<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
[X] Annual Report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the fiscal year ended AUGUST 31, 1995 or
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the transition period from to .
COMMISSION FILE NUMBER 1-8996
SANDY CORPORATION
(Exact name of registrant as specified in its charter)
Michigan 38-1953934
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1500 West Big Beaver Road, Troy, Michigan 48084
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (810) 649-0800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
- ----------------------------------- -----------------------------
Common Stock, Par Value $0.01 American Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X]. No [ ].
The aggregate market value of voting Common Stock held by non-affiliates of the
registrant was approximately $19,056,644 as of October 18, 1995.
The registrant had 2,326,783 shares of Common Stock outstanding as of October
18, 1995.
<PAGE> 2
DOCUMENTS INCORPORATED BY REFERENCE
None.
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INDEX
<TABLE>
<CAPTION>
Page No.
--------
<S> <C> <C> <C>
PART I.
Item 1. Business 4
Item 2. Properties 9
Item 3. Legal Proceedings 10
Item 4. Submission of Matters to a Vote
of Security Holders 11
PART II.
Item 5. Market for Registrant's Common
Equity and Related Stockholder Matters 12
Item 6. Selected Financial Data 13
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of
Operations 15
Item 8. Financial Statements and Supplementary Data 19
Item 9. Changes in and Disagreements With Accountants
on Accounting and Financial Disclosure 20
PART III.
Item 10. Directors and Executive Officers of the Registrant 21
Item 11. Executive Compensation 24
Item 12. Security Ownership of Certain Beneficial Owners
and Management 31
Item 13. Certain Relationships and Related Transactions 33
PART IV.
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K. 35
SIGNATURES 40
</TABLE>
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PART I.
ITEM 1. BUSINESS
GENERAL
Sandy Corporation, (the "Company"), is a full-service performance
improvement company that provides training, communication, and marketing
support products and services for major corporations. The Company was
incorporated under the laws of the State of Michigan in 1971. The Company
provides many products and services to groups, divisions, and departments
within General Motors Corporation ("GM"), which accounted for approximately
49%, 53%, and 57% of the Company's revenue during the fiscal years ended August
31, 1995, 1994, and 1993, respectively. The Company provides services to
groups, divisions, and departments within Ford Motor Company ("Ford"), which
accounted for approximately 32%, 31%, and 21% of the Company's revenue during
the fiscal years ended August 31, 1995, 1994, and 1993, respectively. Loss of
revenue for services provided to either of the above entities could have a
material adverse impact on the Company's revenue and results of operations.
PRODUCTS AND SERVICES
The Company's products and services are specifically designed to
provide the Company's clients with enhanced management and employee performance
and, thereby, competitive advantage. The Company'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. The Company offers expertise primarily in
management education, customer satisfaction enhancement, 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
audio, televised and printed materials, classroom instruction, conferences,
meetings, and seminars.
The Company's business is often conducted through an integrated process
that progresses from consulting research and analysis, to the design and
development of business solutions, to the implementation of those solutions by
a variety of methods and media and to the evaluation (when appropriate) of the
effectiveness of those programs. Although not all projects require each of
these four performance improvement services, many projects require one or a
combination of these services which may overlap substantially. Clients are
generally offered the full range of the Company's services. These activities
are described in greater detail below.
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1. Research and Analysis. The Company's account executives,
consultants, and planners work closely with clients to analyze strategic
objectives, which may include improved business processes, customer
satisfaction, market share, professionalism, profitability, productivity, or
other goals. The Company then works to define the level of human and process
performance that would help achieve such objectives.
2. Design and Development of Performance Improvement Solutions. The
Company's instructional systems designers, researchers, writers, and subject
matter experts design curriculum or marketing materials and program content to
meet client needs. These individuals have specialized capabilities and
expertise in several functional areas, which include among others:
Customer Satisfaction Education -- the teaching of standards based,
customer-sensitive performance approaches to retail and wholesale
employees, which can take the form of classroom instruction or
media-based courses, measurement, and reinforcement programs.
Customer Satisfaction Tools -- glove-box portfolios that assist in
developing improved customer handling, relations, and retention
during the delivery process and throughout the ownership period.
Cultural Change Processes -- the application of analysis instruments
for determining specific needs and the introduction of systemic
approaches toward envisioning and reaching elevated goals and
objectives.
Management Education -- the improvement of management skills in such
areas as strategy, planning, directing, monitoring, motivating, and
evaluating results.
Sales Training -- the improvement of the front-line salesperson by
teaching fundamentals and advanced specific techniques of the sales
transaction.
Product Training -- teaching salespeople about their products to
enable them to present and sell features, benefits, and competitive
advantages to customers. This training is at times related to
point-of-purchase video and other means of visual support to help the
customer understand product technologies and values not readily
observable on the salesroom floor.
Technical Training -- teaching technicians the principles of problem
diagnosis, product repair and maintenance, and customer satisfying
behaviors.
Process Improvement -- the analysis of business processes, using
techniques such as process mapping; the identification of "best
practices" through benchmarking; the creation of performance
standards; and employee involvement concepts.
Sales Promotion -- the development of marketing support tools and
aids. These often are designed to reinforce training principles and
sales activities that are focused on customer satisfaction and
performance improvement.
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The skills described above can be combined into an integrated system
when a client desires coordinated improvement in performance at a number of
organizational levels and/or geographically-dispersed sales and customer
service locations.
3. Implementation. The Company's staff assists in the selection and
design of appropriate methods for delivery of the client's program. The
Company is experienced in the delivery of training and information through a
variety of communication media, such as television, print, and audio media,
classroom training, publications, self-directed learning systems, and customer
satisfaction products and services.
The Company's media capabilities include:
Video -- this medium has applicability in a number of training
situations, particularly when communication speed, equipment
portability, and equipment affordability are important.
Conferences, Meetings, and Seminars -- the Company designs and
produces conferences and meetings for its clients, which combine
various elements of motivation and business information.
Slides, Audio, and Printed Materials -- the Company utilizes these
traditional communication media in a number of business applications.
Computer generated slides permit fast turnaround of visual material,
and lightweight slidefilm cassette equipment makes this instructional
method particularly useful for retrieval at a work station.
Audiocassettes are useful in a number of contexts, including making
better use of automotive travel time. Printed publications are a
relatively inexpensive means of reaching a wide audience.
Satellite Television -- the Company believes that developing and
producing programming for satellite television communication
represents an area of business opportunity, as corporations
increasingly consider using live, interactive satellite networks
linking their headquarters, operating units, branch offices, and
other locations.
Classroom -- The Company conducts classes and other courses in Sales,
Service, and Parts Operations. This includes seminars for sales and
service advisors, dealer operations, internal control, management
development, inventory management, and customer satisfaction
techniques, many of which are delivered at client sites.
4. Evaluation. When engaged to do so, the Company will evaluate the
results of the training and communication programs developed for its clients.
Toward that end, the Company has developed and used procedures and survey
materials which embody a number of instructional and operational criteria.
The Company buys various raw materials and contracts with various
suppliers in connection with the production of the physical elements (such as
microcomputer diskettes, videocassettes, videodiscs, audio tapes, slides, and
printed materials) of its teaching, training, and communication systems and
products. Substantially all of such raw materials and physical elements are
generally available from a number of suppliers.
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COMPETITION
The Company provides a broad range of services and products which compete
with many other businesses in various commercial categories, such as consulting
companies, employee training firms, marketing services companies, and other
training and communications specialists. Most major corporate customers have
internal facilities and also engage outside firms to provide consulting,
training, and/or communication assistance. In addition, the Company competes
with numerous organizations, some of which are substantially larger than the
Company, which provide consulting, training, and/or communication products and
services. The Company also competes with advertising agencies, incentive
fulfillment, and marketing services organizations which in many cases have well
established relationships with the Company's clients or potential clients. The
Company believes there are no dominant companies in any of the markets in which
it competes. The Company believes the major competitive factors with respect
to its products and services are quality, value, creativity, and client
service.
The automotive industry is the major industry in which the Company
competes. The Company's revenues from services provided to this industry are
dependent on such factors as new product introductions and the industry's
attention to process improvement and customer satisfaction.
MARKETING
The Company markets its custom products and services to clients through a
staff of account executives, who are assigned to different client and industry
groups. These account executives provide in-depth support to the various
groups, departments, and divisions which comprise the Company's clients, make
proactive recommendations and/or bid on new projects for existing clients, and
solicit new clients. Services to clients are generally provided pursuant to
project purchase orders or other contractual arrangements.
Services are generally provided on a fixed price basis under individual
purchase orders, many of which are obtained on a bid basis. Included are
service and technical training, customer satisfaction training, management
training, sales training, business meetings, sales promotion, and marketing
services.
Products and services for major corporate customers principally include
companies in the automotive industry. Over the years, the Company has also
served clients in the communications, consumer non-durable products,
computer/electronics, healthcare, home appliance, hotel, manufacturing,
motorcycle, and retail industries. They are provided on a custom project basis
through account executives who are responsible for developing and servicing
accounts in such industries.
In addition to the Company's headquarters in Troy, Michigan, the Company
also maintains an office in Irvine, California, to serve its clients in the
western United States.
At August 31, 1995, the Company had a backlog of orders of $39,402,000, as
compared to $38,386,000 at August 31, 1994 and $41,903,000 at August 31, 1993.
Of the $39,402,000 in backlog at August 31, 1995, approximately $27,100,000 is
expected to be recognized in revenue over the next 12 months. Of the total
backlog at August 31, 1994 and August 31, 1993, the amount of revenue that was
expected to be recognized in revenue over the next 12 months was
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$24,700,000 and $23,895,000, respectively. Virtually all of the Company's
orders are subject to cancellation at the option of the client.
PERSONNEL
As of August 31, 1995, the Company had 157 full-time employees. In
addition, the Company employs a number of part-time employees and engages a
number of independent contractors in connection with the production and
delivery of its products and services. During fiscal year 1995, the Company's
direct payroll costs for its full-time employees were approximately
$10,894,000; the Company also paid $645,000 to part-time employees.
None of the Company's full-time employees are currently represented by any
labor union. Management believes that employee relations are generally good.
In its production of live and recorded performances, the Company engages
various artists and other production personnel. Such engagements are typically
made pursuant to various union contracts to which the Company is a party or
with which the Company otherwise complies.
MERGER WITH AUTOMATIC DATA PROCESSING, INC.
On August 22, 1995, the Company signed a definitive merger agreement with
Automatic Data Processing, Inc. ("ADP") (NYSE:AUD) valued at approximately $30
million. If the merger is consummated, the Company's shareholders will receive
approximately $12 worth of ADP stock for each share of the Company's stock.
The exchange ratio will be determined by the average of the daily closing sale
prices of ADP common stock for the ten consecutive full trading days prior to
the completion of the merger, but the ratio will not adjust more than 10% up or
down from 5.441 Sandy shares for each ADP share.
The merger, intended to qualify as a tax-free "pooling of interests"
transaction, is subject to approval by the Company's shareholders. The final
exchange ratio is subject to pricing adjustment based upon ADP's stock price
for a period immediately prior to the closing. The Company is preparing a
proxy statement for shareholder consideration.
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ITEM 2. PROPERTIES
The Company entered into a lease agreement for its Troy, Michigan,
headquarters, effective February 1, 1994, with the landlord, 1500 Limited
Partnership, a limited partnership owned by certain shareholders of the
Company, which include William H. Sandy, the George J. Forrest Trust, Alan V.
Kidd, Alan M. Sandy, Lewis G. Sandy, and certain other shareholders of the
Company. The agreement was approved by the disinterested members of the
Company's Board of Directors. The lease, which will expire on May 31, 2006,
covers approximately 63,000 square feet. The lease provides for gross lease
payments by the Company ranging from $94,000 to $102,000 per month over the
lease term, plus increases in certain operating costs on a pass-through basis.
The lease provides a $500,000 allowance for building improvements paid by the
Partnership over the lease term and another $100,000 for improvements after
February 1, 2000. There are no options to renew the lease after May, 2006.
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 waived.
In connection with the proposed merger with ADP, the lease agreement,
dated February 1, 1994, between Sandy and 1500 Limited Partnership pertaining
to Sandy's Troy, Michigan headquarters (the "Lease") will be amended effective
at 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; (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.
In June, 1992, the Company sublet approximately 14,000 square feet of
its corporate office space to Henry Ford Health System and Henry Ford Health
System/In-Vitro Fertilization of Australia Partnership. These sublease
agreements were terminated as of February 1, 1994, in conjunction with the new
corporate headquarters' lease agreement.
The Company leases approximately 10,000 square feet of space in Irvine,
California pursuant to a lease that expires in January, 1998. This facility is
used as office/conference space for the professional staff that permanently
reside in California.
The above-noted leased properties are presently adequate to meet the
Company's facility needs with sufficient excess capacity to meet normal
customer demands. Although the Company has no renewal options for any of its
facilities, management believes that the same or substitute facilities may be
obtained at comparable costs.
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ITEM 3. LEGAL PROCEEDINGS
The Company has no significant litigation pending against it.
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to shareholders during the fourth quarter ended
August 31, 1995.
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PART II.
ITEM 5. MARKET FOR REGISTRANT'S COMMON
EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock is listed on the American Stock Exchange.
Its trading symbol is SDY.
Sandy Common Stock Sales Prices and Dividends
<TABLE>
<CAPTION>
Dividends
Fiscal 1994 High Low Declared
----------- ---- --- --------
<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
<CAPTION>
Dividends
Fiscal 1995 High Low Declared
----------- ---- --- --------
<S> <C> <C> <C>
1st 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>
Consent was obtained from Comerica Bank for declaration and payment of
dividends during fiscal 1995 and fiscal 1994.
In connection with the proposed merger with ADP, the Company 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 (August 22, 1995) until the termination of the Merger Agreement.
The number of shareholders of record as of October 18, 1995 was 202.
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ITEM 6. SELECTED FINANCIAL DATA
The table below sets forth selected consolidated financial data of
the Company and should be read in conjunction with the Consolidated Financial
Statements and Notes thereto included elsewhere in this Report. 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 the Company's financial statements for
such years.
<TABLE>
<CAPTION>
Year Ended August 31
--------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
(Amounts in thousands, except per share data)
INCOME STATEMENT DATA:
<S> <C> <C> <C> <C> <C>
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(1) $ 0.58 $ 0.71 $ 0.57 $ 0.85 $ 0.35
======== ======== ======== ======== ========
Cash dividends per share $ 0.16 $ 0.13 $ 0.09 $ 0.00 $ 0.00
======== ======== ======== ======== ========
</TABLE>
(1) Based on weighted average common and common equivalent shares. See Note
H of Notes to Consolidated Financial Statements.
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<TABLE>
<CAPTION>
Year Ended August 31
------------------------------------------------------
1995 1994 1993 1992 1991
----------- ------- -------- -------- -----------
(Amounts in thousands)
BALANCE SHEET DATA:
<S> <C> <C> <C> <C> <C>
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>
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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FISCAL 1995 COMPARED TO FISCAL 1994
Services revenue for fiscal 1995 was $40,912,000 compared to $33,102,000 in
fiscal 1994, a $7,810,000 or 23.6% increase. The services revenue increase was
primarily due to increases in customer relationship training, process change
and re-engineering principles training, seminar-based retail training, and
other retail consulting services for an expanded automotive client base. This
increase was delivered through increased classroom training participation,
regional meetings and conferences, and the use of the Company's wide range of
media capabilities. The Company believes this increase is due in part to the
intensified recognition by new and existing automotive clients of the strategic
relationship between customer care, process re-engineering and competitive
advantage.
Products revenue for fiscal 1995 was $9,336,000 compared to $9,764,000 in
fiscal 1994, a $428,000 or 4.4% decrease. Products revenue was impacted by a
reduction in the average price per unit for some of the Company's products as a
result of the Company entering into a long-term agreement, as well as a
reduction in units shipped caused by reduced vehicle production at another of
the Company's automotive clients.
The Cost of Services as a percent of services revenue for fiscal year 1995
was 75.7%, which is comparable to the fiscal 1994 percent of 75.6%.
The Cost of Products as a percent of products revenue decreased in fiscal
1995 to 85.6% from 87.6% in fiscal 1994. The principal reasons for this
decrease are production efficiencies realized in fiscal 1995 and first year
program development costs incurred in the prior year. The rate of decline in
Cost of Products in the future is not expected to continue at the rate realized
in the current year.
Account Service Expense in fiscal 1995 increased approximately $1,374,000,
or 39.2%, to $4,877,000, compared to $3,503,000 in fiscal 1994. This increase
is primarily due to increased payroll and related expenses for new staff
required to support higher revenue volume and increased proposal activity.
General and Administrative expenses in fiscal 1995 increased approximately
$210,000, or 6.2%, to $3,585,000 from $3,375,000 in fiscal 1994. The increase
is primarily attributable to research and development expenses for client-based
information systems, enhanced media capabilities, and internal process
development.
Total Account Service Expense and General and Administrative expense as a
percent of total revenue increased in fiscal 1995 to 16.8% from 16.0% in fiscal
1994.
Operating Income in fiscal 1995 of $2,835,000 compared to $2,423,000 in
fiscal 1994 is an improvement of $412,000 or 17%. This is due to increased
revenues and slightly higher profit margins, partially offset by higher Account
Service Expense and General and Administrative expenses.
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FISCAL 1995 COMPARED TO FISCAL 1994 - CONTINUED
Interest Income, predominately from tax-exempt investments, was $243,000 in
fiscal 1995 compared to $141,000 in fiscal 1994. This increase is due to the
Company's improved cash position throughout fiscal 1995 and higher short-term
interest rates in the current year.
Other Expense of approximately $650,000 in fiscal 1995 represents valuation
and other related expenses due to merger proposals from Automatic Data
Processing, Inc. (NYSE:AUD) and Westcott Communications, Inc. (NASDAQ:WCTV).
In August, 1995, the Company signed a definitive merger agreement with
Automatic Data Processing, Inc. The Company expects to incur additional merger
expenses in excess of $200,000 through the completion of the transaction.
Income Taxes increased $154,000 in fiscal 1995 to $1,044,000 from $890,000
in fiscal 1994. This increase is due to higher income before taxes and merger
related expenses in fiscal 1995 and no tax benefit recorded for merger related
expenses.
FISCAL 1994 COMPARED TO FISCAL 1993
Services revenue for fiscal 1994 was $33,102,000 compared to $28,046,000 in
fiscal 1993, a $5,056,000 or 18.0% increase. The services revenue increase was
primarily due to increases in process improvement, retail training, consulting
services, and customer satisfaction education services for an expanded
automotive client base. The Company believes the increase in these services is
due in large part to improved conditions in the automotive industry and the
increased importance clients have placed on customer satisfaction and
competitive advantage.
Products revenue for fiscal 1994 was $9,764,000 compared to $6,930,000 in
fiscal 1993, a $2,834,000 or 40.9% increase. The products revenue growth was
due to increased unit volume associated with the inclusion of the Company's
products in a wider range of vehicles. This was partially offset by a decrease
in the average price per unit due to a reduction in the average content in the
Company's products.
The Cost of Services for fiscal year 1994 was $25,011,000 (75.6% of sales),
an increase of $4,397,000 or 21.3% compared to $20,614,000 (73.5% of sales) in
fiscal 1993. The principal reason for the increase in Cost of Services as a
percent of sales is lower profitability on some of the Company's projects for
automotive clients, offset partially by improved efficiencies within the
Company's creative staff.
The Cost of Products for fiscal year 1994 was $8,553,000 (87.6% of sales),
an increase of $2,662,000 or 45.2% compared to $5,891,000 (85.0% of sales) in
fiscal 1993. The principal reason for the increase in Cost of Products as a
percent of sales is lower margins as part of obtaining a long-term contract.
Account Service Expense of $3,503,000 in fiscal 1994 decreased by $200,000
or 5.4% from fiscal 1993. The decrease was primarily due to lower proposal
expenditures in fiscal 1994.
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FISCAL 1994 COMPARED TO FISCAL 1993 - CONTINUED
General and Administrative expenses of $3,375,000 in fiscal 1994 increased
by $431,000 or 14.6% from fiscal 1993. The increase is primarily attributable
to additional expenses for outside services related to marketing, potential
acquisitions, and other consulting services.
The Operating Income in fiscal 1994 of $2,423,000 compared to $1,822,000 in
fiscal 1993 is an improvement of $601,000. This is due to increased revenues
and lower Account Service Expense, partially offset by lower profit margins and
higher General and Administrative expenses.
Interest Income was $141,000 in fiscal 1994 compared to $118,000 in fiscal
1993. This increase is due to a higher average level of investment and higher
short-term interest rates in the latter part of fiscal 1994.
Income Taxes of $890,000 in fiscal 1994 increased by $272,000 compared to
$618,000 in fiscal 1993. The increase is primarily due to higher income before
taxes.
LIQUIDITY AND CAPITAL RESOURCES
During fiscal 1995, operating activities generated $4,280,000 in cash as
compared to fiscal 1994 when these activities used $482,000 in cash. The
increase in cash flows from operating activities is primarily due to improved
cash collections on the Company's higher revenue base and an increase in
accounts payable and accrued expenses, partially offset by the funding of a
previously accrued employee benefit.
Cash used in investing activities was $42,000 in fiscal 1995, a decrease
of $200,000 from fiscal 1994. This decrease is due to funds used for a term
loan agreement with a third party supplier in the prior year.
During fiscal 1995, the Company's financing activities used $512,000 in
cash as compared to $325,000 in fiscal 1994. In fiscal 1995, the Company
used $306,000 to repurchase a portion of shares issued upon exercise of
stock options, as allowed for in the stock option agreement, to satisfy the
Company's income tax withholding obligation with respect to the stock options.
This was partially offset by $160,000 in proceeds from the exercise of these
stock options.
At August 31, 1995, the Company had working capital of approximately
$11,382,000, including a cash balance of $8,870,000. The Company's primary
need for cash is to support its ongoing operating activities. The Company's
primary sources of liquidity are cash provided from operations and a $7,500,000
line of credit arrangement at Comerica Bank. The Company believes that such
sources are adequate to meet its cash and working capital needs.
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LIQUIDITY AND CAPITAL RESOURCES - CONTINUED
Under the line of credit arrangement which expires on December 31, 1995,
Company borrowings bear interest at prime plus .25%. The Company is subject to
certain financial covenants under this arrangement. These covenants include
requirements to maintain minimum levels of working capital and tangible net
worth, maximum debt to net worth ratios, and restrictions on the declaration of
dividends. The Company has met all of these financial covenants and received
consent from Comerica Bank for declaration and payment of dividends at a
quarterly rate of four cents during fiscal 1995.
EFFECT OF INFLATION
The Company does not believe that inflation has had a material effect on
the results of its operations in the past three fiscal years.
18
<PAGE> 19
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDEX
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Independent Auditors' Report F-1
Consolidated Balance Sheets F-2
Consolidated Statements of Earnings F-3
Consolidated Statements of Changes in F-4
Stockholders' Equity
Consolidated Statements of Cash Flows F-5
Notes to Consolidated Financial Statements F-7
Supplementary Financial Information - Selected F-15
Quarterly Financial Data
</TABLE>
19
<PAGE> 20
INDEPENDENT AUDITORS' REPORT
Board of Directors
Sandy Corporation
Troy, Michigan
We have audited the accompanying consolidated balance sheets of Sandy
Corporation as of August 31, 1995 and 1994, and the related consolidated
statements of earnings, changes in stockholders' equity and cash flows for each
of the three years in the period ended August 31, 1995. These consolidated
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of Sandy Corporation as of August 31,
1995 and 1994, and the results of its operations, changes in stockholders'
equity and its cash flows for each of the three years in the period ended
August 31, 1995, in conformity with generally accepted accounting principles.
Deloitte & Touche LLP
Detroit, Michigan
October 18, 1995
F-1
<PAGE> 21
SANDY CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
AUGUST 31
----------------------
ASSETS 1995 1994
- -------------- --------- -----------
<S> <C> <C>
CURRENT ASSETS:
Cash $ 8,870,195 $ 5,144,490
Accounts receivable:
Billed (Note B) 6,347,132 7,225,683
Unbilled 5,379,038 5,011,922
Inventories 643,978 787,204
Prepaid Income taxes 21,791 0
Other current assets 345,791 610,116
Deferred taxes on income (Note D) 320,000 492,000
TOTAL CURRENT ASSETS ----------- -----------
21,927,925 19,271,415
OTHER ASSETS 289,266 228,553
LEASEHOLD IMPROVEMENTS, EQUIPMENT,
FURNITURE AND FIXTURES
Leasehold improvements 733,955 731,168
Equipment 1,813,628 1,774,969
Furniture and fixtures 2,634,444 2,633,488
----------- -----------
5,182,027 5,139,625
Less accumulated depreciation (4,517,512) (4,298,060)
and amortization ----------- -----------
664,515 841,565
TOTAL ASSETS $22,881,706 $20,341,533
=========== ===========
<CAPTION>
AUGUST 31
---------------------
LIABILITIES AND STOCKHOLDERS' EQUITY 1995 1994
---------------------------------------- --------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 4,212,439 $ 3,195,628
Accrued expenses 756,644 809,140
Accrued compensation 1,253,074 1,655,378
Advance billings to customers 4,323,455 3,370,826
Income taxes payable 0 122,210
----------- -----------
TOTAL CURRENT LIABILITIES 10,545,612 9,153,182
OTHER LIABILITIES 120,371 29,510
DEFERRED TAXES ON INCOME (Note D) 119,000 194,000
----------- -----------
TOTAL LIABILITIES 10,784,983 9,376,692
----------- -----------
STOCKHOLDERS' EQUITY:
Common stock, par value $0.01; authorized
8,000,000 shares, issued and outstanding
2,326,783 shares at August 31, 1995 and
2,273,292 shares at August 31, 1994 23,268 22,734
Additional paid-in capital 9,291,200 8,924,852
Retained earnings 2,782,255 2,017,255
TOTAL STOCKHOLDERS' EQUITY ----------- -----------
12,096,723 10,964,841
----------- -----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $22,881,706 $20,341,533
=========== ===========
See notes to consolidated financial statements.
</TABLE>
F-2
<PAGE> 22
SANDY CORPORATION
CONSOLIDATED STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Year Ended August 31
-----------------------------------------
1995 1994 1993
----------- ----------- ------------
<S> <C> <C> <C>
Revenue:
Services $40,911,591 $33,101,894 $ 28,045,724
Products 9,335,606 9,763,658 6,929,518
----------- ----------- ------------
50,247,197 42,865,552 34,975,242
Costs and Expenses:
Cost of Services 30,955,361 25,011,323 20,614,433
Cost of Products 7,994,517 8,553,456 5,891,213
Account Service Expense 4,876,995 3,502,813 3,703,418
General and Administrative 3,585,292 3,374,730 2,944,022
----------- ----------- ------------
47,412,165 40,442,322 33,153,086
----------- ----------- ------------
OPERATING INCOME 2,835,032 2,423,230 1,822,156
Other income (expense):
Interest income 242,685 141,490 118,073
Other expense (Note J) (650,057) 0 0
----------- ----------- ------------
(407,372) 141,490 118,073
INCOME BEFORE INCOME TAXES 2,427,660 2,564,720 1,940,229
Income taxes (Note D) 1,044,000 890,000 618,000
----------- ----------- ------------
NET INCOME $ 1,383,660 $ 1,674,720 $ 1,322,229
=========== =========== =============
Net Income per common share $0.58 $0.71 $0.57
=========== =========== =============
Weighted average common and
common equivalent shares outstanding 2,369,268 2,345,897 2,334,493
=========== =========== =============
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE> 23
SANDY CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
Years ended August 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
ADDITIONAL RETAINED STOCK-
COMMON PAID-IN EARNINGS HOLDERS'
STOCK CAPITAL (DEFICIT) EQUITY
----- ------- ------- -------
<S> <C> <C> <C> <C>
Balance, August 31, 1992 $ 22,781 $ 8,953,464 $ (478,604) $ 8,497,641
Cash dividends declared 0 0 (205,028) (205,028)
Net income 0 0 1,322,229 1,322,229
--------- ----------- ----------- -----------
Balance, August 31, 1993 22,781 8,953,464 638,597 9,614,842
Cash dividends declared 0 0 (296,062) (296,062)
Repurchase of common stock (47) (28,612) 0 (28,659)
(Note I)
Net income 0 0 1,674,720 1,674,720
--------- ----------- ----------- ------------
Balance, August 31, 1994 22,734 8,924,852 2,017,255 10,964,841
Cash dividends declared 0 0 (365,878) (365,878)
Exercise of options for 80,000 800 159,200 0 160,000
shares of Common Stock
(Note H)
Repurchase of common stock (266) (52,952) (252,782) (306,000)
(Note I)
Tax Benefit Relating to Stock 0 260,100 0 260,100
Options Exercised
Net income 0 0 1,383,660 1,383,660
--------- ----------- ----------- ------------
Balance, August 31, 1995 $ 23,268 $ 9,291,200 $ 2,782,255 $12,096,723
========= =========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE> 24
SANDY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
-------------------------------------
1995 1994 1993
--------- -------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 1,383,660 $ 1,674,720 $ 1,322,229
Adjustments to reconcile net
income to net cash provided by
operating activities:
Depreciation and amortization 219,452 402,390 455,865
Deferred income taxes 97,000 (99,000) (140,000)
Amortization of deferred gain 0 0 (38,500)
Pension accrual (652,650) 87,450 83,280
Tax benefit from exercise of stock options 260,100 0 0
Changes in operating assets
and liabilities:
(Increase) decrease in accounts receivable 511,435 (3,440,261) 1,258,160
(Increase) decrease in inventories 143,226 706,583 (682,761)
(Increase) decrease in other assets 264,325 (163,060) (92,697)
Increase in long-term assets (60,713) (28,553) 0
Increase in accounts payable and
accrued expenses 1,214,661 196,522 30,199
Increase (decrease) in income taxes payable (144,001) 9,991 66,787
Increase in advanced billings
to customers 952,629 142,009 1,706,440
Increase in long-term liabilities 90,861 29,510 0
--------- -------- ---------
NET CASH PROVIDED BY (USED IN)
OPERATING ACTIVITIES 4,279,985 (481,699) 3,969,002
--------- -------- ---------
INVESTING ACTIVITIES:
Capital expenditures (42,402) (42,607) (253,342)
Term loan agreement 0 (200,000) 0
--------- -------- ---------
NET CASH USED IN INVESTING
ACTIVITIES (42,402) (242,607) (253,342)
--------- -------- ---------
</TABLE>
F-5
<PAGE> 25
SANDY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
---------------------------------------
1995 1994 1993
----------- ----------- -----------
<S> <C> <C> <C>
FINANCING ACTIVITIES:
Principal payments under
capital lease obligation 0 0 (17,157)
Proceeds from exercise of
stock options 160,000 0 0
Repurchase of common stock (306,000) (28,659) 0
Dividends paid (365,878) (296,062) (205,028)
----------- ----------- -----------
NET CASH USED IN
FINANCING ACTIVITIES (511,878) (324,721) (222,185)
----------- ----------- -----------
NET INCREASE (DECREASE)
IN CASH 3,725,705 (1,049,027) 3,493,475
CASH AT BEGINNING OF PERIOD 5,144,490 6,193,517 2,700,042
----------- ----------- -----------
CASH AT END OF PERIOD $ 8,870,195 $ 5,144,490 $ 6,193,517
=========== =========== ===========
Supplemental Disclosure of Cash Flow
Information - Cash Paid During the Year
for Income Taxes $ 781,403 $ 974,569 $ 691,293
=========== =========== ===========
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE> 26
SANDY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED AUGUST 31, 1995, 1994, AND 1993
NOTE A - SUMMARY OF ACCOUNTING POLICIES
Principles of consolidation
The consolidated financial statements include the accounts of Sandy
Corporation (parent company) and its wholly owned Canadian subsidiary, Sandy
Corporation of Canada. All material intercompany transactions and profits have
been eliminated.
Cash
The Company considers all securities with a maturity of three months
or less at date of purchase to be cash.
Inventories
Inventories represent finished goods and are stated at the lower of
cost (first-in, first-out method) or market, net of a reserve for obsolete
inventory of approximately $152,000, $172,000, and $118,000 at August 31, 1995,
1994, and 1993, respectively.
Leasehold improvements and equipment
Leasehold improvements, equipment, furniture, and fixtures are stated
at cost. Depreciation expense is computed using the straight-line and
accelerated methods over periods from 3 to 15 years. Leasehold improvements
are amortized over the term of the related leases.
Accretion
A deferred gain, which arose from the sale and leaseback of the office
building, was recognized ratably over the 10 years ending August 31, 1993.
F-7
<PAGE> 27
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Revenue recognition and billings
The Company recognizes revenue with respect to services performed on a
project basis as expenses are incurred. The Company recognizes revenue from
product sales when the items are shipped. Amounts so recognized are
accumulated in unbilled accounts receivable and billed periodically or at
completion of the contract, depending upon the terms of the client's purchase
order. Unbilled receivables are expected to be collected within one year.
Proposal costs
The Company defers a portion of proposal costs based upon management's
estimate of realizability utilizing historical successful bid award rates.
These costs are expensed when the related revenue is recognized if the proposal
is sold or when it no longer appears the Company will be awarded the work. The
deferred proposal costs amounted to $47,000 and $39,000 at August 31, 1995 and
1994, respectively.
Earnings per share
Computation of earnings per share for all periods presented is based
on the weighted average shares and equivalents outstanding.
Income Taxes
The Company accounts for income taxes using the asset and liability
approach. Deferred income taxes are provided for temporary differences in
reporting income and expenses for income tax and financial statement purposes
and for the differences between the tax basis of assets and liabilities and
their reported amounts in the financial statements.
Recent Accounting Pronouncements
In December 1991, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No. 107, "Disclosures
About Fair Value of Financial Instruments". The pronouncement will not affect
the operating results or financial position of the Company. The Company does
not expect the future implementation of this pronouncement to produce fair
values significantly different from the values included in the Company's
financial statements. The Company will be required to adopt this statement for
its fiscal year ending August 31, 1996.
F-8
<PAGE> 28
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE B - ALLOWANCE FOR DOUBTFUL ACCOUNTS
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Balance at beginning of year $ 36,000 $ 128,000 $164,000
Provision for doubtful accounts 14,000 11,000 40,000
Write-off of doubtful accounts, net of recoveries
(5,000) (103,000) (76,000)
-------- -------- --------
Balance at end of year $ 45,000 $ 36,000 $128,000
======== ========= ========
</TABLE>
NOTE C - NOTES PAYABLE TO BANK
The Company had available at August 31, 1995, a $7,500,000 line of
credit at 0.25% over the prime rate (8.75% at August 31, 1995). Advances under
the line are unsecured subject only to certain financial covenants. These
covenants include requirements to maintain minimum levels of working capital
and tangible net worth, maximum debt to net worth ratios, and restrictions on
the declaration of dividends. This line of credit arrangement expires on
December 31, 1995. There were no borrowings under the line of credit at August
31, 1995 or August 31, 1994.
NOTE D - INCOME TAXES
The provision for income taxes differs from the expected tax of
$825,000 in 1995, $872,000 in 1994, and $660,000 in 1993 as computed by
applying the United States federal income tax rate to income before income
taxes for the following reasons:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Tax at federal statutory rate 34.0% 34.0% 34.0%
Non-deductible trade or business expenses 10.5% 1.2% 0.4%
Tax-free interest income (3.0%) (1.7%) (1.9%)
Other 1.5% 1.2% (0.6%)
----- ----- -----
Tax at effective rate 43.0% 34.7% 31.9%
===== ===== =====
</TABLE>
F-9
<PAGE> 29
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
The components of income taxes are:
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Currently payable $ 687,000 $ 989,000 $ 758,000
Tax benefit from exercise of stock options
(credited directly to Additional Paid-In Capital) 260,000 0 0
---------- --------- ---------
Total Current Provision 947,000 989,000 758,000
Deferred 97,000 (99,000) (140,000)
---------- --------- ---------
$1,044,000 $ 890,000 $ 618,000
========== ========= =========
<CAPTION>
The components of deferred income taxes are as follows:
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Depreciation and amortization $ (53,000) $(37,000) $ (68,000)
Reserves not deductible in year provided 150,000 (62,000) (72,000)
--------- -------- ---------
$ 97,000 $(99,000) $(140,000)
========= ======== =========
</TABLE>
Deferred tax assets (liabilities) are comprised of the following at August 31,
1995 and August 31, 1994:
<TABLE>
<CAPTION>
Current:
8/31/95 8/31/94
------- -------
<S> <C> <C>
Employment contract $ 0 $192,000
Reserves not deductible in year provided 117,000 90,000
Compensation accrual 91,000 74,000
Inventory adjustments 81,000 99,000
Lease transactions 38,000 50,000
Other (7,000) (13,000)
-------- --------
Current deferred tax asset $320,000 $492,000
======== ========
Noncurrent:
8/31/95 8/31/94
------- -------
Depreciation and amortization $(160,000) $(214,000)
Other 41,000 20,000
--------- ---------
Noncurrent deferred tax liability $(119,000) $(194,000)
========= =========
</TABLE>
F-10
<PAGE> 30
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE E - RELATED PARTY TRANSACTIONS AND LONG-TERM DEBT
The Company entered into a lease agreement for its Troy, Michigan
headquarters, effective February 1, 1994, with the Landlord, 1500 Limited
Partnership, a partnership comprised of certain shareholders of the Company.
The lease provides a $500,000 allowance for building improvements paid by the
partnership over the lease term, $100,000 of which was received by the Company
in fiscal 1994, and another $100,000 for improvements after February 1, 2000.
The lease will expire on May 31, 2006. Rent expense pertaining to the building
amounted to $1,130,000, $1,076,000, and $1,001,000 for the years ended August
31, 1995, 1994, and 1993, respectively.
In connection with the merger discussed in Note J, the lease agreement
will be amended effective at 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 between Sandy Corporation and Automatic Data
Processing, Inc. (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. In connection
with the effectiveness of such amendment to the lease, Automatic Data
Processing, Inc., will guarantee the Surviving Corporation's obligations under
the lease after the closing date. However, in the event the merger is not
effectuated on or before January 31, 1996, this Amendment will be null and
void.
NOTE F - COMMITMENTS
At August 31, 1995, aggregate minimum lease payments under
non-cancelable operating leases for office space and various equipment having
initial or remaining terms of more than one year were as follows:
Fiscal year ending August 31:
<TABLE>
<S> <C>
1996 $ 1,890,000
1997 1,766,000
1998 1,462,000
1999 1,226,000
2000 and thereafter 8,183,000
------------
$ 14,527,000
============
</TABLE>
F-11
<PAGE> 31
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
Rental for the operating leases, including rent expense for the building as
disclosed in Note E, amounted to $1,905,000, $1,807,000, and $1,648,000 for the
years ended August 31, 1995, 1994, and 1993, respectively. Sublease revenue
related to these operating leases was approximately $0, $140,000, and $229,000
in 1995, 1994, and 1993, respectively.
The Company entered into an employment contract with its Chief
Executive Officer effective November 4, 1985. Payments for the first 10 years
under the contract consist of a base amount of $210,000 annually plus an annual
adjustment for inflation and, based upon total organizational performance,
supplemental compensation not to exceed 150% of the base amount for each year
of active employment. Upon completion of active employment, the employee will
consult for a period of five years, during which time the annual payments will
decline from 90% to 60% of the average of the final three years total
compensation. Effective August 31, 1994, the Agreement was amended to provide
for certain payments to be made by the Company in lieu of annual retirement
benefit payments that were originally scheduled to be paid at the end of the
consulting period. The amended Agreement required a payment of $652,650, which
was made in September 1994, and $91,820, which was made on August 31, 1995, in
lieu of all future retirement payments. The cost of the retirement benefit in
1995, 1994, and 1993 amortized as a level percent of compensation over 10
years, was approximately $92,000, $87,000, and $83,000, respectively, before
the related tax benefit.
The Agreement was amended in connection with the execution of the
merger agreement on August 22, 1995, as discussed in Note J, to provide that
the Chief Executive Officer's active employment period will end on the date of
the closing of the merger and, as a result, the five-year consulting period
will begin on the closing date. The amended Agreement also requires the
Company to make a payment of $1,475,000 to the Chief Executive Officer on the
closing date, in lieu of all future consulting payments, bonuses (except the
fiscal 1995 bonus that will be paid separately) or other benefits due under the
amended Agreement.
The Company has a Profit Sharing Plan covering substantially all
full-time employees who have completed one year of service and are employed on
the last day of the calendar year. Contributions thereunder, which are not
material, are in such amounts as the Company's Board of Directors shall
determine at its discretion.
At August 31, 1995, the Company had purchase order commitments of
approximately $4,100,000 relating to projects in process.
NOTE G - MAJOR CUSTOMERS
Revenue from various entities within General Motors Corporation
accounted for approximately 49%, 53%, and 57% of the Company's total revenue in
fiscal 1995, 1994, and 1993, respectively. Revenue from Ford Motor Company
accounted for 32%, 31%, and 21% of the Company's total revenue in fiscal 1995,
1994, and 1993, respectively.
F-12
<PAGE> 32
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
NOTE H - STOCK OPTION PLANS
In fiscal years 1986 and 1990, the Company approved the 1985
Performance Incentive Plan ("1985 Plan") and the 1989 Performance Incentive
Plan ("1989 Plan"), respectively. Under the 1985 Plan, 200,000 shares of the
Company's common stock were reserved for issuance upon the exercise of options
to be granted, and under the 1989 Plan, 150,000 shares were reserved for
issuance upon the exercise of options to be granted. Under both the 1985 Plan
and the 1989 Plan, options may be granted with exercise prices equal to the
fair market value of the Company's common stock on the dates the options are
granted or a percentage of the fair market value, as determined by a committee
of the Board of Directors. Options can be granted under the 1985 Plan until
November 3, 1995 and until November 21, 1999 under the 1989 Plan. During 1994,
options to purchase common stock at $4.63 per share were granted to certain
employees. At August 31, 1995, all 38,000 of these options remain unexercised.
During 1995, options to purchase common stock at $6.75 per share were granted
to certain employees. At August 31, 1995, all 50,000 of these options remain
unexercised.
In September 1988, the Company entered into a nonqualified stock
option agreement with an officer of the Company which allowed for the purchase
of 100,000 shares of common stock at $2.00 per share. This option expired on
August 1, 1995. During fiscal 1989, 40,000 of these shares became exercisable.
During fiscal years 1990 through 1992, an additional 20,000 of these shares
became exercisable in each year. During 1992, 20,000 of these options were
exercised, and the remaining 80,000 of these options were exercised during
1995. (See Note I.)
On September 1, 1992, in conjunction with the amendment and extension
of this officer's employment agreement, the Company entered into an amended
nonqualified stock option agreement with this officer which allows for the
purchase of an additional 50,000 shares of common stock. This option expires
on September 1, 1999. The option price for 30,000 of these options is $8.25
per share which was the fair market value at the date of grant. These options
are exercisable in annual increments of 10,000 shares from September 1, 1993
through September 1, 1995. The option price for the remaining 20,000 of these
options is $11.38, which was the fair market value of the Company's common
stock on September 1, 1995. These options become exercisable in annual
increments of 10,000 shares on September 1, 1996 and September 1, 1997.
However, in the event of a "change in control" as defined in the officer's
employment agreement, the option price for all 50,000 shares will be $8.25 per
share.
In conjunction with the merger agreement discussed in Note J, in the
event of a "change of control" or "disposition" of the Company, as defined in
the various stock option agreements, all outstanding options, as described
above, become immediately exercisable into ADP shares.
F-13
<PAGE> 33
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
In 1995, the Company and its shareholders approved the Sandy
Corporation Directors' Stock Option Plan ("Directors' Plan"). Under the
Directors' Plan, 20,000 shares of the Company's common stock were reserved for
issuance upon the exercise of options to be granted. Options may be granted
under the Directors' Plan with exercise prices equal to the fair market value
of the Company's common stock on the dates the options are granted. Options
granted under the Directors' Plan are 100% exercisable on the date of grant and
may be exercised for a period of 10 years after the date of grant, if not
sooner terminated. Options can be granted under the Directors' Plan until
October 24, 2004.
On October 25, 1994, the Company entered into nonqualified stock
option agreements with four of the Company's directors which allowed for the
purchase of 2,000 shares of common stock at $6.56 per share, which was the fair
market value on date of grant, for each of the four directors. These options
were exercisable on the date of grant, and they expire on October 24, 2004. At
August 31, 1995, all 8,000 of these options remain unexercised.
NOTE I - STOCK REPURCHASE PROGRAM
In October 1993, the Company authorized the repurchase of up to 60,000
shares of the Company's stock. During 1994, the Company repurchased 4,700
shares.
During 1995, as part of the September 1988 nonqualified stock option
agreement with an officer of the Company discussed in Note H, the Company
repurchased 26,609 of the 80,000 shares of common stock issued upon exercise of
the stock options. These shares were purchased, as allowed for in the
nonqualified stock option agreement, to satisfy the Company's obligation to
remit the officer's income tax liability due upon exercise of the options.
NOTE J - MERGER AGREEMENT WITH AUTOMATIC DATA PROCESSING, INC.
On August 22, 1995, the Company signed a definitive merger
agreement with Automatic Data Processing, Inc., ("ADP") valued at approximately
$30 million. The Company's shareholders will receive approximately $12 worth
of ADP stock for each share of the Company's stock. The Agreement is subject
to certain conditions, as described in the Merger Agreement. It is expected
the transaction will close before the end of December 1995. Other Expense of
approximately $650,000 represents merger related expenses incurred in the
current year. The Company expects to incur additional merger expenses of
approximately $230,000 through December, 1995, which is the expected completion
date of the transaction.
F-14
<PAGE> 34
SANDY CORPORATION
QUARTERLY CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Three Months Three Months
Ended Ended Ended Ended Year Ended
November 30, 1994 February 28, 1995 May 31, 1995 August 31, 1995 August 31, 1995
----------------- ------------------ ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenue $ 12,246,354 $ 12,127,082 $ 13,637,431 $ 12,236,330 $ 50,247,197
------------ ------------- ------------ ------------ ------------
Costs and expenses:
Cost of products and services 9,642,092 9,294,275 10,663,380 9,350,131 38,949,878
Account service expense 1,014,418 1,274,098 1,217,916 1,370,563 4,876,995
General and administrative 927,167 949,553 892,970 815,602 3,585,292
------------ ------------- ------------ ------------ ------------
Total costs and expenses 11,583,677 11,517,926 12,774,266 11,536,296 47,412,165
------------ ------------- ------------ ------------ ------------
Operating income 662,677 609,156 863,165 700,034 2,835,032
Other income (expense):
Interest income 40,342 53,577 74,057 74,709 242,685
Other expense 0 0 (365,713) (284,344) (650,057)
------------ ------------- ------------ ------------ ------------
40,342 53,577 (291,656) (209,635) (407,372)
------------ ------------- ------------ ------------ ------------
Income before income taxes 703,019 662,733 571,509 490,399 2,427,660
Income taxes 245,000 223,000 299,000 277,000 1,044,000
------------ ------------- ------------ ------------ ------------
Net income $ 458,019 $ 439,733 $ 272,509 $ 213,399 $ 1,383,660
============ ============= ============ ============ ============
Net income per share $0.19 $0.19 $0.12 $0.08 $0.58
============ ============= ============ ============ ============
Weighted average common and
common equivalent shares outstanding 2,352,104 2,351,925 2,368,798 2,389,004 2,369,268
============ ============= ============ ============ ============
</TABLE>
F-15
<PAGE> 35
SANDY CORPORATION
QUARTERLY CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
<TABLE>
<CAPTION>
Three Months Three Months Three Months Three Months
Ended Ended Ended Ended Year Ended
November 30, 1993 February 29, 1994 May 31, 1994 August 31, 1994 August 31, 1994
----------------- ----------------- ------------ --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenue $ 9,735,662 $ 9,812,324 $ 11,560,767 $ 11,756,799 $ 42,865,552
----------- ----------- ------------ ------------ ------------
Costs and expenses:
Cost of products and services 7,861,557 7,475,699 9,174,616 9,052,907 33,564,779
Account service expense 775,012 846,708 808,356 1,072,737 3,502,813
General and administrative 741,618 921,298 885,445 826,369 3,374,730
----------- ----------- ------------ ------------ ------------
Total costs and expenses 9,378,187 9,243,705 10,868,417 10,952,013 40,442,322
----------- ----------- ------------ ------------ ------------
Operating income 357,475 568,619 692,350 804,786 2,423,230
Interest income 35,016 28,487 34,506 43,481 141,490
----------- ----------- ------------ ------------ ------------
Income before income taxes 392,491 597,106 726,856 848,267 2,564,720
Income taxes 142,000 199,000 238,000 311,000 890,000
----------- ----------- ------------ ------------ ------------
Net income $ 250,491 $ 398,106 $ 488,856 $ 537,267 $ 1,674,720
=========== =========== ============ ============ ============
Net income per share $0.11 $0.17 $0.21 $0.22 $0.71
=========== =========== ============ ============ ============
Weighted average common and
common equivalent shares outstanding 2,334,093 2,346,239 2,351,317 2,347,289 2,345,897
=========== =========== ============ ============ ============
</TABLE>
F-16
<PAGE> 36
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
20
<PAGE> 37
PART III.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The directors and executive officers of the Company are listed below.
The Company's Board of Directors appoints the Company's officers, who serve
until the meeting of the Board following the next annual meeting or until their
successors are appointed and qualified.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<S> <C> <C>
William H. Sandy . . . . . . . . . . . . 66 Chairman, Chief Executive Officer and Director
Raymond A. Ketchledge . . . . . . . . . . 53 President, Chief Operating Officer and Director
Robert J. Bennett . . . . . . . . . . . . 49 Group Vice President
David A. Gugala . . . . . . . . . . . . . 47 Group Vice President
Alan V. Kidd . . . . . . . . . . . . . . 66 Senior Vice President, Secretary and Director
Alan M. Sandy . . . . . . . . . . . . . . 39 Vice President and Director
Frederic H. Strickland . . . . . . . . . 52 Group Vice President
Richard T. White . . . . . . . . . . . . 48 Group Vice President
John G. Zimmerman . . . . . . . . . . . . 55 Group Vice President and Chief Financial Officer
Richard J. Burstein . . . . . . . . . . . 50 Director
George J. Forrest . . . . . . . . . . . . 67 Director
Jay W. Lorsch . . . . . . . . . . . . . . 63 Director
Lewis G. Sandy, M.D., . . . . . . . . . . 37 Director
John T. Sheehy . . . . . . . . . . . . . 53 Director
- ---------------------
</TABLE>
Mr. William H. Sandy has served as the Chairman of the Board of Directors of
the Company, Chief Executive Officer of the Company and a Director of the
Company since its inception in June 1971. Prior to August 8, 1988, Mr. Sandy
also served as President of the Company. William H. Sandy is the father of
Alan M. Sandy and Lewis G. Sandy, M.D.
Mr. Ketchledge was appointed President and Chief Operating Officer in August
1988 and has served as a Director of the Company since 1988. Prior to joining
the Company, Mr. Ketchledge had been President of Austin-Rover Cars of North
America from April 1985 up to the time of that company's sale to overseas
interest in May 1988. Prior to that time Mr. Ketchledge was employed by United
States Volkswagen/Audi operation, Volkswagen of America, Inc. from 1966 to 1985
holding a variety of senior executive positions.
Mr. Bennett was appointed Group Vice President in November 1989. He has worked
for the Company since September 1, 1987 and has served as Group Vice President
of the Professional Staff, President of Marketing Educational Services, and
Vice President of the Company. Mr. Bennett was employed by GM from August 1964
to August 1987 and served in a number of managerial positions within the
various divisions of GM.
21
<PAGE> 38
Mr. Gugala was appointed Group Vice President of General Motors Divisions in
November 1990. He has worked for the Company since July 1976 and has served as
Research Director and Account Director, and in a variety of automotive contact
responsibilities. Prior to joining the Company, he was an instructional
designer for Creative Universal, Inc.
Mr. Kidd has served as a Vice President of the Company, a Director of the
Company and as its Secretary since its inception in June 1971. He has also
served as a Senior Vice President since December 1974. Mr. Kidd has been
primarily engaged in planning and program development.
Mr. Alan M. Sandy has served as a Director of the Company since 1986 and as a
Vice President of the Company since November 1990. From September 1986 to
November 1990, Mr. Alan M. Sandy served as Account Director of the Company. He
previously served in various planning and marketing capacities with the
Company, which he joined in September 1982.
Mr. Strickland was appointed Group Vice President of Professional Staff in
November 1989. He has worked for the Company since June 23, 1980 and has
served in various creative and marketing capacities, including Vice President
of Marketing for the Chevrolet Account and most recently as Senior Vice
President of New Business Development. Prior to joining the Company, he spent
nine years at Ford Motor Company in Sales Training, Business Development, and
in Television and Film Communications.
Mr. White was appointed Group Vice President of Business Development in
October, 1993. He has worked for the Company since November, 1980 and has
served as Vice President, Senior Vice President of Information Systems and
Consulting, and Senior Vice President of Business Development. Prior to
joining the Company, he was a consultant with Deloitte & Touche (formerly
Touche Ross and Company).
Mr. Zimmerman was appointed Group Vice President and Chief Financial Officer in
July 1994. Prior to joining the Company, Mr. Zimmerman had been Senior Vice
President of Finance and Treasurer of Software Alternatives, Inc., and served
in various consulting capacities from May 1990 until July 1994. Prior to that
time, Mr. Zimmerman served as Treasurer of Champion Spark Plug Company from May
1983 through May 1990. From 1971 until 1983, Mr. Zimmerman was employed by
Questor Corporation, a worldwide consumer products company, serving as
Treasurer from 1977.
Mr. Burstein has served as a Director of the Company since 1985. He is a
Partner with the law firm of Honigman Miller Schwartz and Cohn, Detroit,
Michigan, which firm serves as general counsel to the Company.
Mr. Forrest has served as a Director of the Company since its inception in June
1971. He served as Chief Financial Officer of the Company for a number of
years and retired from the positions of Senior Vice President and Treasurer of
the Company in February 1987. He has worked since that time as a consultant.
Mr. Lorsch has served as a Director of the Company since 1987. He is a Senior
Associate Dean of the Harvard Business School and has been Chairman of the
Harvard Business School's Executive Education Program for the last five years.
He is also a Director of the Brunswick Corporation.
22
<PAGE> 39
Mr. Lewis G. Sandy, M.D., has served as a Director of the Company since 1994.
He has served as Vice President of The Robert Wood Johnson foundation, a
charitable foundation, and as Director of General Internal Medicine-Facility
Group Practice of the Robert Wood Johnson Medical School, since 1991. Prior to
that time, he served as Health Center Director of the Harvard Community Health
Plan.
Mr. Sheehy has served as a Director of the Company since 1986. He has served
as a Partner of Sphere Capital Partners since 1987. From 1985 until 1987, Mr.
Sheehy served as Associate Director of Bear, Stearns & Co., Inc., an investment
banking firm. Mr. Sheehy is also a Director, the Secretary and Treasurer of
Greater Pacific Food Holdings, Inc. and a Director of Sphere Capital Advisors,
Ltd., First Australia Fund, Inc., First Australia Prime Income Fund, Inc.,
First Australia Prime Income Investment Co., Ltd. and The First Commonwealth
Fund, Inc.
23
<PAGE> 40
ITEM 11. EXECUTIVE COMPENSATION
SUMMARY COMPENSATION TABLE
The following table sets forth information for each of the fiscal
years ended on August 31 of 1995, 1994 and 1993 concerning the compensation of
the Company's Chief Executive Officer and each of the Company's other four most
highly compensated executive officers (collectively, the "named executive
officers") whose annual salary and bonus exceeded $100,000.
<TABLE>
<CAPTION>
Long-Term
Annual Compensation Compensation
----------------------- ---------------------
Fiscal Other Annual Option All Other
Name and Position Year Salary Bonus Compensation Awards
----------------- ---- ------ ----- ------------ ------
Compensation(1)
---------------
<S> <C> <C> <C> <C> <C> <C>
William H. Sandy . . . . . . . 1995 $269,758 $151,930 $744,470(2) -- $ --
Chairman and Chief 1994 262,366 153,978 -- -- --
Executive Officer 1993 256,791 111,497 -- -- --
Raymond A. Ketchledge . . . . . 1995 $264,139 $161,370 $765,000(3) -- $15,000(4)
President and Chief 1994 233,930 153,978 -- -- 15,000(4)
Operating Officer 1993 228,746 111,497 -- 30,000 15,000(4)
Richard T. White . . . . . . . 1995 $123,946 $ 68,611 -- 5,000 $ 6,755(4)
Group Vice President 1994 115,607 65,010 -- 5,000 6,155(4)
1993 95,444 36,053 -- -- --
Frederic H. Strickland . . . . 1995 $133,064 $ 43,056 -- 5,000 $13,742(4)
Group Vice President 1994 123,621 31,219 -- 5,000 11,683(4)
1993 120,336 30,187 -- -- --
David A. Gugala . . . . . . . . 1995 $123,025 $ 26,088 -- 5,000 $ 5,887(4)
Group Vice President 1994 116,088 14,222 -- 5,000 5,887(4)
1993 112,404 19,110 -- -- --
</TABLE>
(1) Non-cash compensation did not exceed the lesser of $50,000 or 10% of
the individual cash compensation of any executive officer.
(2) In fiscal 1995, Mr. Sandy's Employment and Consulting Agreement was
amended such that Mr. Sandy relinquished his right to receive certain
retirement payments which the Company was obligated to begin paying
him following the completion of a five-year consulting term, which
consulting term was to commence upon the expiration of Mr. Sandy's
employment with the Company. In return, as authorized by the
disinterested members of the Company's Board of Directors, the Company
paid Mr. Sandy $744,470, the amount accrued by the Company with
respect to such obligation.
(3) Includes gain of $765,000 on exercise of stock options.
24
<PAGE> 41
(4) Includes premiums paid in connection with a split dollar life
insurance arrangement.
OPTION GRANTS IN THE LAST FISCAL YEAR
The following table provides details regarding stock options granted to the
named executive officers in the last fiscal year. In addition, in accordance
with SEC rules, hypothetical gains that would exist for the respective options
are shown. These gains are based on assumed rates of annual compounded stock
price appreciation of 5% and 10% from the date the options were granted over
the full option term. Of course, actual gains, if any, on stock option
exercises and stock accruals are dependent on the future performance of the
Common Stock and overall stock market conditions. There can be no assurance
that the amounts reflected in the table will be achieved.
<TABLE>
<CAPTION> Potential Realizable
Value at Assumed
Annual Rates of Stock
% of Total Price Appreciation for
Number of Options Granted Exercise Term (1)
Options to Employees in Price Per Expiration -----------------------
Name Granted Fiscal Year Share (2) Date 5% 10%
---- ------- ----------- --------- -------- ---- -----
<S> <C> <C> <C> <C> <C> <C>
William H. Sandy......... -- -- -- -- -- --
Raymond A. Ketchledge.... -- -- -- -- -- --
Richard T. White......... 5,000 8.8% $6.75 10/26/03 $18,608 $45,831
David A. Gugala.......... 5,000 8.8 6.75 10/26/03 18,608 45,831
Frederic H. Strickland... 5,000 8.8 6.75 10/26/03 18,608 45,831
</TABLE>
(1) In accordance with SEC rules, these columns show gains that might
exist for the option over the life of the option, a period of nine
years. This valuation is hypothetical; if the stock price does not
increase above the exercise price, compensation to the named
executive officers will be zero. A 5% or 10% annually compounded
increase in the Company's stock price from the date of grant to the
end of the 9-year option term would result in stock prices of $10.47
and $15.92 per share, respectively.
(2) The option becomes exercisable on October 31, 1997.
AGGREGATED OPTION EXERCISES IN THE LAST FISCAL YEAR AND FISCAL YEAR-END OPTION
VALUES
The following table sets forth information concerning stock options
exercised by the named executive officers during the fiscal year ended August
31, 1995, as well as the value of unexercised options held by such persons on
August 31, 1995. This table also includes the number of shares covered by both
exercisable and non-exercisable stock options as of the last day of the fiscal
year. Finally, the values for in-the-money options (which represent the
positive spread between the exercise price of any existing stock options and
$11.375 per share, representing the closing price of the Common Stock as
reported by the American Stock Exchange on the last day of fiscal year 1995)
are also included.
25
<PAGE> 42
<TABLE>
<CAPTION>
Shares Value of Unexercised
Acquired Number of Unexercised In-the-Money Options at
Upon Value Options at Fiscal Year-End Fiscal Year-End
Name of Individual Exercise Realized Exercisable/Unexercisable Excercisable/Unexercisable
------------------ -------- -------- ------------------------- --------------------------
<S> <C> <C> <C> <C>
William H. Sandy............ -- -- -- / -- -- / --
Raymond A. Ketchledge....... 80,000 $765,000 30,000/20,000 $93,750/$0
Richard T. White............ -- -- -- /10,000 -- /$56,875
David A. Gugala............. -- -- -- /10,000 -- /$56,875
Frederic H. Strickland...... -- -- -- /10,000 -- /$56,875
</TABLE>
COMPENSATION OF DIRECTORS
The current standard arrangement for compensation of directors is as follows:
officers of the Company who are directors do not receive any additional
compensation for services as a director. Each director who is not an officer
of the Company receives a director fee in the annual amount of $12,000 plus
$1,300 for each board meeting attended ($1,800 per meeting if the director
resides outside of Michigan). There are four regularly scheduled board
meetings per year. An additional sum of $200 per meeting is paid for
attendance at a committee meeting if such meeting falls on a day on which a
meeting of the entire Board of Directors is not held.
The Board of Directors of the Company formed a Special Committee on March 30,
1995, consisting of Mr. Sheehy, who acted as chairman, Mr. Forrest and Mr.
Lorsch, to review merger proposals from Westcott Communications and ADP. The
members of the Special Committee earned compensation for their services of
$2,500 per meeting. Mr. Burstein also served on the Special Committee
initially, but resigned shortly after the Special Committee's formation. In
addition, Messrs. Sheehy and Burstein earned $20,000 and $15,000, respectively,
from the Company for their services in negotiating the Company's merger
agreement with ADP. In total, Messrs. Sheehy, Forrest, Lorsch and Burstein
earned $47,500, $27,500, $27,500 and $20,000, respectively, for
services rendered as Special Committee members or otherwise in connection with
the ADP transaction in fiscal 1995.
26
<PAGE> 43
EMPLOYMENT ARRANGEMENTS
The Company entered into an Employment and Consulting Agreement with William H.
Sandy, the Chairman and Chief Executive Officer of the Company, 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 the Company, Mr. Sandy is to serve as a consultant to the
Company for a period of five years. The Employment and Consulting Agreement
was amended on August 22, 1995 in connection with the execution of the
Merger Agreement, dated August 22, 1995 between the Company, ADP and ADP
Mergerco, Inc. relating to the merger of the Company with and into ADP
Mergerco, Inc. (the "Merger"). The amended Employment and Consulting Agreement
provides 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 the Company 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 will be 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. Amounts paid to
Mr. Sandy pursuant to his employment agreement in fiscal 1995, 1994 and 1993
are set forth in the summary compensation table above.
The Company has entered into an employment agreement with Raymond A.
Ketchledge, effective as of September 1, 1994. Under the agreement, the
Company is to employ Mr. Ketchledge until he is terminated under one of the
events described below. The employment agreement provides for a minimum base
salary of $264,000 adjusted each September 1, plus certain supplemental
compensation (based on the Company's profits) and cost of living adjustments.
The employment agreement also provides for, among other things, the use by Mr.
Ketchledge of a new leased automobile at the Company's expense, certain death
and disability benefits and a split dollar life insurance arrangement pursuant
to which the Company pays $15,000 per year in annual premiums during the term
of the employment agreement. The employment agreement may be terminated by the
Company upon the death of Mr. Ketchledge, upon his permanent disability or for
cause. The Company may also terminate the employment agreement for any other
reason upon written notice to Mr. Ketchledge in which event Mr. Ketchledge
would be entitled to certain severance benefits. Amounts paid to Mr.
Ketchledge pursuant to the employment agreement and to a predecessor employment
agreement in fiscal 1995, 1994 and 1993 are set forth in the summary
compensation table above.
The Company has also entered into employment agreements with several of its
other executive officers. Pursuant to those employment agreements, each such
officer is entitled to severance payments equal to one year's salary upon
termination by the Company without cause, and each such officer has agreed not
to compete with the Company for one year following the termination of the
executive's employment, if such termination is by the officer or by the Company
with cause.
27
<PAGE> 44
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Except for William H. Sandy, all the members of the Compensation Committee are
non-employee directors of the Company. George J. Forrest, a director of the
Company and a member of the Compensation Committee, was employed by the Company
from its inception in June, 1971 until his retirement in February, 1987,
serving for a number of years as the Company's Chief Financial Officer.
No executive officer of the Company serves as a member of the board of
directors or on the compensation committee of a corporation for which any of
the Directors on the Compensation Committee or the Board of Directors is an
executive officer.
Richard J. Burstein, a director of the Company and a member of the Compensation
Committee, is a partner of the law firm of Honigman Miller Schwartz and Cohn.
The Company used the services of this firm during fiscal 1995 and continues to
use the firm's services as to certain matters in fiscal 1996. Work done for
the Company in fiscal 1995 accounted for less than one percent of Honigman
Miller Schwartz and Cohn's annual revenues.
REPORT OF COMPENSATION COMMITTEE
INTRODUCTION
Decisions on compensation of the Company's executives are made by the five
members of the Compensation Committee (the "Committee") of the Board. The
members of the Committee are Messrs. John T. Sheehy (Chairman), Richard J.
Burstein, George J. Forrest, Jay W. Lorsch and William H. Sandy.
GENERAL POLICIES
The overall objective of the Committee with respect to compensation of
executive officers is to provide a compensation program that is intended to
attract, retain and reward key management personnel who contribute to the long
term success of the Company and to motivate executives to achieve goals which
support business strategies and business objectives of the Company.
To achieve these objectives, key management employees other than William H.
Sandy and Raymond A. Ketchledge are paid salaries and bonuses based on
corporate performance and individual initiative and achievements. Mr. Sandy's
compensation is determined pursuant to an employment agreement dated November
1, 1985 (as amended), and Mr. Ketchledge's compensation is determined pursuant
to an employment agreement effective September 1, 1994. Accordingly, the
Committee is not involved in determining their compensation on an annual basis.
28
<PAGE> 45
SALARIES
Individual salary determinations of the Company's key management employees are
based on experience and sustained performance and by reference to the salary
levels which the Committee believes are prevalent in the Company's industry.
BONUSES
Under the Company's bonus program, the Committee establishes a bonus pool
pursuant to a formula which has historically been established annually, prior
to the beginning of the fiscal year. Employees other than Mr. William H. Sandy
and Mr. Ketchledge participate in the bonus pool. Awards of bonuses to
particular employees are made with the recommendations of Mr. William H. Sandy
and Mr. Ketchledge, and are based on each participant's contribution to the
Company's business results.
STOCK OPTION PROGRAM
The Committee believes that stock ownership by executives and stock-based
performance compensation arrangements foster an interest in the enhancement of
shareholder value and thus align management's interests with that of the
shareholders. Thus, beginning in fiscal 1994, the Committee began relying less
on cash bonuses and also awarding stock options to key employees in amounts
reflecting the participant's position and ability to influence the Company's
overall performance. The Committee is utilizing vesting periods to encourage
key employees to continue in the employ of the Company, and granting options
with a term of 10 years to provide a long-term incentive. Generally, the
exercise price of the options will be the fair market value of the underlying
shares on the date of the grant. Thus, such options will have value only if
the price of the underlying shares increases.
OTHER COMPENSATION
At various times in the past the Company has adopted certain broad-based
employee benefit plans in which key management employees have been permitted to
participate and has adopted certain health expense and automotive plans.
Benefits under these plans are not directly or indirectly tied to Company
performance.
CHIEF EXECUTIVE OFFICER COMPENSATION
As indicated above, Mr. William H. Sandy's compensation is determined pursuant
to an employment agreement dated as of November 1, 1985 (as amended). The
Committee thus is not involved in the determination of Mr. Sandy's annual
compensation. The Committee did, however, review and approve the amendments to
Mr. Sandy's employment agreement discussed above under "Employment
Arrangements".
29
<PAGE> 46
BY THE COMPENSATION COMMITTEE:
John T. Sheehy (Chairman)
Richard J. Burstein
George J. Forrest
Jay W. Lorsch
William H. Sandy
PERFORMANCE GRAPH
The following graph compares the yearly cumulative total shareholder return
(i.e., the change in share price plus the cumulative amount of dividends,
assuming dividend reinvestment, divided by the initial share price, expressed
as a percentage) on the Company's common stock, with the cumulative yearly
total return of the Standard & Poor's 500 Composite Index and with a selected
peer group for the past five years. The peer group consists of the 21
companies within the SIC Code 874 in November, 1993, which includes management
consulting companies.
<TABLE>
<CAPTION>
1990 1991 1992 1993 1994 1995
<S> <C> <C> <C> <C> <C> <C>
Sandy Corporation 100 266.67 566.67 348.39 543.79 800.88
S&P 500 Index 100 126.91 136.96 157.80 166.43 202.12
Peer Group 100 123.35 164.06 205.31 232.47 290.91
</TABLE>
30
<PAGE> 47
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of Common Stock (i) by each person who is known by the
Company to own beneficially more than 5% of the Shares of Common Stock, (ii) by
each of the Company's Directors, (iii) by each of the named executive officers,
and (iv) by all the named executive officers and directors, as a group.
<TABLE>
<CAPTION>
Number of Shares
of Common Stock Percentage of
Name of Beneficially Owned as Shares Outstanding
Beneficial Owner of October 18, 1995(1) as of October 18, 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.
31
<PAGE> 48
(2) Includes 2,000 shares that the individual would have the right to
acquire within 60 days of October 18, 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 October 18, 1995 pursuant to stock options
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). Because of his voting power under the shareholder
agreement described under "Certain Relationships and Related
Transactions" William H. Sandy may be deemed to be the beneficial
owner of a total of 1,035,070 shares (44.5% of the shares
outstanding). 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 October 18, 1995, including 38,000 shares subject
to stock options which may be exercised within 60 days of October 18, 1995.
32
<PAGE> 49
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company entered into an Employment and Consulting Agreement with
William H. Sandy, the Chairman and Chief Executive Officer of Sandy, effective
November 4, 1985. 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 as of August 31, 1994 such that Mr. Sandy relinquished
his right to receive certain payments which the Company was obligated to begin
paying him following the completion of a five-year consulting term, which
consulting term was to commence upon the expiration of Mr. Sandy's employment
with the Company. In return, as authorized by the disinterested members of the
Company's Board of Directors, the Company paid Mr. Sandy $744,470, the amount
accrued by the Company with respect to such obligation. The Employment and
Consulting Agreement was further 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, 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.
In connection with the Merger, the lease agreement, dated February 1, 1994,
between the Company and 1500 Limited Partnership pertaining to the Company'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; (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. The Company'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 waived. There are
no options to renew the Lease after May 31, 2006.
On August 22, 1995, William H. Sandy, the Chairman and Chief Executive Officer
of Sandy, executed a voting agreement (the "Voting Agreement") and an
irrevocable proxy agreement (as subsequently amended, the "Irrevocable Proxy
Agreement") in favor of ADP. Pursuant to the Voting Agreement, Mr. Sandy has
irrevocably committed until November 26, 1995 to vote in favor
33
<PAGE> 50
of the Merger (i) 362,900 shares of Sandy Common Stock beneficially owned by
him and (ii) 564,548 shares of Sandy Common Stock (plus up to an additional
20,000 shares if certain outstanding stock options are exercised prior to
November 26, 1995) not beneficially owned by Mr. Sandy to the extent that he
has the right and authority as the "Representative" to vote such shares under
the Shareholder Agreement, dated November 4, 1985, among certain shareholders
of Sandy (the "Shareholder Agreement"). Pursuant to the Irrevocable Proxy
Agreement, ADP has been granted an irrevocable proxy to vote in favor of the
Merger 79,822 shares of Sandy Common Stock beneficially owned by Mr. Sandy
which are not subject to the terms of the Voting Agreement. In addition,
commencing November 26, 1995 (the date on which the Shareholder Agreement
expires in accordance with its terms), the Irrevocable Proxy Agreement will
confer on ADP an irrevocable proxy to vote in favor of the Merger the 362,900
shares of Sandy Common Stock beneficially owned by Mr. Sandy which were
theretofore subject to the terms of the Voting Agreement.
34
<PAGE> 51
PART IV.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K
(a) The following documents are filed as a part of this report:
1. FINANCIAL STATEMENTS
The consolidated financial statements of Sandy Corporation are
incorporated in Part II, Item 8 in this Form 10-K.
2. FINANCIAL STATEMENT SCHEDULES
Financial Statements and Schedules Omitted:
Schedules are omitted because they are not required under
instructions contained in Regulation S-X or because the
information called for is shown in the financial statements and
notes thereto.
3. EXHIBITS
The Exhibit Index on pages 36, 37, 38, and 39 of this Annual
Report on Form 10-K lists the exhibits that are filed as part of
this report.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the three months
ended August 31, 1995.
35
<PAGE> 52
3.EXHIBITS
<TABLE>
<S> <C>
3.1 Articles of incorporation, incorporated by reference from Exhibit 3.1 to Sandy Corporation's registration statement on
Form S-1 (File No. 33-445), effective November 19, 1985.
3.2 Bylaws, incorporated by reference from Exhibit 3.2 to Sandy Corporation's registration statement on Form S-1 (File No.
33-445), effective November 19, 1985.
3.3 Amendment to Articles of incorporation, effective January 22, 1988, incorporated by reference from Exhibit 3.3 to Sandy
Corporation's annual report on Form 10-K for fiscal 1991 (File No. 1-8996).
9.1 Voting Agreement among Sandy Corporation shareholders (contained in Exhibit 10.7).
10.1 Land Contract dated May 18, 1983 between Sandy Corporation and 1500 Limited Partnership and consent of NBD Bank, N.A.
dated November 22, 1983 concerning office facilities at 1500 West Big Beaver Road, incorporated by reference from
Exhibit 10.2 to Sandy Corporation's registration statement on Form S-1 (File No. 33-445), effective November 19, 1985.
10.2 Limited Partnership Agreement dated May 12, 1983 concerning 1500 Limited Partnership, incorporated by reference from
Exhibit 10.3 to Sandy Corporation's registration statement on Form S-1 (File No. 33-445), effective November 19, 1985.
10.3 Amendment and Restatement of the Sandy Corporation Profit Sharing Plan dated as of November 5, 1984, incorporated by
reference from Exhibit 10.14 to Sandy Corporation's registration statement on Form S-1 (File No. 33-445), effective
November 19, 1985.
10.4 1985 Sandy Corporation Performance Incentive Plan, incorporated by reference from Exhibit 10.15 to Sandy Corporation's
registration statement on Form S-1 (File No. 33-445), effective November 19, 1985.
10.5 Employment Agreement with William H. Sandy, incorporated by reference from Exhibit 10.16 to Sandy Corporation's
registration statement on Form S-1 (File No. 33-445), effective November 19, 1985.
10.6 Sandy Corporation Medical Reimbursement Plan, incorporated by reference from Exhibit 10.18 to Sandy Corporation's
registration statement on Form S-1 (File No. 33-445), effective November 19, 1985.
10.7 Shareholder Agreement, effective as of November 19, 1986, incorporated by reference from Exhibit 10.19 to Sandy
Corporation's registration statement on Form S-1 (File No. 33-445), effective November 19, 1985.
</TABLE>
36
<PAGE> 53
10.8 Tax Indemnification Agreement in connection with the termination of
the Subchapter Selection, incorporated by reference from Exhibit 10.20
to Sandy Corporation's registration statement on Form S-1
(File No. 33-445), effective November 19, 1985.
10.9 Amendment to Employment Agreement with William H. Sandy, incorporated
by reference from Exhibit 10.16 to Sandy Corporation's annual report
on Form 10-K for fiscal 1986 (File No. 1-8996).
10.10 Amendment to 1985 Sandy Corporation's Performance Incentive Plan,
incorporated by reference from Exhibit 10.17 to Sandy Corporation's
annual report on Form 10-K for fiscal 1987 (File No. 1-8996).
10.11 Non-qualified stock option agreement with Raymond A. Ketchledge
effective as of September 1, 1988, incorporated by reference from
Exhibit 10.18 to Sandy Corporation's annual report on Form 10-K
for fiscal 1988 (File No. 1-8996).
10.12 Loan Letter Agreement dated November 22, 1991, from Comerica
Bank to William Sandy, Chairman, Raymond Ketchledge, President and
Peter Steffes, Group Vice President and Chief Financial Officer,
concerning the Company's $7,500,000 secured loan commitment,
incorporated by reference from Exhibit 10.27 to Sandy Corporation's
annual report on Form 10-K for fiscal 1991 (File No. 1-8996).
10.13 Non-qualified stock option agreement with Raymond A. Ketchledge
effective as of September 1, 1992, incorporated by reference
from Exhibit 10.32 to Sandy Corporation's annual report on Form 10-K
for fiscal 1992 (File No. 1-8996).
10.14 Letter from Comerica Bank to Peter E. Steffes, dated October 21, 1992,
regarding Comerica's consent to the declaration of a common stock
dividend, incorporated by reference from Exhibit 10.36 to Sandy
Corporation's annual report on Form 10-K for fiscal 1992 (File
No. 1-8996).
10.15 Letter of notification dated November 12, 1992, from Comerica Bank to
Peter E. Steffes concerning changes to Revolving Credit Loan Agreement
by and between Sandy Corporation and Comerica Bank, incorporated by
reference from Exhibit 10.37 to Sandy Corporation's annual report on
Form 10-K for fiscal 1992 (File No. 1-8996).
10.16 Amended and Restated Revolving Credit Agreement, dated June 23, 1993,
by and between Sandy Corporation and Comerica Bank, incorporated by
reference from Exhibit 10.37 to Sandy Corporation's annual report on
Form 10-K for fiscal 1993 (File No. 1-8996).
10.17 Lease agreement dated February 1, 1994, between Sandy Corporation and
1500 Limited Partnership concerning office facilities at 1500 West
Big Beaver Road, Troy, Michigan, incorporated by reference from
Exhibit 10(a) to Sandy Corporation's quarterly report on Form 10-Q
for the quarter ended February 28, 1994 (File No. 1-8996).
37
<PAGE> 54
10.18 1989 Sandy Corporation Performance Incentive Plan, incorporated by
reference from Exhibit 10.29 to Sandy Corporation's annual report on
Form 10-K for fiscal 1994 (File No. 1-8996).
10.19 First Amendment to Amended and Restated Revolving Credit Loan
Agreement, dated August 30, 1994, by and between Sandy Corporation
and Comerica Bank, incorporated by reference from Exhibit 10.30 to
Sandy Corporation's annual report on Form 10-K for fiscal 1994
(File No. 1-8996).
10.20 Letter from Comerica Bank dated June 20, 1994, regarding Comerica's
consent to the declaration of a common stock dividend, incorporated
by reference from Exhibit 10.31 to Sandy Corporation's annual report
on Form 10-K for fiscal 1994 (File No. 1-8996).
10.21 Amendment to Employment and Consulting Agreement with
William H. Sandy, dated August 31, 1994, incorporated by reference
from Exhibit 10.32 to Sandy Corporation's annual report on Form 10-K
for fiscal 1994 (File No. 1-8996).
10.22 Supplemental Income Benefit Agreement with Raymond A. Ketchledge
effective as of November 1, 1994, incorporated by reference from
Exhibit 10.33 to Sandy Corporation's annual report on Form 10-K
for fiscal 1994 (File No. 1-8996).
10.23 Stock Option Agreement with Alan Sandy effective as of
October 27, 1993, incorporated by reference from Exhibit 10.34
to Sandy Corporation's annual report on Form 10-K for fiscal 1994
(File No. 1-8996).
10.24 Stock Option Agreement with Alan Kidd effective as of
October 27, 1993, incorporated by reference from Exhibit 10.35
to Sandy Corporation's annual report on Form 10-K for fiscal 1994
(File No. 1-8996).
10.25 A form of employment agreement between Sandy Corporation and its
Group Vice Presidents, incorporated by reference from Exhibit 10(a)
to Sandy Corporation's quarterly report on Form 10-Q for the quarter
ended November 30, 1994 (File No. 1-8996).
10.26 Employment Agreement with Raymond A. Ketchledge effective as of
September 1, 1994, incorporated by reference from Exhibit 10(a)
to Sandy Corporation's quarterly report on Form 10-Q for the quarter
ended February 28, 1995 (File No. 1-8996).
10.27 Sandy Corporation Director Stock Option Plan as adopted by the Board
of Directors on October 25, 1994, incorporated by reference from
Exhibit 10(b) to Sandy Corporation's quarterly report on Form 10-Q
for the quarter ended February 28, 1995 (File No. 1-8996).
10.28 Second Amendment to Amended and Restated Revolving Credit Loan
Agreement, dated May 4, 1995, by and between Sandy Corporation and
Comerica Bank, incorporated by reference from Exhibit 10(a) to
Sandy Corporation's quarterly report on Form 10-Q for the quarter
ended May 31, 1995 (File No. 1-8996).
38
<PAGE> 55
10.29 Third Amendment to Employment and Consulting Agreement with
William H. Sandy, dated August 22, 1995.
10.30 Amendment to the Lease Agreement, dated August 22, 1995, between
Sandy Corporation and 1500 Limited Partnership concerning office
facilities at 1500 West Big Beaver Road, Troy, Michigan.
10.31 Agreement and Plan of Merger dated August 22, 1995, by and among
ADP Mergerco, Inc., Automatic Data Processing, Inc., and
Sandy Corporation.
10.32 Voting Agreement between William H. Sandy, Marjorie M. Sandy, and
Automatic Data Processing, Inc., dated August 22, 1995.
10.33 Irrevocable Proxy Agreement between William H. Sandy,
Marjorie M. Sandy, and Automatic Data Processing, Inc., dated
August 22, 1995.
10.34 Letter from Comerica Bank dated October 17, 1995, regarding Comerica's
consent to the declaration of a common stock dividend.
22.1 Subsidiaries of the Registrant, incorporated by reference from
Exhibit 22.1 to Sandy Corporation's registration statement on
Form S-1 (File No. 33-445), effective November 19, 1985.
27 Financial Data Schedule for the year ended August 31, 1995.
39
<PAGE> 56
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized, on November 3, 1995.
SANDY CORPORATION
(Registrant)
By:
--------------------------------
William H. Sandy,
Chairman of the Board
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on November 3, 1995.
<TABLE>
<S> <C>
Signature Capacity
- --------- --------
- ------------------------------------- Director and Chairman of the Board
William H. Sandy (principal executive officer)
- ------------------------------------- Director, President and Chief
Raymond A. Ketchledge Operating Officer
- ------------------------------------- Group Vice President and Chief
John G. Zimmerman Financial Officer (principal
financial and accounting officer)
- ------------------------------------- Director
Richard J. Burstein
- ------------------------------------- Director
George J. Forrest
- ------------------------------------- Director
Alan V. Kidd
</TABLE>
40
<PAGE> 57
Signature Capacity
- --------- --------
- ----------------------------- Director
Jay W. Lorsch
- ----------------------------- Director
Alan M. Sandy
- ----------------------------- Director
Lewis G. Sandy, M.D.
- ----------------------------- Director
John T. Sheehy
41
<PAGE> 1
EXHIBIT 10.29
THIRD AMENDMENT TO EMPLOYMENT
AND CONSULTING AGREEMENT
THIS THIRD AMENDMENT TO EMPLOYMENT AND CONSULTING AGREEMENT
(this "Amendment") is made as of August 22, 1995, by and among SANDY
CORPORATION, a Michigan corporation (the "Corporation"), WILLIAM
H. SANDY ("Employee"), and MARJORIE M. SANDY ("Mrs. Sandy").
RECITALS:
A. Employee is Chairman and Chief Executive Officer of the
Corporation.
B. The Corporation and Employee entered into an Employment
and Consulting Agreement dated as of November 4, 1985, as amended
by a First Amendment to Employment and Consulting Agreement dated
as of April 1, 1986, and by an Amendment to Consulting Agreement
dated as of August 31, 1994 (such Employment and Consulting
Agreement, as amended, being referred to herein as the
"Agreement"), pursuant to which Employee is and has been employed
by the Corporation.
C. Section 2 of the Agreement provides that Employee is to
receive from the Corporation an annual bonus award during the
Active Employment Period (as that term is defined in the
Agreement).
D. Employee's Active Employment Period shall terminate
upon the date of the closing (the "Closing Date") of the merger
of ADP Mergerco, Inc., a Michigan corporation, with and into the
Corporation (the "Merger"), which Closing Date shall occur during
the Corporation's 1996 fiscal year.
E. Section 3 of the Agreement provides for Employee's
retention as a consultant to the Corporation for a period of five
years (the "Consulting Period") upon termination of Employee's
Active Employment Period.
F. Employee estimates that the present value of the sum of
(i) all compensation and benefits to be paid to him under
Sections 3 and 5 of the Agreement and (ii) the bonus award, if
any, payable to Employee in respect of the period from September
1, 1995 through the Closing Date under Sections 2 and 5 of the
Agreement, will be approximately $1,475,000 on the Closing Date.
G. The Corporation and Employee wish to amend the
Agreement to provide for the acceleration of certain payments to
be made by the Corporation to Employee under the Agreement and to
amend certain other provisions contained in the Agreement.
-1-
<PAGE> 2
NOW, THEREFORE, the parties hereto agree as follows:
1. Acceleration of Payments. In full and complete
satisfaction of (i) the Corporation's obligations to pay and
provide compensation and benefits to Employee under Sections 3
and 5 of the Agreement and (ii) the Corporation's obligation, if
any, to pay a bonus award to Employee in respect of the period
from September 1, 1995 through the Closing Date under Sections 2
and 5 of the Agreement, the Corporation agrees to pay Employee
the sum of $1,475,000 on the Closing Date.
2. Termination of Active Employment Period; 1995 Bonus.
Notwithstanding anything to the contrary contained in Section 6
of the Agreement, Employee's Active Employment Period shall
terminate, and Employee's Consulting Period shall commence, on
the Closing Date. During the period from September 1, 1995 until
the Closing Date, Employee's base salary (as defined in the
Agreement) shall continue to be paid at the base salary rate paid
during the 1995 fiscal year. Any bonus due to Employee for
employment during the period of September 1, 1994 through August
31, 1995 shall be calculated based on the Corporation's net
income, as determined in accordance with generally accepted
accounting principles consistently applied (which determination
shall take into account all expenses incurred by the Corporation
in connection with the Merger and in connection with the
consideration of any other business combination).
3. Permanent Waiver of Foregone Compensation. Employee
hereby permanently and irrevocably waives any rights he may have
in respect of any amounts of compensation heretofore voluntarily
deferred by him, including, without limitation, all amounts of
compensation deferred pursuant to his July 26, 1988 letter to the
Compensation Committee and his July 20, 1992 letter to Peter
Steffes.
4. Effect on Agreement. Except to the extent specifically
modified herein, the Agreement shall remain binding on the
Corporation and Employee and shall remain in full force and
effect.
5. Consent of Mrs. Sandy. Mrs. Sandy consents to the
actions taken by this Amendment, including specifically the
amendment of any right to health care benefits given to her under
the Agreement.
6. Counterparts. This Amendment may be executed in
several counterparts, each of which shall be an original, but all
of which together shall constitute one and the same agreement.
-2-
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed this Amendment
on the date first written above.
SANDY CORPORATION
By: Raymond A. Ketchledge
------------------------
President
Its:
------------------------
William H. Sandy
------------------------
WILLIAM H. SANDY
Marjorie M. Sandy
------------------------
MARJORIE M. SANDY
-3-
<PAGE> 1
EXHIBIT 10.30
AMENDMENT TO LEASE
This Amendment to Lease (the "Amendment") is entered into as
of the 22nd day of August, 1995, by and between 1500 LIMITED
PARTNERSHIP, a Michigan limited partnership (the "Landlord"), as
landlord, and SANDY CORPORATION, a Michigan corporation (the
"Tenant"), as tenant, who agree as follows:
RECITALS:
A. Landlord and Tenant entered into a certain Lease dated
as of February 1, 1994 (the "Lease"), covering certain real
property and improvements located in the City of Troy, Michigan,
as more particularly described in the Lease (the "Premises").
B. Automatic Data Processing, Inc. ("ADP"), a Delaware
corporation, has agreed to guaranty Tenant's obligations under
the Lease pursuant to a certain Lease Guaranty of even date
herewith.
C. Landlord and Tenant desire to modify the Lease in
certain other respects and have agreed to enter into this
Amendment in order to evidence such modifications.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties
hereto agree as follows:
1. Except as otherwise modified herein, the terms and
conditions of the Lease shall remain in full force and effect.
2. All capitalized terms not defined herein shall have the
meaning ascribed to them in the Lease.
3. Sections 7.1 and 7.2 of the Lease are hereby deleted in
their entirety and replaced with the following new Sections 7.1
and 7.2:
7.1 Tenant shall not make: (i) any structural
alterations, additions or improvements to the Leased
Premises, or (ii) any non-structural alterations, additions
or improvements costing in excess of $50,000.00, without
Landlord's prior written approval, which approval, in the
case of interior non-structural alterations, additions or
improvements shall not be unreasonably withheld, but which
approval, with respect to exterior and structural
alterations (including electrical, mechanical, HVAC, and
plumbing systems), may be withheld by Landlord in its sole
discretion, provided, however, Landlord agrees not to
unreasonably withhold its approval of alterations to the
electrical, mechanical, HVAC and plumbing systems so long as
such alterations do not negatively impact the other tenants
of the Building or the appearance of the Building. In the
event of disapproval of Tenant's proposed alterations,
additions or improvements, Landlord shall give to the Tenant
an itemized statement of the reasons therefor. If Landlord
does not disapprove the plans and specifications or
proposals of Tenant within fifteen (15) business days after
the same have been received by Landlord, such plans,
specifications or proposals shall be deemed to have been
approved by Landlord. All alterations, additions or
improvements made by Tenant to the Leased Premises, except
movable office furniture and equipment installed at Tenant's
expense, shall be the property of Landlord and remain upon
and be surrendered with the Leased Premises at the
expiration of the term hereof. On February 1, 1994,
Landlord paid Tenant an improvement allowance of
$100,000.00. At any time prior to December 31, 1996,
Landlord shall reimburse Tenant in an
<PAGE> 2
additional amount not to exceed $700,000.00 for any
permitted alterations, renovations, and improvements to the
Leased Premises made and paid for by Tenant within ten (10)
days of receipt by Landlord of appropriate lien waivers and
invoices marked paid for completed work in form and content
acceptable to Landlord. Landlord and Tenant acknowledge
that Tenant intends to make certain alterations and
improvements which will be identified by Tenant subsequent
to the date hereof and subject to the approval of Landlord
as herein provided. Tenant acknowledges that all
extraordinary maintenance costs and utility costs relating
to Tenant's improvements, alterations or additions shall be
paid for by Tenant.
7.2 Tenant shall only use contractors approved by
Landlord for any permitted alterations, additions or
improvements to the Leased Premises and Tenant shall obtain
all necessary governmental certificates, licenses, permits
and approvals for any such alterations, additions or
improvements at its sole cost and expense. The foregoing
notwithstanding Landlord shall not withhold its consent to
Tenant's choice of contractor so long as such contractor is
licensed in the State of Michigan, insurable and bondable,
and of a good reputation and experience in similar types of
work. Except as set forth in Section 7.1 hereof, Tenant
shall not be entitled to any reimbursement or compensation
resulting from its payment of the costs or expenses of
constructing any improvements, alterations or additions to
the Leased Premises. Tenant shall not permit any
construction or mechanic's liens to be placed or remain upon
the Leased Premises. In the event that such construction or
mechanic's liens are placed on the Leased Premises, Tenant
shall remove or bond over same within thirty (30) days of
demand by Landlord. Tenant's failure to do so shall
constitute an Event of Default hereunder giving Landlord the
right, inter alia, to terminate this Lease upon thirty (30)
days prior written notice to Tenant. In addition, Tenant
shall indemnify and hold harmless Landlord from any cost or
expense whatsoever (including reasonable attorney fees)
arising from Tenant's permitting a construction or
mechanic's lien to be placed on the Leased Premises.
Landlord has no obligation and has made no promise to alter,
remodel, improve, repair, decorate, or paint the Leased
Premises or any part thereof. No representations with
respect to the condition of the Leased Premises or the
Building have been made by Landlord to Tenant, except as
specifically herein set forth.
4. Notwithstanding the provisions of Lease to the
contrary, Tenant shall be permitted to self-insure all of its
insurance obligations under Sections 11.2, 11.3, 11.4 and 11.5 of
the Lease and no insurance certificates shall be required from
Tenant for such coverages which are self-insured by Tenant,
provided Tenant satisfies the following terms and conditions:
(a) Tenant is and remains an entity controlled by ADP;
(b) ADP has a net worth equal to or in excess of
$100,000,000.00 at all times during the term of this
Lease; and
(c) ADP is and remains a guarantor of all of Tenant's
obligations under this Lease.
Upon written request of Landlord, Tenant shall deliver, or
cause ADP to deliver, to Landlord, the annual published financial
statements of ADP. In the event Tenant is able to satisfy the
foregoing conditions and elects to self-insure, Tenant hereby
agrees to release, indemnify and hold harmless Landlord from and
against any and all liability for claims, costs, expenses, losses
or damages
-2-
<PAGE> 3
which Tenant incurs and which would have been covered by
insurance had Tenant maintained the insurance coverages specified in the Lease
rather than electing to self-insure.
5. Section 36 of the Lease is hereby deleted in its
entirety and is no longer of any further force or effect.
6. Notwithstanding anything contained herein to the
contrary, the parties hereto acknowledge and agree that this
Amendment shall become effective on the effective date of the
merger of ADP Mergerco, Inc. with and into Sandy Corporation and
shall be of full force and effect thereafter. In the event that
the merger of ADP Mergerco, Inc. with and into Sandy Corporation
is not effectuated on or before January 31, 1996, this Amendment
shall be null and void and of no force or effect.
7. This Amendment may be executed in two (2) or more
counterparts, each of which shall be deemed an original and all
of which shall constitute one (1) original.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
LANDLORD:
1500 LIMITED PARTNERSHIP,
a Michigan limited partnership
By: RUDGATE CORP., a Michigan
corporation, its general partner
By: William H. Sandy
-----------------------------
William H. Sandy, President
TENANT:
SANDY CORPORATION, a Michigan corporation
By: Raymond A. Ketchledge
----------------------------------
Its: President
----------------------------------
Accepted and Approved by:
NBD BANK
By:
----------------------
Its:
---------------------
-3-
<PAGE> 1
EXHIBIT 10.31
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> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
ARTICLE 1
<S> <C>
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
1.5 No Fractional Shares. . . . . . . . . . . . . . . . . . . . 3
1.6 Procedure for Exchange of Stock . . . . . . . . . . . . . . 4
1.7 Stock Options . . . . . . . . . . . . . . . . . . . . . . . 6
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ADP MERGERCO AND ADP. . . . . . . . . 6
2.1 Due Organization. . . . . . . . . . . . . . . . . . . . . . 7
2.2 Due Authorization . . . . . . . . . . . . . . . . . . . . . 7
2.3 Assets and Liabilities. . . . . . . . . . . . . . . . . . . 7
2.4 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 8
2.5 Claims and Proceedings. . . . . . . . . . . . . . . . . . . 8
2.6 Financial Statements and Reports. . . . . . . . . . . . . . 8
2.7 Capitalization. . . . . . . . . . . . . . . . . . . . . . . 9
2.8 ADP Common Stock. . . . . . . . . . . . . . . . . . . . . . 9
2.9 Options . . . . . . . . . . . . . . . . . . . . . . . . . . 9
2.10 Additional Rights . . . . . . . . . . . . . . . . . . . . . 9
2.11 Dividends and Stock Purchases . . . . . . . . . . . . . . . 9
2.12 Shareholder Notice. . . . . . . . . . . . . . . . . . . . . 10
2.13 Brokers and Finders . . . . . . . . . . . . . . . . . . . . 10
2.14 Reorganization. . . . . . . . . . . . . . . . . . . . . . . 10
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SANDY . . . . . . . . . . . . . . . . 10
3.1 Due Organization. . . . . . . . . . . . . . . . . . . . . . 10
3.2 Due Authorization . . . . . . . . . . . . . . . . . . . . . 10
3.3 No Consents . . . . . . . . . . . . . . . . . . . . . . . . 11
3.4 Assets and Liabilities. . . . . . . . . . . . . . . . . . . 11
3.5 Properties. . . . . . . . . . . . . . . . . . . . . . . . . 11
3.6 Licenses and Permits. . . . . . . . . . . . . . . . . . . . 11
3.7 Intellectual Rights . . . . . . . . . . . . . . . . . . . . 12
3.8 Compliance with Laws. . . . . . . . . . . . . . . . . . . . 12
</TABLE>
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3.9 Employee Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
3.10 Contracts and Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
3.11 Claims and Proceedings. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.12 Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.13 Financial Statements and Reports. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
3.14 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
3.15 Business Relations. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.16 Brokers and Finders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.17 Notes and Accounts Receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.18 Information Furnished to ADP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.19 Capitalization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
3.20 Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.21 Sandy Dividends and Stock Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.22 Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.23 Customers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.24 Submission to Vote. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.25 Information to be Provided. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.26 Shareholder Vote. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.27 Labor Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
3.28 Ordinary Course . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.29 Chapter 7A and Chapter 7B of MBCA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.30 Pooling of Interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.31 Fixed Assets; Sufficiency of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.32 Leased Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.33 Licensed Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
3.34 Loan Agreements, Debt Instruments and Guarantees. . . . . . . . . . . . . . . . . . . . . . . . . 20
3.35 Employees; Employment Practices; Compensation and Vacations . . . . . . . . . . . . . . . . . 20
3.36 Capital Expenditures. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.37 Bank Accounts and Safe Deposit Boxes; Powers of Attorney. . . . . . . . . . . . . . . . . . 20
3.38 Casualty Losses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
3.39 Transactions with Affiliates. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
3.40 Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.1 Conduct of Sandy's Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
4.2 Conduct of Business by ADP. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
4.3 Shareholder Approval . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.4 Other Agreements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
4.5 Notification of Certain Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
4.6 Access to Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
</TABLE>
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4.7 Public Announcements . . . . . . . . . . . . . . . . . . . . 25
ARTICLE 5
CLOSING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
5.1 Conditions to ADP Mergerco's and ADP's Obligations . . . . . 26
5.2 Conditions to Sandy's Obligations . . . . . . . . . . . . . 30
5.3 Closing and Effective Time . . . . . . . . . . . . . . . . . 33
ARTICLE 6
TERMINATION AND ABANDONMENT . . . . . . . . . . . . . . . . . . . . . . 33
6.1 Termination and Abandonment . . . . . . . . . . . . . . . . 33
6.2 Effect of Termination . . . . . . . . . . . . . . . . . . . 33
ARTICLE 7
MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
7.1 Entire Agreement . . . . . . . . . . . . . . . . . . . . . . 33
7.2 Amendment . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.3 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
7.4 Intentionally Left Blank . . . . . . . . . . . . . . . . . . 34
7.5 Successors and Assigns . . . . . . . . . . . . . . . . . . . 34
7.6 Fees and Expenses . . . . . . . . . . . . . . . . . . . . . 34
7.7 Severability . . . . . . . . . . . . . . . . . . . . . . . . 35
7.8 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.9 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 35
7.10 Non-Survival of Representations, Warranties, and Covenants . 36
7.11 Fiduciary Duties . . . . . . . . . . . . . . . . . . . . . . 36
7.12 Indemnification and Insurance . . . . . . . . . . . . . . . 37
7.13 Knowledge . . . . . . . . . . . . . . . . . . . . . . . . . 37
7.14 Governing Law . . . . . . . . . . . . . . . . . . . . . . . 38
7.15 Headings . . . . . . . . . . . . . . . . . . . . . . . . . . 38
7.16 Sections; Exhibits . . . . . . . . . . . . . . . . . . . . . 38
7.17 Number and Gender of Words . . . . . . . . . . . . . . . . . 38
7.18 Counterparts . . . . . . . . . . . . . . . . . . . . . . . . 38
7.19 Definitions . . . . . . . . . . . . . . . . . . . . . . . . 38
</TABLE>
EXHIBIT A - Plan of Merger
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SCHEDULES
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
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<PAGE> 6
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").
RECITALS
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 I
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.
<PAGE> 7
(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.
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 $.0l 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
2
<PAGE> 8
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 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.
3
<PAGE> 9
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,
4
<PAGE> 10
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 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.
5
<PAGE> 11
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 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):
6
<PAGE> 12
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 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.
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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,
instrumentality, except (a) those claims, actions, suits, or 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
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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 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
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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
Section 1.368-1(d).
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
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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 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
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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,
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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, 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
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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 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,
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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 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
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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 normnal 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.
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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 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.l7 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, $.0l 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
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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.
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
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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 force and effect, and the transactions contemplated
by this Agreement will
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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
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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. Section
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. Section 1.368-1.
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;
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(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 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;
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(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.
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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 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,
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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
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.
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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.
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(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,
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
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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.
(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.
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(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
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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
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:
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(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 that (1) such enforcement may
be subject to applicable bankruptcy, insolvency,
fraudulent transfer, reorganization,
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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
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(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").
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
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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 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.
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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 Automatic Data Processing, Inc.
ADP 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
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If to Sandy: Sandy Corporation
1500 West Big Beaver Road
Troy, Michigan 48084
Attention: Chairman
Phone:810/649-0800
FAX: 810/649-2080
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
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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 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.
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(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:
(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;
(g) "Affiliate" has the meaning set forth in Section 5.1(n)
hereof;
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(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(1)
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;
(ab) "Exchange Fund" has the meaning set forth in Section 1.6(b)
hereof;
(ac) "Exchange Ratio" has the meaning set forth in Section 1.3(a)
hereof;
39
<PAGE> 45
(ad) "Exhibits" has the meaning set forth in Section 7.16 hereof;
(ae) "GAAP" has the meaning set forth in Section 1.1(d) hereof;
(af) "HSR" has the meaning set forth in Section 3.3 hereof;
(ag) "Indemnified Parties" has the meaning set forth in Section
7.12(a);
(ah) "IRS" has the meaning set forth in Section 3.9 hereof;
(ai) "Knowledge" has the meaning set forth in Section 7.13 hereof;
(aj) "Liabilities" has the meaning set forth in Section 2.3 hereof;
(ak) "MAE" has the meaning set forth in Section 2.4 hereof;
(al) "MBCA" has the meaning set forth in the Recitals of this
Agreement;
(am) "Meeting" has the meaning set forth in Section 4.3(a) hereof;
(an) "Merger" has the meaning set forth in the preamble of this
Agreement;
(ao) "Merger Proxy Statement" has the meaning set forth in Section
4.3(c) hereof;
(ap) "NYSE" has the meaning set forth in Section 1.3(a) hereof;
(aq) "Plan" has the meaning set forth in the Recitals of this
Agreement;
(ar) "Registration Statement" has the meaning set forth in Section
4.3(b) hereof;
(as) "Return" and "Returns" have the meanings set forth in Section
3.14 hereof;
(at) "Sandy" has the meaning set forth in the preamble of this
Agreement;
(au) "Sandy Financial Statements" has the meaning set forth in
Section 3.13 hereof;
(av) "Sandy Adjusted Net Worth" has the meaning set forth in
Section 5.1(q) hereof;
(aw) "Sandy Options" has the meaning set forth in Section 1.8(a)
hereof;
(ax) "Sandy SEC Filings" has the meaning set forth in Section 3.13
hereof;
(ay) "Sandy Tax Actions" has the meaning set forth in Section 3.14
hereof;
(az) "Schedules" has the meaning set forth in Section 7.16 hereof;
40
<PAGE> 46
(ba) "SEC" has the meaning set forth in Section 1.1(d) hereof;
(bb) "Sections" has the meaning set forth in Section 7.16 hereof;
(bc) "Stockholders' Representative" has the meaning set forth in
Section 1.7 hereof;
(bd) "Substitute Options" has the meaning set forth in Section
1.8(a) hereof;
(be) "Surviving Corporation" has the meaning set forth in Section
1.1(a) hereof;
(bf) "Tax" and "Taxes" have the meanings set forth in Section 3.14
hereof;
(bg) "Test Date" has the meaning set forth in Section 5.1(q)
hereof;
(bh) "Third Party Offer" has the meaning set forth in Section 7.11
hereof; and
(bi) "Westcott" has the meaning set forth in Section 3.13 hereof.
41
<PAGE> 47
IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year first above written.
ADP MERGERCO, INC.
By: James B. Benson
-----------------------------------
Its: President
------------------------
AUTOMATIC DATA PROCESSING, INC.
By: James B. Benson
------------------------------------
Its: Corporate Vice President
------------------------
SANDY CORPORATION
By: William H. Sandy
----------------------------------
Its: Chairman -- C.E.O.
------------------------
42
<PAGE> 1
EXHIBIT 10.32
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Voting Agreement") is made as of August
22, 1995, by and between WILLIAM H. SANDY ("Shareholder"), MARJORIE M. SANDY
and AUTOMATIC DATA PROCESSING, INC., a Delaware corporation ("ADP").
RECITALS:
A. ADP, ADP Mergerco, Inc., a Michigan corporation and a
wholly-owned subsidiary of ADP ("Mergerco"), and Sandy Corporation, a Michigan
corporation (the "Company"), are concurrently herewith entering into an
Agreement and Plan of Merger, dated the date hereof (the "Merger Agreement"),
which provides for the merger of Mergerco with and into the Company (the
"Merger").
B. Shareholder owns beneficially and of record 442,722 shares
(the "Aggregate Shares") of Company common stock, par value $.0l per share
("Sandy Common Stock").
C. Shareholder is a party to a Shareholder Agreement dated
November 4, 1985 executed by and among various shareholders of the Company (the
"Shareholder Agreement"), which provides that Shareholder, as the
Representative (as such term is defined in the Shareholder Agreement), has the
sole right until November 26, 1995 to direct the vote or written consent of a
portion of the Aggregate Shares (the "Owned Shares") and 584,548 shares of
Sandy Common Stock owned by others, 20,000 shares of which are covered by stock
options (all of such shares are referred to herein collectively, as the
"Controlled Shares"), on all matters presented for action to the Company's
shareholders.
D. To induce ADP and Mergerco to enter into the Merger Agreement,
Shareholder is willing to enter into this Voting Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
1. Agreement to Vote.
(a) Subject to all of the terms and conditions set forth in this
Voting Agreement, to induce ADP and Mergerco to enter into the Merger
Agreement, Shareholder hereby irrevocably agrees to vote on and after the date
hereof the Owned Shares and all of the Controlled Shares which he has the right
and authority as the Representative to vote under the Shareholder Agreement, if
any, and any and all securities issued or issuable in respect thereof (all of
such shares are referred to collectively herein as the "Voting Shares"), in
favor of adopting the Merger Agreement (and the related Plan of Merger) and
approving the Merger at any meeting of the Company's shareholders (including
adjournments thereof) or by written consent.
<PAGE> 2
(b) If after the execution of this Voting Agreement Shareholder
shall die or become incapacitated, cease to have appropriate power or
authority, or if any other such event or events shall occur, this Voting
Agreement shall be binding upon Marjorie M. Sandy, as successor representative
under the Shareholder Agreement.
2. Representations and Warranties of Shareholder. Shareholder
hereby represents and warrants to ADP as follows:
(a) Due Authorization. Shareholder has full legal power to enter
into this Voting Agreement and perform his obligations hereunder. This Voting
Agreement has been duly executed and delivered by Shareholder and constitutes
the valid and binding obligation of Shareholder enforceable against Shareholder
in accordance with its terms.
(b) Conflicting Instruments. The execution and delivery of this
Voting Agreement by Shareholder does not, and the performance of this Voting
Agreement by Shareholder will not, (i) require the consent, waiver, approval or
license or authorization of or any filing with any person or public authority
or (ii) with or without the giving of notice or the lapse of time, or both,
conflict with or result in a breach of any terms or provisions of, or result in
the creation or imposition of any lien, claim, charge or encumbrance upon any
of the Voting Shares under, any agreement or other instrument to which
Shareholder is a party or by which any of Shareholder's property is bound
(including, without limitation, the Shareholder Agreement) or any existing
applicable law, rule, regulation, judgment, decree or order of any governmental
instrumentality, court or administrative body having jurisdiction over
Shareholder or any of Shareholder's property.
(c) Ownership. Except as provided in the Shareholder Agreement or
this Voting Agreement, (i) Shareholder is the record and beneficial owner of
the Owned Shares with sole power to direct the voting and disposition of such
shares, and (ii) the Owned Shares are owned by Shareholder free and clear of
all security interests, liens, claims, encumbrances, charges, restrictions on
transfer, proxies and voting and other agreements.
(d) Shareholder Agreement. Shareholder (i) is presently the
Representative under the Shareholder Agreement, and (ii) has taken no action to
terminate the Shareholder Agreement, make the Shareholder Agreement
unenforceable or otherwise diminish his right and authority as the
Representative to vote the Controlled Shares.
3. Representations and Warranties of ADP. ADP hereby represents
and warrants to Shareholder as follows:
(a) Due Authorization. ADP has full legal power to enter into
this Voting Agreement. This Voting Agreement has been duly executed and
delivered by ADP and constitutes the valid and binding obligation of ADP
enforceable against ADP in accordance with its terms.
-2-
<PAGE> 3
(b) Judgments, Decrees, etc. As of the date hereof, ADP is not
aware of any judgment, decree, injunction, ruling or order of any court,
governmental department, commission, agency or instrumentality outstanding
against Mergerco or ADP which would prohibit or materially restrict or delay
the consummation of the Merger.
(c) Reorganization. As of the date hereof, ADP is not aware of
any facts or circumstances that would suggest that the Merger would not qualify
for federal income tax purposes as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended.
(d) Pooling. As of the date hereof, ADP is not aware of any facts
or circumstances that would suggest that the Merger may not be properly
accounted for as a pooling of interests.
4. Conditions to Obligations. Notwithstanding any other
provision in this Voting Agreement to the contrary, the obligations and
undertakings of Shareholder and Marjorie M. Sandy under this Voting Agreement
are hereby subject to the fulfillment of the following condition:
(a) Pooling. ADP shall have received evidence from Deloitte &
Touche, LLP, in form and substance reasonably satisfactory to ADP, that the
Merger may properly be accounted for as a pooling of interests.
5. Adjustments. If the number of issued and outstanding shares
of Sandy Common Stock is increased, decreased or changed by reason of stock
dividends, split-ups, recapitalizations, combinations, conversions, exchanges of
shares or the like, the number and kind of Voting Shares subject to this
Voting Agreement shall be adjusted appropriately.
6. Covenants of Shareholder. Shareholder hereby covenants and
agrees that neither he nor Marjorie M. Sandy, his wife, shall, without the
prior written consent of ADP, directly or indirectly:
(i) sell, assign, pledge, grant any option or proxy with
respect to, or otherwise transfer or dispose of any of, or enter into
any voting or other agreements with respect to, the Voting Shares, or
deposit the Voting Shares in a voting trust, or take or omit to take
or permit any action which would or might result in any of the
foregoing or otherwise prevent or disable Shareholder from performing
his obligations hereunder; provided, however, that Shareholder may
sell, transfer or dispose of, or permit the sale, transfer or
disposition of, the Voting Shares to a third party who agrees in
writing to be bound by the terms and conditions of this Voting
Agreement; or
-3-
<PAGE> 4
(ii) vote the Voting Shares on any matter referred to in Section
1(a) hereof in a manner inconsistent with this Voting Agreement.
7. Expiration. This Voting Agreement shall expire at the earlier
of (i) the Effective Time (as defined in the Merger Agreement) and (ii) one
business day following the date of termination of the Merger Agreement in
accordance with the terms thereof; provided, however, that notwithstanding
anything to the contrary contained herein, with respect to those Voting Shares
other than the Owned Shares only, this Voting Agreement shall expire at the
earlier of (i) the Effective Time, (ii) one business day following the date of
termination of the Merger Agreement in accordance with the terms thereof and
(iii) the date of the expiration or termination of the Shareholder Agreement.
8. Miscellaneous.
(a) Severability. If any term, provision, covenant or restriction
of this Voting Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Voting Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
(b) Assignment. This Voting Agreement shall survive the death or
incapacity of Shareholder and shall be binding upon and inure to the benefit of
the parties hereto. Neither this Voting Agreement nor any rights hereunder
shall be assigned by any party hereto without the prior written consent of the
other parties hereto, except that ADP may assign its rights to a direct or
indirect subsidiary at least 50% owned by ADP (in which case all references to
ADP shall be deemed to mean such subsidiary).
(c) Amendments. This Voting Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by ADP and Shareholder.
(d) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by delivery in person or by
certified or registered mail (postage prepaid, return receipt requested) to the
respective parties as follows:
If to Shareholder:
William H. Sandy
596 Rudgate
Bloomfield Hills, Michigan 48304
-4-
<PAGE> 5
With a copy to:
Jaffe, Raitt, Heuer & Weiss
Professional Corporation
One Woodward Avenue
Suite 2400
Detroit, Michigan 48226
Attn: Ira J. Jaffe, Esq.
If to ADP:
Automatic Data Processing, Inc.
One ADP Boulevard
Roseland, New Jersey 07068
Attn: General Counsel
or to such other address as any party may have furnished to the other in
writing in accordance herewith.
(e) Governing Law. This Voting Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan.
(f) Counterparts. This Voting Agreement may be executed in
several counterparts, each of which shall be an original, but all of which
together shall constitute one and the same agreement.
(g) Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction hereof.
(h) Specific Performance. Shareholder acknowledges that
performance of its obligations hereunder will confer a unique benefit on ADP
and, accordingly, that a failure of performance by Shareholder is not
compensable by money damages.
IN WITNESS WHEREOF, the parties hereto have caused this Voting
Agreement to be duly executed as of the day and year first above written.
AUTOMATIC DATA PROCESSING, INC.
By: James B. Benson
----------------------------
Title: Corporate Vice President
------------------------
-5-
<PAGE> 6
William H. Sandy
-------------------------
WILLIAM H. SANDY
Marjorie M. Sandy
-------------------------
MARJORIE M. SANDY
The Sandy Corporation hereby acknowledges the existence of this Voting
Agreement and agrees to act in accordance herewith.
SANDY CORPORATION
By: Raymond A. Ketchledge
---------------------
Title: President
-----------------
-6-
<PAGE> 1
EXHIBIT 10.33
IRREVOCABLE PROXY AGREEMENT
THIS IRREVOCABLE PROXY AGREEMENT (the "Proxy Agreement") is made as of August
22, 1995, by and between WILLIAM H. SANDY ("Shareholder"), MARJORIE M. SANDY
and AUTOMATIC DATA PROCESSING, INC., a Delaware corporation ("ADP").
RECITALS:
A. ADP, ADP Mergerco, Inc., a Michigan corporation and a
wholly-owned subsidiary of ADP ("Mergerco"), and Sandy Corporation, a Michigan
corporation (the "Company"), are concurrently herewith entering into an
Agreement and Plan of Merger, dated the date hereof (the "Merger Agreement"),
which provides for the merger of Mergerco with and into the Company (the
"Merger").
B. Shareholder owns beneficially and of record 442,722 shares of
Company common stock, par value $.0l per share (the "Owned Shares").
C. Pursuant to the Merger Agreement, ADP has agreed to purchase
the Owned Shares from Shareholder in connection with the Merger at the
effective time of the Merger.
D. A portion of the Owned Shares (the "Restricted Shares") is
subject to certain restrictions contained in the Shareholder Agreement dated
November 4, 1985 by and among various shareholders of the Company, including
Shareholder (the "Shareholder Agreement"), and the remainder of the Owned
Shares is not subject to the provisions of the Shareholder Agreement (the
"Unrestricted Shares").
E. The Shareholder Agreement shall terminate on November 26, 1995
(the "Termination Date") and the Restricted Shares shall thereafter become free
and clear of any and all restrictions imposed thereon pursuant thereto.
F. Shareholder now desires to grant to ADP an irrevocable proxy
for the sole purpose of directing the vote or written consent of the Owned
Shares, which irrevocable proxy shall become effective as to the Unrestricted
Shares on and after the date hereof and as to the Restricted Shares on and
after the Termination Date, upon the terms and subject to the conditions set
forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
1. GRANT OF IRREVOCABLE PROXY.
(a) Upon the terms and subject to the conditions set forth herein,
to induce ADP and Mergerco to enter into the Merger Agreement, Shareholder
hereby irrevocably makes, constitutes and appoints ADP to act, effective as to
the Unrestricted Shares on and after the date hereof and as to the Restricted
Shares on and after the
<PAGE> 2
Termination Date, as true and lawful proxy and attorney-in-fact in the name and
on behalf of Shareholder with full power to appoint a substitute or
substitutes, and directs ADP, and ADP hereby agrees, to vote the Owned Shares
(and any and all securities issued or issuable in respect thereof) at any
meeting of the shareholders of the Company (including adjournments thereof) or
by written consent in the place and stead of Shareholder in favor of adopting
the Merger Agreement (and the related Plan of Merger) and approving the Merger.
By giving this irrevocable proxy, Shareholder hereby revokes any other proxy
heretofore granted by Shareholder to vote any of the Unrestricted Shares (or
such other securities issued or issuable in respect thereof) on or after the
date hereof and any of the Restricted Shares (or such other securities issued
or issuable in respect thereof) on or after the Termination Date.
(b) All power and authority hereby conferred is coupled with an
interest and, except as otherwise provided in Section 5 hereof, is irrevocable,
shall not be terminated by any act of Shareholder or by operation of law, by
death or incapacity of Shareholder, by lack of appropriate power or authority,
or by the occurrence of any other event or events and shall be binding upon all
beneficiaries, heirs at law, legatees, distributees, successors, assigns and
legal representatives of Shareholder. If after the execution of this Proxy
Agreement, Shareholder shall die or become incapacitated, cease to have
appropriate power or authority, or if any other such event or events shall
occur, ADP is nevertheless authorized and directed to vote the Owned Shares in
accordance with the terms of this Proxy Agreement as if such death, incapacity,
lack of appropriate power or authority or other event or events had not
occurred and regardless of notice thereof.
2. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER. Shareholder
hereby represents and warrants to ADP as follows:
(a) DUE AUTHORIZATION. Shareholder has full legal power to enter
into this Proxy Agreement and perform his obligations hereunder. This Proxy
Agreement has been duly executed and delivered by Shareholder.
(b) CONFLICTING INSTRUMENTS. The execution and delivery of this
Proxy Agreement by Shareholder does not, and the performance of this Proxy
Agreement by Shareholder will not, (i) require the consent, waiver, approval or
license authorization of or any filing with any person or public authority or
(ii) with or without the giving of notice or the lapse of time, or both,
conflict with or result in a breach of any terms or provisions of, or result in
the creation or imposition of any lien, claim, charge or encumbrance upon any
of the Owned Shares under, any agreement or other instrument to which
Shareholder is a party or by which any of Shareholder's property is bound
(including, without limitation, the Shareholder Agreement) or any existing
applicable law, rule, regulation, judgment, decree or order of any governmental
instrumentality, court or administrative body having jurisdiction over
Shareholder or any of Shareholder's property.
(c) OWNERSHIP. Except as provided in the Shareholder Agreement and
in this Proxy Agreement, (i) Shareholder is the record and beneficial owner of
the Owned
-2-
<PAGE> 3
Shares with sole power to direct the voting and disposition of such shares, and
(ii) the Owned Shares are owned by Shareholder free and clear of all security
interests, liens, claims, encumbrances, charges, restrictions on transfer,
proxies and voting and other agreements.
3. ADJUSTMENTS. If the number of Owned Shares increases,
decreases or otherwise changes by reason of stock dividends, split-ups,
recapitalizations, combinations, conversions, exchanges of shares or the like,
the number and kind of Owned Shares subject to this Proxy Agreement shall be
adjusted appropriately.
4. COVENANTS OF SHAREHOLDER. Shareholder and Marjorie M. Sandy,
his wife, each hereby covenants and agrees that he or she shall not, without
the prior written consent of ADP, directly or indirectly:
(i) sell, assign, pledge, grant any option or
proxy with respect to, or otherwise transfer or dispose of any
of, or enter into any voting or other agreements with respect
to, the Owned Shares, or deposit the Owned Shares in a voting
trust, or take or omit to take or permit any action which
would or might result in any of the foregoing or otherwise
prevent or disable Shareholder from performing his obligations
hereunder; provided, however, that Shareholder may sell,
transfer or dispose of any of the Owned Shares to a third
party who agrees in writing to be bound by the terms and
conditions of this Proxy Agreement; or
(ii) vote the Unrestricted Shares on or after the
date hereof or the Restricted Shares on or after the
Termination Date on any matter referred to in Section 1(a)
hereof.
5. EXPIRATION. The irrevocable proxy granted hereby shall become
effective as to the Unrestricted Shares on the date hereof and as to the
Restricted Shares on the Termination Date and shall expire at the earlier of
(i) the Effective Time (as defined in the Merger Agreement) and (ii) one
business day following the date of termination of the Merger Agreement in
accordance with the terms thereof.
6. MISCELLANEOUS.
(a) SEVERABILITY. If any term, provision, covenant or restriction
of this Proxy Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Proxy Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
(b) ASSIGNMENT. This Proxy Agreement shall survive the death or
incapacity of Shareholder and shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, heirs, personal
representatives and assigns, but neither this Proxy Agreement nor any rights
hereunder shall be assigned by any party
-3-
<PAGE> 4
without the prior written consent of the other party hereto, except that ADP
may assign its rights to a direct or indirect subsidiary at least 50% owned by
ADP (in which case all references to ADP shall be deemed to mean such
subsidiary).
(c) AMENDMENTS. This Proxy Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by all of the parties hereto.
(d) NOTICES. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by delivery in person or by
certified or registered mail (postage prepaid, return receipt requested) to the
respective parties as follows:
If to Shareholder: William H. Sandy/Marjorie M. Sandy
or Marjorie M. Sandy 596 Rudgate
Bloomfield Hills, Michigan 48304
With a copy to: Jaffe, Raitt, Heuer & Weiss
Professional Corporation
One Woodward Avenue
Suite 2400
Detroit, Michigan 48226
Attn: Ira J. Jaffe, Esq.
If to ADP: Automatic Data Processing, Inc.
One ADP Boulevard
Roseland, New Jersey 07068
Attn: General Counsel
or to such other address as any party may have furnished to the other in
writing in accordance herewith.
(e) GOVERNING LAW. This Proxy Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan.
(f) COUNTERPARTS. This Proxy Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(g) EFFECT OF HEADINGS. The section headings herein are for
convenience only and shall not affect the construction hereof.
(h) SPECIFIC PERFORMANCE. Shareholder acknowledges that
performance of his obligations hereunder will confer a unique benefit on ADP
and, accordingly, that a failure of performance by Shareholder is not
compensable by money damages.
-4-
<PAGE> 5
IN WITNESS WHEREOF, the parties hereto have caused this Proxy
Agreement to be duly executed as of the day and year first above written.
AUTOMATIC DATA PROCESSING, INC.
By: James B. Benson
------------------------------
Its: Corporate Vice President
------------------------------
William H. Sandy
----------------------------------
WILLIAM H. SANDY
FOR PURPOSES OF SECTION 4 ONLY
Marjorie M. Sandy
----------------------------------
MARJORIE M. SANDY
The Sandy Corporation hereby acknowledges the existence of this Proxy Agreement
and agrees to act in accordance herewith.
SANDY CORPORATION
By: Raymond A. Ketchledge
------------------------------
Its: President
------------------------------
-5-
<PAGE> 1
EXHIBIT 10.34
[COMERICA BANK LETTERHEAD]
October 17, 1995
Mr. John Zimmerman
Chief Financial Officer
Sandy Corporation
1500 W. Big Beaver Road
Troy, MI 48084
Dear John,
As you know, Section 7.1 of the Amended and Restated Revolving Credit Loan
Agreement dated June 23, 1993 by and between Sandy Corporation and Comerica
Bank prohibits Sandy Corporation from declaring or paying a dividend without
the express written consent of Comerica Bank.
Comerica Bank hereby consents to the declaration and payment of a dividend of
up to 4 cents on each of the approximately 2,400,000 issued and outstanding
shares of Sandy Corporation common stock.
The consent provided herein is applicable only to the dividend declared in
August, 1995 and paid over the subsequent twelve month period. If you have any
questions, please feel free to contact me.
Sincerely,
/s/ Lynn M. Ris
Lynn M. Ris
Corporate Banking Representative
Regional Metro Corporate Banking
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Sandy
Corporation's audited financial statements for the year ended August 31, 1995
and is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000778107
<NAME> SANDY CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> AUG-31-1995
<PERIOD-START> SEP-01-1994
<PERIOD-END> AUG-31-1995
<CASH> 8,870
<SECURITIES> 0
<RECEIVABLES> 6,347<F1>
<ALLOWANCES> 0
<INVENTORY> 644
<CURRENT-ASSETS> 21,928
<PP&E> 5,182
<DEPRECIATION> 4,517
<TOTAL-ASSETS> 22,882
<CURRENT-LIABILITIES> 10,546
<BONDS> 0
<COMMON> 23
0
0
<OTHER-SE> 12,074
<TOTAL-LIABILITY-AND-EQUITY> 22,882
<SALES> 9,336
<TOTAL-REVENUES> 50,247
<CGS> 7,995
<TOTAL-COSTS> 38,950
<OTHER-EXPENSES> 9,112
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 2,428
<INCOME-TAX> 1,044
<INCOME-CONTINUING> 1,384
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,384
<EPS-PRIMARY> .58
<EPS-DILUTED> 0
<FN>
<F1>Accounts receivable represents billed amounts and is shown net of the allowance
for doubtful accounts.
</FN>
</TABLE>
