<PAGE> 1
[SANDY CORPORATION LETTERHEAD]
December 1, 1995
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
Sandy Corporation ("Sandy") which will be held on Thursday, January 4, 1996 at
Sandy's corporate headquarters, located at 1500 West Big Beaver Road, Troy,
Michigan 48084, commencing at 11:00 A.M., local time.
At the meeting you will be asked to consider and approve the Agreement and
Plan of Merger, dated as of August 22, 1995 (together with the Plan of Merger in
the form attached thereto, the "Merger Agreement"), by and among Sandy, ADP
Mergerco, Inc. ("ADP Mergerco") and Automatic Data Processing, Inc. ("ADP")
pursuant to which ADP Mergerco will merge with and into Sandy (the "Merger") and
the shareholders of Sandy will receive ADP Common Stock in exchange for their
Sandy Common Stock and Sandy stock options will be converted into options to
purchase ADP Common Stock.
As discussed in the accompanying Proxy Statement/Prospectus, Bear, Stearns
& Co. Inc., Sandy's financial advisor, has delivered a written opinion to the
Board of Directors of Sandy to the effect that the Merger is fair to the
shareholders of Sandy from a financial point of view. A copy of the opinion is
attached to the Proxy Statement/Prospectus and should be read carefully by
shareholders in its entirety.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS
OF SANDY AND ITS SHAREHOLDERS. THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT YOU VOTE IN FAVOR OF THE MERGER.
You may call toll free 1-800-535-1225 for the then current ten-day average
of the daily per share prices of ADP Common Stock and the Exchange Ratio that
would be calculated if such average were the Average ADP Common Stock Price and
for information on how to change or revoke a proxy previously given (as such
terms are defined in the attached Proxy Statement/Prospectus). The actual
Average ADP Common Stock Price and Exchange Ratio are expected to be calculated
after the close of business on December 29, 1995 and may be obtained by calling
this number after that date.
Your vote is important no matter how large or small your holdings may be.
To assure your representation at the meeting, please complete, sign, date and
return your proxy in the enclosed envelope. If you attend the meeting, you may
revoke your proxy and vote in person if you wish, even if you have previously
returned your proxy.
Sincerely,
/s/ R.A. Ketchledge /s/ William H. Sandy
- ------------------------------------- ------------------------------------
Raymond A. Ketchledge William H. Sandy
President and Chief Operating Officer Chairman and Chief Executive Officer
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NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 4, 1996
To Shareholders of Sandy Corporation:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Sandy
Corporation, a Michigan corporation ("Sandy"), will be held on Thursday, January
4, 1996 at 11:00 A.M., local time, at Sandy's corporate headquarters, located at
1500 West Big Beaver Road, Troy, Michigan 48084, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated as of August 22, 1995 (together with the Plan of
Merger in the form attached thereto, the "Merger Agreement"), by and among
Automatic Data Processing, Inc., a Delaware corporation ("ADP"), ADP
Mergerco, Inc., a Michigan corporation and a wholly owned subsidiary of
ADP, and Sandy, the terms and conditions of which are described in the
attached Proxy Statement/Prospectus.
2. To consider and act upon such other business as may properly come
before the meeting or any adjournment thereof.
The close of business on November 27, 1995 has been fixed as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the meeting and any and all adjournments or postponements thereof. The terms
of the Merger Agreement are summarized in the attached Proxy
Statement/Prospectus. A copy of the Merger Agreement is attached to the Proxy
Statement/Prospectus.
A proxy card for the meeting and the Proxy Statement/Prospectus are
enclosed herewith.
By Order of the Board of Directors
Alan V. Kidd,
Secretary
Troy, Michigan
December 1, 1995
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. TO
ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE DATE THE ENCLOSED PROXY, WHICH
IS SOLICITED BY THE BOARD OF DIRECTORS OF SANDY, SIGN EXACTLY AS YOUR NAME
APPEARS THEREON AND RETURN IMMEDIATELY.
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SANDY CORPORATION
PROXY STATEMENT
------------------------
AUTOMATIC DATA PROCESSING, INC.
PROSPECTUS
This Proxy Statement and Prospectus ("Proxy Statement/Prospectus") is being
furnished to the holders of common stock, par value $.01 per share ("Sandy
Common Stock"), of Sandy Corporation, a Michigan corporation ("Sandy"), in
connection with the solicitation of proxies by the Board of Directors of Sandy
for use at the Special Meeting of Shareholders of Sandy to be held on Thursday,
January 4, 1996 at Sandy's corporate headquarters, located at 1500 West Big
Beaver Road, Troy, Michigan 48084, commencing at 11:00 A.M., local time, and at
any and all adjournments or postponements thereof (the "Sandy Special Meeting").
This Proxy Statement/Prospectus also constitutes the Prospectus of Automatic
Data Processing, Inc., a Delaware corporation ("ADP"), with respect to the
issuance of up to 1,009,912 shares (after giving effect to the ADP Stock Split
described below) of ADP common stock, par value $.10 per share ("ADP Common
Stock"), to be issued to the shareholders of Sandy in connection with the Merger
described below. Stockholders of ADP will not be voting to approve the Merger.
ADP Common Stock is traded on the New York Stock Exchange, Inc. (the "NYSE")
under the symbol "AUD." On November 14, 1995, ADP announced a two-for-one common
stock split (the "ADP Stock Split") to be distributed on January 1, 1996 to
shareholders of record on December 15, 1995. Unless otherwise indicated, all per
share earnings and dividends and references to ADP Common Stock in this Proxy
Statement/Prospectus do not reflect the increased number of shares of ADP Common
Stock that would be outstanding after giving effect to the ADP Stock Split. On
November 30, 1995, the closing sale price for ADP Common Stock as reported on
the NYSE was $79 5/8 per share.
This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of ADP Mergerco, Inc., a Michigan corporation and a wholly owned
subsidiary of ADP ("ADP Mergerco"), with and into Sandy, pursuant to an
Agreement and Plan of Merger, dated as of August 22, 1995 (together with the
Plan of Merger in the form attached thereto, the "Merger Agreement"), by and
among ADP Mergerco, ADP and Sandy. Upon consummation of the Merger, Sandy will
become a wholly owned subsidiary of ADP. Consummation of the Merger is subject
to various conditions, including the approval and adoption of the Merger
Agreement by the holders of a majority of the outstanding shares of Sandy Common
Stock at the Sandy Special Meeting. William H. Sandy, the Chairman and Chief
Executive Officer of Sandy, acting in his individual capacity and as trustee of
certain trusts of which Mr. Sandy is a beneficiary, executed an irrevocable
proxy agreement dated August 22, 1995 (which irrevocable proxy agreement has
subsequently been amended) in favor of ADP. Pursuant to this agreement, as
amended, ADP will have an irrevocable proxy to vote 19.0% of the outstanding
Sandy Common Stock (determined as of November 27, 1995, the record date
established for the Sandy Special Meeting) in favor of the Merger. See "The
Merger -- Interests of Certain Persons in the Merger."
At the Effective Time (as defined below), each share of Sandy Common Stock
issued and outstanding immediately prior to the Effective Time (excluding shares
referred to in the last sentence of this paragraph) will be converted into and
exchangeable for shares of ADP Common Stock at the Exchange Ratio (as defined
below). Thus, each Sandy shareholder shall be entitled to receive (in addition
to cash in lieu of fractional shares) a number of shares of ADP Common Stock
equal to the product (rounded down to the nearest whole number) of (i) the
number of shares of Sandy Common Stock exchanged by such shareholder and (ii)
the Exchange Ratio. If the Average ADP Common Stock Price (as defined below) is
greater than or equal to $58.764 (or $29.382 after giving effect to the ADP
Stock Split) and less than or equal to $71.823 (or $35.911 after giving effect
to the ADP Stock Split), then the exchange ratio shall be (rounded to the
seventh decimal place) (i) $12.00 divided by (ii) the Average ADP Common Stock
Price (the "Exchange Ratio"). If the Average ADP Common Stock Price is less than
$58.764 (or $29.382 after giving effect to the ADP Stock Split), then the
Exchange Ratio shall be 0.2042054 (or 0.4084108 after giving effect to the ADP
Stock Split). If the Average ADP Common Stock Price is greater than $71.823 (or
$35.911 after giving effect to the ADP Stock Split), then the Exchange Ratio
shall be 0.1670771 (or 0.3341542 after giving effect to the ADP Stock Split).
Each share of Sandy Common Stock held as treasury stock of Sandy immediately
prior to the Effective Time shall be canceled, retired and cease to exist, and
no exchange or payment shall be made in respect thereof. See "The
Merger -- General."
All information in this Proxy Statement/Prospectus with respect to ADP
Mergerco and ADP has been provided by ADP. All information contained in this
Proxy Statement/Prospectus with respect to Sandy has been provided by Sandy.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to shareholders of Sandy on or about December 1, 1995. A
shareholder who has given a proxy to Sandy may revoke it at any time prior to
its exercise. See "The Sandy Special Meeting -- Record Date; Voting Rights;
Proxies."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is December 1, 1995.
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NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES OFFERED BY THIS
PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION
TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION OF AN OFFER, OR PROXY SOLICITATION, IN ANY SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR THE ISSUANCE OR SALE
OF ANY SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
INCORPORATED BY REFERENCE SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
ADP and Sandy are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the Public
Reference Facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained from the Public
Reference Facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The ADP
Common Stock is listed on the NYSE, the Chicago Stock Exchange and the Pacific
Stock Exchange, and such reports, proxy statements and other information
concerning ADP may be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005, the offices of the Chicago Stock Exchange, 120 South
LaSalle Street, Chicago, Illinois 60603, and the offices of the Pacific Stock
Exchange, 618 South Spring Street, Los Angeles, California 90014 and 310 Pine
Street, San Francisco, California 94104. The Sandy Common Stock is listed on the
American Stock Exchange (the "ASE"), and such reports, proxy statements and
other information concerning Sandy may be inspected at the offices of the ASE,
86 Trinity Place, New York, New York 10006. If the Merger is consummated, the
Sandy Common Stock will be delisted from the ASE, and ADP will take steps to
terminate the registration of the Sandy Common Stock under Section 12 of the
Exchange Act.
ADP has filed with the Commission a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This Proxy
Statement/Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Statements made in this Proxy Statement/Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
Items and information omitted from this Proxy Statement/ Prospectus but
contained in the Registration Statement may be inspected and copied at the
Public Reference Facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
The Merger does not constitute a "significant business combination" for ADP
under the Commission's accounting rules. Therefore, other than under
"Comparative Per Share Data" below, pro forma financial information has not been
included in this Proxy Statement/Prospectus.
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INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS THEY ARE SPECIFICALLY
INCORPORATED BY REFERENCE, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED UPON
WRITTEN OR ORAL REQUEST TO: SECRETARY, AUTOMATIC DATA PROCESSING, INC., ONE ADP
BOULEVARD, ROSELAND, NEW JERSEY 07068, TELEPHONE (201) 994-5000, OR TO
SECRETARY, SANDY CORPORATION, 1500 WEST BIG BEAVER ROAD, TROY MICHIGAN 48084,
TELEPHONE (810) 649-0800. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY DECEMBER 26, 1995.
The following documents which have been filed with the Commission are
incorporated by reference into this Proxy Statement/Prospectus:
1. ADP's Annual Report on Form 10-K for the fiscal year ended June 30, 1995
(File No. 1-5397);
2. ADP's definitive Annual Meeting Proxy Statement filed with the
Commission on September 21, 1995 (File No. 1-5397);
3. ADP's Current Reports on Form 8-K filed with the Commission on September
1, 1995 and November 6, 1995 and ADP's Current Reports on Form 8-K/A filed with
the Commission on November 13, 1995 and November 22, 1995 (File No. 1-5397);
4. ADP's Quarterly Report on Form 10-Q for the quarter ended September 30,
1995 (File No. 1-5397);
5. The description of ADP Common Stock contained in ADP's Registration
Statement on Form 8-A under the Exchange Act (File No. 1-5397) filed with the
Commission on January 21, 1992, including all amendments and reports filed for
the purpose of updating such description; and
6. Sandy's Annual Report on Form 10-K for the fiscal year ended August 31,
1995 (File No. 1-8996).
All documents subsequently filed by ADP or Sandy pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the
offering of the ADP Common Stock, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing such documents.
Any statement contained herein or in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Proxy Statement/Prospectus, except as
so modified or superseded.
This Proxy Statement/Prospectus is accompanied by a copy of Sandy's Annual
Report on Form 10-K for the fiscal year ended August 31, 1995.
3
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
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<S> <C>
SUMMARY............................................................................... 4
BUSINESS OF ADP.................................................................. 4
BUSINESS OF SANDY................................................................ 4
SANDY SPECIAL MEETING............................................................ 5
Time, Place and Date........................................................ 5
Purpose of the Meeting...................................................... 5
Votes Required; Record Date................................................. 5
CHANGE OF VOTE; CALCULATION OF THE EXCHANGE RATIO................................ 5
THE MERGER....................................................................... 6
Merger Consideration........................................................ 6
Exchange of Certificates.................................................... 6
Conditions to the Merger; Termination; Fees and Expenses.................... 7
Listing..................................................................... 7
Dividends................................................................... 7
INTERESTS OF CERTAIN PERSONS IN THE MERGER....................................... 7
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................................... 8
COMPARATIVE RIGHTS OF STOCKHOLDERS............................................... 8
SANDY SPECIAL MEETING................................................................. 9
Purpose of The Sandy Special Meeting............................................. 9
Record Date; Voting Rights; Proxies.............................................. 9
Solicitation of Proxies.......................................................... 10
Quorum........................................................................... 10
Required Vote.................................................................... 10
THE MERGER............................................................................ 11
General ......................................................................... 11
Effective Time................................................................... 12
Conversion Of Shares, Procedures For Exchange Of Certificates.................... 12
Background of The Merger......................................................... 13
Recommendation of the Board of Directors of Sandy; Reasons for the Merger........ 15
Opinion of Sandy's Financial Advisor............................................. 15
Certain Considerations........................................................... 18
Interests of Certain Persons in the Merger....................................... 18
Certain Federal Income Tax Consequences.......................................... 19
Anticipated Accounting Treatment................................................. 20
Antitrust Matters................................................................ 20
Federal Securities Law Consequences.............................................. 20
Stock Exchange Listing........................................................... 21
Dividends ....................................................................... 21
Appraisal Rights................................................................. 21
Fees and Expenses................................................................ 21
THE MERGER AGREEMENT.................................................................. 22
Terms of the Merger.............................................................. 22
Exchange of Certificates......................................................... 23
Representations and Warranties................................................... 24
Conduct of Business Pending the Merger........................................... 25
</TABLE>
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<TABLE>
<CAPTION>
PAGE
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<S> <C>
Additional Agreements............................................................ 27
Conditions to the Merger......................................................... 27
Termination...................................................................... 29
Amendment and Waiver............................................................. 30
Indemnification and Insurance.................................................... 30
SELECTED FINANCIAL DATA............................................................... 31
Sandy............................................................................ 31
ADP.............................................................................. 32
MARKET PRICE PER SHARE DATA........................................................... 33
Sandy............................................................................ 33
ADP.............................................................................. 33
COMPARATIVE PER SHARE PRICES.......................................................... 34
Sandy............................................................................ 34
ADP.............................................................................. 34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................ 35
COMPARISON OF STOCKHOLDER RIGHTS...................................................... 36
Special Meeting of Shareholders.................................................. 36
Inspection Rights................................................................ 36
Action by Consent of Shareholders................................................ 36
Cumulative Voting................................................................ 36
Dividends and Repurchase of Stock................................................ 36
Classification of The Board of Directors......................................... 37
Removal of Directors............................................................. 37
Vacancies on the Board of Directors.............................................. 37
Exculpation of Directors......................................................... 37
Indemnification of Directors, Officers and Others................................ 37
Interested Director Transaction.................................................. 38
Sale, Lease or Exchange of Assets and Mergers.................................... 38
Amendments to Charter............................................................ 38
Amendments to By-laws............................................................ 38
Appraisal Rights................................................................. 38
"Anti-takeover" Statutes......................................................... 39
OTHER MATTERS......................................................................... 40
LEGAL MATTERS......................................................................... 40
EXPERTS............................................................................... 40
ANNEXES:
A. Agreement and Plan of Merger
B. Opinion of Sandy's Financial Advisor
C. Tax Opinion
</TABLE>
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SUMMARY
The following summary is qualified by the detailed information and/or
financial statements included elsewhere, attached to or incorporated by
reference in this Proxy Statement/Prospectus.
BUSINESS OF ADP
ADP is one of the largest independent computing services companies in the
United States offering a wide range of computing services to clients, both large
and small, in industry and finance. ADP's Employer Services offers a
comprehensive range of payroll, tax filing, human resource, direct deposit, cash
management, 40l(k) recordkeeping, timekeeping, and unemployment compensation
management services. These services are provided to over 300,000 clients engaged
in a wide variety of businesses. ADP's Brokerage Services offers a wide range of
services to the investment and brokerage community, including front-office
database, news, analytic and quotation services and back-office stock brokerage
and related financial computing services such as trade processing, cage
management, stock loan accounting, on-line inquiry and data collection,
portfolio reporting, order matching and on-line trading. Through Dealer
Services, ADP offers a service solution which involves selling computer
hardware, licensing computer software and providing software support and
hardware maintenance services to dealers and manufacturers in the automotive,
truck and farm equipment industries throughout the United States, Canada,
Mexico, Germany, France, the Netherlands, the United Kingdom and Taiwan.
Finally, ADP's Automotive Claims Services provides auto repair estimating and
parts availability services to insurance companies, claims adjusters, repair
shops and salvage yards involved in auto collision repair and valuation in the
United States and Canada. The services include automated collision damage repair
estimating for cars and trucks, vehicle valuation services for total losses, and
parts locating and pricing services to auto insurers and repairers to facilitate
the claims settlement and parts locating processes.
On October 27, 1995, ADP acquired control of the GSI Group (as defined
below) when it announced that, pursuant to an ongoing tender offer that was
commenced on October 16, 1995 for all of the outstanding shares of GSI
Participations SCA ("GPSCA") not held by GSI Associes S.A. ("GA"), and all of
the shares of GA, ADP had acquired control over 80% of the outstanding shares of
GPSCA. ADP expects to acquire control of approximately 100% of the outstanding
shares of GPSCA by January 15, 1996, the expiration date for the ongoing tender
offer. If ADP purchases all of the shares of GPSCA not held by GA and all of the
shares of GA, the total purchase price will be approximately FF 2.3 billion
(approximately US $460 million). The transaction may have a slightly dilutive
effect on ADP's earnings per share. Reference is made to the historical
financial statements of the GSI Group and the pro forma financial statements of
ADP and the GSI Group combined, which are incorporated by reference into this
Proxy Statement/Prospectus from ADP's Current Report on Form 8-K/A filed with
the Commission on November 22, 1995.
GPSCA, together with its subsidiaries (collectively, the "GSI Group"), is
the European leader in providing payroll and human resource information
services. The GSI Group also provides facilities management, banking, clearing
and other information services in Europe. The GSI Group's revenues are in excess
of FF 2.0 billion (US $400 million) and it has over 3,000 employees, with
operations in France, Germany, Italy, Spain, Switzerland and the United Kingdom.
BUSINESS OF SANDY
Sandy is a full-service performance improvement company that provides
training, consulting, communication, and marketing support products and services
for major corporations. Sandy was incorporated under the laws of the State of
Michigan in 1971 and provides many products and services to groups, divisions,
and departments within General Motors Corporation, Ford Motor Company, Nissan
Motor Corporation as well as other major corporations. Sandy's products and
services are designed to provide Sandy's clients with enhanced management and
employee performance and, thereby, competitive advantage. Sandy's clients
principally operate in the automotive industry. Other clients over the years
have included companies involved in communications, computer/electronics,
consumer non-durable products, health care, home appliance, hotel,
manufacturing, motorcycle, and retail industries. Sandy offers expertise in
management education, customer
4
<PAGE> 9
satisfaction initiatives, sales training, product training, technical training,
quality systems, process improvement, and marketing services, and utilizes its
expertise in these areas to deliver training programs and related services
through a wide range of media, such as video, audio and printed materials,
classroom instruction, computer-based instruction, conferences, meetings and
seminars.
SANDY SPECIAL MEETING
TIME, PLACE AND DATE
The Sandy Special Meeting will be held on Thursday, January 4, 1996 at
Sandy's corporate headquarters, located at 1500 West Big Beaver Road, Troy,
Michigan 48084 at 11:00 A.M., local time.
PURPOSE OF THE MEETING
At the Sandy Special Meeting, holders of Sandy Common Stock will consider
and vote upon a proposal to approve and adopt the Merger Agreement. In
connection with the Merger, each share of Sandy Common Stock will be converted
into the number of shares of ADP Common Stock determined as provided under "The
Merger -- General" in this Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS OF SANDY HAS UNANIMOUSLY APPROVED THE MERGER AND THE
MERGER AGREEMENT AND RECOMMENDS THAT SANDY SHAREHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. SEE "THE MERGER -- BACKGROUND OF THE MERGER,"
"-- RECOMMENDATION OF THE BOARD OF DIRECTORS OF SANDY; REASONS FOR THE MERGER"
AND "-- INTERESTS OF CERTAIN PERSONS IN THE MERGER."
VOTES REQUIRED; RECORD DATE
The Merger will require approval and adoption of the Merger Agreement by
the affirmative vote of the holders of a majority of the outstanding shares of
Sandy Common Stock. Holders of Sandy Common Stock are entitled to one vote per
share. Only holders of Sandy Common Stock at the close of business on November
27, 1995 (the "Sandy Record Date") will be entitled to notice of and to vote at
the Sandy Special Meeting. See "Sandy Special Meeting."
As of the Sandy Record Date, directors and executive officers of Sandy and
their affiliates were beneficial owners of approximately 33.5% of the
outstanding shares of Sandy Common Stock. William H. Sandy, the Chairman and
Chief Executive Officer of Sandy, acting in his individual capacity and as
trustee of certain trusts of which Mr. Sandy is a beneficiary, executed an
irrevocable proxy agreement dated August 22, 1995 (which irrevocable proxy
agreement has subsequently been amended) in favor of ADP. Pursuant to this
agreement, as amended, ADP will have an irrevocable proxy to vote 19.0%
(determined as of the Sandy Record Date) of the outstanding Sandy Common Stock
in favor of the Merger. See "The Merger -- Interests of Certain Persons in the
Merger" and "Security Ownership of Certain Beneficial Owners and Management."
CHANGE OF VOTE; CALCULATION OF THE EXCHANGE RATIO
Sandy shareholders who have delivered a proxy to Sandy may revoke the proxy
at any time prior to its exercise at the Sandy Special Meeting by giving written
notice to the Secretary of Sandy, by signing and returning a later dated proxy
or by voting in person at the Sandy Special Meeting. ACCORDINGLY, SHAREHOLDERS
OF SANDY WHO HAVE EXECUTED AND RETURNED PROXY CARDS TO SANDY IN ADVANCE OF THE
SANDY SPECIAL MEETING MAY CHANGE THEIR VOTE AT ANY TIME PRIOR TO OR AT THE SANDY
SPECIAL MEETING. THE "AVERAGE ADP COMMON STOCK PRICE" AND THE "EXCHANGE RATIO"
(AS SUCH TERMS ARE DEFINED BELOW) ARE EXPECTED TO BE CALCULATED AFTER THE CLOSE
OF BUSINESS ON DECEMBER 29, 1995.
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SANDY SHAREHOLDERS MAY CALL TOLL FREE 1-800-535-1225 FOR THE THEN CURRENT
TEN-DAY AVERAGE OF THE DAILY PER SHARE PRICES OF ADP COMMON STOCK AND THE
EXCHANGE RATIO THAT WOULD BE CALCULATED IF SUCH AVERAGE WERE THE AVERAGE ADP
COMMON STOCK PRICE AND FOR INFORMATION ON HOW TO CHANGE OR REVOKE A PROXY
PREVIOUSLY GIVEN. THE ACTUAL AVERAGE ADP COMMON STOCK PRICE AND EXCHANGE RATIO
ARE EXPECTED TO BE CALCULATED AFTER THE CLOSE OF BUSINESS ON DECEMBER 29, 1995
AND MAY BE OBTAINED BY CALLING THIS NUMBER AFTER THAT DATE.
THE MERGER
MERGER CONSIDERATION
As promptly as practicable after the satisfaction or waiver of the
conditions set forth in the Merger Agreement, the Merger will be consummated by
filing a Certificate of Merger with the Department of Commerce of the State of
Michigan in accordance with the Michigan Business Corporation Act ("MBCA") (the
time of such filing or such later time as is specified in the Certificate of
Merger being the "Effective Time"). At the Effective Time, each share of Sandy
Common Stock issued and outstanding immediately prior to the Effective Time
(excluding shares referred to in the last sentence of this paragraph) will be
converted into and exchangeable for shares of ADP Common Stock at the Exchange
Ratio (as defined below). Thus, each Sandy shareholder shall be entitled to
receive (in addition to cash in lieu of fractional shares) a number of shares of
ADP Common Stock equal to the product (rounded down to the nearest whole number)
of (i) the number of shares of Sandy Common Stock exchanged by such shareholder
and (ii) the Exchange Ratio. If the Average ADP Common Stock Price (as defined
below) is greater than or equal to $58.764 (or $29.382 after giving effect to
the ADP Stock Split) and less than or equal to $71.823 (or $35.911 after giving
effect to the ADP Stock Split), then the exchange ratio shall be (rounded to the
seventh decimal place) (i) $12.00 divided by (ii) the Average ADP Common Stock
Price (the "Exchange Ratio"). If the Average ADP Common Stock Price is less than
$58.764 (or $29.382 after giving effect to the ADP Stock Split), then the
Exchange Ratio shall be 0.2042054 (or 0.4084108 after giving effect to the ADP
Stock Split). If the Average ADP Common Stock Price is greater than $71.823 (or
$35.911 after giving effect to the ADP Stock Split), then the Exchange Ratio
shall be 0.1670771 (or 0.3341542 after giving effect to the ADP Stock Split).
The "Average ADP Common Stock Price" means the average of the daily closing
sales prices of ADP Common Stock as reported on the NYSE Composite Tape for the
10 consecutive full trading days ending on the Determination Date (as defined
below). The "Determination Date" means the third business day immediately prior
to the later of (i) January 4, 1996 (which is the date (as originally scheduled
in the enclosed Notice of Special Meeting of Shareholders, and without giving
effect to any adjournments or postponements) of the Sandy Special Meeting) and
(ii) the date on which the last regulatory approval required to consummate the
Merger has been obtained and all statutory or regulatory waiting periods in
respect thereof have expired or been terminated. Each share of Sandy Common
Stock held as treasury stock of Sandy immediately prior to the Effective Time
shall be canceled, retired and cease to exist, and no exchange or payment shall
be made in respect thereof.
EXCHANGE OF CERTIFICATES
ADP has appointed Chemical Mellon Shareholder Services to act as exchange
agent for the Merger (the "Exchange Agent"). As soon as practicable after the
Effective Time, ADP shall cause the Exchange Agent to mail appropriate and
customary transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing shares of Sandy Common Stock shall pass, only upon proper delivery
of such certificates to the Exchange Agent) to each holder of Sandy Common Stock
of record as of the Effective Time advising such holder of the effectiveness of
the Merger and the procedure for surrendering to the Exchange Agent outstanding
certificates formerly evidencing Sandy Common Stock in exchange for new
certificates for ADP Common Stock and cash in lieu of fractional shares. Upon
surrender to the Exchange Agent of a certificate formerly representing shares of
Sandy Common Stock, together with duly executed transmittal materials, ADP shall
promptly (i) issue or cause to be issued to the persons entitled thereto a
certificate representing the number of whole shares of ADP Common Stock that
such persons are entitled to receive in the Merger and (ii) distribute or cause
to be distributed to the persons entitled thereto
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cash in lieu of fractional shares (the ADP Common Stock and cash being
collectively the "Merger Consideration"). Upon surrender, each certificate
theretofore evidencing Sandy Common Stock shall be canceled.
At or promptly after the Effective Time, ADP shall deposit the Merger
Consideration with the Exchange Agent (the "Exchange Fund"). After the Effective
Time, ADP shall, on each payment or distribution date, tender to the Exchange
Agent as an addition to the Exchange Fund all dividends and other distributions
applicable to certificates held in the Exchange Fund.
SANDY SHAREHOLDERS SHOULD NOT FORWARD CERTIFICATES FOR SANDY COMMON STOCK
TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. SANDY
SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
CONDITIONS TO THE MERGER; TERMINATION; FEES AND EXPENSES
The obligations of ADP and Sandy to consummate the Merger are subject to
various conditions, including, but not limited to: (i) the effectiveness of the
Registration Statement; (ii) obtaining the requisite stockholder approval; (iii)
the receipt by ADP of evidence reasonably satisfactory to it that the Merger
qualifies for "pooling of interests" accounting treatment; (iv) the absence of
any judgment, decree, injunction, ruling or order of any court, governmental
department, commission, agency or instrumentality outstanding against ADP
Mergerco, ADP or Sandy which prohibits or materially restricts or delays the
consummation of the Merger; and (v) a legal opinion reasonably satisfactory to
Sandy and ADP to the effect that the Merger qualifies for federal income tax
purposes as a tax-free reorganization. In addition, ADP's obligation to
consummate the Merger is subject to the condition that the Sandy Adjusted Net
Worth at the Test Date (as such terms are defined in Section 5.1(q) of the
Merger Agreement) is no less than $10,101,187. See "The Merger
Agreement -- Conditions to the Merger." Neither ADP nor Sandy has any present
intention of waiving any conditions to the Merger set forth in the Merger
Agreement. If either ADP or Sandy elects to waive or revise any of the material
terms of or conditions to the Merger, Sandy will resolicit the proxies of its
shareholders.
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the shareholders of Sandy: (i) by mutual action of the Board
of Directors of each of ADP Mergerco, ADP and Sandy, (ii) by the Board of
Directors of ADP Mergerco, ADP or Sandy if the Merger does not take place on or
before January 31, 1996 or (iii) by the Board of Directors of Sandy in certain
circumstances in the event of a proposed Acquisition Transaction (as defined
below under "The Merger Agreement -- Termination"). See "The Merger
Agreement -- Termination."
LISTING
The shares of ADP Common Stock to be issued in the Merger are authorized
for listing and trading on the NYSE.
DIVIDENDS
ADP expects to continue to declare its regular quarterly dividends. Under
the terms of the Merger Agreement, Sandy is not permitted to declare, set aside
or pay any dividend or other distribution in respect of its capital stock during
the period from the date of the Merger Agreement until the earlier of the
termination of the Merger Agreement and the Effective Time.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Sandy entered into an Employment and Consulting Agreement with William H.
Sandy effective November 4, 1985 (the "Employment and Consulting Agreement").
Under the terms of the Employment and Consulting Agreement, upon completion of
his active employment with Sandy, William H. Sandy is to serve as a consultant
to Sandy for a period of five years. The Employment and Consulting Agreement was
amended in connection with the execution of the Merger Agreement on August 22,
1995 to provide that William H. Sandy's active employment period will end on the
date of the closing of the Merger (the "Closing Date"), and, as a result, the
five-year consulting period will begin on the Closing Date. The amended
Employment and
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Consulting Agreement also requires Sandy to make a payment of $1,475,000 to
William H. Sandy on the Closing Date, in lieu of all future consulting payments,
bonuses (except the fiscal 1995 bonus that has been paid separately to Mr.
Sandy) or benefits to become due to William H. Sandy or to his wife, Marjorie M.
Sandy, under the amended Employment and Consulting Agreement.
In connection with the Merger, the lease agreement, dated February 1, 1994,
between Sandy and 1500 Limited Partnership pertaining to Sandy's Troy, Michigan
headquarters (the "Lease") has been amended effective as of the Closing Date, in
the following manner: (i) an additional improvements allowance of $200,000 will
be made available to the corporation surviving the Merger (the "Surviving
Corporation") immediately after the Closing Date and until December 31, 1996;
(ii) the availability of the last $100,000 of the improvements allowance under
the Lease will be accelerated from February 1, 2000 to the Closing Date so that
the $100,000 allowance will be available immediately after the Closing Date and
until December 31, 1996; and (iii) the Surviving Corporation will be permitted
to self-insure under Sections 11.2, 11.3, 11.4 and 11.5 of the Lease in
accordance with ADP's standard policy. In connection with the effectiveness of
such amendment to the Lease, ADP will guarantee the Surviving Corporation's
obligations under the Lease after the Closing Date. 1500 Limited Partnership is
a Michigan limited partnership owned by, among others, certain directors of
Sandy or their affiliates, including William H. Sandy, the George J. Forrest
Trust, Alan V. Kidd, Alan M. Sandy and Lewis G. Sandy. Sandy's option (which
option would have been exercisable through September 1, 1995) under Section 36
of the Lease to reduce the size of the leased premises by up to approximately
7.6% has been eliminated pursuant to the terms of the Lease, as amended.
William H. Sandy, the Chairman and Chief Executive Officer of Sandy, acting
in his individual capacity and as trustee of certain trusts of which Mr. Sandy
is a beneficiary, executed an irrevocable proxy agreement (which irrevocable
proxy agreement has subsequently been amended) in favor of ADP. Pursuant to this
agreement, as amended, ADP will have an irrevocable proxy to vote 19.0%
(determined as of the Sandy Record Date) of the outstanding Sandy Common Stock
in favor of the Merger.
In addition, there are certain arrangements with respect to stock options
and other rights to acquire Sandy Common Stock held by Sandy's directors and
officers, indemnification and insurance arrangements and other matters which ADP
will assume or has agreed to provide after the Merger. See "The
Merger -- Interests of Certain Persons in the Merger," "The Merger
Agreement -- Indemnification and Insurance" and "Security Ownership of Certain
Beneficial Owners and Management."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Counsel to Sandy, Honigman Miller Schwartz and Cohn, has provided a written
opinion to Sandy that (i) the Merger will qualify as a reorganization under
Section 368(a)(1)(A) and Section 368(a)(2)(E) of the Internal Revenue Code of
1986, as amended (the "Code"), (ii) for federal income tax purposes, no gain or
loss will be recognized by any of ADP, ADP Mergerco., or Sandy as a result of
consummation of the Merger and (iii) except for cash received in lieu of
fractional shares, no gain or loss will be recognized for federal income tax
purposes by a holder of Sandy Common Stock upon the exchange of such stock for
ADP Common Stock pursuant to the Merger. Such opinion is based on various
representations, qualifications and assumptions may not apply to holders of
Sandy Common Stock who are subject to special circumstances, and does not
address any foreign, state or local tax consequences of the Merger. Accordingly,
holders of Sandy Common Stock are urged to consult their own tax advisors
concerning the federal, foreign, state or local tax consequences of the Merger
to them. See "The Merger -- Certain Federal Income Tax Consequences."
COMPARATIVE RIGHTS OF STOCKHOLDERS
The rights of shareholders of Sandy currently are governed by Michigan law,
Sandy's Restated Articles of Incorporation and Sandy's By-laws. Upon
consummation of the Merger, shareholders of Sandy will become stockholders of
ADP, which is a Delaware corporation, and their rights as stockholders of ADP
will be governed by the General Corporation Law of the State of Delaware, ADP's
Amended and Restated Certificate of Incorporation and ADP's By-laws. For a
discussion of various differences between the rights of shareholders of Sandy
and the rights of stockholders of ADP, see "Comparison of Stockholder Rights."
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SANDY SPECIAL MEETING
PURPOSE OF THE SANDY SPECIAL MEETING
At the Special Meeting of Shareholders of Sandy Corporation, a Michigan
corporation ("Sandy"), to be held on Thursday, January 4, 1996 at Sandy's
corporate headquarters, located at 1500 West Big Beaver Road, Troy, Michigan
48084, commencing at 11:00 A.M., local time, and at any and all adjournments or
postponements thereof (the "Sandy Special Meeting"), holders of common stock,
par value $.01 per share, of Sandy ("Sandy Common Stock") will consider and vote
upon proposals to approve and adopt the Agreement and Plan of Merger, dated as
of August 22, 1995 (together with the Plan of Merger in the form attached
thereto, the "Merger Agreement"), by and among Automatic Data Processing Inc., a
Delaware corporation ("ADP"), ADP Mergerco, Inc., a Michigan corporation and a
wholly owned subsidiary of ADP ("ADP Mergerco"), and Sandy and such other
matters as may properly be brought before the Sandy Special Meeting. If the
proposed merger (the "Merger") of ADP Mergerco with and into Sandy is approved
and consummated in accordance with the Merger Agreement, at the Effective Time
(as defined below under "The Merger -- Effective Time"), Sandy will become a
wholly owned subsidiary of ADP, and each outstanding share of Sandy Common Stock
will be converted into and exchangeable for shares of common stock, par value
$.10 per share, of ADP ("ADP Common Stock") at the Exchange Ratio (as defined
below under "The Merger -- General"). The Exchange Ratio is expected to be
calculated after the close of business on December 29, 1995.
THE BOARD OF DIRECTORS OF SANDY HAS UNANIMOUSLY APPROVED THE MERGER AND THE
MERGER AGREEMENT AND RECOMMENDS THAT SANDY SHAREHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. SEE "THE MERGER -- BACKGROUND OF THE MERGER,"
"-- RECOMMENDATION OF THE BOARD OF DIRECTORS OF SANDY; REASONS FOR THE MERGER"
AND "-- INTERESTS OF CERTAIN PERSONS IN THE MERGER."
RECORD DATE; VOTING RIGHTS; PROXIES
The Sandy Board of Directors (the "Sandy Board") has fixed the close of
business on November 27, 1995 as the record date (the "Sandy Record Date") for
determining holders entitled to notice of and to vote at the Sandy Special
Meeting.
As of the Sandy Record Date, there were 2,326,783 shares of Sandy Common
Stock issued and outstanding, each of which entitles the holder thereof to one
vote. All shares of Sandy Common Stock represented by properly executed proxies
delivered to Sandy will, unless such proxies have been previously revoked, be
voted in accordance with the instructions indicated in such proxies. IF NO
INSTRUCTIONS ARE INDICATED, SUCH SHARES OF SANDY COMMON STOCK WILL BE VOTED IN
FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. Sandy does not know of
any matters other than as described in the accompanying Notice of Special
Meeting that are to come before the Sandy Special Meeting. If any other matter
or matters are properly presented for action at the Sandy Special Meeting, the
persons named in the enclosed form of proxy and acting thereunder will have the
discretion to vote on such matters in accordance with their best judgment,
unless such authorization is withheld. A shareholder who has given a proxy to
Sandy may revoke it at any time prior to its exercise by giving written notice
thereof to the Secretary of Sandy, by signing and returning a later dated proxy
or by voting in person at the Sandy Special Meeting. Accordingly, Sandy
shareholders who have executed and returned to Sandy proxy cards in advance of
the Sandy Special Meeting may change their vote at any time prior to or at the
Sandy Special Meeting; however, mere attendance at the Sandy Special Meeting
will not in and of itself have the effect of revoking any proxy.
Votes cast by proxy or in person at the Sandy Special Meeting will
determine whether or not a quorum is present at the Sandy Special Meeting and
will be tabulated by election inspectors appointed for the Sandy Special
Meeting. The election inspectors will treat abstentions as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval
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of any matter submitted to the shareholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
SOLICITATION OF PROXIES
Sandy will bear its own cost of solicitation of proxies. Brokerage houses,
fiduciaries, nominees and others will be reimbursed for their out-of-pocket
expenses in forwarding proxy materials to beneficial owners of stock held in
their names.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of Sandy Common Stock is necessary
to constitute a quorum at the Sandy Special Meeting.
REQUIRED VOTE
The approval of the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of Sandy Common Stock.
Abstentions and broker non-votes will have the effect of votes against approval
of the Merger Agreement. As of the Sandy Record Date, directors and executive
officers of Sandy and their affiliates were beneficial owners of approximately
33.5% of the outstanding shares of Sandy Common Stock. William H. Sandy, the
Chairman and Chief Executive Officer of Sandy, acting in his individual capacity
and as trustee of certain trusts of which Mr. Sandy is a beneficiary, executed
an irrevocable proxy agreement dated August 22, 1995 (which irrevocable proxy
agreement has subsequently been amended) in favor of ADP. Pursuant to this
agreement, as amended, ADP will have an irrevocable proxy to vote 19.0%
(determined as of the Sandy Record Date) of the outstanding Sandy Common Stock
in favor of the Merger. See "The Merger -- Interests of Certain Persons in the
Merger."
THE MATTERS TO BE CONSIDERED AT THE SANDY SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE SHAREHOLDERS OF SANDY. ACCORDINGLY, SHAREHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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THE MERGER
This section of this Proxy Statement/Prospectus, as well as the next
section of this Proxy Statement/ Prospectus entitled "The Merger Agreement,"
describe certain aspects of the proposed Merger. To the extent that it relates
to the Merger Agreement or other agreements described in this Proxy
Statement/Prospectus, the following description does not purport to be complete
and is qualified in its entirety by reference to the Merger Agreement which is
attached as Annex A to this Proxy Statement/Prospectus and is incorporated
herein by reference and such other agreements that are filed as exhibits to the
Registration Statement on Form S-4 (the "Registration Statement") filed by ADP
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. All shareholders are urged to read the Merger
Agreement in its entirety. On November 14, 1995, ADP announced a two-for-one
common stock split (the "ADP Stock Split") to be distributed on January 1, 1996
to shareholders of record on December 15, 1995. Unless otherwise indicated, all
references to per share earnings and dividends and all other references with
respect to ADP Common Stock in this Proxy Statement/Prospectus do not reflect
the increased number of shares of ADP Common Stock that would be outstanding
after giving effect to the ADP Stock Split.
GENERAL
The Merger Agreement provides that the Merger will be consummated if the
approvals of the Sandy shareholders required therefor are obtained and all other
conditions to the Merger are satisfied or waived. At the Effective Time, ADP
Mergerco will be merged with and into Sandy, and Sandy will become a wholly
owned subsidiary of ADP. As a result, at the Effective Time, each share of Sandy
Common Stock issued and outstanding immediately prior to the Effective Time
(excluding shares referred to in the last sentence of this paragraph) will be
converted into and exchangeable for shares of ADP Common Stock at the Exchange
Ratio (as defined below). Thus, each Sandy shareholder shall be entitled to
receive (in addition to cash in lieu of fractional shares) a number of shares of
ADP Common Stock equal to the product (rounded down to the nearest whole number)
of (i) the number of shares of Sandy Common Stock exchanged by such shareholder
and (ii) the Exchange Ratio. If the Average ADP Common Stock Price (as defined
below) is greater than or equal to $58.764 (or $29.382 after giving effect to
the ADP Stock Split) and less than or equal to $71.823 (or $35.911 after giving
effect to the ADP Stock Split), then the Exchange Ratio shall be (rounded to the
seventh decimal place) (i) $12.00 divided by (ii) the Average ADP Common Stock
Price. If the Average ADP Common Stock Price is less than $58.764 (or $29.382
after giving effect to the ADP Stock Split), then the Exchange Ratio shall be
0.2042054 (or 0.4084108 after giving effect to the ADP Stock Split). If the
Average ADP Common Stock Price is greater than $71.823 (or $35.911 after giving
effect to the ADP Stock Split), then the Exchange Ratio shall be 0.1670771 (or
0.3341542 after giving effect to the ADP Stock Split). The "Average ADP Common
Stock Price" means the average of the daily closing sales prices of ADP Common
Stock as reported on the NYSE Composite Tape (as reported in The Wall Street
Journal or, if not reported thereby, as reported by another authoritative source
as mutually agreed by ADP and Sandy) for the 10 consecutive full trading days
ending on the Determination Date (as defined below). The "Determination Date"
means the third business day immediately prior to the later of (i) January 4,
1996 (which is the date (as originally scheduled in the enclosed Notice of
Special Meeting of Shareholders, and without giving effect to any adjournments
or postponements) of the Sandy Special Meeting) and (ii) the date on which the
last regulatory approval required to consummate the Merger has been obtained and
all statutory or regulatory waiting periods in respect thereof have expired or
been terminated. Each share of Sandy Common Stock held as treasury stock of
Sandy immediately prior to the Effective Time shall be cancelled, retired and
cease to exist, and no exchange or payment shall be made in respect thereof.
No fractional shares of ADP Common Stock will be issued in the Merger. In
lieu of fractional shares, each holder of Sandy Common Stock who otherwise would
be entitled to receive a fractional share of ADP Common Stock will instead
receive cash (without interest) determined by multiplying the Average ADP Common
Stock Price by the fractional share interest to which such holder would
otherwise be entitled.
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<PAGE> 16
EFFECTIVE TIME
Consummation of the Merger will occur upon the filing of a Certificate of
Merger with the Department of Commerce of the State of Michigan or at such later
time as is specified on such certificate (the "Effective Time"). The filing of
the Certificate of Merger will occur as soon as practicable after the
satisfaction or waiver of all conditions to the closing of the transactions
contemplated by the Merger Agreement. The Merger Agreement may be terminated by
any party thereto if the Merger shall not have been consummated on or before
January 31, 1996. See "The Merger Agreement -- Conditions to the Merger" and
"-- Termination."
CONVERSION OF SHARES, PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion, at the Exchange Ratio, of Sandy Common Stock into the right
to receive ADP Common Stock will occur automatically at the Effective Time. As
soon as practicable after the Effective Time, ADP shall cause the Exchange Agent
to mail appropriate and customary transmittal materials (which shall specify
that delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of Sandy Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent) to each holder of
Sandy Common Stock of record as of the Effective Time advising such holder of
the effectiveness of the Merger and the procedure for surrendering to the
Exchange Agent outstanding certificates formerly evidencing Sandy Common Stock
in exchange for new certificates for ADP Common Stock and cash in lieu of
fractional shares. Upon surrender to the Exchange Agent of a certificate
formerly representing shares of Sandy Common Stock, together with duly executed
transmittal materials, ADP shall promptly (i) issue or cause to be issued to the
persons entitled thereto a certificate representing the number of whole shares
of ADP Common Stock that such persons are entitled to receive in the Merger and
(ii) distribute or cause to be distributed to the persons entitled thereto cash
in lieu of fractional shares (the ADP Common Stock and cash being collectively
the "Merger Consideration"). Upon surrender, each certificate theretofore
evidencing Sandy Common Stock shall be canceled.
At or promptly after the Effective Time, ADP shall deposit the Merger
Consideration with the exchange agent (the "Exchange Agent") for the Merger (the
"Exchange Fund"). After the Effective Time, ADP shall, on each payment or
distribution date, tender to the Exchange Agent as an addition to the Exchange
Fund all dividends and other distributions applicable to certificates held in
the Exchange Fund.
If any issuance of shares of ADP Common Stock in exchange for shares of
Sandy Common Stock is to be made to a person other than the Sandy shareholder in
whose name the certificate is registered at the Effective Time, it will be a
condition of such exchange that the certificate so surrendered be properly
endorsed or otherwise in proper form for transfer and that the Sandy shareholder
requesting such issuance either pay any transfer or other tax required or
establish to the satisfaction of ADP that such tax has been paid or is not
payable.
After the Effective Time, there will be no further transfers of Sandy
Common Stock on the stock transfer books of Sandy. If a certificate representing
Sandy Common Stock is presented for transfer, it will be cancelled and a
certificate representing the appropriate number of full shares of ADP Common
Stock and cash in lieu of fractional shares and any dividends and distributions
will be issued in exchange therefor.
At and after the Effective Time and until surrendered, shares of Sandy
Common Stock will be deemed for all corporate purposes, other than the payment
of dividends and distributions and voting, to evidence ownership of the number
of full shares of ADP Common Stock into which such shares of Sandy Common Stock
were converted at the Effective Time. No dividends or other distributions, if
any, payable to holders of ADP Common Stock will be paid to the holders of any
certificates for shares of Sandy Common Stock until such certificates are
surrendered. Upon surrender of such certificates, all such declared dividends
and distributions which shall have become payable with respect to such whole
shares of ADP Common Stock in respect of a record date after the Effective Time
will be paid to the holder of record of the whole shares of ADP Common Stock
represented by the certificates issued in exchange therefor, without interest.
See "The Merger Agreement -- Exchange of Certificates."
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<PAGE> 17
SANDY SHAREHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. SANDY SHAREHOLDERS SHOULD
NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
BACKGROUND OF THE MERGER
From time to time over the past several years, the Sandy Board has reviewed
Sandy's strategic alternatives for enhancing profitability and maximizing
shareholder value, including the possible expansion of its existing and related
businesses by acquisition, affiliation or sale to an acquiror. In March 1994,
the Sandy Board rejected two unsolicited proposals from Westcott Communications
("Westcott"). These offers, valued at $8 and $12 per share of Sandy Common
Stock, proposed to exchange Westcott common stock for all of the outstanding
Sandy Common Stock. Following Sandy's rejection of the second Westcott proposal,
Ira J. Jaffe, personal legal counsel for William H. Sandy, had discussions with
Gregory Earles, an executive of Westcott, about whether a stock-for-stock
acquisition of all of the outstanding Sandy Common Stock by Westcott could be
negotiated which would be acceptable to Mr. Sandy. Those discussions did not
lead to any agreement or proposal.
In early January 1995, Mr. Jaffe was contacted by Mr. Earles for the
purpose of inquiring whether a cash offer for all of the outstanding Sandy
Common Stock would be considered by Mr. Sandy. Mr. Jaffe advised Mr. Earles
that, in his opinion, it could be productive for Westcott to present a cash
offer.
In late January 1995, Mr. Earles again contacted Mr. Jaffe and on February
3, 1995, Jack Smith, President of Westcott, and other representatives of
Westcott met with Mr. Jaffe in Detroit, Michigan to discuss the possible format
for a cash acquisition of all the outstanding Sandy Common Stock that might be
acceptable to Mr. Sandy personally. On March 19, 1995, Messrs. Jaffe and Sandy
met with Mr. Smith, Carl Westcott, Chairman of the Board and Chief Executive
Officer of Westcott, and legal counsel for Westcott, in Atlanta, Georgia. At
that meeting, Westcott outlined the general terms of a proposed offer which they
intended to make to the Sandy Board and a proposed employment and consulting
agreement for Mr. Sandy. On March 25, 1995, a cash acquisition proposal of $10
per share was received from Westcott.
Raymond A. Ketchledge, President and Chief Operating Officer of Sandy, met
with Messrs. Westcott and Smith in Dallas, Texas on March 26, 1995 to discuss
Westcott's plans for the operation and management of Sandy if a merger took
place. On March 30, 1995, the Sandy Board met in suburban Detroit. During the
March 30th meeting, a special committee of the Sandy Board (the "Special
Committee") was established by the Sandy Board to review the Westcott proposal
and the Special Committee held its organizational meeting. The Special Committee
consisted of outside directors John T. Sheehy, George J. Forrest, Jay W. Lorsch
and Richard J. Burstein, being all of the directors who were not members of, or
related to members of, Sandy's management. The Special Committee elected Mr.
Sheehy as its Chairman.
On April 3, 1995, members of the Special Committee met with Messrs. Smith
and Westcott in Boston, Massachusetts to discuss the March 25th Westcott
proposal. On April 4, 1995, Mr. Sheehy met with a representative of the
investment banking firm of Bear, Stearns & Co. Inc. ("Bear Stearns") regarding
the engagement of Bear Stearns as financial advisors in connection with the
proposed merger with Westcott.
On April 5, 1995, Mr. Ketchledge advised Mr. Sheehy that some members of
Sandy's management were considering whether to make an offer for Sandy. Later on
April 5, 1995, in light of the possible management offer, Mr. Burstein (a member
of Honigman Miller Schwartz and Cohn, Sandy's legal counsel) resigned from the
Special Committee, and Honigman Miller Schwartz and Cohn advised the Special
Committee that it should engage independent counsel. The Special Committee then
engaged Warner, Norcross and Judd LLP to act as independent counsel to represent
the Special Committee.
On April 10, 1995, Messrs. Westcott and Smith held individual and group
meetings with Sandy senior executives in Birmingham, Michigan and over the next
few weeks Sandy and its advisors reviewed the Westcott proposal.
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In late April 1995, Peter Leger, President of the Dealer Services Group of
ADP, contacted Mr. Sandy regarding ADP's possible interest in acquiring Sandy.
At about the same time, Mr. Sheehy was contacted by Harry Durity, ADP's
Corporate Vice President of Worldwide Business Development. Mr. Durity indicated
ADP's interest in acquiring Sandy. A preliminary timetable for conducting
initial due diligence was discussed. ADP did not make any offer for Sandy Common
Stock during this time.
On May 2, 1995, Sandy management informed the Special Committee that they
would not present a management buyout proposal due to management's belief that
it would not be able to obtain financing on a timely basis.
On May 9, 1995, the Sandy Board met to discuss the merger activities. Mr.
Sandy informed the Sandy Board that he decided that he would be willing to
relinquish an employment and consulting agreement proposed by Westcott if to do
so would result in an improved Westcott offer. At this meeting, the Sandy Board
was advised by a representative of Bear Stearns that, based on such decision of
Mr. Sandy and a review of comparable companies, the Westcott offer of $10 per
share was inadequate. The Special Committee recommended that Sandy not accept
the Westcott offer and the Sandy Board authorized Messrs. Sheehy and Burstein to
enter into negotiations with Westcott to obtain an acceptable offer. Messrs.
Sheehy and Burstein informed Messrs. Westcott and Smith on May 13, 1995 that the
$10 offer was inadequate. Messrs. Sheehy and Burstein asked Mr. Westcott to
raise its bid. On May 14, 1995, Westcott informed Messrs. Sheehy and Burstein
that it would increase its bid to $11 per share in cash but would go no higher.
Westcott made no subsequent offer higher than the May 14, 1995 offer of $11 per
share in cash. Sandy deferred formal evaluation of the Westcott $11 per share
offer until negotiations with ADP were concluded.
On May 15, 1995, Mr. Sheehy met with Mr. Durity who confirmed ADP's
interest in acquiring Sandy. On May 18, 1995, Mr. Ketchledge met with Mr. Leger,
Mr. Durity and John Barfitt, Senior Vice President of ADP's Dealer Services
Group, in Chicago for an initial meeting with ADP executives. The meeting
centered around potential synergies and opportunities for the companies.
On May 23, 1995, Mr. Ketchledge and the senior executive group of Sandy met
with ADP executives, including Messrs. Leger, Durity and Barfitt, to discuss
Sandy and ADP operations and potential synergies. During the week of May 22,
1995, Westcott was informed by Mr. Sheehy that another party was involved in
discussions with Sandy regarding a possible merger. On May 31, 1995, Mr. Durity
visited with Sandy senior management in Troy, Michigan as part of the ADP due
diligence effort.
On June 1, 1995, Sandy received a letter from ADP proposing terms and
conditions for the acquisition of Sandy in exchange for ADP Common Stock valued
at $12 per share. On June 2, 1995, a meeting of the Sandy Board was held to
discuss the Westcott and ADP proposals. On June 5, 1995, the Sandy Board met to
discuss further the Westcott and ADP proposals and determined not to accept the
Westcott $11 merger proposal in light of ADP's $12 proposal. On June 6, 1995,
after unsuccessful negotiations with Westcott in an attempt to improve its
offer, ADP and Sandy executed a letter of intent relating to the proposed merger
with ADP at an offer price of $12 per share in ADP Common Stock. The $12 per
share price was not established by Bear Stearns; rather, it was the product of
negotiations between Sandy and ADP.
Throughout June 1995, representatives of ADP continued its due diligence
efforts and, at the same time, negotiations took place with Westcott toward a
possible agreement. On June 21, 1995, Mr. Sheehy informed Mr. Smith that Sandy
had determined not to enter into an agreement with Westcott at the $11 per share
price.
On June 23, 1995, Mr. Durity indicated to Mr. Sheehy that ADP intended to
proceed with the pursuit of a merger with Sandy. On June 30, 1995, ADP confirmed
in writing that it intended to pursue a merger with Sandy. On July 10, 1995,
representatives of Sandy provided ADP with a draft of a proposed merger
agreement. On July 12 and 13, 1995, Mr. Durity met with Mr. Ketchledge and
described proposed employment arrangements for him and other senior Sandy
executives in the event of a merger. Over the ensuing weeks, negotiations
regarding a merger agreement took place.
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On August 16, 1995, the Sandy Board met, received a confirmation from Bear
Stearns as to the fairness of the transaction and unanimously approved the ADP
proposal. On August 22, 1995, the Merger Agreement was executed.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF SANDY; REASONS FOR THE MERGER
The Board of Directors of Sandy has approved the Merger Agreement, has
determined unanimously that the Merger is advisable and fair and in the best
interests of Sandy and its shareholders and recommends that holders of shares of
Sandy Common Stock vote FOR approval and adoption of the Merger Agreement.
In reaching its decision to approve the Merger Agreement and to recommend
that Sandy's shareholders vote for approval and adoption of the Merger
Agreement, the Sandy Board considered, among other things, the following
factors: (i) its knowledge of the business, operations, properties, assets,
financial condition and operating results of Sandy and ADP; (ii) judgments as to
Sandy's future prospects; (iii) presentations by Sandy's management with respect
to Sandy and ADP; (iv) the recommendation of the Special Committee; (v) the
opinion of Bear Stearns as to the fairness of the transaction to the
shareholders of Sandy (see "-- Opinion of Sandy's Financial Advisor" below);
(vi) the terms of the Merger Agreement, which were the product of extensive
arm's length negotiations (see "The Merger Agreement"); (vii) the historical
trading prices, dividend rates and trading activity for Sandy Common Stock and
ADP Common Stock; (viii) the compatibility of the respective business
philosophies of ADP and Sandy; and (ix) the opportunity for Sandy shareholders
to continue to participate, as holders of ADP Common Stock, in the strategic
business performance improvement industry, and to do so by means of a
transaction which is designed to be tax-free to Sandy's shareholders. The Sandy
Board, with the assistance of Sandy's financial advisor, also considered recent
and current market prices of ADP Common Stock, the manner in which the Exchange
Ratio would be calculated and the relationship of the upper and lower limits
thereof to such market prices, and published research reports dealing with the
merits of investing in ADP Common Stock.
The foregoing discussions of the information and factors considered by the
Sandy Board is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the Merger, the Sandy Board did
not find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination. In
addition, individual members of the Sandy Board may have given different weights
to different factors. For a discussion of the interests of certain members of
Sandy's management and of the Sandy Board in the Merger, see "-- Interests of
Certain Persons in the Merger" below.
OPINION OF SANDY'S FINANCIAL ADVISOR
The Special Committee retained Bear Stearns on April 10, 1995 to render an
opinion to the Sandy Board as to the fairness, from a financial point of view,
of a proposed transaction with Westcott to the public shareholders of Sandy. On
April 26, 1995, Bear Stearns advised the Special Committee that, based on its
review of comparable companies and based on the structure of the proposed
transaction, the consideration of $10 per share offered by Westcott was
inadequate. Bear Stearns did not advise the Special Committee as to the price
which it would then have considered adequate.
On June 6, 1995, the engagement agreement was amended to include
consideration of the Merger. On August 16, 1995, Bear Stearns rendered its oral
opinion to the Board of Directors of Sandy that the ADP offer was superior to
Westcott's offer of $11 per share made on May 14, 1995, and that the Merger was
fair, from a financial point of view, to the public shareholders of Sandy. Bear
Stearns subsequently issued its written opinion to the Board of Directors of
Sandy which has been updated to the date of this Proxy Statement/ Prospectus
(the "Bear Stearns Opinion").
THE FULL TEXT OF THE BEAR STEARNS OPINION IS ATTACHED AS ANNEX B TO THIS
PROXY STATEMENT/PROSPECTUS. HOLDERS OF SANDY COMMON STOCK ARE URGED TO, AND
SHOULD, READ THE BEAR STEARNS OPINION CAREFULLY IN ITS ENTIRETY IN CONJUNCTION
WITH THIS PROXY STATEMENT/PROSPECTUS FOR ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITS OF THE REVIEW BY BEAR STEARNS.
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The Bear Stearns Opinion addresses only the fairness of the Merger, from a
financial point of view, to the shareholders of Sandy and does not constitute a
recommendation to any shareholder of Sandy as to how such shareholder should
vote with respect to the approval of the Merger. The summary of the Bear Stearns
Opinion set forth in this Proxy Statement/Prospectus is qualified in its
entirety by reference to the full text of such opinion.
The Special Committee engaged Bear Stearns as its financial advisor because
Bear Stearns is a nationally recognized investment banking firm and because of
its record and experience in rendering fairness opinions. Bear Stearns, as part
of its investment banking business, is regularly engaged in the valuation of
businesses and securities, mergers and acquisitions, negotiated underwritings,
secondary distributions of securities and private placements. In requesting Bear
Stearns' fairness opinion, the Special Committee did not give any special
instructions to Bear Stearns or impose any limitations upon the scope of the
investigations that Bear Stearns deemed necessary to enable it to deliver its
opinion. During the past five years, neither Bear Stearns nor any affiliate of
Bear Stearns has performed any investment banking or other financial services
for or had any other material relationship with Sandy except those described
herein.
In connection with rendering its written opinion, Bear Stearns, among other
things: (i) reviewed this Proxy Statement/Prospectus in substantially final
form; (ii) reviewed Sandy's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the fiscal years ended August 31, 1993 through 1995; (iii)
reviewed ADP's Annual Reports to Stockholders and Annual Reports on Form 10-K
for the fiscal years ended June 30, 1994 and 1995, its Current Report on Form
8-K filed with the Commission on November 6, 1995, its Current Reports on Form
8-K/A filed with the Commission on November 13, 1995 and November 22, 1995 and
its Quarterly Report on Form 10-Q for the quarter ended September 30, 1995; (iv)
reviewed certain operating and financial information provided to Bear Stearns by
management relating to Sandy's business and prospects; (v) met with certain
members of Sandy's senior management to discuss its operation, historical
financial statements and future prospects; (vi) reviewed the historical prices
and trading volumes of the Sandy Common Stock and ADP Common Stock; (vii)
reviewed publicly available financial data and stock market performance data of
companies which it deemed generally comparable to Sandy; and (viii) conducted
such other studies, analyses, inquiries and investigations as it deemed
appropriate.
Bear Stearns relied upon and assumed, without independent verification, (i)
the accuracy and completeness of all of the financial and other information
provided to it by Sandy and ADP for purposes of its opinion and (ii) the
reasonableness of the assumptions made by the managements of Sandy and ADP with
respect to their publicly disclosed projected financial results and potential
synergies which could be achieved upon consummation of the Merger. Bear Stearns
further relied upon the assurances of the managements of Sandy and ADP that they
are unaware of any facts that would make the information provided to Bear
Stearns incomplete or misleading. In addition, Bear Stearns did not make or seek
to obtain appraisals of Sandy's or ADP's assets and liabilities in rendering its
opinion. The Bear Stearns Opinion is also necessarily based upon the market,
economic and other conditions as in effect on, and the information made
available to it as of, the date of the opinion.
The following is a brief summary of the financial analyses used by Bear
Stearns in connection with providing its oral opinion to the Sandy Board with
respect to the proposal received by Sandy from ADP.
Bear Stearns reviewed and compared the financial and market performance of
Sandy to the financial and market performance of selected publicly traded
companies which it deemed generally comparable to Sandy, i.e., DIMAC, Dimark,
M/A/R/C and, to a lesser extent, AFGL International. Although the comparable
companies were considered similar to Sandy in some respects, none of such
companies possessed a business profile or other characteristics identical to
those of Sandy. For each of the comparable companies, Bear Stearns examined
certain publicly available financial data including, net revenue, operating
margins, earnings before interest, taxes, depreciation and amortization
("EBITDA"), earnings before interest and taxes ("EBIT"), and current and
projected earnings per share. Bear Stearns calculated the ratio of the market
price of Sandy and of each of the comparable company's stock in relation to each
company's earnings per share and the ratio of the enterprise value (i.e., the
total market value of the common stock outstanding plus the par value of total
debt, less cash and cash equivalents) of Sandy and of each of the comparable
companies in relation to each company's EBITDA and EBIT. The ratios of the stock
prices of the comparable companies to
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latest twelve months ("LTM") earnings per share ranged from 10.5x to 27.1x and
had a harmonic mean* of 16.5x, compared to 14.4x for Sandy at the $12 Merger
price. The ratios of the stock prices of the comparable companies to estimated
current year's earnings per share ranged from 12.6x to 24.2x and had a harmonic
mean of 16.4x, compared to 13.3x for Sandy at the $12 Merger price. The ratios
of the stock prices of the comparable companies to estimated next year's
earnings per share ranged from 10.7x to 19.2x and had a harmonic mean of 13.3x,
compared to 12.0x for Sandy at the $12 Merger price. The ratios of the
enterprise value to LTM EBITDA of the comparable companies ranged from 5.5x to
11.2x, and had a harmonic mean of 7.8x, compared to 6.1x for Sandy at the $12
Merger price. The ratios of the enterprise value to LTM EBIT of the comparable
companies ranged from 8.8x to 13.6x and had a harmonic mean of 10.5x, compared
to 6.8x for Sandy at the $12 Merger price. Bear Stearns indicated that, although
the comparable companies operate businesses somewhat similar to Sandy's
business, the comparable companies were as a group superior to Sandy in certain
significant respects. Bear Stearns concluded that Sandy should be expected to
trade at a lower multiple than the comparable companies because Sandy was
dependent on revenues from a small number of clients in a cyclical industry,
lacked the depth in its management team required to grow Sandy significantly
into new areas, had generally grown at a slower rate than the comparable
companies, generally had lower operating margins than the comparable companies
and had a more erratic growth record.
Bear Stearns reviewed the historical market price and volume relating to
Sandy Common Stock and noted that the proposed $12 Merger price represented a
significant premium over the unaffected market price, which Bear Stearns
determined to be in the $7 to $8 range. Bear Stearns noted that Sandy's common
stock had not sold at $12 since 1986, that it was as low as $4.50 in 1993, and
that it had not sold above $9 in more than eight years, other than in connection
with merger proposals.
In evaluating the ADP Common Stock to be received by Sandy shareholders,
Bear Stearns reviewed ADP's earnings and stock trading histories and publicly
available reports on ADP. Bear Stearns also engaged in discussions with ADP. On
the basis of the foregoing, Bear Stearns concluded that the ADP Common Stock to
be received by Sandy shareholders in the Merger should be valued as equivalent
to $12 in cash based on the earnings history of ADP, analysts' research reports,
the historical trading prices and trading volume of ADP, and the number of
shares to be issued in the Merger. Bear Stearns also noted that the ADP
transaction was structured so as to be tax-free for Sandy shareholders until
such time that they sell their shares of ADP Common Stock received as a result
of the Merger.
Based upon the above, Bear Stearns concluded that the Merger was fair, from
a financial point of view, to the public shareholders of Sandy.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying the Bear Stearns Opinion. In arriving at its opinion, Bear Stearns
considered the results of all such analyses. The analyses were prepared solely
for purposes of providing its opinion as to the fairness of the Merger, from a
financial point of view, to the public shareholders of Sandy. As described
above, the Bear Stearns Opinion and presentation to the Sandy Board was one of
many factors taken into consideration by the Sandy Board in making its
determination to approve the Merger. The foregoing summary does not purport to
be a complete description of the analyses performed by Bear Stearns.
Pursuant to the engagement agreement as amended, Sandy agreed to pay Bear
Stearns a fee of $500,000 for its fairness opinion, of which $125,000 was
payable upon execution of the original letter agreement, $125,000 was payable
when Bear Stearns initially rendered its opinion, $50,000 was payable upon
execution of the amendment, and the balance was payable upon mailing of this
Proxy Statement/Prospectus. Sandy also agreed to reimburse Bear Stearns for its
reasonable out-of-pocket expenses and to indemnify Bear Stearns and certain
related persons against certain liabilities in connection with the engagement of
Bear Stearns, including certain liabilities under federal securities laws.
- ---------------
*The harmonic mean is calculated by using the reciprocals of the multiples. The
harmonic mean is used by Bear Stearns because it gives equal weight to equal
dollar investments in the securities whose ratios are being averaged. Bear
Stearns utilizes the harmonic mean in averaging ratios in which price is the
numerator.
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CERTAIN CONSIDERATIONS
In considering whether to approve the Merger Agreement and the transactions
contemplated thereby, shareholders of Sandy should consider the following: (i)
the relative stock prices of ADP Common Stock and Sandy Common Stock at the
Effective Time may vary significantly from the prices as of the date of
execution of the Merger Agreement, the date hereof or the date on which
shareholders of Sandy vote on the Merger due to changes in the business,
operations and prospects of ADP or Sandy, market assessments of the likelihood
that the Merger will be consummated and the timing thereof, general market and
economic conditions, and other factors and (ii) the Exchange Ratio will be set
based on the market price of ADP Common Stock during the 10 consecutive trading
days ending on the Determination Date but will not be greater than 0.2042054 (or
0.4084108 after giving effect to the ADP Stock Split) or less than 0.1670771 (or
0.3341542 after giving effect to the ADP Stock Split). See "-- Interests of
Certain Persons in the Merger" and "The Merger Agreement -- Terms of the Merger"
below.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Sandy Board with respect to the
Merger Agreement and the transactions contemplated thereby, shareholders of
Sandy should be aware that certain members of Sandy's management and the Sandy
Board have certain interests in the Merger that other shareholders of Sandy
generally do not have.
William H. Sandy Employment and Consulting Agreement. Sandy entered into
an Employment and Consulting Agreement with William H. Sandy, the Chairman and
Chief Executive Officer of Sandy, effective November 4, 1985 (the "Employment
and Consulting Agreement"). Under the terms of the Employment and Consulting
Agreement, upon completion of his active employment with Sandy, Mr. Sandy is to
serve as a consultant to Sandy for a period of five years. The Employment and
Consulting Agreement was amended in connection with the execution of the Merger
Agreement on August 22, 1995 to provide that Mr. Sandy's active employment
period will end on the date of the closing of the Merger (the "Closing Date"),
and, as a result, the five-year consulting period will begin on the Closing
Date. The amended Employment and Consulting Agreement also requires Sandy to
make a payment of $1,475,000 to Mr. Sandy on the Closing Date, in lieu of all
future consulting payments, bonuses (except the fiscal 1995 bonus that has been
paid separately to Mr. Sandy) or benefits to become due to Mr. Sandy or to his
wife, Marjorie M. Sandy, under the amended Employment and Consulting Agreement.
Amendment of Lease with 1500 Limited Partnership. In connection with the
Merger, the lease agreement, dated February 1, 1994, between Sandy and 1500
Limited Partnership pertaining to Sandy's Troy, Michigan headquarters (the
"Lease") has been amended effective as of the Closing Date, in the following
manner: (i) an additional improvements allowance of $200,000 will be made
available to the corporation surviving the Merger (the "Surviving Corporation")
immediately after the Closing Date and until December 31, 1996; (ii) the
availability of the last $100,000 of the improvements allowance under the Lease
will be accelerated from February 1, 2000 to the Closing Date so that the
$100,000 allowance will be available immediately after the Closing Date and
until December 31, 1996; and (iii) the Surviving Corporation will be permitted
to self-insure under Sections 11.2, 11.3, 11.4 and 11.5 of the Lease in
accordance with ADP's standard policy. In connection with the effectiveness of
such amendment to the Lease, ADP will guarantee the Surviving Corporation's
obligations under the Lease after the Closing Date. 1500 Limited Partnership is
a Michigan limited partnership owned by, among others, certain directors of
Sandy or their affiliates, including William H. Sandy, the George J. Forrest
Trust, Alan V. Kidd, Alan M. Sandy and Lewis G. Sandy. The Lease, which will
expire on May 31, 2006, provides for gross lease payments by Sandy ranging from
$94,000 to $102,000 per month over the Lease term, plus increases in certain
operating costs on a pass-through basis. Sandy's option (which option would have
been exercisable through September 1, 1995) under Section 36 of the Lease to
reduce the size of the leased premises by up to approximately 7.6% has been
eliminated pursuant to the terms of the Lease, as amended. There are no options
to renew the Lease after May 31, 2006.
Irrevocable Proxy Agreement. William H. Sandy, the Chairman and Chief
Executive Officer of Sandy, acting in his individual capacity and as trustee of
certain trusts of which Mr. Sandy is a beneficiary (the "William Sandy Trusts"),
executed an irrevocable proxy agreement dated August 22, 1995 (as subsequently
amended, the "Irrevocable Proxy Agreement") in favor of ADP. Pursuant to the
Irrevocable Proxy
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Agreement, ADP was granted an irrevocable proxy to vote in favor of the Merger
79,822 shares of Sandy Common Stock owned by Mr. Sandy and the William Sandy
Trusts. In addition, commencing November 26, 1995, the Irrevocable Proxy
Agreement conferred on ADP an irrevocable proxy to vote in favor of the Merger
an additional 362,900 shares of Sandy Common Stock owned by Mr. Sandy and the
William Sandy Trusts. The reason these additional 362,900 shares were not
covered by the Irrevocable Proxy Agreement until November 26, 1995 is that such
shares were until that date subject to certain restrictions contained in the
Shareholder Agreement, dated November 4, 1985, among certain shareholders of
Sandy. Because such Shareholder Agreement expired in accordance with its terms
on November 26, 1995, ADP has a proxy to vote 19.0% (determined as of the Sandy
Record Date) of the outstanding Sandy Common Stock in favor of the Merger
because the Sandy Special Meeting will occur after November 26, 1995.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a description of the material federal income tax
consequences of the Merger. This is not a complete description of all the tax
consequences of the Merger and does not address the tax consequences that may be
relevant to particular categories of shareholders subject to special treatment
under certain federal income tax laws, such as dealers in securities, banks,
insurance companies, foreign individuals and entities, tax-exempt organizations
and shareholders who acquired Sandy Common Stock pursuant to an employee stock
option. Each Sandy shareholder's individual circumstances may affect the tax
consequences of the Merger to him or her. No information is provided herein with
respect to the tax consequences of the Merger under foreign, state or local
laws. Moreover, the description set forth below is based on existing law and
currently applicable treasury regulations promulgated under the Internal Revenue
Code of 1986, as amended (the "Code"), current published administrative
positions of the Internal Revenue Service contained in revenue rulings and
revenue procedures, and judicial decisions, all of which are subject to change
either prospectively or retroactively. In consequence, each Sandy shareholder is
advised to consult his or her own tax advisor as to the specific tax
consequences of the Merger to him or her.
Counsel to Sandy, Honigman Miller Schwartz and Cohn, has provided a written
opinion to Sandy, a copy of which is included as Annex C. The opinion provides,
based on certain representations, qualifications and assumptions contained
therein, that the material federal income tax consequences of the Merger, under
currently applicable law, are as follows:
1. The Merger will qualify as a reorganization within the meaning of
Section 368(a)(1)(A) and Section 368(a)(2)(E) of the Code, and ADP, ADP
Mergerco, and Sandy will each be a party to the reorganization within the
meaning of Section 368(b) of the Code;
2. No gain or loss will be recognized by either ADP, ADP Mergerco, or Sandy
as a result of the consummation of the Merger;
3. No gain or loss will be recognized by a holder of Sandy Common Stock
upon the exchange of shares of Sandy Common Stock for shares of ADP Common Stock
pursuant to the Merger, except with respect to cash received in lieu of a
fractional share interest in ADP Common Stock, as discussed below;
4. The receipt of cash in lieu of fractional shares of ADP Common Stock
will be treated as if the fractional shares were distributed as part of the
exchange and then were redeemed by ADP. Under Section 302 of the Code, this
deemed redemption generally will result in a Sandy shareholder recognizing gain
or loss measured by the difference between (i) the amount of cash received, and
(ii) the tax basis allocable to the fractional shares. Any gain or loss
recognized will be capital gain or loss, assuming that the fractional share of
the ADP Common Stock would have been a capital asset in the hands of the Sandy
shareholder, and such gain or loss will be long-term capital gain or loss if the
surrendered Sandy Common Stock has been held for more than one year at the
Effective Time;
5. The adjusted tax basis of the ADP Common Stock received by a holder of
Sandy Common Stock (including any fractional share of the ADP Common Stock
deemed received) pursuant to the Merger will be the same as the adjusted tax
basis of the shares of Sandy Common Stock surrendered in exchange therefor; and
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6. The holding period of the ADP Common Stock received by a holder of Sandy
Common Stock as a result of the Merger will include the holding period of the
shares of Sandy Common Stock surrendered in exchange therefor, provided that
such Sandy Common Stock is held as a capital asset at the Effective Time.
No advance ruling will be requested or received from the Internal Revenue
Service as to the federal income tax consequences of the Merger. An opinion of
counsel is not binding on the Internal Revenue Service and, because no advance
ruling will be obtained from the Internal Revenue Service, there can be no
assurance that the Merger will constitute a tax-free reorganization, or that
other favorable tax treatment will be available to the shareholders of Sandy.
THE FOREGOING OPINION OF COUNSEL TO SANDY MERELY ADDRESSES THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER UNDER CURRENTLY APPLICABLE LAW AND
DOES NOT TAKE INTO CONSIDERATION THE PARTICULAR FACTS AND CIRCUMSTANCES OF ANY
HOLDER OF SHARES OF SANDY COMMON STOCK. EACH HOLDER OF SHARES OF SANDY COMMON
STOCK IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, AND ALSO AS TO ANY STATE, LOCAL,
FOREIGN OR OTHER TAX CONSEQUENCES. THE FOREGOING OPINION OF COUNSEL IS BASED
UPON THE CODE, TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND
COURT DECISIONS AS OF THE DATE HEREOF, ALL OF WHICH ARE SUBJECT TO CHANGE, AND
ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF COUNSEL'S OPINION. SANDY
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO THEM.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. Under this method of accounting,
the recorded assets and liabilities of ADP and Sandy will be carried forward to
the combined corporation at their recorded amounts, subject to any adjustments
required to conform the accounting policies of the two companies. The Merger
Agreement provides that a condition to the consummation of the Merger is the
receipt by ADP of notification, in form and substance reasonably satisfactory to
it, from Deloitte & Touche LLP, independent certified public accountants of ADP,
that the Merger qualifies for "pooling of interests" accounting treatment.
ANTITRUST MATTERS
Pursuant to the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), ADP and Sandy each filed a
Notification and Report Form for review under the HSR Act with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division"). The waiting periods under the HSR Act with respect
to such filings were terminated on September 11, 1995. Even though the HSR Act
waiting periods were terminated, the FTC or the Antitrust Division could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking divestiture of substantial assets of ADP or
Sandy. Consummation of the Merger is conditioned upon, among other things, the
absence of any judgment, decree, injunction, ruling or order of any court,
governmental department, commission, agency or instrumentality outstanding
against ADP Mergerco, ADP or Sandy which prohibits or materially restricts or
delays the consummation of the Merger. ADP and Sandy do not believe that
consummation of the Merger will result in a violation of any applicable
antitrust laws. However, there can be no assurance that a challenge to the
Merger on antitrust grounds will not be made or, if such a challenge is made, of
the result. ADP and Sandy do not believe that any additional governmental
filings in the United States are required with respect to the Merger, other than
the filing of the Certificate of Merger required to be filed with the Department
of Commerce of the State of Michigan in accordance with the Michigan Business
Corporation Act ("MBCA").
FEDERAL SECURITIES LAW CONSEQUENCES
All ADP Common Stock issued in connection with the Merger will be freely
transferable, except that any ADP Common Stock received by persons who are
deemed to be "affiliates" (as such term is defined under the
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Securities Act) of Sandy or ADP prior to the Merger may be sold by them only in
transactions permitted by the resale provisions of Rule 145 under the Securities
Act ("Rule 145") with respect to affiliates of Sandy, or Rule 144 under the
Securities Act ("Rule 144") with respect to persons who are or become affiliates
of ADP, or as otherwise permitted under the Securities Act. Persons who may be
deemed to be affiliates of Sandy or ADP generally include individuals or
entities that control, are controlled by, or are under common control with, such
corporation and may include certain officers and directors of such corporation
as well as principal stockholders of such corporation.
Affiliates may not sell their shares of ADP Common Stock acquired in
connection with the Merger, except pursuant to an effective registration under
the Securities Act covering such shares or in compliance with Rule 145 (or Rule
144 in the case of persons who are or become affiliates of ADP) or another
applicable exemption from the registration requirements of the Securities Act.
In general, under Rule 145, for two years following the Effective Time, an
affiliate (together with certain related persons) of Sandy would be entitled to
sell shares of ADP Common Stock acquired in connection with the Merger only
through unsolicited "brokers' transactions" or in transactions directly with a
"market maker," as such terms are defined in Rule 145. Additionally, the number
of shares to be sold by an affiliate (together with certain related persons and
certain persons acting in concert) within any three-month period for purposes of
Rule 145 may not exceed the greater of 1% of the outstanding shares of ADP
Common Stock or the average weekly trading volume of such stock during the four
calendar weeks preceding such sale. Rule 145 and Rule 144 would only remain
available, however, to affiliates if ADP remained current with its informational
filings with the Commission under the Exchange Act. Two years after the
Effective Time, an affiliate of Sandy would be able to sell such ADP Common
Stock without such manner of sale or volume limitations provided that ADP was
current with its Exchange Act informational filings and such affiliate was not
then an affiliate of ADP. If such person were an affiliate of ADP, such
limitations would continue to apply under Rule 144. Three years after the
Effective Time, an affiliate of Sandy would be able to sell such shares of ADP
Common Stock without any restrictions so long as such affiliate had not been an
affiliate of ADP for at least three months prior thereto.
STOCK EXCHANGE LISTING
The shares of ADP Common Stock to be issued in the Merger are authorized
for listing and trading on the NYSE.
DIVIDENDS
ADP expects to continue to declare its regular quarterly dividends. Sandy
is not permitted under the terms of the Merger Agreement to declare, set aside
or pay any dividend in cash, stock, property or otherwise in respect of its
capital stock during the period from the date of the Merger Agreement until the
earlier of the termination of the Merger Agreement or the Effective Time.
APPRAISAL RIGHTS
Under the MBCA, the holders of Sandy Common Stock are not entitled to any
appraisal rights with respect to the Merger.
FEES AND EXPENSES
Regardless of whether the Merger is consummated, each of ADP and Sandy will
pay its own respective costs and expenses (including, but not limited to,
attorneys' fees) incurred in connection with the Merger, except in the event
that the Sandy Board terminates the Merger Agreement after having received a
written proposal regarding an Acquisition Transaction (as defined under "The
Merger Agreement -- Termination") which offers more consideration to the
shareholders of Sandy than that offered by ADP, and the Sandy Board recommends
to the shareholders of Sandy that such shareholders accept and/or approve such
Acquisition Transaction. If such event occurs, Sandy will be required to pay
ADP, within one business day after such termination, a fee equal to 4% of the
aggregate purchase price which the third party indicated it would pay in
connection with the proposed Acquisition Transaction which was the basis for
such termination.
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THE MERGER AGREEMENT
The description of the Merger Agreement set forth below does not purport to
be complete and is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached to this Proxy Statement/ Prospectus as
Annex A and incorporated herein by reference. Statements in this Proxy
Statement/Prospectus with respect to the terms of the Merger are qualified in
their entirety by reference to the Merger Agreement. Sandy Shareholders are
urged to read the full text of the Merger Agreement.
TERMS OF THE MERGER
The Merger. At the Effective Time and subject to and upon the terms and
conditions of the Merger Agreement and the MBCA, ADP Mergerco will be merged
with and into Sandy, the separate corporate existence of ADP Mergerco will
cease, and Sandy will continue as the Surviving Corporation.
Effective Time. As promptly as practicable after the satisfaction or
waiver of the conditions to the Merger set forth in the Merger Agreement, the
Merger will be consummated by filing a Certificate of Merger with the Department
of Commerce of the State of Michigan in accordance with the MBCA.
Articles of Incorporation and By-laws. The Merger Agreement provides that
the Articles of Incorporation and By-laws of ADP Mergerco, as in effect
immediately prior to the Effective Time, will be the Articles of Incorporation
and By-laws of the Surviving Corporation until thereafter amended in accordance
with the provisions therein and as provided by the MBCA.
Directors and Officers. The initial directors of the Surviving Corporation
shall be the directors of ADP Mergerco immediately prior to the Effective Time,
in each case until their successors are elected and qualified, and the officers
of the Surviving Corporation shall be the officers of ADP Mergerco immediately
prior to the Effective Time, in each case until their successors are duly
elected and qualified.
Conversion of Stock. At the Effective Time, each share of Sandy Common
Stock issued and outstanding immediately prior to the Effective Time (excluding
shares referred to in the following paragraph) will be converted into and
exchangeable for shares of ADP Common Stock at the Exchange Ratio.
Each share of Sandy Common Stock held as treasury stock of Sandy
immediately prior to the Effective Time shall be canceled, retired and cease to
exist, and no exchange or payment shall be made in respect thereof.
Each share of common stock of ADP Mergerco issued and outstanding
immediately prior to the Effective Time will be converted into one validly
issued, fully paid and nonassessable share of common stock of the Surviving
Corporation.
Options. All stock options outstanding at the Effective Time (i) under
Sandy's 1985 Performance Incentive Plan, 1989 Performance Incentive Plan or
Director Stock Option Plan and (ii) pursuant to the nonqualified stock option
agreement dated August 8, 1988 between Sandy and Raymond Ketchledge or the
amended nonqualified stock option agreement dated September 1, 1992 between
Sandy and Raymond Ketchledge (collectively, the "Sandy Options") shall, by
virtue of the Merger and without any action on the part of the holders of such
options, be converted into and become options to purchase shares of ADP Common
Stock ("Substitute Options") as follows:
(i) each Substitute Option will cover the number of shares of ADP
Common Stock (rounded down to the nearest whole share) which the holder of
the Sandy Option being replaced would have been entitled to receive in the
Merger had such holder exercised, immediately prior to the Effective Time,
the Sandy Option which the Substitute Option is replacing;
(ii) each Substitute Option will be exercisable for a purchase price
per share (rounded down to the nearest cent) determined by dividing (x) the
purchase price per share of Sandy Common Stock payable upon exercise of the
Sandy Option which the Substitute Option replaced, multiplied by the number
of shares of Sandy Common Stock covered by the Sandy Option, by (y) the
number of shares of ADP
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Common Stock covered by the Substitute Option, as determined in accordance
with clause (i) above; and
(iii) each Substitute Option will be exercisable, over each time
period during which the Sandy Option it replaced would have been
exercisable (taking into account any acceleration in vesting brought about
by the Merger), with respect to that number of shares of ADP Common Stock
(rounded down to the nearest whole share) determined by multiplying (x) the
number of shares of Sandy Common Stock with respect to which the Sandy
Option would have been exercisable during that time period by (y) a
fraction, the numerator of which is the total number of shares of ADP
Common Stock covered by the Substitute Option and the denominator of which
is the total number of shares of Sandy Common Stock covered by the replaced
Sandy Option.
Subject to the foregoing requirements, the terms of each Substitute Option
will be substantially equivalent to the terms of the Sandy Option that it
replaces.
Fractional Shares. No fractional shares of ADP Common Stock, and no
certificates representing such fractional shares, shall be issued upon the
surrender for exchange of certificates representing Sandy Common Stock. In lieu
of any fractional share, ADP shall pay to each holder of Sandy Common Stock who
otherwise would be entitled to receive a fractional share of ADP Common Stock an
amount of cash (without interest) determined by multiplying (a) the Average ADP
Common Stock Price times (b) the fractional share interest to which such holder
would otherwise be entitled.
EXCHANGE OF CERTIFICATES
Exchange Agent. ADP has appointed Chemical Mellon Shareholder Services to
act as Exchange Agent.
Exchange Procedures. As soon as practicable after the Effective Time, ADP
shall cause the Exchange Agent to mail appropriate and customary transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to the certificates theretofore representing shares of Sandy Common
Stock shall pass, only upon proper delivery of such certificates to the Exchange
Agent) to each holder of Sandy Common Stock of record as of the Effective Time
advising such holder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent outstanding certificates formerly evidencing
Sandy Common Stock in exchange for new certificates for ADP Common Stock and
cash in lieu of fractional shares. Upon surrender to the Exchange Agent of a
certificate formerly representing shares of Sandy Common Stock, together with
duly executed transmittal materials, ADP shall promptly (i) issue or cause to be
issued to the persons entitled thereto a certificate representing the number of
whole shares of ADP Common Stock that such persons are entitled to receive in
the Merger and (ii) distribute or cause to be distributed to the persons
entitled thereto cash in lieu of fractional shares as provided above. Upon
surrender, each certificate theretofore evidencing Sandy Common Stock shall be
canceled.
At or promptly after the Effective Time, ADP shall deposit the Merger
Consideration with the Exchange Agent as the Exchange Fund. After the Effective
Time, ADP shall, on each payment or distribution date, tender to the Exchange
Agent as an addition to the Exchange Fund all dividends and other distributions
applicable to certificates held in the Exchange Fund.
Transfers of Ownership. If any certificate evidencing shares of ADP Common
Stock is to be issued to a person other than the person in whose name the
certificate surrendered is registered, it shall be a condition to the issuance
of ADP Common Stock that the certificate so surrendered shall be properly
endorsed or be otherwise in proper form for transfer and that the person
requesting such exchange shall pay all transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
certificate surrendered (or establish to the satisfaction of ADP that such tax
has been paid or is not applicable).
Distributions With Respect to Unexchanged Sandy Common Stock. Until
outstanding certificates formerly representing Sandy Common Stock are
surrendered as provided above, no dividend or distribution payable to holders of
record of ADP Common Stock shall be paid to any holder of such outstanding
certificates. Subject to applicable law, upon surrender of such outstanding
certificates by such holder there
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shall be paid to such holder the amount of any dividends or distributions
(without interest) theretofore payable with respect to such whole shares of ADP
Common Stock, but not paid to such holder, and which dividends or distributions
had a record date occurring subsequent to the Effective Time.
Lost, Stolen or Destroyed Certificates. In the event any certificate for
Sandy Common Stock shall have been lost, stolen or destroyed, the Exchange Agent
shall issue and pay in exchange for such lost, stolen or destroyed certificate,
upon the making of an affidavit of that fact by the holder thereof, such shares
of ADP Common Stock and cash for fractional shares, if any, as may be required
pursuant to this Agreement, provided, however, that ADP, in its discretion and
as a condition precedent to the issuance and payment thereof, may require the
holder of such lost, stolen or destroyed certificate to deliver a bond in such
sum as it may direct as indemnity against any claim that may be made against
ADP, Sandy, the Exchange Agent or any other party with respect to the
certificate alleged to have been lost, stolen or destroyed.
DETAILED INSTRUCTIONS, INCLUDING A TRANSMITTAL LETTER, WILL BE MAILED TO
SANDY SHAREHOLDERS PROMPTLY FOLLOWING THE EFFECTIVE TIME AS TO THE METHOD OF
EXCHANGING CERTIFICATES FORMERLY REPRESENTING SHARES OF SANDY COMMON STOCK.
SANDY SHAREHOLDERS SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR SHARES TO THE
EXCHANGE AGENT PRIOR TO RECEIPT OF THE TRANSMITTAL LETTER.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Sandy, in respect of itself and its subsidiary, and of ADP Megerco and ADP,
jointly and severally. When used with respect to Sandy or ADP, "Material Adverse
Effect" means any material adverse effect on the financial condition, assets,
liabilities, results of operations or business of Sandy and its subsidiary or
ADP and its subsidiaries, as the case may be, in each case taken as a whole.
Representations and Warranties of Sandy. The representations and
warranties of Sandy relate, among other things, to the following matters (which
representations and warranties are subject, in certain cases, to specified
exceptions): (i) corporate organization, standing, qualification and similar
corporate matters, (ii) the authorization, execution, delivery and
enforceability of the Merger Agreement, (iii) the absence of certain regulatory
and third party consent requirements, (iv) good and marketable title to property
and assets and the absence of undisclosed liabilities, (v) the absence of
violations of zoning ordinances, municipal regulations or other rules,
regulations or laws pertaining to Sandy's property, except where such violation
would not have a Material Adverse Effect, (vi) the maintenance of certain
licenses, permits, and other authorizations, (vii) ownership, rights to use and
absence of violations or claims in respect of intellectual property, (viii)
compliance with laws, except where noncompliance would not have a Material
Adverse Effect, (ix) matters pertaining to employee plans, (x) contracts and
agreements, (xi) the absence of claims, actions, suits, proceedings, or
investigations pending against or affecting Sandy, and the absence of any
reasonable basis therefor, (xii) insurance, (xiii) reports and other documents
filed with the Commission, the absence of material misstatements or omissions in
the information contained therein, the fair presentation of the financial
statements contained therein in accordance with generally accepted accounting
principles, and the absence of any material adverse change in Sandy's financial
condition, assets, liabilities, results of operations or business taken as a
whole since August 31, 1994, (xiv) payment of taxes and certain other tax
matters, (xv) business relations, (xvi) the absence of brokers and finders,
(xvii) notes and accounts receivable, (xviii) information furnished by Sandy to
ADP, (xix) capitalization, (xx) options, (xxi) the absence of dividends and
stock purchases, (xxii) subsidiaries, (xxiii) customers, (xxiv) the
recommendation of the Merger by the Sandy Board, (xxv) the absence of any
material untrue statements or omissions in the information that Sandy provides
for inclusion in the Registration Statement and this Proxy Statement/Prospectus,
(xxvi) the shareholder vote needed to approve the Merger, (xxvii) labor matters,
(xxviii) conduct of business in the ordinary course since August 31, 1994,
(xxix) nonapplicability of certain provisions of the MBCA, (xxx) the absence of
actions that would disqualify the Merger from being accounted for as a pooling
of interests, (xxxi) fixed assets and sufficiency of assets, (xxxii) leased
properties, (xxxiii) licensed properties, (xxxiv) loan agreements, debt
instruments and guarantees, (xxxv) employees, employment practices, compensation
and vacations, (xxxvi) capital expenditures, (xxxvii) bank accounts and safe
deposit boxes and
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powers of attorney, (xxxviii) the absence of casualty losses, (xxxix)
transactions with affiliates and (xl) classification of the Merger as a tax-free
reorganization for tax purposes.
Representations and Warranties of ADP Mergerco and ADP. The
representations and warranties of ADP Mergerco and ADP relate to the following
matters (which representations and warranties are subject, in certain cases, to
specified exceptions): (i) corporate organization, standing, qualification and
similar corporate matters, (ii) the authorization, execution, delivery and
enforceability of the Merger Agreement, (iii) good and marketable title to
property and assets and the absence of undisclosed liabilities, (iv) compliance
with laws, except where noncompliance would not have a Material Adverse Effect,
(v) the absence of claims, actions, suits, proceedings or investigations pending
or, to the best of ADP Mergerco's and ADP's knowledge, threatened against or
affecting ADP Mergerco or ADP, except those claims, actions, suits, proceedings
or investigations that would not have a Material Adverse Effect or are set forth
in certain schedules or filings, (vi) reports and other documents filed with the
Commission, the absence of material misstatements or omissions in the
information contained therein, the fair presentation of the financial statements
contained therein in accordance with generally accepted accounting principles,
and the absence of any material adverse change in ADP's financial condition,
assets, liabilities, results of operations or business taken as a whole since
June 30, 1994, (vii) capitalization, (viii) validity of ADP Common Stock, (ix)
options, (x) the absence of additional rights of any persons to any equity
interest in ADP upon the consummation of the Merger, except as contemplated by
the Merger Agreement, (xi) the absence of dividends and stock purchases, (xii)
the absence of material untrue statements or omissions in the information that
ADP provides in the Registration Statement and this Proxy Statement/Prospectus,
(xiii) the absence of brokers and finders and (xiv) classification of the Merger
as a tax-free reorganization for tax purposes.
CONDUCT OF BUSINESS PENDING THE MERGER
Conduct of Business by Sandy. The Merger Agreement provides that, prior to
the Effective Time, unless ADP Mergerco and ADP agree in writing, Sandy will
conduct its business in the ordinary course of business and in a manner
consistent with past practice, and Sandy will use reasonable efforts to preserve
intact its present business organizations. The Merger Agreement further provides
that Sandy will use reasonable efforts to maintain its relationships with its
suppliers and customers, and, if requested by ADP Mergerco or ADP, (i) Sandy
will use reasonable efforts to make reasonable arrangements as reasonably
requested by ADP Mergerco or ADP for representatives of ADP Mergerco or ADP to
meet with customers and suppliers of Sandy, and (ii) Sandy will schedule, as
reasonably requested by ADP Mergerco or ADP, meetings of representatives of ADP
Mergerco or ADP with executive officers of Sandy. Except in connection with the
transactions contemplated by the Merger Agreement, without the prior written
consent of ADP Mergerco and ADP, Sandy has agreed that it will not:
(i) issue, sell, pledge, dispose of or encumber any assets, other than
through sales of goods and/or services to Sandy's customers in the ordinary
course of business, consistent with past practice,
(ii) amend Sandy's Restated Articles of Incorporation, as amended (the
"Sandy Articles"), or Sandy's By-laws (the "Sandy By-laws") in effect at
the date of the Merger Agreement,
(iii) split, combine or reclassify any outstanding shares of Sandy
capital stock, or declare, set aside or pay any dividend payable in cash,
stock, property or otherwise with respect to such shares,
(iv) redeem, purchase, acquire or offer to acquire any shares of Sandy
capital stock,
(v) issue, sell, pledge or dispose of, or agree to issue, sell, pledge
or dispose of, any additional shares of, or securities convertible or
exchangeable for, or any options, warrants or rights of any kind to acquire
any shares of, Sandy capital stock of any class whether pursuant to any
rights agreement, stock plan or otherwise, except that Sandy may issue
shares of Sandy Common Stock in accordance with stock options outstanding
as of the date of the Merger Agreement,
(vi) acquire (by merger, consolidation or acquisition of assets) or be
acquired by any corporation, partnership or other business organization or
division thereof,
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(vii) incur any indebtedness for borrowed money, other than in the
ordinary course of business, consistent with past practice, or issue any
debt securities,
(viii) enter into or modify any material contract, lease or agreement,
other than in the ordinary course of business, consistent with past
practice,
(ix) terminate, modify, assign, waive, release or relinquish any
material contract rights or amend any material rights or claims except as
expressly provided in the Merger Agreement,
(x) other than pursuant to previously existing written plans, written
agreements or regular budgets and standard policies, grant any increase in
the salary or other compensation or benefits to Sandy's directors, officers
or employees or grant any bonus to any employee or enter into any
employment agreement, or make any loan to or enter into any material
transaction of any other nature with any officer, director or employee of
Sandy; provided that Sandy may pay fiscal 1995 bonuses based on earnings
before merger-related costs,
(xi) take any action to institute any new severance or termination pay
practices with respect to any directors, officers or employees of Sandy or
to increase the benefits payable under its severance or termination pay
practices,
(xii) hire new employees, other than in the ordinary course of
business, consistent with past practice,
(xiii) adopt or amend, in any respect, except as may be required by
applicable law or regulation (in which case Sandy will notify ADP Mergerco
and ADP of such amendment or adoption and the reasons therefor), any bonus,
profit sharing, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment or other employee benefit
plan, agreement, trust, fund, plan or arrangement for the benefit or
welfare of any directors, officers or employees,
(xiv) except for specified exceptions, make any capital expenditures
or capital commitments in amounts greater than $100,000 in the aggregate,
(xv) make any election for federal income tax purposes,
(xvi) settle or compromise any litigation involving the payment of, or
enter into a settlement agreement to pay over time, an amount in cash,
notes or other property in excess of $50,000, or
(xvii) enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
Conduct of Business by ADP. The Merger Agreement provides that, prior to
the Effective Time, unless Sandy shall otherwise agree in writing:
(i) Neither ADP nor any subsidiary of ADP shall amend its Certificate
of Incorporation (or other such governing document) or By-laws in a manner
which would materially adversely affect the rights of holders of ADP Common
Stock or the ability of ADP to consummate the transactions contemplated by
the Merger Agreement in a timely manner,
(ii) Neither ADP nor any subsidiary of ADP shall make any acquisition
or take any other action that individually or in the aggregate would
materially adversely affect the ability of ADP or ADP Mergerco to
consummate the transactions contemplated by the Merger Agreement in a
timely manner,
(iii) Other than regular quarterly cash dividends which are not in
excess of $.25 per share of ADP Common Stock and any stock split effected
as a stock dividend, ADP shall not declare, set aside, make or pay any
dividend or distribution (whether in cash, stock or property or any
combination thereof) in respect of the ADP Common Stock, and
(iv) ADP shall not agree to do any of the foregoing.
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ADDITIONAL AGREEMENTS
Other Agreements. Subject to the terms and conditions of the Merger
Agreement and to the fiduciary duties of the Sandy Board and the Board of
Directors of ADP, each of the parties to the Merger Agreement has agreed to use
all reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by the
Merger Agreement.
Notification of Certain Matters. Pursuant to the Merger Agreement, Sandy
has agreed to give prompt notice to ADP Mergerco and ADP, and ADP Mergerco and
ADP has agreed to give prompt notice to Sandy, of the occurrence of any event
which any such party believes would be likely to cause any of its
representations or warranties contained in the Merger Agreement to be materially
untrue or inaccurate, or any material failure of the notifying party, or such
notifying party's officers, directors, employees or agents, materially to comply
with or satisfy any covenant, condition or agreement in the Merger Agreement.
Access to Information. Pursuant to the Merger Agreement, Sandy will, and
will cause Sandy's officers, directors, employees and agents, including
attorneys and accountants, to afford, from the date of the Merger Agreement to
the Effective Time, the officers, employees and agents of ADP Mergerco and ADP
complete access at all reasonable times to Sandy's officers, employees, agents,
properties, books, records and workpapers, and shall furnish ADP Mergerco and
ADP all financial, operating and other data and information as ADP Mergerco and
ADP may reasonably request. Pursuant to the Merger Agreement, ADP Mergerco and
ADP have agreed to use reasonable efforts not to disrupt Sandy's business.
Public Announcements. Pursuant to the Merger Agreement, ADP Mergerco, ADP,
and Sandy have agreed not to make, issue or release any public announcement or
statement concerning, or acknowledgment of the existence of, or reveal the
terms, conditions or status of, the transactions contemplated by the Merger
Agreement, or any other communication to shareholders or the investing public
directly or indirectly without first making a good faith attempt to obtain the
other parties' prior approval of, or concurrence in, the contents of such
announcement, which approval or concurrence will not be unreasonably withheld or
delayed; provided, that nothing in the Merger Agreement will prevent any party
from commenting on prior public announcements or from making any announcement,
acknowledgment or statement required by law or the rules of any securities
exchange on which its stock is listed.
Pooling Letters. Pursuant to the Merger Agreement, ADP's and ADP
Mergerco's obligations to consummate the Merger are conditioned upon, among
other things, ADP's receipt of an agreement, in form and substance reasonably
satisfactory to it, from each "affiliate" of Sandy within the meaning of such
term as used in Rule 145 under the Securities Act (an "Affiliate") to the effect
that (i) in accordance with applicable rules with respect to sales of securities
by affiliates in pooling-of-interests transactions, no disposition of ADP Common
Stock received in the Merger will be made by such Affiliate of Sandy until such
time as financial results covering at least 30 days of post-Merger combined
operations have been published, and (ii) such Affiliate of Sandy has not
theretofore taken (and, if such agreement is delivered prior to the Closing
Date, will not take during the remaining period prior thereto) any action
(including, without limitation, selling or otherwise disposing of Sandy Common
Stock owned by such Affiliate of Sandy) that would prevent the Merger from being
accounted for as a pooling of interests.
CONDITIONS TO THE MERGER
Conditions to ADP Mergerco's and ADP's Obligations. The obligations of ADP
Mergerco and ADP to consummate the Merger are subject to the fulfillment of each
of the following conditions:
(i) Representations and Warranties. The representations and
warranties of Sandy contained in the Merger Agreement and the information
contained in the accompanying schedules shall be true and correct on and as
of the Closing Date. Sandy shall have performed in all material respects
all obligations and complied in all material respects with all agreements,
covenants and conditions required by the Merger Agreement to be performed
or complied with by it at or prior to the Closing Date.
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(ii) No Injunctions or Restraints. There shall not be any judgment,
decree, injunction, ruling or order of any court, governmental department,
commission, agency or instrumentality outstanding against ADP Mergerco, ADP
or Sandy which prohibits or materially restricts or delays the consummation
of the Merger.
(iii) Stockholder Approval. The Merger Agreement shall have been
approved and adopted by the requisite vote of the holders of the
outstanding shares of Sandy Common Stock in accordance with the MBCA and
Sandy's Articles of Incorporation and By-laws.
(iv) Consents Obtained. All authorizations, consents and permits
required by Sandy to perform the Merger Agreement shall have been obtained
and shall be in form and substance satisfactory to ADP Mergerco and ADP.
(v) Delivery of Documents. Sandy will have delivered, or will have
caused to be delivered, to ADP Mergerco and ADP (a) a copy of the
resolutions of the Sandy Board approving the adoption, execution,
performance, and delivery of the Merger Agreement and authorizing all
necessary or proper action to enable Sandy to comply with the terms
thereof, (b) a copy of the resolutions duly adopted by Sandy's shareholders
authorizing the adoption, execution, performance, and delivery of the
Merger Agreement and approving the Merger in accordance with the MBCA, and
(c) the opinion of Honigman Miller Schwartz and Cohn, counsel to Sandy,
regarding certain matters pertaining to Sandy.
(vi) Effectiveness of Registration Statement. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued or proceeding for such purpose instituted or threatened, and ADP
shall have received all state blue sky or securities law permits and other
authorizations necessary to consummate the Merger.
(vii) Amendment of Employment and Consulting Agreement. The
Employment and Consulting Agreement between Sandy and William H. Sandy, as
amended through and including the date of the Merger Agreement, shall be in
full force and effect and shall not have been subsequently amended without
the prior written consent of ADP.
(viii) Employment Agreements. Sandy shall have entered into
employment agreements, effective as of the Closing Date, in form and
substance reasonably satisfactory to ADP, with certain key employees of
Sandy to be specified by ADP, and such employees' existing employment
agreements with Sandy shall have been terminated as of the Closing Date.
(ix) Financial Statements. ADP shall have received a complete and
correct copy of Sandy's audited financial statements for the one-year
period ending August 31, 1995, in the form specified in the Merger
Agreement.
(x) Balance Sheets. ADP shall have receive unaudited consolidated
balance sheets and income statements for each complete calendar month from
June 30, 1995 through the last full month immediately prior to the Closing
Date, in each case certified by Sandy's chief financial officer.
(xi) Opinion of Counsel. Sandy shall have received the opinion of
Honigman Miller Schwartz and Cohn, in form and substance reasonably
satisfactory to Sandy and ADP, to the effect that the Merger qualifies for
federal income tax purposes as a reorganization within the meaning of
Section 368 of the Code.
(xii) Agreement with Affiliates of Sandy. ADP shall have received an
agreement, in form and substance reasonably satisfactory to it, from each
affiliate of Sandy regarding certain securities law issues and
pooling-of-interests stock holding requirements.
(xiii) Pooling. ADP shall have received notification from Deloitte &
Touche LLP, in form and substance reasonably satisfactory to it, that the
Merger may properly be accounted for as a pooling of interests.
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(xiv) Credit Agreement. All amounts owing under the Amended and
Restated Revolving Credit Agreement dated June 23, 1993, between Sandy and
Comerica Bank, as amended, shall have been paid in full, and such credit
agreement shall have been terminated by Sandy.
(xv) Lease Agreement. The Lease shall have been amended on terms
mutually satisfactory to ADP and 1500 Limited Partnership and as stated in
the Merger Agreement. (This condition has been satisfied as of the date of
this Proxy Statement/Prospectus as a result of the Lease amendment
described above under "The Merger -- Interests of Certain Persons in the
Merger.")
(xvi) Net Worth of Sandy. ADP shall have received evidence, in form
and substance reasonably acceptable to it, that the "Sandy Adjusted Net
Worth" as of the "Test Date" (both as defined in Section 5.1(q) of the
Merger Agreement) shall be no less than $10,101,187.
Conditions to Sandy's Obligations. The obligations of Sandy to consummate
the Merger is subject to the fulfillment of each of the following conditions:
(i) Representations and Warranties. The representations and
warranties of ADP Mergerco and ADP contained in the Merger Agreement shall
be true and correct on and as of the Closing Date. ADP Mergerco and ADP
shall have performed in all material respects all obligations and complied
in all material respects with all agreements, covenants and conditions
required by the Merger Agreement to be performed or complied with by it at
or prior to the Closing Date.
(ii) Delivery of Resolutions. The delivery to Sandy of a copy of the
resolutions duly adopted by the Board of Directors of ADP Mergerco or a
duly authorized committee thereof approving the execution and delivery of
the Merger Agreement and authorizing all necessary or proper action to
enable ADP Mergerco to comply with the terms of the Merger Agreement.
(iii) No Injunctions or Restraints. There shall not be any judgment,
decree, injunction, ruling or order of any court, governmental department,
commission, agency or instrumentality outstanding against ADP Mergerco, ADP
or Sandy which prohibits or materially restricts or delays the consummation
of the Merger.
(iv) Shareholder Approval. The approval by Sandy's shareholders, in
accordance with the MBCA and Sandy's Articles of Incorporation and By-laws,
of the Merger Agreement and authorizing all necessary or proper action to
enable Sandy to comply with the terms thereof.
(v) Delivery of Merger Consideration. The delivery by ADP of the
Merger Consideration to the Exchange Agent for the conversion of Sandy
Common Stock as set forth in the Plan of Merger.
(vi) Opinion of Counsel. The receipt by Sandy of the opinion of
James B. Benson, General Counsel of ADP, regarding certain matters
pertaining to ADP.
TERMINATION
Termination Events. The Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval by the shareholders of Sandy:
(i) by mutual action of the Board of Directors of each of ADP
Mergerco, ADP and Sandy;
(ii) by the Board of Directors of each of ADP Mergerco, ADP or Sandy
if the Merger does not take place on or before January 31, 1996; or
(iii) by the Sandy Board if Sandy receives a written proposal
regarding any proposed (a) merger of Sandy with or into any third party,
(b) sale of substantially all of the assets of Sandy, (c) sale of more than
one percent of the outstanding shares of Sandy Common Stock, or (d)
consolidation or other business combination involving Sandy or any division
of Sandy (an "Acquisition Transaction") which offers more consideration to
the shareholders of Sandy than that offered by ADP and the Sandy Board
recommends to the shareholders of Sandy that such shareholders accept
and/or approve such Acquisition Transaction.
29
<PAGE> 34
Termination Fee. If the Sandy Board terminates the Merger Agreement
pursuant to (iii) above, Sandy shall pay to ADP, within one business day after
such termination, a fee equal to 4% of the aggregate purchase price which the
third party indicated it would pay in connection with the proposed Acquisition
Transaction which was the basis for such termination.
AMENDMENT AND WAIVER
The Merger Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties thereto; provided, however, that after
approval of the Merger by the shareholders of Sandy, no amendment may be made
which decreases the consideration to which the shareholders of Sandy are
entitled pursuant to the Merger Agreement or otherwise materially adversely
affects the shareholders of Sandy without the further approval of the
shareholders of Sandy.
At any time prior to the Effective Time, whether before or after any
meeting of Sandy's shareholders, any party to the Merger Agreement may (a) in
the case of ADP Mergerco and ADP, extend the time for the performance of any of
the obligations or other acts of Sandy or, subject to the Merger Agreement,
waive compliance with any of the agreements of Sandy or with any conditions to
the respective obligations of ADP Mergerco or ADP, or (b) in the case of Sandy,
acting through its Chairman, extend the time for the performance of any of the
obligations or other acts of ADP Mergerco or ADP or, subject to the Merger
Agreement, waive compliance with any of the agreements of ADP Mergerco or ADP or
with any conditions to its own obligations. Any agreement on the part of a party
to the Merger Agreement shall be valid if set forth in an instrument in writing
signed on behalf of such party by a duly authorized officer.
INDEMNIFICATION AND INSURANCE
Pursuant to the Merger Agreement, for a period of six years after the
Closing Date, ADP shall, or shall cause the Surviving Corporation to, indemnify
and hold harmless each present and former director or officer of Sandy from and
against any and all claims arising out of or in connection with activities in
such capacity or on behalf of, or at the request of, Sandy, occurring on or
prior to the Closing Date ("Claims"), to the fullest extent permitted under
applicable law and, in addition (if not prohibited by applicable law), to the
fullest extent provided in the Sandy Articles and the Sandy By-laws in effect at
the date of the Merger Agreement.
Pursuant to the Merger Agreement, after the Effective Time, ADP shall, or
shall cause the Surviving Corporation to, maintain Sandy's existing officers'
and directors' liability insurance in respect of Claims, or other insurance
(including a run-off policy) in respect of Claims, no less favorable in scope
and amount of coverage, in full force and effect without reduction of coverage
for a period of three years after the Closing Date; provided, however, that ADP
will not be required to pay an annual premium therefor in excess of two times
the last annual premium paid by Sandy prior to the date of the Merger Agreement,
and if ADP is unable to purchase the insurance required by the Merger Agreement,
it shall purchase as much comparable insurance as can be obtained for an annual
premium equal to such maximum amount.
30
<PAGE> 35
SELECTED FINANCIAL DATA
SANDY
The table below sets forth selected consolidated financial data of Sandy
and should be read in conjunction with the consolidated financial statements and
notes thereto that are incorporated by reference into this Proxy
Statement/Prospectus. The selected financial data as of August 31, 1995, 1994,
1993, 1992 and 1991 and for each of the years then ended are derived from
Sandy's financial statements for such years.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
-------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue.................................. $50,247 $42,866 $34,975 $37,768 $34,866
Costs and expenses....................... 47,412 40,442 33,153 35,190 33,629
------- ------- ------- ------- -------
Operating income....................... 2,835 2,424 1,822 2,578 1,237
Other income (expense), net.............. (407) 141 118 (2) (387)
------- ------- ------- ------- -------
Income before income taxes and
cumulative effect of change in
accounting principle................ 2,428 2,565 1,940 2,576 850
Income taxes............................. 1,044 890 618 771 63
------- ------- ------- ------- -------
Income before cumulative effect of
change in accounting principle...... 1,384 1,675 1,322 1,805 787
Cumulative effect of the change in
accounting for income taxes......... -- -- -- 164 --
------- ------- ------- ------- -------
Net Income............................... $ 1,384 $ 1,675 $ 1,322 $ 1,969 $ 787
======= ======= ======= ======= =======
Net Income per common share:
Income before cumulative effect of
change in accounting principle...... $ 0.58 $ 0.71 $ 0.57 $ 0.78 $ 0.35
Cumulative effect of change in
accounting principle................ -- -- -- 0.07 --
------- ------- ------- ------- -------
Net Income per share*.................... $ 0.58 $ 0.71 $ 0.57 $ 0.85 $ 0.35
======= ======= ======= ======= =======
Cash dividends per share................. $ 0.16 $ 0.13 $ 0.09 $ 0.00 $ 0.00
======= ======= ======= ======= =======
BALANCE SHEET DATA:
Working Capital.......................... $11,382 $10,118 $ 9,039 $ 7,740 $ 5,122
Total Assets............................. 22,882 20,342 18,392 15,548 12,746
Deferred income taxes.................... (201) (298) (199) (59) 15
Long-term debt........................... 0 0 0 0 17
Stockholders' equity..................... 12,097 10,965 9,615 8,498 6,419
</TABLE>
- ---------------
* Based on weighted average common and common equivalent shares. See note H of
notes to consolidated financial statements, which are incorporated by
reference into this Proxy Statement/Prospectus.
31
<PAGE> 36
ADP
The table below sets forth selected consolidated financial data of ADP and
should be read in conjunction with the consolidated financial statements and
notes thereto that are incorporated by reference into this Proxy
Statement/Prospectus. The selected financial data as of June 30, 1995, 1994,
1993, 1992 and 1991 and for each of the years then ended are derived from the
ADP's financial statements for such years. The references to per share earnings
and dividends and other references with respect to ADP Common Stock in the
following table do not reflect the increased number of shares of ADP Common
Stock that would be outstanding after giving effect to the ADP Stock Split.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenue.......................... $2,893,742 $2,468,966 $2,223,374 $1,940,571 $1,771,751
---------- ---------- ---------- ---------- ----------
Cost of operations............... 2,335,122 2,001,796 1,816,995 1,586,725 1,463,952
Interest expense................. 24,340 20,840 19,819 12,266 8,169
---------- ---------- ---------- ---------- ----------
2,359,462 2,022,636 1,836,814 1,598,991 1,472,121
---------- ---------- ---------- ---------- ----------
Earnings before income taxes and
cumulative effect of accounting
changes........................ 534,280 446,330 386,560 341,580 299,630
Provision for income taxes....... 139,450 112,210 92,360 85,400 71,940
---------- ---------- ---------- ---------- ----------
Net earnings before cumulative
effect of accounting changes... 394,830 334,120 294,200 256,180 227,690
Cumulative effect of accounting
changes........................ -- (4,800) -- -- --
---------- ---------- ---------- ---------- ----------
Net earnings..................... $ 394,830 $ 329,320 $ 294,200 $ 256,180 $ 227,690
---------- ---------- ---------- ---------- ----------
Earnings per share:
Before cumulative effect of
accounting changes.......... $ 2.77 $ 2.37 $ 2.08 $ 1.84 $ 1.63
Cumulative effect of accounting
changes..................... -- (.03) -- -- --
---------- ---------- ---------- ---------- ----------
Net earnings................... $ 2.77 $ 2.34 $ 2.08 $ 1.84 $ 1.63
========== ========== ========== ========== ==========
Average number of common shares
outstanding.................... 142,556 140,890 141,327 139,045 139,936
---------- ---------- ---------- ---------- ----------
Cash dividends per share......... $ .625 $ .54 $ .475 $ .415 $ .3625
---------- ---------- ---------- ---------- ----------
Return on equity*................ 20.9% 21.0% 20.9% 22.1% 21.9%
At year end:
Cash, cash equivalents and
marketable securities....... $1,291,889 $1,062,190 $ 886,452 $ 741,357 $ 432,141
Working capital................ $ 667,920 $ 507,243 $ 355,047 $ 366,752 $ 299,488
Total assets................... $3,201,096 $2,711,751 $2,439,400 $2,169,300 $1,564,930
Long-term debt................. $ 390,177 $ 372,959 $ 347,583 $ 333,192 $ 49,052
Shareholders' equity........... $2,096,615 $1,691,251 $1,494,456 $1,296,728 $1,052,620
</TABLE>
- ---------------
* Before cumulative effect of accounting changes in 1994 (see notes to ADP's
consolidated financial statements, which are incorporated by reference into
this Proxy Statement/Prospectus).
32
<PAGE> 37
MARKET PRICE PER SHARE DATA
SANDY
Sandy Common Stock is listed on the American Stock Exchange under the
symbol SDY. The following table sets forth (i) the high and low closing prices
per share of Sandy Common Stock as reported on the American Stock Exchange and
the dividends per share paid on Sandy Common Stock for the quarterly periods
presented below, which periods correspond to Sandy's quarterly fiscal periods
for financial reporting purposes and (ii) the market value of Sandy Common Stock
(on an historical and equivalent basis) on August 21, 1995, the date preceding
public announcement of the Merger.
<TABLE>
<CAPTION>
FISCAL 1994 HIGH LOW DIVIDENDS
----------- ----- ----- ---------
<S> <C> <C> <C>
1st Quarter............................................... $6 5/8 $4 5/8 $0.03
2nd Quarter............................................... 7 1/4 5 5/8 0.03
3rd Quarter............................................... 9 3/8 5 5/8 0.03
4th Quarter............................................... 8 3/8 5 5/8 0.04
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1995 HIGH LOW DIVIDENDS
------------ ----- ----- ---------
<S> <C> <C> <C>
lst Quarter............................................... $ 8 3/8 $5 7/8 $0.04
2nd Quarter............................................... 8 5 5/8 0.04
3rd Quarter............................................... 10 7 0.04
4th Quarter............................................... 11 7/8 9 3/4 0.04
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1996 HIGH LOW DIVIDENDS
----------- ------ ----- ---------
<S> <C> <C> <C>
1st Quarter.............................................. $12 5/8 $11 1/4 --
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL EQUIVALENT
---------- ----------
<S> <C> <C>
AUGUST 21, 1995.......................................... $10 3/4 $ 11.13
</TABLE>
ADP
ADP Common Stock is listed and traded on the New York Stock Exchange under
the symbol AUD. The following table sets forth (i) the high and low sales prices
per share of ADP Common Stock as reported on the NYSE Composite Tape, and the
dividends per share paid on ADP Common Stock for the quarterly periods presented
below, which periods correspond to ADP's quarterly fiscal periods for financial
reporting purposes and (ii) the market value of ADP Common Stock (on an
historical basis) on August 21, 1995, the date preceding public announcement of
the Merger, in each case without giving effect to the ADP Stock Split.
<TABLE>
<CAPTION>
FISCAL 1994 HIGH LOW DIVIDENDS
----------- ----- ----- ---------
<S> <C> <C> <C>
1st Quarter............................................... $52 5/8 $47 $0.13
2nd Quarter............................................... 56 7/8 49 5/8 0.13
3rd Quarter............................................... 55 1/2 50 1/4 0.13
4th Quarter............................................... 55 1/4 47 5/8 0.15
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1995 HIGH LOW DIVIDENDS
----------- ----- ----- ---------
<S> <C> <C> <C>
lst Quarter............................................... $56 7/8 $50 3/4 $ 0.15
2nd Quarter............................................... 59 3/4 52 1/2 0.15
3rd Quarter............................................... 65 1/2 57 1/2 0.15
4th Quarter............................................... 66 60 1/2 0.175
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1996 HIGH LOW DIVIDENDS
----------- ----- ----- ---------
<S> <C> <C> <C>
1st Quarter............................................... $70 3/4 $61 7/8 $0.175
2nd Quarter (through November 30)......................... 79 5/8 68 --
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL
----------
<S> <C>
AUGUST 21, 1995........................................... $66 5/8
</TABLE>
33
<PAGE> 38
COMPARATIVE PER SHARE DATA
SANDY
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1993 1994 1995 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SANDY HISTORICAL
Book value per share as of August 31, 1995.... (a) (a) $ 5.20 $ 5.20
Cash dividends per share for the years ended
August 31.................................. $ .09 $.13 $ .16 $ .16
Net earnings per share for the years ended
August 31.................................. $ .57 $.71 $ .58 $ .58
SANDY EQUIVALENT PROFORMA
Book value per share as of August 31, 1995.... (a) (a) $ 2.44(b) $ 2.43(c)
Cash dividends per share for the years ended
August 31.................................. $ .079(b) $.09(b) $ .104(b) $ .104(c)
Net earnings per share for the years ended
August 31.................................. $ .35(b) $.39(b) $ .46(b) $ .42(c)
</TABLE>
- ---------------
(a) Not required
(b) Gives effect to the proforma combination of ADP and Sandy (combining the
June 30 financials of ADP and the August 31 financials of Sandy) expressed
in equivalent ADP shares using an assumed exchange ratio of 0.1670771 ADP
shares to 1 Sandy share before giving effect to the ADP Stock Split. The
assumed exchange ratio is based on the market value of ADP Common Stock on
November 30, 1995 (the last business day before the date of this Proxy
Statement/Prospectus).
(c) Gives effect to the proforma combination of ADP, Sandy and GSI (combining
the June 30 financials of ADP and GSI and the August 31 financials of Sandy
expressed in equivalent ADP shares using an assumed exchange ratio of
0.1670771 ADP shares to 1 Sandy share before giving effect to the ADP Stock
Split. The assumed exchange ratio is based on the market value of ADP
Common Stock on November 30, 1995 (the last business day before the date of
this Proxy Statement/Prospectus).
ADP
The data in the following table does not reflect the increased number of
shares of ADP Common Stock that would be outstanding after giving effect to the
ADP Stock Split.
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1993 1994 1995 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ADP HISTORICAL
Book value per share as of June 30, 1995........... (a) (a) $ 14.55 $ 14.53 (c)
Cash dividends per share for the years ended June
30.............................................. $ .475 $ .54 $ .625 $ .625(c)
Net earnings per share for the years ended
June 30......................................... $ 2.08 $ 2.34 $ 2.77 $ 2.52 (c)
ADP PROFORMA
Book value per share as of June 30, 1995........... (a) (a) $ 14.58(b) $ 14.56 (d)
Cash dividends per share for the years ended June
30.............................................. $ .475(b) $ .54(b) $ .625(b) $ .625(d)
Net earnings per share for the years ended
June 30......................................... $ 2.08(b) $ 2.34(b) $ 2.77(b) $ 2.52 (d)
</TABLE>
- ---------------
(a) Not required.
(b) Gives effect to the proforma combination of ADP and Sandy (combining the
June 30 financials of ADP and the August 31 financials of Sandy).
(c) Gives effect to the proforma combination of ADP and GSI. Book value, cash
dividends and net earnings per share would be $7.26, $.3125 and $1.26,
respectively, after giving effect to the ADP Stock Split.
(d) Gives effect to the proforma combination of ADP, Sandy and GSI. Book value,
cash dividends, and net earnings per share would be $7.28, $.3125 and
$1.26, respectively, after giving effect to the ADP Stock Split.
34
<PAGE> 39
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of Sandy Common Stock (i) by each person who is known by
Sandy to own beneficially more than 5% of the outstanding Shares of Sandy Common
Stock, (ii) by each of Sandy's Directors, (iii) by each of the executive
officers of Sandy named as such in Sandy's Annual Report on Form 10-K for the
fiscal year ended August 31, 1995, and (iv) by all of Sandy's executive officers
and directors, as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE OF
COMMON STOCK BENEFICIALLY SHARES OUTSTANDING
NAME OF OWNED AS OF AS OF NOVEMBER 20,
BENEFICIAL OWNER NOVEMBER 20, 1995(1) 1995(1)
------------------ ---------------------------- ------------------
<S> <C> <C>
Richard J. Burstein................................ 2,000(2) *
Steven A. Cohen.................................... 225,800(6) 9.7%
George J. Forrest.................................. 57,500(2)(3) 2.5%
David A. Gugala.................................... 1,000 *
Raymond A. Ketchledge.............................. 83,891(4) 3.6%
Alan V. Kidd....................................... 60,000 2.6%
Jay W. Lorsch...................................... 2,710(2) *
Alan M. Sandy...................................... 65,300 2.8%
Lewis G. Sandy..................................... 44,600 1.9%
William H. Sandy................................... 450,522(5) 19.4%
John T. Sheehy..................................... 21,500(2) *
Frederic H. Strickland............................. 0 --
Richard T. White................................... 0 --
</TABLE>
- ---------------
* Less than 1%.
(1) "Beneficial Ownership" is deemed to include shares for which an individual,
directly or indirectly, has or shares voting or investment power, or both.
(2) Includes 2,000 shares that the individual would have the right to acquire
within 60 days of November 20, 1995 pursuant to stock options exercisable
within such period.
(3) Includes 55,500 shares held by George J. Forrest as trustee for the benefit
of George J. Forrest under a trust agreement dated April 28, 1978. Does not
include 129,900 shares beneficially owned by adult children of Mr. Forrest.
(4) Includes 30,000 shares that Mr. Ketchledge would have the right to acquire
within 60 days of November 20, 1995 pursuant to stock option exercisable by
him within such period.
(5) Includes 430,422 shares held by William H. Sandy under a trust agreement
dated November 25, 1978; 12,300 shares owned outright by William H. Sandy;
and 7,800 shares owned by Marjorie M. Sandy (Mr. Sandy's wife). Mr. William
H. Sandy's address is 1500 W. Big Beaver Road, Troy, Michigan 48084.
(6) Includes 155,800 shares owned directly by Mr. Cohen and 70,000 shares owned
by S.A.C. Capital Management, L.P., a limited partnership in which Mr. Cohen
is a general partner. Mr. Cohen's address is 520 Madison Avenue, 7th Floor,
New York, NY 10022. This information is taken from Schedule 13D, as filed
with the Securities and Exchange Commission, Washington, D.C., on April 11,
1995.
All directors and officers as a group beneficially owned 789,023 shares
(33.5%) of Common Stock as of November 20, 1995, including 38,000 shares subject
to stock options which may be exercised within 60 days of November 20, 1995.
35
<PAGE> 40
COMPARISON OF STOCKHOLDER RIGHTS
At the Effective Time, the shareholders of Sandy will become stockholders
of ADP. As shareholders of Sandy, their rights are currently governed by
Michigan law and by the Sandy Articles and the Sandy By-laws. As stockholders of
ADP, their rights will be governed by Delaware law and by the Amended and
Restated Certificate of Incorporation of ADP (the "ADP Certificate") and the
By-laws of ADP (the "ADP By-laws"). The following discussion summarizes the
material differences between the rights of holders of Sandy Common Stock and
holders of ADP Common Stock and certain of the differences between the Sandy
Articles and the ADP Certificate and between the Sandy By-laws and the ADP
By-laws. This summary does not purport to be complete and is qualified in its
entirety by reference to the Sandy Articles and Sandy By-laws, the ADP
Certificate and ADP By-laws and the relevant provisions of Michigan and Delaware
law.
SPECIAL MEETING OF SHAREHOLDERS
Michigan law provides that special meetings of shareholders may be called
by the board or by officers, directors or shareholders as provided in a
corporation's by-laws. In addition, a special meeting may be called by a court
on application of the holders of not less than 10% of the shares entitled to
vote at a meeting. The Sandy By-laws provide that special meetings of the
shareholders may be called by the Chairman of the Board, by the President, by a
majority of the Board of Directors or at the request in writing of the holders
of not less than ten percent of all shares entitled to vote at a meeting.
Delaware law provides that special meetings of stockholders may be called only
by the directors or by any other person as may be authorized by the
corporation's certificate of incorporation or by-laws. The ADP By-laws provide
that special meetings may be called by the President or the Secretary upon
requisition in writing from two directors, or holders of one-third of the issued
and outstanding shares of ADP Common Stock, or by resolution of the Board of
Directors.
INSPECTION RIGHTS
Inspection rights under Michigan and Delaware law are substantially
similar. In both states, stockholders, upon the demonstration of a proper
purpose, have the right to inspect a corporation's stock ledger, stockholder
list and other books and records.
ACTION BY CONSENT OF SHAREHOLDERS
Under Michigan law, the articles of incorporation may provide that any
action to be taken by the shareholders may be taken without a meeting, without
prior notice, and without a vote, if consents in writing, setting forth the
action so taken, are signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
the action at a meeting at which all shares entitled to vote on the action were
present. The Sandy Articles do not provide otherwise, except that any action
taken by written consent of the shareholders will not be effective unless the
proposed action is approved by the Board of Directors before the consent of
shareholders is executed. Delaware law similarly allows action without a
stockholders' meeting absent a provision to the contrary in the certificate of
incorporation. The ADP Certificate does not provide otherwise.
CUMULATIVE VOTING
Under Michigan and Delaware law, a corporation may provide in its charter
for cumulative voting by stockholders in elections of directors (i.e., each
stockholder casts as many votes for directors as he or she has shares of stock
multiplied by the number of directors to be elected). The Sandy Articles do not
provide for cumulative voting. The ADP Certificate does not provide for
cumulative voting.
DIVIDENDS AND REPURCHASE OF STOCK
Under Michigan law, subject to restriction by the articles of
incorporation, a corporation may pay dividends to its shareholders unless after
such a distribution the corporation would not be able to pay its debts as they
became due in the usual course of business, or the corporation's total assets
would be less than the sum of total liabilities plus the amount that would be
needed to satisfy the dissolution rights of shareholders whose
36
<PAGE> 41
preferential rights are superior to those receiving the distribution. The Sandy
Articles do not provide for dividend restrictions beyond those imposed by
Michigan law. Under Delaware law, a corporation generally is permitted to
declare and pay dividends out of surplus or out of net profits for the current
and/or preceding fiscal year, provided that such dividends will not reduce
capital below the aggregate amount of capital represented by the issued and
outstanding stock of all classes having a preference upon the distribution of
assets.
Also, under Delaware law, a corporation may generally redeem or repurchase
shares of its stock if such redemption or repurchase will not impair the capital
of the corporation. Under Michigan law, a corporation may acquire its own shares
subject to restrictions imposed by its articles of incorporation. The Sandy
Articles do not impose any such restrictions.
CLASSIFICATION OF THE BOARD OF DIRECTORS
Michigan and Delaware law permit (but do not require) classification of a
corporation's board of directors into one, two or three classes. The Sandy
Articles do not provide for the creation of more than one class of director. The
ADP Certificate also does not provide for the creation of more than one class of
director.
REMOVAL OF DIRECTORS
Under Michigan and Delaware law, unless the charter provides otherwise,
stockholders may generally remove directors with or without cause by a majority
vote. In Delaware, however, stockholders may remove members of classified boards
only for cause unless the certificate of incorporation provides otherwise. The
Sandy Articles do not provide otherwise. The ADP By-laws provide for removal of
directors at any time, with or without cause, by the vote of the holders of a
majority of the shares of ADP Common Stock.
VACANCIES ON THE BOARD OF DIRECTORS
Under both Michigan and Delaware law, unless otherwise provided in the
charter or by-laws, vacancies on the board of directors and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by the remaining directors or by the shareholders. The Sandy
Articles and the Sandy By-laws do not provide otherwise. The ADP By-laws provide
that any vacancy may be filled by the majority vote of the remaining directors
at any regular or special meeting of the Board of Directors, or by the
stockholders at the next annual or at any special meeting called for such
purpose.
EXCULPATION OF DIRECTORS
Michigan and Delaware law have substantially similar provisions relating to
exculpation of directors. Each state's law permits, and the ADP Certificate and
the Sandy Articles provide that no director shall be personally liable to the
corporation or any of their respective stockholders for monetary damages for
breaches of fiduciary duty except where such exculpation is expressly
prohibited. Both Michigan and Delaware law prohibit exculpation (i) for a breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or that involve intentional misconduct
or knowing violation of law, (iii) for unlawful payments of dividends or (iv)
for any transaction from which the director derived an improper personal
benefit. Michigan also prohibits exculpation (x) for unlawful loans to the
directors, officers or employees of the corporation or its subsidiary and (y)
for unlawful distributions to shareholders during or after dissolution of the
corporation without paying or providing as required for the debts, obligations
and liabilities of the corporation. Delaware also prohibits exculpation for
unlawful redemptions of capital stock.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Both Michigan and Delaware law generally permit indemnification of
directors and officers for expenses incurred by them by reason of their position
with the corporation, if the director or officer has acted in good faith with
the reasonable belief that his conduct was in the best interest of the
corporation and not unlawful. However, Delaware law, unlike Michigan law, does
not permit a corporation to indemnify persons against judgments in actions
brought by or in the right of the corporation unless the Delaware Court of
Chancery
37
<PAGE> 42
approves the indemnification. The Sandy By-laws provide that its officers,
directors, employees and agents shall be indemnified to the fullest extent
authorized or permitted by the MBCA. The ADP Certificate provides that its
officers and directors shall be indemnified to the full extent permitted under
Delaware Law.
INTERESTED DIRECTOR TRANSACTION
Michigan and Delaware have substantially similar laws with regard to
interested director transactions. Both states provide that no transaction
between a corporation and one or more of its directors or officers or an entity
in which one or more of its directors or officers are directors or officers or
have a financial interest shall be void or voidable solely for that reason, or
solely because the director or officer is present at, participates in or votes
at the meeting of the board of directors or committee which authorizes the
transaction. In order that such a transaction not be found void or voidable, it
must, after disclosure of material facts, be approved by the disinterested
directors, a committee of disinterested directors or the stockholders, or the
transaction must be fair as to the corporation.
SALE, LEASE OR EXCHANGE OF ASSETS AND MERGERS
Michigan law requires approval of a merger by the holders of a majority of
the outstanding shares of the corporation entitled to vote on the plan of
merger, and, if a class or series is entitled to vote on the plan as a class, a
majority of these shareholders as well. For a sale, lease or exchange of all or
substantially all of a corporation's property in the usual and regular course of
its business, Michigan law does not require shareholder approval. However, where
such a sale, lease or exchange is not in the usual and regular course of
business Michigan law requires approval by holders of a majority of the
outstanding shares of the corporation entitled to vote. The Sandy Articles do
not provide otherwise.
Delaware law requires the approval of the directors and the vote of holders
of a majority of the outstanding stock entitled to vote thereon for the sale,
lease or exchange of all or substantially all of a corporation's property and
assets or a merger or consolidation of the corporation into any other
corporation, although the certificate of incorporation may require a higher
stockholder vote. The ADP Certificate does not require a higher vote.
AMENDMENTS TO CHARTER
Under both Michigan and Delaware law, charter amendments require the
approval of the holders of a majority of the outstanding stock and a majority of
each class of stock outstanding and entitled to vote thereon as a class, unless
the certificate of incorporation requires a greater proportion. The Sandy
Articles do not require a greater proportion. The ADP certificate does not
require a greater proportion.
AMENDMENTS TO BY-LAWS
Under Michigan law, the board or the shareholders may amend a corporation's
by-laws, unless the articles of incorporation reserve this power exclusively to
the shareholders. The Sandy Articles do not reserve this power exclusively to
the shareholders. Delaware law provides that stockholders may amend a
corporation's by-laws and, if provided in its charter, the board of directors
also has the power. The ADP Certificate confers amending power on the Board of
Directors subject to further amendment by the stockholders.
APPRAISAL RIGHTS
The rights of dissenting stockholders to obtain the fair value of their
shares (so-called "appraisal rights") are similarly limited under Michigan and
Delaware law. Michigan law allows appraisal rights by statute for a statutory
merger, a sale or exchange of all or substantially all of the property of the
corporation other than in the usual and regular course of business and for some
amendments to the articles of incorporation. However, Michigan law, similar to
Delaware law, does not allow appraisal rights where the corporation's shares are
listed on a national securities exchange or held of record by not less than
2,000 persons; nor are appraisal rights available in a transaction where
shareholders receive cash or shares that satisfy this standard. Given that the
Sandy Common Stock is listed on a national securities exchange, and that the ADP
Common Stock that
38
<PAGE> 43
Sandy shareholders are to receive in this Merger is listed on a national
securities exchange as well, no appraisal rights are available to Sandy
shareholders under Michigan law.
Under Delaware law, appraisal rights may be available in connection with a
statutory merger or consolidation in certain specific situations. Appraisal
rights are not available under Delaware law when a corporation is to be the
surviving corporation and no vote of its stockholders is required to approve the
merger. In addition, unless otherwise provided in the charter, no appraisal
rights are available under Delaware law to holders of shares of any class of
stock which is either: (a) listed on a national securities exchange or
designated as a national market system security on an inter-dealer quotation
system by the National Association of Securities Dealers, Inc. or (b) held of
record by more than 2,000 stockholders, unless such stockholders are required by
the terms of the merger to accept anything other than: (i) shares of stock of
the surviving corporation; (ii) shares of stock of another corporation which are
or will be so listed on a national securities exchange or designated as a
national market system security on an inter-dealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 stockholders; (iii) cash in lieu of fractional shares of such stock; or
(iv) any combination thereof. Appraisal rights are not available under Delaware
law in the event of sale, lease or exchange of all or substantially all of a
corporation's assets or the adoption of an amendment to its certificate of
incorporation, unless such rights are granted in the corporation's certificate
of incorporation. The ADP Certificate does not grant such rights. No appraisal
rights are available to ADP stockholders pursuant to this Merger.
"ANTI-TAKEOVER" STATUTES
Business Combination Statute. Chapters 7A and 7B of the MBCA restrict the
ability of certain persons to acquire control of a Michigan corporation. In
general, under Chapter 7A, "business combinations" (defined to include, among
other transactions, certain mergers, dispositions of assets or shares and
recapitalizations) between covered Michigan business corporations or their
subsidiaries and an "interested shareholder" (defined as the direct or indirect
beneficial owner of at least 10% of the voting power of a covered corporation's
outstanding shares) can be consummated only if approved by at least 90% of the
votes of each class of the corporation's shares entitled to vote and by at least
two-thirds of such voting shares not held by the interested shareholder or such
shareholder's affiliates, unless five years have elapsed after the person
involved became an "interested shareholder" and unless certain price and other
conditions are satisfied. The board of directors may exempt "business
combinations" with a particular "interested shareholder" by resolution adopted
prior to the time the "interested shareholder" attained that status. ADP is not
an "interested shareholder" as defined in Chapter 7A and therefore this
provision does not apply to the transactions contemplated by the Merger.
Delaware's business combination statute provides that, if a person acquires
15% or more of the stock of a Delaware corporation without the approval of the
board of directors of that corporation (an "interested stockholder") he may not
engage in certain transactions with the corporation for a period of three years.
The Delaware statute includes certain exceptions to this prohibition; for
example, if the board of directors approves the acquisition of stock or the
transaction prior to the time that the person became an interested stockholder,
or if the interested stockholder acquires 85% of the voting stock of the
corporation (excluding voting stock owned by directors who are also officers and
certain employee stock plans) in one transaction, or if the transaction is
approved by the board of directors and by the affirmative vote of two-thirds of
the outstanding voting stock which is not owned by the interested stockholder.
Control Share Acquisition. Under Chapter 7B of the MBCA, an entity that
acquires "Control Shares" of a corporation may vote the Control Shares on any
matter only if a majority of all shares, and of all non "Interested Shares," of
each class of shares entitled to vote as a class, approve such voting rights.
Interested Shares are shares owned by officers of a corporation,
employee-directors of a corporation and the entity making the Control Share
Acquisition. Control Shares are shares that, when added to shares already owned
by an entity, would give the entity voting power in the election of directors
over any of three thresholds: one-fifth, one-third and a majority. The effect of
the statute is to condition the acquisition of voting control of a corporation
on the approval of a majority of the pre-existing disinterested shareholders.
Chapter 7B provides that the acquisition of any shares of an issuing public
corporation does not constitute a control share
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<PAGE> 44
acquisition if the issuing public corporation is a party to an agreement of
merger. Chapter 7B therefore does not apply to the transactions contemplated by
the Merger.
Delaware does not have a control share statute.
OTHER MATTERS
It is not expected that any matters other than those described in this
Proxy Statement/Prospectus will be brought before the Sandy Special Meeting. If
any other matters are presented, however, it is the intention of the persons
named in the Sandy proxy to vote the proxy in accordance with the discretion of
the persons named in such proxy.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
offered hereby will be passed upon for ADP by James B. Benson, Esq., Corporate
Vice President and General Counsel of ADP. As of the date hereof, Mr. Benson
beneficially owns 15,881 shares of ADP Common Stock. Certain legal matters in
connection with the Merger will be passed upon for Sandy by Honigman Miller
Schwartz and Cohn, Detroit, Michigan. Partners of Honigman Miller Schwartz and
Cohn beneficially own an aggregate of 42,061 shares of Sandy Common Stock.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this Proxy Statement/Prospectus by reference from the ADP Annual
Report on Form 10-K for the fiscal year ended June 30, 1995 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The financial statements and the related financial statement schedule
incorporated in this Proxy Statement/Prospectus by reference from the Sandy
Annual Report on Form 10-K for the fiscal year ended August 31, 1995 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
Representatives of Deloitte & Touche LLP expect to be present at the Sandy
Special Meeting, and, while they do not plan to make a statement at the Sandy
Special Meeting, such representatives will be available to respond to
appropriate questions from shareholders in attendance.
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<PAGE> 45
ANNEX A
<PAGE> 46
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ADP MERGERCO, INC.,
A MICHIGAN CORPORATION
AND
AUTOMATIC DATA PROCESSING, INC.,
A DELAWARE CORPORATION
AND
SANDY CORPORATION,
A MICHIGAN CORPORATION
DATED AS OF
AUGUST 22, 1995
<PAGE> 47
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
THE MERGER.............................................................................. 1
1.1 The Merger....................................................................... 1
1.2 Effect on Outstanding Shares of Sandy Common Stock; ADP Mergerco Common Stock.... 2
1.3 Exchange Ratio................................................................... 2
1.4 Rights of Holders of Sandy Common Stock; ADP Common Stock........................ 2
1.5 No Fractional Shares............................................................. 3
1.6 Procedure for Exchange of Stock.................................................. 3
1.7 Stock Options.................................................................... 4
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ADP MERGERCO AND ADP.................................. 5
2.1 Due Organization................................................................. 5
2.2 Due Authorization................................................................ 5
2.3 Assets and Liabilities........................................................... 5
2.4 Compliance with Laws............................................................. 6
2.5 Claims and Proceedings........................................................... 6
2.6 Financial Statements and Reports................................................. 6
2.7 Capitalization................................................................... 7
2.8 ADP Common Stock................................................................. 7
2.9 Options.......................................................................... 7
2.10 Additional Rights................................................................ 7
2.11 Dividends and Stock Purchases.................................................... 7
2.12 Shareholder Notice............................................................... 7
2.13 Brokers and Finders.............................................................. 7
2.14 Reorganization................................................................... 7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SANDY................................................. 8
3.1 Due Organization................................................................. 8
3.2 Due Authorization................................................................ 8
3.3 No Consents...................................................................... 8
3.4 Assets and Liabilities........................................................... 8
3.5 Properties....................................................................... 8
3.6 Licenses and Permits............................................................. 9
3.7 Intellectual Rights.............................................................. 9
3.8 Compliance with Laws............................................................. 9
3.9 Employee Plans................................................................... 9
3.10 Contracts and Agreements......................................................... 11
3.11 Claims and Proceedings........................................................... 11
3.12 Insurance........................................................................ 11
3.13 Financial Statements and Reports................................................. 11
3.14 Taxes............................................................................ 12
3.15 Business Relations............................................................... 12
3.16 Brokers and Finders.............................................................. 13
3.17 Notes and Accounts Receivable.................................................... 13
</TABLE>
i
<PAGE> 48
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3.18 Information Furnished to ADP..................................................... 13
3.19 Capitalization................................................................... 13
3.20 Options.......................................................................... 13
3.21 Sandy Dividends and Stock Purchases.............................................. 13
3.22 Subsidiaries..................................................................... 13
3.23 Customers........................................................................ 13
3.24 Submission to Vote............................................................... 14
3.25 Information to be Provided....................................................... 14
3.26 Shareholder Vote................................................................. 14
3.27 Labor Matters.................................................................... 14
3.28 Ordinary Course.................................................................. 14
3.29 Chapter 7A and Chapter 7B of MBCA................................................ 14
3.30 Pooling of Interests............................................................. 14
3.31 Fixed Assets; Sufficiency of Assets.............................................. 14
3.32 Leased Properties................................................................ 14
3.33 Licensed Properties.............................................................. 14
3.34 Loan Agreements, Debt Instruments and Guarantees................................. 15
3.35 Employees; Employment Practices; Compensation and Vacations...................... 15
3.36 Capital Expenditures............................................................. 15
3.37 Bank Accounts and Safe Deposit Boxes; Powers of Attorney......................... 15
3.38 Casualty Losses.................................................................. 15
3.39 Transactions with Affiliates..................................................... 15
3.40 Reorganization................................................................... 15
ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS..................................................... 16
4.1 Conduct of Sandy's Business...................................................... 16
4.2 Conduct of Business by ADP....................................................... 17
4.3 Shareholder Approval............................................................. 17
4.4 Other Agreements................................................................. 18
4.5 Notification of Certain Matters.................................................. 18
4.6 Access to Information............................................................ 18
4.7 Public Announcements............................................................. 18
ARTICLE 5
CLOSING................................................................................. 19
5.1 Conditions to ADP Mergerco's and ADP's Obligations............................... 19
5.2 Conditions to Sandy's Obligations................................................ 22
5.3 Closing and Effective Time....................................................... 23
ARTICLE 6
TERMINATION AND ABANDONMENT............................................................. 24
6.1 Termination and Abandonment...................................................... 24
6.2 Effect of Termination............................................................ 24
</TABLE>
ii
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 7
MISCELLANEOUS........................................................................... 24
7.1 Entire Agreement................................................................. 24
7.2 Amendment........................................................................ 24
7.3 Waiver........................................................................... 24
7.4 Intentionally Left Blank......................................................... 24
7.5 Successors and Assigns........................................................... 24
7.6 Fees and Expenses................................................................ 24
7.7 Severability..................................................................... 25
7.8 Waiver........................................................................... 25
7.9 Notices.......................................................................... 25
7.10 Non-Survival of Representations, Warranties, and Covenants....................... 26
7.11 Fiduciary Duties................................................................. 26
7.12 Indemnification and Insurance.................................................... 26
7.13 Knowledge........................................................................ 27
7.14 Governing Law.................................................................... 27
7.15 Headings......................................................................... 27
7.16 Sections; Exhibits............................................................... 27
7.17 Number and Gender of Words....................................................... 27
7.18 Counterparts..................................................................... 27
7.19 Definitions...................................................................... 27
</TABLE>
EXHIBIT A -- Plan of Merger
SCHEDULES
<TABLE>
<S> <C>
SCHEDULE 3.3 -- Consents
SCHEDULE 3.6 -- Licenses
SCHEDULE 3.7 -- Intellectual Rights
SCHEDULE 3.9 -- Employee Plans
SCHEDULE 3.10 -- Contracts and Agreements
SCHEDULE 3.11 -- Sandy Claims and Proceedings
SCHEDULE 3.12 -- Insurance
SCHEDULE 3.13 -- Acquisition Expenses
SCHEDULE 3.14 -- Taxes
SCHEDULE 3.15 -- Business Relations
SCHEDULE 3.17 -- Notes and Accounts Receivables
SCHEDULE 3.20 -- Options
SCHEDULE 3.21 -- Sandy Dividends and Stock Purchases
SCHEDULE 3.22 -- Subsidiaries
SCHEDULE 3.23 -- Customers
SCHEDULE 3.32 -- Leased Properties
SCHEDULE 3.33 -- Licensed Properties
SCHEDULE 3.34 -- Debt Instruments
SCHEDULE 3.35 -- Employees
SCHEDULE 3.36 -- Capital Expenditures
SCHEDULE 3.37 -- Bank Accounts
</TABLE>
iii
<PAGE> 50
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of August 22, 1995, by and among ADP Mergerco, Inc., a Michigan
corporation ("ADP Mergerco"), Automatic Data Processing, Inc., a Delaware
corporation and owner of all of the outstanding capital stock of ADP Mergerco
("ADP") and Sandy Corporation, a Michigan corporation ("Sandy").
R E C I T A L S
WHEREAS, the respective boards of directors of ADP Mergerco and Sandy have
approved the merger of ADP Mergerco with and into Sandy (the "Merger") under the
Michigan Business Corporation Act (the "MBCA") in accordance with the provisions
of this Agreement and the Plan of Merger (the "Plan") in substantially the form
attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions set forth in this Agreement,
and in order to set forth the terms and conditions of the Merger and the mode of
carrying the Merger into effect, the parties agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger.
(a) Upon the terms and subject to the conditions set forth in this
Agreement and the Plan, and in accordance with the MBCA, at the Effective Time
(such term and all other capitalized terms used herein having the respective
meanings set forth in Section 7.19 hereof), ADP Mergerco will be merged with and
into Sandy. As a result of the Merger, the separate corporate existence of ADP
Mergerco will cease and Sandy shall continue as the surviving corporation of the
Merger (the "Surviving Corporation") under its present corporate name.
(b) On the Closing Date, or as soon thereafter as practicable, the parties
will execute and file with the Department of Commerce of the State of Michigan,
a Certificate of Merger in accordance with the MBCA. The Merger will become
effective upon the filing of such Certificate of Merger in accordance with
Sections 131 and 707 of the MBCA (the "Effective Time"). At the Effective Time,
ADP Mergerco will be merged with and into Sandy.
(c) The Articles of Incorporation and Bylaws of ADP Mergerco in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and Bylaws of the Surviving Corporation until thereafter amended in accordance
with the provisions therein and as provided by the MBCA. The initial directors
of the Surviving Corporation shall be the directors of ADP Mergerco immediately
prior the Effective Time, in each case until their successors are elected and
qualified, and the initial officers of the Surviving Corporation shall be the
officers of ADP Mergerco immediately prior to the Effective Time, in each case
until their successors are duly elected and qualified.
(d) The parties will structure the Merger so that it will be accounted for
by ADP and Sandy as a pooling of interests in accordance with generally accepted
accounting principles ("GAAP") and applicable rules and regulations of the
Securities and Exchange Commission (the "SEC"). Subject to the terms and
conditions hereof, each party will use its best efforts and will take all
actions and do all things necessary or appropriate to obtain such accounting
treatment.
(e) The parties intend to structure the Merger so that it will be treated
for federal income tax purposes as a tax-free reorganization pursuant to Section
368 of the Internal Revenue Code and, subject to the terms and conditions
hereof, each party will take all reasonable actions to obtain such tax
treatment.
<PAGE> 51
1.2 Effect on Outstanding Shares of Sandy Common Stock; ADP Mergerco Common
Stock.
To effectuate the Merger, and subject to the terms and conditions of this
Agreement and the Plan, at the Effective Time:
(a) each share of Sandy common stock, par value $.01 per share (the "Sandy
Common Stock"), which is issued and outstanding immediately prior to the
Effective Time shall be converted into and exchangeable for shares of common
stock, par value $.10 per share, of ADP ("ADP Common Stock") at the Exchange
Ratio and ADP shall issue to holders of Sandy Common Stock shares of ADP Common
Stock based on the Exchange Ratio in exchange for the outstanding shares of
Sandy Common Stock, and pay cash in lieu of any fractional share as provided in
Section 1.5 hereof;
(b) each share of Sandy Common Stock held as treasury stock of Sandy
immediately prior to the Effective Time shall be canceled, retired and cease to
exist, and no exchange or payment shall be made in respect thereof; and
(c) each share of common stock, par value $.01 per share, of ADP Mergerco
which is issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable share
of common stock of the Surviving Corporation.
1.3 Exchange Ratio.
(a) If the Average ADP Stock Price is equal to or greater than $58.764 and
less than or equal to $71.823, then the Exchange Ratio shall be (rounded to the
seventh decimal place) (i) $12.00, divided by (ii) the Average ADP Common Stock
Price (the "Exchange Ratio"). The "Average ADP Common Stock Price" means the
average of the daily closing sales prices of ADP Common Stock as reported on the
New York Stock Exchange ("NYSE") (as reported by The Wall Street Journal or, if
not reported thereby, as reported by another authoritative source as mutually
agreed by ADP and Sandy) for the 10 consecutive full trading days ending on the
Determination Date. The "Determination Date" shall mean the third business day
immediately prior to the later of (i) the date (as originally scheduled in the
notice mailed to Sandy's shareholders, and without giving effect to any
adjournments or postponements) of the Sandy meeting of shareholders to obtain
the shareholder approval referred to in Section 4.3 hereof and (ii) the date on
which the last regulatory approval required to consummate the Merger has been
obtained and all statutory or regulatory waiting periods in respect thereof have
expired or been terminated.
(b) If the Average ADP Stock Price is less than $58.764, then the Exchange
Ratio shall be 0.2042054.
(c) If the Average ADP Stock Price is greater than $71.823, then the
Exchange Ratio shall be 0.1670771.
(d) If, from and including the date hereof through the Effective Time,
shares of ADP Common Stock shall be changed into a different number of shares or
a different class of shares by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or if a stock
dividend thereon shall be declared with a record date within such period, then
the computation of the Average ADP Common Stock Price shall be appropriately and
proportionately adjusted.
1.4 Rights of Holders of Sandy Common Stock; ADP Common Stock.
(a) At and after the Effective Time and until surrendered for exchange,
each outstanding stock certificate which immediately prior to the Effective Time
represented shares of Sandy Common Stock shall be deemed for all purposes,
except as contemplated by Section 1.6(c), to evidence ownership of and to
represent the number of whole shares of ADP Common Stock into which such shares
of Sandy Common Stock shall have been converted, and the record holder of such
outstanding certificate shall, after the Effective Time, be entitled to vote the
shares of ADP Common Stock into which such shares of Sandy Common Stock shall
have been converted on any matters on which the holders of record of ADP Common
Stock, as of any date subsequent to the Effective Time, shall be entitled to
vote. In any matters relating to such certificates theretofore evidencing shares
of outstanding Sandy Common Stock, ADP may rely conclusively upon the
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<PAGE> 52
record of shareholders maintained by Sandy containing the names and addresses of
the holders of record of Sandy Common Stock immediately prior to the Effective
Time.
(b) At and after the Effective Time, ADP shall reserve a sufficient number
of authorized but non-outstanding shares of ADP Common Stock for issuance or
exchange in connection with the conversion of Sandy Common Stock into ADP Common
Stock.
1.5 No Fractional Shares. No fractional shares of ADP Common Stock, and no
certificates representing such fractional shares, shall be issued upon the
surrender for exchange of certificates representing Sandy Common Stock. In lieu
of any fractional share, ADP shall pay to each holder of Sandy Common Stock who
otherwise would be entitled to receive a fractional share of ADP Common Stock an
amount of cash (without interest) determined by multiplying (a) the Average ADP
Common Stock Price times (b) the fractional share interest to which such holder
would otherwise be entitled.
1.6 Procedure for Exchange of Stock.
(a) After the Effective Time, holders of certificates theretofore
evidencing outstanding shares of Sandy Common Stock, upon surrender of such
certificates to Chemical-Mellon Shareholder Services, as exchange agent (in such
capacity, the "Exchange Agent"), shall be entitled to receive, (i) certificates
representing the number of whole shares of ADP Common Stock into which shares of
Sandy Common Stock theretofore represented by the certificates so surrendered
shall have been converted as provided in Section 1.2(a) hereof and (ii) cash
payments in lieu of fractional shares, if any, as provided in Section 1.5
hereof. As soon as practicable after the Effective Time, ADP shall cause the
Exchange Agent to mail appropriate and customary transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Sandy Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent) to each
holder of Sandy Common Stock of record as of the Effective Time advising such
holder of the effectiveness of the Merger and the procedure for surrendering to
the Exchange Agent outstanding certificates formerly evidencing Sandy Common
Stock in exchange for new certificates for ADP Common Stock and cash in lieu of
fractional shares. ADP shall not be obligated to deliver or cause the Exchange
Agent to deliver the consideration to which any former holder of shares of Sandy
Common Stock is entitled as a result of the Merger until such holder surrenders
the certificate or certificates representing such shares for exchange as
provided in such transmittal materials and this Section 1.6(a). Upon surrender
to the Exchange Agent of a certificate formerly representing shares of Sandy
Common Stock, together with duly executed transmittal materials, ADP shall
promptly (i) issue or cause to be issued to the persons entitled thereto a
certificate representing the number of whole shares of ADP Common Stock that
such persons are entitled to receive pursuant to Section 1.2 hereof and (ii)
distribute or cause to be distributed to the persons entitled thereto cash in
lieu of fractional shares in the amount determined pursuant to Section 1.5
hereof. Upon surrender, each certificate theretofore evidencing Sandy Common
Stock shall be cancelled. If any certificate evidencing shares of ADP Common
Stock is to be issued to a person other than the person in whose name the
certificate surrendered is registered, it shall be a condition to the issuance
of ADP Common Stock that the certificate so surrendered shall be properly
endorsed or be otherwise in proper form for transfer and that the person
requesting such exchange shall pay all transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
certificate surrendered (or establish to the satisfaction of ADP that such tax
has been paid or is not applicable).
(b) At or promptly after the Effective Time, ADP shall deposit with the
Exchange Agent, for exchange in accordance with this Section 1.6, certificates
representing the shares of ADP Common Stock and cash in lieu of fractional
shares (such certificates and cash are hereinafter referred to as the "Exchange
Fund") to be issued or paid by ADP pursuant to this Article 1 in connection with
the Merger. After the Effective Time, ADP shall, on each payment or distribution
date, tender to the Exchange Agent as an addition to the Exchange Fund all
dividends and other distributions applicable to certificates held in the
Exchange Fund.
(c) Until outstanding certificates formerly representing Sandy Common Stock
are surrendered as provided in Section 1.6(a) hereof, no dividend or
distribution payable to holders of record of ADP Common Stock shall be paid to
any holder of such outstanding certificates, but upon surrender of such
outstanding certificates by such holder there shall be paid to such holder out
of the Exchange Fund the amount of any
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<PAGE> 53
dividends or distributions (without interest) theretofore payable with respect
to such whole shares of ADP Common Stock, but not paid to such holder, and which
dividends or distributions had a record date occurring subsequent to the
Effective Time.
(d) After the Effective Time, there shall be no further registration of
transfers on the records of Sandy of outstanding certificates formerly
representing shares of Sandy Common Stock, and if a certificate formerly
representing such shares is presented to Sandy or ADP, it shall be forwarded to
the Exchange Agent for cancellation and exchange for certificates representing
shares of ADP Common Stock as herein provided.
(e) All shares of ADP Common Stock and cash for any fractional shares
issued and paid upon the surrender for exchange of certificates theretofore
evidencing shares of Sandy Common Stock in accordance with the above terms and
conditions shall be deemed to have been issued and paid in full satisfaction of
all rights pertaining to the underlying shares of Sandy Common Stock.
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof or any ADP Common Stock) that remains unclaimed by the
holders of Sandy Common Stock for 12 months after the Effective Time shall be
returned or repaid to ADP. Any holders of certificates theretofore evidencing
shares of Sandy Common Stock who have not theretofore complied with this Section
1.6 shall thereafter look only to ADP for payment of their shares of ADP Common
Stock, cash in lieu of fractional shares and any unpaid dividends and
distributions on the ADP Common Stock deliverable in respect of each share of
Sandy Common Stock that such holder holds as determined pursuant to this
Agreement, in each case, without any interest thereon. If outstanding
certificates for shares of Sandy Common Stock are not surrendered or the payment
for them not claimed prior to the date on which such payments would otherwise
escheat to or become the property of any governmental unit or agency, the
unclaimed items shall, to the extent not prohibited by abandoned property and
any other applicable law, become the property of ADP (and to the extent not in
its possession shall be paid over to it), free and clear of all claims or
interest of any person previously entitled to such claims. Notwithstanding the
foregoing, none of ADP, the Exchange Agent or any other person shall be liable
to any former holder of Sandy Common Stock for any amount delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any certificate for Sandy Common Stock shall have been
lost, stolen or destroyed, the Exchange Agent shall issue and pay in exchange
for such lost, stolen or destroyed certificate, upon the making of an affidavit
of that fact by the holder thereof, such shares of ADP Common Stock and cash for
fractional shares, if any, as may be required pursuant to this Agreement,
provided, however, that ADP, in its discretion and as a condition precedent to
the issuance and payment thereof, may require the holder of such lost, stolen or
destroyed certificate to deliver a bond in such sum as it may direct as
indemnity against any claim that may be made against ADP, Sandy, the Exchange
Agent or any other party with respect to the certificate alleged to have been
lost, stolen or destroyed.
1.7 Stock Options.
(a) All stock options outstanding at the Effective Time (i) under Sandy's
1985 Performance Incentive Plan, 1989 Performance Incentive Plan or Director
Stock Option Plan or (ii) pursuant to the nonqualified stock option agreement
dated August 8, 1988 between Sandy and Raymond Ketchledge or the amended
nonqualified stock option agreement dated September 1, 1992 between Sandy and
Raymond Ketchledge (collectively, the "Sandy Options") shall, by virtue of the
Merger and without any action on the part of the holders of such options, be
converted into and become options to purchase shares of ADP Common Stock
("Substitute Options") as follows:
(i) each Substitute Option will cover the number of shares of ADP
Common Stock (rounded down to the nearest whole share) which the holder of
the Sandy Option being replaced would have been entitled to receive in the
Merger had such holder exercised, immediately prior to the Effective Time,
the Sandy Option which the Substitute Option is replacing;
(ii) each Substitute Option will be exercisable for a purchase price
per share (rounded down to the nearest cent) determined by dividing (x) the
purchase price per share of Sandy Common Stock payable upon exercise of the
Sandy Option which the Substitute Option replaced, multiplied by the number
of
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shares of Sandy Common Stock covered by the Sandy Option, by (y) the number
of shares of ADP shares of Sandy Common Stock covered by the Substitute
Option, as determined in accordance with clause (i) above; and
(iii) each Substitute Option will be exercisable, over each time
period during which the Sandy Option it replaced would have been
exercisable (taking into account any acceleration in vesting brought about
by the Merger), with respect to that number of shares of ADP Common Stock
(rounded down to the nearest whole share) determined by multiplying (x) the
number of shares of Sandy Common Stock with respect to which the Sandy
Option would have been exercisable during that time period by (y) a
fraction, the numerator of which is the total number of shares of ADP
Common Stock covered by the Substitute Option and the denominator of which
is the total number of shares of Sandy Common Stock covered by the replaced
Sandy Option.
(b) Subject to the foregoing requirements, the terms of each Substitute
Option will be substantially equivalent to the terms of the Sandy Option that it
replaces.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ADP MERGERCO AND ADP
ADP Mergerco and ADP hereby jointly and severally represent and warrant to
Sandy as follows (with the understanding that Sandy is relying materially on
each representation and warranty in entering into and performing this
Agreement):
2.1 Due Organization. ADP Mergerco and ADP are corporations validly
existing and in good standing under the laws of the State of Michigan and the
State of Delaware, respectively, and have full power and authority and are
entitled to own or lease their properties and to carry on their business as, and
in the places where, such properties are owned or leased and such business is
conducted.
2.2 Due Authorization. ADP Mergerco and ADP have full power and authority
to enter into and perform their obligations under this Agreement and each
agreement, instrument and document required to be executed by ADP Mergerco or
ADP in accordance with this Agreement. The execution, delivery, and performance
by ADP Mergerco and ADP of this Agreement and the agreements, documents, and
instruments required to be executed and delivered by ADP Mergerco and ADP in
accordance with this Agreement (i) have been duly authorized by the Boards of
Directors of ADP Mergerco and ADP, respectively, and (ii) do not require the
consent of the shareholders of ADP. This Agreement has been and the agreements,
documents, and instruments required to be executed and delivered by ADP Mergerco
and ADP in accordance with this Agreement on the Closing Date will have been
duly and validly executed and delivered by ADP Mergerco and ADP and constitute,
or will constitute, valid and binding obligations of ADP Mergerco and ADP,
enforceable against ADP Mergerco and ADP in accordance with their respective
terms, except that (i) such validity, binding effect and enforceability may be
subject to applicable bankruptcy, insolvency, fraudulent transfer, or other
laws, now or hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses (including commercial
reasonableness, good faith, and fair dealing) and to the discretion of the court
before which any proceeding therefor may be brought. None of the execution,
delivery or performance of this Agreement or any other agreement, instrument, or
document to be executed by ADP Mergerco or ADP in accordance with this Agreement
will (a) violate any foreign, federal, state, county, or local law, rule, or
regulation or any order, writ, injunction, or decree of any court, agency or
governmental body applicable to ADP Mergerco or ADP or their properties, (b)
violate or conflict with, or permit the cancellation of, any agreement to which
ADP Mergerco or ADP is a party, or by which either of them or any of their
properties are bound, or result in the creation of any lien, security interest,
charge, or encumbrance upon any of such properties, or (c) violate or conflict
with any provision of the Certificate of Incorporation or the Bylaws of either
ADP Mergerco or ADP.
2.3 Assets and Liabilities. ADP has good and marketable title to, or a
valid leasehold or other possessory interest in, the properties and assets (the
"Assets") owned or used by it, located on its premises, or
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shown on the ADP Financial Statements or acquired after March 31, 1995, except
for properties and assets disposed of in the ordinary course of business,
consistent with past practice, since March 31, 1995. ADP does not have any
obligations or liabilities, absolute or contingent, including without
limitation, mortgages, liens, pledges, charges, encumbrances or other third
party security interests ("Liabilities"), except for those Liabilities which
have been (i) reflected and appropriately reserved against in accordance with
GAAP consistently applied in the ADP Financial Statements or (ii) incurred in
the ordinary course of business, consistent with past practice, after March 31,
1995.
2.4 Compliance with Laws. To ADP's knowledge, ADP and its use and
occupancy of its Assets and properties, wherever located, have complied, and are
complying, with all foreign, federal, state, county, and local laws,
regulations, and orders that are applicable to ADP's business, and ADP has filed
with the proper authorities all statements and reports required by the laws,
regulations, and orders to which it or its properties or operations are subject,
except where such noncompliance or failure to file, individually and/or in the
aggregate, would not have a MAE. When used with respect to ADP or Sandy, "MAE"
means any material adverse effect on the financial condition, assets,
liabilities, results of operations or business of ADP and its subsidiaries or
Sandy and its subsidiary, as the case may be, in each case taken as a whole. No
claim has been made by any governmental authority (and, to the best of ADP's
knowledge, no such claim is anticipated) to the effect that the business
conducted by ADP fails to comply with any law, rule, regulation, or ordinance,
except for any such noncompliance which would not have a MAE. Without limiting
the foregoing, ADP has complied with all judicial and governmental requirements
relating to pollution and environmental control and regulation and employee
health and safety including, but not limited to, laws, rules, regulations,
ordinances, and orders related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, handling, presence, emission,
discharge, release, or threatened release into or on the air, land, surface,
water, groundwater, personal property, or structures, wherever located, of any
contaminants, hazardous materials, hazardous or toxic substances, or wastes as
defined under any federal, state, or local laws, regulations, or ordinances,
except for any such noncompliance which would not have a MAE.
2.5 Claims and Proceedings. There are no claims, actions, suits,
proceedings, or investigations pending or, to the best of ADP Mergerco's and
ADP's knowledge, threatened against or affecting ADP Mergerco or ADP or any of
their Assets, at law or in equity, or before or by any court, municipal, or
other governmental department, commission, board, agency, or instrumentality,
except (a) those claims, actions, suits, proceedings or investigations which, if
concluded in a manner adverse to ADP or ADP Mergerco, would not have a MAE or
(b) as set forth in any of the ADP SEC Filings or the ADP Financial Statements.
No inquiry, action, or proceeding has been instituted or, to the best of ADP
Mergerco's and ADP's knowledge, threatened to restrain or prohibit the carrying
out of the transactions contemplated by this Agreement or to challenge the
validity of any part of such transactions or seeking damages on account thereof.
2.6 Financial Statements and Reports. ADP has previously furnished Sandy
with true and correct copies (with exhibits) of (a) its Annual Report on Form
10-K for the fiscal year ended June 30, 1994, as filed with the SEC; (b) its
Quarterly Reports on Form 10-Q for the three, six and nine months ended
September 30, 1994, December 31, 1994 and March 31, 1995, as filed with the SEC;
(c) the definitive proxy statements relating to all meetings of its shareholders
during the three years preceding the date of this Agreement; and (d) all other
reports and registration statements filed by ADP with the SEC since June 30,
1992 (collectively, the "ADP SEC Filings"). As of their respective dates, the
ADP SEC Filings did not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, except any such
statement or omission therein which has been corrected or otherwise disclosed or
updated in a subsequent filing with the SEC. Since June 30, 1991, ADP has filed
with the SEC all reports and registration statements and all other filings
required to be filed with the SEC under the rules and regulations of the SEC.
ADP has also delivered to Sandy a complete and correct copy of ADP's audited
financial statements for the three year period ended June 30, 1994, audited by
Deloitte & Touche, LLP, certified public accountants, and ADP's unaudited
balance sheets, statements of cash flows, and earnings statements at and for the
three-month, six-month and nine-month periods ended September 30, 1994, December
31, 1994 and March 31, 1995 (which unaudited balance sheets, statements of cash
flows, and earnings statements may be subject to normal
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recurring year-end and audit adjustments, which, in the aggregate are not
reasonably expected to be material) (the "ADP Financial Statements"). The ADP
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis with prior periods and each of the ADP Financial Statements
fairly presents in all material respects the financial position, results of
operations, or changes in financial position, as the case may be, of ADP as of
the indicated date or for the indicated period. Since June 30, 1994, there has
been no material adverse change in the financial condition, assets, liabilities,
results of operations or business of ADP and its subsidiaries taken as a whole.
2.7 Capitalization. The authorized capital stock of ADP consists of (i)
500,000,000 shares of ADP Common Stock, of which 143,826,080 shares were issued
and outstanding as of July 31, 1995 and (ii) 300,000 shares of preferred stock,
par value $1.00 per share, of which no shares are issued and outstanding as of
the date hereof. All issued and outstanding shares of ADP Common Stock were
validly issued and are fully paid and non-assessable and free of preemptive
rights, and 13,291,336 shares were held by ADP in its treasury as of July 31,
1995.
2.8 ADP Common Stock. The shares of ADP Common Stock to be delivered in
connection with the Merger (i) have been duly authorized and when delivered
pursuant to this Agreement, will be validly issued, fully paid and
non-assessable, and (ii) will be covered by an effective registration statement
on Form S-4, pursuant to which the issuance of such shares of ADP Common Stock
to Sandy's shareholders will be registered.
2.9 Options. Except (i) as disclosed in the ADP SEC Filings, (ii) for
stock options granted after March 31, 1995 in the ordinary course of business
pursuant to ADP's stock option plans, and (iii) for commitments to issue an
immaterial number of shares of ADP Common Stock in connection with acquisitions
completed prior to the date hereof, there are no outstanding options, rights
(including stock appreciation and similar rights), warrants, calls or
commitments (including, without limitation, any statutory or other legal
commitments) relating to ADP's capital stock or obligating ADP to issue or
dispose of any shares of its capital stock.
2.10 Additional Rights. Except as contemplated hereby, the consummation of
the Merger will not obligate ADP to issue any additional equity interest in ADP,
to declare any dividend or make any distributions of any property or assets, or
to redeem, purchase, acquire, or offer to acquire any shares of capital stock of
ADP in accordance with the Certificate of Incorporation of ADP or any contract
or agreement to which ADP is a party.
2.11 Dividends and Stock Purchases. Except (i) as disclosed in the ADP SEC
Filings, (ii) for regular quarterly dividends and (iii) for repurchases of
shares pursuant to ADP's Board of Directors' approved repurchase program, from
March 1, 1994 through the date of this Agreement, ADP has not declared, set
aside or made payment of any dividend or distribution of assets to the holders
of ADP Common Stock, nor has it repurchased any shares of ADP Common Stock.
2.12 Shareholder Notice. The Registration Statement will not, at the time
it becomes effective, contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, except that no
representation is made by ADP with respect to information supplied by Sandy or
any Affiliate thereof which relates to Sandy or any Affiliate or associate of
Sandy.
2.13 Brokers and Finders. ADP has not caused any liability to be incurred
to any finder, broker, or sales agent in connection with the execution,
delivery, or performance of, or the transactions contemplated by, this
Agreement.
2.14 Reorganization. It is the present intention of ADP to continue at
least one significant historic business line of Sandy after the Merger, or to
use at least a significant portion of Sandy's historic business assets in a
business after the Merger, in each case within the meaning of Treas. Reg sec.
1.368-1(d).
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SANDY
Sandy hereby represents and warrants to ADP Mergerco and ADP as follows
(with the understanding that ADP Mergerco and ADP are relying materially on each
such representation and warranty in entering into and performing this Agreement)
(for purposes of this Article 3, the term "Sandy" shall mean Sandy Corporation
and its subsidiary):
3.1 Due Organization. Sandy is a corporation validly existing and in good
standing under the laws of the State of Michigan, and has full power and
authority to own or lease its properties and to carry on its business as, and in
the places where, such properties are owned or leased and such business is now
conducted. Sandy is duly qualified as a foreign corporation to do business, and
is in good standing, in each jurisdiction in which the character of its
properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a MAE. Sandy has previously delivered to ADP true and correct copies of
Sandy's Articles of Incorporation and Bylaws as in effect on the date hereof.
3.2 Due Authorization. Sandy has full power and authority to enter into
and perform its obligations under this Agreement and each agreement, instrument,
and document required to be executed by Sandy in accordance with this Agreement,
subject to approval of its shareholders. This Agreement has been, and the
agreements, documents and instruments required to be executed and delivered by
Sandy in accordance with this Agreement on the Closing Date will have been, duly
and validly authorized, executed and delivered by Sandy, and constitute, or will
constitute, valid and binding obligations of Sandy, enforceable against Sandy in
accordance with their respective terms, except that (i) such validity, binding
effect and enforceability may be subject to applicable bankruptcy, insolvency,
fraudulent transfer, or other laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses (including commercial reasonableness, good faith, and fair dealing) and
to the discretion of the court before which any proceeding therefor may be
brought. None of the execution, delivery, or performance of this Agreement or
any other agreement, instrument, or document to be executed by Sandy in
accordance with this Agreement will, (a) violate any foreign, federal, state,
county, or local law, rule, or regulation or any order, writ, injunction, or
decree of any court, agency or governmental body applicable to Sandy or any of
their properties, (b) violate or conflict with, or permit the cancellation of,
any agreement to which Sandy is a party, or by which it or any of its properties
are bound, or result in the creation of any lien, security interest, charge, or
encumbrance upon any of such properties, or (c) violate or conflict with any
provision of the Articles of Incorporation or the Bylaws of Sandy.
3.3 No Consents. Except as described on Schedule 3.3 and except for (a)
the approval of the transaction by Sandy's shareholders under the provisions of
the MBCA, (b) filings made pursuant to the Exchange Act and the rules and
regulations promulgated thereunder, (c) the filing of premerger notification,
and the expiration or early termination of the waiting period required under,
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR")
and (d) the filing of a Certificate of Merger with the Department of Commerce of
the State of Michigan, no consent or approval of any governmental agency and no
material consent or approval of any third party is required in order for Sandy
to enter into and perform this Agreement or any agreement, instrument, or
document executed or to be executed by Sandy in accordance with this Agreement.
3.4 Assets and Liabilities. Sandy has good and marketable title to, or a
valid leasehold or other possessory interest in, the Assets owned or used by it,
located on its premises, or shown on the Sandy Financial Statements or acquired
after May 31, 1995, except for properties and assets disposed of in the ordinary
course of business, consistent with past practice, since May 31, 1995. Sandy
does not have any Liabilities, except for those Liabilities which have been (i)
reflected and appropriately reserved against in accordance with GAAP
consistently applied in the Financial Statements or (ii) incurred in the
ordinary course of business, consistent with past practice, after May 31, 1995.
3.5 Properties. The operation of the properties and business of Sandy in
the manner in which they are now operated does not violate any zoning
ordinances, municipal regulations, or other rules, regulations, or
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laws, except for violations which would not have a MAE. No covenants, easements,
rights-of-way, or regulations impair in any material respect the use of Sandy's
Assets for the purposes for which they are now operated. There are no pending
or, to the best of Sandy's knowledge, threatened condemnation or similar
proceedings or assessments affecting its Assets.
3.6 Licenses and Permits. Sandy has obtained all licenses, permits and
other authorizations, and has taken all actions, necessary to comply in all
material respects with applicable laws or governmental regulations in connection
with its business as now conducted. Schedule 3.6 lists all foreign, federal,
state, county, and local governmental licenses, authorizations, accreditations,
certificates, permits, and orders held or applied for by Sandy which are
material to the conduct of the business of Sandy, taken as a whole. Sandy has
complied, and is complying, in all material respects with the terms and
conditions of all such licenses, authorizations, accreditations, certificates,
permits, and orders, and no material violation of any such licenses,
authorizations, accreditations, certificates, permits, or orders, or the laws or
rules governing the issuance or continued validity thereof, has occurred. No
claim has been made by any governmental authority (and, to the best knowledge of
Sandy, no such claim is anticipated) to the effect that any license,
authorization, accreditation, certificate, permit, or order in addition to those
listed on Schedule 3.6 is necessary with respect to the business conducted by
Sandy.
3.7 Intellectual Rights. Schedule 3.7 lists all trademarks and service
marks (registered or unregistered), trade names, patents and copyrights and
applications therefor, and other intellectual property owned or used by or
registered in the name of Sandy or in which Sandy has any right, license, or
interest which are material to the business conducted by Sandy. Except for the
documents listed on Schedule 3.7, Sandy is not a party to any license
agreements, either as licensor or licensee, with respect to any trademarks,
service marks, trade names, patents or copyrights or applications therefor,
trade secrets, know-how, processes or other intellectual property which are
material to the business conducted by Sandy. Sandy has good and marketable title
to or the right to use such assets and all inventions, processes, designs,
formulae, trade secrets, and know-how necessary for the conduct of Sandy's
business, without the payment of any royalty or similar payment. To the best of
Sandy's knowledge, Sandy is not infringing any patent, trademark, service mark,
trade name, copyright, trade secret, know-how, process or other intellectual
property rights of others and there are no infringements by others of any such
rights owned by or licensed to Sandy. No patents, trademarks and service marks,
trade names, copyrights, trade secrets, know-how, processes or other
intellectual property rights or interest therein or license thereof, other than
those set forth in Section 3.7, are necessary for the conduct of Sandy's
business as now conducted.
3.8 Compliance with Laws. To Sandy's knowledge, subject to the matters
discussed in Section 3.14 hereof, Sandy and its use and occupancy of its Assets
and properties, wherever located, have complied, and are complying, with all
foreign, federal, state, county, and local laws, regulations, and orders that
are applicable to its business and has filed with the proper authorities all
statements and reports required by the laws, regulations, and orders to which it
or its properties or operations are subject, except where such noncompliance or
failure to file, individually and/or in the aggregate, would not have a MAE. No
claim has been made by any governmental authority (and, to the best of Sandy's
knowledge, no such claim is anticipated) to the effect that the business
conducted by Sandy fails to comply with any law, rule, regulation, or ordinance,
except for any such noncompliance which would not have a MAE. Without limiting
the foregoing, Sandy has complied with all judicial and governmental
requirements relating to pollution and environmental control and regulation and
employee health and safety including, but not limited to, laws, rules,
regulations, ordinances, and orders related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, handling, presence,
emission, discharge, release, or threatened release into or on the air, land,
surface, water, groundwater, personal property, or structures, wherever located,
of any contaminants, hazardous materials, hazardous or toxic substances, or
wastes as defined under any federal, state, or local laws, regulations, or
ordinances, except for any such noncompliance which would not have a MAE.
3.9 Employee Plans.
(a) Sandy does not maintain or have any actual or potential liability or
obligation with respect to any employee benefit, policy, arrangement or
agreement (including without limitation, any savings, retirement,
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fringe benefit, stock option, bonus, incentive compensation, deferred
compensation, excess, supplemental executive compensation, employee stock
purchase, vacation, sickness or disability, severance or separation, restricted
stock plan, policy or arrangement) or employment or consulting contracts or
agreements (including without limitation, any "employee benefit plan," as
defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), whether or not subject to ERISA, whether written or oral ("Employee
Plans"), other than those set forth on Schedule 3.9(a). With respect to each
Employee Plan, Sandy has heretofore delivered to ADP true and complete copies of
the following documents, where applicable: (i) the text of the Employee Plan
(including any amendments thereto) and of any trust or insurance contract
maintained in connection therewith, (ii) the three most recent annual reports
(IRS Form 5500 series), together with required schedules filed with the IRS and
any financial statements or opinions required under ERISA, (iii) the most recent
summary plan description and all modifications, and (iv) the most recent
determination letter issued by the Internal Revenue Service ("IRS").
(b) Neither Sandy nor any corporation or other trade or business which is
or has been under common control with Sandy (as determined under Section 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the "Code"))
has ever maintained, contributed to or incurred any obligation or liability with
respect to (i) any "multiemployer plan", as defined in Section 3(37) or
4001(a)(3) of ERISA or Section 414(f) of the Code (either as an employer or a
joint employer) or (ii) any other plan covered by Title IV of ERISA or subject
to the requirements of Section 412 of the Code and Sandy has no actual or
contingent liability under Title IV of ERISA or Section 412 of the Code to any
person or entity, including the Pension Benefit Guaranty Corporation, the IRS,
any such plan or the participants (or their beneficiaries) in any such plan and
there is no basis for any such liability as the result of or after the
consummation of the transactions contemplated by this Agreement.
(c) Each Employee Plan that is intended to be qualified under Section 401
of the Code is, to Sandy's best knowledge, so qualified and has been so
qualified during the period from its adoption to date, and each trust forming a
part thereof is exempt from tax pursuant to Section 501 of the Code and all
contributions made thereto have been deductible by Sandy. A favorable
determination letter has been issued by the IRS with respect to each such plan
and trust, which letter includes a determination with respect to the
qualification of the plan under the Tax Reform Act of 1986 and subsequent tax
legislation (or if such letter has not yet been received, an application has
been made to the IRS for such determination within the remedial amendment period
so that such letter will have retroactive effect to the effective date of such
legislation) and there are no facts and nothing has occurred that would
adversely affect the qualification of such plan.
(d) No Employee Plan is a "voluntary employees' beneficiary association"
within the meaning of Section 501(c)(9) of the Code and there have been no other
"welfare benefit funds" within the meaning of Section 419 of the Code relating
to Employees. Except as set forth on Schedule 3.9(d), no Employee Plan provides
health, dental, life insurance or other welfare benefits (whether on an insured
or self-insured basis) to Employees after their retirement or other termination
of employment from Sandy (other than continuation coverage required under
Section 601 through 609 of ERISA and Section 4980B of the Code which may be
purchased at the sole expense of the Employee).
(e) To Sandy's best knowledge, each Employee Plan has, in all material
respects, been maintained and administered in compliance with its terms and with
the requirements prescribed by any and all statutes, orders, rules and
regulations, including, but not limited to, ERISA and the Code, which are
applicable to such plan and there is no audit, investigation, dispute,
arbitration, claim, suit, or grievance, pending or threatened, involving an
Employee Plan (other than routine claims for benefits), and, to the best
knowledge of Sandy, there is no basis for such a claim. To Sandy's best
knowledge, there have been no "prohibited transactions" (within the meaning of
Section 4975 of the Code or Section 406 of ERISA) with respect to any Employee
Plan.
(f) All contributions have been, or prior to the Effective Time will be,
made under, and all obligations to Employees (including vacation entitlements)
have been, or prior to the Effective Time will be, satisfied with respect to,
each Employee Plan for all periods up to the Effective Time, except as shown in
the Financial
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Statements. Except as disclosed in Schedule 3.9(f), the costs of all Employee
Plans are fully accrued and reflected in the Financial Statements.
(g) Except as otherwise indicated on Schedule 3.9(g), none of the Employee
Plans provides for the payment of separation, severance, termination or
similar-type benefits to any person or the acceleration of any rights to
benefits under any Employee Plan or obligates Sandy to pay separation,
severance, termination or similar-type benefits solely as a result of any
transaction contemplated by this Agreement or as a result of a "change in
control" (within the meaning of such term under Section 280G of the Code).
3.10 Contracts and Agreements. Schedule 3.10A sets forth a complete and
accurate list of all written or oral contracts, commitments, leases, and other
agreements, to which Sandy is a party or by which it or its properties or assets
may be bound which (a) relate to the leasing of real property, (b) provide for
payments in any one year in excess of $100,000 or (c) are otherwise material to
the operation of Sandy's business. Sandy has afforded to ADP and its officers,
attorneys, and other representatives the opportunity to review complete and
correct copies of all such contracts, commitments, leases, and other agreements
to which Sandy is a party or by which Sandy or its properties are bound. Sandy
is not and, to the best of Sandy's knowledge, no other party thereto is, in
default (and no event has occurred which, with the passage of time or the giving
of notice, or both, would constitute a default) under any contract, commitment,
lease, or other agreement to which Sandy is a party or by which it or its
properties or assets may be bound, and Sandy has not waived any material right
under any such contract, commitment, lease, or other agreement. Sandy has not
received any notice of default or termination under any such contract,
commitment, lease, or other agreement, and Sandy has not assigned or otherwise
transferred any rights under any such contract, commitment, lease, or other
agreement. As of July 31, 1995, there were no written or oral contracts,
commitments, or other agreements pursuant to which or in connection with which
Sandy has accepted payment of more than $50,000 for services or goods yet to be
performed or provided by Sandy to a third party other than those set forth in
Schedule 3.10B (including a list of such contracts, commitments or agreements).
3.11 Claims and Proceedings. There are no claims, actions, suits,
proceedings, or investigations pending against or affecting Sandy or any of its
Assets or against or affecting any Employee Plans or any fiduciary for or assets
of any such plans, at law or in equity, or before or by any court, municipal, or
other governmental department, commission, board, agency, or instrumentality,
nor is there any reasonable basis for any such claims, suits, proceeding or
investigations, except as set forth in Schedule 3.11 and except for claims,
actions, suits, proceedings or investigations which (i) are filed or instituted
after the date hereof and (ii) seek damages or other amounts (including costs
and expenses) in an amount less than $50,000, individually, or $100,000, in the
aggregate. No inquiry, action, or proceeding has been instituted to restrain or
prohibit the carrying out of the transactions contemplated by this Agreement or
to challenge the validity of any part of such transactions or seeking damages on
account thereof, nor is there any reasonable basis for any such inquiry, action
or proceeding.
3.12 Insurance. Schedule 3.12 lists all policies of insurance, other than
title insurance policies, held by or on behalf of Sandy and each outstanding
claim thereunder in excess of $10,000. All policies of insurance set forth on
Schedule 3.12 are in full force and effect, and no notice of cancellation has
been received or, to Sandy's knowledge, has been sent by the insurance carrier
thereof. In the reasonable judgment of Sandy's management, the policies are in
amounts which are adequate in relation to the business and properties of Sandy
(but in any event in amounts not less than the amounts generally purchased by
other similar businesses), and all premiums to date have been paid in full.
3.13 Financial Statements and Reports. Sandy has previously furnished ADP
with true and correct copies (with exhibits) of (a) its Annual Report on Form
10-K for the fiscal year ended August 31, 1994, as filed with the SEC; (b) its
Quarterly Reports on Form 10-Q for the three months ended November 30, 1994,
February 28, 1995 and May 31, 1995, as filed with the SEC; (c) all of its
Current Reports on Form 8-K filed with the SEC subsequent to August 31, 1994;
(d) the definitive proxy statements relating to all meetings of its shareholders
during the three years preceding the date of this Agreement; and (e) all other
reports and registration statements filed by Sandy with the SEC since August 31,
1992 (collectively, the "Sandy SEC Filings"). As of their respective dates, the
Sandy SEC Filings did not contain any untrue statement of a
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material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, except any such statement or omission therein which has been
corrected or otherwise disclosed or updated in a subsequent filing with the SEC.
Since August 31, 1991, Sandy has filed with the SEC all reports and registration
statements and all other filings required to be filed with the SEC under the
rules and regulations of the SEC. Sandy has also delivered to ADP a complete and
correct copy of Sandy's audited financial statements for the three year period
ended August 31, 1994, audited by Deloitte & Touche, LLP, certified public
accountants, and Sandy's unaudited balance sheet, statement of cash flows, and
income statement at and for the nine-month period ended May 31, 1995 (which
unaudited balance sheet, statement of cash flows, and income statement may be
subject to normal recurring year-end and audit adjustments, which, in the
aggregate are not reasonably expected to be material) (the "Sandy Financial
Statements"). The Sandy Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis with prior periods and each of the Sandy
Financial Statements fairly presents in all material respects the financial
position, results of operations, or changes in financial position, as the case
may be, of Sandy as of the indicated date or for the indicated period. Since
August 31, 1994, except for expenses incurred in connection with the
transactions contemplated by this Agreement and in connection with the
consideration of a transaction with Westcott Communications, Inc. ("Westcott"),
there has been no material adverse change in the financial position, assets,
liabilities, results of operations or business of Sandy and its subsidiaries
taken as a whole. A true and complete list of all expenses heretofore incurred
and hereafter expected to be incurred by Sandy in connection with the
transactions contemplated hereby and in connection with the consideration of a
transaction with Westcott is contained in Schedule 3.13.
3.14 Taxes. Except as set forth on Schedule 3.14A, all federal, foreign,
state, county, and local tax (including, without limitation, income, gross
receipts, excise, property, franchise, license, sales, use, withholding,
estimated, occupancy, capital, profits, employment, unemployment compensation,
payroll related, import duties and other governmental charges and assessments),
whether or not measured in whole or in part by net income, and including
deficiencies, interest, additions to tax or interest, and penalties with respect
thereto, and including expenses associated with contesting any proposed
adjustment related to any of the foregoing (collectively, "Taxes" or,
individually, a "Tax") returns, reports, and declarations of estimated tax
(collectively, "Returns" or, individually a "Return") which were required to be
filed by Sandy on or before the date hereof have been filed within the time and
in the manner provided by law, and all such Returns are true and correct and
accurately reflect, in all material respects, the Tax liabilities of Sandy. All
Returns required to be filed by Sandy after the date hereof and on or before the
Effective Time shall be prepared and timely filed, in a manner consistent with
prior years and applicable laws and regulations. All Taxes required to be paid
on or before the date hereof have been timely paid or adequately accrued in the
Financial Statements. Any Taxes required to be paid after the date hereof and on
or before the Effective Time shall be timely paid. Schedule 3.14B lists all of
the jurisdictions in which Sandy has filed Returns during the 1994, 1993 and
1992 calendar years. Sandy has provided to ADP true and complete copies of all
such Returns. Except as set forth on Schedule 3.14C, Sandy has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collections of Taxes. There are no current, pending or, to the
best of Sandy's knowledge, threatened, claims, assessments, notices, proposals
to assess, deficiencies, or audits (collectively, "Sandy Tax Actions") with
respect to any Taxes owed or allegedly owed by Sandy which remain unpaid and for
which, in the reasonable judgment of Sandy's management, adequate provision has
not been made in the Financial Statements. Except as set forth on Schedule
3.14D, to the best of Sandy's knowledge, there is no basis for any Sandy Tax
Actions. There are no tax liens on any of the assets of Sandy except for liens
for current taxes not yet due and payable. Except as set forth on Schedule
3.14D, proper and accurate amounts (other than immaterial amounts) have been
withheld and remitted by Sandy from and in respect of its Employees for all
periods in full and complete compliance in all material respects with the tax
withholding provisions of all applicable laws and regulations. Sandy is, and
since 1986 has been, a C corporation as defined in Section 1361 of the Code.
Sandy has not agreed to nor is Sandy required to make any adjustments under
Section 481(a) of the Code by reason of change in accounting method or
otherwise. Sandy has not been nor is a party to any tax sharing agreement.
3.15 Business Relations. Except as set forth on Schedule 3.15, to the
knowledge of Sandy, since August 31, 1994, Sandy has not received notice that
any customer, client, or supplier of Sandy will cease or
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otherwise refuse to do business with Sandy in the same manner as such business
had been previously conducted with Sandy.
3.16 Brokers and Finders. Sandy has not caused any liability to be
incurred to any finder, broker, or sales agent in connection with the execution,
delivery, or performance of, or the transactions contemplated by, this
Agreement, except for fees not to exceed $500,000 paid or to be paid to its
financial advisor, Bear, Stearns & Co., Inc. ("Bear, Stearns"), for which Sandy
will be responsible. Sandy has heretofore delivered to ADP a true and complete
copy of the agreement(s) pursuant to which Bear, Stearns has provided and will
provide service to Sandy in connection with the transactions contemplated by
this Agreement.
3.17 Notes and Accounts Receivable. Schedule 3.17 lists all of the notes
and accounts receivable of Sandy at May 31, 1995. Except as listed on Schedule
3.17, (a) all of the notes and accounts receivable are free and clear of any
security interests, liens, encumbrances, or other charges and are, in the
reasonable judgment of Sandy's management, adequately reserved for on Sandy's
balance sheet as of May 31, 1995; (b) to the best of Sandy's knowledge, none of
the notes or accounts receivable is subject to any offset or claims of offset,
other than normal credits and returns in the ordinary course of business; and
(c) none of the obligors on the notes or accounts receivable has given notice
that they will or may refuse to pay the full amount thereof or any portion
thereof. This Section 3.17 does not constitute a warranty by Sandy that any of
the notes or accounts receivable will be collected by Sandy following the
transactions contemplated hereby.
3.18 Information Furnished to ADP. Sandy has made available to ADP and its
officers, attorneys, accountants, and representatives true and correct copies of
all agreements, documents, and other items listed on the schedules to this
Agreement and all books and records of Sandy. The books and records of Sandy
accurately reflect in all material respects the transactions to which Sandy is a
party or by which its properties are subject or bound.
3.19 Capitalization. The authorized capital stock of Sandy consists of
8,000,000 shares of Sandy Common Stock and 2,000,000 shares of preferred stock,
$.01 par value per share, of which 2,326,783 shares of Sandy Common Stock and no
shares of preferred stock are issued and outstanding as of the date hereof. Each
share of Sandy Common Stock is entitled to one vote for purposes of approving
the Merger. All issued and outstanding shares of Sandy Common Stock were validly
issued and are fully paid and nonassessable and free of preemptive rights, and
no shares are held by Sandy in its treasury. 146,000 shares of Sandy Common
Stock, and no shares of preferred stock, are reserved for issuance upon the
exercise of outstanding Sandy Options as of the date hereof.
3.20 Options. Except as set forth on Schedule 3.20, (a) there are no
outstanding options, rights (including stock appreciation and similar rights),
warrants, calls, commitments (including, without limitation, any statutory or
other legal commitments) or written agreements relating to Sandy's capital stock
or obligating Sandy to issue or dispose of any shares of its capital stock.
3.21 Sandy Dividends and Stock Purchases. Except as set forth on Schedule
3.21, since March 31, 1994, Sandy has not declared, set aside or made payment of
any dividend or distribution of assets to the holders of Sandy Common Stock, nor
has it repurchased any shares of Sandy Common Stock.
3.22 Subsidiaries. Sandy has no direct or indirect subsidiaries and no
stock or other equity or ownership interests (whether controlling or not) in any
corporation, association, partnership, joint venture, or other entity, other
than as set forth in Schedule 3.22. Sandy Corporation of Canada is an inactive
corporation which has no material assets and conducts no business.
3.23 Customers. Schedule 3.23 accurately sets forth as of June 30, 1995
the name of each existing customer of Sandy, which, in the past 12 months,
purchased more than $50,000 of goods or services from Sandy, and a list of any
written agreement between Sandy and such customer, if the agreement is effective
and obligates Sandy to future performance over more than 6 months or for more
than $25,000 in the next three months relating to the customer.
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3.24 Submission to Vote. Based in part on the financial analysis performed
by its financial advisors, the Board of Directors of Sandy has adopted a
resolution recommending that the Merger and the other transactions contemplated
herein be submitted to and approved by Sandy's shareholders.
3.25 Information to be Provided. None of the information supplied by Sandy
for inclusion in the Registration Statement will, at the time the Registration
Statement is filed with the SEC or the Merger Proxy Statement is mailed to Sandy
shareholders, contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
3.26 Shareholder Vote. The affirmative vote of the holders of a majority
of the outstanding shares of Sandy Common Stock is the only vote of the holders
of any class or series of stock of Sandy necessary to approve the Merger.
3.27 Labor Matters. Sandy is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by Sandy.
At no time since July 1, 1993 has Sandy been involved in any labor discussions
with any unit or group seeking to become a bargaining unit for any of its
employees. There are no material controversies, strikes, work stoppages or
disputes pending or threatened between Sandy and any of the employees or former
employees of Sandy ("Employees").
3.28 Ordinary Course. Since August 31, 1994, Sandy has conducted its
business only in the ordinary course, consistent with its past practice, except
(a) as expressly permitted by this Agreement or in connection with the
transactions contemplated by this Agreement, (b) as set forth in any of the
Sandy SEC Filings or any of the Sandy Financial Statements, and (c) in
connection with Sandy's dealings with Westcott.
3.29 Chapter 7A and Chapter 7B of MBCA. Section 780 of Chapter 7A of the
MBCA does not apply to any business combination (as defined in Chapter 7A of the
MBCA) between Sandy and ADP Mergerco or any of its affiliates, and Chapter 7B of
the MBCA does not apply to control share acquisitions (as defined in Chapter 7B
of the MBCA) of shares of Sandy.
3.30 Pooling of Interests. To Sandy's best knowledge, Sandy has not taken,
failed to take, or agreed to take or not to take any action which would
disqualify the Merger as a pooling of interests for accounting purposes.
3.31 Fixed Assets; Sufficiency of Assets. The physical and intangible
assets of Sandy, whether owned, licensed or leased by it, are sufficient to
provide all services currently offered or committed by Sandy to its customers.
There are no assets or property necessary for the conduct of the business of
Sandy as presently utilized or conducted which are not owned, leased, or
licensed by Sandy.
3.32 Leased Properties. Schedule 3.32 contains a list of all outstanding
realty and material personalty leases to which Sandy is a party or by which it
is bound, whether as lessee or lessor, on the date hereof. Sandy has heretofore
provided ADP with true and complete copies of all such leases. Sandy occupies or
uses all of the real and personal property leased by it under and in accordance
with such leases, and has neither assigned its interests under any such lease
nor further subleased the property which is the subject of any such lease. All
of such leases are in full force and effect and the transactions contemplated by
this Agreement will not effect a termination of or otherwise interfere with
Sandy's rights under each such lease, nor violate any term or provision of any
such lease or incur any additional charge thereunder. Sandy has not made any
material alterations to, or installed any fixtures at, the leased premises set
forth in Schedule 3.32 such that it will have an obligation to retrofit any such
leased premises.
3.33 Licensed Properties. Schedule 3.33 contains a list of all outstanding
licenses to which Sandy is a party or by which it is bound, whether as licensee
or licensor, on the date hereof (including without limitation any software
licenses other than commercial, off-the-shelf software used in the ordinary
course of business). Sandy has heretofore provided ADP with true and complete
copies of all such licenses. Except as otherwise set forth in Schedule 3.33: (a)
Sandy has the right to use all of the property licensed by it under any such
licenses, and (b) any license granted by Sandy to others is non-exclusive and
any such licensees are not and shall not be entitled to further sublicense,
assign or transfer the licensed property to others. All of such licenses are in
full
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force and effect, and the transactions contemplated by this Agreement will not
effect a termination of or otherwise interfere with Sandy's rights under any
license agreement as to which it is the licensee, nor violate any term or
provision of any such license or incur any additional charge thereunder.
3.34 Loan Agreements, Debt Instruments and Guarantees. Schedule 3.34
contains a true and complete list of all loan agreements, debt instruments,
guarantees, or any related documents of any nature whatsoever which are
outstanding on the date hereof and to which Sandy is a party or by which it is
bound. Sandy has heretofore provided ADP with true and complete copies of all
such documents. Except as otherwise set forth in Schedule 3.34, all outstanding
liabilities and debts of Sandy may be prepaid in whole or in part at any time
without penalty, all of such liabilities and debts shall continue as liabilities
and debts of Sandy notwithstanding the transactions contemplated by this
Agreement without mandatory prepayment, penalty or points, and no event has
occurred prior to the date hereof which with the lapse of time or the giving of
notice or both would constitute a default of either party under any such loan
agreement, debt instrument, guaranty, or any related document.
3.35 Employees; Employment Practices; Compensation and Vacations. Schedule
3.35 contains a true and complete listing of all employees of Sandy during the
one-year period ending on the date hereof, their annual salary, date of hire,
date of next review, date of last review and, if applicable, their dates of
termination. Schedule 3.35 also contains a separate true and complete listing of
all independent contractors engaged by Sandy during the one-year period ending
on the date hereof, together with the terms of the compensation arrangements
applicable to each such independent contractor. Since August 31, 1994, except in
the ordinary course of business and consistent as to timing and amount with past
practices, Sandy has not: (a) increased the compensation payable or to become
payable to or for the benefit of any of its employees or independent
contractors, (b) provided any of its employees with increased security or tenure
of employment, (c) increased the amount payable to any of its employees upon the
termination of any such person's employment, or (d) increased, augmented or
improved benefits granted to or for the benefit of any of its employees under
any bonus, stock option, profit sharing, pension, retirement, deferred
compensation, insurance or other direct or indirect benefit plan or arrangement.
3.36 Capital Expenditures. Except as set forth in Schedule 3.36, there are
no capital projects or capital expenditures currently committed for or
undertaken by Sandy which are not paid for on the date hereof.
3.37 Bank Accounts and Safe Deposit Boxes; Powers of Attorney. Schedule
3.37 contains: (a) the names of all banks in which Sandy has an account
(including without limitation any trust account) or safe deposit box, and (b)
the names of all persons or entities, if any, holding powers of attorney from
Sandy.
3.38 Casualty Losses. Since August 31, 1994, there has not been any
material loss, damage or destruction to or of any of the assets, property or
business of Sandy (other than as to which all necessary repairs or replacements
have been made or will be covered by insurance proceeds when made) nor have any
of such assets, properties or business of Sandy been affected as a result of
fire, accident or other casualty, war, civil strife or act of God (other than in
any immaterial respect and as to which all necessary repairs or replacements
have been made or will be covered by insurance proceeds when made).
3.39 Transactions with Affiliates. Sandy has heretofore provided ADP with
true and complete copies of all contracts or agreements of any nature
whatsoever, whether written or oral, between Sandy and any director, executive
officer or other Affiliate of Sandy, including without limitation any employment
agreement or other compensation or reimbursement arrangement, any loan or
guarantee, and any purchase or sales agreement.
3.40 Reorganization. Sandy operates at least one significant historic
business line, or owns at least a significant portion of its historic business
assets, in each case within the meaning of Treas. Reg. sec. 1.368-1(d). Sandy
has no knowledge that any shareholder of Sandy has any present plan, intention
or arrangement to dispose of any of the ADP Common Stock to be received in the
Merger in a manner that would cause the Merger to violate the continuity of
shareholder interest requirement set forth in Treas. Reg. sec. 1.368-1.
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ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 Conduct of Sandy's Business. Sandy covenants and agrees that, prior to
the Effective Time, unless ADP Mergerco and ADP shall otherwise agree in writing
or as otherwise expressly contemplated by this Agreement:
(a) Sandy will carry on its businesses in the regular and ordinary
course, consistent with past practice, and, except in connection with the
transactions contemplated by this Agreement or in connection with any other
offer to acquire shares or assets of Sandy to the extent permitted by
Section 7.11 of this Agreement, use reasonable efforts to preserve intact
its present business organizations. Without limiting the foregoing Sandy
will not directly or indirectly, without the prior written consent of ADP
Mergerco and ADP and except in connection with the transactions
contemplated by this Agreement:
(i) issue, sell, pledge, dispose of or encumber its Assets, other
than through sales of goods and/or services to Sandy's customers in the
ordinary course of business, consistent with past practice;
(ii) amend Sandy's Articles of Incorporation or By-laws;
(iii) split, combine or reclassify any outstanding shares of Sandy
capital stock, or declare, set aside or pay any dividend payable in
cash, stock, property or otherwise with respect to such shares;
(iv) redeem, purchase, acquire or offer to acquire any shares of
Sandy capital stock;
(v) issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or securities
convertible or exchangeable for, or any options, warrants or rights of
any kind to acquire any shares of, Sandy capital stock of any class
whether pursuant to any rights agreement, stock plan or otherwise,
except that Sandy may issue shares of Sandy Common Stock in accordance
with currently outstanding stock options;
(vi) acquire (by merger, consolidation or acquisition of stock or
assets) or be acquired by any corporation, partnership or other business
organization or division thereof;
(vii) incur any indebtedness for borrowed money, other than in the
ordinary course of business, consistent with past practice, or issue any
debt securities;
(viii) enter into or modify any material contract, lease or
agreement, other than in the ordinary course of business, consistent
with past practice;
(ix) terminate, modify, assign, waive, release or relinquish any
material contract rights or amend any material rights or claims except
as expressly provided in this Agreement;
(x) other than pursuant to previously existing written plans,
written agreements or regular budgets and standard policies, grant any
increase in the salary or other compensation or benefits to Sandy's
directors, officers or employees or grant any bonus to any employee or
enter into any employment agreement, or make any loan to or enter into
any material transaction of any other nature with any officer, director
or employee of Sandy; provided, that Sandy may pay fiscal 1995 bonuses
based on earnings before merger-related costs;
(xi) take any action to institute any new severance or termination
pay practices with respect to any directors, officers or employees of
Sandy or to increase the benefits payable under its severance or
termination pay practices;
(xii) hire new employees, other than in the ordinary course of
business, consistent with past practice;
(xiii) adopt or amend, in any respect, except as may be required by
applicable law or regulation (in which case Sandy will notify ADP
Mergerco and ADP of such amendment or adoption and the
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reasons therefor), any bonus, profit sharing, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund, plan
or arrangement for the benefit or welfare of any directors, officers or
employees;
(xiv) except as set forth on Schedule 3.36, make any capital
expenditures or capital commitments in amounts greater than $100,000 in
the aggregate;
(xv) make any election for federal income tax purposes;
(xvi) settle or compromise any litigation involving the payment of,
or enter into a settlement agreement to pay over time, an amount in
cash, notes or other property in excess of $50,000; or
(xvii) enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
(b) Sandy will use reasonable efforts, to the extent not prohibited by
the foregoing provisions of this Section 4.1, to maintain its relationships
with its suppliers and customers, and, if requested by ADP Mergerco or ADP,
(i) Sandy will use reasonable efforts to make reasonable arrangements as
reasonably requested by ADP Mergerco or ADP for representatives of ADP
Mergerco or ADP to meet with customers and suppliers of Sandy (provided
however that ADP Mergerco or ADP will give Sandy reasonable notice of such
meetings), and (ii) Sandy will schedule, as reasonably requested by ADP
Mergerco or ADP, meetings of representatives of ADP Mergerco or ADP with
executive officers of Sandy.
4.2 Conduct of Business by ADP. From the date of this Agreement to the
Effective Time, unless Sandy shall otherwise agree in writing or as otherwise
expressly contemplated or permitted by other provisions of this Agreement,
including but not limited to, this Section 4.2:
(a) Neither ADP nor any subsidiary of ADP shall amend its Certificate
of Incorporation (or other such governing document) or bylaws in a manner
which would materially adversely affect the rights of holders of ADP Common
Stock or the ability of ADP to consummate the transactions contemplated
hereby in a timely manner;
(b) Neither ADP nor any subsidiary of ADP shall make any acquisition
or take any other action that individually or in the aggregate would
materially adversely affect the ability of ADP or ADP Mergerco to
consummate the transactions contemplated hereby in a timely manner; and
(c) Other than regular quarterly cash dividends which are not in
excess of $.25 per share of ADP Common Stock and any stock split effected
as a stock dividend, ADP shall not declare, set aside, make or pay any
dividend or distribution (whether in cash, stock or property or any
combination thereof) in respect of the ADP Common Stock; and
(d) ADP shall not agree to do any of the foregoing.
4.3 Shareholder Approval.
(a) As soon as reasonably practicable following the date hereof, Sandy will
take all action necessary in accordance with the Exchange Act, the laws of the
State of Michigan and Sandy's Articles of Incorporation and Bylaws to call, give
notice of, and convene a meeting of Sandy shareholders (the "Meeting") to
consider and vote upon the approval and adoption of this Agreement and the Plan,
and for such other purposes as Sandy may deem necessary or desirable. As of the
date of this Agreement, the Board of Directors of Sandy has determined, based in
part upon the financial analysis performed by its financial advisors, that the
Merger is advisable and in the best interest of the shareholders of Sandy and,
subject to their fiduciary duties, shall recommend that Sandy's shareholders
vote to approve and adopt this Agreement and the Plan and any other matters to
be submitted to Sandy's shareholders in connection therewith. Sandy shall use
reasonable efforts to solicit and secure from its shareholders such approval and
adoption, subject to the fiduciary duties of the directors of Sandy, which
efforts shall include without limitation diligently soliciting shareholder
proxies therefor and advising ADP Mergerco and ADP upon request from time to
time as to the status of the shareholder vote then tabulated. Nothing in this
Section shall in any way bind or obligate any officers or
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directors of Sandy to act in any way in their capacities as shareholders of
Sandy. The Meeting will take place as soon after the date hereof as permitted
under applicable law and as is reasonably practicable.
(b) As promptly as reasonably practicable following the execution of this
Agreement, ADP and Sandy shall file with the SEC a registration statement on
Form S-4 (the "Registration Statement") covering the issuance and delivery of
the ADP Common Stock to the shareholders of Sandy and containing preliminary
proxy materials which comply with the requirements of the Exchange Act with
respect to the transactions contemplated hereby and will use their best efforts
to cause such Registration Statement to be declared effective and such
preliminary proxy materials to be cleared by the SEC. Sandy and ADP will
cooperate fully in the preparation and filing of the Registration Statement and
such preliminary proxy materials and any amendments and supplements thereto.
(c) Promptly after the Registration Statement (including the definitive
proxy statement contained therein (the "Merger Proxy Statement")) becomes
effective, Sandy shall cause the Merger Proxy Statement to be mailed to its
stockholders to solicit their approval of the transactions contemplated herein
and therein. Sandy shall not use any proxy material in connection with the
Meeting without ADP's prior approval.
4.4 Other Agreements. Subject to the terms and conditions herein provided
and to the fiduciary duties of the Boards of Directors of Sandy and ADP, each of
the parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including without limitation, using
all reasonable efforts to obtain all necessary waivers, consents and approvals
and to effect all necessary registrations and filings, including, but not
limited to, filings required under the Exchange Act and the HSR; except that the
foregoing shall not require ADP Mergerco, ADP or Sandy to agree to make any
divestiture of a significant asset in order to obtain any waiver, consent or
approval. Subject to the terms and conditions herein provided, ADP, as the
parent corporation of ADP Mergerco, will cause ADP Mergerco to take all
reasonable actions and to do, or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective as promptly as
possible the transactions contemplated by this Agreement.
4.5 Notification of Certain Matters. Sandy shall give prompt notice to ADP
Mergerco and ADP, and ADP Mergerco and ADP shall give prompt notice to Sandy, of
(i) the occurrence, or failure to occur, of any event which such party believes
would be likely to cause any of its representations or warranties contained in
this Agreement (including as it relates to information contained in the
schedules prepared pursuant to Articles 2 and 3) to be untrue or inaccurate in
any material respect at any time from the date hereof to the Effective Time and
(ii) any material failure of Sandy, ADP or ADP Mergerco, as the case may be, or
any officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that failure to give such notice shall not
constitute a waiver of any defense that may be validly asserted. No disclosure
of changes to the Article 3 schedules pursuant to this Section 4.5 will be
deemed to amend or supplement the schedules or prevent or cure any
misrepresentation, breach of warranty, or breach of any covenant thereunder.
4.6 Access to Information. Sandy will, and will cause Sandy's officers,
directors, employees and agents, including attorneys and accountants, to afford,
from the date hereof to the Effective Time, the officers, employees and agents
of ADP Mergerco and ADP complete access at all reasonable times to Sandy's
officers, employees, agents, properties, books, records and workpapers, and
shall furnish ADP Mergerco and ADP all financial, operating and other data and
information as ADP Mergerco and ADP may reasonably request. ADP Mergerco and ADP
will use reasonable efforts not to disrupt Sandy's business.
4.7 Public Announcements. None of ADP Mergerco, ADP or Sandy will make,
issue or release any oral or written public announcement or statement
concerning, or acknowledgment of the existence of, or reveal the terms,
conditions or status of, the transactions contemplated by this Agreement and the
Plan, or any other communication to shareholders or the investing public,
directly or indirectly (including without limitation press releases and
statements to securities analysts), without first making a good faith attempt to
obtain the prior approval of, or concurrence in, the contents of such
announcement, acknowledgment or statement by the other of them, which approval
or concurrence will not be unreasonably withheld or delayed; provided, that
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nothing in this Agreement will prevent any party from commenting on prior public
announcements or from making any announcement, acknowledgement or statement
required by law or the rules of any securities exchange on which its stock is
listed.
ARTICLE 5
CLOSING
5.1 Conditions to ADP Mergerco's and ADP's Obligations. Notwithstanding
any other provision herein to the contrary, the obligations of ADP Mergerco and
ADP to consummate the transactions contemplated hereby are subject to the
fulfillment of each of the following conditions:
(a) The representations and warranties of Sandy contained herein and
the information contained in the schedules prepared pursuant to Article 3
shall be true and correct on and as of the Closing Date with the same force
and effect as though such representations and warranties had been made and
such information had been given on and as of the Closing Date, except to
the extent waived in writing by ADP; Sandy shall have performed in all
material respects all obligations and complied in all material respects
with all agreements, covenants and conditions required by this Agreement to
be performed or complied with by it at or prior to the Closing Date.
(b) There shall not be any judgment, decree, injunction, ruling or
order of any court, governmental department, commission, agency or
instrumentality outstanding against ADP Mergerco, ADP or Sandy which
prohibits or materially restricts or delays the consummation of the Merger.
(c) This Agreement and the Plan shall have been approved and adopted
by the requisite vote of the holders of the outstanding shares of Sandy
Common Stock in accordance with the MBCA and Sandy's Articles of
Incorporation and Bylaws.
(d) All authorizations, consents and permits required by Sandy to
perform this Agreement and the Plan shall have been obtained and shall be
in form and substance satisfactory to ADP Mergerco and ADP. The required
statutory waiting period under the HSR shall have expired or been
terminated and no condition shall have been imposed with respect thereto
which is not acceptable to ADP Mergerco and ADP.
(e) Sandy will have delivered, or will have caused to be delivered, to
ADP Mergerco and ADP the following:
(i) A copy of the resolutions duly adopted by Sandy's Board of
Directors approving the adoption, execution, performance, and delivery
of this Agreement and the Plan and authorizing all necessary or proper
action to enable Sandy to comply with the terms hereof and thereof.
(ii) A copy of the resolutions duly adopted by Sandy's shareholders
authorizing the adoption, execution, performance, and delivery of this
Agreement and the Plan and approving the Merger in accordance with the
MBCA.
(iii) The opinion of Honigman Miller Schwartz and Cohn to the
effect that:
(A) Sandy is a corporation validly existing and in good standing
under the laws of the state of its incorporation and is duly
qualified to do business within the jurisdictions set forth therein;
(B) Sandy has the corporate power and authority to execute,
deliver, and perform its obligations under this Agreement and the
Plan; the execution, delivery, and performance by Sandy of its
obligations under this Agreement and the Plan have been duly
authorized by all necessary corporate action on the part of Sandy;
and this Agreement and the Plan have been duly executed and delivered
by Sandy and constitute the valid and binding obligations of Sandy,
enforceable against Sandy in accordance with their respective terms,
except that (1) such validity, binding effect and enforceability may
be subject to applicable bankruptcy, insolvency,
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fraudulent transfer, reorganization, moratorium or other laws, now or
hereafter in effect, affecting creditors' rights generally, and (2)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses (including
commercial reasonableness, good faith, and fair dealing) and to the
discretion of the court before which any proceeding therefor may be
brought;
(C) The execution, delivery, and performance by Sandy of its
obligations under this Agreement and the Plan (i) do not violate (a)
Sandy's Articles of Incorporation or Bylaws or (b) any law known to
counsel to be applicable to Sandy where such violation would
reasonably be expected to have a material adverse effect upon the
validity, performance or enforceability of any of the terms of this
Agreement applicable to Sandy, or (c) based solely on a review of the
results of a litigation search in the United States District Court
for the Eastern District of Michigan, Southern Division, dated within
two weeks of the Closing Date, and the Oakland County, Michigan
Circuit Court, dated within two weeks of the Closing Date (the
"Searches") and a certificate of officers of Sandy, any of Sandy's
obligations under any judgment, decree, or order of any court or any
other agency of government and (ii) do not constitute a breach of, or
a default under, any of the agreements listed as exhibits to Sandy's
most recent Annual Report on Form 10-K filed with the SEC or any
subsequent Quarterly Reports on Form 10-Q and any other material
agreements of Sandy actually known to counsel (collectively, the
"Agreements");
(D) No approval, authorization, or other action by, or filing
with, any governmental authority of the United States of America or
the State of Michigan is required for the execution, delivery and
performance by Sandy of this Agreement or the Plan (other than under
state "blue sky" laws, the SEC approvals contemplated by Section
4.3(b) hereof, the approval of the U.S. Department of Justice and the
Federal Trade Commission pursuant to the HSR and the filing of a
Certificate of Merger with the Department of Commerce of the State of
Michigan);
(E) Subject to compliance with applicable federal and state
securities laws (as to which counsel need express no opinion), all of
the outstanding shares of Sandy Common Stock have been duly
authorized, validly issued and fully paid, and are nonassessable and
free of any preemptive rights created by the Articles of
Incorporation or Bylaws of Sandy or created by any of the Agreements;
(F) This Agreement and the Plan were duly and validly approved
by the shareholders of Sandy in accordance with the MBCA and Sandy's
Articles of Incorporation and Bylaws, and, assuming that this
Agreement and the Plan were duly and validly approved by ADP Mergerco
in accordance with the MBCA and ADP Mergerco's Articles of
Incorporation and Bylaws, upon filing a Certificate of Merger with
the Department of Commerce of the State of Michigan the Merger will
become effective under the laws of the State of Michigan;
(G) Based solely on the Searches, the results of an inquiry to
members of such counsel's firm and a certificate of officers of
Sandy, such counsel shall confirm to ADP and ADP Mergerco that to its
actual knowledge (i) there are no claims, actions, suits, proceedings
or investigations pending or threatened in writing against Sandy or
any Employee Plans, at law or in equity, before any court or
governmental agency, except as set forth in Section 3.11 hereof and
(ii) no action or proceeding has been instituted or threatened in
writing to restrain or prohibit the performance of any party's
obligations under this Agreement or to challenge the validity of any
part of this Agreement or seeking damages on account thereof; and
(H) The treatment of the Sandy Stock Options contemplated by
Section 1.8 will not result in the breach of any of the Sandy Stock
Options or the stock option plans pursuant to which such options were
granted or violate any law, rule, regulation or order.
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(iv) A Certificate from the Chairman of Sandy, solely in his
capacity as an officer of Sandy, to the effect that the Company has
complied with Section 4.1 of this Agreement and the representations and
warranties in Article 3 are true and correct in all respects on the
Closing Date.
(f) The Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall have
been issued and no proceeding for that purpose and no similar proceeding in
respect of the Merger Proxy Statement shall have been initiated or
threatened by the SEC. ADP shall have received all state blue sky or
securities law permits and other authorizations necessary to consummate the
Merger.
(g) The Employment and Consulting Agreement dated November 4, 1985
between Sandy and William H. Sandy, as heretofore amended and as amended on
the date hereof (the "Employment and Consulting Agreement"), shall be in
full force and effect and shall not have been subsequently amended without
the prior written consent of ADP.
(h) Sandy shall have entered into employment agreements, in form and
substance reasonably satisfactory to ADP, with certain key employees of
Sandy to be specified by ADP, and such employees' existing employment
agreements with Sandy shall have been terminated.
(i) ADP shall have received a complete and correct copy of Sandy's
audited financial statements for the one-year period ending August 31,
1995, reported on without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit, by
Deloitte & Touche, LLP or other certified public accountants of nationally
recognized standing.
(j) ADP shall have received unaudited consolidated balance sheets and
income statements for each complete calendar month from June 30, 1995
through the last full month immediately prior to the Closing Date, in each
case certified by Sandy's chief financial officer as being prepared in
accordance with Sandy's books and records and consistent with past
practices.
(k) Sandy shall have received the opinion of Honigman Miller Schwartz
and Cohn, in form and substance reasonably satisfactory to Sandy and ADP,
to the effect that the Merger qualifies for federal income tax purposes as
a reorganization within the meaning of Section 368 of the Code.
(l) All amounts owing under the Amended and Restated Revolving Credit
Agreement, dated June 23, 1993, between Sandy and Comerica Bank, as
amended, shall have been paid in full, and such credit agreement shall have
been terminated by Sandy.
(m) ADP shall have received an agreement, in form and substance
reasonably satisfactory to it, from each "affiliate" of Sandy within the
meaning of such term as used in Rule 145 under the Securities Act (an
"Affiliate") to the effect that (i) no disposition of ADP Common Stock
received in the Merger will be made by such persons except within the
limits and in accordance with the applicable provisions of (x) said Rule
145, as amended from time to time, or except in a transaction which, in the
opinion of legal counsel reasonably satisfactory to ADP, is exempt from
registration under the Securities Act of 1933 and (y) Securities Act
Release No. 5312 with respect to sales of ADP Common Stock by Affiliates
until such time as financial results covering at least 30 days of
post-merger combined operations have been published, provided that ADP
agrees to publish promptly financial statements reflecting such combined
operations and (ii) such person has not theretofore taken (and, if such
agreement is delivered prior to the Closing Date, will not take during the
remaining period prior thereto) any action (including, without limitation,
selling or otherwise disposing of Sandy Common Stock beneficially owned by
such person) that would prevent the Merger from being accounted for as a
pooling of interests.
(n) ADP shall have received evidence from Deloitte & Touche LLP, in
form and substance reasonably satisfactory to it, that the Merger may
properly be accounted for as a pooling of interests.
(o) In consideration of ADP's guaranty of the obligations of the
Surviving Corporation under the lease agreement dated February 1, 1994
between Sandy and 1500 Limited Partnership, such lease shall have been
amended, on terms mutually satisfactory to ADP and 1500 Limited
Partnership, (i) to add an additional improvements allowance of $200,000
thereunder to be available to the Surviving Corporation
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immediately after the Effective Time and until December 31, 1996, (ii) to
accelerate the availability of the last $100,000 of the improvements
allowance thereunder from February 1, 2000 to the Closing Date so that such
$100,000 allowance shall be available immediately after the Effective Time
and until December 31, 1996 and (iii) to permit the Surviving Corporation
to self-insure under Sections 11.2, 11.3, 11.4 and 11.5 of such lease in
accordance with ADP's standard policy.
(q) ADP shall have received evidence, in form and substance reasonably
satisfactory to it, that the Sandy Adjusted Net Worth as at the Test Date
shall be no less than $10,101,187. The "Sandy Adjusted Net Worth" means the
stockholders' equity of Sandy, calculated in a manner consistent with that
used to calculate stockholders' equity in the Sandy Financial Statements,
provided that: (i) the Sandy Adjusted Net Worth shall be calculated as if
all amounts payable to William Sandy under the Employment and Consulting
Agreement and the $190,000 in additional expenses and fees used by the
parties in calculating the $10,101,187 figure are deductible for federal
income tax purposes at the statutory corporate rate, and (ii) the Sandy
Adjusted Net Worth shall be calculated as if all amounts payable to William
Sandy under the Employment and Consulting Agreement had been paid as of the
Test Date. The "Test Date" means the last day of the calendar month ending
more than ten but less than forty-one days before the Closing Date.
5.2 Conditions to Sandy's Obligations. Notwithstanding any other provision
herein to the contrary, the obligation of Sandy to consummate the transactions
contemplated hereby is subject to the fulfillment of each of the following
conditions:
(a) The representations and warranties of ADP Mergerco and ADP
contained herein shall be true and correct on and as of the Closing Date
with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date, except to the
extent waived in writing by Sandy and except that any representations and
warranties made as of a specified date will be deemed true and correct as
of the Closing Date if they were true and correct on the specified date.
ADP Mergerco and ADP shall have performed in all material respects all
obligations and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed or
complied with by either of them at or prior to the Effective Time.
(b) The delivery to Sandy of a copy of the resolutions duly adopted by
ADP Mergerco's Board of Directors or a duly authorized committee thereof
approving the execution and delivery of this Agreement and the Plan and
authorizing all necessary or proper action to enable ADP Mergerco to comply
with the terms hereof.
(c) There shall not be any judgment, decree, injunction, ruling or
order of any court, governmental department, commission, agency or
instrumentality outstanding against ADP Mergerco, ADP or Sandy which
prohibits or materially restricts or delays the consummation of the Merger.
(d) The approval by Sandy's shareholders, in accordance with the MBCA
and Sandy's Articles of Incorporation and Bylaws, of this Agreement and the
Plan and authorizing all necessary or proper action to enable Sandy to
comply with the terms hereof.
(f) The delivery by ADP of the Exchange Fund to the Exchange Agent for
the conversion of the Sandy Common Stock as set forth in the Plan.
(g) The opinion of James B. Benson, General Counsel of ADP, to the
effect that:
(A) ADP is a corporation validly existing and in good standing
under the laws of the State of Delaware;
(B) ADP has the corporate power and the corporate authority to
execute, deliver, and perform its obligations under this Agreement
and the Plan; the execution, delivery, and performance by ADP of its
obligations under this Agreement and the Plan have been duly
authorized by all necessary corporate action on the part of ADP; and
this Agreement and the Plan have been duly executed and delivered by
ADP and constitute the valid and binding agreements of ADP,
enforceable against ADP in accordance with their respective terms,
except
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that (1) such enforcement may be subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, or other
laws, now or hereafter in effect, affecting creditors' rights
generally, and (2) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable
defenses (including commercial reasonableness, good faith, and fair
dealing) and to the discretion of the court before which any
proceeding therefor may be brought;
(C) The execution, delivery, and performance by ADP of its
obligations under this Agreement and the Plan (i) do not violate (a)
ADP's Certificate of Incorporation or Bylaws or (b) any law known to
counsel to be applicable to ADP where such violation would reasonably
be expected to have a material adverse effect upon the validity,
performance or enforceability of any of the terms of this Agreement
applicable to ADP, or (c) any of ADP's obligations under any
judgment, decree, or order of any court or any other agency of
government known to counsel that is applicable to ADP or its
properties and (ii) do not constitute a breach of, or a default
under, any of the agreements listed as exhibits to ADP's most recent
Annual Report on Form 10-K filed with the SEC or any subsequent
Quarterly Reports on Form 10-Q and any other material agreements of
ADP actually known to counsel;
(D) No approval, authorization, or other action by, or filing
with, any governmental authority of the United States of America or
the State of Delaware is required in connection with the execution,
delivery and performance by ADP of this Agreement or the Plan (other
than under state "blue sky" laws, the SEC approvals contemplated by
Section 4.3(b) and the approval of the U.S. Department of Justice and
the Federal Trade Commission pursuant to the HSR);
(E) This Agreement and the Plan were duly and validly approved
by the shareholders of ADP Mergerco in accordance with ADP Mergerco's
Certificate of Incorporation and Bylaws;
(F) The Registration Statement has become effective under the
Securities Act of 1933, as amended, and, to the best knowledge of
such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated;
(G) The shares of ADP Common Stock to be issued in connection
with the Merger have been duly authorized and when issued in
accordance with the terms of this Agreement and the Plan will be
validly issued, fully paid and nonassessable; and
(H) Subject to compliance with applicable federal and state
securities laws (as to which counsel need express no opinion), all of
the outstanding shares of ADP Common Stock have been duly authorized,
validly issued and fully paid, and are nonassessable and free of any
preemptive rights created by the Articles of Incorporation or Bylaws
of ADP or created by any of the agreements referred to in clause
(C)(ii) above.
5.3 Closing and Effective Time. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Sandy, 1500 West Big Beaver Road, Troy, Michigan 48084 at 10:00 a.m. local
time as soon as practicable after the satisfaction of the conditions precedent
to the Closing, or at such other time and place as mutually agreed by ADP
Mergerco, ADP and Sandy (the "Closing Date").
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ARTICLE 6
TERMINATION AND ABANDONMENT
6.1 Termination and Abandonment. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval by the shareholders of Sandy:
(a) by mutual action of the Boards of Directors of ADP Mergerco, ADP
and Sandy;
(b) by the Board of Directors of ADP Mergerco, ADP or Sandy if the
Merger does not take place on or before January 31, 1996; or
(c) by the Board of Directors of Sandy pursuant to Section 7.11
hereof.
6.2 Effect of Termination. Except as provided in Section 7.6 hereof with
respect to fees and expenses and in Section 7.1 hereof with respect to
confidentiality, in the event of the termination of this Agreement and the
abandonment of the Merger, this Agreement shall thereafter become void and have
no effect, and no party hereto shall have any liability to any other party
hereto or its shareholders or directors or officers in respect thereof, except
that nothing herein shall relieve any party from liability for any breach
hereof.
ARTICLE 7
MISCELLANEOUS
7.1 Entire Agreement. This Agreement (together with the schedules
contemplated herein and the documents delivered in connection herewith)
supersedes all prior documents, understandings, and agreements, oral or written,
relating to this transaction and constitutes the entire understanding among the
parties with respect to the subject matter hereof; provided, however, that the
Confidentiality Agreement dated May 2, 1995 and the Non-Disclosure Agreement
dated May 2, 1995 shall each survive the execution, delivery and termination of
this Agreement.
7.2 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto; provided, however,
that after approval of the Merger by the shareholders of Sandy, no amendment may
be made which decreases the consideration to which the shareholders of Sandy are
entitled pursuant to this Agreement or otherwise materially adversely affects
the shareholders of Sandy without the further approval of the shareholders of
Sandy.
7.3 Waiver. At any time prior to the Effective Time, whether before or
after any meeting of Sandy's shareholders, any party hereto may (a) in the case
of ADP Mergerco and ADP, extend the time for the performance of any of the
obligations or other acts of Sandy or, subject to the provisions contained in
Section 7.2 hereof, waive compliance with any of the agreements of Sandy or with
any conditions to the respective obligations of ADP Mergerco or ADP, or (b) in
the case of Sandy, acting through its Chairman, extend the time for the
performance of any of the obligations or other acts of ADP Mergerco or ADP, or
waive compliance with any of the agreements of ADP Mergerco or ADP or with any
conditions to its own obligations. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party by a duly authorized officer.
7.4 Intentionally Left Blank.
7.5 Successors and Assigns. No rights or obligations of any party hereto
under this Agreement may be assigned. Any assignment in violation of the
foregoing shall be null and void. Subject to the preceding sentence of this
Section 7.5, the provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
7.6 Fees and Expenses.
(a) Except as otherwise provided in subsection (b) below, regardless of
whether the Merger is consummated, each of the parties hereto shall pay its own
respective costs and expenses (including, but not
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limited to, attorneys' fees) incurred in connection with this Agreement and the
transactions contemplated hereby.
(b) If the Board of Directors of Sandy terminates this Agreement pursuant
to Section 7.11(d) hereof, then Sandy shall pay to ADP, within one business day
after such termination, a fee equal to four percent of the aggregate purchase
price which the third party indicated it would pay in connection with the
proposed Acquisition Transaction which was the basis for such termination.
7.7 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable; this Agreement shall
be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part hereof; and the remaining provisions shall
remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom. Furthermore,
in lieu of such illegal, invalid, or unenforceable provision, there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
7.8 Waiver. No failure or delay on the part of any party in exercising any
right, power, or privilege hereunder or under any of the documents delivered in
connection with this Agreement shall operate as a waiver of such right, power,
or privilege; nor shall any single or partial exercise of any such right, power,
or privilege preclude any other or future exercise thereof or the exercise of
any other right, power, or privilege.
7.9 Notices. Any notices required or permitted to be given under this
Agreement (and, unless otherwise expressly provided therein, under any document
delivered in connection with this Agreement) will be sufficient if given in
writing and shall be deemed received: (a) when personally delivered to the
relevant party at such party's address as set forth below, (b) when confirmed if
delivered by facsimile or similar device, (c) if sent by mail, on the third day
following the date when deposited in the United States mail, certified or
registered mail, postage prepaid, to the relevant party at its address indicated
below or (d), if sent by recognized overnight courier, on the day following the
date when delivered to the courier, postage prepaid, addressed to the relevant
party at its address indicated below:
If to ADP or ADP Automatic Data Processing, Inc.
Mergerco: 1950 Hassell Road
Hoffman Estates, Illinois 60195
Attention: President, Dealer Services Group
Phone: 708/397-1700
FAX: 708/885-3099
with a copy to, in the case of notices to either ADP Mergerco or
ADP (which shall not constitute notice):
Automatic Data Processing, Inc.
One ADP Boulevard
Roseland, New Jersey 07068
Attention: General Counsel
Phone: 201/994-5750
FAX: 201/535-6199
If to Sandy: Sandy Corporation
1500 West Big Beaver Road
Troy, Michigan 48084
Attention: Chairman
Phone: 810/649-0800
FAX: 810/649-2080
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with a copy to (which shall not constitute notice):
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
Attention: Donald J. Kunz, Esq.
Phone: 313/256-7704
FAX: 313/962-0176
Each party may change its address for purposes of this Section 7.9 by proper
written notice to the other parties.
7.10 Non-Survival of Representations, Warranties, and Covenants. Except as
provided in Section 7.12 hereof, regardless of any investigation at any time
made by or on behalf of any party hereto or of any information any party may
have in respect thereof, all covenants, agreements, representations, and
warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall automatically terminate (without further
action) at the Effective Time.
7.11 Fiduciary Duties. Sandy will immediately cease any and all
discussions and negotiations with any and all third parties regarding any
proposed (i) merger of Sandy with or into any third party, (ii) sale of
substantially all of the assets of Sandy, (iii) sale of more than one percent of
the outstanding shares of Sandy Common Stock, or (iv) consolidation or other
business combination involving Sandy or any division of Sandy (an "Acquisition
Transaction"). Except as set forth below in this Section 7.11, Sandy will not,
and will not permit any of its officers, directors, investment bankers,
attorneys or accountants to, and will not authorize any of its employees, agents
or representatives to, directly or indirectly, (i) encourage, solicit or
initiate discussions or negotiations with, or provide any non-public information
to, any person or entity other than ADP or its affiliates (or any group in which
ADP or its affiliates participates) concerning an Acquisition Transaction or
(ii) otherwise encourage, solicit or initiate inquiries or the submission of any
proposal contemplating an Acquisition Transaction. Sandy may, without liability
for breach of this Agreement, (a) furnish information and engage in discussions
or negotiations with any person if Honigman Miller Schwartz and Cohn or other
independent legal counsel to Sandy advises the Board of Directors of Sandy that
failure to furnish such information or engage in such discussions or
negotiations is likely to be considered a breach by the Board of Directors of
Sandy of its fiduciary duties, (b) take and disclose to Sandy's shareholders a
position with respect to a tender offer by a third party (a "Third Party Offer")
pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or make
such disclosure to Sandy's shareholders that, in the good faith judgment of the
Board of Directors of Sandy based upon the advice of Honigman Miller Schwartz
and Cohn or other independent legal counsel to Sandy, may be required under
applicable law, (c) take action to provide that Chapter 7A or 7B of the MBCA
does not apply to acquisitions of shares of Sandy Common Stock pursuant to any
Third Party Offer at a value or consideration per share which, after
consultation with Sandy's financial advisors, the Board of Directors of Sandy
determines is higher than the Exchange Ratio, approve any such Third Party Offer
and the transactions contemplated thereby, or otherwise take any similar action
which, in the good faith judgment of the Board of Directors based upon the
advice of Honigman Miller Schwartz and Cohn or other independent legal counsel
to Sandy, may be required by the directors' fiduciary duties with respect to any
such Third Party Offer or (d) terminate this Agreement if Sandy receives a
written proposal regarding an Acquisition Transaction which offers more
consideration to the shareholders of Sandy than that offered hereunder by ADP
and the Board of Directors of Sandy recommends to the shareholders of Sandy that
such shareholders accept and/or approve such Acquisition Transaction.
7.12 Indemnification and Insurance.
(a) For six years after the Closing Date, ADP shall, or shall cause the
Surviving Corporation to, indemnify and hold harmless each present and former
director or officer of Sandy (the "Indemnified Parties") from and against any
and all claims arising out of or in connection with activities in such capacity
or on behalf of, or at the request of, Sandy, occurring on or prior to the
Closing Date ("Claims"), to the fullest extent permitted under applicable law
and, in addition (if not prohibited by applicable law), to the fullest extent
provided in Sandy's charter and bylaws in effect at the date hereof. If any
Claim or Claims asserted or made
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within such six year period, all rights to indemnification in respect of any
such Claim or Claims shall continue until disposition of any and all such
Claims. Without limiting the foregoing, after the Effective Time ADP shall, or
shall cause the Surviving Corporation to, advance expenses incurred with respect
to the foregoing, as they are incurred, to the fullest extent permitted under
applicable law, provided that the person on whose behalf the expenses are
advanced provides an undertaking (which need not be secured) to repay such
advances if it is ultimately determined in a final, non- appealable judicial
proceeding that such person is not entitled to indemnification.
(b) After the Effective Time, ADP shall, or shall cause the Surviving
Corporation to, maintain Sandy's existing officers' and directors' liability
insurance in respect of Claims, or other insurance (including a run-off policy)
in respect of Claims, no less favorable in scope and amount of coverage, in full
force and effect without reduction of coverage for a period of three years after
the Closing Date; provided, however, that ADP will not be required to pay an
annual premium therefor in excess of two times the last annual premium paid by
Sandy prior to the date hereof and if ADP is unable to purchase the insurance
required by this Section 7.12 it shall purchase as much comparable insurance as
can be obtained for an annual premium equal to such maximum amount.
7.13 Knowledge.
(a) When used in this Agreement, the term "knowledge" (or any variation
thereof) of Sandy shall refer to the actual knowledge of or notice to William H.
Sandy, Raymond A. Ketchledge, John Zimmerman or any other executive officer of
Sandy, and the term "best knowledge" of Sandy shall refer to the actual
knowledge of or notice to any of such persons after due inquiry by all of such
persons.
(b) When used in this Agreement, the term "knowledge" (or any variation
thereof) of ADP or ADP Mergerco shall refer to the actual knowledge of or notice
to Josh Weston, Art Weinbach, Peter Leger or any other executive officer of ADP
or ADP Mergerco, and the term "best knowledge" of ADP or ADP Mergerco shall
refer to the actual knowledge of or notice to any of such persons after due
inquiry by all of such persons.
7.14 Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without regard to its choice
of laws principles.
7.15 Headings. The headings and captions used in this Agreement are,
unless specified otherwise, for convenience only and shall not be deemed to
limit, amplify, or modify the terms of this Agreement or affect the meaning
hereof.
7.16 Sections; Exhibits. All references to "sections", "schedules", and
"exhibits" herein are, unless specifically indicated otherwise, references to
sections, schedules, and exhibits of and to this Agreement.
7.17 Number and Gender of Words. Whenever herein the singular number is
used, the same shall include the plural where appropriate, and words of any
gender shall include each other gender where appropriate.
7.18 Counterparts. This Agreement may be executed in multiple
counterparts; provided however, that all such counterparts together shall be
deemed to constitute one agreement. This Agreement may be executed by facsimile
signatures.
7.19 Definitions. For purposes of this Agreement, the term:
<TABLE>
<S> <C>
(a) "Acquisition Transaction" has the meaning set forth in Section 7.11 hereof;
(b) "ADP" has the meaning set forth in the preamble to this Agreement;
(c) "ADP Sandy Common Stock" has the meaning set forth in Section 1.2(a) hereof;
(d) "ADP Financial Statements" has the meaning set forth in Section 2.6 hereof;
(e) "ADP Mergerco" has the meaning set forth in the preamble to this Agreement;
(f) "ADP SEC Filings" has the meaning set forth in Section 2.6 hereof;
</TABLE>
27
<PAGE> 77
<TABLE>
<S> <C>
(g) "Affiliate" has the meaning set forth in Section 5.1(n) hereof;
(h) "Affiliate Stockholder" has the meaning set forth in Section 5.1(l) hereof;
(i) "Affiliate Stockholders' Agreement" has the meaning set forth in Section 5.1(l)
hereof;
(j) "Agreement" has the meaning set forth in the preamble to this Agreement;
(k) "Assets" has the meaning set forth in Section 2.3 hereof;
(l) "Average ADP Common Stock Price" has the meaning set forth in Section 1.3(a)
hereof;
(m) "Best Knowledge" has the meaning set forth in Section 7.13 hereof;
(n) "Claim" and "Claims" have the meanings set forth in Section 7.12(a) hereof;
(o) "Closing" has the meaning set forth in Section 5.3 hereof;
(p) "Closing Date" has the meaning set forth in Section 5.3 hereof;
(q) "Code" has the meaning set forth in Section 3.9(c) hereof;
(r) "Sandy Common Stock" has the meaning set forth in Section 1.2(a) hereof;
(s) "Determination Date" has the meaning set forth in Section 1.3(a) hereof;
(t) "Effective Time" has the meaning set forth in Section 1.1(b) hereof;
(u) "Employees" has the meaning set forth in Section 3.27 hereof;
(v) "Employee Plans" has the meaning set forth in Section 3.9(b) hereof;
(w) "Employment and Consulting Agreement" has the meaning set forth in Section
5.1(g) hereof;
(x) "ERISA" has the meaning set forth in Section 3.9(b) hereof;
(y) "Escrow Agent" has the meaning set forth in Section 5.1(l) hereof;
(z) "Escrow Agreement" has the meaning set forth in Section 5.1(b) hereof;
(aa) "Exchange Agent" has the meaning set forth in Section 1.6(a) hereof;
(bb) "Exchange Fund" has the meaning set forth in Section 1.6(b) hereof;
(cc) "Exchange Ratio" has the meaning set forth in Section 1.3(a) hereof;
(dd) "Exhibits" has the meaning set forth in Section 7.16 hereof;
(ee) "GAAP" has the meaning set forth in Section 1.1(d) hereof;
(ff) "HSR" has the meaning set forth in Section 3.3 hereof;
(gg) "Indemnified Parties" has the meaning set forth in Section 7.12(a);
(hh) "IRS" has the meaning set forth in Section 3.9 hereof;
(ii) "Knowledge" has the meaning set forth in Section 7.13 hereof;
(jj) "Liabilities" has the meaning set forth in Section 2.3 hereof;
(kk) "MAE" has the meaning set forth in Section 2.4 hereof;
(ll) "MBCA" has the meaning set forth in the Recitals of this Agreement;
(mm) "Meeting" has the meaning set forth in Section 4.3(a) hereof;
(nn) "Merger" has the meaning set forth in the preamble of this Agreement;
(oo) "Merger Proxy Statement" has the meaning set forth in Section 4.3(c) hereof;
</TABLE>
28
<PAGE> 78
<TABLE>
<S> <C>
(pp) "NYSE" has the meaning set forth in Section 1.3(a) hereof;
(qq) "Plan" has the meaning set forth in the Recitals of this Agreement;
(rr) "Registration Statement" has the meaning set forth in Section 4.3(b) hereof;
(ss) "Return" and "Returns" have the meanings set forth in Section 3.14 hereof;
(tt) "Sandy" has the meaning set forth in the preamble of this Agreement;
(uu) "Sandy Financial Statements" has the meaning set forth in Section 3.13 hereof;
(vv) "Sandy Adjusted Net Worth" has the meaning set forth in Section 5.1(q) hereof;
(ww) "Sandy Options" has the meaning set forth in Section 1.8(a) hereof;
(xx) "Sandy SEC Filings" has the meaning set forth in Section 3.13 hereof;
(yy) "Sandy Tax Actions" has the meaning set forth in Section 3.14 hereof;
(zz) "Schedules" has the meaning set forth in Section 7.16 hereof;
(aaa) "SEC" has the meaning set forth in Section 1.1(d) hereof;
(bbb) "Sections" has the meaning set forth in Section 7.16 hereof;
(ccc) "Stockholders' Representative" has the meaning set forth in Section 1.7 hereof;
(ddd) "Substitute Options" has the meaning set forth in Section 1.8(a) hereof;
(eee) "Surviving Corporation" has the meaning set forth in Section 1.1(a) hereof;
(fff) "Tax" and "Taxes" have the meanings set forth in Section 3.14 hereof;
(ggg) "Test Date" has the meaning set forth in Section 5.1(q) hereof;
(hhh) "Third Party Offer" has the meaning set forth in Section 7.11 hereof; and
(iii) "Westcott" has the meaning set forth in Section 3.13 hereof.
</TABLE>
29
<PAGE> 79
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ADP MERGERCO, INC.
By: /s/ JAMES B. BENSON
-----------------------------------
Its: President
AUTOMATIC DATA PROCESSING, INC.
By: /s/ JAMES B. BENSON
-----------------------------------
Its: Corporate Vice President
SANDY CORPORATION
By: /s/ WILLIAM H. SANDY
-----------------------------------
Its: Chairman -- C.E.O.
30
<PAGE> 80
EXHIBIT "A"
PLAN OF MERGER
OF
ADP MERGERCO, INC.
(A MICHIGAN CORPORATION)
WITH AND INTO
SANDY CORPORATION
(A MICHIGAN CORPORATION)
This Plan of Merger (this "Plan") is made, entered into, and agreed to as
of , 1995, by and among ADP MERGERCO, INC., a Michigan corporation
("ADP Mergerco"), AUTOMATIC DATA PROCESSING, INC., a Delaware corporation
("ADP") and SANDY CORPORATION, a Michigan corporation ("Sandy").
RECITALS
A. Sandy, ADP Mergerco and ADP are parties to an Agreement and Plan of
Merger, dated as of August 22, 1995 (the "Merger Agreement"), providing for the
Merger (the "Merger") of ADP Mergerco with and into Sandy in accordance with the
Michigan Business Corporation Act (the "MBCA") and this Plan. Sandy and ADP
Mergerco are hereinafter sometimes referred to as the "Constituent
Corporations."
B. The Boards of Directors of the Constituent Corporations deem it
advisable and in the best interests of the Constituent Corporations and in the
best interests of their respective shareholders that ADP Mergerco be merged with
and into Sandy.
NOW, THEREFORE, the Constituent Corporations hereby agree as follows:
AGREEMENT
1. Merger. The Constituent Corporations shall effect the Merger on the
terms and conditions set forth in this Plan.
(a) Pursuant to MBCA Section 450.1701(2)(a), at the Effective Time and
in accordance with the MBCA, ADP Mergerco shall be merged with and into
Sandy, the separate corporate existence of ADP Mergerco (except as it may
be continued by operation of law) shall cease, and Sandy shall continue as
the surviving corporation under its present corporate name. Sandy as it
exists from and after the Effective Time is sometimes referred to
hereinafter as the "Surviving Corporation."
(b) Consistent with MBCA Section 450.1724, upon the effectiveness of
the Merger, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, as well of a public as of a private
nature, and be subject to all the restrictions, disabilities and duties, of
each of the Constituent Corporations; and all property, real, personal and
mixed, and all debts due to any of the Constituent Corporations on whatever
account, including subscriptions to shares, and all other things in action
and all and every other interest, of or belonging to each of the
Constituent Corporations, shall be vested in the Surviving Corporation
without further act or deed and without any transfer or assignment having
occurred; and all property, rights, privileges, immunities and franchises,
and all and every other interest shall be thereafter as effectually the
property of the Surviving Corporation as they were of the Constituent
Corporations, and the title to any real estate vested by deed or otherwise
in either of the Constituent Corporations shall not revert or be in any way
impaired by reason of the Merger; but all rights of creditors and all liens
upon any property of either of the Constituent Corporations shall be
preserved unimpaired, and all debts, liabilities and duties of the
Constituent Corporations shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said
debts, liabilities and duties had been incurred or contracted by it; and
all other effects of the Merger specified in the MBCA shall result
therefrom.
1
<PAGE> 81
(c) Pursuant to MBCA Section 450.1707, as soon as practicable after
the satisfaction or waiver of the conditions to the Merger contained in the
Merger Agreement, the parties hereto will cause the Merger to be
consummated by filing with the Department of Commerce of the State of
Michigan a properly executed Certificate of Merger incorporating this Plan
of Merger (the time of filing of a Certificate of Merger relating to the
Merger being the "Effective Time").
2. Shares Entitled to Vote on the Merger. Pursuant to MBCA Section
450.1703(a)(1) and (2), this Plan shall be submitted for and become effective
upon approval of the shareholders of each of the Constituent Corporations.
Pursuant to MBCA Section 450.1703(a), the designation and number of outstanding
shares of each class and series of shares entitled to vote on the Merger, and
each class and series of shares entitled to vote as a class on the Merger, for
each Constituent Corporation, is set forth below:
[to be provided]
3. Articles of Incorporation: By-Laws: Directors and Officers. The
Articles of Incorporation and Bylaws of ADP Merger in effect immediately prior
to the Effective Time shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation, until thereafter amended in accordance with the
provisions therein and as provided by the MBCA. The initial directors of the
Surviving Corporation shall be the directors of ADP Mergerco immediately prior
the Effective Time, in each case until their successors are elected and
qualified, and the initial officers of the Surviving Corporation shall be the
officers of ADP Mergerco immediately prior to the Effective Time, in each case
until their successors are duly elected and qualified.
4. Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of ADP Mergerco or ADP, Sandy or any
holder of any shares of capital stock of Sandy or ADP Mergerco:
(a) each issued and outstanding share of Sandy common stock, par value
$.01 per share (the "Sandy Common Stock"), shall be converted into and
exchangeable for shares of ADP common stock, par value $.10 per share (the
"ADP Common Stock"), at the Exchange Ratio as defined in Section 1.3 of the
Merger Agreement and ADP shall, subject to Section 1.7 of the Merger
Agreement, issue to holders of Sandy Common Stock shares of ADP Common
Stock based on the Exchange Ratio in exchange for the outstanding shares of
Sandy Common Stock, and holders of Sandy Common Stock shall be paid cash in
lieu of any fractional share as provided in Section 1.5 of the Merger
Agreement;
(b) each share of Sandy Common Stock held as treasury stock of Sandy
shall be canceled, retired and cease to exist, and no exchange or payment
shall be made in respect thereof; and
(c) each share of ADP Mergerco common stock, par value $.01 per share,
which is issued and outstanding immediately prior to the Effective Time
shall be converted into and become one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
5. Stock Options.
(a) All stock options outstanding at the Effective Time under Sandy's 1985
Performance Incentive Plan, 1989 Performance Incentive Plan, or pursuant to the
nonqualified stock option agreement dated September 1988 between Sandy and
Raymond Ketchledge or the amended nonqualified stock option agreement dated
September 1, 1992 between Sandy and Raymond Ketchledge (collectively, the "Sandy
Options") shall, by virtue of the Merger and without any action on the part of
the holders of such options, be converted into and become options to purchase
shares of ADP Common Stock ("Substitute Options") as follows:
(i) each Substitute Option will cover the number of shares of ADP
Common Stock (rounded down to the nearest whole share) which the holder of
the Sandy Option being replaced would have been entitled to receive in the
Merger had such holder exercised, immediately prior to the Effective Time,
the Sandy Option which the Substitute Option is replacing;
(ii) each Substitute Option will be exercisable for a purchase price
per share (rounded down to the nearest cent) determined by dividing (x) the
purchase price per share of Sandy Common Stock payable
2
<PAGE> 82
upon exercise of the Sandy Option which the Substitute Option replaced,
multiplied by the number of shares of Sandy Common Stock covered by the
Sandy Option, by (y) the number of shares of ADP shares of Sandy Common
Stock covered by the Substitute Option, as determined in accordance with
clause (i) above; and
(iii) each Substitute Option will be exercisable, over each time
period during which the Sandy Option it replaced would have been
exercisable (taking into account any acceleration in vesting brought about
by the Merger), with respect to that number of shares of ADP Common Stock
(rounded down to the nearest whole share) determined by multiplying (x) the
number of shares of Sandy Common Stock with respect to which the Sandy
Option would have been exercisable during that time period by (y) a
fraction, the numerator of which is the total number of shares of ADP
Common Stock covered by the Substitute Option and the denominator of which
is the total number of shares of Sandy Common Stock covered by the replaced
Sandy Option.
(b) Subject to the foregoing requirements, the terms of each Substitute
Option will be substantially equivalent to the terms of the Sandy Option that it
replaces.
6. Merger Payment Procedure.
(a) After the Effective Time, holders of certificates theretofore
evidencing outstanding shares of Sandy Common Stock, upon surrender of such
certificates to an exchange agent appointed by ADP (the "Exchange Agent"), shall
be entitled to receive, (i) certificates representing the number of whole shares
of ADP Common Stock into which shares of Sandy Common Stock theretofore
represented by the certificates so surrendered shall have been converted as
provided in Section 1.2(a) of the Merger Agreement and (ii) cash payments in
lieu of fractional shares, if any, as provided in Section 1.5 of the Merger
Agreement. As soon as practicable after the Effective Time, ADP shall cause the
Exchange Agent to mail appropriate and customary transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Sandy Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent) to each
holder of Sandy Common Stock of record as of the Effective Time advising such
holder of the effectiveness of the Merger and the procedure for surrendering to
the Exchange Agent outstanding certificates formerly evidencing Sandy Common
Stock in exchange for new certificates for ADP Common Stock. ADP shall not be
obligated to deliver the consideration to which any former holder of shares of
Sandy Common Stock is entitled as a result of the Merger until such holder
surrenders the certificate or certificates representing such shares for exchange
as provided in such transmittal materials and Section 1.6(a) of the Merger
Agreement. Upon surrender, each certificate evidencing Sandy Common Stock shall
be canceled.
(b) On or promptly after the Effective Time, ADP shall deposit with the
Exchange Agent, for exchange in accordance with this Section 6, certificates
representing the shares of ADP Common Stock and cash in lieu of fractional
shares (such certificates and cash are hereinafter referred to as the "Exchange
Fund") to be issued or paid by ADP pursuant to Article 1 of the Merger Agreement
in connection with the Merger. After the Effective Time, ADP shall, on the
payment or distribution date, tender to the Exchange Agent as an addition to the
Exchange Fund all dividends and other distributions applicable to certificates
held in the Exchange Fund.
(c) Until outstanding certificates formerly representing Sandy Common Stock
are surrendered as provided in Section 6(a) hereof, no dividend or distribution
payable to holders of record of ADP Common Stock shall be paid to any holder of
such outstanding certificates, but upon surrender of such outstanding
certificates by such holder out of the Exchange Fund there shall be paid to such
holder the amount of any dividends or distributions (without interest)
theretofore payable with respect to such whole shares of ADP Common Stock, but
not paid to such holder, and which dividends or distributions had a record date
occurring subsequent to the Effective Time.
7. Return of Exchange Fund by Exchange Agent. Any portion of the Exchange
Fund (including the proceeds of any investments thereof or any ADP Common Stock)
that remains unclaimed by the holders of Sandy Common Stock for six months after
the Effective Time shall be returned or repaid to ADP. Any
3
<PAGE> 83
holders of certificates theretofore evidencing shares of Sandy Common Stock who
have not theretofore complied with Section 1.6 of the Merger Agreement shall
thereafter look only to ADP for payment of their shares of ADP Common Stock,
cash in lieu of fractional shares and any unpaid dividends and distributions on
the ADP Common Stock deliverable in respect of each share of Sandy Common Stock
that such holder holds as determined pursuant to the Merger Agreement, in each
case, without any interest thereon. If outstanding certificates for shares of
Sandy Common Stock are not surrendered or the payment for them not claimed prior
to the date on which such payments would otherwise escheat to or become the
property of any governmental unit or agency, the unclaimed items shall, to the
extent not prohibited by abandoned property and any other applicable law, become
the property of ADP (and to the extent not in its possession shall be paid over
to it), free and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing, none of ADP, the
Exchange Agent or any other person shall be liable to any former holder of Sandy
Common Stock for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
8. Closing of Sandy Transfer Books. At the Effective Time, the stock
transfer books of Sandy shall be closed and no transfer of shares of Sandy
Common Stock shall thereafter be made.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to
be duly executed as of the date first above written.
ADP MERGERCO, INC.
By:
----------------------------------
Its:
----------------------------------
AUTOMATIC DATA PROCESSING, INC.
By:
----------------------------------
Its:
----------------------------------
SANDY CORPORATION
By:
----------------------------------
Its:
----------------------------------
4
<PAGE> 84
ANNEX B
<PAGE> 85
BEAR, STEARNS & CO., INC.
245 PARK AVENUE
NEW YORK, NEW YORK 10167
(212) 272-2000
FAX: (212) 272-3092
ATLANTA - BOSTON
CHICAGO - DALLAS - LOS ANGELES
NEW YORK - SAN FRANCISCO
SAO PAULO - LONDON - PARIS - GENEVA
BEIJING - HONG KONG - SHANGHAI - TOKYO
November 30, 1995
Board of Directors
Sandy Corporation
1500 West Big Beaver Road
Troy, Michigan 48084
Attention: William Sandy, Chairman
Dear Sirs;
We understand that Sandy Corporation ("Sandy") and Automatic Data
Processing, Inc. ("ADP") have entered into an agreement and plan of merger dated
as of August 22, 1995 (the "Merger Agreement"), whereby Sandy will merge into
ADP (the "Transaction"). Pursuant to the Merger Agreement, each share of Sandy
will be exchanged for a number of shares determined by dividing $12.00 by the
average closing price of ADP for the ten trading days ending three days prior to
the Sandy shareholders meeting, but not less than 0.1670771 nor more than
0.2042054 shares, before ADP's pending two-for-one stock split. You have
provided us with the proxy statement/prospectus, which includes the Merger
Agreement, in substantially the form to be sent to the shareholders of Sandy
(the "Proxy Statement").
You have asked us to render our opinion as to whether the Transaction is
fair, from a financial point of view, to the shareholders of Sandy.
In the course of our analyses for rendering this opinion, we have;
1. reviewed the Proxy Statement;
2. reviewed Sandy's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the fiscal years ended August 31, 1993 through 1995;
3. reviewed ADP's Annual Reports to Shareholders and Annual Reports on Form
10-K for the fiscal years ended June 30, 1994 and 1995, its Current
Reports on Form 8-K filed with the Securities and Exchange Commission
(the "Commission") September 1, 1995 and November 6, 1995, its Current
Reports on Form 8-K/A filed with the Commission on November 13 and
November 22, 1995, and its Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995;
4. reviewed certain operating and financial information provided to us by
management relating to Sandy's business and prospectus;
5. met with certain members of Sandy's senior management to discuss its
operations, historical financial statements and future prospects;
6. reviewed the historical prices and trading volumes of the common shares
of Sandy and ADP;
7. reviewed publicly available financial data and stock market performance
data of companies which we deemed generally comparable to Sandy; and
8. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In the course of our review, we have relied upon and assumed the accuracy
and completeness of the financial and other information provided to us by Sandy
and ADP. We have not assumed any responsibility for
<PAGE> 86
the information provided to us and we have further relied upon the assurances of
the managements of Sandy and ADP that they are unaware of any facts that would
make the information or projections provided to us incomplete or misleading. In
arriving at our opinion, we have not performed or obtained any independent
appraisal of the assets of Sandy or ADP. Our opinion is necessarily based on
economic, market and other conditions, and the information made available to us,
as of the date thereof.
Based on the foregoing, it is our opinion that the Transaction is fair,
from a financial point of view, to the shareholders of Sandy.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ G.E. MATTHEWS
------------------------------------
Managing Director
2
<PAGE> 87
ANNEX C
<PAGE> 88
November 28, 1995
Board of Directors
Sandy Corporation
1500 West Big Beaver Road
Troy, Michigan 48084
Ladies and Gentlemen:
We have acted as counsel to Sandy Corporation, a Michigan corporation
("Sandy"), with respect to the merger of ADP Mergerco, Inc. ("ADP Mergerco"), a
Michigan corporation and a wholly-owned subsidiary of Automatic Data Processing,
Inc., a Delaware corporation ("ADP"), with and into Sandy, pursuant to an
Agreement and Plan of Merger (the "Agreement"), dated as of August 22, 1995, by
and among ADP Mergerco, ADP and Sandy (the "Merger"). Capitalized terms not
otherwise defined herein shall have the meaning assigned to them in the
Agreement.
You have requested our opinion with respect to certain of the federal
income tax consequences of the Merger. For purposes of rendering this opinion,
we have reviewed the Agreement and such other documents as we have deemed
necessary or appropriate. As a basis for this opinion, we have received and
expressly rely upon representations set forth below made on behalf of Sandy and
ADP by an officer of each corporation.
Based on the foregoing, we advise Sandy and the shareholders of Sandy that,
if the Merger is consummated pursuant to the Agreement, we are of the opinion
that, under currently applicable federal income tax law:
1. The Merger will qualify as a reorganization within the meaning of
Section 368(a)(1)(A) and Section 368(a)(2)(E) of the Code, and ADP, ADP
Mergerco, and Sandy will each be a party to the reorganization within the
meaning of Section 368(b) of the Code;
2. No gain or loss will be recognized by either ADP, ADP Mergerco, or Sandy
as a result of the consummation of the Merger;
3. No gain or loss will be recognized by a holder of Sandy Common Stock
upon the exchange of shares of Sandy Common Stock for shares of ADP Common Stock
pursuant to the Merger, except with respect to cash received in lieu of a
fractional share interest in ADP Common Stock, as discussed below;
4. The receipt of cash in lieu of fractional shares of ADP Common Stock
will be treated as if the fractional shares were distributed as part of the
exchange and then were redeemed by ADP. Under Section 302 of the Code, this
deemed redemption generally will result in a Sandy shareholder recognizing gain
or loss measured by the difference between (i) the amount of cash received, and
(ii) the tax basis allocable to the fractional share. Any gain or loss
recognized will be capital gain or loss, assuming that the fractional share of
the ADP Common Stock would have been a capital asset in the hands of the Sandy
shareholder, and such gain or loss will be long-term capital gain or loss if the
surrendered Sandy Common Stock has been held for more than one year as of the
date of the Merger;
5. The adjusted tax basis of the ADP Common Stock received by a holder of
Sandy Common Stock (including any fractional share of the ADP Common Stock
deemed received) pursuant to the Merger will be the same as the adjusted tax
basis of the shares of Sandy Common Stock surrendered in exchange therefor; and
<PAGE> 89
Sandy Corporation
November 28, 1995
6. The holding period of the ADP Common Stock received by a holder of Sandy
Common Stock as a result of the Merger will include the holding period of the
shares of Sandy Common Stock surrendered in exchange therefor, provided that
such Sandy Common Stock is held as a capital asset as of the date of the Merger.
Our opinion is based on the following representations made on behalf of
Sandy and/or ADP by an officer of each corporation:
1. To the best of the knowledge of the management of Sandy, there is no
plan or intention by the shareholders of Sandy to sell, exchange, or otherwise
dispose of a number of shares of ADP Common Stock received in the Merger that
would reduce the Sandy shareholders' ownership of such ADP Common Stock to a
number of shares having a value, as of the date of the Merger, of less than 50%
of the value of all of the formerly outstanding stock of Sandy as of the date of
the Merger. For purposes of this representation, (i) shares of Sandy Common
Stock exchanged for cash or other property will be treated as outstanding Sandy
stock on the date of the Merger, and (ii) shares of Sandy stock and shares of
ADP stock held by Sandy shareholders and otherwise sold, redeemed or disposed of
before or after the Merger and in contemplation of the Merger will be
considered. For purposes of this representation, moreover, shares of ADP Common
Stock received in exchange for shares of Sandy Common Stock acquired pursuant to
the exercise of outstanding warrants or options of Sandy or acquired in
contemplation of the Merger will not be considered as owned by the Sandy
shareholders.
2. There will be no dissenters to the Merger.
3. On the date of the Merger, the fair market value of the assets of Sandy
will exceed the sum of its liabilities plus the amount of liabilities, if any,
to which the assets of Sandy are subject.
4. Sandy is not under the jurisdiction of a court in a "Title 11 or similar
case" within the meaning of Section 368(a)(3)(A) of the Code, and neither Sandy,
ADP, nor ADP Mergerco is an "investment company" within the meaning of Section
368(a)(2)(F)(iii) and (iv) of the Code.
5. None of the compensation received by any shareholder-employee or
shareholder-consultant of Sandy pursuant to any employment, consulting or
similar agreement or arrangement will be separate consideration for, or
allocable to, any of his or her shares of Sandy stock. None of the shares of ADP
Common Stock received by any shareholder-employee or shareholder-consultant of
Sandy pursuant to the Merger will be separate consideration for, or allocable
to, any such employment, consulting, or similar agreement or arrangement. The
compensation paid to each shareholder-employee or shareholder-consultant of
Sandy will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's length for similar services.
6. The fair market value of the ADP Common Stock and other consideration to
be received by each Sandy shareholder pursuant to the Merger will be
approximately equal to the fair market value of the Sandy Common Stock
surrendered in the exchange.
7. Pursuant to the Merger, except for payments of cash in lieu of
fractional shares of ADP Common Stock, Sandy stock will be exchanged solely for
ADP Common Stock.
8. Following the Merger, Sandy will hold (i) at least 90% of the fair
market value of its net assets and at least 70% of the fair market value of its
gross assets held immediately prior to the Merger, and (ii) at least 90% of the
fair market value of ADP Mergerco's net assets and at least 70% of the fair
market value of ADP Mergerco's gross assets held immediately prior to the
Merger. For purposes of this representation, amounts paid by Sandy or ADP
Mergerco to Sandy shareholders who receive cash or other property, amounts used
by Sandy or ADP Mergerco to pay expenses incurred in connection with the Merger,
and redemptions and distributions (except for regular, normal dividends) made by
Sandy or ADP Mergerco in connection with the
2
<PAGE> 90
Sandy Corporation
November 28, 1995
Merger will be included as assets held by Sandy and ADP Mergerco, respectively,
immediately prior to the Merger.
9. Before the Merger, ADP will be in control of ADP Mergerco within the
meaning of Section 368(c) of the Code.
10. ADP has no plan or intention (i) to liquidate Sandy, (ii) to merge
Sandy with or into another corporation, (iii) to sell or otherwise dispose of
the stock of Sandy except for transfers of stock to corporations controlled by
ADP within the meaning of Section 368(c) of the Code, or (iv) to cause Sandy to
sell or otherwise dispose of any of its assets or of any of the assets acquired
from ADP Mergerco, except for dispositions made in the ordinary course of
business or transfers of assets to a corporation controlled by Sandy within the
meaning of Section 368(c) of the Code.
11. There is no plan or intention for Sandy to issue additional shares of
its stock following the Merger that would result in ADP losing control of Sandy
within the meaning of Section 368(c) of the Code.
12. ADP Mergerco will have no liabilities assumed by Sandy, and will not
transfer to Sandy any assets subject to liabilities, in the Merger.
13. Following the Merger, Sandy will continue its historic business or use
a significant portion of its historic business assets in a business.
14. ADP, ADP Mergerco, Sandy and the shareholders of Sandy will pay their
respective expenses, if any, incurred in connection with the Merger.
15. There is no intercorporate indebtedness existing between ADP and Sandy
or between ADP Mergerco and Sandy that was issued, acquired, or will be settled
at a discount.
16. In the Merger, shares of Sandy stock representing control of Sandy, as
defined in Section 368(c) of the Code, will be exchanged solely for ADP Common
Stock. For purposes of this representation, shares of Sandy stock exchanged for
cash or other property (including cash or other property originating with ADP or
Sandy) will be treated as outstanding Sandy stock on the date of the Merger.
17. At the time of the Merger, Sandy will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person or persons could acquire stock in Sandy that, if exercised
or converted, would affect ADP's acquisition or retention of control of Sandy
within the meaning of Section 368(c) of the Code.
18. The payment of cash in lieu of fractional shares of ADP Common Stock is
solely for the purpose of avoiding the expense and inconvenience to ADP of
issuing fractional shares and does not represent separately bargained for
consideration.
19. The total cash consideration that will be paid in the Merger to Sandy
shareholders instead of issuing fractional shares of ADP Common Stock will not
exceed 1% of the total consideration that will be issued or paid in the Merger
to Sandy shareholders in exchange for their shares of Sandy stock.
20. The fractional share interest of each Sandy shareholder will be
aggregated and no Sandy shareholder will receive, in exchange for his Sandy
stock, cash in an amount equal to or greater than the value of one full share of
ADP Common Stock.
21. ADP has no plan or intention to reacquire any of its stock issued in
the Merger.
22. All representations and warranties made by Sandy, ADP, and ADP Mergerco
in the Agreement were true and correct in all material respects as of the date
of the Agreement, and all such representations and warranties will be true and
correct in all material respects at the time of the Merger.
3
<PAGE> 91
Sandy Corporation
November 28, 1995
Our opinion is limited to the matters expressly addressed above. No opinion
is expressed, and none should be inferred, as to any other matter. Our opinion
may not be applicable to persons who acquired Sandy Common Stock pursuant to
exercise of employee stock options or to persons subject to other special
circumstances. Moreover, our opinion is based on existing law and currently
applicable Treasury Regulations promulgated under the Code, current published
administrative positions of the Internal Revenue Service contained in revenue
rulings and revenue procedures and judicial decisions, all of which are subject
to change either prospectively or retroactively. To the extent changes in fact
or law occur after the date hereof, our opinion is not applicable and we
undertake no obligation to update our opinion in such event.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ HONIGMAN MILLER SCHWARTZ AND COHN
--------------------------------------
Honigman Miller Schwartz and Cohn
4
<PAGE> 92
SANDY CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF SANDY CORPORATION
SPECIAL MEETING OF SHAREHOLDERS - JANUARY 4, 1996
William H. Sandy, Raymond A. Ketchledge and George J. Forrest, and each of
them, are hereby authorized to represent and vote the stock of the undersigned
at the Special Meeting of Shareholders to be held January 4, 1996, and at any
adjournment or adjournments thereof.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
such stock, and hereby ratifies and confirms all that said attorneys and
proxies, or other substitutes, may do by virtue hereof. If only one attorney
and proxy shall be present and acting, then that one shall have and may
exercise all the powers of said attorneys and proxies.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
____________________________________ ______________________________________
____________________________________ ______________________________________
____________________________________ _________________________________SNDCM
<TABLE>
<S><C>
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
SANDY CORPORATION 2. In their discretion with respect to any other
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 1: matters that may properly come before the
meeting.
For Against Abstain
1. The proposal to adopt the / / / / / / The shares represented by this proxy will be
Agreement and Plan of voted in accordance with the specifications
Merger, by and among Sandy made herein. If no specifications are made,
Corporation, ADP Mergerco, this proxy will be voted FOR proposal 1.
Inc. and Automatic Data
Processing, Inc. The undersigned hereby acknowledges receipt of
the Notice of Special Meeting of Shareholders
and Proxy Statement/Prospectus with respect to
the January 4, 1996 Special Meeting.
RECORD DATE SHARES:
Please be sure to sign and date this Proxy. Date Mark box at right if comments or address / /
_________________________________________________________________ change have been noted on the reverse
| | side of this card.
| |
|______Stockholder sign here____________Co-owner sign here______|
DETACH CARD DETACH CARD
</TABLE>
