
<S> <C>
affiliate ................................................ Section 9.03(a)
Agreement ................................................ Preamble
beneficial owner ......................................... Section 9.03(b)
Blue Sky Laws ............................................ Section 3.05(b)
Board .................................................... Recitals
business day ............................................. Section 9.03(c)
Certificate of Merger .................................... Section 2.02
Certificates ............................................. Section 2.09(b)
Code ..................................................... Section 3.10(a)
Company .................................................. Preamble
Competing Proposal ....................................... Section 8.03(a)
Confidentiality Agreement ................................ Section 6.04(b)
control .................................................. Section 9.03(d)
Delaware Law ............................................. Recitals
Disclosure Schedule ...................................... Section 3.03
Dissenting Shares ........................................ Section 2.08(a)
Effective Time ........................................... Section 2.02
Environmental Claims ..................................... Section 3.16(a)
Environmental Law ........................................ Section 3.16(a)
Environmental Permit ..................................... Section 3.16(a)
ERISA .................................................... Section 3.10(a)
Exchange Act ............................................. Section 1.02(b)
Expenses ................................................. Section 8.03(a)
Fee ...................................................... Section 8.03(a)
Governmental Authority ................................... Section 3.16(a)
Hazardous Materials ...................................... Section 3.16(a)
HSR Act .................................................. Section 3.05(b)
Indemnified Parties ...................................... Section 6.07(b)
Intellectual Property .................................... Section 3.14(a)
IRS ...................................................... Section 3.10(a)
leased property .......................................... Section 3.16(a)
Licensed Intellectual Property ........................... Section 3.14(a)
Liens .................................................... Section 3.13(b)
Material Adverse Effect .................................. Section 3.01
Material Contract ........................................ Section 3.17
Merger ................................................... Recitals
Merger Consideration ..................................... Section 2.06(a)
Minimum Condition ........................................ Section 1.01(a)
Multiemployer Plan ....................................... Section 3.10(b)
Multiple Employer Plan ................................... Section 3.10(b)
1994 Balance Sheet ....................................... Section 3.07(c)
Offer .................................................... Recitals
Offer Documents .......................................... Section 1.01(b)
Offer to Purchase ........................................ Section 1.01(b)
Option ................................................... Section 2.07
Owned Intellectual Property .............................. Section 3.14(a)
Parent ................................................... Preamble
Paying Agent ............................................. Section 2.09(a)
Permitted Liens .......................................... Section 3.13(b)
Per Share Amount ......................................... Recitals
person ................................................... Section 9.03(e)
Plans .................................................... Section 3.10(a)
Proxy Statement .......................................... Section 3.12
Purchaser ................................................ Preamble
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Schedule 14D-9 .......................................... Section 1.02(b)
Schedule 14D-1 .......................................... Section 1.01(b)
SEC ...................................................... Section 1.01(b)
SEC Reports .............................................. Section 3.07(a)
Securities Act ........................................... Section 3.07(a)
Shares ................................................... Recitals
Stockholders' Meeting .................................... Section 6.01(a)
subsidiary ............................................... Section 9.03(f)
Surviving Corporation .................................... Section 2.01
Transactions ............................................. Section 3.04
WARN ..................................................... Section 3.10(f)
</TABLE>
<PAGE> 4
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I
THE OFFER
SECTION 1.01. The Offer............................................. 2
SECTION 1.02. Company Action........................................ 3
ARTICLE II
THE MERGER
SECTION 2.01. The Merger............................................ 4
SECTION 2.02. Effective Time; Closing............................... 4
SECTION 2.03. Effect of the Merger.................................. 5
SECTION 2.04. Certificate of Incorporation; By-laws................. 5
SECTION 2.05. Directors and Officers................................ 5
SECTION 2.06. Conversion of Securities.............................. 5
SECTION 2.07. Stock Options......................................... 6
SECTION 2.08. Dissenting Shares..................................... 6
SECTION 2.09. Surrender of Shares; Stock Transfer Books............. 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.01. Organization and Qualification........................ 8
SECTION 3.02. Certificate of Incorporation and By-laws.............. 9
SECTION 3.03. Capitalization........................................ 9
SECTION 3.04. Authority Relative to this Agreement.................. 9
SECTION 3.05. No Conflict; Required Filings and Consents............ 10
SECTION 3.06. Compliance............................................ 10
SECTION 3.07. SEC Filings; Financial Statements..................... 11
SECTION 3.08. Absence of Certain Changes or Events.................. 12
SECTION 3.09. Absence of Litigation................................. 12
SECTION 3.10. Employee Benefit Plans................................ 13
SECTION 3.11. Labor Matters......................................... 15
SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy Statement...... 15
SECTION 3.13. Real Property and Leases.............................. 16
SECTION 3.14. Trademarks, Patents and Copyrights.................... 16
SECTION 3.15. Taxes................................................. 19
SECTION 3.16. Environmental Matters................................. 19
SECTION 3.17. Material Contracts.................................... 21
SECTION 3.18. Brokers............................................... 21
SECTION 3.19. Opinion of Financial Advisor.......................... 22
SECTION 3.20. Related Party Transactions............................. 22
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
SECTION 4.01. Corporate Organization................................ 22
SECTION 4.02. Authority Relative to this Agreement.................. 22
SECTION 4.03. No Conflict; Required Filings and Consents............ 23
SECTION 4.04. Financing............................................. 23
SECTION 4.05. Offer Documents; Proxy Statement...................... 23
</TABLE>
<PAGE> 5
<TABLE>
<S> <C> <C>
SECTION 4.06. Brokers............................................... 24
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger.. 24
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting.................................. 26
SECTION 6.02. Proxy Statement........................................ 27
SECTION 6.03. Company Board Representation; Section 14(f)............ 27
SECTION 6.04. Access to Information; Confidentiality................. 28
SECTION 6.05. No Solicitation of Transactions........................ 28
SECTION 6.06. Employee Benefits Matters.............................. 29
SECTION 6.07. Directors' and Officers' Indemnification............... 29
SECTION 6.08. Notification of Certain Matters........................ 30
SECTION 6.09. Further Action; Reasonable Best Efforts................ 31
SECTION 6.10. Public Announcements................................... 31
SECTION 6.11. Confidentiality Agreement.............................. 31
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger............................... 31
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination............................................ 32
SECTION 8.02. Effect of Termination.................................. 33
SECTION 8.03. Fees and Expenses...................................... 34
SECTION 8.04. Amendment.............................................. 35
SECTION 8.05. Extension; Waiver...................................... 35
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements............................................. 35
SECTION 9.02. Notices................................................ 35
SECTION 9.03. Certain Definitions.................................... 36
SECTION 9.04. Severability........................................... 37
SECTION 9.05. Entire Agreement; Assignment........................... 37
SECTION 9.06. Parties in Interest.................................... 38
SECTION 9.07. Specific Performance................................... 38
SECTION 9.08. Governing Law.......................................... 38
SECTION 9.09. Headings............................................... 38
SECTION 9.10. Counterparts........................................... 38
ANNEX A Conditions to the Offer
</TABLE>
<PAGE> 6
AGREEMENT AND PLAN OF MERGER, dated as of December 19, 1995 (this
"Agreement", which term shall include all Annexes and Exhibits hereto), among
THOMSON U.S. HOLDINGS INC., a Delaware corporation ("Parent"), SCS SUBSIDIARY,
INC., a Delaware corporation and a wholly owned subsidiary of Parent
("Purchaser"), and SCS/COMPUTE, INC., a Delaware corporation (the "Company").
WHEREAS, the respective Boards of Directors of Parent, Purchaser and
the Company have approved the acquisition of the Company by Parent on the terms
and subject to the conditions set forth in this Agreement;
WHEREAS, in furtherance of such acquisition, it is proposed that
Purchaser shall make a cash tender offer (the "Offer") to acquire all of the
issued and outstanding shares (other than shares subject to the Stock Purchase
Agreement referred to below) of common stock, par value $.10 per share, of the
Company (the "Shares"), at a price of $ 6.75 per Share (such amount, or any
greater amount per Share pursuant to the Offer, being hereinafter referred to as
the "Per Share Amount") net to the seller in cash, upon the terms and subject to
the conditions of this Agreement and the Offer;
WHEREAS, the Board of Directors of the Company (the "Board") has
approved the making of the Offer and resolved and agreed to recommend that
holders of Shares tender their Shares pursuant to the Offer;
WHEREAS, also in furtherance of such acquisition, the Boards of
Directors of Parent, Purchaser and the Company have each approved the merger
(the "Merger") of Purchaser with and into the Company in accordance with the
General Corporation Law of the State of Delaware ("Delaware Law") following the
consummation of the Offer and upon the terms and subject to the conditions set
forth herein; and
WHEREAS, Parent, Purchaser and Robert W. Nolan, Sr. have entered into
a Stock Purchase Agreement, dated as of the date hereof (the "Stock Purchase
Agreement"), pursuant to which Mr. Nolan has agreed to sell 1,082,570 Shares to
Purchaser for a purchase price per Share equal to the Per Share Amount;
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements herein contained, and
intending to be legally bound hereby, Parent, Purchaser and the Company hereby
agree as follows:
ARTICLE I
THE OFFER
SECTION 1.01. The Offer. (a) Provided that this Agreement shall not
have been terminated in accordance with Section 8.01 and none of the events set
forth in Annex A hereto shall have occurred or be existing, Purchaser shall
commence the Offer as promptly as reasonably practicable after the date hereof,
but in no event later than five business days after the initial public
announcement of Purchaser's intention to commence the Offer. The obligation of
Purchaser to accept for payment and pay for Shares tendered pursuant to the
Offer shall be subject to the condition (the "Minimum Condition") that at least
the number of Shares that when added to the Shares already owned by Parent and
the number of Shares to be purchased by Purchaser pursuant to the Stock Purchase
Agreement shall constitute more than 50% of the then outstanding Shares on a
fully diluted basis (including, without limitation, all Shares issuable upon the
conversion of any convertible securities or upon the exercise of any options,
warrants or rights) shall have been validly tendered and not withdrawn prior to
the expiration of the Offer and also shall be subject to the satisfaction of the
other conditions set forth in Annex A hereto. Purchaser expressly reserves the
right to waive any such condition, to increase the Per Share Amount, and to make
any other changes in the terms and conditions of the Offer; provided, however,
that no change may be made
<PAGE> 7
without the consent of the Company which decreases the Per Share Amount or which
reduces the maximum number of Shares to be purchased in the Offer or which
imposes conditions to the Offer in addition to those set forth in Annex A
hereto. The Per Share Amount shall, subject to applicable withholding of taxes,
be net to the seller in cash, upon the terms and subject to the conditions of
the Offer. Subject to the terms and conditions of the Offer, Purchaser shall
pay, as promptly as practicable after expiration of the Offer, for all Shares
validly tendered and not withdrawn.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, Purchaser shall file with the Securities and Exchange Commission (the
"SEC") a Tender Offer Statement on Schedule 14D-1 (together with all amendments
and supplements thereto, the "Schedule 14D-1") with respect to the Offer. The
Schedule 14D-1 shall contain or shall incorporate by reference an offer to
purchase (the "Offer to Purchase") and forms of the related letter of
transmittal and any related summary advertisement (the Schedule 14D-1, the Offer
to Purchase and such other documents, together with all supplements and
amendments thereto, being referred to herein collectively as the "Offer
Documents"). Parent, Purchaser and the Company agree to correct promptly any
information provided by any of them for use in the Offer Documents which shall
have become false or misleading, and Parent and Purchaser further agree to take
all steps necessary to cause the Schedule 14D-1 as so corrected to be filed with
the SEC and the other Offer Documents as so corrected to be disseminated to
holders of Shares, in each case as and to the extent required by applicable
federal securities laws. In the event that the Offer is terminated or withdrawn
by Purchaser, Parent and Purchaser shall cause all tendered Shares to be
returned pursuant to the instructions set forth in the letter of transmittal.
SECTION 1.02. Company Action. (a) The Company hereby approves of and
consents to the Offer and represents that (i) the Board, at a meeting duly
called and held on December 14, 1995, has unanimously (except for abstentions of
interested directors) (A) determined that this Agreement and the transactions
contemplated hereby, including each of the Offer and the Merger, are fair to and
in the best interests of the holders of Shares, (B) approved and adopted this
Agreement and the transactions contemplated hereby and (C) resolved to recommend
that the stockholders of the Company accept the Offer and approve and adopt this
Agreement and the transactions contemplated hereby, and (ii) Fister & Associates
have delivered to the Board a written opinion that the consideration to be
received by the holders of Shares pursuant to each of the Offer and the Merger
is fair to the holders of Shares from a financial point of view. Subject only to
the fiduciary duties of the Board under applicable law as advised in writing by
independent counsel, the Company hereby consents to the inclusion in the Offer
Documents of the recommendation of the Board described in the immediately
preceding sentence. The Company has been advised by each of its directors and
executive officers (other than Robert W. Nolan, Sr. with respect to the Shares
to be sold pursuant to the Stock Purchase Agreement) that they intend either to
tender all Shares beneficially owned by them to Purchaser pursuant to the Offer
or to vote such Shares in favor of the approval and adoption by the stockholders
of the Company of this Agreement and the transactions contemplated hereby.
(b) As soon as reasonably practicable on the date of commencement of
the Offer, the Company shall file with the SEC a Solicitation/Recommendation
Statement on Schedule 14D-9 (together with all amendments and supplements
thereto, the "Schedule 14D-9") containing the recommendation of the Board
described in Section 1.02(a) and shall disseminate the Schedule 14D-9 to the
extent required by Rule 14d-9 promulgated under the Securities Exchange Act of
1934, as amended (the "Exchange Act"), and any other applicable federal
securities laws. The Company, Parent and Purchaser agree to correct promptly any
information provided by any of them for use in the Schedule 14D-9 which shall
have become false or misleading, and the Company further agrees to take all
steps necessary to cause the Schedule 14D-9 as so corrected to be filed with the
SEC and disseminated to holders of Shares, in each case as and to the extent
required by applicable federal securities laws. Purchaser and its counsel shall
be given an opportunity to review and comment on the Schedule 14D-9 and any
amendments thereto prior to the filing thereof with the SEC. The Company shall
provide Purchaser and its counsel with a copy of any written comments or
telephonic notification of any verbal comments the Company may receive from the
SEC or
<PAGE> 8
its staff with respect to the Schedule 14D-9 promptly after the receipt thereof
and shall provide Purchaser and its counsel with a copy of any written responses
and telephonic notification of any verbal responses of the Company or its
counsel.
(c) The Company shall promptly furnish Purchaser with mailing labels
containing the names and addresses of all record holders of Shares and with
security position listings of Shares held in stock depositories, each as of a
recent date, together with all other available listings and computer files
containing names, addresses and security position listings of record holders and
beneficial owners of Shares. The Company shall furnish Purchaser with such
additional information, including, without limitation, updated listings and
computer files of stockholders, mailing labels and security position listings,
and such other assistance as Parent, Purchaser or their agents may reasonably
request. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer or the Merger, Parent and Purchaser
shall hold in confidence the information contained in such labels, listings and
files, shall use such information only in connection with the Offer and the
Merger, and, if this Agreement shall be terminated in accordance with Section
8.01, shall deliver to the Company all copies of such information then in their
possession.
ARTICLE II
THE MERGER
SECTION 2.01. The Merger. Upon the terms and subject to the conditions
set forth in Article VII, and in accordance with Delaware Law, at the Effective
Time (as hereinafter defined) Purchaser shall be merged with and into the
Company. As a result of the Merger, the separate corporate existence of
Purchaser shall cease and the Company shall continue as the surviving
corporation of the Merger (the "Surviving Corporation"). Notwithstanding
anything to the contrary contained in this Section 2.01, Parent may elect
instead, at any time prior to the fifth business day immediately preceding the
date on which the Proxy Statement (as hereinafter defined) is mailed initially
to the Company's stockholders, to merge the Company into Purchaser or another
direct or indirect wholly owned subsidiary of Parent. In such event, the parties
agree to execute an appropriate amendment to this Agreement in order to reflect
the foregoing and to provide, as the case may be, that Purchaser or such other
wholly owned subsidiary of Parent shall be the Surviving Corporation.
SECTION 2.02. Effective Time; Closing. As promptly as practicable
after the satisfaction or, if permissible, waiver of the conditions set forth in
Article VII, the parties hereto shall cause the Merger to be consummated by
filing this Agreement or a certificate of merger or certificate of ownership and
merger (in either case, the "Certificate of Merger") with the Secretary of State
of the State of Delaware, in such form as is required by, and executed in
accordance with the relevant provisions of, Delaware Law (the date and time of
such filing being the "Effective Time"). Prior to such filing, a closing shall
be held at the offices of Shearman & Sterling, 599 Lexington Avenue, New York,
New York 10022, or such other place as the parties shall agree, for the purpose
of confirming the satisfaction or waiver, as the case may be, of the conditions
set forth in Article VII.
SECTION 2.03. Effect of the Merger. At the Effective Time, the effect
of the Merger shall be as provided in the applicable provisions of Delaware Law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
the Company and Purchaser shall vest in the Surviving Corporation, and all
debts, liabilities, obligations, restrictions, disabilities and duties of the
Company and Purchaser shall become the debts, liabilities, obligations,
restrictions, disabilities and duties of the Surviving Corporation.
SECTION 2.04. Certificate of Incorporation; By-laws. (a) Unless
otherwise determined by Parent prior to the Effective Time, at the Effective
Time the Certificate of Incorporation of Purchaser, as in effect immediately
prior to the Effective Time, shall be the
<PAGE> 9
Certificate of Incorporation of the Surviving Corporation until thereafter
amended as provided by law and such Certificate of Incorporation; provided,
however, that, at the Effective Time, Article I of the Certificate of
Incorporation of the Surviving Corporation shall be amended to read as follows:
"The name of the corporation is SCS/Compute, Inc."
(b) Unless otherwise determined by Parent prior to the Effective Time,
the By-laws of Purchaser, as in effect immediately prior to the Effective Time,
shall be the By-laws of the Surviving Corporation until thereafter amended as
provided by law, the Certificate of Incorporation of the Surviving Corporation
and such By-laws.
SECTION 2.05. Directors and Officers. The directors of Purchaser
immediately prior to the Effective Time shall be the initial directors of the
Surviving Corporation, each to hold office in accordance with the Certificate of
Incorporation and By-laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the initial officers of
the Surviving Corporation, in each case until their respective successors are
duly elected or appointed and qualified.
SECTION 2.06. Conversion of Securities. At the Effective Time, by
virtue of the Merger and without any action on the part of Purchaser, the
Company or the holders of any of the following securities:
(a) Each of the Shares issued and outstanding immediately prior
to the Effective Time (other than any Shares to be cancelled pursuant to
Section 2.06(b) and any Dissenting Shares) (as hereinafter defined) shall
be cancelled and shall be converted automatically into the right to receive
an amount equal to the Per Share Amount, in cash (the "Merger
Consideration") payable, without interest, to the holder of such Share,
upon surrender, in the manner provided in Section 2.08, of the certificate
that formerly evidenced such Share;
(b) Each Share held in the treasury of the Company and each Share
owned by Purchaser, Parent or any direct or indirect wholly owned
subsidiary of Parent or of the Company immediately prior to the Effective
Time shall be cancelled without any conversion thereof and no payment or
distribution shall be made with respect thereto; and
(c) Each share of Common Stock, par value $.10 per share, of
Purchaser issued and outstanding immediately prior to the Effective Time
shall be converted into and exchanged for one validly issued, fully paid
and nonassessable share of Common Stock, par value $.10 per share, of the
Surviving Corporation.
SECTION 2.07. Stock Options. Immediately prior to the Effective Time,
each outstanding option to purchase Shares (each, an "Option"), whether or not
then exercisable, shall be cancelled by the Company, and each holder of a
cancelled Option shall be entitled to receive from Purchaser at the same time as
payment for Shares is made by Purchaser in connection with the Merger, in
consideration for the cancellation of such Option, an amount in cash equal to
the product of (i) the number of Shares previously subject to such Option and
(ii) the excess, if any, of the Per Share Amount over the exercise price per
Share previously subject to such Option.
SECTION 2.08. Dissenting Shares. (a) Notwithstanding any provision of
this Agreement to the contrary, Shares that are outstanding immediately prior to
the Effective Time and which are held by stockholders who shall not have 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
Section 262 of Delaware Law (collectively, the "Dissenting Shares") shall not be
converted into or represent the right to receive the Merger Consideration. Such
stockholders shall be entitled to receive payment of the appraised value of such
Shares held by them in accordance with the provisions of such Section 262,
except that all Dissenting Shares held by stockholders who shall have failed to
perfect or who effectively shall have withdrawn or lost their rights to
appraisal of such Shares under such Section 262 shall thereupon be deemed to
have been converted into and to have become
<PAGE> 10
exchangeable for, as of the Effective Time, the right to receive the Merger
Consideration, without any interest thereon, upon surrender, in the manner
provided in Section 2.09, of the certificate or certificates that formerly
evidenced such Shares.
(b) The Company shall give Parent (i) prompt notice of any demands for
appraisal received by the Company, withdrawals of such demands, and any other
instruments served pursuant to Delaware Law and received by the Company and (ii)
the opportunity to direct all negotiations and proceedings with respect to
demands for appraisal under Delaware Law. The Company shall not, except with the
prior written consent of Parent, make any payment with respect to any demands
for appraisal or offer to settle or settle any such demands.
SECTION 2.09. Surrender of Shares; Stock Transfer Books. (a) Prior to
the Effective Time, Purchaser shall designate a bank or trust company to act as
agent (the "Paying Agent") for the holders of Shares in connection with the
Merger to receive the funds to which holders of Shares shall become entitled
pursuant to Section 2.06(a). Such funds shall be invested by the Paying Agent as
directed by the Surviving Corporation, provided that such investments shall be
in obligations of or guaranteed by the United States of America or of any agency
thereof and backed by the full faith and credit of the United States of America,
in commercial paper obligations rated A-1 or P-1 or better by Moody's Investors
Services, Inc. or Standard & Poor's Corporation, respectively, or in deposit
accounts, certificates of deposit or banker's acceptances of, repurchase or
reverse repurchase agreements with, or Eurodollar time deposits purchased from,
commercial banks with capital, surplus and undivided profits aggregating in
excess of $500 million (based on the most recent financial statements of such
bank which are then publicly available at the SEC or otherwise); provided,
however, that no loss on any investment made pursuant to this Section 2.09 shall
relieve the Surviving Corporation of its obligation to pay the Per Share Amount
for each Share outstanding immediately prior to the Effective Time (other than
Shares cancelled pursuant to Section 2.06(b) and any Dissenting Shares). The
Surviving Corporation and Parent shall be responsible for the fees and expenses
of or incurred by the Paying Agent.
(b) Promptly after the Effective Time, the Surviving Corporation shall
cause to be mailed to each person who was, at the Effective Time, a holder of
record of Shares entitled to receive the Merger Consideration pursuant to
Section 2.06(a) a form of letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and title to the certificates
evidencing such Shares (the "Certificates") shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and instructions for use in
effecting the surrender of the Certificates pursuant to such letter of
transmittal. Upon surrender to the Paying Agent of a Certificate, together with
such letter of transmittal, duly completed and validly executed in accordance
with the instructions thereto, and such other documents as may be required
pursuant to such instructions, the holder of such Certificate shall be entitled
to receive in exchange therefor the Merger Consideration for each Share formerly
evidenced by such Certificate, and such Certificate shall then be cancelled. No
interest shall accrue or be paid on the Merger Consideration payable upon the
surrender of any Certificate for the benefit of the holder of such Certificate.
If payment of the Merger Consideration is to be made to a person other than the
person in whose name the surrendered Certificate is registered on the stock
transfer books of the Company, it shall be a condition of payment that the
Certificate so surrendered shall be endorsed properly or otherwise be in proper
form for transfer and that the person requesting such payment shall have paid
all transfer and other taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the Certificate
surrendered or shall have established to the satisfaction of the Surviving
Corporation that such taxes either have been paid or are not applicable.
(c) At any time following the sixth month after the Effective Time,
the Surviving Corporation shall be entitled to require the Paying Agent to
deliver to it any funds which had been made available to the Paying Agent and
not disbursed to holders of Shares (including, without limitation, all interest
and other income received by the Paying Agent in respect of all funds made
available to it), and thereafter such holders shall be entitled to look
<PAGE> 11
to the Surviving Corporation (subject to abandoned property, escheat and other
similar laws) only as general creditors thereof with respect to any Merger
Consideration that may be payable upon due surrender of the Certificates held by
them. Notwithstanding the foregoing, neither the Surviving Corporation nor the
Paying Agent shall be liable to any holder of a Share for any Merger
Consideration delivered in respect of such Share to a public official pursuant
to any abandoned property, escheat or other similar law.
(d) At the close of business on the day of the Effective Time, the
stock transfer books of the Company shall be closed and thereafter there shall
be no further registration of transfers of Shares on the records of the Company.
From and after the Effective Time, the holders of Shares outstanding immediately
prior to the Effective Time shall cease to have any rights with respect to such
Shares except as otherwise provided herein or by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent and Purchaser
that:
SECTION 3.01. Organization and Qualification. The Company is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has the requisite power and
authority and all necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing or in good standing or to have
such power, authority and governmental approvals would not, individually or in
the aggregate, have a Material Adverse Effect (as defined below). The Company is
duly qualified or licensed as a foreign corporation to do business, and is in
good standing, in each jurisdiction where the character of the properties owned,
leased or operated by it or the nature of its business makes such qualification
or licensing necessary, except for such failures to be so qualified or licensed
and in good standing that would not, individually or in the aggregate, have a
Material Adverse Effect. "Material Adverse Effect", when used in connection with
the Company, means any change or effect that when taken together with all other
adverse changes and effects that are within the scope of the representations and
warranties made by the Company in this Agreement is or is reasonably likely to
be materially adverse to the business, operations, properties, condition
(financial or otherwise), assets or liabilities (including, without limitation,
contingent liabilities) or prospects of the Company. The Company does not
directly or indirectly own any equity or similar interest in, or any interest
convertible into or exchangeable or exercisable for, any equity or similar
interest in, any corporation, partnership, joint venture or other business
association or entity.
SECTION 3.02. Certificate of Incorporation and By-laws. The Company
has heretofore furnished to Parent a complete and correct copy of the
Certificate of Incorporation and the By-laws or equivalent organizational
documents, each as amended to date, of the Company. Such Certificate of
Incorporation and By-laws are in full force and effect. The Company is not in
violation of any provision of its Certificate of Incorporation or By-laws.
SECTION 3.03. Capitalization. The authorized capital stock of the
Company consists of 15,000,000 Shares and 2,000,000 shares of Series A Preferred
Stock. As of the date hereof, (i) 2,571,977 Shares are issued and outstanding,
all of which are validly issued, fully paid and nonassessable, (ii) 514,300
Shares are held in the treasury of the Company and (iii) 300,000 Shares are
reserved for future issuance pursuant to Options. Except as set forth in this
Section 3.03, and except as set forth in Section 3.03 of the Disclosure Schedule
previously delivered by the Company to Parent (the "Disclosure Schedule"), which
sets forth the holder of each Option, the date of grant and the applicable
exercise price, there are no options, warrants or other rights (including those
commonly referred to as "shareholder rights" or "poison pill" rights),
agreements, arrangements or commitments of any character relating to the issued
or unissued capital stock of the Company or obligating the Company to issue or
sell any shares of capital stock of, or other equity interests in, the Company.
As of
<PAGE> 12
the date hereof, 100,000 shares of Series A Preferred Stock are issued and
outstanding. All Shares subject to issuance as aforesaid, upon issuance on the
terms and conditions specified in the instruments pursuant to which they are
issuable, will be duly authorized, validly issued, fully paid and nonassessable.
SECTION 3.04. Authority Relative to this Agreement. The Company has
all necessary corporate power and authority to execute and deliver this
Agreement, to perform its obligations hereunder and to consummate the
transactions contemplated hereby (the "Transactions"). The execution and
delivery of this Agreement by the Company and the consummation by the Company of
the Transactions have been duly and validly authorized by all necessary
corporate action on the part of the Company and no other corporate proceedings
on the part of the Company are necessary to authorize this Agreement or to
consummate the Transactions (other than, with respect to the Merger, the
approval and adoption of this Agreement by the holders of a majority of the then
outstanding Shares if and to the extent required by applicable law, and the
filing and recordation of appropriate merger documents as required by Delaware
Law). This Agreement has been duly and validly executed and delivered by the
Company and, assuming the due authorization, execution and delivery by Parent
and Purchaser, constitutes a legal, valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other laws affecting creditors' rights generally (including,
without limitation, the effect of statutory and other law regarding fraudulent
conveyances, fraudulent transfers and preferential transfers) and as may be
limited by the exercise of judicial discretion and the application of principles
of equity including, without limitation, requirements of good faith, fair
dealing, conscionability and materiality (regardless of whether considered in a
proceeding in equity or at law). The Company has taken all appropriate actions
so that the restrictions on business combinations contained in Section 203 of
Delaware Law will not apply with respect to or as a result of the Transactions
or the Stock Purchase Agreement or the transactions contemplated thereby.
SECTION 3.05. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by the Company do not, and the
performance of this Agreement by the Company will not, (i) conflict with or
violate the Certificate of Incorporation or By-laws of the Company, (ii)
conflict with or violate any law, rule, regulation, order, judgment or decree
applicable to the Company or by which any property or asset of the Company is
bound or affected or (iii) except as set forth in Section 3.05(a) of the
Disclosure Schedule, result in any breach of or constitute a default (or an
event which with notice or lapse of time or both would become a default) under,
or give to others any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of the Company pursuant to, any Material Contract, note, bond,
mortgage, indenture, contract, agreement, lease, license, permit or franchise or
other instrument or obligation to which the Company is a party or by which the
Company or any property or asset of the Company is bound or affected.
(b) The execution and delivery of this Agreement by the Company do
not, and the performance of this Agreement by the Company will not, require any
consent, approval, authorization or permit of, or filing with or notification
to, any governmental or regulatory authority, domestic or foreign, except (i)
for applicable requirements, if any, of the Exchange Act, state securities or
"blue sky" laws ("Blue Sky Laws") and state takeover laws, the pre-merger
notification requirements of the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations thereunder (the "HSR Act") and
filing and recordation of appropriate merger documents as required by Delaware
Law and (ii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Offer or the Merger, or otherwise prevent the Company from
performing its obligations under this Agreement, and would not, individually or
in the aggregate, have a Material Adverse Effect.
SECTION 3.06. Compliance. The Company is not in conflict with, or in
default or violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or by which any property or asset of the
Company is bound or affected, or (ii) any note, bond, mortgage, indenture,
contract, agreement, lease, license, permit,
<PAGE> 13
franchise or other instrument or obligation to which the Company is a party or
by which the Company or any property or asset of the Company is bound or
affected, except for any such conflicts, defaults or violations that would not,
individually or in the aggregate, have a Material Adverse Effect.
SECTION 3.07. SEC Filings; Financial Statements. (a) The Company has
filed all forms, reports and documents required to be filed by it with the SEC
since January 31, 1993, and has heretofore made available to Parent, in the form
filed with the SEC, (i) its Annual Reports on Form 10-K for the fiscal years
ended January 31, 1993, 1994 and 1995, respectively, (ii) its Quarterly Reports
on Form 10-Q for the periods ended April 30, 1995, July 31, 1995 and October 31,
1995 and (iii) all proxy statements relating to the Company's meetings of
stockholders (whether annual or special) held since January 31, 1993, and (iv)
all other forms, reports and other registration statements (other than Quarterly
Reports on Form 10-Q not referred to in clause (ii) above) filed by the Company
with the SEC since January 31, 1993 (the forms, reports and other documents
referred to in clauses (i), (ii), (iii) and (iv) above being referred to herein,
collectively, as the "SEC Reports"). The SEC Reports (i) were prepared in
accordance with the requirements of the Securities Act of 1933, as amended (the
"Securities Act"), and the Exchange Act, as the case may be, and the rules and
regulations thereunder and (ii) did not at the time they were filed (or at the
effective date thereof in the case of registration statements) contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary in order to make the statements made therein, in
the light of the circumstances under which they were made, not misleading.
(b) Each of the financial statements (including, in each case, any
notes thereto) contained in the SEC Reports was prepared in accordance with
generally accepted accounting principles applied on a consistent basis
throughout the periods indicated (except as may be indicated in the notes
thereto) and each fairly presented the financial position, results of operations
and changes in financial position of the Company as at the respective dates
thereof and for the respective periods indicated therein (subject, in the case
of unaudited statements, to normal and recurring year-end adjustments which were
not and are not expected, individually or in the aggregate, to have a Material
Adverse Effect).
(c) Except as and to the extent set forth on the balance sheet of the
Company as at January 31, 1995, including the notes thereto (the "1994 Balance
Sheet") or disclosed in any SEC Report filed by the Company after January 31,
1995, the Company has no liability or obligation of any nature (whether accrued,
absolute, contingent or otherwise) which would be required to be reflected on a
balance sheet, or in the notes thereto, prepared in accordance with generally
accepted accounting principles, except for liabilities and obligations incurred
in the ordinary course of business consistent with past practice since January
31, 1995 which would not, individually or in the aggregate, have a Material
Adverse Effect.
(d) The Company has heretofore furnished to Parent complete and
correct copies of all amendments and modifications (if any) listed in Section
3.07(d) of the Disclosure Schedule that have not been filed by the Company with
the SEC to all agreements, documents and other instruments that previously had
been filed by the Company with the SEC and are currently in effect.
SECTION 3.08. Absence of Certain Changes or Events. Since January 31,
1995, except as contemplated by this Agreement or disclosed in any SEC Report
filed since January 31, 1995 and prior to the date of this Agreement, the
Company has conducted its business only in the ordinary course and in a manner
consistent with past practice and, since January 31, 1995, there has not been
(i) any change in the business, operations, properties, condition (financial or
otherwise), assets or liabilities (including, without limitation, contingent
liabilities) or prospects of the Company having, individually or in the
aggregate, a Material Adverse Effect, (ii) any damage, destruction or loss
(whether or not covered by insurance) with respect to any property or asset of
the Company and having, individually or in the aggregate, a Material Adverse
Effect, (iii) any change by the Company in its accounting methods, principles or
practices, (iv) any revaluation by the Company of any
<PAGE> 14
asset (including, without limitation, any writing down of the value of inventory
or writing off of notes or accounts receivable), other than in the ordinary
course of business consistent with past practice, (v) any entry by the Company
into any commitment or transaction material to the Company, (vi) except as set
forth in Section 3.08 of the Disclosure Schedule, any declaration, setting aside
or payment of any dividend or distribution in respect of any capital stock of
the Company or any redemption, purchase or other acquisition of any of its
securities, (vii) prior to the date of this Agreement, no breach of any of the
contracts referred to in Section 3.17, and, to the best knowledge of the
Company, no threat of any such breach, or (viii) except as set forth in Section
3.08 of the Disclosure Schedule, any increase in or establishment of any bonus,
insurance, severance, deferred compensation, pension, retirement, profit
sharing, stock option (including, without limitation, the granting of stock
options, stock appreciation rights, performance awards, or restricted stock
awards), stock purchase or other employee benefit plan, or any other increase in
the compensation payable or to become payable to any officers or key employees
of the Company, except in the ordinary course of business consistent with past
practice.
SECTION 3.09. Absence of Litigation. Except as disclosed in the SEC
Reports filed prior to the date of this Agreement, there is no claim, action,
proceeding or investigation pending or, to the best knowledge of the Company,
threatened against the Company or any property or asset of the Company before
any court, arbitrator or administrative, governmental or regulatory authority or
body, domestic or foreign. As of the date hereof, neither the Company nor any
property or asset of the Company is subject to any order, writ, judgment,
injunction, decree, determination or award having, or that could reasonably be
expected to have, individually or in the aggregate, a Material Adverse Effect.
SECTION 3.10. Employee Benefit Plans. (a) Section 3.10 of the
Disclosure Schedule contains a true and complete list of (i) all employee
benefit plans (within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA")) and all bonus, stock option,
stock purchase, restricted stock, incentive, deferred compensation, retiree
medical or life insurance, supplemental retirement, severance or other benefit
plans, programs or arrangements, and all employment, termination, severance or
other contracts or agreements to which the Company is a party, with respect to
which the Company has any obligation or which are maintained, contributed to or
sponsored by the Company for the benefit of any current or former employee,
officer or director of the Company and (ii) each employee benefit plan for which
the Company could incur liability under Section 4069 of ERISA, in the event such
plan were terminated, or under Section 4212(c) of ERISA, or in respect of which
the Company remains secondarily liable under Section 4204 of ERISA
(collectively, the "Plans"). Each Plan is in writing and the Company has
previously furnished to Parent a true and complete copy of each Plan and a true
and complete copy of each material document prepared in connection with each
such Plan, including, without limitation, (i) a copy of each trust or other
funding arrangement, (ii) each summary plan description and summary of material
modifications, (iii) the most recently filed Internal Revenue Service ("IRS")
Form 5500, (iv) the most recently received IRS determination letter for each
such Plan and (v) the most recently prepared actuarial report and financial
statement in connection with each such Plan. The Company has no express or
implied commitment (i) to create, incur liability with respect to or cause to
exist any other employee benefit plan, program or arrangement, (ii) to enter
into any contract or agreement to provide compensation or benefits to any
individual or (iii) to modify, change or terminate any Plan, other than with
respect to a modification, change or termination required by ERISA or the
Internal Revenue Code of 1986, as amended (the "Code").
(b) Other than as specifically disclosed in Section 3.10 of the
Disclosure Schedule, none of the Plans is a multiemployer plan, within the
meaning of Section 3(37) or 4001(a)(3) of ERISA (a "Multiemployer Plan"), or a
single employer pension plan, within the meaning of Section 4001(a)(15) of
ERISA, for which the Company or any Subsidiary could incur liability under
Section 4063 or 4064 of ERISA (a "Multiple Employer Plan"). None of the Plans
(i) provides for the payment of separation, severance, termination or
similar-type benefits to any person, (ii) obligates the Company or any
Subsidiary to pay separation, severance, termination or other benefits as a
result of any Transaction or (iii) obligates the Company or any Subsidiary to
make any payment or provide any benefit
<PAGE> 15
that could be subject to a tax under Section 4999 of the Code. None of the Plans
provides for or promises retiree medical, disability or life insurance benefits
to any current or former employee, officer or director of the Company. With
respect to each Multiemployer Plan and Multiple Employer Plan, Section 3.10(b)
of the Disclosure Schedule sets forth an accurate statement of the total amount
of withdrawal liability that the Company would incur in the event of a complete
withdrawal, within the meaning of Title IV of ERISA, from each such Plan.
(c) Each Plan which is intended to be qualified under Section 401(a)
of the Code has received a favorable determination letter from the IRS that such
Plan is so qualified, and each trust established in connection with any Plan
which is intended to be exempt from federal income taxation under Section 501(a)
of the Code has received a determination letter from the IRS that such trust is
so exempt. No fact or event has occurred since the date of any such
determination letter from the IRS that could adversely affect the qualified
status of any such Plan or the exempt status of any such trust. Each trust
maintained or contributed to by the Company or any Subsidiary which is intended
to be qualified as a voluntary employees' beneficiary association exempt from
federal income taxation under Sections 501(a) and 501(c)(9) of the Code has
received a favorable determination letter from the IRS that it is so qualified
and so exempt, and no fact or event has occurred since the date of such
determination by the IRS that could adversely affect such qualified or exempt
status.
(d) There has been no prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) with respect to any Plan not
exempt pursuant to Section 408 of ERISA or Section 4975 of the Code. Neither the
company nor any Subsidiary is currently liable or has previously incurred any
liability for any tax or penalty arising under Section 4971, 4972, 4979, 4980 or
4980B of the Code or Section 502(c) of ERISA, and no fact or event exists which
could give rise to any such liability. Neither the Company nor any Subsidiary
has incurred any liability under, arising out of or by operation of Title IV of
ERISA (other than liability for premiums to the Pension Benefit Guaranty
Corporation arising in the ordinary course), including, without limitation, any
liability in connection with (i) the termination or reorganization of any
employee pension benefit plan subject to Title IV of ERISA or (ii) the
withdrawal from any Multiemployer Plan or Multiple Employer Plan, and no fact or
event exists which could give rise to any such liability. No complete or partial
termination has occurred within the five years preceding the date hereof with
respect to any Plan. No reportable event (within the meaning of Section 4043 of
ERISA) has occurred or is expected to occur with respect to any Plan subject to
Title IV of ERISA. No asset of the Company is the subject of any lien arising
under Section 302(f) of ERISA or Section 412(n) of the Code; the Company has not
been required to post any security under Section 307 of ERISA or Section
401(a)(29) of the Code; and no fact or event exists which could give rise to any
such lien or requirement to post any such security.
(e) Each Plan is now and has been operated in all material respects in
accordance with the requirements of all applicable laws, including, without
limitation, ERISA and the Code, and the Company has performed all obligations
required to be performed by it under, is not in any respect in default under or
in violation of, and has no knowledge of any default or violation by any party
to, any Plan. No Plan has incurred an "accumulated funding deficiency" (within
the meaning of Section 302 of ERISA or Section 412 of the Code), whether or not
waived. All contributions, premiums or payments required to be made with respect
to any Plan are fully deductible for income tax purposes and no such deduction
previously claimed has been challenged by any government entity. The 1994
Balance Sheet reflects an accrual of all amounts of employer contributions and
premiums accrued but unpaid with respect to the Plans. With respect to each Plan
subject to Title IV of ERISA, the accumulated benefit obligations of such Plan
(determined as of the date of the most recent actuarial valuation prepared for
such Plan) does not exceed the fair market value of the assets of such Plan
(determined as of the date of such valuation) attributable to such obligations.
(f) The Company has not incurred any liability under, and has complied
in
<PAGE> 16
all respects with, the Worker Adjustment Retraining Notification Act and the
regulations promulgated thereunder ("WARN") and does not reasonably expect to
incur any such liability as a result of actions taken or not taken prior to the
Effective Time. Section 3.10(f) of the Disclosure Schedule lists (i) all the
employees terminated or laid off by the Company during the 90 days prior to the
date hereof and (ii) all the employees of the Company who have experienced a
reduction in hours of work of more than 50% during any month during the 90 days
prior to the date hereof and describes all notices given by the Company in
connection with WARN. The Company will, by written notice to Parent and
Purchaser, update Section 3.10(f) of the Disclosure Schedule to include any such
terminations, layoffs and reductions in hours from the date hereof through the
Effective Time and will provide Parent and Purchaser with any related
information which they may reasonably request.
SECTION 3.11. Labor Matters. (i) There are no controversies pending
or, to the best knowledge of the Company, threatened between the Company and any
of its employees, which controversies have or could have a Material Adverse
Effect; (ii) the Company is not a party to any collective bargaining agreement
or other labor union contract applicable to persons employed by the Company,
nor, to the best knowledge of the Company, are there any activities or
proceedings of any labor union to organize any such employees; (iii) there are
no unfair labor practice complaints pending against the Company before the
National Labor Relations Board or any current union representation questions
involving employees of the Company; and (iv) there is no strike, slowdown, work
stoppage or lockout existing, or, to the best knowledge of the Company,
threatened, by or with respect to any employees of the Company.
SECTION 3.12. Offer Documents; Schedule 14D-9; Proxy Statement.
Neither the Schedule 14D-9 nor any information supplied by the Company for
inclusion in the Offer Documents shall, at the respective times the Schedule
14D-9, the Offer Documents or any amendments or supplements thereto are filed
with the SEC or are first published, sent or given to stockholders of the
Company, as the case may be, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements made therein, in the light of the circumstances
under which they are made, not misleading. Neither the proxy statement to be
sent to the stockholders of the Company in connection with the Stockholders'
Meeting or the information statement to be sent to such stockholders, as
appropriate (such proxy statement or information statement, as amended or
supplemented, being referred to herein as the "Proxy Statement"), shall, at the
date the Proxy Statement (or any amendment or supplement thereto) is first
mailed to stockholders of the Company, at the time of the Stockholders' Meeting
(as hereinafter defined) and at the Effective Time, be false or misleading with
respect to any material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements made therein, in the
light of the circumstances under which they are made, not misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders' Meeting which shall have
become false or misleading. The Schedule 14D-9 and the Proxy Statement shall
comply in all material respects as to form with the requirements of the Exchange
Act and the rules and regulations thereunder.
SECTION 3.13. Real Property and Leases. (a) The Company has sufficient
title to all its properties and assets to conduct its business as currently
conducted or as contemplated to be conducted.
(b) Each parcel of real property owned or leased by the Company (i)
except as set forth in Section 3.13 of the Disclosure Schedule, is owned or
leased free and clear of all mortgages, pledges, liens, security interests,
conditional and installment sale agreements, encumbrances, charges or other
claims of third parties of any kind (collectively, "Liens"), other than (A)
Liens for current taxes and assessments not yet past due, (B) inchoate
mechanics' and materialmen's Liens for construction in progress, (C) workmen's,
repairmen's, warehousemen's and carriers' Liens arising in the ordinary course
of business of the Company consistent with past practice, and (D) all matters of
record, Liens and other imperfections of title and encumbrances which,
individually or in the aggregate, would not have a Material Adverse Effect
(collectively, "Permitted Liens"), and
<PAGE> 17
(ii) is neither subject to any governmental decree or order to be sold nor is
being condemned, expropriated or otherwise taken by any public authority with or
without payment of compensation therefor, nor, to the best knowledge of the
Company, has any such condemnation, expropriation or taking been proposed.
(c) All leases of real property leased for the use or benefit of the
Company to which the Company is a party and all amendments and modifications
thereto are in full force and effect and have not been modified or amended, and
there exists no default under any such lease by the Company, nor any event which
with notice or lapse of time or both would constitute a default thereunder by
the Company.
SECTION 3.14. Trademarks, Patents and Copyrights. (a) Section
3.14(a)(i) of the Disclosure Schedule sets forth a true and complete list and a
brief description of all patents, patent rights, trademarks, trademark rights,
trade names, trade name rights, copyrights and service marks ("Intellectual
Property", which term shall also include all trade secrets, know-how and other
proprietary rights and information) to which the Company holds, or has a right
to hold, right, title and interest ("Owned Intellectual Property"), including a
complete identification of each patent, registration or application for such
patent and trademark registration, and Section 3.14(a)(ii) of the Disclosure
Schedule sets forth a true and complete list of all Intellectual Property
licensed or sublicensed to the Company (other than mass distributed software
licenses on a shrink-wrap basis) ("Licensed Intellectual Property"), including a
list of any license or sublicense thereof. Except as otherwise described in
Section 3.14(a)(i) of the Disclosure Schedule, in each case where a registration
or patent or application for registration or patent listed in Section 3.14(a)(i)
of the Disclosure Schedule is held by assignment, the assignment has been duly
recorded with the U.S. Patent and Trademark Office or other appropriate
government agency. Except as disclosed in Section 3.14(a)(iii) of the Disclosure
Schedule, the Company has not received any written notice or claim that the
rights of the Company in or to such Intellectual Property conflict with or
infringe on the rights of any other Person.
(b) (i) Except as set forth in Section 3.14(b) of the Disclosure
Schedule, the Company's interest in all the Owned Intellectual Property is owned
by the Company free and clear of any security interest, pledge, mortgage, lien,
charge, encumbrance, existing adverse claim or preferential arrangement and (ii)
no claim, action, suit, arbitration, inquiry, proceeding or investigation by or
before any Governmental Authority (other than ex parte patent office
proceedings) has been made or asserted or is pending (nor, to the best knowledge
of the Company, has any such claim, action, suit, arbitration, inquiry,
proceeding or investigation been threatened) against the Company either (A)
based upon or challenging or seeking to deny or restrict the use by the Company
of any of the Owned Intellectual Property or (B) alleging that any services
provided, or products manufactured or sold by the Company are being provided,
manufactured or sold in violation of any patents or trademarks, or any other
rights of any person. To the best knowledge of the Company, no person is using
any trademarks, service marks or trade names that are confusingly similar to
trademarks, service marks or trade names included in the Owned Intellectual
Property. To the best knowledge of the Company, no person is using any patents,
copyrights, trade secrets or similar property which infringe granted patents or
copyrights included in the Owned Intellectual Property. The Company has not
granted any license or other right to any other person with respect to the
Company's interest in the Owned Intellectual Property. The consummation of the
Transactions will not result in the termination or impairment of the Company's
interest in any of the Owned Intellectual Property.
(c) The Company has, or has caused to be, made available to Parent
correct and complete copies of all the licenses and sublicenses for Licensed
Intellectual Property listed in Section 3.14(a)(ii) of the Disclosure Schedule
and any and all ancillary documents pertaining thereto (including, but not
limited to, all amendments, consents and evidence of commencement dates and
expiration dates). With respect to each of such licenses and sublicenses:
(i) such license or sublicense, together with all ancillary documents
delivered pursuant to the first sentence of this Section 3.14(c), is valid
and binding
<PAGE> 18
obligation of the Company and in full force and effect and represents the
entire agreement between the respective licensor and licensee with respect
to the subject matter of such license or sublicense;
(ii) such license or sublicense will not cease to be valid and
binding obligation of the Company and in full force and effect on terms
identical to those currently in effect as a result of the consummation of
the transactions contemplated by this Agreement, nor will the consummation
of the transactions contemplated by this Agreement constitute a breach or
default under such license or sublicense or otherwise give the licensor or
sublicensor a right to terminate such license or sublicense;
(iii) with respect to each such license or sublicense: (A) the Company
has not received any notice of termination or cancellation under such
license or sublicense and no licensor or sublicensor has any right of
termination or cancellation under such license or sublicense except in
connection with the default of the Company thereunder, (B) the Company has
not received any notice of a breach or default under such license or
sublicense, which breach or default has not been cured and (C) the Company
has not granted to any other person any rights, adverse or otherwise, under
such license or sublicense;
(iv) neither the Company nor, to the best knowledge of the Company,
any other party to such license or sublicense is in breach or default in
any material respect which breach has not been waived or cured, and, to the
best knowledge of the Company, no event has occurred that, with notice or
lapse of time or both would constitute such a breach or default or permit
termination, modification or acceleration under such license or sublicense;
(v) no claim, action, suit, arbitration, inquiry, proceeding or
investigation by or before any Governmental Authority (other than ex parte
patent office proceedings) has been made or asserted or is pending (nor, to
the best knowledge of the Company, has any such claim, action, suit,
arbitration, inquiry, proceeding or investigation been threatened) against
the Company either (A) based upon or challenging or seeking to deny or
restrict the use by the Company of any of the Licensed Intellectual
Property or (B) alleging that any Licensed Intellectual Property is being
licensed, sublicensed or used in violation of any patents or trademarks, or
any other rights of any person; and
(vi) to the best knowledge of the Company, no person is infringing
any granted patents, copyrights, trademarks, service marks or trade names,
or has misappropriated trade secrets or similar property, included in the
Licensed Intellectual Property.
(d) The Company has taken reasonable measures to assure and maintain
the confidentiality of the processes and formulae, research and development
results and other know-how of the Company, the value of which is contingent upon
maintenance of the confidentiality thereof and, to the best knowledge of the
Company, there have not been any material breaches of any confidentiality
obligations owing to the Company.
SECTION 3.15. Taxes. The Company has timely filed all federal, state,
local and foreign tax returns and reports required to be filed by it, all such
returns are true, correct and complete and it has timely paid and discharged all
taxes shown as due thereon and has paid all applicable ad valorem taxes as are
due. Neither the IRS nor any other taxing authority or agency, domestic or
foreign, is now asserting or, to the best knowledge of the Company, threatening
to assert against the Company any deficiency or claim for additional taxes or
interest thereon or penalties in connection therewith. The Company has not
granted any waiver of any statute of limitations with respect to, or any
extension of a period for the assessment of, any federal, state, county,
municipal or foreign income tax. The accruals and reserves for taxes reflected
in the 1994 Balance Sheet are adequate to cover all taxes accruable through such
date (including interest and penalties, if any, thereon) in accordance with
generally accepted accounting principles. The Company has not made an
<PAGE> 19
election under Section 341(f) of the Code. There are no tax liens on any assets
of the Company. The Company is not a party to any agreement or arrangement what
would result in the payment of any "excess parachute payments" within the
meaning of section 280G of the Internal Revenue Code. No acceleration of the
vesting schedule for any property that is substantially unvested, within the
meaning of the regulations under section 83 of the Internal Revenue Code, will
occur in connection with the Merger. The Company has not been includible in a
consolidated return for any taxable period for which the statute of limitations
has not expired. The Company is not subject to any accumulated earnings tax
penalty or personal holding company tax.
SECTION 3.16. Environmental Matters. (a) For purposes of this
Agreement, the following terms shall have the following meanings: (i)
"Environmental Claims" means any and all actions, suits, demands, demand
letters, claims, liens, notices of non-compliance or violation, notices of
liability or potential liability, proceedings, consent orders or consent
agreements relating in any way to any Environmental Law, any Environmental
Permit or any Hazardous Materials; (ii) "Environmental Law" means any statute,
law, rule, ordinance or code, in effect now or any time prior to the Closing,
and any judicial or administrative interpretation thereof, including any
judicial or administrative order, consent decree or judgment, relating to
pollution or protection of the environment, health, safety or natural resources,
including without limitation, those relating to the use, handling,
transportation, treatment, storage, disposal, release or discharge of Hazardous
Materials; (iii) "Environmental Permit" means any permit, approval,
identification number, license or other authorization required under any
applicable Environmental Law; (iv) "Governmental Authority" means any United
States federal, state or local or any foreign government, governmental,
regulatory or administrative authority, agency or commission or any court,
tribunal, or judicial or arbitral body; (v) "Hazardous Materials" means (A)
petroleum and petroleum products, by products or breakdown products, radioactive
materials, asbestos-containing materials and polychlorinated biphenyls, and (B)
any other chemicals, materials or substances defined or regulated as toxic or
hazardous or as a pollutant or contaminant or as a waste under any applicable
Environmental Law; and (vi) "leased property" and "leased properties" means the
real property which the Company has the right to control pursuant to its lease
and not any property which the Company does not have the right to control.
(b) Except as described in Section 3.16 of the Disclosure Schedule:
(i) the Company is and has been in material compliance with all applicable
Environmental Laws; (ii) the Company has obtained all necessary Environmental
Permits and is and has been in material compliance with their requirements;
(iii) to the best knowledge of the Company, there are no underground or
aboveground storage tanks or any surface impoundments, septic tanks, pits, sumps
or lagoons in which Hazardous Materials are being or have been treated, stored
or disposed of on any of the owned or leased properties or, with respect to the
period of the Company's ownership, tenancy or operation of such property, on any
real property formerly owned, leased or occupied by the Company; (iv) to the
best knowledge of the Company, no owned or leased properties or any property
adjoining any owned or leased properties is listed or proposed for listing on
the National Priorities List under the Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended through the date hereof, or
on the Comprehensive Environmental Response, Compensation and Liability
Information System, as updated through the date hereof, or any analogous state
list of sites requiring investigation or cleanup; (v) to the best knowledge of
the Company, there is no asbestos or asbestos-containing material on any of the
owned or leased properties; (vi) the Company has not released, discharged or
disposed of Hazardous Materials on any of the owned or leased properties or on
any real property formerly owned, leased or occupied by the Company in any
manner or quantity that can give rise to a Material Adverse Effect; (vii) the
Company is not undertaking, has not completed, and, to the best knowledge of the
Company, is not required to conduct, any investigation or assessment or remedial
or response action relating to any release, discharge or disposal of or
contamination with Hazardous Materials at any site, location or operation,
either voluntarily or pursuant to the order of any Governmental Authority or the
requirements of any Environmental Law; and (viii) there are no past, pending or,
to the best knowledge of the Company, threatened Environmental Claims against
the Company or any of its properties,
<PAGE> 20
and, to the best knowledge of the Company, there are no facts which can form the
basis of any such Environmental Claim, including without limitation with respect
to any off-site disposal location presently or formerly used by the Company or
any of its predecessors.
(c) The Company has made available to Parent copies of any
environmental audit reports, studies or analyses in its possession or under its
control relating to the owned or leased properties or the operations of the
Company.
SECTION 3.17. Material Contracts. Section 3.17 of the Disclosure
Schedule lists each contract or agreement to which the Company is a party (i)
that is required to be filed pursuant to Item 601(b)(10) of Regulation S-K under
the Securities Act (each of which has been so filed as an Exhibit to the SEC
Reports), (ii) that grants to a third party any commercial rights to exploit any
of the Intellectual Property or (iii) the absence of which would have a Material
Adverse Effect (each, a "Material Contract"). Each Material Contract is in full
force and effect and is enforceable against the parties thereto (other than the
Company) in accordance with its terms, except as may be limited by bankruptcy,
insolvency, reorganization, moratorium or other laws affecting creditors' rights
generally (including, without limitation, the effect of statutory and other law
regarding fraudulent conveyances, fraudulent transfers and preferential
transfers) and as may be limited by the exercise of judicial discretion and the
application of principles of equity, including, without limitation, requirements
of good faith, fair dealing, conscionability and materiality (regardless of
whether considered in a proceeding in equity or at law), and no condition or
state of facts exists that, with notice or the passage of time, or both, would
constitute a material default by the Company or, to the best knowledge of the
Company, any third party under any Material Contract. The Company has duly
complied in all material respects with the provision of each Material Contract
to which it is a party.
SECTION 3.18. Brokers. No broker, finder or investment banker (other
than Aylward and Associates) is entitled to any brokerage, finder's or other fee
or commission in connection with the Transactions based upon arrangements made
by or on behalf of the Company. The Company has heretofore furnished to Parent a
complete and correct copy of all agreements between the Company and Aylward and
Associates
SECTION 3.19. Opinion of Financial Advisor. The Board of Directors of
the Company has received the written opinion of Fister & Associates, dated the
date of this Agreement, to the effect that the cash consideration to be received
in the Offer and the Merger by the Company's public stockholders is fair to the
Company's public stockholders from a financial point of view, a copy of such
opinion has been delivered to Parent and such opinion has not been withdrawn or
modified.
SECTION 3.20. Related Party Transactions. Except as disclosed in the
SEC Reports, there are no material agreements, arrangements or understandings
between the Company, on the one hand, and any affiliate of the Company, on the
other hand.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally, represent and
warrant to the Company that:
SECTION 4.01. Corporate Organization. Each of Parent and Purchaser is
a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization.
SECTION 4.02. Authority Relative to this Agreement. Each of Parent and
Purchaser has all necessary corporate power and authority to execute and deliver
this Agreement, to perform its obligations hereunder and to consummate the
Transactions. The execution and delivery of this Agreement by Parent and
Purchaser and the consummation by
<PAGE> 21
Parent and Purchaser of the Transactions have been duly and validly authorized
by all necessary corporate action on the part of Parent and Purchaser and no
other corporate proceedings on the part of Parent or Purchaser are necessary to
authorize this Agreement or to consummate the Transactions (other than, with
respect to the Merger, the filing and recordation of appropriate merger
documents as required by Delaware Law). This Agreement has been duly and validly
executed and delivered by Parent and Purchaser and, assuming the due
authorization, execution and delivery by the Company, constitutes a legal, valid
and binding obligation of each of Parent and Purchaser enforceable against each
of Parent and Purchaser in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally (including, without limitation, the
effect of statutory and other law regarding fraudulent conveyances, fraudulent
transfers and preferential transfers) and as may be limited by the exercise of
judicial discretion and the application of principles of equity including,
without limitation, requirements of good faith, fair dealing, conscionability
and materiality (regardless of whether considered in a proceeding in equity or
at law).
SECTION 4.03. No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and Purchaser do not, and the
performance of this Agreement by Parent and Purchaser will not, (i) conflict
with or violate the Certificate of Incorporation or By-laws of either Parent or
Purchaser, (ii) conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Parent or Purchaser or by which any property or
asset of either of them is bound or affected, or (iii) result in any breach of
or constitute a default (or an event which with notice or lapse of time or both
would become a default) under, or give to others any rights of termination,
amendment, acceleration or cancellation of, or result in the creation of a lien
or other encumbrance on any property or asset of Parent or Purchaser pursuant
to, any note, bond, mortgage, indenture, contract, agreement, lease, license,
permit, franchise or other instrument or obligation to which Parent or Purchaser
is a party or by which Parent or Purchaser or any property or asset of either of
them is bound or affected, except for any such conflicts, violations, breaches,
defaults or other occurrences which would not, individually or in the aggregate,
prevent Parent or Purchaser from performing their respective obligations under
this Agreement and consummating the Transactions.
(b) The execution and delivery of this Agreement by Parent and
Purchaser do not, and the performance of this Agreement by Parent and Purchaser
will not, require any consent, approval, authorization or permit of, or filing
with or notification to, any governmental or regulatory authority to be obtained
or made by Parent or Purchaser, domestic or foreign, except (i) for applicable
requirements, if any, of the Exchange Act, Blue Sky Laws and state takeover
laws, the HSR Act and filing and recordation of appropriate merger documents as
required by Delaware Law and (ii) where the failure to obtain such consents,
approvals, authorizations or permits, or to make such filings or notifications,
would not prevent or delay consummation of the Offer or the Merger, or otherwise
prevent Parent or Purchaser from performing their respective obligations under
this Agreement.
SECTION 4.04. Financing. Parent has, or will have available to it at
the time Purchaser is required to pay for Shares under the terms of the Offer,
and will make available to Purchaser, sufficient funds to permit Purchaser to
acquire all of the outstanding Shares in the Offer and the Merger.
SECTION 4.05. Offer Documents; Proxy Statement. The Offer Documents
will not, at the time the Offer Documents are filed with the SEC or are first
published, sent or given to stockholders of the Company, as the case may be,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the statements
made therein, in the light of the circumstances under which they are made, not
misleading. The information supplied by Parent for inclusion in the Proxy
Statement will not, on the date the Proxy Statement (or any amendment or
supplement thereto) is first mailed to stockholders of the Company, at the time
of the Stockholders' Meeting or at the Effective Time, contain any statement
which, at such time and in light of the circumstances under which it is made, is
false or misleading with respect to any material
<PAGE> 22
fact, or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein not false or misleading or
necessary to correct any statement in any earlier communication with respect to
the solicitation of proxies for the Stockholders' Meeting which shall have
become false or misleading. Notwithstanding the foregoing, Parent and Purchaser
make no representation or warranty with respect to any information supplied by
the Company or any of its representatives which is contained in any of the
foregoing documents or the Offer Documents. The Offer Documents shall comply in
all material respects as to form with the requirements of the Exchange Act and
the rules and regulations thereunder.
SECTION 4.06. Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Transactions based upon arrangements made by or on behalf of Parent or
Purchaser.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.01. Conduct of Business by the Company Pending the Merger.
The Company covenants and agrees that, between the date of this Agreement and
the Effective Time, unless Parent shall otherwise agree in writing, the business
of the Company shall be conducted only in, and the Company shall not take any
action except in, the ordinary course of business and in a manner consistent
with past practice; and the Company shall use its best efforts to preserve
substantially intact the business organization of the Company, to keep available
the services of the current officers, employees and consultants of the Company
and to preserve the current relationships of the Company with customers,
suppliers and other persons with which the Company has significant business
relations. By way of amplification and not limitation, except as contemplated by
this Agreement, the Company shall not, between the date of this Agreement and
the Effective Time, directly or indirectly do, or propose to do, any of the
following without the prior written consent of Parent:
(a) amend or otherwise change its Certificate of Incorporation or
By-laws;
(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
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
(except for the issuance of a maximum of 130,000 Shares issuable pursuant
to Options outstanding on the date hereof) or (ii) any assets of the
Company except for sales in the ordinary course of business and in a manner
consistent with past practice;
(c) except as set forth in Section 5.01 of the Disclosure
Schedule, 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;
(d) except as set forth in Section 5.01 of the Disclosure
Schedule, 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; (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
<PAGE> 23
contract or agreement other than in the ordinary course of business,
consistent with past practice; (iv) authorize any single capital commitment
which is in excess of $50,000 or capital expenditures which are, in the
aggregate, in excess of $100,000 for the Company; or (v) enter into or
amend any contract, agreement, commitment or arrangement with respect to
any matter set forth in this Section 5.01(e);
(f) except as set forth in Section 5.01 of the Disclosure
Schedule, increase the compensation payable or to become payable to its
officers or employees, except for increases in accordance with past
practices in salaries or wages of employees of the Company who are not
officers 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 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;
(g) 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 receivables);
(h) make any tax election or settle or compromise any material
federal, state, local or foreign income tax liability;
(i) settle or compromise any pending or threatened suit, action
or claim which is material or which relates to any of the Transactions;
(j) 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 1994 Balance Sheet or subsequently incurred in the
ordinary course of business and consistent with past practice;
(k) sell, assign, transfer, license, sublicense, pledge or
otherwise encumber any of the Intellectual Property; or
(l) announce an intention, commit or agree to do any of the
foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.01. Stockholders' Meeting. (a) If required by applicable law
in order to consummate the Merger, the Company, acting through the Board, shall,
in accordance with applicable law and the Company's Certificate of Incorporation
and By-laws, (i) duly call, give notice of, convene and hold an annual or
special meeting of its stockholders as soon as practicable following
consummation of the Offer for the purpose of considering and taking action on
this Agreement and the transactions contemplated hereby (the "Stockholders'
Meeting") and (ii) subject to its fiduciary duties under applicable law as
advised in writing by independent counsel, (A) include in the Proxy Statement
the unanimous recommendation of the Board that the stockholders of the Company
approve and adopt this Agreement and the transactions contemplated hereby and
(B) use its best efforts to obtain such approval and adoption. At the
Stockholders' Meeting, Parent and Purchaser shall cause all Shares then owned by
them to be voted in favor of the approval and adoption of this Agreement and the
transactions contemplated hereby.
<PAGE> 24
(b) Notwithstanding the foregoing, in the event that Purchaser shall
acquire at least 90 percent of the then outstanding Shares, the parties hereto
agree, at the request of Purchaser, subject to Article VII, to take all
necessary and appropriate action to cause the Merger to become effective, in
accordance with Section 253 of Delaware Law, as soon as reasonably practicable
after such acquisition, without a meeting of the stockholders of the Company.
SECTION 6.02. Proxy Statement. If required by applicable law, as soon
as practicable following consummation of the Offer, the Company shall file the
Proxy Statement with the SEC under the Exchange Act, and shall use its best
efforts to have the Proxy Statement cleared as promptly as practicable by the
SEC. Parent, Purchaser and the Company shall cooperate with each other in the
preparation of the Proxy Statement, and the Company shall notify Parent of the
receipt of any comments of the SEC with respect to the Proxy Statement and of
any requests by the SEC for any amendment or supplement thereto or for
additional information and shall provide to Parent promptly copies of all
correspondence between the Company or any representative of the Company and the
SEC. The Company shall give Parent and its counsel the opportunity to review the
Proxy Statement prior to its being filed with the SEC and shall give Parent and
its counsel the opportunity to review all amendments and supplements to the
Proxy Statement and all responses to requests for additional information and
replies to comments prior to their being filed with, or sent to, the SEC. Each
of the Company, Parent and Purchaser agrees to use its reasonable best efforts,
after consultation with the other parties hereto, to respond promptly to all
such comments of and requests by the SEC and to cause the Proxy Statement and
all required amendments and supplements thereto to be mailed to the holders of
Shares entitled to vote at the Stockholders' Meeting at the earliest practicable
time.
SECTION 6.03. Company Board Representation; Section 14(f). (a)
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
shall 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 and affiliates of Purchaser
following such purchase bears to the total number of Shares then outstanding,
and the Company shall, 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. At such times, the Company shall use its best efforts to
cause persons designated by Purchaser to constitute the same percentage as
persons designated by Purchaser shall constitute of the Board of each committee
of the Board, in each case only to the extent permitted by applicable law.
Notwithstanding the foregoing, until the earlier of (i) the time Purchaser
acquires a majority of the then outstanding Shares on a fully diluted basis and
(ii) the Effective Time, the Company shall use its best efforts to ensure that
all the members of the Board and each committee of the Board as of the date
hereof who are not employees of the Company shall remain members of the Board
and of such committees.
(b) The Company shall promptly take all actions required pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 promulgated thereunder in order
to fulfill its obligations under this Section 6.03 and shall include in the
Schedule 14D-9 such information with respect to the Company and its officers and
directors as is required under Section 14(f) and Rule 14f-1 to fulfill such
obligations. Parent or Purchaser shall supply to the Company and be solely
responsible for any information with respect to either of them and their
nominees, officers, directors and affiliates required by such Section 14(f) and
Rule 14f-1.
(c) Following the election of designees of Purchaser pursuant to this
Section 6.03, prior to the Effective Time, any amendment of this Agreement or
the Certificate of Incorporation or By-laws of the Company, any termination of
this 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
<PAGE> 25
hereunder shall require the concurrence of a majority of the directors of the
Company then in office who are neither (i) designees of Purchaser nor (ii)
employees of the Company.
SECTION 6.04. Access to Information; Confidentiality. (a) From the
date hereof to the Effective Time, the Company shall, and shall cause the
officers, directors, employees, auditors and agents of the Company 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
complete access at all reasonable times to the officers, employees, agents,
properties, offices, plants and other facilities, books and records of the
Company, and shall furnish Parent and Purchaser and persons providing or
committing to provide Parent or Purchaser with financing for the Transactions
with all financial, operating and other data and information as Parent or
Purchaser, through its officers, employees or agents, may reasonably request.
(b) All information obtained by Parent or Purchaser pursuant to this
Section 6.04 shall be kept confidential in accordance with the confidentiality
agreement, dated October 10, 1995 (the "Confidentiality Agreement"), between
Parent and the Company.
(c) No investigation pursuant to this Section 6.04 shall affect any
representation or warranty in this Agreement of any party hereto or any
condition to the obligations of the parties hereto.
SECTION 6.05. No Solicitation of Transactions. Unless this Agreement
shall have been terminated pursuant to Section 8.01, the Company shall not,
directly or indirectly, through any officer, director, agent or otherwise,
solicit, initiate or encourage the submission of 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 business combination with the Company 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; provided, however, that nothing
contained in this Section 6.05 shall prohibit the Board from responding to any
unsolicited proposal made in writing to acquire the Company pursuant to a
merger, consolidation, share exchange, business combination or other similar
transaction or to acquire all or substantially all of the assets of the Company,
to the extent the Board, after consultation with independent legal counsel,
determines in good faith that such action is required for the Board to comply
with its fiduciary duty to stockholders imposed by Delaware Law. The Company
immediately shall cease and cause to be terminated all existing discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. The Company shall notify Parent promptly if any such proposal or
offer, or any inquiry or contact with any person with respect thereto, is made
and shall, in any such notice to Parent, 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. The Company
agrees not to release any third party from, or waive any provision of, any
confidentiality or standstill agreement to which the Company is a party.
SECTION 6.06. Employee Benefits Matters. Parent intends that, for a
period of one year immediately following the Effective Time, it shall, or shall
cause the Surviving Corporation to, continue to maintain employee benefit and
welfare plans, programs, contracts, agreements policies and executive incentives
and perquisites, other than equity- based plans, for the benefit of active and
retired employees of the Company or the Surviving Corporation which in the
aggregate provide benefits that are no less favorable to employees than the
benefits provided to such active and retired employees on the date hereof.
SECTION 6.07. Directors' and Officers' Indemnification. (a) The
By-laws of the Surviving Corporation shall contain provisions no less favorable
with respect to indemnification, advancement of expenses and related matters
than are set forth in Article VII of the By-laws of the Company as in effect on
the date hereof, which provisions shall not be amended, repealed or otherwise
modified for a period of three years from the
<PAGE> 26
Effective Time in any manner that would affect adversely the rights thereunder
of individuals who at the Effective Time were directors, officers, employees,
fiduciaries or agents of the Company, unless such modification shall be required
by law.
(b) The Company shall, 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, the Surviving Corporation
shall, to the fullest extent permitted under applicable law, indemnify and hold
harmless, each present and former director, officer, employee, fiduciary and
agent of the Company (collectively, the "Indemnified Parties") against all costs
and expenses (including attorneys' fees), judgments, fines, losses, claims,
damages, liabilities and settlement amounts paid 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, employee, fiduciary or agent, whether occurring before, at or
after the Effective Time, whether asserted or claimed prior to, at or after the
Effective Time, for a period of three years after the date hereof. In the event
of any such claim, action, suit, proceeding or investigation, (i) the Company or
the Surviving Corporation, as the case may be, shall pay the reasonable fees and
expenses of counsel selected by the Indemnified Parties, which counsel shall be
reasonably satisfactory to the Company or the Surviving Corporation, promptly
after statements therefor are received and (ii) the Company and the Surviving
Corporation shall cooperate in the defense of any such matter; provided,
however, that neither the Company nor the Surviving Corporation shall be liable
for any settlement effected without its written consent (which consent shall not
be unreasonably withheld); and provided, further, that neither the Company nor
the Surviving Corporation shall be obligated pursuant to this Section 6.07(b) 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 shall 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 three-year period, all rights to indemnification in
respect of such claim shall continue until the disposition of such claim.
(c) In the event the Company or the Surviving Corporation or any of
their respective successors or assigns (i) consolidates with or merges into any
other person and shall not be the continuing or surviving corporation or entity
of such consolidation or merger or (ii) transfers all or substantially all of
its properties and assets to any person, then, and in each such case, proper
provision shall be made so that the successors and assigns of the Company or the
Surviving Corporation, as the case may be, or at Parent's option, Parent, shall
assume the obligations set forth in this Section 6.07.
SECTION 6.08. Notification of Certain Matters. The Company shall give
prompt notice to Parent, and Parent shall give prompt notice to the Company, of
(i) the occurrence, or non-occurrence, of any event the occurrence, or
non-occurrence, of which would be likely to cause any representation or warranty
of the Company contained in this Agreement to be untrue or inaccurate and (ii)
any failure of the Company, Parent or Purchaser, as the case may be, to comply
with or satisfy any covenant, condition or agreement to be complied with or
satisfied by it hereunder; provided, however, that the delivery of any notice
pursuant to this Section 6.08 shall not limit or otherwise affect the remedies
available hereunder to the party receiving such notice.
SECTION 6.09. Further Action; Reasonable Best Efforts. Upon the terms
and subject to the conditions hereof, each of the parties hereto shall (i) make
promptly its respective filings, and thereafter make any other required
submissions, under the HSR Act with respect to the Transactions 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, including, without limitation, using its reasonable best efforts
to obtain all licenses, permits (including, without limitation, Environmental
Permits), consents, approvals, authorizations, qualifications and orders of
governmental authorities and parties to contracts with the Company as are
necessary for the consummation of the Transactions and to fulfill the conditions
to the Offer and the Merger. In case at any time after the Effective Time any
<PAGE> 27
further action is necessary or desirable to carry out the purposes of this
Agreement, the proper officers and directors of each party to this Agreement
shall use their reasonable best efforts to take all such action.
SECTION 6.10. Public Announcements. Parent, Purchaser and the Company
shall consult with each other before issuing any press release or otherwise
making any public statements with respect to this Agreement or any Transaction
and shall not issue any such press release or make any such public statement
without the consent of the other parties, except as may be required by law or
the Company's listing agreement with the Nasdaq National Market.
SECTION 6.11. Confidentiality Agreement. The Company hereby waives the
provisions of the Confidentiality Agreement as and to the extent necessary to
permit the consummation of each Transaction as contemplated by this Agreement.
Upon the acceptance for payment of Shares pursuant to the Offer, the
Confidentiality Agreement shall be deemed to have terminated without further
action by the parties thereto.
ARTICLE VII
CONDITIONS TO THE MERGER
SECTION 7.01. Conditions to the Merger. The respective obligations of
each party to effect the Merger shall be subject to the satisfaction at or prior
to the Effective Time of the following conditions:
(a) Stockholder Approval. This Agreement and the transactions
contemplated hereby shall have been approved and adopted by the affirmative
vote of the stockholders of the Company to the extent required by Delaware
Law and the Certificate of Incorporation of the Company;
(b) HSR Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated;
(c) No Order. No foreign, United States or state governmental
authority or other agency or commission or foreign, United States or state
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
Transactions; and
(d) Offer. Purchaser or its permitted assignee shall have
purchased all Shares validly tendered and not withdrawn pursuant to the
Offer; provided, however, that this condition shall not be applicable to
the obligations of Parent or Purchaser if, in breach of this Agreement or
the terms of the Offer, Purchaser fails to purchase any Shares validly
tendered and not withdrawn pursuant to the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01. Termination. This Agreement may be terminated and the
Merger and the other Transactions may be abandoned at any time prior to the
Effective Time, notwithstanding any requisite approval and adoption of this
Agreement and the transactions contemplated hereby by the stockholders of the
Company:
<PAGE> 28
(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 shall not have occurred on or before March 31, 1996;
provided, however, that the right to terminate this Agreement under this
Section 8.01(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or
resulted in, the failure of the Effective Time to occur on or before such
date; or (ii) any court of competent jurisdiction in the United States or
other United States governmental authority shall have issued an order,
decree, ruling or taken any other action restraining, enjoining or
otherwise prohibiting the Merger and such order, decree, ruling or other
action shall have become final and nonappealable; or
(c) By Parent if (i) due to an occurrence or circumstance that
would result in a failure to satisfy any condition set forth in Annex A
hereto, Purchaser shall have (A) failed to commence the Offer within 30
days following the date of this Agreement, (B) terminated the Offer without
having accepted any Shares for payment thereunder or (C) failed to pay for
Shares pursuant to the Offer within 60 days following the commencement of
the Offer, unless such failure to pay for Shares shall have been caused by
or resulted from the failure of Parent or Purchaser to perform in any
material respect any material covenant or agreement of either of them
contained in this Agreement or the material breach by Parent or Purchaser
of any material representation or warranty of either of them contained in
this Agreement or (ii) prior to the purchase of Shares pursuant to the
Offer, the Board or any committee thereof shall have withdrawn or modified
in a manner adverse to Purchaser or Parent its approval or recommendation
of the Offer, this Agreement, the Merger or any other Transaction or shall
have recommended another merger, consolidation, business combination with,
or acquisition of, the Company or its assets or another tender offer for
Shares, or shall have resolved to do any of the foregoing; or
(d) By the Company, upon approval of the Board, if (i) Purchaser
shall have (A) failed to commence the Offer within 30 days following the
date of this Agreement, (B) terminated the Offer without having accepted
any Shares for payment thereunder or (C) failed to pay for Shares pursuant
to the Offer within 60 days following the commencement of the Offer, unless
such failure to pay for Shares shall have been caused by or resulted from
the failure of the Company to perform in any material respect any material
covenant or agreement of the Company contained in this Agreement or the
material breach by the Company of any material representation or warranty
of the Company contained in this Agreement or (ii) prior to the purchase of
Shares pursuant to the Offer the Board shall have withdrawn or modified in
a manner adverse to Purchaser or Parent its approval or recommendation of
the Offer, this Agreement or the Merger in order to approve the execution
by the Company of a definitive agreement providing for the acquisition of
the Company or its assets or a merger or other business combination or in
order to approve a tender offer or exchange offer for Shares by a third
party, in either case, as determined by the Board in the exercise of its
good faith judgment and after consultation with its legal counsel and
financial advisors, on terms more favorable to the Company's stockholders
than the Offer and the Merger taken together; provided, however, that such
termination under this clause (ii) shall not be effective until the Company
has made payment to Parent of the Fee (as hereinafter defined) required to
be paid pursuant to Section 8.03(a) and has deposited with a mutually
acceptable escrow agent $500,000 for reimbursement to Parent and Purchaser
of Expenses (as hereinafter defined).
SECTION 8.02. Effect of Termination. In the event of the termination
of this Agreement pursuant to Section 8.01, this Agreement shall forthwith
become void, and there shall be no liability on the part of any party hereto,
except (i) as set forth in Sections 8.03 and 9.01 and (ii) nothing herein shall
relieve any party from liability for any breach hereof.
SECTION 8.03. Fees and Expenses. (a) In the event that
<PAGE> 29
(i) any person shall have commenced a tender or exchange offer for
10% or more (or which, assuming the maximum amount of securities which
could be purchased, would result in any person beneficially owning 10% or
more) of the then outstanding Shares or otherwise for the direct or
indirect acquisition of the Company or all or substantially all of its
assets for per Share consideration having a value greater than the Per
Share Amount (a "Competing Proposal") and (w) the Board does not recommend
against the Competing Proposal, (x) the Offer shall have remained open for
at least 20 business days, (y) the Minimum Condition shall not have been
satisfied and (z) this Agreement shall have been terminated pursuant to
Section 8.01; or
(ii) this Agreement is terminated (x) pursuant to Section 8.01(c)(ii)
or (y) pursuant to Section 8.01(d)(ii);
then, in any such event, the Company shall pay Parent promptly (but in no event
later than one business day after the first of such events shall have occurred)
a fee of U.S.$1,000,000 (the "Fee"), which amount shall be payable in
immediately available funds, plus all Expenses up to $500,000 in the aggregate.
For purposes of this Section 8.03, the term "Expenses" shall mean all
out-of-pocket expenses and fees of each of Parent, Purchaser and their
respective shareholders and affiliates (including, without limitation, fees and
expenses payable to all banks, investment banking firms, other financial
institutions and other persons and their respective agents and counsel for
arranging, committing to provide or providing any financing for the Transactions
or structuring the Transactions and all fees of counsel, accountants, experts
and consultants to Parent and Purchaser, and all printing and advertising
expenses and all costs and expenses incurred by or on behalf of Parent and
Purchaser in connection with the collection under and enforcement of this
Section 8.03) actually incurred or accrued by any of them or on their behalf in
connection with the Transactions, including, without limitation, the financing
thereof, and actually incurred or accrued by banks, investment banking firms,
other financial institutions and other persons and assumed by Parent and
Purchaser in connection with the negotiation, preparation, execution and
performance of this Agreement, the structuring and financing of the Transactions
and any financing commitments or agreements relating thereto.
(b) Except as set forth in this Section 8.03, all costs and expenses
incurred in connection with this Agreement and the Transactions shall be paid by
the party incurring such expenses, whether or not any Transaction is
consummated.
SECTION 8.04. Amendment. Subject to Section 6.03(c), this Agreement
may be amended by the parties hereto by action taken by or on behalf of their
respective Boards of Directors at any time prior to the Effective Time;
provided, however, that, after the approval and adoption of this Agreement and
the transactions contemplated hereby by the stockholders of the Company, no
amendment may be made which would reduce the amount or change the type of
consideration into which each Share shall be converted upon consummation of the
Merger. This Agreement may not be amended except by an instrument in writing
signed by the parties hereto.
SECTION 8.05. Extension; Waiver. At any time prior to the Effective
Time, any party hereto may (i) extend the time for the performance of any
obligation or other act of any other party hereto, (ii) waive any inaccuracy in
the representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any agreement or condition
contained herein. Any such extension or waiver shall be valid only if set forth
in an instrument in writing signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
<PAGE> 30
SECTION 9.01. Non-Survival of Representations, Warranties and
Agreements. The representations, warranties and agreements in this Agreement
shall terminate at the Effective Time or upon the termination of this Agreement
pursuant to Section 8.01, as the case may be, except that the agreements set
forth in Articles II and Sections 6.06 and 6.07 shall survive the Effective Time
indefinitely and those set forth in Sections 6.04(b) and 8.03 shall survive
termination indefinitely. This Section 9.01 shall not limit any covenant or
agreement of the parties which by its terms contemplates performance after the
Effective Time of the Merger.
SECTION 9.02. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and shall
be deemed to have been duly given upon receipt) by delivery in person, by
telecopy or by registered or certified mail (postage prepaid, return receipt
requested) to the respective parties at the following addresses (or at such
other address for a party as shall be specified in a notice given in accordance
with this Section 9.02):
if to Parent or Purchaser:
Thomson U.S. Holdings Inc.
c/o The Thomson Corporation
Metro Center at One Station Place
Stamford, Connecticut 06902
Telecopier No. : (203) 348-5718
Attention: General Counsel
with a copy (which shall not by itself constitute notice) to:
Research Institute of America
90 Fifth Avenue
New York, New York 10011
Telecopier No.: (212) 337-4197
Attention: Euan C. Menzies
and a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Telecopier No.: (212) 848-7179
Attention: David W. Heleniak, Esq.
if to the Company:
SCS/Compute, Inc.
2252 Welsch Industrial Court
St. Louis, Missouri 63146
Telecopier No.: (314) 432-7308
Attention: Chief Executive Officer
with a copy (which shall not by itself constitute notice) to:
Peper, Martin, Jensen, Maichel and Hetlage
720 Olive Street, 24th floor
St. Louis, Missouri 63101
Telecopier No: (314) 621-4834
Attention: John R. Short, Esq.
SECTION 9.03. Certain Definitions. For purposes of this Agreement,
the term:
<PAGE> 31
(a) "affiliate" of a specified person means a person who directly
or indirectly through one or more intermediaries controls, is controlled
by, or is under common control with, such specified person;
(b) "beneficial owner" with respect to any Shares means a person
who shall be deemed to be the beneficial owner of such Shares (i) which
such person or any of its affiliates or associates (as such term is defined
in Rule 12b-2 promulgated under the Exchange Act) beneficially owns,
directly or indirectly, (ii) which such person or any of its affiliates or
associates has, directly or indirectly, (A) the right to acquire (whether
such right is exercisable immediately or subject only to the passage of
time), pursuant to any agreement, arrangement or understanding or upon the
exercise of conversion rights, exchange rights, warrants or options, or
otherwise, or (B) the right to vote pursuant to any agreement, arrangement
or understanding or (iii) which are beneficially owned, directly or
indirectly, by any other persons with whom such person or any of its
affiliates or associates or person with whom such person or any of its
affiliates or associates has any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of any Shares;
(c) "business day" means any day on which the principal offices
of the SEC in Washington, D.C. are open to accept filings, or, in the case
of determining a date when any payment is due, any day on which banks are
not required or authorized to close in the City of New York;
(d) "control" (including the terms "controlled by" and "under
common control with") means the possession, directly or indirectly or as
trustee or executor, of the power to direct or cause the direction of the
management and policies of a person, whether through the ownership of
voting securities, as trustee or executor, by contract or credit
arrangement or otherwise;
(e) "person" means an 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; and
(f) "subsidiary" or "subsidiaries" of the Company, the Surviving
Corporation, Parent or any other person means an affiliate controlled by
such person, directly or indirectly, through one or more intermediaries.
SECTION 9.04. Severability. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or legal
substance of the Transactions is not affected in any manner materially adverse
to any party. Upon such determination that any term or other provision is
invalid, illegal or incapable of being enforced, the parties hereto shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the Transactions be consummated as originally contemplated to the
fullest extent possible.
SECTION 9.05. Entire Agreement; Assignment. Except as set forth in
Sections 6.04 and 6.11, this Agreement constitutes the entire agreement among
the parties with respect to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, among the parties, or any of
them, with respect to the subject matter hereof. This Agreement shall not be
assigned by operation of law or otherwise, except that Parent and Purchaser may
assign all or any of their rights and obligations hereunder to any affiliate of
Parent provided that no such assignment shall relieve the assigning party of its
obligations hereunder if such assignee does not perform such obligations.
<PAGE> 32
SECTION 9.06. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of the parties hereto and their respective
successors and assigns, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, other than
Section 6.07 (which is intended to be for the benefit of the persons covered
thereby and may be enforced by such persons).
SECTION 9.07. Specific Performance. The parties hereto agree that
irreparable damage would occur in the event any provision of this Agreement was
not performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or in equity.
SECTION 9.08. Governing Law. Except to the extent that Delaware Law
applies to the Transactions, this Agreement shall be governed by, and construed
in accordance with, the laws of the State of New York applicable to contracts
executed in and to be performed entirely within that State.
SECTION 9.09. Headings. The descriptive headings contained in this
Agreement are included for convenience of reference only and shall not affect in
any way the meaning or interpretation of this Agreement.
SECTION 9.10. Counterparts. This Agreement may be executed in one or
more counterparts, and by the different parties hereto in separate counterparts,
each of which when executed shall be deemed to be an original but all of which
taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, Parent, Purchaser and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
THOMSON U.S. HOLDINGS INC.
By /s/ Nigel R. Harrison
Name: Nigel R. Harrison
Title: Executive Vice President
SCS SUBSIDIARY, INC.
By /s/ Nigel R. Harrison
Name: Nigel R. Harrison
Title: Treasurer
SCS/COMPUTE, INC.
By /s/ Robert W. Nolan, Sr.
Name: Robert W. Nolan, Sr.
Title: President
<PAGE> 33
ANNEX A
Conditions to the Offer
Notwithstanding any other provision of the Offer, 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 prior to the expiration of the Offer,
or (iii) at any time on or after the date of this 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 court or governmental, administrative or regulatory
authority or agency, domestic or foreign, (i) challenging or seeking to
make illegal, materially delay or otherwise directly or indirectly restrain
or prohibit or make materially more costly the making of the Offer, the
acceptance for payment of, or payment for, any Shares by Parent, Purchaser
or any other affiliate of Parent or the consummation of any other
Transaction, or seeking to obtain material damages in connection with any
Transaction; (ii) seeking to prohibit or limit materially the ownership or
operation by the Company, Parent or any of its subsidiaries of all or any
material portion of the business or assets of the Company, Parent or any of
its subsidiaries, or to compel the Company, Parent or any of its
subsidiaries to dispose of or hold separate all or any material portion of
the business or assets of the Company, Parent or any of its subsidiaries,
as a result of the Transactions; (iii) seeking to impose 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 stockholders, including, without
limitation, the approval and adoption of this Agreement and the
transactions contemplated hereby; (iv) seeking to require divestiture by
Parent, Purchaser or any other affiliate of Parent of any Shares; or (v)
which otherwise has a Material Adverse Effect or which is reasonably likely
to materially adversely affect the business, operations, properties,
condition (financial or otherwise), assets or liabilities (including,
without limitation, contingent liabilities) or prospects of Parent.
(b) there shall have been any action taken, or any statute, rule,
regulation, legislation, interpretation, judgment, order or injunction
enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to (i) Parent, the Company or any subsidiary or affiliate of
Parent or the Company or (ii) any Transaction, by any legislative body,
court, government or governmental, administrative or regulatory authority
or agency, domestic or foreign, other than the routine application of the
waiting period provisions of the HSR Act to the Offer, the Stock Purchase
Agreement or the Merger, which is reasonably likely to result, directly or
indirectly, in any of the consequences referred to in clauses (i) through
(v) of paragraph (a) above;
(c) there shall have occurred any change, condition, event or
development that, when taken together with all such other changes,
conditions, events and developments, has a Material Adverse Effect with
respect to the Company;
(d) (i) it shall have been publicly disclosed or Purchaser shall
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of 25% or more of the then outstanding Shares has been
acquired by any person, other than
<PAGE> 34
Parent or any of its affiliates or Mr. Robert W. Nolan, Sr. or (ii) (A) the
Board or any committee thereof shall have withdrawn or modified in a manner
adverse to Parent or Purchaser the approval or recommendation of the Offer,
the Merger, this Agreement, or approved or recommended any takeover
proposal or any other acquisition of Shares other than the Offer and the
Merger or (B) the Board or any committee thereof shall have resolved to do
any of the foregoing;
(e) any representation or warranty of the Company in this
Agreement which is qualified as to materiality shall not be true and
correct or any such representation or warranty that is not so qualified
shall not be true and correct in any material respect, in each case as if
such representation or warranty was made as of such time on or after the
date of this Agreement;
(f) 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 this Agreement;
(g) this Agreement shall have been terminated in accordance with
its terms; or
(h) Purchaser and the Company shall have agreed that Purchaser
shall terminate the Offer or postpone the acceptance for payment of or
payment for Shares thereunder;
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) 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 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.
<PAGE> 1
[FISTER & ASSOCIATES, INC. LETTERHEAD]
November 20, 1995
Mr. Charles G. Wilson
Executive Vice President
Finance and Administration
SCS/Compute
2252 Welsch Industrial Court
St. Louis, MO 63146
RE: Fairness Opinion
Dear Chuck:
It is our understanding that your company is considering a cash buyout of all
of the shares of your company by a prospective purchaser who will make a
definitive offer within the next two weeks. It is my understanding further that
you are interested in receiving an opinion as to the fairness of the current
indication of price and you need this by December 5th for presentation to a
board meeting on December 12th.
We would be pleased to offer our services in giving you our preliminary
indication and should you wish a finalized fairness opinion, issue same, at
time and place and in form acceptable to your attorneys and ourselves. It is
our understanding, however, that there is nothing unusual about the transaction
and that standard fairness opinions acceptable in the marketplace are what you
are seeking.
We propose to do this on the basis of an hourly charge of $175.00/hour with a
$1,000.00 paid at the beginning of the assignment. We would estimate at the
present time, 30 to 40 hours for completing the initial assessment of the
fairness of the transaction. Any additional time spent in discussions with
management, presentations to the Board of Directors and discussions with
attorneys finalizing the fairness opinion might add an additional 5 to 10
hours. Should our hours exceed these estimates
<PAGE> 2
during the assignment, we will inform you, but of course you will be working
with us on an on going basis.
In order for us to complete our assignment, we will need your signature on the
bottom of this letter indicating our engagement for the purposes of issuing a
fairness opinion; we will need a letter from you describing the fundamentals of
the potential deal; and we will further need information listed on the enclosed
schedule. Because of the time constraints we would appreciate, of course,
having this as soon as possible after we are selected for the engagement.
Yours very truly,
By: /s/ RICHARD E. FISTER
----------------------
Richard E. Fister
President
REF:dlr
Enclosure
Accepted:
SCS/COMPUTE
/s/ CHARLES G. WILSON
- ---------------------------
Authorized Signature
A Private Investment Banking Firm
7711 Carondelet Avenue - Suite 810 - St. Louis, MO 63105 - (314) 862-6220 -
(314) 862-5558 Fax
<PAGE> 1
[FISTER & ASSOCIATES, INC. LETTERHEAD]
December 19, 1995
Board of Directors
SCS/Compute, Inc.
2252 Welsch Industrial Court
St. Louis, MO 63146
Members of the Board:
We understand that Thomson U.S. Holdings, Inc. ("Thomson"), SCS Subsidiary,
Inc. ("Subsidiary"), and Robert W. Nolan, Sr. ("Nolan") are to enter into a
Stock Purchase Agreement (the "Stock Agreement") dated December 19, 1995 for
the purchase by Subsidiary of all of the shares of common stock owned directly
by Nolan at a purchase price of $6.75 per share, and further that Thomson,
Subsidiary and SCS/Compute, Inc. ("SCS") are to enter into an Agreement and
Plan of Merger (the "Agreement") dated December 19, 1995 pursuant to which
Subsidiary will make a cash tender offer for the balance of SCS's outstanding
common stock not subject to the Stock Agreement at a purchase price of $6.75
per share, and Subsidiary will subsequently merge with and into SCS, with each
issued and outstanding share of Common Stock of SCS not purchased in the tender
offer or pursuant to the Stock Agreement converting into the right to receive
$6.75 per share in cash (the "Proposed Transaction"). The terms and conditions
of the Proposed Transaction are set forth in more detail in the Agreement.
We have been requested by SCS to render our opinion with respect to the
fairness, from a financial point of view, to SCS's stockholders of the
consideration to be received in the Proposed Transaction. Our opinion does not
in any manner address SCS's underlying business decision to proceed with or
effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (1) all publicly
available information concerning SCS which we believe to be relevant to our
inquiry, including its Form 10-K dated January 31, 1995 and its draft Form 10-Q
dated October 31, 1995; (2) financial and operating information with respect to
the business, operations and prospects of SCS furnished to us by SCS
(including, without limitations, projections for the fiscal years 1995-2000
prepared by management of SCS); (3) a trading history of SCS's common stock and
a comparison of that trading history with those of other companies, which we
deemed relevant; (4) a comparison of the historical financial results and
present financial condition of SCS with those of other companies which we
deemed relevant; (5) an analysis of the Computer Software and Services
industries; and (6) an analysis of sale transactions in the Software Industry
during 1995. In addition, we have had discussions with the management of SCS
concerning its business, operations, assets, financial condition and prospects
<PAGE> 2
and undertook such other studies, analyses and investigations as we deemed
appropriate.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information used by us without assuming
any responsibility for independent verification of such information and have
further relied upon the assurances of management of SCS that they are not aware
of any facts that would make such information inaccurate or misleading. For
purposes of our analysis, we also reviewed the financial projections of SCS
which, upon advice of SCS, we assumed were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
management of SCS as to the future financial performance of SCS. In arriving at
our opinion, we have not conducted a physical inspection of the properties and
facilities of SCS and have not made nor obtained any evaluations or appraisals
of the assets or liabilities of SCS. Our opinion is necessarily based upon
market, economic and other conditions as they exist on, and can be evaluated as
of, the date of this letter.
Based upon and subject to the foregoing, we are of the opinion as of the date
hereof that, from a financial point of view, the consideration to be received
in the Proposed Transaction is fair to the stockholders of SCS.
We have acted as financial advisor to SCS in connection with the Proposed
Transaction and will receive a fee for the rendering of this opinion. In
addition, SCS has agreed to indemnify us for certain liabilities which may
arise out of the rendering of this opinion.
This opinion is for the use and benefit of the Board of Directors of SCS. This
opinion is not intended to be and does not constitute a recommendation to any
stockholder of the Company as to whether to accept the consideration to be
offered to such stockholder in connection with the Proposed Transaction.
Very truly yours,
FISTER & ASSOCIATES, INC.
/s/ Richard E. Fister
---------------------
Richard E. Fister, President
A Private Investment Banking Firm
7711 Carondelet Avenue - Suite 810 - St. Louis, MO 63105 - (314) 862-6220 -
(314) 862-5558 Fax
<PAGE> 1
STOCK PURCHASE AGREEMENT
among
THOMSON U.S. HOLDINGS INC.
SCS SUBSIDIARY, INC.
and
ROBERT W. NOLAN, SR.
Dated as of December 19, 1995
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
<S> <C> <C>
ARTICLE I
DEFINITIONS
1.01 Certain Defined Terms . . . . . . . . . . . . . . . . . . . . 1
1.02 Adjustments upon Changes in Capitalization. . . . . . . . . . 3
ARTICLE II
PURCHASE AND SALE
2.01 Purchase and Sale . . . . . . . . . . . . . . . . . . . . . . 4
2.02 Closing . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.03 Closing Deliveries by Seller. . . . . . . . . . . . . . . . . 4
2.04 Closing Deliveries by the Purchaser . . . . . . . . . . . . . 5
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF SELLER AS TO THE COMPANY
3.01 Title to Stock. . . . . . . . . . . . . . . . . . . . . . . . 5
3.02 Authority Relative to this Agreement. . . . . . . . . . . . . 5
3.03 No Conflict; Required Filings and Consents. . . . . . . . . . 6
3.04 Compliance. . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.05 Absence of Litigation . . . . . . . . . . . . . . . . . . . . 6
3.06 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . 6
3.07 Merger Agreement. . . . . . . . . . . . . . . . . . . . . . . 7
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
4.01 Corporate Organization. . . . . . . . . . . . . . . . . . . . 7
4.02 Authority Relative to this Agreement. . . . . . . . . . . . . 7
4.03 No Conflict; Required Filings and Consents. . . . . . . . . . 7
4.04 Investment Intent . . . . . . . . . . . . . . . . . . . . . . 8
4.05 Absence of Litigation . . . . . . . . . . . . . . . . . . . . 8
4.06 No Brokers. . . . . . . . . . . . . . . . . . . . . . . . . . 8
</TABLE>
<PAGE> 3
<TABLE>
<S> <C> <C>
ARTICLE V
COVENANTS
5.01 Irrevocable Proxy . . . . . . . . . . . . . . . . . . . . . . 9
5.02 Merger Agreement. . . . . . . . . . . . . . . . . . . . . . . 9
5.03 Standstill, Etc.. . . . . . . . . . . . . . . . . . . . . . . 9
5.04 No Solicitation . . . . . . . . . . . . . . . . . . . . . . . 9
5.05 Filings; Consents . . . . . . . . . . . . . . . . . . . . . . 10
5.06 Public Announcements. . . . . . . . . . . . . . . . . . . . . 10
5.07 Sales and Transfer Taxes. . . . . . . . . . . . . . . . . . . 10
5.08 Guaranty by Parent. . . . . . . . . . . . . . . . . . . . . . 11
5.09 Waiver of Appraisal Rights. . . . . . . . . . . . . . . . . . 11
5.10 Further Assurances. . . . . . . . . . . . . . . . . . . . . . 11
ARTICLE VI
CONDITIONS TO CLOSING
6.01 Conditions to the Obligations of Seller . . . . . . . . . . . 11
6.02 Conditions to Obligations of Parent and the Purchaser . . . . 12
ARTICLE VII
INDEMNIFICATION
7.01 Survival. . . . . . . . . . . . . . . . . . . . . . . . . . . 13
7.02 Indemnification . . . . . . . . . . . . . . . . . . . . . . . 13
7.03 Limitations on Indemnification. . . . . . . . . . . . . . . . 15
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
8.01 Termination . . . . . . . . . . . . . . . . . . . . . . . . . 16
8.02 Effect of Termination . . . . . . . . . . . . . . . . . . . . 16
8.03 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . 17
8.04 Waiver. . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
ARTICLE IX
MISCELLANEOUS
9.01 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
9.02 Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . 18
9.03 Entire Agreement; Headings. . . . . . . . . . . . . . . . . . 18
9.04 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . . 18
9.05 Equitable Relief; Preservation of Remedies. . . . . . . . . . 19
9.06 No Third-Party Beneficiaries. . . . . . . . . . . . . . . . . 19
9.07 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . 19
9.08 Severability. . . . . . . . . . . . . . . . . . . . . . . . . 19
9.09 Consent to Jurisdiction . . . . . . . . . . . . . . . . . . . 19
9.10 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . 20
</TABLE>
<PAGE> 4
STOCK PURCHASE AGREEMENT (the "Agreement") dated as of December 19,
1995, among ROBERT W. NOLAN, SR. ("Seller"), THOMSON U.S. HOLDINGS INC.
("Parent"), a Delaware corporation, and SCS SUBSIDIARY, INC., a Delaware
corporation (the "Purchaser").
WHEREAS, concurrently with the execution and delivery of this
Agreement, Parent, the Purchaser and SCS/Compute, Inc., a Delaware corporation
(the "Company") are entering into an Agreement and Plan of Merger (the "Merger
Agreement") which provides, upon the terms and subject to the conditions
thereof, for the acquisition of the Company by Parent through a cash tender
offer by Purchaser (the "Offer") for all outstanding shares of Common Stock, par
value $.10 per share (the "Common Stock") at a price of $ 6.75 per share net to
the seller in cash, and, subsequent to consummation of the Offer and the
transactions contemplated by this Agreement, the merger of Purchaser with and
into the Company (the "Merger"), pursuant to which each issued and outstanding
share of Company Common Stock not owned directly or indirectly by Parent,
Purchaser or the Company will be converted into the right to receive the price
per share paid in the Offer (the "Offer Price") in cash; and
WHEREAS, the Seller acknowledges and agrees that he has executed and
delivered this Agreement in order to induce Parent and Purchaser to enter into
the Merger Agreement;
WHEREAS, Seller is the beneficial and of record owner of 1,082,570
shares of Common Stock (the "Shares"); and
WHEREAS, Stockholder desires to sell to the Purchaser and the Purchaser
desires to purchase from Seller, the Shares;
NOW, THEREFORE, in consideration of the premises and the covenants,
agreements, representations and warranties herein contained, the parties agree
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.01 Certain Defined Terms. As used in this Agreement, the
following terms shall have the following meanings:
(a) "Agreement" has the meaning set forth in the preamble.
(b) "Claims Notice" has the meaning set forth in Section 7.02(c).
(c) "Closing" has the meaning set forth in Section 2.02.
(d) "Closing Date" has the meaning set forth in Section 2.02.
(e) "Common Stock" has the meaning set forth in the recitals.
(f) "Company" has the meaning set forth in the recitals.
(g) "Department of Justice" means the Antitrust Division of the United
States Department of Justice.
(h) "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
(i) "FTC" means the Federal Trade Commission.
<PAGE> 5
(j) "HSR Act" means the Hart-Scott-Rodino Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder.
(k) "Indemnified Person" has the meaning set forth in Section 7.02(c).
(l) "Indemnifying Party" has the meaning set forth in Section 7.02(c).
(m) "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended.
(n) "Lien" means any security interest, lien (including tax lien),
pledge, claim (other than a pending lawsuit), charge, escrow, encumbrance,
option, forfeiture, penalty, restriction, right of first refusal, action in
law or equity, community property right or other marital right, mortgage,
security agreement, voting trust, transfer restriction under any
shareholder agreement or similar agreement, arrangement, contract,
commitment, understanding or obligation, whether or not relating in any way
to credit or the borrowing of money.
(o) "Loss" means any expense (including reasonable attorneys' fees and
disbursements), fine, penalty, loss, claim, damage, liability, suit,
deficiency, judgment or amount paid in settlement, including, without
limitation, any thereof in connection with any threatened, pending or
completed claim, dispute, suit, proceeding or investigation (whether civil,
criminal, administrative, investigative or otherwise).
(p) "Material Adverse Effect", when used in connection with any party
to this Agreement, means any change or effect that, when taken together
with all other adverse changes and effects that are within the scope of the
representations and warranties made by such party in this Agreement is, or
is reasonably likely to be materially adverse to the business, operations,
properties, condition (financial or otherwise), assets or liabilities
(including, without limitation, contingent liabilities) or prospects of
that party.
(q) "Merger Agreement" has the meaning set forth in the recitals.
(r) "Offer" has the meaning set forth in the preamble.
(s) "Parent" has the meaning set forth in the preamble.
(t) "Person" means any corporation, partnership, person or other entity
or group.
(u) "Purchaser" has the meaning set forth in the preamble.
(v) "SEC" means the Securities and Exchange Commission.
(w) "Seller" has the meaning set forth in the preamble.
(x) "Shares" has the meaning set forth in the recitals.
(y) "Tax" or "Taxes" means all income, gross receipts, sales, ad
valorem, use, employment, franchise, profits, environmental, recording,
property, excise, gains or other taxes, fees, stamp taxes and duties,
assessments or charges of any kind whatsoever (whether payable directly or
by withholding), together with any interest and any penalties, additions to
tax or additional amounts imposed by any taxing authority with respect
thereto.
(z) "1934 Act" means the Securities Exchange Act of 1934, as amended.
<PAGE> 6
(aa) "1933 Act" means the Securities Act of 1933, as amended.
(bb) "Transactions" means all of the transactions provided for under
this Agreement.
SECTION 1.02 Adjustments upon Changes in Capitalization. For all
purposes of this Agreement, "the Shares" shall mean and include a share of
Common Stock in the form existing on the date hereof and all securities or
property (excluding regular quarterly cash dividends) issued or exchanged with
respect thereto from and after the date of this Agreement upon any
reorganization, recapitalization, reclassification, merger, consolidation,
spin-off, partial or complete liquidation, stock dividend, split-up, sale of
assets, distribution to stockholders or combination of the Company's capital
stock or any other similar change in its capital structure. In the event of any
such change in the number of shares of Common Shares, the number and kind of
Shares shall be appropriately adjusted to restore to the Purchaser its rights
and privileges hereunder. The rights of Purchaser under this Section 1.02 shall
be in addition to, and shall in no way limit, its rights against the Company for
breach by the Company of the Merger Agreement.
ARTICLE II
PURCHASE AND SALE
SECTION 2.01 Purchase and Sale. Upon the terms and subject to the
conditions set forth in this Agreement, Seller agrees to sell and deliver to the
Purchaser, and the Purchaser agrees to purchase from Seller, the Shares. The
purchase price for each of the Shares shall be equal to $ 6.75 (or, if higher,
the highest price paid for any share of Company Common Stock by Parent or any of
its Affiliates pursuant to the Offer).
SECTION 2.02 Closing. Subject to the terms and conditions of this
Agreement, the sales and purchases of the Shares contemplated hereby will take
place at a closing (the "Closing") at the offices of Shearman & Sterling, 599
Lexington Avenue, New York, New York 10022 at 10:00 A.M., New York City time, on
January 31, 1996, or at such other time or on such other date as to which the
parties may agree. The time and date upon which the Closing occurs are herein
called the "Closing Date". The parties hereto agree that in the event that the
Purchaser shall purchase Common Stock pursuant to the Offer, the Closing shall
take place, subject to the terms and conditions hereof, immediately after the
expiration of the Offer.
SECTION 2.03 Closing Deliveries by Seller. At the Closing, Seller will
deliver or cause to be delivered to the Purchaser:
(a) stock certificates evidencing the Shares, duly endorsed in blank or
accompanied by stock powers duly executed in blank, in form satisfactory to
the Purchaser and with all required stock transfer tax stamps affixed; and
(b) a certificate signed by Seller stating that, (i) the
representations and warranties of Seller contained in this Agreement are
true and correct in all material respects as of the Closing, with the same
force and effect as if made as of the Closing and (ii) the covenants and
agreements contained in this Agreement to be complied with by Seller at or
prior to the Closing shall have been complied with.
SECTION 2.04 Closing Deliveries by the Purchaser. At the Closing, the
Purchaser will deliver or cause to be delivered to Seller:
(a) the aggregate purchase price payable pursuant to Section 2.01, by
check or wire transfer, in immediately available funds; and
(b) a certificate of the Purchaser signed by a duly authorized officer
of the Purchaser stating that (i) the representations and warranties of the
Purchaser contained
<PAGE> 7
in this Agreement shall be true and correct in all material respects as of the
Closing, with the same force and effect as if made as of the Closing except
where the failure to be so true and correct would not have a material adverse
effect of the ability of the Purchaser to consummate the transactions
contemplated by this Agreement (the "Transactions"), and (ii) the covenants and
agreements contained in this Agreement to be complied with by the Purchaser at
or prior to the Closing shall have been complied with in all material respects
except where the failure to so comply would not have a material adverse effect
on the ability of the Purchaser to consummate the Transactions.
ARTICLE III
REPRESENTATIONS AND
WARRANTIES OF SELLER AS TO THE COMPANY
Seller represents and warrants to Parent and the Purchaser as follows:
SECTION 3.01 Title to Stock. Except as set forth on Schedule 3.01,
Seller is the lawful owner (both beneficially and of record) of the Shares and
Seller has good and valid title to such Shares. At the Closing, Seller will be
the lawful owner (both beneficially and of record) of the Shares and will have
good and valid title to such Shares and will have the right, power and capacity
to sell, assign, transfer and deliver the same to the Purchaser pursuant to this
Agreement, free and clear of all Liens. Upon delivery of the Shares to the
Purchaser as provided in Article II, the Purchaser will have good and valid
title to and ownership of the Shares, free and clear of all Liens, and such
capital stock will be fully paid and nonassessable.
SECTION 3.02 Authority Relative to this Agreement. Seller has the full
right, capacity and power to execute and deliver this Agreement, to perform his
obligations hereunder and to consummate the Transactions. This Agreement has
been duly and validly executed and delivered by Seller and, assuming the due
authorization, execution and delivery by Parent and the Purchaser, constitutes a
legal, valid and binding obligation of Seller enforceable against Seller in
accordance with its terms, except as enforceability may be limited by
bankruptcy, insolvency, reorganization, moratorium or other laws affecting
creditors' rights generally (including, without limitation, the effect of
statutory and other law regarding fraudulent conveyances, fraudulent transfers
and preferential transfers), as may be limited by the exercise of judicial
discretion and the application of principles of equity including, without
limitation, requirements of good faith, fair dealing, conscionability and
materiality (regardless of whether considered in a proceeding in equity or at
law) and that the remedy of specific performance and injunctive and other forms
of equitable relief may be subject to equitable defenses and to the discretion
of the Court before which any proceeding therefor may be brought.
SECTION 3.03 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Seller do not, and the performance
of this Agreement by Seller will not, conflict with or violate any law, rule,
regulation, order, judgment or decree applicable to Seller.
(b) The execution and delivery of the Agreement by Seller do not, and
the performance of this Agreement by Seller will not, require any consent,
approval, authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, except for (i) filing
the pre-merger notification and report forms with respect to the transactions
contemplated by this Agreement under the HSR Act, (ii) filings required to be
made with the SEC pursuant to the rules and regulations of the 1934 Act and
applicable state takeover laws, or (iii) filings with the Nasdaq Small Cap
Market or the National Association of Securities Dealers, Inc.
SECTION 3.04 Compliance. Seller is not in default or violation of, any
law, rule, regulation, order, judgment or decree applicable to Seller that would
materially impair the ability or obligation of Seller to perform fully on a
timely basis his obligations under this
<PAGE> 8
Agreement.
SECTION 3.05 Absence of Litigation. There is no claim, action,
proceeding or investigation pending or, to the best knowledge of Seller,
threatened against, relating to or affecting Seller, the Company, or any of
their respective properties or rights, before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign that, if determined adversely to Seller or the Company, would materially
impair the ability or obligation of Seller to perform fully on a timely basis
his obligations under this Agreement.
SECTION 3.06 No Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement based on arrangements made
by and on behalf of Seller.
SECTION 3.07 Merger Agreement. All the representations and warranties
set forth in Article III of the Merger Agreement are true, complete and correct.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT AND THE PURCHASER
Parent and the Purchaser, jointly and severally, represent and warrant
to Seller as follows:
SECTION 4.01 Corporate Organization. Each of Parent and the Purchaser
is a corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its organization.
SECTION 4.02 Authority Relative to this Agreement. Each of Parent and
the Purchaser has all necessary corporate power and authority to execute and
deliver this Agreement, to perform its obligations hereunder and to consummate
the Transactions. The execution and delivery of this Agreement by Parent and the
Purchaser and the consummation by Parent and the Purchaser of the Transactions
have been duly and validly authorized by all necessary corporate action on the
part of Parent and the Purchaser and no other corporate proceedings on the part
of Parent or the Purchaser are necessary to authorize this Agreement or to
consummate the Transactions. This Agreement has been duly and validly executed
and delivered by Parent and the Purchaser and, assuming the due authorization,
execution and delivery by Seller, constitutes a legal, valid and binding
obligation of each of Parent and the Purchaser enforceable against each of
Parent and the Purchaser in accordance with its terms, except as enforceability
may be limited by bankruptcy, insolvency, reorganization, moratorium or other
laws affecting creditors' rights generally (including, without limitation, the
effect of statutory and other law regarding fraudulent conveyances, fraudulent
transfers and preferential transfers), as may be limited by the exercise of
judicial discretion and the application of principles of equity including,
without limitation, requirements of good faith, fair dealing, conscionability
and materiality (regardless of whether considered in a proceeding in equity or
at law) and that the remedy of specific performance and injunctive and other
forms of equitable relief may be subject to equitable defenses and to the
discretion of the court before which any proceedings therefor may be brought.
SECTION 4.03 No Conflict; Required Filings and Consents. (a) The
execution and delivery of this Agreement by Parent and the Purchaser do not, and
the performance of this Agreement by Parent and the Purchaser will not, at the
time of closing, (i) conflict with or violate the Certificate of Incorporation
or By-laws of either Parent or the Purchaser, (ii) conflict with or violate any
law, rule, regulation, order, judgment or decree applicable to Parent or the
Purchaser or by which any property or asset of either of them is bound or
affected, or (iii) result in any breach of or constitute a default (or an event
which with notice or lapse of time or both would become a default) under, or
give to others any rights of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or other encumbrance on any
property or asset of Parent or the Purchaser pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit, franchise
<PAGE> 9
or other instrument or obligation to which Parent or the Purchaser is
a party or by which Parent or the Purchaser or any property or asset of either
of them is bound or affected, except for any such conflicts, violations,
breaches, defaults or other occurrences which would not, individually or in the
aggregate, prevent Parent or the Purchaser from performing their respective
obligations under this Agreement.
(b) The execution and delivery of this Agreement by Parent and the
Purchaser do not and the performance of this Agreement by Parent and the
Purchaser will not, require any consent, approval, authorization or permit of,
or filing with or notification to, any governmental or regulatory authority to
be obtained or made by Parent or the Purchaser, domestic or foreign, except (i)
for applicable requirements, if any, of the Exchange Act, Blue Sky Laws and
state takeover laws and the HSR Act (ii) filings with the Nasdaq Small Cap
Market and the NASD filings required under the laws of foreign jurisdictions and
(iii) where failure to obtain such consents, approvals, authorizations or
permits, or to make such filings or notifications, would not prevent or delay
consummation of the Transactions, or otherwise prevent Parent or the Purchaser
from performing their respective obligations under this Agreement.
SECTION 4.04 Investment Intent. The Purchaser will acquire the Shares
for investment purposes only and not with a view to any resale or distribution
thereof and will not sell any Shares purchased pursuant to this Agreement except
in compliance with applicable federal and state securities laws.
SECTION 4.05 Absence of Litigation. There is no claim, action,
proceeding or investigation pending or, to the best knowledge of the Parent or
the Purchaser, threatened against the Parent or the Purchaser or any property or
asset of the Parent or the Purchaser before any court, arbitrator or
administrative, governmental or regulatory authority or body, domestic or
foreign that, if determined adversely to Parent or the Purchaser, would
materially impair the ability of Parent or the Purchaser to perform fully on a
timely basis their respective obligations under this Agreement. As of the date
hereof, neither the Parent nor the Purchaser is subject to any order, writ,
judgment, injunction, decree, determination or award that if determined
adversely to Parent or the Purchaser, would materially impair the ability of
Parent or the Purchaser to perform fully on a timely basis their respective
obligations under this Agreement.
SECTION 4.06 No Brokers. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the transactions contemplated by this Agreement and the Merger Agreement
based on arrangements made by and on behalf of the Purchaser.
ARTICLE V
COVENANTS
SECTION 5.01 Irrevocable Proxy. Seller hereby irrevocably appoints
Purchaser, with full power of substitution and resubstitution, as Seller's
agent, attorney and proxy, during the term of this Agreement, to vote, or give
consents with respect to, all of the Shares owned by Seller in favor of the
Merger Agreement and the transactions contemplated thereby and against (a) any
other proposal for the acquisition of the Company or its assets or a merger or
other business combination of the Company with any third party or (b) any other
proposal that would, or is reasonably likely to, result in any of the conditions
to Purchaser's obligations under this Agreement not being fulfilled. Seller
intends this proxy to be irrevocable and coupled with an interest. Seller hereby
revokes any proxy previously granted with respect to Seller's Shares. Seller's
proxy granted pursuant to this Section 5.01 shall terminate and be revoked upon
any termination of this Agreement in accordance with its terms.
SECTION 5.02 Merger Agreement. Seller shall not, in his capacity as
stockholder of the Company, take any action or omit to take any action that is
inconsistent with compliance by the Company with the terms of the Merger
Agreement in all respects.
<PAGE> 10
From the date hereof through the Closing Date, Seller shall use his reasonable
best efforts to cause (i) the Company to fulfill all of its obligations under
the Merger Agreement and (ii) the representations and warranties contained in
Article III of the Merger Agreement to continue to be true and correct in all
material respects on and as of the Closing Date as if made on and as of the
Closing Date. Seller shall promptly notify, or cause to be notified, the
Purchaser of any event, condition or circumstance occurring from the date hereof
through the Closing Date that would constitute a violation or breach of this
Agreement or of the Merger Agreement.
SECTION 5.03 Standstill, Etc. From the date hereof to the Closing Date,
Seller covenants and agrees that, without the prior written consent of the
Purchaser, he will not (i) sell, tender pursuant to the Offer or any other
tender offer, pledge, encumber, assign, transfer, exchange or otherwise dispose
of, or enter into any contract, option or other arrangement or understanding
with respect to the sale, tender, pledge, encumbrance, assignment, transfer,
exchange or disposition of, any of the Shares; (ii) acquire any additional
shares of Company Common Stock or warrants, options or other rights to purchase
any shares of Company Common Stock; or (iii) grant any proxies (other than
pursuant to Section 5.01) with respect to the Shares, deposit any Shares into a
voting trust or enter into a voting agreement with respect to any Shares.
SECTION 5.04 No Solicitation. From the date hereof to the Closing Date,
Seller shall not, directly or indirectly, solicit, initiate or encourage any
discussions of, or submission of proposals or offers from any person, relating
to any acquisition or purchase of all or (other than in the ordinary course of
business) a portion of the assets of, or any equity interest in, the Company or
any of its subsidiaries or any business combination with the Company or any of
its subsidiaries, 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. Seller shall
immediately cease and cause to be terminated any existing discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing and shall promptly notify the Purchaser if any such proposal or offer,
or any inquiry or contact with any Person with respect thereto, is made and
shall, in any such notice to the Purchaser, indicate in reasonable detail the
identity of the offeror and the terms and conditions of any proposal.
SECTION 5.05 Filings; Consents. (a) Seller, Parent and the Purchaser
will promptly file, or cause to be filed, with the FTC and the Department of
Justice, pursuant to the HSR Act, all requisite documents and notifications in
connection with the sale of the Shares pursuant to this Agreement. Each of
Parent and the Purchaser will make or cause to be made all such other filings
and submissions, if any, under laws and regulations applicable to Parent and the
Purchaser as may be required of each of them for the consummation of the
purchase of the Shares pursuant to this Agreement. Seller will make or cause to
be made all such other filings and submissions under laws and regulations
applicable to Seller, if any, as may be required of Seller for the consummation
of the sale of the Shares pursuant to this Agreement. Each of the parties hereto
agrees that it will coordinate and cooperate with the other parties hereto in
exchanging such information and providing such reasonable assistance as may be
requested in connection with all of the foregoing.
(b) Parent, the Purchaser and Seller will use their respective
reasonable best efforts to obtain, prior to the Closing, all consents and
approvals which are necessary to the consummation of the Transactions.
SECTION 5.06 Public Announcements. Seller, Parent and the Purchaser
will consult with each other before issuing any press releases or otherwise
making any public statements with respect to this Agreement and the Merger
Agreement and the transactions contemplated hereby and thereby, and shall not
issue any such press release or make any such public statement prior to such
consultation, except as may be required by law or any listing agreement with a
national securities exchange.
SECTION 5.07 Sales and Transfer Taxes. Seller shall pay any stock
transfer
<PAGE> 11
taxes and any real property gains and transfer taxes relating to the sale,
acquisition, conveyance, transfer and delivery of the Shares that are sold to
the Purchaser hereunder. The Purchaser and Seller shall cooperate with respect
to the filing of any returns, reports or other filings due in connection with
such Taxes.
SECTION 5.08 Guaranty by Parent. In consideration of the covenants,
agreements and undertakings of Seller contained in this Agreement, Parent hereby
guarantees to Seller, and his successors and assigns, the full, prompt and
complete payment and performance by the Purchaser of all of the covenants,
conditions and agreements of the Purchaser contained in this Agreement. Parent
hereby waives all notice of default by the Purchaser or notice of acceptance of
this Agreement by Seller, and consents to any extension that may be given by
Seller to the Purchaser of time of payment or performance. This guarantee shall
be construed as a continuing absolute and unconditional guarantee of payment and
performance and not as a guarantee of collection.
SECTION 5.09 Waiver of Appraisal Rights. Seller hereby waives any right
he may have to demand appraisal pursuant to Section 262 of the Delaware General
Corporation Law in connection with the Merger.
SECTION 5.10 Further Assurances. At any time and from time to time for
a reasonable period of time after the Closing, at the Purchaser's reasonable
request, Seller will duly execute, acknowledge and deliver all such further and
other assurances and documents, and will take such other action consistent with
the terms of this Agreement, at Seller's expense, for the purpose of better
assigning, transferring and conveying to the Purchaser, or reducing to the
Purchaser's possession, any or all of the Shares.
ARTICLE VI
CONDITIONS TO CLOSING
SECTION 6.01 Conditions to the Obligations of Seller. The obligations
of Seller to consummate the purchase and sale contemplated by this Agreement
shall be subject to the fulfillment, at or prior to the Closing, of each of the
following conditions, any one or more of which may be waived by Seller:
(a) Representations and Warranties; Covenants. All representations and
warranties of Parent and the Purchaser contained in this Agreement shall be
true and correct on and as of the Closing Date (except for those
representations and warranties made as of a certain date, in which case, as
of that date), with the same force and effect as if made on and as of the
Closing Date (except for those representations and warranties made as of a
certain date, in which case, as of that date), except where the failure of
any representations or warranties to be true and correct would not, either
individually or in the aggregate, materially impair the ability or
obligation of Parent and Purchaser to perform fully on a timely basis their
respective obligations under this Agreement, and all material covenants
contained in this Agreement to be complied with by Parent and the Purchaser
on or before the Closing Date shall have been complied with in all material
respects.
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase of the Shares contemplated hereby shall
have expired or been terminated.
(c) No Order. No United States, state or foreign governmental authority
or other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and has the effect
of making the acquisition of the Shares illegal or otherwise prohibiting
consummation of the Transactions.
(d) The Merger Agreement. The Merger Agreement shall not have been
<PAGE> 12
terminated, prior to the acceptance for payment by Purchaser of any shares
of Company Common Stock pursuant to the Offer, by the Company as a result
of a material breach by Parent or Purchaser of its respective obligations
under the Merger Agreement.
SECTION 6.02 Conditions to Obligations of Parent and the Purchaser. The
obligations of Parent and the Purchaser to consummate the purchases and sales
contemplated by this Agreement shall be subject to the fulfillment, at or prior
to the Closing, of each of the following conditions, any one or more of which
may be waived by them:
(a) Representations and Warranties; Covenants. All representations and
warranties of Seller contained in this Agreement shall be true and correct
in all respects as of the Closing Date (except for those representations
and warranties made as of a certain date, in which case, as of that date),
with the same force and effect as if made as of the Closing Date (except
for those representations and warranties made as of a certain date, in
which case, as of that date), except where the failure of any
representations or warranties to be true and correct would not, either
individually or in the aggregate, have a Material Adverse Effect on the
Company and all material covenants contained in this Agreement to be
complied with by Seller on or before the Closing Date shall have been
complied with in all material respects.
(b) HSR Act. Any waiting period (and any extension thereof) under the
HSR Act applicable to the purchase of the Shares contemplated hereby shall
have expired or been terminated.
(c) No Order. No United States, state or foreign governmental authority
or other agency or commission or United States or state court of competent
jurisdiction shall have enacted, issued, promulgated, enforced or entered
any statute, rule, regulation, injunction or other order (whether
temporary, preliminary or permanent) which is in effect and has the effect
of making the acquisition of Shares illegal or otherwise prohibiting
consummation of the Transactions.
(d) No Material Adverse Effect. No event or events shall have occurred,
or be reasonably likely to occur, which, individually or in the aggregate,
have, or could reasonably be expected to have, a Material Adverse Effect on
the Company.
(e) Key Employee; Employment Agreement. Seller shall have continued to
be employed as Chief Executive Officer of the Company with duties and
responsibilities comparable to the duties and responsibilities he has
performed in the past and shall have executed and delivered to the Company
the Employment Agreement substantially in the form attached hereto as
Exhibit A.
(f) Conditions to Offer. All conditions to Purchaser's obligation to
accept for payment shares of Company Common Stock tendered pursuant to the
Offer shall have been satisfied.
ARTICLE VII
INDEMNIFICATION
SECTION 7.01 Survival. Subject to the limitations and other provisions
of this Agreement, the representations and warranties of the parties hereto
contained herein shall survive the Closing and shall remain in full force and
effect, regardless of any investigation made by or on behalf of any of the
parties hereto, for a period of two years after the Closing Date, except for the
representations and warranties contained in Sections 3.01 and 3.02, which shall
survive the Closing Date without limitation. Neither the period of survival nor
the liability of Seller with respect to Seller's representations and warranties
shall be reduced by any investigation made at any time by or on behalf of the
Purchaser or Parent. If written notice of a claim has been given prior to the
expiration of the applicable representations and
<PAGE> 13
warranties by the Purchaser or Parent to Seller, then the relevant
representations and warranties shall survive as to such claim, until such claim
has been finally resolved. The covenants and agreements of the parties hereto
shall survive the Closing and shall remain in full force and effect, regardless
of any investigation of any of the parties hereto.
SECTION 7.02 Indemnification. (a) Subject to the other terms and
conditions of this Agreement and as an adjustment to purchase price, Seller
agrees to indemnify Parent and any subsidiary or affiliate thereof, whether now
or thereafter such a subsidiary or affiliate, and any director, officer or
employee of any thereof against and hold each of them harmless from all Losses
arising out of the breach of any representation or warranty of Seller, or any
covenant or agreement of Seller herein. Anything in Section 7.01 to the contrary
notwithstanding, no claim may be asserted nor may any action be commenced
against Seller for breach of any representation or warranty, unless notice of
such claim or action is received by Seller describing in reasonable detail the
facts and circumstances with respect to the subject matter of such claim or
action on or prior to the date on which the statute of limitations with respect
to such representation or warranty expires.
(b) Subject to the other terms and conditions of this Agreement, Parent
and the Purchaser agree, jointly and severally, to indemnify Seller against and
hold Seller harmless from all Losses arising out of the breach of any
representation or warranty in Section 4.04 or 4.06 or any covenant or agreement
of Parent and the Purchaser herein. Anything in Section 7.01 to the contrary
notwithstanding, no claim may be asserted nor may any action be commenced
against Parent or the Purchaser for breach of any representation or warranty
unless notice of such claim or action is received by Parent or the Purchaser
describing the facts and circumstances with respect to the subject matter of
such claim or action on or prior to the date on which the statute of limitations
with respect to such representation or warranty expires.
(c) Promptly after receipt by any party hereto (the "Indemnified
Person") of notice of any demand, claim or circumstances which, with lapse of
time, would or might give rise to a claim or the commencement (or threatened
commencement) of any action, proceeding or investigation that may result in a
Loss, the Indemnified Person shall give notice thereof (the "Claims Notice") to
any party or parties obligated to provide indemnification pursuant to this
Section 7.02 (the "Indemnifying Party"). The Claims Notice shall describe such
threatened claim or demand in reasonable detail, and shall indicate the amount
(estimated, if necessary) of the Loss that has been or may be suffered by the
Indemnified Person. The Indemnifying Party shall have the right to direct,
through counsel of its own choosing, the defense or settlement of any such claim
or proceeding at its own expense. If the Indemnifying Party elects to assume the
defense of any such claim, the Indemnified Person may participate in such
defense, but in such case the expenses of the Indemnified Person shall be paid
by the Indemnified Person; provided, however, that if there exists or is
reasonably likely to exist a conflict of interest that would make it
inappropriate in the judgment of the Indemnified Person, in its sole and
absolute discretion, for the same counsel to represent both the Indemnified
Person and the Indemnitor, then the Indemnified Person shall be entitled to
retain its own counsel, in each jurisdiction for which the Indemnified Person
determines counsel is required, at the expense of the Indemnitor. Such
Indemnified Person shall cooperate with the Indemnifying Party in the defense or
settlement thereof, and shall make available to the Indemnifying Party any
documents or other papers within its control that are necessary or appropriate
for such defense, and the Indemnifying Party shall reimburse the Indemnified
Person for all its reasonable out-of-pocket expenses in connection therewith. If
the Indemnifying Party elects to direct the defense of any such claim, the
Indemnified Person shall not pay, or permit to be paid, any part of any claim
arising from such asserted liability unless the Indemnifying Party consents in
writing to such payment or unless the Indemnifying Party, subject to the last
sentence of this Section 7.02(c), withdraws from the defense of such asserted
liability or unless a final judgment from which no appeal may be taken by or on
behalf of the Indemnifying Party is entered against the Indemnified Person for
such liability. If the Indemnifying Party shall fail to defend, or if after
commencing or undertaking any such defense fails to prosecute or withdraws from
such defense, the Indemnified Person shall have the right to undertake the
defense or settlement thereof, at the Indemnifying Party's expense. If the
Indemnified Person assumes the defense of any such claim or proceeding pursuant
to this Section 7.02(c) and proposes to settle such
<PAGE> 14
claim or proceeding prior to a final judgment thereon or to forego appeal with
respect thereto, then the Indemnified Person shall give the Indemnifying Party
prompt notice thereof and the Indemnifying Party shall have the right to
participate in the settlement or assume or reassume the defense of such claim or
proceeding.
(d) Without limiting any other remedy available to any Indemnified
Person, each Indemnified Person that shall have suffered a Loss as to which it
shall be entitled to indemnification, shall be entitled to satisfy, either in
whole or in part, such right to indemnification by setting off or recouping the
amount of such Loss, or any portion thereof, against any obligation that any
Indemnified Person or any affiliate thereof shall have to pay money to Seller,
including, without limitation, any amounts owed by Parent or the Purchaser to
Seller pursuant to any employment contract of Seller.
SECTION 7.03 Limitations on Indemnification. (a) Notwithstanding any
provision to the contrary contained in this Agreement, the indemnifications in
favor of the Purchaser and Parent contained in Section 7.02(a) herein shall not
be effective until the aggregate dollar amount of all Losses indemnified against
under such section exceeds $100,000; provided, however, that the maximum amount
of indemnifiable Losses which may be recovered from Seller arising out of or
resulting from the causes enumerated in this Article VII shall be an amount
equal to $2,000,000 with respect to any Losses in connection with a breach of
the representation and warranty set forth in Section 3.07 and the aggregate
purchase price paid to Seller pursuant to Section 2.01 with respect to all other
Losses.
(b) Notwithstanding any provision to the contrary contained in this
Agreement, the indemnifications in favor of the Seller contained in Section
7.02(b) herein shall not be effective until the aggregate dollar amount of all
Losses indemnified against under such section exceeds $100,000; provided,
however, that the maximum amount of indemnifiable Losses which may be recovered
from the Purchaser and Parent arising out of or resulting from the causes
enumerated in this Article VII shall be an amount equal to the aggregate
purchase price paid to Seller pursuant to Section 2.01 with respect to all
Losses.
(c) To the extent that an indemnification obligation pursuant to one of
the provisions of Section 7.02 herein overlaps with an indemnification
obligation pursuant to any
<PAGE> 15
other provision of Section 7.02 herein or any other provision of this Agreement,
the party seeking such indemnification shall be entitled to only one of such
indemnification payments.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.01 Termination. This Agreement may be terminated at any time
prior to the Closing:
(a) By the mutual written consent of Seller and the Purchaser;
(b) By either party, if the Closing shall not have occurred by March
31, 1996; provided, however, that the right to terminate this Agreement
under this Section 8.01(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement shall have been the
cause of, or shall have resulted in, the failure of the Closing to occur on
or prior to such date;
(c) By the Purchaser if, between the date hereof and the time scheduled
for the Closing: (i) an event or condition occurs that has resulted in or
that may be expected to result in a Material Adverse Effect on the Company,
(ii) any material representation or warranty of Seller contained in this
Agreement shall not have been true and correct when made or deemed made,
(iii) Seller shall not have complied with any material covenant or
agreement to be complied with by it and contained in this Agreement; or
(iv) Seller, the Company or any Subsidiary makes a general assignment for
the benefit of creditors, or any proceeding shall be instituted by or
against Seller, the Company or any Subsidiary seeking to adjudicate any of
them a bankrupt or insolvent, or seeking liquidation, winding up or
reorganization, arrangement, adjustment, protection, relief or composition
of its debts under any Law relating to bankruptcy, insolvency or
reorganization;
(d) by Seller if, prior to the acceptance for purchase by Purchaser of
any shares of Company Common Stock pursuant to the Offer, the Company shall
terminate the Merger Agreement as a result of a material breach by Parent
or Purchaser of its respective obligations thereunder; or
(e) by Parent and Purchaser upon termination of the Offer or the Merger
Agreement in accordance with the terms thereof for any reason other than a
material breach by Parent or Purchaser of their respective obligations
thereunder.
SECTION 8.02 Effect of Termination. In the event of termination of this
Agreement as provided in Section 8.01, this Agreement shall forthwith become
void and there shall be no liability on the part of any party hereto, except (a)
as set forth in Section 9.04 and (b) nothing herein shall relieve either party
from liability for any breach hereof.
SECTION 8.03 Amendment. This Agreement may not be amended or modified
except by an instrument in writing signed by Seller, Parent and the Purchaser.
SECTION 8.04 Waiver. At any time prior to the Closing, any party hereto
may (a) waive any inaccuracies in the representations and warranties of the
other party contained herein or in any document delivered pursuant hereto and
(b) waive compliance by the other party with any of the agreements or conditions
contained herein. Any such waiver shall be valid if set forth in an instrument
in writing signed by the party to be bound thereby.
ARTICLE IX
MISCELLANEOUS
SECTION 9.01 Notices. Any notice or other communication required or
permitted hereunder shall be in writing, and shall be delivered personally,
telegraphed,
<PAGE> 16
telexed, sent by facsimile transmission or sent by certified, registered or
express mail, postage prepaid. Any such notice shall be deemed to have been
given when so telegraphed, telexed or, if sent by facsimile transmission,
answerback received, or if mailed, two days after deposit in the United States
mails, or if personally delivered, addressed to the parties as follows:
Parent or the Purchaser:
Thomson U.S. Holdings Inc.
c/o The Thomson Corporation
Metro Center at One Station Place
Stamford, Connecticut 06902
Attention: General Counsel
Telecopier: (203) 348-5718
With a copy to:
Research Institute of America
90 Fifth Avenue
New York, New York 10011
Attention: Euan C. Menzies
Telecopier: (212) 377-4277
And a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: David W. Heleniak, Esq.
Telecopier: (212) 848-7179
Seller:
Robert W. Nolan, Sr.
2252 Welsch Industrial Court
St. Louis, Missouri 63146
Telecopier: (314) 432-7308
With a copy to:
Peper, Martin, Jensen, Maichel and Hetlage
720 Olive Street, 24th Floor
St. Louis, Missouri 63101
Telecopier: (314) 621-4834
Attention: John R. Short, Esq.
Any party may change its above address and attorney for notices upon written
notice to the other parties in accordance with this Section 9.01.
SECTION 9.02 Assignment. All terms of this Agreement shall be binding
upon, and inure to the benefit of, the parties hereto and their respective legal
representatives, successors, heirs and assigns. This Agreement, however, may not
be assigned by any party without the prior written consent of the other parties.
SECTION 9.03 Entire Agreement; Headings. This Agreement and the Merger
Agreement constitute the entire agreement between the parties hereto with
respect to the transactions contemplated hereby and shall supersede and cancel
all prior and contemporaneous agreements, whether written or oral, between such
parties dealing with the subject matter hereof. Section and paragraph headings
are not to be considered part of this Agreement and are included solely for
convenience and are not intended to be full or accurate descriptions of the
contents
<PAGE> 17
thereof.
SECTION 9.04 Fees and Expenses. All costs and expenses incurred in
connection with this Agreement (i) by Parent and the Purchaser shall be paid by
Parent and the Purchaser and (ii) by Seller shall be paid by the Company,
whether or not the transactions contemplated hereby are consummated.
SECTION 9.05 Equitable Relief; Preservation of Remedies. If either
Seller on the one hand, or the Purchaser on the other hand, commits a breach, or
threatens to commit a breach, of its obligations to consummate the transactions
provided for herein, the other party shall have the right and remedy to have the
provisions of this Agreement specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to Seller on the one hand, and
the Purchaser on the other, and that money damages will not provide an adequate
remedy to the other party.
SECTION 9.06 No Third-Party Beneficiaries. Nothing in this Agreement
shall confer any rights upon any person who or entity which is not a party or an
assignee of a party to this Agreement.
SECTION 9.07 Counterparts. This Agreement may be signed in any number
of counterparts with the same effect as if the signatures to each counterpart
were upon a single instrument, and all such counterparts together shall be
deemed an original of this Agreement.
SECTION 9.08 Severability. If any provision of this Agreement, or the
application of any such provision to any person or circumstance, shall be held
invalid by a court of competent jurisdiction, the remainder of this Agreement,
or the application of such provision to persons or circumstances other than
those as to which it is held invalid, shall not be affected thereby.
SECTION 9.09 Consent to Jurisdiction. Seller, Parent and the Purchaser
each hereby irrevocably and unconditionally:
(a) Submits itself in any legal action or proceeding relating to this
Agreement, or for recognition and enforcement of any judgment in respect
hereof, to the non- exclusive jurisdiction of the courts of the State of
New York located in the City of New York and the courts of the United
States of America for the Southern District of New York, and Appellate
courts from any thereof, and consents and agrees to such action or
proceeding being brought in such courts;
(b) Confirms that its obligations hereunder are wholly commercial in
nature, waives and agrees not to assert, by way of motion, as a defense, or
otherwise, in any suit, action or proceeding relating to this Agreement or
any claim that it is not personally subject to the jurisdiction of the
courts named in paragraph (a) above;
(c) Waives any objection that it may now or hereafter have to the venue
of any such action or proceeding in any such court or that such action or
proceeding was brought in an inconvenient court and agrees not to plead or
claim the same;
SECTION 9.10 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of New York applicable to
contracts made and to be performed wholly within such State.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the day and year first above written.
THOMSON U.S. HOLDINGS INC.
<PAGE> 18
By: /s/ Nigel R. Harrison
Name: Nigel R. Harrison
Title: Executive Vice President
SCS SUBSIDIARY, INC.
By: /s/ Nigel R. Harrison
Name: Nigel R. Harrison
Title: Treasurer
/s/ Robert W. Nolan, Sr.
Robert W. Nolan, Sr.
<PAGE> 19
Consent of Spouse
The undersigned, as the spouse of Robert W. Nolan, Sr., who is a
signatory of the foregoing Stock Purchase Agreement, hereby consents to,
confirms and ratifies any sale by her spouse of any Shares contemplated by the
foregoing Stock Purchase Agreement, and for purposes of any community property
laws and all other laws, conveys all her right, title and interest in and to
such Shares to the purchaser of such Shares.
/s/ Lou Ann Nolan
<PAGE> 1
Exhibit A
EMPLOYMENT AGREEMENT
EMPLOYMENT AGREEMENT (the "Agreement"), dated January __, 1996 between
SCS/Compute, Inc. (the "Company") and Robert W. Nolan, Sr. (the "Executive").
The Executive has served as a key executive of the Company and in
recognition thereof it is the desire of the Company and the Executive to enter
into this Agreement in order to provide the Executive with the opportunity to
share in the long-term growth of the Company, and to reward him for his future
contributions to the success of the Company on the terms and subject to the
conditions hereinafter set forth.
Accordingly, the parties agree as follows:
1. Employment, Duties and Acceptance.
1.1 Employment by the Company. The Company agrees to employ the
Executive for the Term (as defined in Section 2) as President and Chief
Executive Officer to perform such duties as the Executive shall reasonably be
directed to perform by the Chief Executive Officer of Research Institute of
America Group (the "CEO of RIAG"). Such duties shall initially include the
current duties performed by the Executive for the Company and such duties shall
at all times include such other and further duties as shall be reasonably
assigned to the Executive by the CEO of RIAG consistent with Executive's
experience. Notwithstanding any provision of this Section 1 to the contrary, the
Executive shall have no authority to do any of the following on behalf of the
Company other than with the express approval of the CEO of RIAG:
(a) Promulgate annual business plans for the Company, including, without
limitation, budgets, operating plans and strategic plans;
(b) Make any business or product acquisition;
(c) Make any capital expenditure in excess of $25,000;
(d) Make any sale or divestiture of any asset;
(e) Enter into any real estate lease; and
(f) Enter into any other contract, including, without limitation, software
license and consulting agreements, in excess of $50,000;
provided, however, that in the event, and to the extent that, the aforementioned
limitations are modified with respect to executives at other operating entities
of Thomson U.S. Holdings Inc. and its affiliates ("Thomson") such limitations
will also be altered with respect to the Executive.
1.2 Acceptance of Employment by the Executive. The Executive accepts
such employment and shall render the services described above.
1.3 Place of Employment. The Executive's principal place of employment
shall be in the St. Louis, Missouri area, subject to such reasonable travel as
the rendering of the services hereunder may require and subject to the
Executive's consent to be transferred elsewhere.
2. Term of Employment. This Agreement shall take effect, and the term of
the Executive's employment under this Agreement shall commence, as of the
Effective Time (as defined in the merger agreement (the "Merger Agreement")
dated December 20, 1995 among Thomson U.S. Holdings Inc., SCS Subsidiary Inc.
and SCS/Compute, Inc. (the "Effective Date") and shall end on December 31, 2000
subject to the terms set forth in Section 4.1 hereof (the "Term").
3. Compensation.
3.1 Salary. As compensation for all services to be rendered pursuant to
this Agreement, during the Term the Company shall pay the Executive a salary at
the annual rate of $260,000 payable in accordance with the payroll policies of
the Company as from time to time in effect, less such deductions as shall be
required to be withheld by applicable law and regulations. The Executive's
salary shall be increased on each December 31st during the Term in an amount
determined with reference to the increase in the consumer price index for all
urban consumers in the St. Louis, Missouri area for the prior calendar year.
3.2 Employee Benefits, Vacation and Expenses. The Executive shall be
entitled (i) to participate in the employee benefit plans of the Company,
subject to the terms of such plans, (ii) to receive four weeks of paid vacation
during each year of the Term,
<PAGE> 2
subject to appropriate scheduling thereof, and (iii) to be reimbursed for
expenses actually incurred or paid by the Executive during the Term in the
performance of the Executive's services under this Agreement to the extent that,
and upon the same terms as, the Company may, in its discretion, provide such
benefit plans, vacation days and expense reimbursement to other key executives
of the Company.
3.3 Incentive Payments. In addition to the salary referred to in
Section 3.1 above and subject to the terms of this Section 3.3, Section 3.5
below and Schedules 1 and 2 attached to this Agreement, the Executive shall also
be eligible to receive from the Company:
(a) an annual incentive payment (the "Annual Bonus") in respect of each
calendar year of the Term (for purposes of this Section 3.3 the period from
the Effective Date through December 31, 1996 shall be deemed the first
calendar year of the Term) with such Annual Bonus to be calculated and
payable in accordance with the provisions of Schedule 1 attached hereto,
which Schedule 1 may be amended during the Term by agreement of the
Executive and the CEO of RIAG or his designee, subject to approval by
Thomson; and
(b) a long-term incentive payment ("LTIP") in respect of each of the
three years during the Term ending December 31, 1998, 1999 and 2000, with
each such LTIP payment to be calculated and payable in accordance with the
provisions of Schedule 2 attached hereto, which Schedule 2 may be amended
during the Term by agreement of the Executive and the CEO of RIAG, subject
to approval by Thomson.
3.4 No Distortion. The Executive agrees that he has a fiduciary
responsibility not to jeopardize the ongoing success of the Company in any one
year and hereby agrees to maintain expenses sufficient to manage the business of
the Company in which he is engaged for both the present and future during the
Term.
3.5 Effect of Termination on the Bonuses. Except as specified below, in
the event of a termination of employment by the Executive or by the Company in
accordance with the terms of this Agreement, the Company shall not be obligated
to pay to the Executive any further Annual Bonus or LTIP (or any outstanding
portion thereof). In the event of the termination of this Agreement prior to its
expiration by the Company under clause (a), (b) or (h) of Section 4.1, the
Company shall pay the Executive or the Executive's representative, as
appropriate, promptly following termination any Annual Bonus the Executive would
have received under Section 3.3(a) for the year in which the termination took
place based on the Approved Budget (as defined below) for such year and, if such
termination occurs in the second or third year of the Term, a prorated portion
(on a per diem basis) of any LTIP the Executive would have received under
Section 3.3(a) in the third year of the Term based on the Approved Budget for
such year, or, if such termination occurs in the fourth or fifth year of the
Term, any LTIP the Executive would have received under Section 3.3(a) for the
year in which the termination took place based on the Approved Budget for such
year. "Approved Budget" shall mean the detailed financial forecast of revenues,
operating income and management cash of the Company as approved by the CEO of
RIAG. The Approved Budget shall be prepared on or about January 1 of each year
during the Term and shall be adjusted during each such year to reflect changes
in underlying business conditions.
4. Termination.
4.1 Events of Termination. The Company may terminate this Agreement
prior to the expiration of the Term upon the occurrence of any of the following
events:
a) the death of the Executive;
b) the Disability (as hereinafter defined) of the Executive;
c) the conviction of the Executive of any felony;
d) the gross neglect or willful misconduct of the Executive in
connection with the performance of his duties hereunder, or a
willful failure to follow a reasonable directive of the CEO
of RIAG not inconsistent with the other provisions of this
Agreement;
e) a material breach by the Executive of any of the provisions of
this Agreement;
f) the commission by the Executive of any act or acts of
dishonesty reasonably determined by the CEO of RIAG to
render the Executive unfit for continued employment with the
Company; or
g) the failure of the Company to meet minimum financial
<PAGE> 3
performance criteria as indicated on Schedule 3 attached
hereto, which Schedule 3 may be amended during the Term by
agreement of the Executive and the CEO of RIAG, subject to
approval by Thomson; and
h) for any other reason;
provided that termination of this Agreement under clauses (b) through (h) shall
be made upon written notice to the Executive by the Company. The Executive may
terminate this Agreement at any time for any reason upon written notice to the
Company. The term "Disability" shall mean, with respect to the Executive, that
the Company determines reasonably that due to physical or mental disability,
whether total or partial, the Executive is or will be substantially unable to
perform his services hereunder for (i) a period of 180 consecutive days, or (ii)
shorter periods aggregating 180 days during any continuous one year period.
4.2 Effect of Termination. If the Company or the Executive terminates
this Agreement pursuant to Section 4.1 hereof, this Agreement shall become null
and void and have no further force or effect, except as otherwise provided
herein, and except that Sections 5, 6 and 7 shall survive any such termination
of this Agreement. If this Agreement is terminated by the Company pursuant to
clause (c), (d), (e) or (f) of Section 4.1 or by the Executive for any reason on
or before December 31, 1997, the Executive shall be entitled only to payment of
his then current base salary pursuant to Section 3.1 through the date of
termination. If this Agreement is terminated by the Company pursuant to clause
(a), (b), (g), or (h) of Section 4.1, the Executive shall be entitled to payment
of his base salary pursuant to Section 3.1 for two years following the date of
such termination and the amounts, if any, payable under Section 3.5. If the
Agreement is terminated by the Executive for any reason following December 31,
1997 and prior to expiration of the Term, the Executive shall be entitled to
payment of his base salary pursuant to Section 3.1 for one year following the
date of such termination.
4.3 Consulting Services Beyond the Term. The Company and the Executive
agree that the Executive and Thomson Information Services, Inc. shall enter into
a consulting agreement which shall be executed in substantially the form
attached hereto as Attachment A and shall be effective upon the earlier of
expiration of the Term hereunder or termination of Executive's employment prior
to expiration of the Term pursuant to Section 4.1.
5. Certain Covenants of the Executive.
5.1 Covenants. The Executive acknowledges that (i) the Company is
engaged and in the future will be engaged in the business of developing,
designing, publishing and selling compliance and other information products and
services for tax and accounting professionals as well as products and services
for third parties that integrate with products and services used by tax and
accounting professionals (all of the foregoing shall include, without
limitation, software, databases and consulting services of the type provided by
the Company) (the foregoing, together with any other businesses related to tax
and accounting professionals that the Company or its affiliates may engage in
from the date hereof to the date of the termination of this Agreement for which
the Executive has management responsibility under this Agreement, being
hereinafter referred to as the "Company Business"); (ii) his services to the
Company will be special and unique; (iii) his work for the Company will give him
access to trade secrets of and confidential information concerning the Company;
(iv) the Company Business is national in scope; (v) the Company would not have
entered into this Agreement but for the agreements and covenants contained in
this Section 5; and (vi) the agreements and covenants contained in this Section
5 are essential to protect the business and goodwill of the Company. In order to
induce the Company to enter into this Agreement, the Executive covenants and
agrees that:
5.1.1 Restrictive Covenants. In consideration for the payments to
the Executive contemplated hereunder, during the Term hereof and for a period
equal to three years after the termination or expiration of the Executive's
employment with the Company (the "Restricted Period"), the Executive shall not,
other than as specifically provided in this Agreement, directly or indirectly,
(i) engage in the Company Business or a business competitive with the Company
Business; (ii) assist any person in conducting a business competitive with the
Company Business, provided, however, that this is not intended to restrict the
Executive's ownership of up to 5% of the securities of a publicly traded company
that engages in the Company Business; (iii) interfere with business
relationships (whether
<PAGE> 4
formed heretofore or hereafter) between the Company and customers of or
suppliers to the Company Business; and provided further that the obligations of
the Executive pursuant to this Section 5.1.1 shall terminate after the second
year of the Restricted Period. The Executive agrees that, in the event of a
breach or threatened breach by the Executive of this section, the Company shall
be entitled to injunctive relief restraining the Executive from engaging in any
of the aforesaid prohibited activities. Nothing hereunder, however, shall be
construed as prohibiting the Company from pursuing any other remedies available
to it in law or in equity.
5.1.2 Confidential Information; Personal Relationships. During and
after the Restricted Period, the Executive shall keep secret and retain in
strictest confidence, and shall not use for the benefit of himself or others,
except in connection with the business and affairs of the Company and its
affiliates, all confidential information relating to the Company Business or to
the Company or to the business of any of the Company's affiliates, including,
but not limited to, "know-how," trade secrets, customer lists, subscription
lists, details of consultant contracts, pricing policies, operational methods,
marketing plans or strategies, product development techniques or plans, business
acquisition plans, technical processes, new personnel acquisition plans,
processes, designs and design projects, inventions, software, source codes,
object codes, system documentation and research projects and other business
affairs relating to the Company Business or to any affiliate of the Company
learned by the Executive heretofore or hereafter, and shall not disclose them to
anyone outside of the Company and its affiliates, either during or after
employment by the Company or any of its affiliates, except (i) as required in
the course of performing his duties hereunder, or (ii) with the Company's
express written consent, or (iii) pursuant to legal process. Notwithstanding the
foregoing, the obligations of the Executive pursuant to this Section 5.1.2 shall
not apply to confidential information:
(a) which at the date hereof or thereafter becomes a matter of public
knowledge without breach by the Executive of this Agreement; or
(b) which is obtained by the Executive from a person other than the
Company or an affiliate of the Company who is under no obligation
of confidentiality to the Company.
5.1.3 Employees and Consultants of the Company. During the
Restricted Period, the Executive shall not, directly or indirectly, (a) hire,
solicit or encourage any employee to leave the employment of the Company or any
of its affiliates, (b) hire or enter into a consulting relationship with any
such employee who has left the employment of the Company or any of its
affiliates within three months of the termination of such employee's employment
with the Company or any of its affiliates, (c) solicit or encourage any
consultant to terminate a consulting relationship with the Company or any of its
affiliates or (d) hire or enter into a consulting relationship with any such
consultant who has terminated a consulting relationship related to the Company
Business with the Company or any of its affiliates within three months of the
termination of such consultant's relationship with the Company or any of its
affiliates; provided, however, that no provision of this Section 5.1.3 shall
prohibit any action the Executive may take with respect to Robert W. Nolan, Jr..
5.1.4 Consequence of Termination. Upon termination of the
Executive's employment with the Company, all documents, records, notebooks, and
similar repositories of or containing trade secrets or intellectual property
then in the Executive's possession, including copies thereof, whether prepared
by the Executive or others, will be promptly returned to or left with the
Company.
5.2 Rights and Remedies upon Breach. If the Executive breaches, or
threatens to commit a breach of, any of the provisions of Section 5.1 (the
"Restrictive Covenants"), the Company shall have the right and remedy to have
the Restrictive Covenants specifically enforced by any court having equity
jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide adequate remedy to the Company. Such rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or in equity.
5.3 Severability of Covenants. The Executive acknowledges and agrees
that the Restrictive Covenants are reasonable and valid in geographical and
temporal scope and in all other respects. If any court determines that any of
the Restrictive Covenants or any part thereof, is invalid or unenforceable, the
remainder of the Restrictive Covenants shall
<PAGE> 5
not thereby be affected and shall be given full effect, without regard to the
invalid portions.
5.4 Blue-Pencilling. If any court determines that any of the
Restrictive Covenants, or any part thereof, is unenforceable because of the
duration or geographic scope of such provision, such court shall have the power
to reduce the duration or scope of such provision, as the case may be, and, in
its reduced form, such provision shall then be enforceable and shall be
enforced.
6. Intellectual Property. The Company shall be the sole owner of all the
products and proceeds of the Executive's services hereunder, including, but not
limited to, all materials, ideas, concepts, formats, suggestions, developments,
arrangements, packages, programs and other intellectual properties that the
Executive may acquire, obtain, develop or create in connection with and during
the term of the Executive's employment hereunder, free and clear of any claims
by the Executive (or anyone claiming under the Executive) of any kind or
character whatsoever. The Executive shall, at the request of the Company,
execute such assignments, certificates or other instruments as the Company may
from time to time deem necessary or desirable to evidence, establish, maintain,
perfect, protect, enforce or defend its right, title and/or interest in or to
any such properties.
7. Other Provisions.
7.1 Consent to Jurisdiction and Service of Process. Any legal action,
suit or proceeding in equity or in law arising out of or relating to this
Agreement and the transactions contemplated hereby or thereby shall be
instituted solely in any state or federal court in the state of Missouri and
each party agrees not to assert, by way of motion, as a defense, or otherwise,
in any such action, suit or proceeding, any claim that such party is not subject
personally to the jurisdiction of such court, that its property is exempt or
immune from attachment, that the action, suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit or proceeding is
improper, or that this Agreement may not be enforced in or by such court. Each
party further irrevocably submits to the jurisdiction of any such court in any
such action, suit or proceeding. Nothing herein contained shall be deemed to
affect the right of any party to serve process in any manner permitted by law.
7.2 Notices. Any notice or other communication required or which may be
given hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or overnight courier, or
sent by certified, registered or express mail, postage prepaid, and shall be
deemed given when so delivered personally, telegraphed, telexed or sent by
facsimile transmission or overnight courier, or, if mailed, four days after the
date of mailing, as follows:
(i) if to the Company, to:
Euan Menzies
Chief Executive Officer
RESEARCH INSTITUTE OF AMERICA
90 Fifth Avenue
New York, NY 10011
with a copy to:
THE THOMSON CORPORATION
Metro Center at One Station Place
Stamford at One Station Place
Stamford, CT 06902
Attn: General Counsel
(ii) if to the Executive, to:
Robert W. Nolan, Sr.
14584 Whittington Court
Chesterfield, MO 63017
Any party may by notice given in accordance with this Section to the other
parties designate another address for receipt of notices hereunder.
7.3 Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and, upon the
Effective Date, supersedes all prior agreements with respect thereto, written or
oral, including, without
<PAGE> 6
limitation, the Long Term Compensation Plan - Chief Executive Officer, effective
February 1, 1995 and the FY '95 Executive Incentive Compensation Plan; provided,
however, that to the extent not paid to the Executive prior to the Effective
Date, the Company shall pay to the Executive an amount equal to that to which
the Executive would have been entitled under the FY '95 Executive Incentive
Compensation Plan.
7.4 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties and by
Thomson, or, in the case of a waiver, by the party waiving compliance and, in
the case of the Company, by Thomson. No delay on the part of any party in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any waiver on the part of any party of any right, power or
privilege hereunder, nor any single or partial exercise of any right, power or
privilege hereunder, preclude any other or further exercise thereof or the
exercise of any other right, power or privilege hereunder.
7.5 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Missouri applicable to agreements made
and to be performed entirely within such State.
7.6 Assignment. This Agreement, and the Executive's rights and
obligations hereunder, may not be assigned by the Executive. The Company may,
without the Executive's consent, assign its rights, together with its
obligations, under this Agreement in connection with any sale, transfer or other
disposition of all or substantially all of its assets or business, whether by
merger, consolidation or otherwise. This Agreement shall be binding on any
successor to the Company.
7.7 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same instrument.
7.8 Headings. The headings in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
SCS/COMPUTE, INC.
By:
--------------------
Robert W. Nolan, Sr.
-----------------------
Accepted and Agreed to:
THOMSON INFORMATION
SERVICES, INC.
By:
-----------------------
<PAGE> 7
SCHEDULE 1
Annual Bonus
A. Calculations: Revenue, Operating Income and Management Cash shall each be
as determined in accordance with generally acceptable accounting principles
consistently applied, calculated and certified by the chief financial officer of
the Company and approved by the CEO of RIAG. The CEO of RIAG will deliver a
certificate of determination of Revenue, Operating Income and Management Cash to
the Executive no later than ninety days after the end of each respective
calendar year during the Term.
The financial targets included herein have been developed using the
financial accounting policies adopted by the Company at the time of the Merger
Agreement, utilizing a January 31 fiscal year end. The effect on the targets of
any adjustments to these policies and a change to a calendar year end will be
quantified and will adjust the targets as agreed between the CEO of RIAG and the
Executive.
Any payments of Annual Bonus amounts are funded out of the operating
results of the Company and are included in the calculation of Operating Income
to arrive at the Annual Bonus amount.
The Annual Bonus amount will be calculated by applying the percentage bonus
earned (using the financial targets in B. below and the pro forma bonus schedule
in C. below) to the salary of the Executive in effect during the relevant
calendar year.
The Executive will not be eligible for any payments unless the "Floor"
targets for both Revenue and Operating Income for the relevant year as
identified in B. below are met or exceeded.
B. Financial Targets
The financial targets for each fiscal year under the Agreement are as follow
(note: 1996 relates to the fiscal year ending January 31, 1997, et seq.):
<TABLE>
<CAPTION>
1996 1997 1998 1999 2000
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenue
- -------
"Target" Revenue $22,300, $24,530, $26,983, $29,681, $32,649,
Growth 12.6% 10.0% 10.0% 10.0% 10.0%
"Floor" Revenue $21,185, $23,304, $25,634, $28,197, $31,017,
"Ceiling" Revenue $25,000, $27,500, $30,250, $33,275, $36,600,
Operating Income
- ----------------
"Target" OI $4,400, $5,550, $6,604, $7,420, $8,162,
Growth 67.3% 26.1% 19.0% 12.4% 10.0%
Margin 19.7% 22.6% 24.5% 25.0% 25.0%
"Floor" OI $4,180, $5,273, $6,274, $7,049, $7,754,
"Ceiling" OI $6,000, $6,875, $7,563, $8,319, $9,150,
Management Cash
- ---------------
"Target" Mgmt. Cash $3,960, $4,995, $6,604, $7,420, $8,162,
Growth 36.6% 26.1% 32.2% 12.4% 10.0%
Conversion 90.0% 90.0% 100.0% 100.0% 100.0%
"Floor" Cash n/a n/a n/a n/a n/a
"Ceiling" Cash $5,400, $6,188, $7,563, $8,319, $9,150,
</TABLE>
- ---------------
Note: All dollar amounts are in thousands of U.S. dollars.
<PAGE> 8
C. Pro Forma Percentage Bonus Schedule
(i) Percentage Bonus Schedule for 1996:
PLAN % BONUS EARNED
<TABLE>
<CAPTION>
% Net Sales Operating Mgmt Net Sales Operating Mgmt
Achieved Revenue Income Cash Revenue Income Cash Total
- -------- --------- --------- ---- --------- --------- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
FLOOR 95 $21,185, $4,180, n/a
96 $21,408, $4,224, $3,802, 3.0 6.0 1.0 10.0
97 $21,631, $4,268, $3,841, 6.0 12.0 2.0 20.0
98 $21,854, $4,312, $3,881, 9.0 18.0 3.0 30.0
99 $22,077, $4,358, $3,920, 12.0 24.0 4.0 40.0
TARGET $22,300, $4,400, $3,960, 15.0 30.0 5.0 50.0
CEILING $25,000, $6,000, $5,400, 30.0 60.0 10.0 100.0
</TABLE>
In no event shall the percentage bonus earned exceed 100% of salary.
(ii) Percentage Bonus Schedule for years 1997 through 2000 will be prepared on a
consistent basis with the Percentage Bonus Schedule for 1996 using the
relevant financial targets for each of those years.
D. Treatment of Acquisitions: Acquisitions with revenues of up to $1.0 million
will be included in the results of the ongoing operations at the Company and the
targets used herein will not be adjusted. The targets used herein will be
adjusted to include the Revenue, Operating Income and Management Cash included
in the approved Thomson Board Papers for each acquisition with revenues in
excess of $1.0 million.
E. Treatment of Changes in Operations: The targets used herein are based on
the existing operations of the Company, as such may change in the ordinary
course of business. The targets may be adjusted for any extraordinary changes
including, but not limited to, product transfers to/from the Company and
significant new investment in product development funded by Thomson.
F. Payment: Payment of the Annual Bonus pursuant to Section 3.3(a) and this
Schedule 1 shall be made as soon as practicable after the determination of
Revenue, Operating Income and Management Cash for the relevant period as
provided above (but in no event later than ninety days after year end) and shall
be subject to required withholdings.
<PAGE> 9
SCHEDULE 2
LTIP
A. Calculations: Revenue and Operating Income shall each be as determined in
accordance with generally acceptable accounting principles consistently applied,
calculated and certified by the chief financial officer of the Company and
approved by the CEO of RIAG. The CEO of RIAG will deliver a certificate of
determination of Revenue and Operating Income to the Executive no later than
ninety days after the end of each respective calendar year during the Term.
The financial targets included herein have been developed using the
financial accounting policies adopted by the Company at the time of the Merger
Agreement, utilizing a January 31 fiscal year end. The effect on the targets of
any adjustments to these policies and a change to a calendar year end will be
quantified and will adjust the targets as agreed between the CEO of RIAG and the
Executive.
Any payments of LTIP amounts are funded out of the operating results of the
Company and are included in the calculation of Operating Income to arrive at the
LTIP amount.
The LTIP amount will be calculated as provided below. The Executive will
not be eligible for any payments unless the "Floor" targets as identified in B.
below for the relevant year are met or exceeded.
B. LTIP Formula: Executive will be eligible to begin receiving payments of the
LTIP if the minimum ("Floor") Revenue and Operating Income targets are achieved
as outlined below. All dollar amounts are in thousands of U.S. dollars.
<TABLE>
<CAPTION>
(i) Targets (Floor) for Fiscal Year:
1998 1999 2000
<S> <C> <C> <C>
Revenue $30,000, $35,000, $40,000,
Operating Income $ 7,500, $ 8,750, $10,000,
Bonus for Achieving Target $ 250, $ 250, $ 250,
</TABLE>
(ii) An incremental bonus of 20% of Operating Income in excess of Floor will
also be payable.
Example: In fiscal year 1996, if Revenue is $30,000 and Operating
Income is $9,000, then the bonus equals:
<TABLE>
<S> <C>
Bonus for achieving target: $250,
Incremental bonus at 20% of OI
amount over $7,500, $300,
Total Bonus $550,
</TABLE>
(iii) Treatment of Acquisitions:
Revenues up to $1.0 Million: Financial results will be added to the
ongoing operations of the Company.
Targets will not be adjusted.
Revenues greater than $1.0 Million: Operating Income targets for each year
of the Agreement will be increased by
12% of the purchase price of the
acquisition. Revenue targets will not
be adjusted.
(iv) Treatment of Changes in Operations: The targets used herein are based on
the existing operations of the Company, as such may change in the ordinary
course of business. The targets may be adjusted for any extraordinary changes
including, but not limited to, product transfers to/from the Company and
significant new investment in product development funded by Thomson.
<PAGE> 10
C. Payment: Payment of LTIP pursuant to Section 3.3(a) and this Schedule 2
shall be made as soon as practicable after the determination of Revenue and
Operating Income for the relevant period as provided above (but in no event
later than ninety days after year end) and shall be subject to required
withholdings.
<PAGE> 11
SCHEDULE 3
Minimum Company Financial Performance Criteria:
The Company's minimum financial performance criteria require that Revenue and
Operating Income for each calendar year during the Term must exceed the previous
year's Revenue and Operating Income by at least 5% and 10% respectively. The
calculation for 1996 will be based on the Company's fiscal year 1995 results,
except that in no event will the minimum Revenue and Operating Income
requirements for 1996 be less than $20 million and $3.75 million respectively.
Notwithstanding the foregoing, if the minimum growth rates are not met but the
Company's overall performance exceeds the financial targets included in Schedule
1 (Section B.), then the Company's financial performance will be considered
acceptable for purposes of this Schedule.
<PAGE> 12
Attachment A
CONSULTING AGREEMENT
CONSULTING AGREEMENT (the "Agreement"), dated January __, 1996 between
Thomson Information Services, Inc. (the "Company") and Robert W. Nolan, Sr. (the
"Consultant").
The Consultant has served as a key executive of SCS/Compute, Inc., an
affiliate of the Company, and in recognition thereof it is the desire of the
Company and the Consultant to enter into this Agreement in order to ensure that
the services and advice of the Consultant will be available to the Company for
the term of the Agreement and to reward the Consultant for his continuing
contributions to the success of the Company on the terms and subject to the
conditions hereinafter set forth.
Accordingly, the parties agree as follows:
1. Consulting Engagement. The Company hereby engages the Consultant for the
Consulting Period (as defined in Section 2) to perform such consulting, advisory
and other services as the Consultant shall reasonably be requested to perform by
the Chief Executive Officer of Research Institute of America Group. The
Consultant hereby accepts such engagement and shall render the services
described above.
2. Consulting Period. This Agreement shall take effect, and the term of the
Consultant's engagement under this Agreement shall commence, as of the earlier
of the date of termination of Consultant's employment pursuant to Section 4.1 of
the Employment Agreement between the Consultant and the Company dated January
__, 1996 (the "Employment Agreement") and expiration of the Term of the
Employment Agreement (as such term is defined in Section 2 of the Employment
Agreement) (the "Effective Date") and shall end on the third anniversary of the
Effective Date (the "Consulting Period").
3. Compensation.
3.1 Fee. As compensation for all services to be rendered during the
Consulting Period pursuant to this Agreement, the Company shall pay the
Consultant a total fee of $1,050,000. Such fee shall be payable in the following
amounts at the following times: (i) during the period commencing on the
Effective Date and ending on the second anniversary of the Effective Date, an
annual amount of $400,000 payable monthly in arrears; and (ii) during the period
commencing on the date immediately following the second anniversary of the
Effective Date and ending on the third anniversary of the Effective Date, an
annual amount of $250,000 payable monthly in arrears.
3.2 Expenses. The Consultant shall be entitled to be reimbursed for
reasonable expenses actually incurred or paid by the Consultant in the
performance of the Consultant's services during the Consulting Period under this
Agreement.
4. Independent Contractor. The Consultant acknowledges that he is being
retained by the Company as an independent contractor and not as an employee. The
Company shall not exercise direction or control over the Consultant in his
performance of services hereunder. Accordingly, the Consultant hereby
acknowledges: (i) the Consultant shall be solely responsible for and shall file,
on a timely basis, tax returns and payments required to be filed with or made to
any relevant tax authorities with respect to his performance of services
hereunder; (ii) the Company will not withhold any taxes from compensation paid
by the Company to the Consultant during the Consulting Period unless legally
required to do so; (iii) the Consultant will be responsible for providing his
own office space; and (iv) the Company will not provide the Consultant during
the Consulting Period with (a) life insurance, (b) health insurance, (c)
long-term disability insurance or (d) any other employee benefits, rights or
entitlements under any plans of the Company or of SCS/Compute, Inc.. The
Company's only obligations under this Agreement are to pay the Consultant the
compensation and expenses described in Section 3 hereof.
5. No Agency. Nothing contained in this Agreement shall be construed as
creating an agency relationship between the Company and the Consultant and,
without the Company's prior written consent, the Consultant shall have no
authority hereunder to bind the Company or make any commitments on the Company's
behalf. The Consultant shall not take any action in connection with his
rendering of services hereunder which he reasonably believes would cause any
third party to assume that he has such authority.
6. Certain Covenants of the Consultant. The Consultant acknowledges that his
<PAGE> 13
obligations pursuant to Sections 5, 6 and 7.1 of the Employment Agreement are
ongoing; provided, however, that any breach by the Executive of such Sections 5,
6 and 7.1 of the Employment Agreement shall not, without more, be deemed a
breach of this Agreement.
Upon termination of the Consultant's engagement hereunder, all
documents, records, notebooks, and similar repositories of or containing trade
secrets or intellectual property then in the Consultant's possession, including
copies thereof, whether prepared by the Consultant or others, will be promptly
returned to or left with the Company.
The Company shall be the sole owner of all the products and proceeds of
the Consultant's services hereunder, including, but not limited to, all
materials, ideas, concepts, formats, suggestions, developments, arrangements,
packages, programs and other intellectual properties that the Consultant may
acquire, obtain, develop or create in connection with and during the term of the
Consultant's engagement hereunder, free and clear of any claims by the
Consultant (or anyone claiming under the Consultant) of any kind or character
whatsoever. The Consultant shall, at the request of the Company, execute such
assignments, certificates or other instruments as the Company may from time to
time deem necessary or desirable to evidence, establish, maintain, perfect,
protect, enforce or defend its right, title and/or interest in or to any such
properties.
7. Rights and Remedies upon Breach. If the Consultant breaches, or threatens
to commit a breach of, any of the provisions of Section 5 or 6 of this
Agreement, the Company shall have the right and remedy to have the Consultant's
obligations pursuant to such Sections specifically enforced by any court having
equity jurisdiction, it being acknowledged and agreed that any such breach or
threatened breach will cause irreparable injury to the Company and that money
damages will not provide adequate remedy to the Company. Such rights and
remedies shall be in addition to, and not in lieu of, any other rights and
remedies available to the Company under law or in equity.
8. Other Provisions.
8.1 Consent to Jurisdiction and Service of Process. Any legal action,
suit or proceeding in equity or in law arising out of or relating to this
Agreement and the transactions contemplated hereby or thereby shall be
instituted solely in any state or federal court in the state of Missouri and
each party agrees not to assert, by way of motion, as a defense, or otherwise,
in any such action, suit or proceeding, any claim that such party is not subject
personally to the jurisdiction of such court, that its property is exempt or
immune from attachment, that the action, suit or proceeding is brought in an
inconvenient forum, that the venue of the action, suit or proceeding is
improper, or that this Agreement may not be enforced in or by such court. Each
party further irrevocably submits to the jurisdiction of any such court in any
such action, suit or proceeding. Nothing herein contained shall be deemed to
affect the right of any party to serve process in any manner permitted by law.
8.2 Notices. Any notice or other communication required or which may be
given hereunder shall be in writing and shall be delivered personally,
telegraphed, telexed, sent by facsimile transmission or overnight courier, or
sent by certified, registered or express mail, postage prepaid, and shall be
deemed given when so delivered personally, telegraphed, telexed or sent by
facsimile transmission or overnight courier, or, if mailed, four days after the
date of mailing, as follows:
(i) if to the Company, to:
Euan Menzies
Chief Executive Officer
RESEARCH INSTITUTE OF AMERICA
90 Fifth Avenue
New York, NY 10011
with a copy to:
THE THOMSON CORPORATION
Metro Center at One Station Place
Stamford at One Station Place
Stamford, CT 06902
Attn: General Counsel
(ii) if to the Consultant, to:
<PAGE> 14
Robert W. Nolan, Sr.
14584 Whittington Court
Chesterfield, MO 63017
Any party may by notice given in accordance with this Section to the other
parties designate another address for receipt of notices hereunder.
8.3 Entire Agreement. This Agreement contains the entire agreement
between the parties with respect to the subject matter hereof and, upon the
Effective Date, supersedes all prior agreements with respect thereto, written or
oral, except as specifically provided in Section 6 of this Agreement.
8.4 Waivers and Amendments. This Agreement may be amended, modified,
superseded, canceled, renewed or extended, and the terms and conditions hereof
may be waived, only by a written instrument signed by the parties, or, in the
case of a waiver, by the party waiving compliance. No delay on the part of any
party in exercising any right, power or privilege hereunder shall operate as a
waiver thereof, nor shall any waiver on the part of any party of any right,
power or privilege hereunder, nor any single or partial exercise of any right,
power or privilege hereunder, preclude any other or further exercise thereof or
the exercise of any other right, power or privilege hereunder.
8.5 Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of Missouri applicable to agreements made
and to be performed entirely within such State.
8.6 Assignment. This Agreement, and the Consultant's rights and
obligations hereunder, may not be assigned by the Consultant other than by
devise, inheritance or operation of intestacy. The Company may, without the
Consultant's consent, assign its rights, together with its obligations, under
this Agreement in connection with any sale, transfer or other disposition of all
or substantially all of its assets or business, whether by merger, consolidation
or otherwise. This Agreement shall be binding on any successor to the Company.
8.7 Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original but all of which together shall constitute one
and the same instrument.
8.8 Headings. The headings in this Agreement are for reference purposes
only and shall not in any way affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the parties have executed this Agreement on the date
first above written.
THOMSON INFORMATION
SERVICES, INC.
By:
--------------------
Robert W. Nolan, Sr.
-----------------------
<PAGE> 1
MUTUAL NONDISCLOSURE AGREEMENT
This letter will set forth our understanding regarding the restrictions that are
to be placed on the use, dissemination and disclosure of certain proprietary
information to be exchanged between SCS/Compute, Inc., a Delaware corporation
(hereafter referred to as "SCS"), on the one hand, and Research Institute of
America Inc., a Delaware corporation (hereinafter referred to as "RIA") on the
other. This information may include, but will not necessarily be limited to,
each of our companies' respective proprietary information regarding each's
current products and services.
1. Each of us agrees to maintain in confidence all such
information as may be disclosed by either of us to the other which is clearly
labeled or identified as confidential or proprietary when furnished. It is
expressly understood that the information includes without limitation any
information, process, technique, algorithm, program, design, drawing, formula,
formulation, test or other data relating to servicing, financing, or personnel
matter relating to the disclosing party, its present or future products, sales,
suppliers, clients, customers, employees, consultants, investors or business,
whether in oral, written, graphic, or electronic form.
2. Except in accordance with the terms of this letter, neither of
us may use or disclose any information disclosed to it by the other without the
written permission of the disclosing party. The information may be disclosed to
employees within the organization or agents or consultants of the receiving
party who are involved in the evaluation of such products, designs or systems,
but it will not be disseminated to any others without such written consent. In
addition, each of us shall exercise due diligence to maintain all such
information in confidence; "due diligence" here shall mean at least the same
precautions and standard of care which a reasonable person in our business
would use to safeguard his own proprietary information.
3. The commitments made in this letter shall remain in effect for
five years following the date of this letter. Our agreement is made on the
understanding, however, that there is no obligation imposed by this letter
regarding information that (a) now or later becomes generally known or available
through no act or omission on the part of the receiving party; (b) is already
known to the receiving party at the time it was first disclosed to it under this
Agreement, (c) is furnished by the disclosing party to others with written
permission to disclose provided by the disclosing party; or (d) is received by
the receiving party from a third party under no obligation of confidence.
4. We each agree that neither party will attempt to reverse
compile any software programs provided to it by the other under this Agreement.
5. All information and any other materials (including, without
limitation, documents, models, databases, designs and lists) furnished by one
party to the other under this Agreement are and shall remain the property of
the disclosing party and shall be returned to it by the receiving party
promptly upon request, together with any copies of such material. The receiving
party agrees (a) to maintain appropriate records of all such copies and (b) to
reproduce on any copy (in whatever form) all copyright and other proprietary
notices in the same form as they appear on the materials provided to the
receiving party by the disclosing party.
6. Each party recognizes that the other (including certain of its
corporate affiliate(s)) may be engaged in the research, development,
<PAGE> 2
production, marketing, licensing and/or sale of similar products to those being
considered under this Agreement. Such product may be competitive with those of
the other and may display the same or similar functionality. Nothing in this
Agreement shall be construed to prevent either party from engaging
independently in such activities, provided it does not utilize the information
of the other in order to do so.
7. Each party recognizes that any actual or threatened disclosure
of information in violation of this Agreement may cause the disclosing party
irreparable harm and that such party shall be entitled to injunctive relief or a
decree of specific performance upon a proper showing of such a violation,
without the necessity of demonstrating actual monetary damage.
8. For a period of one year from the date hereof, neither party nor
their subsidiaries or affiliates will directly or indirectly approach, solicit
or otherwise seek to induce or encourage any employee of the other party to
leave his or her employment with the other party.
9. This Agreement shall be binding upon each of our respective
officers, directors, employees, parent company and other corporate affiliates.
It may not be assigned by either party without the consent of the other. If any
term of this letter is held to be illegal or unenforceable, such holding shall
not affect the validity of the remaining provisions of this letter. This letter
contains the entire understanding of the parties regarding its subject matter,
and it supersedes all prior agreements or understandings between us on such
subject(s). This letter shall be construed in accordance with the laws of the
State of New York applicable to agreements made and fully performed therein. We
both acknowledge that it may not be modified except in writing duly signed by
both parties.
To indicate that the foregoing accurately sets forth our agreement, each of the
parties has signed this letter in the space provided below.
Research Institute of America Inc. SCS/Compute, Inc.
By /s/ David J. Shea By /s/ Charles G. Wilson
------------------------------- ---------------------------------
David J. Shea Charles G. Wilson
VP Business Development Executive Vice President Finance &
Administration
10/10/95 10/9/95
- ---------------------------------- -------------------------------------
Date Date
<PAGE> 1
[SCS/COMPUTE(R) LETTERHEAD]
NEWS RELEASE
Contact at The Thomson Corporation: Nigel R. Harrison
Executive Vice President
203/328-9422
Contact at SCS/Compute: Charles G. Wilson
Executive Vice President
314/432-7323
FOR IMMEDIATE RELEASE
THE THOMSON CORPORATION AND SCS/COMPUTE, INC.
APPROVE MERGER AGREEMENT
ST. LOUIS, December 20, 1995 -- SCS/Compute, Inc. (SCS), a leading
software supplier to tax and accounting professionals, announced today that it
has entered into a definitive agreement and plan of merger with Thomson U.S.
Holdings, Inc., a division of The Thomson Corporation (Thomson) of Toronto,
Canada. The principal activities of Thomson are specialized information and
publishing, and leisure travel. With annual sales of U.S. $6.5 billion, and
45,000 employees, Thomson operates primarily in North America and the United
Kingdom and has expanding interests internationally.
Robert W. Nolan, Sr., chairman, president and chief executive officer
of SCS, has entered into a definitive agreement with Thomson to sell his
1,082,570 shares of common stock at a price of $6.75 per share. Under the terms
of the merger agreement, Thomson will begin a $6.75 per share cash tender offer
no later than Wednesday, December 27, 1995 for the remaining 1,489,407 shares
of SCS's outstanding common stock. SCS is listed on the NASDAQ Small-Cap Stock
market under the symbol SCOMC.
<PAGE> 2
Add one
The Board of Directors of SCS has approved the merger agreement and has
determined that the proposed transaction is fair to, and in the best interests
of, the SCS stockholders. In reaching this conclusion, the Board of Directors
relied in part upon the fairness opinion from Fister & Associates, Inc., the
financial advisor to SCS.
The acquisition is subject to more than 50 percent of the shares
outstanding being tendered, including Nolan's stock. The completion of the
merger is also subject to other customary conditions. Following the completion
of the transaction, SCS will operate as a separate company within Thomson's
Research Institute of America (RIA) Group. RIA Group, formed earlier this year,
is comprised of RIA, Warren Gorham & Lamont, and Practitioners Publishing
Company. Together these professional publishers are one of the leading
information providers to the tax and accounting markets in the United States.
###
