<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------
SCHEDULE 14D-1
TENDER OFFER STATEMENT PURSUANT TO SECTION 14(D)(1)
OF THE SECURITIES EXCHANGE ACT OF 1934
CARNEGIE GROUP, INC.
(Name of Subject Company)
LOGICA ACQUISITION CORP.
LOGICA INC.
LOGICA PLC
(Bidders)
SHARES OF COMMON STOCK, $.01 PAR VALUE
(Title of Class of Securities)
143497 10 5
(CUSIP Number of Class of Securities)
COREY TORRENCE
PRESIDENT AND CHIEF EXECUTIVE OFFICER
LOGICA INC.
32 HARTWELL AVENUE
LEXINGTON, MA 02421
(Name, Address, Including Zip Code, and Telephone Number of Person Authorized
to
Receive Notices and Communications on Behalf of Bidders)
WITH A COPY TO:
JOSEPH L. JOHNSON III, P.C.
JAMES A. MATARESE, ESQ.
GOODWIN, PROCTER & HOAR LLP
EXCHANGE PLACE
53 STATE STREET
BOSTON, MA 02109
------------
CALCULATION OF FILING FEE
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
TRANSACTION AMOUNT OF
VALUATION* FILING FEE
- ------------------------------------------------------------------------------
<S> <C>
$40,601,500 $8,120.30
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
</TABLE>
* For purposes of calculating fee only. This amount assumes the purchase of
all of the shares of Common Stock of the Company at $5.00 in cash per share
which are issued and outstanding as of October 1, 1998 on a fully diluted
basis (8,120,300). The amount of the filing fee calculated in accordance
with Regulation 240.0-11 of the Securities Exchange Act of 1934, as
amended, equals 1/50 of one percentum of the value of shares to be
purchased.
[_]Check box if any part of the fee is offset by Rule 0-11(a)(2) and identify
the filing with which the offsetting fee was previously paid. Identify the
previous filing by registration statement number, or the Form of Schedule
and the date of its filing.
<TABLE>
<S> <C> <C> <C>
Amount Previously Paid: Not applicable. Filing Party: Not applicable.
Form or Registration No.: Not applicable. Date Filed: Not applicable.
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
1 of 11 pages
<PAGE>
SCHEDULE 14D-1
---------------------- ------------------
CUSIP NO. 143497 10 5 PAGE 2 OF 11 PAGES
---------------------- ------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Logica Acquisition Corp.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [_]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) or 2(f)
[_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
- --------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[_]
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0.0%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
2 of 11 pages
<PAGE>
SCHEDULE 14D-1
--------------------- ------------------
CUSIP NO. 143497 10 5 PAGE 3 OF 11 PAGES
--------------------- ------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Logica Inc.
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [_]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
AF
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) or 2(f)
[_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
Delaware
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
- --------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[_]
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0.0%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
3 of 11 pages
<PAGE>
SCHEDULE 14D-1
--------------------- ------------------
CUSIP NO. 143497 10 5 PAGE 4 OF 11 PAGES
--------------------- ------------------
1 NAME OF REPORTING PERSON
S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON
Logica plc
- --------------------------------------------------------------------------------
2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP (a) [X]
(b) [_]
- --------------------------------------------------------------------------------
3 SEC USE ONLY
- --------------------------------------------------------------------------------
4 SOURCE OF FUNDS
WC
- --------------------------------------------------------------------------------
5 CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO
ITEMS 2(e) or 2(f)
[_]
- --------------------------------------------------------------------------------
6 CITIZENSHIP OR PLACE OF ORGANIZATION
England
- --------------------------------------------------------------------------------
7 AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON
None
- --------------------------------------------------------------------------------
8 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (7) EXCLUDES CERTAIN SHARES
[_]
- --------------------------------------------------------------------------------
9 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (7)
0.0%
- --------------------------------------------------------------------------------
10 TYPE OF REPORTING PERSON
CO
4 of 11 pages
<PAGE>
This Tender Offer Statement on Schedule 14D-1 (this "Statement") relates to
the offer by Logica Acquisition Corp., a Delaware corporation ("Purchaser")
and a wholly owned subsidiary of Logica Inc., a Delaware corporation
("Parent") and a wholly owned subsidiary of Logica plc, a public limited
company organized under the laws of England ("Logica plc"), to purchase all
outstanding shares of common stock, par value $.01 per share (the "Shares"),
of Carnegie Group, Inc., a Delaware corporation, at a price of $5.00 per
Share, net to the seller in cash without interest, upon the terms and subject
to the conditions set forth in the Offer to Purchase dated October 7, 1998
(the "Offer to Purchase") and in the related Letter of Transmittal (which
together constitute the "Offer"), copies of which are attached hereto as
Exhibits (a) (1) and (a) (2), respectively.
ITEM 1. SECURITY AND SUBJECT COMPANY.
(a) The name of the subject company is Carnegie Group, Inc., a Delaware
corporation (the "Company"), which has its principal executive offices at Five
PPG Place, Pittsburgh, PA 15222.
(b) The class of securities to which this statement relates is the shares of
common stock, par value $.01 per share (the "Shares"), of the Company. The
information set forth in the "Introduction" and Section 1 of the Offer to
Purchase (the "Offer to Purchase"), annexed hereto as Exhibit (a)(1), is
incorporated herein by reference.
(c) The information set forth in Section 6 of the Offer to Purchase is
incorporated herein by reference.
ITEM 2. IDENTITY AND BACKGROUND.
(a)-(d) and (g) This Statement is filed by the Purchaser, Parent and Logica
plc. The information concerning the name, state or other place of
organization, principal business and address of the principal office of each
of the Purchaser, Parent and Logica plc, and the information concerning the
name, age, business address, present principal occupation or employment and
the name, principal business and address of any corporation or other
organization in which such employment or occupation is conducted, material
occupations, positions, offices or employments during the last five years and
citizenship of each of the executive officers and directors of each of the
Purchaser, Parent and Logica plc are set forth in the Introduction, Section 9,
Annex I and Annex II to the Offer to Purchase and is incorporated herein by
reference.
(e) and (f) During the last five years, neither the Purchaser, Parent nor
Logica plc, or, to the best knowledge of the Purchaser, Parent and Logica plc,
any of the persons listed in Annex I or Annex II to the Offer to Purchase, has
been (i) convicted in a criminal proceeding (excluding traffic violations or
similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting activities subject to, federal or state
securities laws or finding any violation of such laws.
ITEM 3. PAST CONTACTS, TRANSACTIONS OR NEGOTIATIONS WITH THE SUBJECT COMPANY.
(a)-(b) The information set forth in the "Introduction," Section 9, Section
10 and Section 11 of the Offer to Purchase is incorporated herein by
reference.
ITEM 4. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
(a)-(b) The information set forth in Section 12 of the Offer to Purchase is
incorporated herein by reference.
(c) Not applicable.
5 of 11 pages
<PAGE>
ITEM 5. PURPOSE OF THE TENDER OFFER AND PLANS OR PROPOSALS OF THE BIDDER.
(a)-(g) The information set forth in the "Introduction," Section 7 and
Section 11 of the Offer to Purchase is incorporated herein by reference.
ITEM 6. INTEREST IN SECURITIES OF THE SUBJECT COMPANY.
(a)-(b) The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
ITEM 7. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH RESPECT
TO THE SUBJECT COMPANY'S SECURITIES.
The information set forth in Section 9, Section 10 and Section 11 of the
Offer to Purchase is incorporated herein by reference.
ITEM 8. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The information set forth in Section 16 of the Offer to Purchase is
incorporated herein by reference.
ITEM 9. FINANCIAL STATEMENTS OF CERTAIN BIDDERS.
The information set forth in Section 9 of the Offer to Purchase is
incorporated herein by reference.
ITEM 10. ADDITIONAL INFORMATION.
(a) The information set forth in Section 11 of the Offer to Purchase is
incorporated herein by reference.
(b)-(c) The information set forth in Section 15 and Section 17 of the Offer
to Purchase is incorporated herein by reference.
(d) The information set forth in Section 7 of the Offer to Purchase is
incorporated herein by reference.
(e) None.
(f) The information set forth in the Offer to Purchase, the Letter of
Transmittal and the Agreement and Plan of Merger, dated September 30, 1998, by
and among the Company, Parent and Purchaser, to the extent not otherwise
incorporated herein by reference, is incorporated herein by reference.
ITEM 11. MATERIAL TO BE FILED AS EXHIBITS.
The following Exhibits are filed herewith:
(a)(1) Offer to Purchase, dated October 7, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees.
(a)(5) Letter from Brokers, Dealers, Commercial Banks, Trust Companies and
Other Nominees to their Clients.
(a)(6) Guidelines for Certification of Taxpayer Identification Number on
Substitute Form W-9.
(a)(7) Press Release issued for publication in the United States on October
1, 1998.
6 of 11 pages
<PAGE>
(a)(8) Press release issued for publication in the United Kingdom on October
1, 1998.
(a)(9) Consolidated Financial Statements of Logica plc for the years ended
June 30, 1998, 1997 and 1996.
(a)(10) Summary Advertisement published on October 7, 1998.
(b) None.
(c)(1) Agreement and Plan of Merger, dated as of September 30, 1998, by and
among the Company, Parent and Purchaser.
(c)(2) Confidentiality Agreement, dated as of August 27, 1998, by and
between the Company and Parent.
(c)(3) Amendment to Confidentiality Agreement, dated as of September 22,
1998, by and between the Company and Parent.
(c)(4) Tender Agreement, dated as of September 30, 1998, by and among the
Company, Parent, Purchaser, Dennis Yablonsky and Veronica Yablonsky.
(c)(5) Tender Agreement, dated as of September 30, 1998, by and among the
Company, Parent, Purchaser and John W. Manzetti.
(c)(6) Tender Agreement, dated as of September 30, 1998, by and among the
Company, Parent, Purchaser, Raj Reddy, Anuradha Reddy, Anuradha
Reddy, as trustee for the Geetha Reddy Trust, and Anuradha Reddy, as
trustee for the Shyamala Reddy Trust.
(c)(7) Tender Agreement, dated as of September 30, 1998, by and among the
Company, Parent, Purchaser, Jaime Carbonell, Jaime Carbonell, as
custodian for Diana Carbonell, Jamie Carbonell, as custodian for
Isabelle Carbonell, Jaime Carbonell, as custodian for Ruben
Carbonell, Jaime Carbonell, as custodian for Rachel Carbonell, Jamie
Carbonell, as trustee for Diana Carbonell, Jaime Carbonell, as
trustee for Isabelle Carbonell, Jaime Carbonell, as trustee for Ruben
Carbonell, and Jaime Carbonell, as trustee for Rachel Carbonell.
(c)(8) Tender Agreement, dated as of September 30, 1998, by and among the
Company, Parent, Purchaser, Mark S. Fox, Tressa S. Fox, and Tressa S.
Fox, as trustee for Jacob Fox.
(c)(9) Employment Agreement, dated as of September 30, 1998, by and between
Parent and Dennis Yablonsky.
(c)(10) Employment Agreement, dated as of September 30, 1998, by and between
Parent and John Manzetti.
(c)(11) Employment Agreement, dated as of September 30, 1998, by and between
Parent and Bruce Russell.
(c)(12) Employment Agreement, dated as of September 30, 1998, by and between
Parent and Raymond Kalustyan.
(d) None.
(e) Not applicable.
(f) None.
7 of 11 pages
<PAGE>
SIGNATURES
After due inquiry and to the best knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
Date: October 7, 1998
LOGICA PLC
/s/ Mario Anid
By: _________________________________
Name: Mario Anid
Title: Corporate Development
Director
8 of 11 pages
<PAGE>
SIGNATURES
After due inquiry and to the best knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
Date: October 7, 1998
LOGICA INC.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title: President and Chief
Executive Officer
9 of 11 pages
<PAGE>
SIGNATURES
After due inquiry and to the best knowledge and belief, I certify that the
information set forth in this statement is true, complete and correct.
Date: October 7, 1998
LOGICA ACQUISITION CORP.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title: President
10 of 11 pages
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
EXHIBIT NO. EXHIBIT PAGE
----------- ------- ------------
<C> <S> <C>
(a)(1) Offer to Purchase, dated October 7, 1998.
(a)(2) Letter of Transmittal.
(a)(3) Notice of Guaranteed Delivery.
(a)(4) Letter to Brokers, Dealers, Commercial Banks, Trust
Companies and Other Nominees.
(a)(5) Letter from Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees to their
Clients.
(a)(6) Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9.
(a)(7) Press Release issued for publication in the United
States on October 1, 1998.
(a)(8) Press Release issued for publication in the United
Kingdom on October 1, 1998.
(a)(9) Consolidated Financial Statements of Logica plc for
the years ended June 30, 1998, 1997 and 1996.
(a)(10) Summary Advertisement published on October 7, 1998.
(b) None.
(c)(1) Agreement and Plan of Merger, dated as of September
30, 1998, by and among the Company, Parent and
Purchaser.
(c)(2) Confidentiality Agreement, dated as of August 27,
1998, by and between the Company and Parent.
(c)(3) Amendment to Confidentiality Agreement, dated as of
September 22, 1998, by and between the Company and
Parent.
(c)(4) Tender Agreement, dated as of September 30, 1998,
by and among the Company, Parent, Purchaser, Dennis
Yablonsky and Veronica Yablonsky.
(c)(5) Tender Agreement, dated as of September 30, 1998,
by and among the Company, Parent, Purchaser and
John W. Manzetti.
(c)(6) Tender Agreement, dated as of September 30, 1998,
by and among the Company, Parent, Purchaser, Raj
Reddy, Anuradha Reddy, Anuradha Reddy, as trustee
for the Geetha Reddy Trust, and Anuradha Reddy, as
trustee for the Shyamala Reddy Trust.
(c)(7) Tender Agreement, dated as of September 30, 1998,
by and among the Company, Parent, Purchaser, Jaime
Carbonell, Jaime Carbonell, as custodian for Diana
Carbonell, Jamie Carbonell, as custodian for
Isabelle Carbonell, Jaime Carbonell, as custodian
for Ruben Carbonell, Jaime Carbonell, as custodian
for Rachel Carbonell, Jamie Carbonell, as trustee
for Diana Carbonell, Jaime Carbonell, as trustee
for Isabelle Carbonell, Jaime Carbonell, as trustee
for Ruben Carbonell, and Jaime Carbonell, as
trustee for Rachel Carbonell.
(c)(8) Tender Agreement, dated as of September 30, 1998,
by and among the Company, Parent, Purchaser, Mark
S. Fox, Tressa S. Fox, and Tressa S. Fox, as
trustee for Jacob Fox.
(c)(9) Employment Agreement, dated as of September 30,
1998, by and between Parent and Dennis Yablonsky.
(c)(10) Employment Agreement, dated as of September 30,
1998, by and between Parent and John Manzetti.
(c)(11) Employment Agreement, dated as of September 30,
1998, by and between Parent and Bruce Russell.
(c)(12) Employment Agreement, dated as of September 30,
1998, by and between Parent and Raymond Kalustyan.
(d) None.
(e) Not applicable.
(f) None.
</TABLE>
11 of 11 pages
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OUTSTANDING SHARES OF COMMON STOCK
OF
CARNEGIE GROUP, INC.
BY
LOGICA ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY
OF
LOGICA INC.,
A WHOLLY OWNED SUBSIDIARY
OF
LOGICA PLC
AT
$5.00 PER SHARE NET
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, NOVEMBER 4, 1998, UNLESS THE OFFER IS EXTENDED.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which would represent at least a majority of all issued and outstanding
Shares on a fully diluted basis. See Introduction and Section 13.
THE BOARD OF DIRECTORS OF CARNEGIE GROUP, INC., BY THE UNANIMOUS VOTE OF ALL
DIRECTORS, HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF CARNEGIE GROUP, INC. AND ITS STOCKHOLDERS, HAS APPROVED THE
OFFER, THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT THE HOLDERS OF
SHARES OF CARNEGIE GROUP, INC. ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
---------------
IMPORTANT
Any holder of Shares desiring to tender all or any portion of such Shares
should either (i) complete and sign the enclosed Letter of Transmittal (or
facsimile thereof) in accordance with the instructions in the Letter of
Transmittal and mail or deliver it together with the certificates representing
tendered Shares, and any other required documents, to the Depositary or tender
such Shares pursuant to the procedures for book-entry transfer set forth in
Section 3 or (ii) request such holder's broker, dealer, commercial bank, trust
company or other nominee to effect the transaction for such holder. Any holder
whose Shares are registered in the name of a broker, dealer, commercial bank,
trust company or other nominee must contact such broker, dealer, commercial
bank, trust company or other nominee if such holder desires to tender such
Shares.
A holder who desires to tender Shares and whose certificates representing
such Shares are not immediately available, or who cannot comply with the
procedures for book-entry transfer described in this Offer to Purchase on a
timely basis, may tender such Shares by following the procedures for
guaranteed delivery set forth in Section 3.
Questions and requests for assistance or for additional copies of this Offer
to Purchase, the Letter of Transmittal or other tender offer materials may be
directed to the Dealer Manager or to the Information Agent at their respective
addresses and telephone numbers set forth on the back cover of this Offer to
Purchase. Holders of Shares may also contact brokers, dealers, commercial
banks or trust companies for assistance concerning the Offer.
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
October 7, 1998
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
INTRODUCTION............................................................. 1
1. Terms of the Offer................................................. 2
2. Acceptance for Payment and Payment for Shares...................... 4
3. Procedure for Accepting the Offer and Tendering Shares............. 5
4. Withdrawal Rights.................................................. 8
5. Certain Federal Income Tax Consequences............................ 8
6. Price Range of the Shares; Dividends............................... 9
7. Effect of the Offer on the Market for the Shares; Stock Quotation;
Exchange Act Registration; Margin Regulations..................... 10
8. Certain Information Concerning the Company......................... 11
9. Certain Information Concerning Purchaser, Parent and Logica plc.... 13
10. Background of the Offer; Contacts with the Company................. 17
Purpose of the Offer and Merger; The Merger Agreement and the
11. Tender Agreements.................................................. 19
12. Source and Amount of Funds......................................... 31
13. Certain Conditions of the Offer.................................... 31
14. Dividends and Distributions........................................ 33
15. Certain Legal Matters.............................................. 33
16. Fees and Expenses.................................................. 35
17. Miscellaneous...................................................... 35
Annex I--Information with Respect to Directors
and Executive Officers of Purchaser and Parent.................... I-1
Annex II--Information with Respect to Directors
and Executive Officers of Logica plc.............................. II-1
</TABLE>
i
<PAGE>
To the Holders of Common Stock of Carnegie Group, Inc.:
INTRODUCTION
Logica Acquisition Corp., a Delaware corporation ("Purchaser") and a wholly
owned subsidiary of Logica Inc., a Delaware corporation ("Parent"), hereby
offers to purchase all outstanding shares of common stock, par value $.01 per
share (the "Shares"), of Carnegie Group, Inc., a Delaware corporation (the
"Company"), at a purchase price of not less than $5.00 per Share, net to the
seller in cash without interest (the "Offer Price"), upon the terms and
subject to the conditions set forth in this Offer to Purchase and in the
related Letter of Transmittal (which together constitute the "Offer").
Parent has formed Purchaser in connection with the Offer and the Merger
Agreement (as such term is hereinafter defined). Parent is a wholly owned
subsidiary of Logica plc, a public limited company organized under the laws of
England ("Logica plc" and, together with its subsidiaries, "Logica"). For
information concerning Purchaser, Parent and Logica plc, see Section 9.
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of September 30, 1998 (the "Merger Agreement"), by and among the Company,
Parent and Purchaser. Pursuant to the Merger Agreement, and subject to the
terms and conditions thereof, Purchaser will be merged with and into the
Company (the "Merger"). At the effective time of the Merger (the "Effective
Time"), (i) each Share not beneficially owned by Parent, Purchaser or any
other direct or indirect subsidiary of Parent immediately prior thereto (other
than those Shares held in the treasury of the Company and Shares held by
holders who perfect any appraisal rights that they may have under Delaware
law) will be canceled and retired and be converted into the right to receive
in cash an amount per Share equal to the highest price per Share paid by
Purchaser pursuant to the Offer, without interest thereon (the "Merger
Consideration"), and (ii) the Company will become a wholly owned subsidiary of
Parent. For a discussion of the terms of the Merger Agreement, see Section 11.
THE BOARD OF DIRECTORS OF THE COMPANY (THE "COMPANY BOARD"), BY THE
UNANIMOUS VOTE OF ALL DIRECTORS, HAS DETERMINED THAT THE OFFER AND THE MERGER
ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS STOCKHOLDERS, HAS
APPROVED THE OFFER, THE MERGER AGREEMENT AND THE MERGER, AND RECOMMENDS THAT
THE COMPANY'S HOLDERS OF SHARES ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
THE COMPANY BOARD HAS RECEIVED THE OPINIONS OF UPDATA CAPITAL, INC.
("UPDATA") AND PARKER/HUNTER INCORPORATED ("PARKER/HUNTER"), THE COMPANY'S
FINANCIAL ADVISORS, THAT THE CASH CONSIDERATION TO BE RECEIVED BY THE
STOCKHOLDERS OF THE COMPANY PURSUANT TO THE OFFER AND THE MERGER IS FAIR TO
SUCH STOCKHOLDERS FROM A FINANCIAL POINT OF VIEW. COPIES OF THE OPINIONS OF
UPDATA AND PARKER/HUNTER ARE CONTAINED IN THE COMPANY'S
SOLICITATION/RECOMMENDATION STATEMENT ON SCHEDULE 14D-9 (THE "SCHEDULE 14D-
9"), WHICH IS BEING MAILED TO HOLDERS OF SHARES CONTEMPORANEOUSLY HEREWITH,
AND HOLDERS OF SHARES ARE URGED TO READ THE OPINIONS IN THEIR ENTIRETY FOR A
DESCRIPTION OF THE ASSUMPTIONS MADE, FACTORS CONSIDERED AND PROCEDURES
FOLLOWED BY UPDATA AND PARKER/HUNTER.
THE OFFER IS CONDITIONED UPON, AMONG OTHER THINGS, THERE BEING VALIDLY
TENDERED AND NOT WITHDRAWN PRIOR TO THE EXPIRATION OF THE OFFER THAT NUMBER OF
SHARES WHICH WOULD REPRESENT AT LEAST A MAJORITY OF ALL OUTSTANDING SHARES ON
A FULLY DILUTED BASIS (THE "MINIMUM SHARE CONDITION"). SEE SECTION 13 FOR
OTHER CONDITIONS OF THE OFFER. THE OFFER WILL EXPIRE AT 12:00 MIDNIGHT, NEW
YORK CITY TIME, ON WEDNESDAY, NOVEMBER 4, 1998, UNLESS THE OFFER IS EXTENDED.
The Company has represented to Parent and Purchaser that (i) as of October
1, 1998, there were 6,556,424 Shares issued and outstanding, and, since
October 1, 1998, no additional Shares have been issued other than pursuant to
the exercise of Options outstanding on October 1, 1998, and (ii) as of the
date hereof, there are 1,563,876 Shares issuable upon the exercise of
outstanding stock options granted pursuant to the Company's employee stock
option plans (the "Options").
1
<PAGE>
Pursuant to the Merger Agreement, immediately prior to the Effective Time,
the Company will take all necessary actions so that each Option which is
outstanding (whether or not exercisable) and which has not been exercised or
canceled prior thereto will be surrendered to Parent and will be forthwith
canceled. Upon cancellation, the holder of an Option will be entitled to
receive in settlement thereof a payment from the Company equal to the product
of (i) the total number of Shares subject to such Option and (ii) the excess,
if any, of the Merger Consideration over the exercise price per Share subject
to such Option. See Section 11.
Based on the foregoing, Purchaser believes that approximately 4,060,151
Shares must be validly tendered and not withdrawn prior to the expiration of
the Offer in order for the Minimum Share Condition to be satisfied.
Promptly after the purchase of Shares pursuant to the Offer and if required
by Delaware law, the Company has agreed to convene a meeting of its
stockholders to consider and vote upon the approval of the Merger. At such
meeting, Purchaser and Parent have agreed that all of the Shares then
beneficially owned by Parent, Purchaser or any other direct or indirect
subsidiary of Parent will be voted in favor of the Merger. Under the Delaware
General Corporation Law (the "DGCL"), the affirmative vote of the holders of a
majority of the Shares is required to approve the Merger. If the Minimum Share
Condition is satisfied, Purchaser will own a majority of the Shares and,
accordingly, will have sufficient voting power to effect the approval of the
Merger by holders of Shares without the affirmative vote of any other such
holder.
At the Company's request, Purchaser is forwarding with the Offer the
Company's letter to holders of Shares (the "Letter to Holders") and its
Schedule 14D-9 filed by the Company pursuant to the Securities Exchange Act of
1934, as amended (the "Exchange Act"), each of which includes information
concerning the position of the Company Board with respect to the Offer and the
Merger. The Schedule 14D-9 also contains certain information pursuant to
Section 14(f) of the Exchange Act and Rule 14f-1 thereunder (the "Rule 14f-1
Information"), which is being furnished in connection with the possible
designation by Parent, in accordance with the Merger Agreement, of persons to
be elected or appointed to the Company Board. Neither Parent nor Purchaser
assumes any responsibility for the accuracy or completeness of the Letter to
Holders, the Schedule 14D-9 or the Rule 14f-1 Information (other than
information provided by Parent or Purchaser). See Section 11.
Tendering holders will not be obligated to pay brokerage commissions or,
except as set forth in Instruction 7 of the Letter of Transmittal, transfer
taxes on the purchase of Shares by Purchaser pursuant to the Offer. However,
certain tendering holders or other payees who fail to complete and sign the
Substitute Form W-9 that is included in the Letter of Transmittal may be
subject to a required backup federal income tax withholding of 31% of the
gross proceeds payable to such holders or other payees pursuant to the Offer.
See Section 3. Purchaser will pay all charges and expenses of ChaseMellon
Shareholder Services, L.L.C. (the "Depositary"), Donaldson, Lufkin & Jenrette
Securities Corporation, as Dealer Manager (in such capacity, the "Dealer
Manager"), and D.F. King & Co., Inc. (the "Information Agent") incurred in
connection with the Offer. See Section 16.
The directors and executive officers of the Company who beneficially own
Shares have agreed pursuant to Tender Agreements dated September 30, 1998 to
tender all such Shares pursuant to the Offer. As of the date hereof, such
directors and executive officers beneficially owned an aggregate of 1,200,976
Shares, representing approximately 18.3% of the outstanding Shares.
THIS OFFER TO PURCHASE AND THE RELATED LETTER OF TRANSMITTAL CONTAIN
IMPORTANT INFORMATION WHICH HOLDERS OF SHARES ARE URGED TO READ CAREFULLY
BEFORE MAKING ANY DECISION WITH RESPECT TO THE OFFER.
1. TERMS OF THE OFFER. Upon the terms and subject to the conditions of the
Offer (including, if the Offer is extended or amended, the terms and
conditions of any extension or amendment), Purchaser will accept for payment
and thereby purchase, all Shares validly tendered prior to the Expiration Date
and not properly withdrawn as permitted by Section 4. The term "Expiration
Date" shall mean 12:00 midnight, New York City
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time, on Wednesday, November 4, 1998, unless and until Purchaser, in its sole
discretion (but subject to the terms of the Merger Agreement), shall have
extended the period of time for which the Offer is open, in which event the
term "Expiration Date" shall mean the latest time and date at which the Offer,
as so extended by Purchaser, shall expire. For purposes of this Offer, the
term "business day" shall have the meaning set forth in Rule 14d-1(c)(6)
promulgated under the Exchange Act.
THE OFFER IS CONDITIONED UPON SATISFACTION OF THE MINIMUM SHARE CONDITION
AND THE SATISFACTION OF THE OTHER CONDITIONS SET FORTH IN SECTION 13.
Purchaser expressly reserves the right, in its sole discretion, at any time
or from time to time, to modify the terms and conditions of the Offer in
accordance with the terms of the Merger Agreement by giving oral or written
notice of such modification to the Depositary. If the conditions of the Offer
are not satisfied prior to the Expiration Date, Purchaser, subject to the
terms of the Merger Agreement, may (i) decline to accept for payment, or
purchase or pay for, any of the Shares tendered and terminate the Offer, (ii)
extend the Offer and retain the Shares (subject to withdrawal rights as set
forth in Section 4) which have been tendered during the period for which the
Offer is extended, or (iii) waive any one or more of the conditions of or
otherwise amend the Offer. There can be no assurance that Purchaser will
exercise its right to extend the Offer or waive any of the conditions of the
Offer.
Subject to the applicable regulations of the Securities and Exchange
Commission (the "Commission"), Purchaser also expressly reserves the right, in
its sole discretion (but subject to the terms and conditions of the Merger
Agreement), at any time or from time to time, to (i) delay acceptance for
payment of or, regardless of whether such Shares were theretofore accepted for
payment, payment for any Shares pending receipt of any regulatory or
governmental approvals specified in Section 15 or in order to comply, in whole
or in part, with any applicable law, (ii) terminate the Offer and not accept
for payment or pay for any Shares, upon the occurrence of any of the
conditions specified in Section 13, and (iii) waive any condition or otherwise
amend the Offer in any respect, in each case by giving oral or written notice
of such delay, termination, waiver or amendment to the Depositary. As set
forth in the Merger Agreement, Purchaser has agreed that it will not amend the
Offer to decrease the Offer Price, to change the consideration offered to
holders of Shares into a form other than cash, to change (other than to waive)
the Minimum Share Condition or the other conditions set forth in the Merger
Agreement, or to reduce the maximum number of Shares to be purchased in the
Offer. See Section 13.
Purchaser acknowledges that (i) Rule 14e-1(c) under the Exchange Act
requires Purchaser to pay the consideration offered or return the Shares
tendered promptly after the termination or withdrawal of the Offer, and (ii)
Purchaser may not delay acceptance for payment of, or payment for (except as
provided in clause (i) of the preceding paragraph), any Shares upon the
occurrence of any of the conditions specified in Section 13 without extending
the period of time during which the Offer is open.
Purchaser expressly reserves the right, at any time or from time to time, in
its sole discretion (but subject to the terms and conditions of the Merger
Agreement) to extend for any reason the period during which the Offer is open,
including by reason of the occurrence of any of the conditions specified in
Section 13, by giving oral or written notice of such extension to the
Depositary. During any extension of the Offer, all Shares previously tendered
and not withdrawn will remain subject to the Offer and subject to the right of
the tendering holder to withdraw such holder's Shares. See Section 4.
Any extension, delay in acceptance for payment or payment, termination,
waiver or amendment will be followed as promptly as practicable by public
announcement thereof, and such announcement in the case of an extension will
be issued no later than 9:00 a.m., New York City time, on the next business
day after the previously scheduled Expiration Date. Without limiting the
manner in which Purchaser may choose to make any public announcement, subject
to applicable law (including Rules 14d-4(c) and 14d-6(d) under the Exchange
Act, which require that material changes be promptly disseminated to holders
of Shares), Purchaser will have no obligation to publish, advertise or
otherwise communicate any such public announcement other than by issuing a
release to the Dow Jones News Service.
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Subject to the terms and conditions of the Merger Agreement, if Purchaser
makes a material change in the terms of the Offer or the information
concerning the Offer, or if it waives a material condition of the Offer,
Purchaser will extend the Offer and disseminate additional tender offer
materials to the extent required by Rules 14d-4(c), 14d-6(d) and 14e-1 under
the Exchange Act. The minimum period during which an offer must remain open
following material changes in the terms of the Offer, other than a change in
price or a change in percentage of securities sought (other than increases of
not more than two percent of the outstanding Shares), will depend upon the
facts and circumstances, including the materiality of the changes. With
respect to a change in price or, subject to certain limitations, a change in
the percentage of securities sought, a minimum period of ten business days
from the date of such change is generally required to allow for adequate
dissemination to securityholders. Accordingly, subject to the terms and
conditions of the Merger Agreement, if, prior to the Expiration Date,
Purchaser increases (other than increases of not more than two percent of the
outstanding Shares) or decreases the number of Shares being sought, or
increases or decreases the consideration offered pursuant to the Offer, and,
if, at the time notice of any such increase or decrease in the number of
Shares being sought or such increase or decrease in the consideration being
offered is first published, sent or given to holders of such Shares, the Offer
is scheduled to expire at any time earlier than the period ending on the tenth
business day from and including the date that such notice is first so
published, sent or given, the Offer will be extended at least until the
expiration of such ten business-day period.
Pursuant to the Merger Agreement, the Company has agreed to furnish promptly
to Purchaser a list of names and addresses of all record holders of Shares and
a security position listing of Shares held in stock depositories, each as of a
recent date, and to promptly furnish Purchaser with such additional
information, including updated lists of shareholders, mailing labels and
security position listings, and such other assistance as Purchaser or its
agents may reasonably request. This Offer to Purchase and the related Letter
of Transmittal will be mailed by Purchaser to record holders of Shares and
will be furnished to brokers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Company's
stockholder list or, if applicable, who are listed as participants in a
clearing agency's security position listing.
2. ACCEPTANCE FOR PAYMENT AND PAYMENT FOR SHARES. Upon the terms and subject
to the conditions of the Offer (including, if the Offer is extended or
amended, the terms and conditions of any such extension or amendment),
Purchaser will accept for payment and thereby purchase, and will pay for,
Shares validly tendered prior to the Expiration Date (and not withdrawn
pursuant to Section 4) as soon as practicable after the latest of (i) the
Expiration Date, and (ii) subject to compliance with Rule 14e-1(c) under the
Exchange Act, the satisfaction or waiver of all conditions to the Offer. See
Sections 13 and 15.
In all cases, payment for Shares purchased pursuant to the Offer will be
made only after timely receipt by the Depositary of (i) certificates for such
Shares, or timely confirmation (a "Book-Entry Confirmation") of the book-entry
transfer of such Shares into the Depositary's account at The Depository Trust
Company, (the "Book-Entry Transfer Facility"), pursuant to the procedures set
forth in Section 3, (ii) a properly completed and duly executed Letter of
Transmittal (or facsimile thereof) with any required signature guarantees, or
an Agent's Message (as such term is hereinafter defined), and (iii) any other
documents required by the Letter of Transmittal. Accordingly, payment may be
made to tendering holders at different times if delivery of Shares and other
required documents occur at different times. UNDER NO CIRCUMSTANCES WILL
INTEREST ON THE PURCHASE PRICE FOR SHARES BE PAID, REGARDLESS OF ANY DELAY IN
MAKING SUCH PAYMENT.
For purposes of the Offer, Purchaser will be deemed to have accepted for
payment, and thereby purchased, Shares validly tendered prior to the
Expiration Date and not withdrawn pursuant to Section 4 if, as and when
Purchaser gives oral or written notice to the Depositary of the Purchaser's
acceptance for payment of such Shares pursuant to the Offer. Upon the terms
and subject to the conditions of the Offer, payment for Shares accepted
pursuant to the Offer will be made by deposit of the purchase price therefor
with the Depositary, which will act as agent for the tendering holders of
Shares for purposes of receiving payments from Purchaser and transmitting such
payments to the tendering holders whose Shares have been accepted for payment.
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<PAGE>
If Purchaser is delayed in its acceptance for payment or payment for Shares
or is unable to accept for payment or pay for Shares tendered pursuant to the
Offer for any reason, then, without prejudice to the Purchaser's rights under
the Offer, the Depositary may, subject to Rule 14e-1(c) promulgated under the
Exchange Act, retain tendered Shares on behalf of Purchaser, and such Shares
may not be withdrawn except to the extent tendering holders of Shares are
entitled to withdrawal rights as set forth in Section 4. Purchaser will pay
any stock transfer taxes incident to the transfer and sale to it or its order
of Shares pursuant to the Offer, except as otherwise provided in Instruction 7
to the Letter of Transmittal, as well as charges and expenses of the
Depositary.
If any tendered Shares are not accepted for payment pursuant to the terms
and conditions of the Offer for any reason, or if certificates representing
more Shares than are tendered are submitted to the Depositary, certificates
for such unpurchased or untendered Shares will be returned, without expense to
the tendering holder (or, in the case of Shares tendered by book-entry
transfer of such Shares into the Depositary's account at the Book-Entry
Transfer Facility pursuant to the procedures set forth in Section 3, such
Shares will be credited to an account maintained within such Book-Entry
Transfer Facility), as soon as practicable following the expiration,
termination or withdrawal of the Offer.
If, prior to the Expiration Date, Purchaser increases the consideration
offered to holders of Shares pursuant to the Offer, such increased
consideration will be paid to all holders whose Shares are purchased pursuant
to the Offer whether or not such Shares have been tendered prior to such
increase in consideration.
Purchaser reserves the right, in its sole discretion, to transfer or assign
to one or more of its affiliates, in whole or in part, the right to purchase
Shares tendered pursuant to the Offer. Any such transfer or assignment will
not relieve Purchaser of its obligations under the Offer and will in no way
prejudice the rights of tendering holders to receive payment for Shares
validly tendered and accepted for payment pursuant to the Offer.
3. PROCEDURE FOR ACCEPTING THE OFFER AND TENDERING SHARES.
Valid Tender of Shares. For Shares to be validly tendered pursuant to the
Offer, a properly completed and duly executed Letter of Transmittal (or
facsimile thereof), with any required signature guarantees, or, in the case of
a book-entry transfer, an Agent's Message, and any other required documents,
must be received by the Depositary at one of its addresses set forth on the
back cover of this Offer to Purchase and either (i) certificates for such
Shares must be received by the Depositary, together with the Letter of
Transmittal (or facsimile thereof), at such address, or such Shares must be
tendered pursuant to the procedures for book-entry transfer set forth below
and a Book-Entry Confirmation received by the Depositary, in each case prior
to the Expiration Date, or (ii) the guaranteed delivery procedure set forth
below must be complied with.
Book-Entry Transfer. The Depositary will establish accounts with respect to
the Shares at the Book-Entry Transfer Facility for purposes of the Offer
within two business days after the date of this Offer to Purchase. Any
financial institution that is a participant in the Book-Entry Transfer
Facility's system may make book-entry delivery of Shares by causing such Book-
Entry Transfer Facility to transfer such Shares into the Depositary's account
in accordance with such Book-Entry Transfer Facility's procedure for such
transfer. Although delivery of Shares may be effected through book-entry
transfer at the Book-Entry Transfer Facility, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or an Agent's Message, and any other required documents,
must, in any case, be transmitted to, and received by, the Depositary at one
of its addresses set forth on the back cover of this Offer to Purchase prior
to the Expiration Date, or the guaranteed delivery procedure, as described
below, must be complied with. DELIVERY OF DOCUMENTS TO THE BOOK-ENTRY TRANSFER
FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant in such Book-Entry
Transfer
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<PAGE>
Facility tendering the Shares that such participant has received and agrees to
be bound by the terms of the Letter of Transmittal and that Purchaser may
enforce such agreement against the participant.
Signature Guarantees. Signatures on all Letters of Transmittal must be
guaranteed by a firm which is a member firm of a registered national
securities exchange, a member of the National Association of Securities
Dealers, Inc. (the "NASD") or a commercial bank or trust company having an
office or correspondent in the United States (each of the foregoing being
referred to as an "Eligible Institution") which is a participant in an
approved Signature Guarantee Medallion Program, unless the Shares tendered
thereby are tendered (i) by a registered holder of such Shares who has not
completed either the box entitled "Special Payment Instructions" or the box
entitled "Special Delivery Instructions" on the Letter of Transmittal, or (ii)
for the account of an Eligible Institution. See Instruction 1 of the Letter of
Transmittal.
If a certificate for Shares is registered in the name of a person other than
the signatory of the Letter of Transmittal, or if payment is to be made, or a
certificate for Shares not accepted for payment or not tendered is to be
returned, to a person other than the registered holder, then such certificate
for Shares must be endorsed or accompanied by appropriate stock powers, in
either case signed exactly as the name or names of the registered holder or
holders appear on such certificate for Shares, with the signatures on such
certificate or stock powers guaranteed by an Eligible Institution which is a
participant in an approved Signature Guarantee Medallion Program, as provided
in the Letter of Transmittal. See Instructions 1 and 5 of the Letter of
Transmittal.
Guaranteed Delivery. If a holder of Shares desires to tender such Shares
pursuant to the Offer and such holder's certificates evidencing such Shares
are not immediately available, or if the procedure for book-entry transfer
cannot be completed on a timely basis, or such holder cannot deliver the
certificates and all other required documents to the Depositary prior to the
Expiration Date, such Shares may nevertheless be tendered if all of the
following guaranteed delivery procedures are complied with:
(i) such tender is made by or through an Eligible Institution; and
(ii) a properly completed and duly executed Notice of Guaranteed Delivery,
substantially in the form provided by Purchaser herewith, is received
by the Depositary, as provided below, prior to the Expiration Date;
and
(iii) the certificates for all physically delivered Shares in proper form
for transfer, or a confirmation of a book-entry transfer of such
Shares into the Depositary's account at the Book-Entry Transfer
Facility, as described above, together with a properly completed and
duly executed Letter of Transmittal (or facsimile thereof), any
required signature guarantees, or an Agent's Message, and any other
required documents are received by the Depositary within three
National Association of Securities Dealers, Inc. Automated Quotation
System (the "Nasdaq Stock Market") trading days after the date of
execution of such Notice of Guaranteed Delivery.
The Notice of Guaranteed Delivery may be delivered by hand or transmitted by
telegram, telex, facsimile transmission or mail to the Depositary and must
include a signature guarantee by an Eligible Institution in the form set forth
in such Notice of Guaranteed Delivery.
In all cases, payment for Shares tendered and accepted for payment pursuant
to the Offer will be made only after timely receipt by the Depositary of (i)
certificates for such Shares or of a Book-Entry Confirmation relating to such
Shares, (ii) either a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, or
an Agent's Message, and (iii) any other required documents.
THE METHOD OF DELIVERY OF CERTIFICATES FOR SHARES, THE LETTER OF TRANSMITTAL
AND ANY OTHER REQUIRED DOCUMENTS, INCLUDING DELIVERY THROUGH THE BOOK-ENTRY
TRANSFER FACILITY, IS AT THE OPTION AND SOLE RISK OF THE TENDERING HOLDER OF
SHARES, AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY RECEIVED BY
THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL WITH RETURN RECEIPT
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REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES, SUFFICIENT TIME
SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
Appointment as Proxy. BY EXECUTING A LETTER OF TRANSMITTAL OR BY CAUSING THE
TRANSMISSION OF AN AGENT'S MESSAGE AS SET FORTH ABOVE, A TENDERING HOLDER OF
SHARES IRREVOCABLY APPOINTS DESIGNEES OF PURCHASER AS HIS PROXIES, WITH FULL
POWER OF SUBSTITUTION IN THE MANNER SET FORTH IN THE LETTER OF TRANSMITTAL, TO
THE FULL EXTENT OF SUCH HOLDER'S RIGHTS WITH RESPECT TO THE SHARES TENDERED BY
SUCH HOLDER AND ACCEPTED FOR PAYMENT BY PURCHASER AND WITH RESPECT TO ANY AND
ALL OTHER SHARES OR OTHER SECURITIES ISSUED OR ISSUABLE IN RESPECT OF SUCH
SHARES ON OR AFTER THE DATE OF THE MERGER AGREEMENT. All such proxies will be
considered coupled with an interest in the tendered Shares. Such appointment
will be effective when, and only to the extent that, Purchaser accepts such
Shares for payment. Upon such appointment, all prior proxies given by such
holder (with respect to such Shares and such other Shares and securities) will
be revoked, without further action, and no subsequent proxies may be given nor
any subsequent written consent executed by such holder (and, if given or
executed, will not be deemed effective). Purchaser's designees will, with
respect to the Shares for which the appointment is effective, be empowered to
exercise all voting and other rights of such holder as they in their sole
discretion may deem proper at any annual or special meeting of holders of
Shares or any adjournment or postponement thereof, by written consent in lieu
of such meeting or otherwise. Purchaser reserves the right to require that, in
order for Shares to be validly tendered, immediately upon the acceptance for
payment of such Shares, Purchaser must be able to exercise full voting rights
with respect to such Shares.
Determination of Validity. All questions as to the form of documents and the
validity, eligibility (including time of receipt) and acceptance for payment
of any tender of Shares will be determined by Purchaser, in its sole
discretion, which determination shall be final and binding on all parties.
Purchaser reserves the absolute right to reject any and all tenders determined
by it not to be in proper form or the acceptance for payment of which may, in
the opinion of the Purchaser's counsel, be unlawful. Purchaser also reserves
the absolute right to waive or amend any of the conditions of the Offer
(subject to the terms and conditions of the Merger Agreement) or any defect or
irregularity in the tender of any Shares of any holder, whether or not similar
defects or irregularities are waived in the case of other holders of Shares.
No tender of Shares will be deemed to have been validly made until all defects
and irregularities have been cured or waived. None of Parent, Purchaser,
Logica plc, the Depositary, the Information Agent, the Dealer Manager or any
other person will be under any duty to give notification of any defects or
irregularities in tenders or shall incur any liability for failure to give any
such notification. Purchaser's interpretation of the terms and conditions of
the Offer (including the Letter of Transmittal and instructions thereto) will
be final and binding.
A tender of Shares pursuant to any one of the procedures described above
will constitute the tendering holder's acceptance of the terms and conditions
of the Offer, as well as the tendering holder's representation and warranty
that (i) such holder owns the Shares being tendered within the meaning of Rule
14e-4 promulgated under the Exchange Act, and (ii) the tender of such Shares
complies with Rule 14e-4.
The acceptance for payment of Shares by Purchaser pursuant to any of the
procedures described above will constitute a binding agreement between the
tendering holder and Purchaser upon the terms and subject to the conditions of
the Offer.
Backup Federal Tax Withholding. TO PREVENT BACKUP FEDERAL INCOME TAX
WITHHOLDING ON PAYMENTS OF CASH PURSUANT TO THE OFFER, A TENDERING HOLDER OF
SHARES MUST PROVIDE THE DEPOSITARY WITH SUCH HOLDER'S CORRECT TAXPAYER
IDENTIFICATION NUMBER ("TIN") AND CERTIFY THAT SUCH HOLDER IS NOT SUBJECT TO
BACKUP FEDERAL INCOME TAX WITHHOLDING BY COMPLETING THE SUBSTITUTE FORM W-9
INCLUDED AS PART OF THE LETTER OF TRANSMITTAL. IF A HOLDER OF SHARES DOES NOT
PROVIDE SUCH HOLDER'S CORRECT TIN OR FAILS TO PROVIDE THE CERTIFICATIONS
DESCRIBED ABOVE, THE INTERNAL REVENUE SERVICE (THE "IRS") MAY IMPOSE A PENALTY
ON SUCH HOLDER AND THE PAYMENT OF CASH TO SUCH HOLDER PURSUANT TO THE OFFER
MAY BE SUBJECT TO BACKUP WITHHOLDING OF 31%. ALL HOLDERS SURRENDERING SHARES
PURSUANT TO THE OFFER SHOULD COMPLETE AND SIGN THE MAIN SIGNATURE FORM AND THE
SUBSTITUTE FORM W-9 INCLUDED AS PART OF THE LETTER OF TRANSMITTAL TO PROVIDE
THE INFORMATION AND CERTIFICATION NECESSARY TO AVOID BACKUP WITHHOLDING
(UNLESS AN APPLICABLE EXEMPTION
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EXISTS AND IS PROVED IN A MANNER SATISFACTORY TO PURCHASER AND THE
DEPOSITARY). CERTAIN HOLDERS OF SHARES (INCLUDING, AMONG OTHERS, ALL
CORPORATIONS AND CERTAIN FOREIGN INDIVIDUALS AND ENTITIES) ARE NOT SUBJECT TO
BACKUP WITHHOLDING. SEE SECTION 5 AND INSTRUCTION 9 OF THE LETTER OF
TRANSMITTAL.
4. WITHDRAWAL RIGHTS. Except as otherwise stated in this Section 4, tenders
of Shares made pursuant to the Offer are irrevocable. Shares tendered pursuant
to the Offer may be withdrawn at any time prior to the Expiration Date and,
unless theretofore accepted for payment by Purchaser pursuant to the Offer,
may also be withdrawn at any time after December 5, 1998. If Purchaser extends
the Offer, is delayed in its acceptance for payment of Shares or is unable to
accept Shares for payment pursuant to the Offer for any reason, then, without
prejudice to the Purchaser's rights under the Offer, the Depositary may,
nevertheless, on behalf of Purchaser, retain tendered Shares, and such Shares
may not be withdrawn except to the extent that tendering holders are entitled
to, and duly exercise, withdrawal rights as described in this Section 4. Any
such delay will be by an extension of the Offer to the extent required by law.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission notice of withdrawal must be timely received by the Depositary at
one of its addresses set forth on the back cover of this Offer to Purchase.
Any such notice of withdrawal must specify the name of the person who tendered
the Shares to be withdrawn, the number of Shares to be withdrawn and the names
in which the certificates evidencing the Shares to be withdrawn are
registered, if different from that of the person who tendered such Shares. If
certificates for Shares have been delivered or otherwise identified to the
Depositary, then, prior to the physical release of such certificates, the
tendering holder must also submit the serial numbers shown on the particular
certificates representing the Shares to be withdrawn and the signature(s) on
the notice of withdrawal must be guaranteed by an Eligible Institution which
is a participant in an approved Signature Guarantee Medallion Program, except
in the case of Shares tendered for the account of the Eligible Institution. If
Shares have been tendered pursuant to the procedures for book-entry transfer
set forth in Section 3, any notice of withdrawal must also specify the name
and number of the account at the appropriate Book-Entry Transfer Facility to
be credited with the withdrawn Shares.
All questions as to the form and validity (including time of receipt) of any
notice of withdrawal will be determined by Purchaser, in its sole discretion,
which determination will be final and binding on all parties. None of Parent,
Purchaser, Logica plc, the Depositary, the Information Agent, the Dealer
Manager or any other person will be under any duty to give notification of any
defects or irregularities in any notice of withdrawal or incur any liability
for failure to give such notification.
Any Shares properly withdrawn will be deemed not to have been validly
tendered for purposes of the Offer, but may be retendered at any subsequent
time prior to the Expiration Date by again following one of the procedures
described in Section 3.
5. CERTAIN FEDERAL INCOME TAX CONSEQUENCES. The receipt of cash for Shares
pursuant to the Offer (or pursuant to the Merger) will be a taxable
transaction for federal income tax purposes and may also be a taxable
transaction under applicable state, local, foreign and other tax laws. In
general, for federal income tax purposes, a holder of Shares will recognize
gain or loss upon such exchange equal to the difference between such holder's
adjusted tax basis in the Shares sold in the Offer and the amount of cash
received in exchange therefor. Such gain or loss generally will be capital
gain or loss for federal income tax purposes if the Shares were held as
capital assets.
Under the Internal Revenue Code of 1986, as amended (the "Code"), the
maximum marginal federal income tax rate applicable to net capital gain (the
excess of net long-term capital gain over net short-term capital loss)
recognized by individuals is 20%; for corporate taxpayers, the maximum
marginal federal income tax rate applicable to net capital gain is 35%. Excess
short-term and long-term capital losses may be deducted by a noncorporate
taxpayer against ordinary income only in an amount not to exceed $3,000 in any
year; capital losses are deductible by corporations only against capital
gains.
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The foregoing discussion may not apply to Shares acquired by a holder
pursuant to an employee stock plan or otherwise as compensation, to holders
who are not citizens or residents of the United States or to other categories
of holders subject to special treatment under federal income tax laws, such as
dealers in securities, banks, insurance companies and tax-exempt entities.
A holder of Shares (other than certain exempt holders) who tenders Shares
may be subject to 31% backup federal income tax withholding unless the holder
provides such holder's TIN and certifies that such TIN is correct or properly
certifies that such holder is awaiting a TIN. A holder of Shares who does not
furnish such holder's TIN may be subject to a penalty imposed by the IRS. Each
holder should complete and sign the Substitute Form W-9 included as part of
the Letter of Transmittal to provide the information and certification
necessary to avoid backup withholding. See Section 3.
If backup withholding applies, the payor is required to withhold 31% from
payments. This is not an additional tax; the amount of the backup withholding
can be credited against the tax liability of the person subject to the backup
withholding. If backup withholding results in an overpayment of tax, a refund
can be obtained upon filing an income tax return.
THE FOREGOING SUMMARY OF CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE
OFFER IS INCLUDED FOR GENERAL INFORMATION ONLY. DUE TO THE INDIVIDUAL NATURE
OF TAX CONSEQUENCES, HOLDERS OF SHARES ARE STRONGLY URGED TO CONSULT THEIR OWN
TAX ADVISORS WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES TO THEM OF THE
OFFER AND THE MERGER, INCLUDING THE APPLICATION AND EFFECTS OF APPLICABLE
STATE, LOCAL, FOREIGN AND OTHER TAX LAWS AND OF CHANGES IN THE TAX LAWS UNDER
THE CODE.
6. PRICE RANGE OF THE SHARES; DIVIDENDS. The Shares are traded and are
reported in the Nasdaq National Market under the symbol "CGIX". The following
table sets forth, for the periods indicated, the high and low sales quotations
per Share for which such quotations were reported by the Nasdaq National
Market.
<TABLE>
<CAPTION>
PRICE
---------------
HIGH LOW
------- -------
<S> <C> <C>
YEAR ENDED DECEMBER 31, 1996
First Quarter................................................ $10 1/4 $ 6 5/8
Second Quarter............................................... 10 3/4 8 1/4
Third Quarter................................................ 8 3/4 5
Fourth Quarter............................................... 8 1/2 5 1/4
YEAR ENDED DECEMBER 31, 1997
First Quarter................................................ $ 7 3/4 $ 5 3/8
Second Quarter............................................... 7 3/4 5
Third Quarter................................................ 8 6 1/2
Fourth Quarter............................................... 8 2 13/16
YEAR ENDED DECEMBER 31, 1998
First Quarter................................................ $ 4 $ 2 3/4
Second Quarter............................................... 4 15/32 3 1/8
Third Quarter................................................ 3 3/4 1 1/2
Fourth Quarter (through October 5, 1998)..................... 4 11/16 4 1/16
</TABLE>
On September 30, 1998, the last full trading day prior to the date of the
first public announcement of the Purchaser's intention to commence the Offer
and the last full trading day prior to the commencement of the Offer, the last
reported high and low sales quotations per Share on the Nasdaq National Market
were $2 3/4 and $2 9/16, respectively. Holders of Shares are urged to obtain a
current market quotation for the Shares.
According to the Company's Annual Report on Form 10-K filed for the fiscal
year ended December 31, 1997 (the "1997 10-K"), the Company has never declared
or paid cash dividends and has no intention to pay any cash dividends in the
foreseeable future.
9
<PAGE>
7. EFFECT OF THE OFFER ON THE MARKET FOR THE SHARES; STOCK QUOTATION;
EXCHANGE ACT REGISTRATION; MARGIN REGULATIONS. Purchaser currently anticipates
that, as a result of the purchase of Shares pursuant to the Offer, the number
of Shares that might otherwise trade publicly, and the number of holders of
those Shares, will be substantially reduced. This could adversely affect the
liquidity and market value of the remaining Shares held by the public.
Stock Quotation. Depending upon the subsequent aggregate market value and
price per Share of any Shares not purchased pursuant to the Offer and the
aggregate number of outstanding Shares following consummation of the Offer,
the Shares may no longer qualify for inclusion on the Nasdaq National Market.
According to guidelines published by the NASD, the NASD requires that, to
continue to be designated for inclusion in the Nasdaq National Market, an
issuer must comply with all of the requirements under one of two maintenance
standards. Under the first maintenance standard, an issuer must have (i) at
least 750,000 publicly held shares with a market value of at least $5,000,000,
held by at least 400 shareholders of round lots, (ii) net tangible assets of
at least $4,000,000, (iii) shares with a minimum bid price of $1.00, and (iv)
at least two registered and active market makers. Under the second maintenance
standard, an issuer must have (i) at least 1,100,000 publicly held shares with
a market value of at least $15,000,000, held by at least 400 shareholders of
round lots, (ii) a market capitalization of at least $50 million or total
assets and total revenue of at least $50 million each for the most recently
completed fiscal year or two of the last three most recently completed fiscal
years, (iii) shares with a minimum bid price of $5.00, and (iv) at least four
registered and active market makers.
If, as a result of the purchase of Shares pursuant to the Offer or
otherwise, price and other quotations regarding the shares are no longer
reported by the Nasdaq National Market, the market for the Shares could be
adversely affected. The extent of the public market for the Shares and the
availability of such quotations would, however, depend upon the number of
holders of Shares and/or the aggregate market value of the Shares remaining at
such time, the interest in maintaining a market in the Shares on the part of
securities firms, the possible termination of registration of the Shares under
the Exchange Act as described below, and other factors. Neither Parent,
Purchaser nor Logica plc can predict whether the reduction in the number of
Shares that might otherwise trade publicly would have an adverse or beneficial
effect on the market price for or the marketability of the Shares or whether
it would cause future market prices to be greater or less, on a per share
basis, than the Merger Consideration.
Exchange Act Registration. The Shares are currently registered under the
Exchange Act. Such registration may be terminated upon application by the
Company to the Commission at any time at which the Shares are not listed on a
national securities exchange or there are fewer than 300 holders of record of
the Shares. The termination of the registration of the Shares under the
Exchange Act would substantially reduce the information required to be
furnished by the Company to holders of Shares and to the Commission and would
make certain provisions of the Exchange Act, such as the requirement of
furnishing a proxy statement in connection with meetings of holders of Shares,
the short-swing profit recovery provisions of Section 16(b) and the
requirements of Rule 13e-3 with respect to "going private" transactions, no
longer applicable with respect to the Shares or the Company, as the case may
be. Furthermore, the ability of "affiliates" of the Company and persons
holding "restricted securities" of the Company to dispose of such securities
pursuant to Rule 144 or Rule 144A promulgated under the Securities Act of
1933, as amended (the "Securities Act"), may be impaired or even eliminated.
If registration of the Shares under the Exchange Act were terminated, the
Shares would no longer be eligible for reporting on the Nasdaq Stock Market or
for continued inclusion on the Federal Reserve Board's (as such term is
hereinafter defined) list of margin securities. Parent, Purchaser and Logica
plc intend to seek to cause the Company to terminate registration of the
Shares under the Exchange Act as soon after consummation of the Offer as the
requirements for such termination of registration are met.
Margin Regulations. The Shares are currently "margin securities," as such
term is defined under the rules of the Board of Governors of the Federal
Reserve System (the "Federal Reserve Board"), which has the effect, among
other things, of allowing brokers to extend credit on the collateral of such
Shares. Depending upon factors similar to those described above regarding
market quotations, it is possible that the Shares might no longer constitute
"margin securities" for purposes of the Federal Reserve Board's margin
regulations and, therefore,
10
<PAGE>
might become ineligible as collateral for margin loans made by brokers. In
addition, if registration of the Shares under the Exchange Act were
terminated, the Shares would no longer constitute "margin securities."
8. CERTAIN INFORMATION CONCERNING THE COMPANY. Except as otherwise set forth
herein, the information concerning the Company contained in this Offer to
Purchase, including financial information, has been taken from or based upon
publicly available documents and records on file with the Commission and other
publicly available information and is qualified in its entirety by reference
thereto. Although neither Parent, Purchaser nor Logica plc has any knowledge
that would indicate that any statements contained herein based on such
documents and records are untrue, each of Parent, Purchaser and Logica plc
disclaims any and all responsibility for the accuracy or completeness of such
information or for any failure by the Company to disclose events that may have
occurred and may affect the significance or accuracy of any such information
but which are unknown to Parent, Purchaser or Logica plc as of the date of
this Offer to Purchase.
The Company is a Delaware corporation with its principal executive offices
located at Five PPG Place, Pittsburgh, PA 15222. According to the Company's
1997 10-K, the Company provides business and technical consulting,
client/server and Internet-based custom software development, third-party
package implementation and systems integration services with a focus on two
business areas in the information technology professional services
marketplace: customer interaction and logistics, planning and scheduling.
Available Information. The Company is subject to the informational filing
requirements of the Exchange Act and, in accordance therewith, is obligated to
file periodic reports, proxy statements and other information with the
Commission relating to its business, financial condition and other matters.
Certain information as of particular dates concerning the Company's directors
and officers, their compensation, stock options granted to them, the principal
holders of the Company's securities and any material interest of such persons
in transactions with the Company is required to be disclosed in proxy
statements distributed to holders of Shares and filed with the Commission.
Such reports, proxy statements and other information should be available for
inspection at the Public Reference Facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, and should also be available
for inspection at the Commission's regional offices located at 500 West
Madison Street, Suite 1400, Chicago, IL 60661 and 7 World Trade Center, 13th
Floor, New York, NY 10048. Copies of such materials should be obtainable by
mail, upon payment of the Commission's customary charges, by writing to the
Commission's principal office at 450 Fifth Street, N.W., Washington, D.C.
20549. The Commission maintains a Web site that contains reports, proxy and
information statements and other materials that are filed through the
Commission's Electronic Data Gathering, Analysis and Retrieval (EDGAR) system.
This Web site can be accessed at http://www.sec.gov. Such materials should
also be available for inspection at the offices of Nasdaq Operations, 1735 K
Street, N.W., Washington, D.C. 20006.
Selected Summary Financial Information. Set forth below is certain selected
historical consolidated financial information relating to the Company and its
subsidiaries, which has been excerpted or derived from information contained
in the 1997 10-K and the Company's Quarterly Reports on Form 10-Q for the six
month periods ended June 30, 1998 and June 30, 1997, as filed by the Company
with the Commission. More comprehensive financial information is included in
such reports and other documents filed by the Company with the Commission. The
financial information set forth below is qualified in its entirety by
reference to such reports and other documents and all the financial statements
and related notes contained therein.
11
<PAGE>
CARNEGIE GROUP, INC. AND SUBSIDIARIES
SELECTED SUMMARY CONSOLIDATED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
SIX MONTHS FISCAL YEAR
ENDED JUNE 30, ENDED DECEMBER 31,
------------------------ -----------------------------------
1998 1997 1997 1996 1995
----------- ----------- ----------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT
INFORMATION
Total Revenues........ $16,160,150 $14,989,925 $29,406,261 $28,409,048 $25,650,308
Total Costs and
Expenses............. 18,229,987 13,818,288 29,954,868 26,108,632 22,803,188
Income (loss) before
income taxes......... (1,786,901) 1,510,058 181,959 2,927,943 2,849,103
Net income (loss)..... (2,060,379) 909,756 109,592 3,360,156 4,676,029
Basic earnings (loss)
per share............ (0.32) 0.14 0.02 0.54 0.99
BALANCE SHEET (AT END OF
PERIOD)
Working Capital....... $13,711,567 $20,690,884 $18,794,981 $19,793,418 $16,139,276
Total Assets.......... 27,411,668 30,438,785 29,590,804 28,489,255 24,988,635
Total Liabilities..... 5,455,313 5,732,135 5,520,724 4,850,887 5,259,444
Stockholders' Equity.. 21,956,355 24,706,650 24,070,080 23,638,368 19,729,191
</TABLE>
Financial Projections. In the course of the discussions between Logica and
the Company that led to the execution of the Merger Agreement, the Company
provided Logica with certain information which Logica believes is not publicly
available. Such information included projections of the Company's fiscal 1998
and fiscal 1999 operating performance. The Company does not as a matter of
course make public either estimates of its annual results prior to the
completion of its audit or projections as to future performance or earnings,
and such estimated and projected information set forth below are included in
this Offer to Purchase only because the information was provided to Logica.
CARNEGIE GROUP, INC. AND SUBSIDIARIES
SELECTED SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDING
-----------------------------------
DECEMBER 31, 1998 DECEMBER 31, 1999
----------------- -----------------
(ESTIMATED) (ESTIMATED)
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
Total Revenues.............................. $33,560 $40,000
Total Costs and Expenses.................... 32,110 35,850
Income (loss) before income taxes........... (452) 4,710
Net income (loss)........................... (1,304) 2,738
Basic earnings (loss) per share............. (0.19) 0.37
</TABLE>
The Company's 1998 and 1999 projections referred to in the table above (the
"1998 Projections" and "1999 Projections," respectively) were developed by the
Company's management and were predicated on management's assumptions with
respect to certain macroeconomic conditions and operating expenses for fiscal
1998 and fiscal 1999, without giving effect to the Offer, the Merger or to any
action to be taken by Logica or the Company, as the surviving corporation of
the Merger, after the Effective Time. For purposes of calculating earnings per
Share shown in the table above for fiscal 1998 and fiscal 1999, the Company
assumed that there were outstanding 6,909,000 and 7,400,000 Shares,
respectively.
The 1998 Projections and 1999 Projections were prepared by the Company's
management in the ordinary course of the Company's quarterly forecasting
process. The Company informed Logica that the 1998 Projections take into
account revenue backlog at June 30, 1998 and assume a normal rate of
conversion of the Company's current pipeline opportunities to deliver revenue
for the balance of the year. The 1998 Projections also assume the continuation
of the Company's business with existing key customers at similar levels.
12
<PAGE>
The Company informed Logica that the 1999 Projections assume: (i) a revenue
growth rate of 20% over fiscal 1998 based on the continued expansion of
business with existing customers, the acquisition by the Company of accounts
with new customers, an increase in business from the Company's strategic
alliance program and inflationary increases in billing rates, (ii) unchanged
overhead costs, with the exception of sales and marketing costs, which were
assumed to generally rise in line with the increase in revenue, (iii) no
significant changes in the level of research and development or capital
expenditures, and (iv) the surplus facilities in Pittsburgh would be subleased
by the end of fiscal 1998.
The foregoing information was not prepared with a view toward complying with
published guidelines of the Commission regarding projections or forecasts or
with the American Institute of Certified Public Accountants Guide for
Prospective Financial Statements. While presented with numerical specificity,
the projections necessarily reflect numerous assumptions (not all of which
were stated in the projections and not all of which were provided to Parent),
including assumptions with respect to industry performance, general business
and economic conditions and the availability and cost of capital, many of
which are inherently uncertain and/or beyond the Company's control.
Accordingly, the foregoing projections are not necessarily indicative of
future performance of the Company, which may be significantly more favorable
or less favorable than as set forth above. Although the projections were one
of many factors considered, they were not material to the decision of Logica
plc, Parent and Purchaser to proceed with the Offer. The inclusion of this
information should not be regarded as an indication that Logica plc, Parent,
Purchaser, Donaldson, Lufkin & Jenrette Securities Corporation, the financial
advisor to Parent (in such capacity, "DLJ"), or anyone who received the
information considered it a reliable predictor of future events, and this
information should not be relied on as such. Because the foregoing projections
are inherently subject to uncertainty, none of Parent, Purchaser, Logica plc,
DLJ, the Company or anyone to whom the information was provided assumes any
responsibility for the validity, reasonableness, accuracy or reliability of
such information, and the Company has made no representations to Parent,
Purchaser or Logica plc regarding any such information.
9. CERTAIN INFORMATION CONCERNING PURCHASER, PARENT AND LOGICA PLC. Founded
in the United Kingdom in 1969, Logica plc is a leading international computer
consultancy, systems integration and software company. The mission of Logica
plc and its subsidiaries, including Parent, is to help leading organizations
worldwide achieve their business objectives through the use of information
technology by providing an all-embracing service from consultancy through
systems development, design and integration to applications management,
support and end user training. Logica plc provides information technology
services concentrating on (a) the marketing, design, production, integration
and maintenance of custom built software and associated hardware systems; (b)
consultancy, applications management and project management in the field of
information technology; and (c) the design, development, implementation and
marketing of software products and the re-usable elements of applications
software called systems kernels. Logica's customers are global organizations
who view information technology as a mission-critical element of their own
business and key to their success and market differentiation. With a workforce
of approximately 6,500 employees from offices in 23 countries worldwide,
Logica's customer base covers a wide range of market sectors including
finance, telecommunications, energy and utilities, industry, civil government,
defense, transport and space.
None of Logica plc, Parent or Purchaser is subject to the information filing
requirements of the Exchange Act, and, accordingly, none of Logica plc, Parent
or Purchaser files reports or other information with the Commission relating
to its business, financial condition or other matters. Set forth below is
certain selected consolidated financial information relating to Logica for the
fiscal years ended June 30, 1998, 1997 and 1996. The selected consolidated
financial information is denominated in pounds sterling and prepared in
accordance with generally accepted accounting principles in the United Kingdom
("UK GAAP"). UK GAAP differs in certain significant respects from generally
accepted accounting principles in the United States ("US GAAP"). Immediately
following the summary consolidated financial information of Logica plc and its
subsidiaries set forth below is a brief summary of certain differences between
UK GAAP and US GAAP. Logica has not examined whether adjustments necessary to
conform its Financial Statements to US GAAP would be material.
13
<PAGE>
The financial statements of Logica for the fiscal years ended June 30, 1998,
1997 and 1996 (the "Financial Statements") have been filed with the Commission
as Exhibit (a)(9) to the Schedule 14D-1 and are incorporated herein by
reference. The Financial Statements may be inspected at the Commission's
public reference facilities in Washington D.C., and copies thereof may be
obtained from such facilities upon payment of the Commission's customary
charges, in the manner set forth in Section 8 above, under "Available
Information" (although they will not be available at the regional offices of
the Commission). Set forth below is certain summary financial information
excerpted or derived from the Financial Statements of Logica. Such summary
information is qualified in its entirety by reference to the Financial
Statements and all the financial information and related notes contained
therein.
LOGICA PLC AND SUBSIDIARIES
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
(IN THOUSANDS OF POUNDS STERLING(1), EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED JUNE 30,
--------------------------------------
1998 1997 1996
(Pounds)'000 (Pounds)'000 (Pounds)'000
------------ ------------ ------------
<S> <C> <C> <C>
INCOME STATEMENT DATA
Amounts in accordance with UK GAAP
Turnover.............................. 472,957 338,465 284,810
Operating Profit...................... 39,643 27,669 23,638
Profit on ordinary activities before
interest............................. 40,358 28,182 24,162
Profit on ordinary activities before
Taxation............................. 41,825 28,148 24,710
Profit attributable to shareholders... 29,971 19,333 16,580
PER SHARE DATA
Amounts in accordance with UK GAAP
Earnings per ordinary share -
pence(2)............................ 42.3 31.0 27.1
BALANCE SHEET DATA (AT END OF PERIOD)
Amounts in accordance with UK GAAP
Net current assets.................... 49,543 42,226 41,139
Total assets.......................... 236,363 154,903 127,989
Total liabilities..................... (153,488) (91,666) (57,649)
Shareholders' funds................... 82,875 63,237 70,340
</TABLE>
- --------
(1) Logica plc publishes its consolidated financial statements in Pounds
Sterling. The United States Dollar exchange rate based on the London
closing mid-rates for Pounds Sterling to Dollars, expressed in $1 per
(Pounds)1, for the fiscal dates indicated, are as follows and are based on
published financial sources:
<TABLE>
<CAPTION>
YEAR
END YEAR YEAR YEAR
RATE HIGH LOW AVERAGE
------ ------ ------ -------
<S> <C> <C> <C> <C>
Fiscal Year ended 6/30/96....................... 1.5537 1.6074 1.4965 1.5470
Fiscal Year ended 6/30/97....................... 1.6641 1.7114 1.5375 1.6147
Fiscal Year ended 6/30/98....................... 1.6686 1.7064 1.5782 1.6466
</TABLE>
(2) The weighted average number of shares outstanding during the fiscal years
ended June 30, 1996, 1997 and 1998 were 61,263,881, 63,844,408 and
70,829,354, respectively.
Certain Differences Between UK GAAP and US GAAP. UK GAAP differs in certain
significant respects from US GAAP. The principal differences, which management
of Logica plc believes may have a material impact on Logica, are summarized
below. Given the inherent differences between UK GAAP and US GAAP, the
financial statements presented under UK GAAP are not presented fairly, in all
material respects, under US
14
<PAGE>
GAAP. Logica has not quantified these differences, nor prepared consolidated
financial statements under US GAAP, nor undertaken a reconciliation of UK GAAP
and US GAAP financial statements. Had Logica undertaken any such
quantification or preparation or reconciliation, other potentially significant
accounting and disclosure differences might have come to their attention,
which are not identified below. Accordingly, Logica can provide no assurance
that the identified differences in the summary below represent all the
principal differences relating to Logica. Further, no attempt has been made to
identify future differences between UK GAAP and US GAAP as the result of
prescribed changes in accounting standards. Regulatory bodies that promulgate
UK GAAP and US GAAP have significant ongoing projects that could affect future
comparisons such as this one. Finally, no attempt has been made to identify
all future differences between UK GAAP and US GAAP that may affect the
financial statements as a result of transactions or events that may occur in
the future. Although UK GAAP differs in certain significant respects from US
GAAP, Logica believes that the differences are not material to a decision by a
holder of Shares whether to sell, tender or hold any Shares because the Offer
is for cash and any such difference would not affect the ability of Logica to
pay for the Shares to be acquired pursuant to the Offer. In this regard, as
set forth in the Financial Statements, Logica has sufficient funds in its
working capital accounts and existing lines of credit to pay for the Shares to
be acquired pursuant to the Offer and the Merger.
Software Revenue Recognition. It is the policy of Logica to recognize
revenue on the sale of software products to customers on a milestone basis as
follows: 40% on receipt of order from the customer; 40% on delivery to the
customer; and 20% on final customer acceptance. Under US GAAP, if the sale of
software requires significant production, modification or customization then
the entire arrangement must be accounted for under contract accounting. Under
contract accounting, four criteria must be satisfied before revenue can be
recognized: (i) persuasive evidence that an arrangement exists; (ii) delivery
has occurred; (iii) the vendor's fee is fixed or determinable; and (iv)
collectibility is probable.
Software Development Costs. It is the policy of Logica to write off software
development costs in the year in which they are incurred unless they are to be
reimbursed by third parties. Under US GAAP, costs associated with the
development of software products to be sold or otherwise marketed should be
capitalized subsequent to the establishment of technological feasibility up
until the product's general release. These costs should then be amortized over
the estimated economic life of the software product.
Goodwill and US Purchase Accounting. Under US GAAP and UK GAAP, purchase
consideration in respect of subsidiaries acquired is allocated on the basis of
appraised values to the various net assets of the subsidiaries at the dates of
acquisition and any net balance is treated as goodwill. However, US GAAP also
requires value to be assigned to any separately identifiable intangible
assets--which would be amortized over their estimated useful lives not to
exceed 40 years--and to acquired in-process research and development which
would be written off to the profit and loss account in the period of the
acquisition. If part of the purchase consideration is contingent on a future
event, then under UK GAAP an estimate of the amount is included as part of the
cost at the date of acquisition. This estimate is revised each year until the
eventual outcome is certain. Under US GAAP, this cost is not recognized until
the contingency is resolved or the amount is determinable. US GAAP requires
goodwill to be recognized as an asset and amortized over its estimated useful
life not to exceed 40 years. Under UK GAAP, for the years ended through June
30, 1998, goodwill may be written off directly against reserves. For the year
ending June 30, 1999 onwards, UK GAAP requires goodwill and any separately
unidentifiable intangible assets to be recognized as an asset and amortized
over its estimated useful life. There is a rebuttable presumption this does
not exceed 20 years. This presumption can be rebutted and a useful life can be
regarded as infinite, but only in certain rare circumstances. Under
transitional arrangements, goodwill previously eliminated against reserves may
be reinstated as a prior year adjustment, or remain eliminated against
reserves.
Deferred Taxation. Under UK GAAP, no provision is made for deferred taxation
if there is reasonable evidence that such deferred taxation will not be
payable in the foreseeable future. Deferred tax assets are generally not
recognized under UK GAAP unless they are expected to be recovered in the
foreseeable future or, if relating to losses, where recovery can be assumed
beyond reasonable doubt (usually one year from the balance
15
<PAGE>
sheet date). Under US GAAP, deferred tax assets and liabilities are recognized
in full and any net deferred tax assets are then assessed for probable
recoverability. As long as it is more likely than not that sufficient future
taxable income will be available to utilize the deferred tax assets, no
valuation allowance is provided.
Other Post-retirement Benefits. In respect of other post-retirement benefit
obligations, US GAAP applies the principles of accounting for pensions which
requires the present value of the benefit obligation to be determined using a
current market discount rate and the plan assets to be valued on a market or
market-related basis. UK GAAP permits the benefit obligation to be discounted
at a long-term risk-adjusted rate and the plan assets to be valued on an
actuarial basis.
In addition to the difference in discount rates, the amortization procedure
under US GAAP applies a corridor approach for recognizing gains and losses in
the determination of periodic pension expense. Under UK GAAP, actuarial gains
and losses are amortized normally over the expected remaining service lives
without such corridor approach. Additionally, for UK funding and accounting
purposes, it is satisfactory to carry out actuarial valuation on a three-year
interval, whereas annual valuations are required under US GAAP.
Cash Flow Statements. The definition of "cash flow" differs between UK and
US GAAP. Cash flow under UK GAAP represents increases or decreases in "cash,"
which is comprised of cash in hand and repayable on demand and overdrafts.
Under US GAAP, cash flow represents increases or decreases in "cash and cash
equivalents," which include short term highly liquid investments with original
maturities of less than 90 days, and exclude overdrafts.
There are also certain differences in classification of items within the
cash flow statement between UK and US GAAP. Under UK GAAP, cash flows are
presented in the following categories: (i) operating activities; (ii) returns
on investments and servicing of finance; (iii) taxation; (iv) capital
expenditure and financial investment; (v) acquisitions and disposals; (vi)
equity dividends paid; (vii) management of liquid resources; and (viii)
financing. Under US GAAP, cash flows are segregated into operating, investing
and financing activities.
Cash flows from taxation, returns on investments and servicing of finance
would be, with the exception of any interest paid but capitalized, included as
operating activities under US GAAP. The payment of any dividends would be
included under financing activities and any capitalized interest would be
included under investing activities for US GAAP purposes. Additionally, under
US GAAP cash flows from the purchase and sale of tangible fixed assets and the
sale of debt and equity investments would be shown within investing
activities.
Earnings Per Share. Under UK GAAP, earnings per share is determined based
upon the weighted average number of shares of ordinary stock in issue during
the respective periods, and a fully diluted calculation is provided only if
materially different from the undiluted amount. In addition, the average
number of shares issued in prior years is restated to reflect the bonus
element of any rights issue of shares in the current year. Under US GAAP, the
calculation of net income per share includes the dilutive effect of the
assumed exercise of certain outstanding share options.
Current Assets and Liabilities. Current assets under UK GAAP include amounts
which fall due after more than one year. Under US GAAP such assets would be
reclassified as non-current assets. Provisions for liabilities and charges
under UK GAAP include amounts due within one year, which would be reclassified
to current liabilities under US GAAP.
Classification of Leases. Differences can arise upon the determination of
whether a lease is a finance lease or an operating lease. Under UK GAAP, a
lease is classified as a finance lease when the lessee has substantially all
the risks and rewards associated with the ownership of the asset, other than
the legal title. Under US GAAP, one of the following four criteria must be met
to classify a lease as a capital lease; (i) the lease transfers ownership of
the property to the lessee by the end of the lease term, (ii) the lease
contains a bargain purchase option, (iii) the lease term is equal to 75% or
more of the estimated economic life of the leased property or (iv) the present
value at the beginning of the lease term of the minimum lease payments equals
or exceeds 90% of the fair value of the leased property.
16
<PAGE>
Ordinary Dividends. Under UK GAAP, final ordinary dividends are provided for
in the fiscal year in respect of which they are recommended by the board of
directors for approval by the shareholders. Under US GAAP, such dividends are
not provided for until declared by the board of directors.
Accounting for Associates. Under US and UK GAAP, the equity method of
accounting is used to account for associates. However, under US GAAP, the
investor presents its share of the associate's profits and losses at a post-
tax level whereas under UK GAAP the investor's share of the associate's
profits and losses are presented pre-tax with its share of the associate's tax
shown separately.
Employee Stock Compensation. Under US GAAP, entities have a choice of
methods for determining the costs of benefits arising from employee stock
compensation plans, being either the "intrinsic value" method or a fair value
method. Under the "intrinsic value" method, compensation cost is the
difference between the market price of the stock at the measurement date and
the price to be contributed by the employee. Under the fair value method,
compensation cost is based on the estimated fair value of the option at date
of grant using an option pricing model which considers: the stock price at
grant date, the exercise price and expected life of the option, expected price
volatility, expected dividend yield and a risk-free interest rate. Under UK
GAAP, except for options issued under Inland Revenue approved employee save as
you earn (SAYE) schemes, compensation cost is the difference between the
market value of the shares at the date of grant of the conditional award less
any contribution that the employee is required to make.
Employee Share Option Plans (ESOPs). Under US GAAP, shares purchased by, and
held within an ESOP are shown at cost as a debit balance within equity and
described as "unearned ESOP shares." For ESOP shares which are committed to be
released to compensate employees, the sponsoring company recognizes a
compensation cost equal to the fair value of the shares. Under UK GAAP, where,
generally, the ESOP shares are held for the continuing benefit of the
sponsoring company's business, they are classified as "own shares" within
fixed assets; otherwise they are classified as "own shares" within current
assets. Cost is written down to residual amount (the option proceeds) over the
employee's service period.
Holiday Pay. US GAAP requires that provision for employee's future absences
(i.e. holiday pay) shall be made on an accrual basis if (i) the employee's
right to receive compensation for future absence is due to past service, (ii)
the obligation accumulates, (iii) the payment is probable and (iv) the amount
can be reasonably estimated. There are no formal rules under UK GAAP and
either the accrual or cash method is used in practice.
Except as set forth in this Offer to Purchase, none of Purchaser, Parent,
Logica plc or, to the best knowledge of Purchaser, Parent and Logica plc, any
of the persons listed on Annexes I and II, has any contract, arrangement,
understanding or relationship with any other person with respect to any
securities of the Company, including, but not limited to, any contract,
arrangement, understanding or relationship concerning the transfer or the
voting of any securities of the Company, joint ventures, loan or option
arrangements, puts or calls, guarantees of loans, guarantees against loss, or
the giving or withholding of proxies. Except as set forth in this Offer to
Purchase, none of Purchaser, Parent, Logica plc or, to the best knowledge of
Purchaser, Parent, and Logica plc, any of the persons listed on Annexes I and
II, has had, since September 30, 1995, any business relationships or
transactions with the Company or any of its executive officers, directors or
affiliates that would require reporting under the rules of the Commission.
Except as set forth in this Offer to Purchase since September 30, 1995, there
have been no contacts, negotiations or transactions between Purchaser, Parent,
Logica plc, or their subsidiaries or, to the best knowledge of Purchaser,
Parent and Logica plc, any of the persons listed on Annexes I and II, and the
Company or its affiliates, concerning a merger, consolidation or acquisition,
tender offer or other acquisition of securities, election of directors or a
sale or other transfer of a material amount of assets. Except as set forth in
this Offer to Purchase, none of Purchaser, Parent, Logica plc, or, to the best
knowledge of Purchaser, Parent, or Logica plc, any of the persons listed on
Annexes I and II, beneficially owns any shares or has effected any
transactions in the Shares in the past 60 days.
10. BACKGROUND OF THE OFFER; CONTACTS WITH THE COMPANY. On May 26, 1998,
Thomas Miranda, the Vice President--Customer Contact Solutions of the
Communications Division of Parent, Mike Maloney, the
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Executive Vice President of the Communications Division of Parent, and Dennis
Yablonsky, the President and Chief Executive Officer of the Company, met to
discuss a possible working partnership between Logica and the Company that
would enhance the ability of both companies to better serve their clients. In
the course of such discussions, Logica became more informed about the Company
and its management, facilities and technical abilities and became interested
in a more formal partnership arrangement with the Company. As a result of the
May 26 meeting, Logica believed that exploring a potential business
combination with the Company would be attractive to both Logica and the
Company.
On July 1, 1998, Mario Anid, the Corporate Development Director and a member
of the Executive Committee of Logica plc, Corey Torrence, the President and
Chief Executive Officer of Parent, and Mr. Maloney met with Mr. Yablonsky,
John Manzetti, the Executive Vice President and Chief Financial Officer of the
Company, and a representative of the Company's financial advisors, to discuss
the potential benefits of a business combination between Logica and the
Company. During July and August of 1998, similar discussions continued between
representatives of Logica and the Company for the purpose of further exploring
a possible strategic transaction. These discussions focused primarily on
topics relating to business integration, ongoing business strategy and
financial matters.
At a meeting held on August 19, 1998, Messrs. Anid, Torrence, Yablonsky and
Manzetti discussed possible structures for a transaction. At that meeting,
Logica indicated that it was willing to proceed by means of a cash tender
offer for all of the outstanding Shares. Logica also indicated that its
preliminary evaluation of an offer price was in the range of $5.50 to $5.75
per Share.
On August 25, 1998, Mr. Manzetti telephoned Mr. Anid and indicated that a
third party had expressed an interest in a potential stock transaction with
the Company at a value of $6.00 per Share. Mr. Manzetti informed Mr. Anid of
his view that the Company Board would look more favorably on a cash offer of
$6.00 per Share than on any potential stock transaction at that price. The
Company Board met later on August 25 to discuss the status of the discussions
between Logica and the Company. Mr. Manzetti telephoned Mr. Anid after the
Board meeting and indicated that the Company Board was interested in
continuing discussions with Logica if Logica would consider a $6.00 per Share
cash price. Shortly thereafter, Mr. Anid informed the Company that, subject to
negotiation of acceptable documentation and the completion of satisfactory due
diligence, Logica was prepared to agree to a price of $6.00 per Share.
On August 27, 1998, Logica and the Company entered into a confidentiality
agreement (the "Confidentiality Agreement"), which provides generally that
each of the parties and their respective representatives will keep
confidential any non-public information furnished to them in connection with
the mutual consideration of a potential transaction involving the acquisition
of the Company by Parent. In addition, the Confidentiality Agreement
prohibited, with certain exceptions, the Company or any of its representatives
from participating in negotiations with any party other than Parent with
respect to a merger, consolidation, business combination, sale of all or
substantially all assets, tender offer or other similar transaction involving
the Company, until September 22, 1998 (the "Exclusivity Period"). The
Confidentiality Agreement also provided that, with certain exceptions, until
the date that is the earlier of six months from the date of the
Confidentiality Agreement or the date on which the Company and Parent entered
into a definitive agreement concerning a transaction between the companies,
neither Parent nor any of its representatives would, among other things,
acquire any securities of the Company or seek to effect a tender offer, merger
or other business combination transaction involving the Company.
On September 1, 1998, Logica plc entered into an agreement regarding the
engagement of DLJ as exclusive financial advisor to Logica plc in connection
with the evaluation of a potential strategic transaction with the Company.
On September 1, 1998, representatives of Logica, together with its legal and
financial advisors, met in Pittsburgh, Pennsylvania to commence a more
detailed investigation of the business, operations and facilities of the
Company. Thereafter, the Company provided Logica with certain nonpublic
information about the Company's business, operations and prospects, including
fiscal 1998 and 1999 financial projections prepared by
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the Company's management. Legal counsel for Logica also commenced preparation
of the Merger Agreement and a draft was circulated among the parties. During
the remainder of September 1998, the parties, with the assistance of their
respective legal counsel and financial advisors, conducted extensive
negotiations with respect to the terms of the Merger Agreement, the Tender
Agreements and related documentation.
On September 15, 1998, Mr. Anid met with Messrs. Yablonsky and Manzetti to
discuss certain matters relating to the proposed transaction. In these
discussions, Mr. Anid indicated that, as a result of Logica's due diligence
review and recent adverse market conditions, Logica was reducing its offer
price from $6.00 per Share to $5.00 per Share. At the meeting, Messrs. Anid,
Yablonsky and Manzetti also discussed the willingness of Messrs. Yablonsky and
Manzetti to forego certain severance benefits to which they were contractually
entitled in exchange for entering into employment agreements with the Parent
following the Merger.
Following the September 15 meeting, Logica and the Company, with the
assistance of their respective legal counsel and financial advisors, continued
negotiations of the terms of the Merger Agreement and related documentation.
During this period, Logica also negotiated with Messrs. Yablonsky, Manzetti,
Bruce Russell, the Senior Vice President of the Company, and Raymond
Kalustyan, the Vice President--Business Development of the Company, concerning
their willingness to forego certain severance benefits to which they otherwise
would be contractually entitled following the execution of the Merger
Agreement. In exchange for foregoing such amounts, Logica proposed that these
individuals would enter into at will employment agreements (the "Employment
Agreements") pursuant to which these individuals would (i) initially maintain
their existing salaries, (ii) be entitled to bonus payments if certain
performance criteria were achieved, (iii) receive options to acquire ordinary
shares of Logica plc and (iv) receive certain severance benefits (which were
less than those to which they were entitled under their existing severance
agreements) if their employment was terminated during certain periods.
On September 17, 1998, Mr. Yablonsky telephoned Mr. Anid and indicated that,
following numerous discussions with the Company's legal and financial
advisors, the Company was willing to agree to a price of $5.00 per Share if
the parties could agree on the other unresolved terms of the Merger Agreement
and related documentation.
On September 22, 1998, Logica and the Company entered into an amendment to
the Confidentiality Agreement to extend the Exclusivity Period to September
30, 1998.
On September 25, 1998, the Board of Directors of Logica plc met to discuss,
among other things, the terms of the proposed acquisition of the Company.
After considering and discussing such terms at length, the Board of Directors
of Logica plc approved the Merger and the Offer and the execution of the
related documentation, including the Merger Agreement.
Thereafter, the parties continued negotiating the final terms of the Merger
Agreement and related documentation. At a meeting held on September 28, 1998,
the Company Board met to consider the status of the negotiations and at a
meeting held on September 29, 1998, the Company Board approved the Merger and
the Offer and the execution of the related documentation, including the Merger
Agreement. On the evening of September 30, 1998, the Merger Agreement was
executed by the parties thereto, the Tender Agreements were executed by the
Management Stockholders (as hereinafter defined) and the Employment Agreements
were executed by Messrs. Yablonsky, Manzetti, Russell and Kalustyan.
11. PURPOSE OF THE OFFER AND MERGER; THE MERGER AGREEMENT AND THE TENDER
AGREEMENTS.
The Purpose of the Offer. The purpose of the Offer and the Merger is for
Parent to acquire control of, and the entire equity interest in, the Company.
The Offer and the Merger Agreement are intended to increase the likelihood
that the Merger will be effected as promptly as practicable. The purpose of
the Merger is to acquire all outstanding Shares not tendered and purchased
pursuant to the Offer.
The Merger Agreement. The Merger Agreement provides for the commencement of
the Offer as promptly as practicable after the date of the Merger Agreement,
but in any event not later than five business days following
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the public announcement of the Offer. The obligation of Parent to cause
Purchaser to commence the Offer and to accept for payment any Shares tendered
pursuant to the Offer is subject to the satisfaction of certain conditions,
which are described in Section 13.
The Merger. The Merger Agreement provides that, as soon as practicable
following fulfillment or waiver of the conditions described below under
"Conditions to the Merger," Purchaser will be merged with and into the
Company, which will be the surviving corporation in the Merger (the "Surviving
Corporation") and each then-outstanding Share not owned by Parent, Purchaser
or any other direct or indirect subsidiary of Parent (other than those Shares
held in the treasury of the Company and Shares held by holders who perfect any
appraisal rights that they may have under the DGCL) will be canceled and
retired and be converted into a right to receive the Merger Consideration.
Vote Required to Approve Merger. Under the DGCL, the Merger requires the
approval of the holders of at least a majority of outstanding Shares. If the
Minimum Share Condition is satisfied, Purchaser will own a majority of the
Shares and, accordingly, will have sufficient voting power to effect the
approval of the Merger by holders of Shares without the affirmative vote of
any other such holder.
The Company has agreed in the Merger Agreement to take all action necessary
in accordance with applicable law and its Restated Certificate of
Incorporation and Amended and Restated By-Laws to convene a meeting of its
stockholders promptly after the purchase of Shares pursuant to the Offer to
consider and vote upon the approval of the Merger, if such stockholder
approval is required by applicable law. Parent and Purchaser have agreed in
the Merger Agreement that, at any such meeting, all of the Shares then
beneficially owned by Parent, Purchaser or any other direct or indirect
subsidiary of Parent will be voted in favor of the Merger. Under the Merger
Agreement, subject to the applicable fiduciary duties of the Company Board,
the Company will recommend that the Company's stockholders approve the Merger
if such stockholder approval is required.
Conditions to the Merger. The Merger Agreement provides that the obligations
of the Company, Parent and Purchaser to consummate the Merger are subject to
the satisfaction of the following conditions: (i) the stockholders of the
Company will have duly approved the Merger and adopted the Merger Agreement,
if and as required by applicable law; (ii) Purchaser will have accepted for
payment and purchased all Shares validly tendered and not withdrawn pursuant
to the Offer and such Shares will satisfy the Minimum Share Condition; (iii)
all necessary approvals, authorizations and consents of any governmental or
regulatory entity required to consummate the Merger will have been obtained
and remain in full force and effect, and all waiting periods relating to such
approvals, authorizations and consents will have expired or been terminated;
(iv) the consummation of the Merger will not be precluded by any preliminary
or permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission or any statute, rule, regulation or executive order
promulgated or enacted, by any governmental authority which would make the
consummation of the Merger illegal or otherwise prevent the consummation of
the Merger; and (v) any applicable waiting period under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended, and the rules and regulations
promulgated thereunder (collectively, the "HSR Act") will have expired or been
terminated.
Termination of the Merger Agreement. The Merger Agreement may be terminated
and the Merger may be abandoned, notwithstanding any prior approval of the
Merger Agreement or of the Merger by the stockholders of the Company, (i) by
the mutual consent of the Parent or Purchaser and the Company; (ii) by Parent
and Purchaser, on the one hand, or the Company, on the other hand, if the
Offer is terminated, withdrawn or expires pursuant to its terms without any
Shares having been purchased thereunder, provided, however, that the right to
terminate the Merger Agreement pursuant to this clause will not be available
(a) to any party if such party materially breaches the Merger Agreement, or
(b) if an order, decree or ruling or any action (which order, decree, ruling
or other action the Company, Parent and Purchaser will use their best efforts
to lift) by any Governmental Entity (as such term is defined in the Merger
Agreement) permanently restrains, enjoins or otherwise prohibits the
acceptance for payment of, or payment for, Shares pursuant to the Offer or the
Merger; (iii) by the Company, (a) if (I) Parent or Purchaser fails to commence
the Offer on or prior to five business days following the date of
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the initial public announcement of the Offer, or (II) Parent or Purchaser will
not have purchased Shares pursuant to the Offer by December 31, 1998, or (III)
the Offer will have been terminated without Parent or Purchaser having
purchased any Shares in the Offer, (b) in connection with the Company entering
into a definitive agreement to effect a Superior Proposal (as such term is
hereinafter defined), provided, however, that written notice will have been
provided by the Company to Parent not later than 12:00 noon two business days
in advance of any date the Company intends to exercise its termination rights
and enter into such agreement (which notice will specify proposed terms of
such agreement and the identity of the persons making such proposal), and
provided further, however, that the Company, prior to any such termination,
will have made payment to Parent of all Termination Fee and Parent Expenses
(as such terms are hereinafter defined), or (c) if Parent or Purchaser
breaches in any material respect any of their respective representations,
warranties, covenants or other agreements contained in the Merger Agreement,
which breach cannot be or has not been cured within 15 days after the giving
of written notice to Parent or Purchaser, except, in any case, for breaches
which are not reasonably likely to affect adversely Parent's or Purchaser's
ability to consummate the Offer or the Merger, provided, however, that no cure
period will be applicable under any circumstances to (iii)(a) above; (iv) by
Parent and Purchaser, if (a) prior to the commencement of the Offer, due to an
occurrence that if occurring after the commencement of the Offer would result
in a failure to satisfy any of the offer conditions set forth in the Merger
Agreement, under circumstances in which such failure could not reasonably be
expected to be cured within 15 days after the giving of written notice by
Parent or Purchaser, Parent or Purchaser fails to commence the Offer on or
prior to five business days following the date of the initial public
announcement of the Offer, (b) prior to the purchase of Shares pursuant to the
Offer, the Company breaches any representation, warranty, covenant or other
agreement contained in the Merger Agreement which breach (I) cannot be or has
not been cured within 15 days after the giving of written notice to the
Company, and (II) would give rise to the failure of an offer condition set
forth in paragraph (c) or (e) of Annex A of the Merger Agreement; or (c) prior
to the purchase of Shares pursuant to the Offer, Parent or Purchaser is
entitled to terminate the Offer as a result of (I) an occurrence that would
result in a failure to satisfy any of the offer conditions set forth in the
Merger Agreement, or (II) in the case of the offer conditions set forth in
paragraphs (c) and (e) of Annex A of the Merger Agreement, the failure of any
such condition under circumstances in which such failure could not reasonably
be expected to be cured within 15 days after the giving of written notice to
the Company.
Other Offers. The Company has agreed in the Merger Agreement that except as
explicitly permitted under the Merger Agreement, the Company will not (and
will cause each of its subsidiaries not to), directly or indirectly, and will
not authorize or permit any of the respective officers, directors, employees
or any investment banker, financial advisor, attorney, accountant or other
representative retained by it to, directly or indirectly, solicit, initiate or
encourage (including by way of furnishing non-public information), or take any
other action to facilitate, any inquiries or the making of any proposal or
offer that constitutes, or may reasonably be expected to lead to, any
Acquisition Proposal (as such term is hereinafter defined), or participate in
any discussions or negotiations regarding an Acquisition Proposal.
Notwithstanding anything contained in the Merger Agreement, the Company will
not be prohibited by the Merger Agreement from (i) furnishing non-public
information to, or entering into discussions or negotiations with, any person
or entity that makes an unsolicited written Acquisition Proposal that would
reasonably likely lead to a Superior Proposal if, and only to the extent that,
(a) the Company Board, after consultation with and based upon the advice of
independent legal counsel, determines in good faith that the failure to take
such action could reasonably be expected to be a breach of the Company Board's
fiduciary duties under applicable law and (b) prior to furnishing such non-
public information to, or entering into discussions or negotiations with, such
person or entity, the Company receives from such person or entity an executed
confidentiality agreement in reasonably customary form on terms not more
favorable to such person or entity than the terms contained in the
Confidentiality Agreement; (ii) complying with Rule 14e-2 promulgated under
the Exchange Act with regard to a tender or exchange offer; (iii) making such
disclosure to the Company's stockholders, as in the good faith judgment of the
Company Board, after consultation with and based upon the advice of
independent legal counsel is required by applicable law; or (iv) withdrawing
or modifying its recommendations, consents or approvals with respect to the
Offer, the Merger Agreement and the Merger, approving or recommending an
Acquisition Proposal
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to its stockholders or causing the Company to enter into any letter of intent,
agreement in principle, acquisition agreement or other agreement with respect
to an Acquisition Proposal (except for the Confidentiality Agreement) if there
is a Superior Proposal outstanding and the Company Board, after consultation
with and based upon the advice of independent legal counsel, determines in
good faith that the failure to take such action could reasonably be expected
to be a breach of the Company Board's fiduciary duties under applicable law.
The Company has agreed in the Merger Agreement that it will promptly (but in
any event within one day) advise Parent orally and in writing of any
Acquisition Proposal (including amendments or proposed amendments) or any
inquiry regarding the making of an Acquisition Proposal including any request
for information, the material terms and conditions of such request,
Acquisition Proposal or inquiry. In addition, the Company has agreed that it
will promptly (but in any event within one day) keep Parent fully informed of
the status and details (including amendments or proposed amendments) of any
such request, Acquisition Proposal or inquiry.
For purposes of the Merger Agreement, the term "Acquisition Proposal" shall
mean any proposed or actual (i) merger, consolidation or similar transaction
involving the Company, (ii) sale, lease or other disposition, directly or
indirectly, by merger, consolidation, share exchange or otherwise, of any
assets of the Company or any of its subsidiaries representing 15% or more of
the consolidated assets of the Company and its subsidiaries, (iii) issue, sale
or other disposition of (including by way of merger, consolidation, share
exchange or any similar transaction) securities (or options, rights or
warrants to purchase, or securities convertible into, such securities)
representing 15% or more of the votes associated with the outstanding
securities of the Company, (iv) transaction in which any person shall acquire
beneficial ownership (as such term is defined in Rule 13d-3 under the Exchange
Act), or the right to acquire beneficial ownership, or any "group" (as such
term is defined under the Exchange Act) shall have been formed which
beneficially owns or has the right to acquire beneficial ownership of, 15% or
more of the outstanding Shares, (v) recapitalization, restructuring,
liquidation, dissolution, or other similar type of transaction with respect to
the Company or any of the Company's subsidiaries, or (vi) transaction which is
similar in form, substance or purpose to any of the transactions contemplated
by the Offer and the Merger Agreement; provided, however, that the term
"Acquisition Proposal" shall not include the Offer, the Merger Agreement and
the transactions contemplated thereby.
For purposes of the Merger Agreement, the term "Superior Proposal" means any
bona fide Acquisition Proposal, which is not subject to the receipt of any
necessary financing and which the Company Board determines in its good faith
judgment, based on the advice from an independent financial advisor, is
superior to the Company's stockholders from a financial point of view to the
Offer and the Merger.
Fees and Expenses. Except as otherwise provided in the Merger Agreement,
whether or not the Offer or the Merger is consummated, all fees, costs and
expenses incurred in connection with the Offer, the Merger Agreement and the
transactions contemplated thereby will be paid by the party incurring such
cost or expense. Notwithstanding the foregoing, upon consummation of the
Merger, Parent may be reimbursed by the Company for all costs and expenses
incurred by Parent and Purchaser in connection with the Offer, the Merger
Agreement and the transactions contemplated thereby. If the Merger Agreement
is terminated as a result of (i) a willful breach by the Company of any
representation, warranty, covenant or other agreement contained in the Merger
Agreement prior to the purchase of Shares pursuant to the Offer, which breach
(a) cannot be or has not been cured within 15 days after giving written notice
to the Company, or (b) would give rise to the failure of an offer condition
set forth in paragraph (c) or (e) of Annex A to the Merger Agreement; or (ii)
the Company entering into a definitive agreement to effect a Superior
Proposal, provided, however, that written notice will have been provided by
the Company to Parent no later than 12:00 noon two business days in advance of
any date that it intends to exercise its termination rights and enter into
such agreement (which notice shall specify proposed terms of such agreement
and the identity of the persons making such proposal), and provided further,
however that the Company, prior to any such termination, will have made
payment to Parent of all Termination Fee and Parent Expenses (as such terms
are hereinafter defined), the Company will make a cash payment to Parent of
$2,000,000 (the "Termination Fee") plus Parent's out-of-pocket costs and
expenses, including without limitation, fees and disbursements of its outside
legal counsel, investment bankers, accountants and other consultants retained
by or on behalf of Parent together with the other out-of-pocket costs incurred
by it in
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connection with analyzing, structuring, participating in the negotiations of
the terms and conditions, arranging financing, conducting due diligence, and
other activities related to the Offer and the Merger and the transactions
contemplated thereby, including, without limitation, commitment fees paid to
potential lenders (collectively, the "Parent Expenses") provided, however,
that the aggregate amount of all Parent Expenses to be reimbursed by the
Company shall not exceed $1,000,000. Any Termination Fee or Parent Expenses
will be payable by the Company to Parent (by wire transfer of immediately
available funds to an account designated by Parent) within two business days
after demand by Parent.
Conduct of the Company's Business Until the Effective Time. The Merger
Agreement provides that during the period from the date of the Merger
Agreement until the Effective Time, except as otherwise provided in the Merger
Agreement, the Company will, and will cause each of its subsidiaries to,
conduct their respective businesses in the regular and ordinary course,
consistent with past practice, use their best efforts to preserve intact the
present business organization of the Company and each of its subsidiaries, to
keep available the services of each of their present advisors, managers,
officers and employees, and to preserve the goodwill of those having business
relationships with the Company or its subsidiaries. The Merger Agreement
further provides that, from the date of the Merger Agreement until the
Effective Time, except as consented in writing to by Parent, or as expressly
provided in the Merger Agreement, the Company will not, and will not permit
any of its subsidiaries to, (i)(a) declare, set aside or pay any dividend or
other distribution (whether in cash, stock, or property or any combination
thereof) in respect of any of its capital stock, (b) split, combine or
reclassify any of its capital stock, or (c) repurchase, redeem or otherwise
acquire any of its securities, except, in the case of clause (c), for the
acquisition of Shares from holders of Options in full or partial payment of
the exercise price payable by such holders upon exercise of Options
outstanding on the date of the Merger Agreement; (ii) authorize for issuance,
issue, sell, deliver or agree or commit to issue, sell or deliver (whether
through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) any stock of any class or any
other securities (including indebtedness having the right to vote) or equity
equivalents (including, without limitation, stock appreciation rights) (other
than the issuance of Shares upon the exercise of Options outstanding on the
date of the Merger Agreement in accordance with their present terms); (iii)
acquire, sell, lease, encumber, transfer or dispose of any assets outside the
ordinary course of business which are material to the Company or any of its
subsidiaries (whether by asset acquisition, stock acquisition or otherwise),
except pursuant to obligations in effect on the date of the Merger Agreement
which have been disclosed in writing to Parent and Purchaser prior to the date
of the Merger Agreement; (iv)(a) incur any amount of indebtedness for borrowed
money, guarantee any indebtedness, issue or sell debt securities or warrants
or rights to acquire any debt securities, guarantee (or become liable for) any
debt of others, make any loans, advances or capital contributions, mortgage,
pledge or otherwise encumber any material assets, create or suffer any
material lien thereupon other than in the ordinary course of business
consistent with prior practice, or (b) incur any short-term indebtedness for
borrowed money, except, in each such case, pursuant to credit facilities in
existence on the date of the Merger Agreement which have been disclosed in
writing to Parent and Purchaser prior to the date of the Merger Agreement and
set forth in the Company disclosure schedules to the Merger Agreement, and as
necessary to carry on the Company's business in the usual, regular and
ordinary course, consistent with past practice; (v) pay, discharge or satisfy
any claims, liabilities or obligations (absolute, accrued, asserted or
unasserted, contingent or otherwise), other than any payment, discharge or
satisfaction (a) in the ordinary course of business consistent with past
practice, or (b) in connection with the Offer, the Merger Agreement and the
transactions contemplated thereby; (vi) change any of the accounting
principles or practices used by it (except as required by generally accepted
accounting principles, in which case written notice shall be provided to
Parent and Purchaser prior to any such change); (vii) except as required by
law, (a) enter into, adopt, amend or terminate any Company Benefit Plan (as
such term is defined in the Merger Agreement), (b) enter into, adopt, amend or
terminate any agreement, arrangement, plan or policy between the Company or
any of its subsidiaries and one or more of their directors or officers, or (c)
except for normal increases in the ordinary course of business consistent with
past practice, increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any
Company Benefit Plan or arrangement as in effect as of the date hereof; (viii)
adopt any amendments to the Restated Certificate of Incorporation of the
Company and the Amended and Restated Bylaws of the Company, except as
expressly provided by the terms of this Agreement; (ix) enter into a new
agreement
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or amend any existing agreement which could reasonably be expected to have a
Company Material Adverse Effect (as such term is hereinafter defined); (x)
adopt a plan of complete or partial liquidation or resolutions providing for
or authorizing such a liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or reorganization; (xi) enter into or amend,
extend or otherwise alter any collective bargaining agreement; (xii) settle or
compromise any litigation (whether or not commenced prior to the date of the
Merger Agreement) other than settlements or compromises or litigation where
the amount paid (after giving effect to insurance proceeds actually received)
in settlement or compromise does not exceed $10,000; (xiii) grant any new or
modified severance or termination arrangement or increase or accelerate any
benefits payable under its severance or termination pay policies in effect on
the date hereof, except as required under the present terms of any employment
agreement or severance agreement in effect on the date of the Merger
Agreement; (xiv) enter into any transaction, contract or arrangement with any
affiliate, except as required under the present terms of any contract or
arrangement with any such affiliate in effect on the date of the Merger
Agreement; (xv) enter into any other material agreement outside the ordinary
course of business; (xvi) enter into an agreement to take any of the actions
stated in clauses (i) through (xv) above; or (xvii) authorize any of, or
commit or agree to take any of, or take any corporate action in furtherance
of, any of the actions stated in clauses (i) through (xv) above.
Board Representation. The Merger Agreement provides that, promptly upon the
purchase of Shares pursuant to the Offer, Parent will be entitled to designate
such number of directors, rounded up to the next whole number, on the
Company's Board as is equal to the product of (i) the total number of
directors on the Company Board (after giving effect to the directors
designated by Parent pursuant to this sentence) and (ii) the percentage that
the total votes represented by such number of Shares in the election of
directors of the Company so purchased bears to the total votes represented by
the number of Shares outstanding. In furtherance thereof, the Company will,
upon request by Parent, promptly increase the size of the Company Board and/or
exercise its best efforts to secure the resignations of such number of its
directors as is necessary to enable Parent's designees to be elected to the
Company Board and will take all actions to cause Parent's designees to be so
elected to the Company Board. At such time, the Company will also cause
persons designated by Parent to constitute at least the same percentage
(rounded up to the next whole number) as is on the Company Board of (a) each
committee of the Company Board, (b) each board of directors (or similar body)
of each of the Company's subsidiaries, and (c) each committee (or similar
body) of each such board. The Company will take, at its expense, all action
required pursuant to Section 14(f) and Rule 14f-1 of the Exchange Act in order
to fulfill its obligations and will include in the Schedule 14D-9 to its
stockholders such information with respect to the Company and its officers and
directors as is required by such Section 14(f) and Rule 14f-1. Parent will
supply to the Company in writing and be solely responsible for any information
with respect to itself and its nominees, officers, directors and affiliates
required by such Section 14(f) and Rule 14f-1. The foregoing provisions are in
addition to and do not limit any rights which Purchaser, Parent or any of
their affiliates may have as a holder or beneficial owner of Shares as a
matter of law with respect to the election of directors or otherwise. In the
event that Parent's designees are elected to the Company Board, until the
Effective Time, the Company Board will have at least three directors who are
directors on the date hereof (the "Independent Directors"), provided that, in
such event, if the number of Independent Directors will be reduced below three
for any reason whatsoever, any remaining Independent Directors (or Independent
Director, if there be only one remaining) will be entitled to designate
persons to fill such vacancies who will be deemed to be Independent Directors
for purposes of this Agreement or, if no Independent Director then remains,
the other directors will designate three persons to fill such vacancies who
will not be stockholders, affiliates or associates of Parent or Purchaser and
such persons will be deemed to be Independent Directors for purposes of the
Merger Agreement. Notwithstanding anything in the Merger Agreement to the
contrary, in the event that Parent's designees are elected to the Company
Board, after the acceptance for payment of Shares pursuant to the Offer and
prior to the Effective Time, the affirmative vote of a majority of the
Independent Directors will be required to (i) amend or terminate the Merger
Agreement by the Company, (ii) exercise or waive any of the Company's rights,
benefits or remedies hereunder, or (iii) extend the time for performance of
Parent's and Purchaser's respective obligations hereunder.
Options. The Merger Agreement provides that each option (collectively, the
"Options") granted under the Company's 1989 Stock Option Plan (the "1989
Plan"), 1995 Stock Option Plan (the "1995 Plan") and
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Long-Term Incentive Stock Option Plan (the "Long-Term Plan" and, together with
the 1989 Plan and the 1995 Plan, the "Stock Option Plans") which is
outstanding (whether or not currently exercisable), as of immediately prior to
the Effective Time and which has not been exercised or cancelled prior thereto
will at the Effective Time, be cancelled and upon the surrender and
cancellation of the option agreement presenting such Option and delivery of an
Option Termination (as such term is defined in the Merger Agreement), Parent
shall pay to the holder thereof cash in an amount equal to the product of (i)
the number of Shares provided for in such Option and (ii) the excess, if any,
of the Merger Consideration over the exercise price per Share provided for in
such Option, which cash payment will be treated as compensation and will be
net of any applicable federal or state withholding tax (the "Option
Consideration"). The Company will take all actions necessary to ensure that
(i) all Options, to the extent not exercised prior to the Effective Time, will
terminate and be cancelled as of the Effective Time and thereafter be of no
further force or effect, (ii) no Options are granted after the date of this
Agreement, and (iii) at the Effective Time, the Stock Option Plans and all
Options issued thereunder will terminate.
The Merger Agreement further provides that except as may be otherwise agreed
to by Parent or Purchaser and the Company, the Stock Option Plans and the
Company's 1995 Employee Stock Purchase Plan (the "Purchase Plan") will
terminate as of the Effective Time and the provisions in any other plan,
program or arrangement providing for the issuance or grant of any other
interest in respect of the capital stock of the Company or any of its
subsidiaries will be deleted as of the Effective Time and no holder of Options
or any participant in any Stock Option Plan or the Purchase Plan or any other
plans, programs or arrangements will have any right thereunder to acquire any
equity securities of the Company, the surviving corporation or any subsidiary
thereof. In connection with the foregoing, Parent, Purchaser and the Company
agree that participants in the Purchase Plan will not be entitled to purchase
any shares under the Purchase Plan for the period beginning October 1, 1998
and ending on the Effective Time, and after the Effective Time, any amounts
which have been withheld from participants under the Purchase Plan will be
returned without interest to such participants.
Employee Benefits. The Merger Agreement provides that except as may
otherwise be agreed to by the parties to the Merger Agreement, after the
closing of the Merger, Parent will cause Purchaser or the Company to honor all
obligations under the existing terms of the employment and severance
agreements to which the Company or any of its subsidiaries is currently a
party. For a period of up to twelve months following the Effective Time as
determined by Parent in its sole discretion (the "Transition Period"),
employees of the Company will continue to participate in the employee benefit
plans of the Company on substantially similar terms to those currently in
effect. Following the Transition Period, the Company's employees will be
permitted to participate in the employee benefit plans of Parent as in effect
on the date thereof on terms substantially similar to those provided to
employees of Parent. The Merger Agreement further provides that if any
employee of the Company or of any of the Company's subsidiaries becomes a
participant in any employee benefit plan, practice or policy of Parent, any of
its affiliates or the surviving corporation of the Merger, such employee will
be given credit under such plan for all service prior to the Effective Time
with the Company and the Company's subsidiaries and prior to the time such
employee becomes such a participant, for purposes of eligibility (including,
without limitation, waiting periods) and vesting but not for any other
purposes for which such service is either taken into account or recognized
(including, without limitation, benefit accrual); provided, however, that such
employees will be given credit for such service for purposes of any vacation
policy. In addition, if any employees of the Company or any of the Company's
subsidiaries employed as of the closing date of the Merger become covered by a
medical plan of Parent, any of its affiliates or the surviving corporation of
the Merger, such medical plan will not impose any exclusion on coverage for
preexisting medical conditions with respect to these employees.
Indemnification. The Merger Agreement provides that all rights to
indemnification existing in favor of, and all limitations on the personal
liability of the directors, officers, employees and agents of the Company and
its subsidiaries provided for in the Restated Certificate of Incorporation of
the Company and the Amended and Restated Bylaws of the Company as in effect as
of the date of the Merger Agreement with respect to matters occurring prior to
the Effective Time, and including the Offer and the Merger will continue in
full force and
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effect for a period of not less than six years from the Effective Time;
provided however, that all rights to indemnification in respect of any claims
(a "Claim") asserted or made within such period will continue until the
disposition of such Claim. The Merger Agreement further provides that at or
prior to the Effective Time, Parent will purchase directors' and officers'
liability insurance coverage for the Company's directors and officers which
will provide such directors and officers with coverage for six years following
the Effective Time of not less than the existing coverage under, and have
other terms not materially less favorable to the insured persons than the
directors' and officers' liability insurance coverage presently maintained by
the Company; provided, however, that in any event the total aggregate cost of
such policy shall not exceed $250,000 (the "Maximum Amount"); and provided,
further, that if such coverage cannot be obtained for such cost, the Company
will maintain, for such six-year period, the maximum amount of comparable
coverage as will be available for the Maximum Amount on such terms.
Representations and Warranties. In the Merger Agreement, the Company made
customary representations and warranties to Parent and the Purchaser with
respect to, among other things, its organization and qualification, its
capitalization, its authority relative to the Merger Agreement, filings made
by the Company with the Commission, the absence of certain changes or events,
litigation, payment of taxes, maintenance of its books and records, title to
properties, intellectual property, environmental matters, labor matters,
employee benefit plans, related party matters, Year 2000 compliance, suppliers
and customers and insurance.
Also in the Merger Agreement, Parent made representations and warranties to
the Company with respect to, among other things, its organization and
qualification, its authority relative to the Merger Agreement, necessary
consents and approvals and the availability of funds to consummate the Offer
and the Merger.
The Tender Agreements. Concurrently with the execution of the Merger
Agreement, Parent, Purchaser and the executive officers and directors of the
Company who beneficially own Shares (collectively referred to as the
"Management Stockholders" and each a "Management Stockholder") entered into
Tender Agreements (the "Tender Agreements"). The following is a summary of
certain provisions of the Tender Agreements.
Pursuant to the Tender Agreements, the Management Stockholders agreed to,
not later than the fifth business day after commencement of the Offer, validly
tender (or cause the record owner of such shares to validly tender) pursuant
to the Offer and not withdraw an aggregate of 1,200,976 Shares owned by the
Management Stockholders (together with any Shares acquired by the Management
Stockholders after the date of the Tender Agreements and prior to the
termination thereof, whether upon the exercise of Options, or by means of
purchase, dividend, distribution or otherwise), representing approximately
18.3% of the total Shares outstanding.
Each Management Stockholder agreed pursuant to the Tender Agreements that it
would during the term of the Tender Agreements, vote the Management
Stockholder's Shares owned by it at any meeting of the stockholders of the
Company, however called, or in connection with any written consent (i) in
favor of the Merger and any actions in furtherance thereof, and (ii) against
any Acquisition Proposal and against any action or agreement that would
impede, frustrate, prevent or nullify the Tender Agreements, or result in a
breach in any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or which
would result in any of the offer conditions set forth in Annex A to the Merger
Agreement or set forth in Article VIII of the Merger Agreement not being
fulfilled. Each Management Stockholder covenanted and agreed that, except as
contemplated by the Tender Agreements and the Merger Agreement, it shall not
(i) transfer (which term includes, without limitation, any sale, gift, pledge
or other disposition), or consent to any transfer of, any or all of such
Management Stockholder's Shares, Options or any interest therein, (ii) enter
into any contract, option or other agreement or understanding with respect to
any transfer of any or all of such Shares, Options or any interest therein,
(iii) grant any proxy, power-of-attorney or other authorization in or with
respect to such Shares or Options, (iv) deposit such Shares or Options into a
voting trust or enter into a voting agreement or arrangement with respect to
such Shares or Options, or (v) take any other action that would in any way
restrict, limit or interfere with the performance of its obligations under the
Tender Agreements or the transactions contemplated by the Tender Agreements or
the Merger Agreement.
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The Tender Agreements further provide that in order to induce Parent and
Purchaser to enter into the Merger Agreement, each Management Stockholder
shall grant to Parent an irrevocable option (a "Stock Option") to purchase
such Management Stockholder's Shares (the "Option Shares") at an amount (the
"Purchase Price") equal to the Offer Price. If (i) the Offer is terminated,
abandoned or withdrawn by Parent or Purchaser (due to the failure of the offer
conditions set forth in paragraph (g) or (h) of Annex A to the Merger
Agreement), or (ii) the Merger Agreement is terminated by the Company pursuant
to Section 9.1(c)(ii) of the Merger Agreement, each Stock Option shall, in any
such case, become exercisable, in whole or in part, upon the first to occur of
any such event and remain exercisable in whole or in part until the date which
is 60 days after the date of the occurrence of such event (the "60 Day
Period"), so long as: (i) all waiting periods under the HSR Act required for
the purchase of the Option Shares upon such exercise will have expired or been
waived, and (ii) there will not be in effect any preliminary or final
injunction or other order issued by any Governmental Entity prohibiting the
exercise of the Stock Options pursuant to this Agreement; provided, however,
that if all HSR Act waiting periods have not expired or been waived or there
is in effect any such injunction or order, in each case on the expiration of
the 60 Day Period, the 60 Day Period will be extended until five (5) business
days after the later of (a) the date of expiration or waiver of all HSR Act
waiting periods or (b) the date of removal or lifting of such injunction or
order. In the event that Parent wishes to exercise a Stock Option, Parent will
send a written notice (the "Notice") to the Management Stockholders
identifying the place and date (not less than two nor more than five (5)
business days from the date of the Notice) for the closing of such purchase.
Each Management Stockholder agreed, in the capacity as a Management
Stockholder or otherwise, that neither such Management Stockholder nor any of
its subsidiaries or affiliates shall (and such Management Stockholder shall
use its best efforts to cause its officers, directors, employees,
representatives and agents, including, but not limited to, investment bankers,
attorneys and accountants, not to), directly or indirectly, encourage,
solicit, participate in or initiate discussions or negotiations with, or
provide any information to, any corporation, partnership, person or other
entity or group (other than Parent, any of its affiliates or representatives)
concerning any Acquisition Proposal or take any other action prohibited by
Section 7.4 of the Merger Agreement. Each Management Stockholder will
immediately cease any existing activities, discussions or negotiations with
any parties conducted heretofore with respect to any Acquisition Proposal and
will immediately communicate to Parent the terms of any proposal, discussion,
negotiation or inquiry (and will disclose any written materials received by
such Management Stockholder in connection with such proposal, discussion,
negotiation or inquiry) and the identity of the party making such proposal or
inquiry which it may receive in respect of any such transaction.
Under the Tender Agreements, each Management Stockholder irrevocably granted
to and appointed Parent, Corey Torrence and Douglas Webb, or either of them,
in their respective capacities as officers of Parent, and any individual who
shall succeed to any such office of Parent, and each of them individually,
such Management Stockholder's proxy and attorney-in-fact (with full power of
substitution), for and in the name, place and stead of such Management
Stockholder, to vote such Management Stockholder's Shares, or grant a consent
or approval in respect of the Shares in favor of any or all of the
transactions contemplated by the Merger Agreement and Tender Agreements and
against any Acquisition Proposal. Each Management Stockholder waived any
rights of appraisal or rights to dissent from the Merger.
The Tender Agreements contain certain representations and warranties of the
parties. Each Management Stockholder severally represented that it is the
record and Beneficial Owner (as such term is defined in the Tender Agreements)
of the Shares and has sole voting and dispositive powers with respect to the
Management Stockholder Shares. In addition, Parent, Purchaser and the
Management Stockholders made representations regarding their organization and
qualification, authority relative to the Tender Agreements, and absence of
conflicts.
Employment Agreement with Dennis Yablonsky. In connection with the Offer and
the Merger, Parent and Dennis Yablonsky have entered into an at will
employment agreement (the "Yablonsky Employment Agreement") which is
conditioned and becomes effective only upon the consummation of the Merger.
Under the Yablonsky Employment Agreement, Mr. Yablonsky agreed to serve as the
Executive Vice President of the Carnegie Group division of Parent. The
Yablonsky Employment Agreement provides that Mr. Yablonsky will
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receive, subject to certain conditions, an initial annual salary of $240,000
and Mr. Yablonsky will be eligible for performance bonuses to be determined
annually by Parent. In addition to the performance bonuses to be determined
annually by Parent, Mr. Yablonsky will be entitled, for the fiscal year ending
December 31, 1998, to receive a bonus to which he would otherwise have been
entitled under the Company's current bonus plan. Pursuant to the Merger
Agreement, Mr. Yablonsky will receive cash in exchange for his Options which
have an exercise price less than the Offer Price. See Section 11. With respect
to each Option held by Mr. Yablonsky having an exercise price greater than or
equal to the Offer Price, Mr. Yablonsky will receive a Logica Option to
acquire such number of ordinary shares of Logica plc ("Ordinary Shares") equal
to (i) the product of the number of Shares represented by the Option and the
exercise price of such Option, divided by (ii) the exchange rate in U.S.
Dollars per British Pounds, (iii) such result divided by the market price of
an Ordinary Share as of the Effective Time (the "Option Formula"). Under the
Yablonsky Employment Agreement, in the event Mr. Yablonsky terminates his
employment with Parent with an effective date that is before or after the
Anniversary Date (as such term is defined in the Yablonsky Employment
Agreement), Mr. Yablonsky will not be entitled to receive any compensation or
other payments from Parent. However, in the event Mr. Yablonsky terminates his
employment with Parent with an effective date on the date which is the
Anniversary Date, Parent will continue to pay Mr. Yablonsky's salary at the
rate in effect as of the closing date of the Merger (the "Closing Date") and
Mr. Yablonsky's benefits for a period of twelve (12) months from the
termination date. The Yablonsky Employment Agreement further provides that in
the event Parent terminates Mr. Yablonsky's employment with an effective date
that is (i) on or before the Anniversary Date, Parent will continue to pay Mr.
Yablonsky's salary at the rate in effect as of the Closing Date until the
second anniversary of the Closing Date and Mr. Yablonsky's benefits for a
period of twelve (12) months after the termination date, (ii) after the
Anniversary Date and before the date which is eighteen (18) months after the
Closing Date, Parent will continue to pay Mr. Yablonsky's salary at the rate
in effect as of the Closing Date and Mr. Yablonsky's benefits until the second
anniversary of the Closing Date, or (iii) after the date which is eighteen
(18) months after the Closing Date, Parent will continue to pay Mr.
Yablonsky's salary at the rate in effect as of the Closing Date and Mr.
Yablonsky's benefits for a period of six (6) months after the termination
date.
Employment Agreement with John Manzetti. In connection with the Offer and
the Merger, Parent and John Manzetti have entered into an at will employment
agreement (the "Manzetti Employment Agreement") which is conditioned and
becomes effective only upon the consummation of the Merger. Under the Manzetti
Employment Agreement, Mr. Manzetti agreed to serve as the Senior Vice
President--Finance and Government Operations of the Carnegie Group division of
Parent. The Manzetti Employment Agreement provides that Mr. Manzetti will
receive, subject to certain conditions, an initial annual salary of $200,004
and Mr. Manzetti will be eligible for performance bonuses to be determined
annually by Parent. In addition to the performance bonuses to be determined
annually by Parent, Mr. Manzetti will be entitled, for the fiscal year ending
December 31, 1998, to receive a bonus to which he would otherwise have been
entitled under the Company's current bonus plan. Pursuant to the Merger
Agreement, Mr. Manzetti will receive cash in exchange for his Options which
have an exercise price less than the Offer Price. See Section 11. With respect
to each Option held by Mr. Manzetti having an exercise price greater than or
equal to the Offer Price, Mr. Manzetti will be entitled to receive Logica
Options determined pursuant to the Option Formula. Under the Manzetti
Employment Agreement, in the event Mr. Manzetti terminates his employment with
Parent with an effective date that is before or after the Nine-Month
Anniversary Date (as such term is defined in the Manzetti Employment
Agreement), Mr. Manzetti will not be entitled to receive any compensation or
other payments from Parent. However, in the event Mr. Manzetti terminates his
employment with Parent with an effective date on the date which is the Nine-
Month Anniversary Date, Parent will continue to pay Mr. Manzetti's salary at
the rate in effect as of the Closing Date and Mr. Manzetti's benefits for a
period of nine (9) months from the termination date. The Manzetti Employment
Agreement further provides that in the event Parent terminates Mr. Manzetti's
employment with an effective date that is (i) on or before the Nine-Month
Anniversary Date, Parent will continue to pay Mr. Manzetti's salary at the
rate in effect as of the Closing Date until the date that is eighteen (18)
months after the Closing Date and Mr. Manzetti's benefits for a period of nine
(9) months after the termination date, or (ii) after the Nine-Month
Anniversary Date, Parent will continue to pay Mr. Manzetti's salary at the
rate in effect as of the Closing Date and Mr. Manzetti's benefits for a period
of six (6) months after the termination date.
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Employment Agreement with Bruce Russell. In connection with the Offer and
the Merger, Parent and Bruce Russell have entered into an at will employment
agreement (the "Russell Employment Agreement") which is conditioned and
becomes effective only upon the consummation of the Merger. Under the Russell
Employment Agreement, Mr. Russell agreed to serve as the Senior Vice
President--Engineering of the Carnegie Group division of Parent. The Russell
Employment Agreement provides that Mr. Russell will receive, subject to
certain conditions, an initial annual salary of $200,004 and Mr. Russell will
be eligible for performance bonuses to be determined annually by Parent. In
addition to the performance bonuses to be determined annually by Parent, Mr.
Russell will be entitled, for the fiscal year ending December 31, 1998, to
receive a bonus to which he would otherwise have been entitled under the
Company's current bonus plan. Pursuant to the Merger Agreement, Mr. Russell
will receive cash in exchange for his Options which have an exercise price
less than the Offer Price. See Section 11. With respect to each Option held by
Mr. Russell having an exercise price greater than or equal to the Offer Price,
Mr. Russell will be entitled to receive Logica Options determined pursuant to
the Option Formula. Under the Russell Employment Agreement, in the event Mr.
Russell terminates his employment with Parent with an effective date that is
before or after the Nine-Month Anniversary Date (as such term is defined in
the Russell Employment Agreement), Mr. Russell will not be entitled to receive
any compensation or other payments from Parent. However, in the event Mr.
Russell terminates his employment with Parent with an effective date on the
date which is the Nine-Month Anniversary Date, Parent will continue to pay Mr.
Russell's salary at the rate in effect as of the Closing Date and Mr.
Russell's benefits for a period of nine (9) months from the termination date.
The Russell Employment Agreement further provides that in the event Parent
terminates Mr. Russell's employment with an effective date that is (i) on or
before the Nine-Month Anniversary Date, Parent will continue to pay Mr.
Russell's salary at the rate in effect as of the Closing Date until the date
that is eighteen (18) months after the Closing Date and Mr. Russell's benefits
for a period of nine (9) months after the termination date, or (ii) after the
Nine-Month Anniversary Date, Parent will continue to pay Mr. Russell's salary
at the rate in effect as of the Closing Date and Mr. Russell's benefits for a
period of six (6) months after the termination date.
Employment Agreement with Raymond Kalustyan. In connection with the Offer
and the Merger, Parent and Raymond Kalustyan have entered into an at will
employment agreement (the "Kalustyan Employment Agreement") which is
conditioned and becomes effective only upon the consummation of the Merger.
Under the Kalustyan Employment Agreement, Mr. Kalustyan agreed to serve as the
Vice President of the Carnegie Group division of Parent. The Kalustyan
Employment Agreement provides that Mr. Kalustyan will receive, subject to
certain conditions, an initial annual salary of $150,000 and Mr. Kalustyan
will be eligible for performance bonuses to be determined annually by Parent.
In addition to the performance bonuses to be determined annually by Parent,
Mr. Kalustyan will be entitled to receive, (i) for the fiscal year ending
December 31, 1998, a bonus to which he would otherwise have been entitled
under the Company's current bonus plan, and (ii) at the Effective Time, a one-
time bonus of $50,000 payable in one lump sum. Pursuant to the Merger
Agreement, Mr. Kalustyan will receive cash in exchange for his Options which
have an exercise price less than the Offer Price. See Section 11. Under the
Kalustyan Employment Agreement, in the event Mr. Kalustyan terminates his
employment with Parent with an effective date that is before or after the
Seventh-Month Anniversary Date (as such term is defined in the Kalustyan
Employment Agreement), Mr. Kalustyan will not be entitled to receive any
compensation or other payments from Parent. However, in the event Mr.
Kalustyan terminates his employment with Parent with an effective date on the
date which is the Seventh-Month Anniversary Date, Parent will continue to pay
Mr. Kalustyan's salary at the rate in effect as of the Closing Date and Mr.
Kalustyan's benefits for a period of six (6) months from the termination date.
The Kalustyan Employment Agreement further provides that in the event Parent
terminates Mr. Kalustyan's employment with an effective date that is (i) on or
before the Seventh-Month Anniversary Date, Parent will continue to pay Mr.
Kalustyan's salary at the rate in effect as of the Closing Date until the date
that is thirteen (13) months after the Closing Date and Mr. Kalustyan's
benefits for a period of six (6) months after the termination date, or (ii)
after the Seventh-Month Anniversary Date, Parent will continue to pay Mr.
Kalustyan's salary at the rate in effect as of the Closing Date and Mr.
Kalustyan's benefits for a period of six (6) months after the termination
date.
Each of the Merger Agreement, the Tender Agreements, the Yablonsky
Employment Agreement, the Manzetti Employment Agreement, the Russell
Employment Agreement and the Kalustyan Employment
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Agreement contains other terms and conditions. The foregoing description of
certain terms and provisions of such agreements is qualified in its entirety
by reference to the text of such agreements, which are filed as exhibits to
the Schedule 14D-1, which may be examined at, and copies thereof may be
obtained from, the offices of the Commission in the manner set forth in
Section 8 (except that copies are not available at the regional offices of the
Commission), and are available via EDGAR at the Commission's website.
Miscellaneous. No appraisal rights are available in connection with the
Offer. However, if the Merger is consummated, stockholders of the Company may
have certain rights under Delaware law to demand appraisal of, and seek the
payment in cash of the fair value of, their Shares. Such rights, if the
statutory procedures are strictly complied with, could lead to a judicial
determination of the fair value (which, under Delaware law, excludes any
element of value arising from the accomplishment or expectation of the Merger)
required to be paid in cash to such dissenting holders for their Shares. Any
such judicial determination of the fair value of Shares could be based upon
considerations other than or in addition to the price paid in the Offer and
the market value of the Shares. The value so determined could be more or less
than the purchase price per Share paid pursuant to the Offer or the
consideration per Share to be paid in the Merger. The foregoing summary of the
rights of dissenting shareholders does not purport to be a complete statement
of the procedures to be followed by stockholders desiring to exercise their
appraisal rights. The preservation and exercise of appraisal rights are
conditioned on strict adherence to the applicable provisions of Delaware law.
A more complete description of appraisal rights under Delaware law will be
sent to stockholders of the Company if the merger is or is to be consummated.
The Merger will have to comply with any federal law applicable at the time.
In the event that the Merger is consummated more than one year after
termination of the Offer and Purchaser has become an affiliate of the Company
as a result of the Offer, or the Merger provides for the payment of
consideration less than that paid pursuant to the Offer, and in certain other
circumstances, Purchaser may be required to comply with Rule 13e-3 under the
Exchange Act. If applicable, Rule 13e-3 would require, among other things,
that certain financial information concerning the Company and certain
information relating to the fairness of such transaction and the consideration
offered to minority stockholders be filed with the Commission and distributed
to minority stockholders prior to the consummation of such transaction.
Purchaser does not believe that Rule 13e-3 will be applicable to the Merger.
Upon the completion of the Offer, Logica intends to conduct a detailed
review of the Company and its assets, corporate structure, dividend policy,
capitalization, operations, properties, policies, management, and personnel
and consider, subject to the terms of the Merger Agreement, what, if any,
changes would be desirable in light of the circumstances which then exist and
reserves the right to effect such actions or changes. Such changes could
include changes in the Company's business, corporate structure, Certificate of
Incorporation, By-Laws, capitalization, Company Board, management or dividend
policy, although Logica has no current plans with respect to any of such
matters, except as disclosed in this Offer to Purchase. Upon consummation of
the Offer, Logica intends to elect its representatives to the Company Board as
provided for in the Merger Agreement.
Except as noted in this Offer to Purchase, Logica has no present plans or
proposals that would result in an extraordinary corporate transaction, such as
a merger, reorganization, liquidation, or sale or transfer of assets,
involving the Company or any of its subsidiaries, or any material changes in
the Company's corporate structure, business or composition of its management
or personnel.
Whether or not Purchaser purchases Shares pursuant to the Offer, subject to
the terms of the Merger Agreement, Logica expressly reserves the right to
acquire, following consummation or termination of the Offer, and may
thereafter acquire, subject to the availability of Shares at favorable prices
and the availability of financing, additional Shares through open market
purchases, privately negotiated transactions, another tender offer or
otherwise. Any such purchases of additional Shares might be on terms which are
the same as, or more or less favorable than, those of this Offer. In any
event, Logica is under no obligation to effect any such purchases. Logica also
reserves the right to dispose of any or all Shares acquired by it.
30
<PAGE>
12. SOURCE AND AMOUNT OF FUNDS. The total amount of funds required by Logica
to purchase all of the Shares pursuant to the Offer and to pay related fees
and expenses is estimated to be approximately $38 million (the "Total Funds
Amount"). Purchaser plans to obtain all funds needed for the Offer and the
Merger and to pay related fees and expenses through capital contributions and
advances that will be made by Logica plc and Parent. Logica plc plans to
obtain funds for such capital contributions and advances from cash accounts
and available lines of credit or credit facilities to be established by Logica
plc prior to the acceptance of and payment for Shares in the Offer. Logica plc
has not conditioned the Offer on obtaining financing and Logica plc has
available in its cash accounts and under existing lines of credit amounts in
excess of the Total Funds Amount.
Logica anticipates that any indebtedness incurred to fund the Offer and the
Merger will be repaid from a variety of sources, which may include, but may
not be limited to, funds generated internally by Logica and its affiliates,
bank refinancing, and the public or private sale of debt securities. Decisions
concerning the method of repayment will be made based on Logica's review from
time to time of the feasibility of particular actions and on prevailing
interest rates and market conditions.
13. CERTAIN CONDITIONS OF THE OFFER. The Merger Agreement provides that
Purchaser shall not be required to accept for payment, or to purchase or to
pay for, any tendered Shares, and Purchaser may terminate or amend the Offer
and may postpone the purchase of, and payment for, the Shares if: (i) there
shall not have been validly tendered and not withdrawn immediately prior to
the expiration of the Offer, at least that number of Shares that, when taken
as a whole with all the other Shares owned or acquired by Purchaser (whether
pursuant to the Offer or otherwise), constitutes at least the Minimum Share
Condition; (ii) prior to the time of payment for any such Shares, any waiting
period (and any extension thereof) applicable to the Offer under the HSR Act,
shall not have expired or otherwise been terminated; or (iii) at any time on
or after the date of the Merger Agreement and prior to the time of payment for
any such Shares, any of the following events shall have occurred:
(a) there shall be in effect a preliminary or permanent injunction or other
order, decree or ruling by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission, or a statute,
rule, regulation or executive order shall have been promulgated or enacted by
a governmental authority (or, in the case of an action or proceeding before or
by any governmental, regulatory or administrative agency or commission or
governmental authority, any of the foregoing shall be threatened or pending)
which (1) restrains or prohibits the making of the Offer or the consummation
of the Offer, (2) prohibits or restricts the ownership or operation by
Purchaser (or any of its subsidiaries) of any portion of the Company's or
Company subsidiaries' business, properties or assets which is material to the
Company as a whole, (3) imposes any material limitation on the ability of
Purchaser or Parent effectively to acquire or to hold or to exercise full
rights of ownership of the Shares, including, without limitation, the right to
vote the Shares purchased by Purchaser or Parent on all matters presented to
the shareholders of the Company, (4) imposes any limitations on the ability of
Parent or any of its subsidiaries to control in any material respect the
business, properties and operations of the Company, or (5) which otherwise
results in a Company Material Adverse Effect. A "Company Material Adverse
Effect" shall mean a material adverse effect on the current business, results
of operations or financial condition of the Company and its subsidiaries taken
as a whole, other than any actions, omissions, changes, events or effects that
(1) are primarily related to a general drop in stock prices in the United
States or the United Kingdom that are primarily due to political or economic
turmoil, or (2) are primarily related to or result from the announcement or
pendency of the Offer and/or the Merger, including disruptions to the
Company's business or the business of its subsidiaries, and their respective
employees, customers and suppliers; provided, however, that fully diluted
earnings per share (calculated in accordance with US GAAP consistently
applied) of the Company for the fiscal quarter ended September 30, 1998 of
$0.00 or more shall not be deemed to have a Company Material Adverse Effect;
(b) any of the representations and warranties of the Company contained in
the Merger Agreement (1) specifically concerning the Customer Contracts (as
such term is defined in the Merger Agreement), or (2) that are qualified as to
Company Material Adverse Effect shall not have been, or shall cease to be,
true and correct in all material respects (whether because of circumstances or
events occurring in whole or in part prior to, on or after the date of the
Merger Agreement), or any of the representations and warranties of the Company
set forth in the Merger
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<PAGE>
Agreement that are not so qualified shall not have been, or cease to be, true
and correct (whether because of circumstances or events occurring in whole or
in part prior to, on or after the date of the Merger Agreement) under
circumstances in which such failure to be true and correct results in a
Company Material Adverse Effect;
(c) there shall have occurred (1) any general suspension of, or limitation
on prices for, or trading in, securities on the New York Stock Exchange, the
American Stock Exchange or the Nasdaq Stock Market which shall continue for
more than 24 hours, (2) a declaration of a banking moratorium or any
suspension of payments in respect of banks in the United States or the United
Kingdom (whether or not mandatory), (3) a commencement of a war, armed
hostilities or other international or national calamity directly or indirectly
involving the United States or the United Kingdom which has a material adverse
effect on Logica plc's ability to borrow sufficient funds under its bank
facilities to purchase and pay for the Shares pursuant to the Offer and the
Merger in accordance with the terms of the Merger Agreement, or (4) any
limitation (whether or not mandatory) by any United States or United Kingdom
governmental authority or agency on the extension of credit by banks or other
financial institutions, which has a material adverse effect on Logica plc's
ability to borrow sufficient funds under its bank facilities to purchase and
pay for the Shares pursuant to the Offer and the Merger in accordance with the
terms of the Merger Agreement;
(d) a tender or exchange offer for some portion of or all the Shares shall
have been publicly proposed to be made or shall have been made by another
person with respect to the Shares;
(e) the Merger Agreement shall have been terminated in accordance with its
terms;
(f) since the date of the Merger Agreement, there has occurred any change
that, when taken together with all other such changes, has a Company Material
Adverse Effect;
(g) the Company shall not have performed all obligations required to be
performed by it under the Merger Agreement, including, without limitation, the
covenants contained in Article 2, 6 or 7 thereof, except where any failure to
perform (1) would, individually or in the aggregate, not materially impair or
significantly delay the ability of Purchaser to consummate the Offer; (2) has
been caused by or results from a material breach of the Merger Agreement by
Parent or Purchaser; or (3) does not have a Company Material Adverse Effect
(provided, however, that the foregoing exceptions shall not apply to the
covenants contained in Article 2 of the Merger Agreement);
(h) Parent shall have learned that any person, entity or "group" (within the
meaning of Section 13(d) of the Exchange Act) shall have acquired beneficial
ownership of more than 5% of the Shares, through the acquisition of Shares,
the formation of a group or otherwise, or shall have been granted any right,
option or warrant, conditional or otherwise, to acquire ownership of more than
5% of the Shares; provided, however, that the acquisition of beneficial
ownership of more than 5% of the Shares but less than 15% of the Shares by any
such person, entity or "group" as contemplated by the foregoing shall not be
deemed a failure of this condition provided that such Shares were acquired and
are held by such person, entity or "group" solely as a passive investment and
not (1) with a purpose or effect of changing or influencing control of the
Company, or (2) in connection with or as a participant in any transaction
having that purpose or effect, in each case other than the Offer;
(i) any consent, authorization, order or approval of (or filing or
registration with) any governmental commission, board, other regulatory body
or other third party required to be made or obtained by the Company or any of
its subsidiaries or affiliates in connection with the execution, delivery and
performance of this Agreement shall not have been obtained or made, except
where the failure to have obtained or made any such consent, authorization,
order, approval, filing or registration, would not have a Company Material
Adverse Effect;
(j) any principal stockholder who has executed a Tender Agreement shall have
failed to tender his or her Shares or the option set forth in Paragraph 3 of
any of the Tender Agreements shall not be in full force and effect in
accordance with the terms thereof, or any United States federal or state court
of competent jurisdiction shall have issued an injunction or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
enforcement of any of the terms of any Tender Agreement; or
32
<PAGE>
(k) the Company is unable to obtain waivers (on terms reasonably
satisfactory to Parent and Purchaser) with respect to any default,
termination, acceleration of payment or performance or modification clause
contained in any contract, agreement, commitment, or lease, to which the
Company or any of its subsidiaries is a party or by which the Company or any
of its subsidiaries, or their respective properties or assets is bound, except
where the failure to have so obtained such waiver or waivers does not have a
Company Material Adverse Effect.
Pursuant to the Merger Agreement, the foregoing conditions (i) may be
asserted by Purchaser or Parent regardless of the circumstances (including any
action or inaction by Purchaser or any of its affiliates other than a material
breach of the Merger Agreement), and (ii) are for the sole benefit of
Purchaser, Parent and their respective affiliates. The foregoing conditions
may be waived by Parent in whole or in part at any time and from time to time
in the sole discretion of Parent. The conditions may be considered to be
material to the Offer. The failure by Purchaser or Parent at any time to
exercise any of the foregoing rights will not be deemed a waiver of any other
rights and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
See Section 11 for a description of certain representations, warranties,
covenants and agreements of the Company under the Merger Agreement, the breach
or failure to satisfy of which may constitute a failure to satisfy certain of
the conditions to the Offer.
14. DIVIDENDS AND DISTRIBUTIONS. If, on or after the date of the Merger
Agreement, the Company should (i) split, combine or otherwise change the
Shares or its capitalization, (ii) issue or sell any additional securities of
the Company or otherwise cause an increase in the number of outstanding
securities of the Company (except for Shares issuable upon the exercise of
Options outstanding on the date of the Merger Agreement), or (iii) acquire
currently outstanding Shares or otherwise cause a reduction in the number of
outstanding Shares, then, without prejudice to the Purchaser's rights
described under Sections 1 and 13, Purchaser, in its sole discretion, may make
such adjustments as it deems appropriate in the purchase price and other terms
of the Offer and the Merger, including, without limitation, the amount and
type of securities offered to be purchased.
15. CERTAIN LEGAL MATTERS.
General. Except as described below, based upon discussions between Purchaser
and the Company and the examination by Purchaser of available information
filed by the Company with the Commission and other publicly available
information concerning the Company, Purchaser is not aware of any license or
regulatory permit that appears to be material to the business of the Company
and the Company's subsidiaries, taken as a whole, that might be adversely
affected by the acquisition of Shares by Purchaser pursuant to the Offer or,
except as set forth below, of any approval or any other action by any domestic
(federal or state) or foreign governmental, administrative or regulatory
authority that would be required for the acquisition or ownership of Shares by
Purchaser pursuant to the Offer. Should any such approval or other action be
required, it is presently contemplated that such approval or action would be
sought. Although Purchaser does not presently intend to delay acceptance for
payment of Shares tendered pursuant to the Offer pending the receipt of any
such approval or the outcome of any such actions, there can be no assurance
that any such approval or other action, if needed, would be obtained, or would
be obtained without substantial conditions, or that adverse consequences might
not result to the Company's business or that certain parts of the Company's
business might not have to be disposed of in the event that such approvals
were not obtained or such other actions were not taken in order to obtain any
such approval or other action. If certain types of adverse actions are taken
with respect to the matters discussed below, Purchaser could decline to accept
for payment any Shares tendered. Purchaser's obligation under the Offer to
accept the Shares for payment is subject to certain conditions, including
conditions relating to the legal matters discussed in this Section 15. See
Section 13.
Antitrust. The Offer and Merger are subject to the HSR Act, which provides
that certain acquisition transactions may not be consummated unless certain
information has been furnished to the Federal Trade Commission ("FTC") and the
Antitrust Division of the Department of Justice and certain waiting period
requirements have been satisfied. Each of Logica and the Company intends to
file a Notification and Report Form under the HSR Act with respect to the
Offer on or about October 8, 1998.
33
<PAGE>
Under the provisions of the HSR Act applicable to the Offer, the purchase of
Shares pursuant to the Offer may not be consummated until the expiration of a
15-calendar day waiting period following the filing by Logica and the Company.
Accordingly, assuming the filing is in substantial compliance with the HSR
Act, the waiting period will expire at 11:59 p.m., New York City time, on
October 23, 1998 (assuming an October 8, 1998 filing date), unless earlier
terminated by the FTC and the Antitrust Division. However, if either the FTC
or the Antitrust Division requests additional information or documents from
Logica or the Company within such initial waiting period, the initial waiting
period would be extended for an additional ten days from the date of
substantial compliance by Logica or the Company, as the case may be with such
request. Thereafter, the waiting period may be extended only by a court order
or with the consent of Logica or the Company, as the case may be. Each of the
parties has requested that the FTC and the Antitrust Division grant early
termination of the applicable waiting period, but there can be no assurance
that such request will be granted.
The FTC and the Antitrust Division frequently scrutinize the legality under
the antitrust laws of transactions such as the Purchaser's acquisition of
Shares pursuant to the Offer. At any time before or after the Purchaser's
acceptance for payment of Shares, the FTC or the Antitrust Division could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the acquisition of Shares
pursuant to the Offer or otherwise or seeking divestiture of Shares acquired
by Purchaser or divestiture of substantial assets of Purchaser or its
subsidiaries. Private parties and state attorney generals may also bring legal
action under the antitrust laws under certain circumstances. Based upon the
Purchaser's discussions with the Company and its examination of publicly
available information with respect to the Company, Purchaser believes that the
acquisition by Purchaser of the Shares will not violate the antitrust laws.
Nevertheless, there can be no assurance that a challenge to the Offer on
antitrust grounds will not be made, or, if such a challenge is made, of the
result.
State Takeover Laws. The Company is incorporated under the laws of the State
of Delaware. Section 203 of the DGCL limits the ability of a Delaware
corporation to engage in business combinations with "interested stockholders"
(defined as any beneficial owner of 15% or more of the outstanding voting
stock of the corporation) unless, among other things, the corporation's board
of directors has given its prior approval to either the business combination
or the transaction which resulted in the stockholder becoming an "interested
stockholder." The Company has represented in the Merger Agreement that it
properly elected that Section 203 of the DGCL be inapplicable to the offer,
the Merger and the transactions contemplated in the Merger Agreement. At a
meeting on September 29, 1998, the Company Board approved the Merger
Agreement, the Merger, the Offer and the Purchaser's purchase of Shares
pursuant to the Offer. Accordingly, the provisions of Section 203 of the DGCL
have been satisfied with respect to the offer and the Merger and such
provisions will not delay the consummation of the Merger.
A number of states have adopted laws and regulations applicable to offers to
acquire securities of corporations which are incorporated in such states
and/or which have substantial assets, stockholders, principal executive
offices or principal places of business therein. In Edgar v. MITE Corporation,
the Supreme Court of the United States held that the Illinois Business
Takeover Statute, which made the takeover of certain corporations more
difficult, imposed a substantial burden on interstate commerce and was
therefore unconstitutional. In CTS Corporation v. Dynamics Corporation of
America, however, the Supreme Court of the United States held that as a matter
of corporate law, and in particular, those laws concerning corporate
governance, a state may constitutionally disqualify an acquiror of "control
shares" (i.e., shares representing ownership in excess of certain voting power
thresholds) of a corporation incorporated in such state and meeting certain
other judicial requirements from exercising voting power with respect to those
shares without the approval of a majority of the disinterested stockholders.
Subsequently, a number of Federal courts ruled that various state takeover
statutes were unconstitutional insofar as they apply to corporations
incorporated outside the state of enactment.
Purchaser does not believe that any of the takeover laws adopted by any
other states in which the Company conducts business applies by its terms to
the Offer or the Merger Agreement, and Purchaser has not taken steps
34
<PAGE>
to comply with any such takeover law. Should any person seek to apply any
state takeover law, Purchaser will take such action as then appears desirable,
which may include challenging the validity or applicability of any such
statute in appropriate court proceedings. In the event it is asserted that one
or more state takeover laws is applicable to the Offer, the Merger or the
Merger Agreement and an appropriate court does not determine that such law is
inapplicable or invalid as applied to the Offer, the Merger or the Merger
Agreement, Purchaser may be required to file certain information with, or
receive approvals from, the relevant state authorities. In addition, if
enjoined, Purchaser may be unable to accept for payment any Shares tendered
pursuant to the Offer or be delayed in continuing or consummating the Offer
and the Merger. In such case, Purchaser may not be obligated to accept for
payment any Shares tendered. See Section 13.
16. FEES AND EXPENSES. DLJ is acting as financial advisor to Logica plc,
Parent and Purchaser in connection with the Merger Agreement and is also
acting as Dealer Manager in connection with the Offer. In connection with the
transaction, Parent has agreed to pay DLJ a financial advisory fee of
$800,000, $200,000 of which is payable upon the commencement of the Offer and
the remainder is payable upon consummation of the Merger. Parent has also
agreed to reimburse DLJ for its reasonable out-of-pocket expenses (including
reasonable fees and expenses of its legal counsel) and to indemnify DLJ
against certain liabilities and expenses in connection with its services as
Dealer Manager and financial advisor, including certain liabilities under the
federal securities laws.
Parent has retained D.F. King & Co., Inc. to act as the Information Agent
and ChaseMellon Shareholder Services, L.L.C. to act as the Depositary in
connection with the Offer. The Information Agent may contact holders of Shares
by mail, facsimile, telephone, telex, telegraph or in person and may request
brokers, dealers or other nominee holders to forward the Offer materials to
beneficial owners of Shares. The Information Agent and the Depositary each
will receive reasonable and customary compensation for such services, plus
reimbursement for certain out-of-pocket expenses. Parent has also agreed to
indemnify the Information Agent and the Depositary against certain liabilities
and expenses in connection with the Offer, including certain liabilities under
the federal securities laws. Neither the Information Agent nor the Depositary
has been retained to make solicitations or recommendations in connection with
the Offer.
Purchaser will not pay any fees or commissions to any broker or dealer or
other person (other than the Dealer Manager) in connection with the
solicitation of tenders of Shares pursuant to the Offer. Brokers, dealers,
banks and trust companies will be reimbursed by Purchaser upon request for
customary mailing and handling expenses incurred by them in forwarding
material to their customers.
17. MISCELLANEOUS. The Offer is being made to all holders of Shares.
Purchaser is not aware of any jurisdiction where the making of the Offer is
prohibited by any administrative or judicial action pursuant to any valid
state statute. If Purchaser becomes aware of any valid state statute
prohibiting the making of the Offer or the acceptance of Shares pursuant
thereto, Purchaser will make a good faith effort to comply with any such state
statute. If, after such good faith effort, Purchaser cannot comply with any
such state statute, the Offer will not be made to (nor will tenders be
accepted from or on behalf of) the holders of Shares in such state. In any
jurisdiction where the securities, blue sky or other laws require the Offer to
be made by a licensed broker or dealer, the Offer shall be deemed to be made
on behalf of Purchaser by the Dealer Manager or by one or more registered
brokers or dealers licensed under the laws of such jurisdiction.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION ON BEHALF OF PURCHASER, PARENT, LOGICA PLC OR THE COMPANY NOT
CONTAINED IN THIS OFFER TO PURCHASE OR IN THE LETTER OF TRANSMITTAL, AND IF
GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED.
35
<PAGE>
Pursuant to Rule 14d-3 promulgated under the Exchange Act, Purchaser, Parent
and Logica plc have filed with the Commission the Schedule 14D-1 (including
exhibits), furnishing certain additional information with respect to the
Offer. The Schedule 14D-1 and any amendments thereto, including exhibits, may
be inspected at, and copies may be obtained from, the same places and in the
same manner as set forth in Section 8 (except that they will not be available
at the regional offices of the Commission).
LOGICA PLC
LOGICA INC.
LOGICA ACQUISITION CORP.
October 7, 1998
36
<PAGE>
ANNEX I
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER AND PARENT
The following tables set forth the name, age, current business address and
present principal occupation and citizenship or employment, and material
occupations, positions, offices or employment for the past five years of each
director and executive officer of Purchaser and Parent. The current business
address of each such person is 32 Hartwell Avenue, Lexington, Massachusetts
02421, except the current business address for each of Mr. Given and Dr. Read
is Stephenson House, 75 Hampstead Road, London NW1 2PL, United Kingdom. Each
such person is a citizen of the United States except for Messrs. Webb and
Given, Dr. Read and Ms. Horsfall who are citizens of the United Kingdom.
DIRECTORS AND EXECUTIVE OFFICERS OF PURCHASER
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PURCHASER
- ---- --- -----------------------
<S> <C> <C>
Corey Torrence.................................. 40 President and Director
Douglas Webb.................................... 37 Vice President and Director
</TABLE>
COREY TORRENCE. Mr. Torrence became the President and a Director of Logica
Acquisition Corp. in connection with its formation in September 1998. Mr.
Torrence joined Logica Inc. as President, Chief Executive Officer and a
Director in October 1997 and has been an Executive Committee Member of Logica
plc since October 1997. He was previously employed by AT&T Solutions, where he
was Managing Partner of the company's Supply Chain Management Consulting
Practice from 1995 until 1997. Mr. Torrence served as Vice President and
General Manager for the U.S. Atlantic Region of SHL Systemhouse Inc. from 1993
until 1995.
DOUGLAS WEBB. Mr. Webb became the Vice President and a Director of Logica
Acquisition Corp. in connection with its formation in September 1998. Mr. Webb
has held the position of Chief Financial Officer of Logica Inc. since 1997 and
has also served as a Director of Logica Inc. since January 1996. From April
1997 to December 1997, Mr. Webb served as the Executive Vice President of the
Communications Division of Logica Inc. From 1996 to 1997, he held the position
of Chief Operating Officer of Logica Inc. From 1995 to 1996, he held the
position of Chief Financial Officer of Logica Inc. He was also Group Financial
Controller of Logica plc from 1994 to 1995. He was previously employed by
Price Waterhouse, where he was employed as a Senior Manager from 1990 to 1994.
DIRECTORS AND EXECUTIVE OFFICERS OF PARENT
<TABLE>
<CAPTION>
NAME AGE POSITION WITH PARENT
- ---- --- --------------------
<S> <C> <C>
Corey Torrence.......... 40 President, Chief Executive Officer and Director
Douglas Webb............ 37 Chief Financial Officer and Director
Karen Roche............. 47 Executive Vice President--Financial Services Division
Mike Maloney............ 42 Executive Vice President--Communications Division
Pauline Horsfall........ 39 Vice President--Human Resources
Jim Cypert.............. 62 Vice President--Asset and Resource Management and
Acting Vice President--Energy and Utilities Division
Dr. Martin Read......... 48 Director
Andrew Given............ 50 Director
</TABLE>
COREY TORRENCE. Mr. Torrence joined Logica Inc. as President, Chief
Executive Officer and a Director in October 1997 and has been an Executive
Committee Member of Logica plc since October 1997. He was
I-1
<PAGE>
previously employed by AT&T Solutions, where he was Managing Partner of the
company's Supply Chain Management Consulting Practice from 1995 until 1997.
Mr. Torrence served as Vice President and General Manager for the U.S.
Atlantic Region of SHL Systemhouse Inc. from 1993 until 1995.
DOUGLAS WEBB. Mr. Webb has held the position of Chief Financial Officer of
Logica Inc. since 1997 and has also served as a Director of Logica Inc. since
January 1996. From April 1997 to December 1997, Mr. Webb served as the
Executive Vice President of the Communications Division of Logica Inc. From
1996 to 1997, he held the position of Chief Operating Officer of Logica Inc.
From 1995 to 1996, he held the position of Chief Financial Officer of Logica
Inc. He was also Group Financial Controller of Logica plc from 1994 to 1995.
He was previously employed by Price Waterhouse, where he was employed as a
Senior Manager from 1990 to 1994.
KAREN ROCHE. Ms. Roche was appointed Executive Vice President--Financial
Services Division of Logica Inc. in 1997. She was previously employed as Vice
President--Financial Products Group of Logica Inc. from 1996 to 1997 and Vice
President--Wholesale Banking Division of Logica Inc. from 1993 to 1995.
MIKE MALONEY. Mr. Maloney joined Logica Inc. as Executive Vice President--
Communications Division in 1997. He was previously employed by Ameritech,
where he served in various capacities from 1995 to 1997, including: General
Manager--Managed Services, Acting Vice President--Alliance Business Sales, and
General Manager--Alliance Business Planning. Mr. Maloney served as Managing
Director--Networked Systems Management Business Development for SHL
Systemhouse from 1993 to 1995.
PAULINE HORSFALL. Ms. Horsfall joined Logica Inc. as Vice President--Human
Resources in 1997. She was previously employed by Logica plc, where she was
Management Development and Training Manager from 1995 to 1997. Ms. Horsfall
served as Director of Human Resources, Sensors Group for Thorn EMI Electronics
from 1993 to 1995.
JIM CYPERT. Mr. Cypert has served as Vice President--Asset and Resource
Management and Acting Vice President--Energy and Utilities Division of Logica
Inc. since 1998. At Logica Inc., Mr. Cypert was also employed as Vice
President--Marketing for the Energy and Utilities Division from 1996 to 1998.
From 1993 to 1996, Mr. Cypert was Vice President of Integration Services for
the Synercom Division at Logica Inc.
DR. MARTIN READ. Dr. Read has been a Director of Logica Inc. since October
1993. Since 1993, he has also been Managing Director and the Chief Executive
of Logica plc. From 1990 to 1993, Dr. Read served as Managing Director of GEC
Marconi Radar and Control Systems Limited and associated companies.
ANDREW GIVEN. Mr. Given has been a Director of Logica Inc. since April 1994.
Mr. Given has also been on the board of Logica plc as Group Finance Director
since April 1990 and has served as Company Secretary for Logica plc since June
1993.
I-2
<PAGE>
ANNEX II
DIRECTORS AND EXECUTIVE OFFICERS OF LOGICA PLC
The following table sets forth the name, age, current business address and
present principal occupation or employment, and material occupations,
positions, offices or employment for the past five years of each director and
executive of Logica plc. The current business address of each such person is
Stephenson House, 75 Hampstead Road, London NW1 2PL, United Kingdom, except
the current business address for each of Messrs. Craig and De Meyere is
Wijnhaven 69, 3011 WJ Rotterdam, The Netherlands, and for Mr. Torrence is
32 Hartwell Avenue, Lexington, Massachusetts 02421. Each such person is a
citizen of the United Kingdom, except Mr. De Meyere, who is a citizen of the
Kingdom of Belgium, Mr. Mamsch, who is a citizen of Germany, Mr. Torrence, who
is a citizen of the United States of America and Mr. Vinken, who is a citizen
of The Netherlands.
<TABLE>
<CAPTION>
NAME AGE POSITION
- ---- --- --------
<S> <C> <C>
Sir Frank Barlow........ 68 Non-Executive Chairman, Board Member, Executive Committee
Member and Non-Executive Director
Dr. Martin Read......... 48 Managing Director and Chief Executive, Board Member and
Executive Committee Member
Mario Anid.............. 40 Executive Committee Member and Corporate Development Director
Duncan Craig............ 49 Board Member, Executive Committee Member and Regional Director for
Continental European Operations
Wilfried De Meyere...... 45 Executive Committee Member and Regional Director
for Continental European Operations
Elizabeth Filkin........ 57 Non-Executive Director
Andrew Given............ 50 Board Member, Executive Committee Member, Group Finance
Director and Company Secretary
Royston Hoggarth........ 36 Executive Committee Member and Director of International
Lines of Business
Laurence Julien......... 52 Executive Committee Member and Supervisory Managing Director
of Logica UK Limited
Jim McKenna............. 43 Board Member, Executive Committee Member, Group Personnel
Director and Regional Director for Asia Pacific Region
Helmut Mamsch........... 53 Non-Executive Director
Sam Sassoon............. 53 Executive Committee Member and Supervisory
Managing Director of Logica UK Limited
Corey Torrence.......... 40 Executive Committee Member and President and Chief Executive
Officer of Logica Inc.
Pierre Vinken........... 70 Non-Executive Director
Richard Wakeling........ 51 Non-Executive Director
</TABLE>
SIR FRANK BARLOW. Sir Frank joined the board as a Non-Executive Director in
January 1995 and became Chairman in November 1995. Among the many companies of
which Sir Frank serves as Director, he has served as a Director of the
Economist Newspaper Ltd since 1984 and served as Managing Director of Pearson
plc from 1986 until his retirement at the end of 1996. Sir Frank was knighted
in the Queen's New Year's Honours List 1998 for services to the newspaper
industry.
II-1
<PAGE>
DR. MARTIN READ. Dr. Read joined the board as Managing Director and Chief
Executive in July 1993. He has also served as a Director of Logica Inc. since
October 1993. From 1990 to 1993, Dr. Read served as Managing Director of GEC
Marconi Radar and Control Systems Limited and associated companies.
MARIO ANID. Mr. Anid joined the Executive Committee in 1995 as Corporate
Development Director. He was previously Corporate Development Director at Sema
Group plc from 1993 until 1995.
DUNCAN CRAIG. Mr. Craig joined the board in 1991 and is Regional Director
for Continental European Operations. He joined Logica plc in 1971 and has been
based in The Netherlands since 1974.
WILFRIED DE MEYERE. Mr. De Meyere joined the Executive Committee in July
1998 as Regional Director for Continental European Operations. From 1994 to
1998, he was Managing Director of Logica BV. From 1992 to 1996, Mr. De Meyere
was the Chief Executive of Logica SA/NV.
ELIZABETH FILKIN. Ms. Filkin joined the board as a Non-Executive Director in
January 1995. Ms. Filkin has also been the Adjudicator for the Inland Revenue,
Customs and Excise, Contributions Agency and Contributions Unit Northern
Ireland since June 1993. She has also served as a Non-Executive Director at
the Britannia Building Society since 1992.
ANDREW GIVEN. Mr. Given joined the board as Group Finance Director in April
1990 and has served as the Company Secretary since June 1993. Mr. Given has
also served as a Director of Logica Inc. since April 1994.
ROYSTON HOGGARTH. Mr. Hoggarth joined the Executive Committee in December
1997, as Director of International Lines of Business, responsible for Finance,
Telecoms and Energy and Utilities. From 1993 to 1997, Mr. Hoggarth served as
General Manager at IBM, where he was responsible for the group's retail brands
worldwide.
LAURENCE JULIEN. Mr. Julien joined the Executive Committee in 1996 as
Supervisory Managing Director of Logica UK Limited. He joined Logica in 1980
and has held line management positions since 1984.
JIM MCKENNA. Mr. McKenna joined the Executive Committee in 1993 as Group
Personnel Director and was appointed to the board in February 1998. Since 1996
he has also been the Regional Director for the Asia Pacific Region. From 1985
to 1993 Mr. McKenna served as Personnel Director of GEC Marconi Radar and
Control Systems Limited and associated companies.
HELMUT MAMSCH. Mr. Mamsch joined the board as a Non-Executive Director in
September 1997. He has also served as Director of VEBA AG since January 1998
and a Director of MEMEC Inc. (USA) since May 1998. From 1989 until 1996, Mr.
Mamsch served as Director of Raab Karcher U.K., Ltd.
SAM SASSOON. Mr. Sassoon joined the Executive Committee in November 1996 as
a Supervisory Managing Director of Logica UK Limited. From January 1993 until
June 1996, Mr. Sassoon served as Vice President and General Manager of the
European outsourcing group of Unisys.
COREY TORRENCE. Mr. Torrence joined the Executive Committee in October 1997
as President and Chief Executive of Logica Inc. He has also served as a
Director of Logica Inc. since October 1997. From 1995 until 1997, Mr. Torrence
served as Managing Partner of the Supply Chain Management Consulting Practice
for AT&T Solutions. From 1993 until 1995, Mr. Torrence served as Vice
President and General Manager for the U.S. Atlantic Region of SHL Systemhouse
Inc.
PIERRE VINKEN. Mr. Vinken joined the board in April 1990 and is a Non-
Executive Director, having previously served on the board of directors for
Logica BV since 1985. He was formerly chairman of Reed Elsevier plc until his
retirement in 1995. He was also a director of Pearson plc and The Economist
Group.
RICHARD WAKELING. Mr. Wakeling joined the board as a Non-Executive Director
in January 1995. He is a Non-Executive Director of Staveley Industries, Oxford
Instruments, and Henderson Geared Income & Growth Trust. He is also Chairman
of Henderson Technology Trust.
II-2
<PAGE>
Manually signed facsimile copies of the Letter of Transmittal will be
accepted. Letters of Transmittal and certificates evidencing Shares and any
other required document should be sent or delivered by each holder of Shares
or his broker, dealer, commercial bank, trust company or other nominee to the
Depositary at one of its addresses set forth below.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Mail: By Overnight Delivery: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway
South Hackensack, New Jersey Mail Drop-Reorg 13th Floor
07606 Ridgefield Park, New New York, New York
Jersey 07660 10271
Attention:
Reorganization
Department
Facsimile Transmission:
(201) 329-8936
(For Eligible Institutions Only)
CONFIRM BY TELEPHONE:
(201) 296-4860
----------------
Any questions or requests for assistance or additional copies of this Offer
to Purchase, the Letter of Transmittal and the Notice of Guaranteed Delivery
and related materials may be directed to the Information Agent or the Dealer
Manager at their respective locations and telephone numbers set forth below.
Holders of Shares may also contact their broker, dealer, commercial banks or
trust companies for assistance concerning the Offer.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
CALL TOLL FREE:
(800) 714-3312
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
277 Park Avenue
New York, New York 10172
Call Collect: (212) 892-7995
<PAGE>
LETTER OF TRANSMITTAL
TO TENDER SHARES OF COMMON STOCK
OF
CARNEGIE GROUP, INC.,
PURSUANT TO THE OFFER TO PURCHASE DATED OCTOBER 7, 1998
BY
LOGICA ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY
OF
LOGICA INC.,
A WHOLLY OWNED SUBSIDIARY
OF
LOGICA PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, NOVEMBER 4, 1998, UNLESS THE OFFER IS EXTENDED.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Mail: By Overnight Delivery: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway 13th Floor
South Hackensack, Mail Drop-Reorg New York,
New Jersey 07606 Ridgefield Park, New Jersey 07660 New York 10271
Attention:
Reorganization Department
Facsimile Transmission:
(201) 329-8936 (For Eligible Institutions Only)
CONFIRM BY TELEPHONE:
(201) 296-4860
---------------
Your bank or broker can assist you in completing this Letter of Transmittal.
The instructions enclosed with this Letter of Transmittal must be followed and
should be read carefully. Questions and requests for additional copies of the
Offer to Purchase (as hereinafter defined) and this Letter of Transmittal may
be directed to the Information Agent as indicated in Instruction 10.
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE NUMBER OTHER THAN AS
LISTED ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
<PAGE>
THIS LETTER OF TRANSMITTAL IS TO BE COMPLETED BY HOLDERS OF SHARES EITHER IF
CERTIFICATES ARE TO BE FORWARDED HEREWITH OR IF A TENDER OF SHARES IS TO BE
MADE BY BOOK-ENTRY TRANSFER TO THE ACCOUNT MAINTAINED BY CHASEMELLON
SHAREHOLDER SERVICES, L.L.C. (THE "DEPOSITARY") AT THE DEPOSITORY TRUST
COMPANY ("DTC") (THE "BOOK-ENTRY TRANSFER FACILITY") (PURSUANT TO THE
PROCEDURES SET FORTH IN SECTION 3, "PROCEDURE FOR ACCEPTING THE OFFER AND
TENDERING SHARES," OF THE OFFER TO PURCHASE (AS HEREINAFTER DEFINED)). HOLDERS
OF SHARES WHOSE CERTIFICATES ARE NOT IMMEDIATELY AVAILABLE, OR WHO ARE UNABLE
TO DELIVER THEIR CERTIFICATES OR CONFIRMATION OF THE BOOK-ENTRY TENDER OF
THEIR SHARES INTO THE DEPOSITARY'S ACCOUNT AT THE BOOK-ENTRY TRANSFER FACILITY
(A "BOOK-ENTRY CONFIRMATION") AND ALL OTHER DOCUMENTS REQUIRED BY THIS LETTER
OF TRANSMITTAL TO THE DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE (AS SUCH
TERM IS DEFINED IN SECTION 1, "TERMS OF THE OFFER," OF THE OFFER TO PURCHASE),
MUST TENDER THEIR SHARES ACCORDING TO THE GUARANTEED DELIVERY PROCEDURE SET
FORTH IN SECTION 3, "PROCEDURE FOR ACCEPTING THE OFFER AND TENDERING SHARES,"
OF THE OFFER TO PURCHASE. SEE INSTRUCTION 2. DELIVERY OF DOCUMENTS TO THE
BOOK-ENTRY TRANSFER FACILITY DOES NOT CONSTITUTE DELIVERY TO THE DEPOSITARY.
<TABLE>
<CAPTION>
DESCRIPTION OF SHARES TENDERED
- ----------------------------------------------------------------------------------------------------
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE(S) AND SHARE(S) TENDERED
(PLEASE FILL IN, IF BLANK) (ATTACH ADDITIONAL SIGNED LIST IF NECESSARY)
- ----------------------------------------------------------------------------------------------------
TOTAL NUMBER
OF SHARES NUMBER
CERTIFICATE EVIDENCED BY OF SHARES
NUMBER(S)* CERTIFICATE(S)* TENDERED**
<S> <C> <C> <C>
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
----------------------------------------------
TOTAL SHARES
- ----------------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by holders tendering Shares by book-entry
transfer.
** Unless otherwise indicated, it will be assumed that all Shares evidenced
by any certificate(s) delivered to the Depositary are being tendered.
See Instruction 4.
The names and addresses of the registered holders should be printed, if not
already printed above, exactly as they appear on the certificates representing
the Shares tendered hereby. The certificates and number of Shares that the
undersigned wishes to tender should be indicated in the appropriate boxes.
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE DEPOSITARY WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution __________________________________________
Account Number ________________ Transaction Code Number ________________
[_]CHECK HERE IF TENDERED SHARES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY PREVIOUSLY SENT TO THE DEPOSITARY AND COMPLETE
THE FOLLOWING:
Name(s) of Registered Owner(s) _________________________________________
Window Ticket Number (if any) __________________________________________
Date of Execution of Notice of Guaranteed Delivery _____________________
Name of Institution which Guaranteed Delivery __________________________
If Delivered by Book-Entry Transfer, Check Box:
[_] DTC
Account Number ________________ Transaction Code Number ________________
<PAGE>
NOTE: SIGNATURES MUST BE PROVIDED BELOW.
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned hereby tenders to Logica Acquisition Corp., a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of Logica Inc., a
Delaware corporation (the "Parent") and a wholly owned subsidiary of Logica
plc, a public limited company organized under the laws of England ("Logica
plc"), the above described shares of common stock, par value $.01 per share
(the "Shares"), of Carnegie Group, Inc., a Delaware corporation (the
"Company"), at a purchase price of $5.00 per Share, net to the seller in cash,
upon the terms and subject to the conditions set forth in the Offer to
Purchase dated October 7, 1998 (the "Offer to Purchase"), receipt of which is
hereby acknowledged, and in accordance with this Letter of Transmittal (which,
together with the Offer to Purchase, constitute the "Offer").
Subject to, and effective upon, acceptance for payment of the Shares
tendered herewith in accordance with the terms and subject to the conditions
of the Offer, the undersigned hereby sells, assigns and transfers to or upon
the order of the Purchaser, all right, title and interest in and to all of the
Shares tendered hereby and irrevocably constitutes and appoints the Depositary
the true and lawful agent and attorney-in-fact of the undersigned with respect
to such Shares, with full power of substitution (such power of attorney being
deemed to be an irrevocable power coupled with an interest), to (i) deliver
certificates for such Shares or transfer ownership of such Shares on the
account books maintained by the Book-Entry Transfer Facility, together, in
either such case, with all accompanying evidences of transfer and
authenticity, to or upon the order of the Purchaser, upon receipt by the
Depositary, as the undersigned's agent, of the purchase price, (ii) present
such Shares for transfer on the books of the Company, and (iii) receive all
benefits and otherwise exercise all rights of beneficial ownership of such
Shares, all in accordance with the terms and subject to the conditions of the
Offer.
The undersigned hereby irrevocably appoints designees of the Purchaser as
the attorneys-in-fact and proxies of the undersigned, each with full power of
substitution, to vote in such manner as each such attorney and proxy or the
substitute for any such attorney and proxy will in the sole discretion of each
such attorney and proxy deem proper, and otherwise act (including pursuant to
written consent) with respect to all the Shares tendered hereby which have
been accepted for payment by the Purchaser prior to the time of such vote or
other action, which the undersigned is entitled to vote at any meeting of
holders of Shares (whether annual or special and whether or not an adjourned
meeting) of the Company, or consent in lieu of any such meeting or otherwise.
This power of attorney and proxy is coupled with an interest in the Company
and in the Shares and is irrevocable and is granted in consideration of, and
is effective upon, the Purchaser's oral or written notice to the Depositary of
its acceptance for payment of such Shares in accordance with the terms of the
Offer. Such acceptance for payment will revoke all prior powers of attorney
and proxies appointed by the undersigned at any time with respect to such
Shares and no subsequent powers of attorney or proxies may be given (and if
given will not be effective) with respect thereto by the undersigned. The
undersigned acknowledges that the Purchaser expressly reserves the right to
require that, in order for Shares to be deemed validly tendered, immediately
upon the acceptance for payment of such Shares, the Purchaser or the
Purchaser's designee is able to exercise full voting and other rights of a
record and beneficial holder, including acting by written consent, with
respect to such Shares.
The undersigned hereby represents and warrants that (i) the undersigned has
full power and authority to tender, sell, assign and transfer the Shares
tendered hereby, and (ii) when the same are accepted for payment by the
Purchaser, the Purchaser will acquire good, marketable and unencumbered title
thereto, free and clear of all liens, restrictions, charges, claims and
encumbrances, and the same will not be subject to any adverse claim. The
undersigned, upon request, will execute and deliver any signature guarantee or
additional documents deemed by the Depositary or the Purchaser to be necessary
or desirable to complete or confirm the sale, assignment and transfer of the
Shares tendered hereby.
<PAGE>
All authority conferred or agreed to be conferred by this Letter of
Transmittal will not be affected by, and will survive, the death or incapacity
of the undersigned, and any obligations of the undersigned hereunder will be
binding upon the heirs, executors, administrators, trustees in bankruptcy,
personal and legal representatives, successors and assigns of the undersigned.
Except as stated in the Offer to Purchase, this tender is irrevocable,
provided that Shares tendered pursuant to the Offer may be withdrawn at any
time prior to the Expiration Date.
The undersigned understands that the acceptance for payment of tendered
Shares pursuant to any of the procedures described in Section 3, "Procedure
for Accepting the Offer and Tendering Shares," of the Offer to Purchase and in
the instructions hereto will constitute a binding agreement between the
undersigned and the Purchaser upon the terms and subject to the conditions set
forth in the Offer, including the undersigned's representation and warranty
that (i) the undersigned "owns" the Shares being tendered within the meaning
of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended, and (ii) the tender of such Shares complies with Rule 14e-4. The
undersigned recognizes that under certain circumstances set forth in the Offer
to Purchase, the Purchaser may not be required to accept for payment any of
the Shares tendered hereby.
Unless otherwise indicated herein under "Special Payment Instructions,"
please issue the check for the purchase price and/or return any certificate(s)
for Shares not tendered or not accepted for payment in the names of the
undersigned. Similarly, unless otherwise indicated under "Special Delivery
Instructions," please mail the check for the purchase price and/or return any
certificates for any Shares not tendered or accepted for payment (and
accompanying documents, as appropriate) to the undersigned at the address
appearing under "Description of Shares Tendered." In the event that both the
Special Delivery Instructions and the Special Payment Instructions are
completed, please issue the check for the purchase price and/or return any
certificate(s) for Shares not tendered or accepted for payment in the name of,
and deliver said check and/or certificates to, the person or persons so
indicated. Unless otherwise indicated under "Special Payment Instructions," in
the case of a book-entry delivery of Shares, please credit the account
maintained at the Book-Entry Transfer Facility indicated above with any Shares
not accepted for payment. The undersigned recognizes that the Purchaser has no
obligation pursuant to the Special Payment Instructions to transfer any Shares
from the name of the registered holder thereof if the Purchaser does not
accept for payment any of the Shares so tendered.
<PAGE>
SPECIAL PAYMENT INSTRUCTIONS SPECIAL DELIVERY INSTRUCTIONS
(SEE INSTRUCTIONS 1, 5, 6 AND 7) (SEE INSTRUCTIONS 1, 5, 6 AND 7)
To be completed ONLY if certif- To be completed ONLY if certif-
icate(s) for Shares not tendered icate(s) for Shares not tendered
or not accepted for payment or not accepted for payment
and/or any check for the pur- and/or any check for the pur-
chase price of Shares accepted chase price of Shares purchased
for payment are to be issued in are to be sent to someone other
the name of someone other than than the undersigned, or to the
the undersigned, or if Shares undersigned at an address other
delivered by book-entry transfer than that shown above.
which are not accepted for pay-
ment are to be returned by
credit to an account maintained
at the Book-Entry Transfer Fa-
cility other than the account
indicated above.
Mail [_] check [_] certificate(s)
to:
Name: ___________________________
---------------------------------
Issue [_] check [_] certificate(s) (PLEASE TYPE OR PRINT)
to:
Address: ________________________
Name: ___________________________
---------------------------------
---------------------------------
(PLEASE TYPE OR PRINT) ---------------------------------
(INCLUDE ZIP CODE)
Name(s): ________________________
Address: ________________________
---------------------------------
---------------------------------
(INCLUDE ZIP CODE)
---------------------------------
(Tax Identification or Social
Security Number)
(Also complete Substitute Form
W-9 below)
[_]Credit unpurchased Shares
delivered by Book-Entry
Transfer Facility account set
forth below:
---------------------------------
(Book-Entry Transfer Facility
Account Number, if applicable)
<PAGE>
IMPORTANT:
HOLDERS OF SHARES SIGN HERE
_____________________________________________________________
_____________________________________________________________
SIGNATURES OF HOLDERS OF SHARES
Dated: , 1998
(Must be signed by registered holder(s) exactly as name(s)
appear(s) on stock certificate(s) or on a security position
listing or by person(s) authorized to become registered
holder(s) by certificates and documents transmitted
herewith. If signature is by an officer of a corporation,
attorney-in-fact, executor, administrator, trustee,
guardian, or other person acting in a fiduciary or
representative capacity, please set forth the full title and
see Instruction 5).
Name(s): ____________________________________________________
(PLEASE TYPE OR PRINT)
Capacity (full title): ______________________________________
Address: ____________________________________________________
_____________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: ________________________________
Tax Identification or Social Security No.: __________________
(Also complete Substitute Form W-9 below)
GUARANTEE OF SIGNATURES
(IF REQUIRED--SEE INSTRUCTIONS 1 AND 5)
Authorized Signature: _______________________________________
Name: _______________________________________________________
(PLEASE TYPE OR PRINT)
Title: ______________________________________________________
Name of Firm: _______________________________________________
Address: ____________________________________________________
_____________________________________________________________
(INCLUDE ZIP CODE)
Area Code and Telephone No.: ________________________________
Dated: , 1998
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE OFFER
1. GUARANTEE OF SIGNATURES. No signature guarantee on this Letter of
Transmittal is required if (i) this Letter of Transmittal is signed by the
registered holders of Shares (which term, for purposes of this document, will
include any participant in the Book-Entry Transfer Facility whose name appears
on a security position listing as the owner of Shares) tendered herewith
unless such holders have completed either the box entitled "Special Delivery
Instructions" or "Special Payment Instructions" on this Letter of Transmittal,
or (ii) such Shares are tendered for the account of a member of a registered
national securities exchange or of the National Association of Securities
Dealers, Inc. or a commercial bank or trust company having an office or
correspondent in the United States (each, an "Eligible Institution"). In all
other cases, all signatures on this Letter of Transmittal must be guaranteed
by an Eligible Institution which is a participant in an approved Signature
Guarantee Medallion Program. If the certificate is registered in the name of a
person other than the signer of this Letter of Transmittal, the tendered
certificate must be endorsed or accompanied by appropriate stock powers,
signed exactly as the name or names of the registered owner or owners appear
on the certificate, with the signatures on the certificate or stock powers
guaranteed as aforesaid. See Instruction 5.
2. DELIVERY OF LETTER OF TRANSMITTAL AND CERTIFICATES. This Letter of
Transmittal is to be completed by holders of Shares either if certificates are
to be forwarded herewith or, unless an Agent's Message (as hereinafter
defined) is utilized, if tenders are to be made pursuant to the procedures for
delivery by book-entry transfer set forth in Section 3, "Procedure For
Accepting the Offer and Tendering Shares," of the Offer to Purchase.
Certificates for all physically tendered Shares, or Book-Entry Confirmation,
as the case may be, as well as a properly completed and duly executed Letter
of Transmittal (or facsimile thereof) and any other documents required by this
Letter of Transmittal, must be received by the Depositary at one of its
addresses set forth herein on or prior to the Expiration Date, or the
tendering holder of Shares must comply with the guaranteed delivery procedures
set forth below.
Holders whose certificates for Shares are not immediately available or who
cannot deliver their certificates and all other required documents to the
Depositary on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Shares
pursuant to the guaranteed delivery procedures set forth in Section 3,
"Procedure for Accepting the Offer and Tendering Shares," of the Offer to
Purchase. Pursuant to such procedures, (i) such tender must be made by or
through an Eligible Institution, (ii) a properly completed and duly executed
Notice of Guaranteed Delivery, substantially in the form provided by the
Purchaser, must be received by the Depositary, either by hand delivery, mail,
telegram or facsimile transmission, on or prior to the Expiration Date, and
(iii) the certificates for all physically tendered Shares, in proper form for
transfer, or Book-Entry Confirmation, as the case may be, together with a
properly completed and duly executed Letter of Transmittal (or facsimile
thereof), together with any required signature guarantees, or an Agent's
Message, and any other required documents, must be received by the Depositary
within three National Association of Securities Dealers, Inc. Automated
Quotation System trading days after the date of execution of the Notice of
Guaranteed Delivery.
The term "Agent's Message" means a message transmitted by the Book-Entry
Transfer Facility to, and received by, the Depositary and forming a part of a
Book-Entry Confirmation, which states that such Book-Entry Transfer Facility
has received an express acknowledgment from the participant tendering the
Shares, that such participant has received and agrees to be bound by the terms
of the Letter of Transmittal and that the Purchaser may enforce such agreement
against the participant.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE CERTIFICATES FOR
SHARES AND ALL OTHER REQUIRED DOCUMENTS IS AT THE OPTION AND SOLE RISK OF THE
TENDERING HOLDER OF SHARES AND THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE DEPOSITARY. IF DELIVERY IS BY MAIL, REGISTERED MAIL
WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED, IS RECOMMENDED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ENSURE TIMELY DELIVERY.
<PAGE>
No alternative, conditional or contingent tenders will be accepted and no
fractional Shares will be purchased. All tendering holders of Shares, by
execution of this Letter of Transmittal (or facsimile hereof), waive any right
to receive any notice of the acceptance of their Shares for payment.
3. INADEQUATE SPACE. If the space provided herein is inadequate, the
certificate number and/or the number of Shares should be listed on a separate
signed schedule attached hereto.
4. PARTIAL TENDERS. (Not applicable to holders of Shares who tender by book-
entry transfer). If fewer than all the Shares evidenced by any certificate
submitted are to be tendered, fill in the number of Shares that are to be
tendered in the box entitled "Number of Shares Tendered." In such case, as
soon as practicable after the Expiration Date, new certificates for the
remainder of the Shares that were evidenced by your old certificates will be
sent to you, unless otherwise provided in the appropriate box on this Letter
of Transmittal. All Shares represented by certificates delivered to the
Depositary will be deemed to have been tendered unless otherwise indicated.
5. SIGNATURES ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered owners of the Shares
tendered hereby, the signatures must correspond with the names as written on
the face of the certificates without alteration, enlargement or any change
whatsoever.
If any of the Shares tendered hereby are held of record by two or more joint
owners, all such owners must sign this Letter of Transmittal (or facsimile
hereof).
If any of the Shares tendered hereby are registered in different names on
several certificates, it will be necessary to complete, sign and submit as
many separate Letters of Transmittal (or facsimiles thereof) as there are
different registrations of certificates.
If this Letter of Transmittal (or facsimile hereof) or any certificate or
stock power is signed by a trustee, executor, administrator, guardian,
attorney-in-fact, agent, officer of a corporation or other person acting in a
fiduciary or representative capacity, such person should so indicate when
signing, and proper evidence satisfactory to Purchaser of such person's
authority so to act must be submitted.
When this Letter of Transmittal (or facsimile hereof) is signed by the
registered owners of the Shares listed and transmitted hereby, no endorsements
of certificates or separate stock powers are required unless payment is to be
made, or certificates for Shares not tendered or purchased are to be issued,
to a person other than the registered owner in which case signatures on such
certificates or stock powers must be guaranteed by an Eligible Institution
which is a participant in an approved Signature Medallion Guarantee Program.
If this Letter of Transmittal (or facsimile hereof) is signed other than by
the registered owner of the certificates listed, the certificates must be
endorsed or accompanied by appropriate stock powers, in either case signed
exactly as the name or names of the registered owners appear on the
certificates and signatures on such certificates or stock powers are required
and must be guaranteed by an Eligible Institution which is a participant in an
approved Signature Medallion Guarantee Program, unless the signature is that
of an Eligible Institution which is a participant in an approved Signature
Medallion Guarantee Program.
6. SPECIAL PAYMENT AND DELIVERY INSTRUCTIONS. If a check and/or certificates
for unpurchased or untendered Shares are to be issued in the name of a person
other than the signer of this Letter of Transmittal (or facsimile hereof) or
to an address other than that shown above, the appropriate boxes on this
Letter of Transmittal (or facsimile hereof) should be completed. Holders
tendering Shares by book-entry transfer may request that Shares not purchased
be credited to such account maintained at the Book-Entry Transfer Facility as
such holder of Shares may designate hereon. If no such instructions are given,
such Shares not purchased will be returned by crediting the account at the
Book-Entry Transfer Facility.
7. STOCK TRANSFER TAXES. Except as set forth in this Instruction 7, the
Purchaser will pay or cause to be paid all stock transfer taxes applicable to
the purchase of Shares pursuant to the Offer. If payment of the purchase
<PAGE>
price is to be made to, or if certificates for Shares not tendered or
purchased are to be registered in the name of, any persons other than the
registered owners, or if tendered certificates are registered in the name of
any persons other than the persons signing this Letter of Transmittal (or
facsimile hereof), the amount of any stock transfer taxes (whether imposed on
the registered owner or such other person) payable on account of the transfer
to such person will be deducted from the purchase price unless satisfactory
evidence of the payment of such taxes or exemption therefrom is submitted.
Except as provided in this Instruction 7, it will not be necessary for
transfer tax stamps to be affixed to the certificates listed in this Letter of
Transmittal.
8. WAIVER OF CONDITIONS. The conditions of the Offer may be waived by the
Purchaser, in whole or in part, at any time or from time to time, in the
Purchaser's sole discretion, in the case of any Shares tendered.
9. SUBSTITUTE FORM W-9. Each tendering holder of Shares (or other payee) is
required to provide the Depositary with a correct taxpayer identification
number ("TIN"), generally the holder's social security or federal employer
identification number, and with certain other information, on Substitute Form
W-9, which is provided under "Important Tax Information" below, and to certify
that the holder of Shares (or other payee) is not subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the tendering holder of Shares (or other payee) to 31% federal income
tax withholding on the payment of the purchase price. The box in Part I of the
Substitute Form W-9 may be checked if the tendering holder of Shares (or other
payee) has not been issued a TIN and has applied for a TIN or intends to apply
for a TIN in the near future. If the box in Part I is checked and the
Depositary is not provided with a TIN by the time of payment, the Depositary
will withhold 31% on all such payments of the purchase price until a TIN is
provided to the Depositary.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions or requests for
assistance or for additional copies of the Offer to Purchase, this Letter of
Transmittal, the Notice of Guaranteed Delivery and the Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9 may be
directed to the Information Agent at the address set forth below or from your
broker, dealer, commercial bank, trust company or other nominee.
IMPORTANT: THIS LETTER OF TRANSMITTAL (OR FACSIMILE HEREOF), TOGETHER WITH
ANY REQUIRED SIGNATURE GUARANTEES, OR, IN THE CASE OF A BOOK-ENTRY TRANSFER,
AN AGENT'S MESSAGE, AND ANY OTHER REQUIRED DOCUMENTS, MUST BE RECEIVED BY THE
DEPOSITARY ON OR PRIOR TO THE EXPIRATION DATE.
IMPORTANT TAX INFORMATION
Under federal income tax law, a holder whose tendered Shares are accepted
for payment is required to provide the Depositary with such holder's current
TIN on Substitute Form W-9 below. If such holder is an individual, the TIN is
such holder's social security number. If the Depositary is not provided with
the correct TIN, the holder of Shares or other payee may be subject to a $50
penalty imposed by the Internal Revenue Service (the "IRS"). In addition,
payments that are made to such holder of Shares or other payee with respect to
Shares purchased pursuant to the Offer may be subject to 31% backup
withholding.
Certain holders of Shares (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. In order for a foreign individual to qualify as an
exempt recipient, such individual must submit a statement to the Depositary,
signed under penalties of perjury, attesting to such individual's exempt
status. Such statements can be obtained from the Depositary. See the enclosed
"Guidelines for Certification of Taxpayer Identification Number on Substitute
Form W-9" for additional instructions.
If backup withholding applies, the Depositary is required to withhold 31% of
any payment made to the holder of Shares or other payee. Backup withholding is
not an additional tax. Rather, the federal income tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld.
If withholding results in an overpayment of taxes, a refund may be obtained
from the IRS.
<PAGE>
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments made to a holder or other payee
with respect to Shares purchased pursuant to the Offer, the holder of Shares
is required to notify the Depositary of the holder's current TIN (or the TIN
of any other payee) by completing the form below, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder is awaiting a
TIN), and that (i) the holder has not been notified by the IRS that the holder
is subject to backup withholding as a result of failure to report all interest
or dividends, or (ii) the IRS has notified the holder that the holder is not
longer subject to backup withholding (see Part II of Substitute Form W-9).
WHAT NUMBER TO GIVE THE DEPOSITARY
The holder of Shares is required to give the Depositary the TIN (i.e.,
social security number or employer identification number) of the record owner
of the Shares. If the Shares are registered in more than one name or are not
registered in the name of the actual owner, consult the enclosed "Guidelines
for Certification of Taxpayer Identification Number on Substitute Form W-9"
for additional guidance on which number to report.
PAYER'S NAME: CHASEMELLON SHAREHOLDER SERVICES, L.L.C., AS DEPOSITARY AGENT
- -------------------------------------------------------------------------------
PART I--Taxpayer Identification Number (TIN)
SUBSTITUTE
FORM W-9 Please enter your correct number in the appropriate
box below. NOTE: If the account is more than one
name, see the chart on the enclosed form,
Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9, for
guidance on which number to enter.
DEPARTMENT OF THE
TREASURY
INTERNAL REVENUE
SERVICE
PAYER'S REQUEST Social Security Number OR Employer Identification
FOR Number
--------------------- -----------------------
TAXPAYER
IDENTIFICATION If you do not have a TIN, see instructions "How to
NUMBER AND Get a TIN" and check the box below.
CERTIFICATION
TIN Applied for [_]
--------------------------------------------------------
PART II--For Payees Exempt from Backup Withholding
(see Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9)
- -------------------------------------------------------------------------------
PART III--CERTIFICATION--Under penalties of perjury, I certify that:
(1) The number shown on this form is my correct Taxpayer Identification
Number (or I am waiting for a number to be issued to me), and
(2) I am not subject to backup withholding because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal
Revenue Service (IRS) that I am subject to backup withholding as a
result of a failure to report all interest and dividends, or (c) IRS
has notified me that I am no longer subject to backup withholding.
CERTIFICATION INSTRUCTIONS. You must cross out Item (2) above if you have
been notified by IRS that you are currently subject to backup withholding
because you have failed to report all interest and dividends on your tax
return.
Signature(s) ________________________ Date ____________________________
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE OFFER. PLEASE REVIEW THE
ENCLOSED GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER
ON SUBSTITUTE FORM W-9 FOR ADDITIONAL DETAILS.
<PAGE>
Questions and requests for assistance or additional copies of the Offer to
Purchase, this Letter of Transmittal and other tender offer materials may be
directed to the Information Agent as set forth below.
The Information Agent for the Offer is:
D.F. KING & CO., INC.
77 Water Street
New York, New York 10005
Call Toll Free:
(800) 714-3312
The Dealer Manager for the Offer is:
DONALDSON, LUFKIN & JENRETTE
277 Park Avenue
New York, New York 10172
Call Collect: (212) 892-7995
<PAGE>
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF SHARES OF COMMON STOCK
OF
CARNEGIE GROUP, INC.
(NOT TO BE USED FOR SIGNATURE GUARANTEES)
As set forth in the Offer to Purchase (as hereinafter defined), this form,
or one substantially equivalent hereto, must be used to accept the Offer (as
hereinafter defined) if certificates for shares of common stock, par value
$.01 (the "Shares"), of Carnegie Group, Inc., are not immediately available or
time will not permit all required documents to reach the Depositary on or
prior to the Expiration Date (as defined in Section 1, "Terms of the Offer,"
of the Offer to Purchase) or if the procedures for book-entry transfer cannot
be completed on a timely basis. Such form may be delivered by hand or
transmitted by telegram, facsimile transmission or mail to ChaseMellon
Shareholder Services, L.L.C. (the "Depositary"). See Section 3, "Procedure for
Accepting the Offer and Tendering Shares," of the Offer to Purchase.
The Depositary for the Offer is:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By Mail: By Overnight Delivery: By Hand:
P.O. Box 3301 85 Challenger Road 120 Broadway
South Hackensack, Mail Drop-Reorg 13th Floor
New Jersey 07606 Ridgefield Park, New York, New York 10271
New Jersey 07660
Attention: Reorganization
Department
Facsimile Transmission:
(201) 329-8936
(For Eligible Institutions Only)
CONFIRM BY TELEPHONE:
(201) 296-4860
----------------
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE A VALID DELIVERY.
THIS FORM IS NOT TO BE USED TO GUARANTEE SIGNATURES. IF A SIGNATURE ON A
LETTER OF TRANSMITTAL IS REQUIRED TO BE GUARANTEED BY AN "ELIGIBLE
INSTITUTION" (AS HEREINAFTER DEFINED) UNDER THE INSTRUCTIONS THERETO, SUCH
SIGNATURE GUARANTEE MUST APPEAR IN THE APPLICABLE SPACE PROVIDED IN THE
SIGNATURE BOX ON THE LETTER OF TRANSMITTAL.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to Logica Acquisition Corp., a Delaware
corporation and a wholly owned subsidiary of Logica Inc., a Delaware
corporation and a wholly owned subsidiary of Logica plc, a public limited
company organized under the laws of England, upon the terms and subject to the
conditions set forth in its Offer to Purchase dated October 7, 1998 (the "Offer
to Purchase") and the related Letter of Transmittal (which together constitute
the "Offer"), receipt of which is hereby acknowledged, the number of shares of
common stock, par value $.01 (the "Shares"), of Carnegie Group, Inc., a
Delaware corporation, indicated below pursuant to the guaranteed delivery
procedures set forth in Section 3, "Procedure for Accepting the Offer and
Tendering Shares," of the Offer to Purchase.
Number of Shares: _________________ Signatures: _______________________
Names of Record Holders: __________ ___________________________________
___________________________________ Dated: _____________________ , 1998
Please Type or Print
If Shares will be delivered by
book-entry transfer
Addresses: ________________________ check the box and provide account
number.
___________________________________ [_] The Depository Trust Company
Zip Code
Certificate No. for Shares (if
available):
___________________________________ Account Number: ___________________
___________________________________
GUARANTEE
(Not To Be Used For Signature Guarantee)
The undersigned, a member firm of a registered national securities exchange,
a member of the National Association of Securities Dealers, Inc. (the "NASD")
or a commercial bank or trust company having an office or correspondent in the
United States (each, an "Eligible Institution"), hereby (i) represents that the
above-named persons are deemed to own the Shares tendered hereby within the
meaning of Rule 14e-4 promulgated under the Securities Exchange Act of 1934, as
amended ("Rule 14e-4"), (ii) represents that such tender of Shares complies
with Rule 14e-4, and (iii) guarantees that either the certificates for Shares
tendered hereby in proper form for transfer, or timely confirmation of the
book-entry of such Shares into the Depositary's account at The Depository Trust
Company (pursuant to the procedures set forth in Section 3, "Procedure for
Accepting the Offer and Tendering Shares," of the Offer to Purchase), together
with a properly completed and duly executed Letter of Transmittal (or facsimile
thereof) with any required signature guarantees, or an Agent's Message (as
defined in the Offer to Purchase), and any other required documents, will be
received by the Depositary at one of its addresses set forth above within three
NASD Automated Quotation System trading days after the date of execution
hereof.
The Eligible Institution that completes this form must communicate the
guarantee to the Depositary and must deliver the Letter of Transmittal and
certificates for Shares to the Depositary within the time period shown herein.
Failure to do so could result in a financial loss to such Eligible Institution.
Name of Firm: _____________________ Title: ____________________________
Authorized Signature: Address: __________________________
(Zip Code)
___________________________________ Area Code and Telephone Number:
___________________________________
NOTE: DO NOT SEND CERTIFICATES FOR SHARES WITH THIS FORM. CERTIFICATES FOR
SHARES SHOULD ONLY BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF
COMMON STOCK
OF
CARNEGIE GROUP, INC.
AT
$5.00 PER SHARE NET
BY
LOGICA ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY
OF
LOGICA INC.,
A WHOLLY OWNED SUBSIDIARY
OF
LOGICA PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, NOVEMBER 4, 1998,
UNLESS THE OFFER IS EXTENDED.
October 7, 1998
To Brokers, Dealers, Commercial Banks,
Trust Companies and Other Nominees:
We have been appointed by Logica Acquisition Corp., a Delaware corporation
(the "Purchaser") and a wholly owned subsidiary of Logica Inc., a Delaware
corporation (the "Parent") and a wholly owned subsidiary of Logica plc, a
public limited company organized under the laws of England ("Logica plc"), to
act as the Information Agent in connection with the Purchaser's offer to
purchase all of the outstanding shares of common stock, par value $.01 (the
"Shares"), of Carnegie Group, Inc., a Delaware corporation, at the purchase
price of $5.00 per Share, net to the seller in cash without interest, upon the
terms and subject to the conditions set forth in the Offer to Purchase dated
October 7, 1998 (the "Offer to Purchase") and the related Letter of
Transmittal (which together constitute the "Offer") enclosed herewith.
For your information and for forwarding to your clients for whom you hold
Shares registered in your name or in the name of your nominee, or who hold
Shares registered in their own names, we are enclosing the following
documents:
1. The Offer to Purchase dated October 7, 1998;
2. A letter from Carnegie Group, Inc. with attached Schedule 14D-9 (without
exhibits);
<PAGE>
3. The Letter of Transmittal to be used by holders of Shares in accepting
the Offer (facsimile copies of the Letter of Transmittal may be used to
tender Shares);
4. A Notice of Guaranteed Delivery to be used to accept the Offer if
certificates for Shares are not immediately available or time will not
permit all required documents to reach the Depositary on or prior to the
Expiration Date (as defined in the Offer to Purchase) or if the
procedures for book-entry transfer cannot be completed on a timely
basis;
5. A form of letter which may be sent to your clients for whose accounts
you hold Shares in your name or in the name of a nominee, with space
provided for obtaining such client's instructions with regard to the
Offer;
6. Guidelines of the Internal Revenue Service for Certification of Taxpayer
Identification Number on Substitute Form W-9; and
7. A return envelope addressed to ChaseMellon Shareholder Services, L.L.C.,
the Depositary.
THE BOARD OF DIRECTORS OF CARNEGIE GROUP, INC., BY THE UNANIMOUS VOTE OF ALL
DIRECTORS, HAS DETERMINED THAT THE OFFER AND THE MERGER ARE FAIR TO AND IN THE
BEST INTERESTS OF CARNEGIE GROUP, INC. AND ITS STOCKHOLDERS, HAS APPROVED THE
OFFER, THE MERGER AGREEMENT AND THE MERGER AND RECOMMENDS THAT THE HOLDERS OF
SHARES OF CARNEGIE GROUP, INC. ACCEPT THE OFFER AND TENDER THEIR SHARES
PURSUANT TO THE OFFER.
We are asking you to contact your clients for whom you hold Shares
registered in your name (or in the name of your nominee) or who hold Shares
registered in their own names. Please bring the Offer to their attention as
promptly as possible. The Purchaser will not pay any fees or commissions to
any broker or dealer or other person (other than the Dealer Manager, the
Depositary and the Information Agent as described in the Offer to Purchase) in
connection with the solicitation of tenders of Shares pursuant to the Offer.
Brokers, dealers, banks and trust companies will be reimbursed by the
Purchaser upon request for customary mailing and handling expenses incurred by
them in forwarding the Offer to Purchase and the related documents to their
clients. The Purchaser will pay or cause to be paid all stock transfer taxes
applicable to the purchase of Shares pursuant to the Offer, except as set
forth in instruction 7 of the Letter of Transmittal.
YOUR PROMPT ACTION IS REQUESTED. WE URGE YOU TO CONTACT YOUR CLIENTS AS
PROMPTLY AS POSSIBLE, THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00
MIDNIGHT, NEW YORK CITY TIME, ON WEDNESDAY, NOVEMBER 4, 1998, UNLESS THE OFFER
IS EXTENDED.
In order to take advantage of the Offer, a properly completed and duly
executed Letter of Transmittal (or facsimile thereof), with any required
signature guarantees, or, in the case of a book-entry transfer, an Agent's
Message, and any other required documents, must be received by the Depositary
at one of its addresses set forth on the back cover of the Offer to Purchase
and either (i) certificates for such Shares must be received by the
Depositary, together with the Letter of Transmittal (or facsimile thereof), at
such address, or such Shares must be tendered pursuant to the procedures for
book-entry transfer set forth below and a Book-Entry Confirmation (as defined
in the Offer to Purchase) received by the Depositary, in each case prior to
the Expiration Date, or (ii) the guaranteed delivery procedure set forth in
the Offer to Purchase must be complied with, all in accordance with the Offer
to Purchase.
A holder of Shares who desires to tender Shares and whose certificates
representing such Shares are not immediately available, or who cannot comply
with the procedures for book-entry transfer on a timely basis, may tender such
Shares by following the procedures for guaranteed delivery set forth in
Section 3, "Procedure for Accepting the Offer and Tendering Shares," of the
Offer to Purchase.
2
<PAGE>
Any inquiries you have with respect to the Offer should be addressed to the
Information Agent, at its address and telephone number set forth on the back
cover of the Offer to Purchase.
Additional copies of the enclosed material may be obtained from the
Information Agent or from brokers, dealers, banks or trust companies.
Very truly yours,
D.F. KING & CO., INC.
NOTHING HEREIN OR IN THE ENCLOSED DOCUMENTS WILL CONSTITUTE YOU OR ANY OTHER
PERSON AS THE AGENT OF THE PURCHASER, THE DEALER MANAGER, THE PARENT, LOGICA
PLC, ANY AFFILIATE OF THE PURCHASER, THE PARENT, LOGICA PLC, THE DEPOSITARY,
THE DEALER MANAGER OR THE INFORMATION AGENT, OR AUTHORIZE YOU OR ANY OTHER
PERSON TO GIVE ANY INFORMATION OR USE ANY DOCUMENT OR MAKE ANY STATEMENT ON
BEHALF OF ANY OF THEM IN CONNECTION WITH THE OFFER, EXCEPT FOR STATEMENTS
EXPRESSLY MADE IN THE OFFER TO PURCHASE OR THE LETTER OF TRANSMITTAL.
Enclosures
3
<PAGE>
OFFER TO PURCHASE FOR CASH
ALL OF THE OUTSTANDING SHARES OF
COMMON STOCK
OF
CARNEGIE GROUP, INC.
AT
$5.00 PER SHARE NET
BY
LOGICA ACQUISITION CORP.,
A WHOLLY OWNED SUBSIDIARY OF
LOGICA INC.,
A WHOLLY OWNED SUBSIDIARY OF
LOGICA PLC
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT,
NEW YORK CITY TIME, ON WEDNESDAY, NOVEMBER 4, 1998,
UNLESS THE OFFER IS EXTENDED.
October 7, 1998
To Our Clients:
Enclosed for your consideration is the Offer to Purchase dated October 7,
1998 (the "Offer to Purchase") and the related Letter of Transmittal (which
together constitute the "Offer") relating to the Offer by Logica Acquisition
Corp., a Delaware corporation (the "Purchaser") and a wholly owned subsidiary
of Logica Inc., a Delaware corporation (the "Parent") and a wholly owned
subsidiary of Logica plc, a public limited company organized under the laws of
England, to purchase all of the outstanding shares of common stock, par value
$.01 (the "Shares"), of Carnegie Group, Inc., a Delaware corporation, at $5.00
per Share, net to the seller in cash without interest, upon the terms and
subject to the conditions set forth in the Offer to Purchase and the related
Letter of Transmittal. We are the holder of record of Shares held by us for
your account. A tender of such Shares can be made only by us as the holder of
record and pursuant to your instructions. THE LETTER OF TRANSMITTAL IS
FURNISHED TO YOU FOR YOUR INFORMATION ONLY AND CANNOT BE USED BY YOU TO TENDER
SHARES HELD BY US FOR YOUR ACCOUNT.
Accordingly, we request instructions as to whether you wish to have us
tender on your behalf any or all of the Shares held by us for your account,
pursuant to the terms and subject to the conditions set forth in the Offer to
Purchase and Letter of Transmittal.
Your attention is directed to the following:
1.The tender price is $5.00 per Share, net to you in cash.
2.The Offer is being made for all of the outstanding Shares.
<PAGE>
3. The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that
number of Shares which would represent at least a majority of all
outstanding Shares (on a fully diluted basis).
4. The Offer and withdrawal rights expire at 12:00 midnight, New York City
time, on Wednesday, November 4, 1998, unless the Offer is extended.
5. Any stock transfer taxes applicable to the sale of Shares to the
Purchaser pursuant to the Offer will be paid by the Purchaser, except as
otherwise provided in Instruction 7 of the Letter of Transmittal.
If you wish to have us tender any or all of your Shares, please so instruct
us by completing, executing and returning to us the attached instruction form
in the enclosed envelope. If you authorize tender of your Shares, all such
Shares will be tendered unless otherwise specified on the attached instruction
form. Your instructions should be forwarded to us in ample time to permit us
to submit a tender on your behalf by the expiration of the Offer.
THE OFFER IS NOT BEING MADE TO, NOR WILL TENDERS BE ACCEPTED FROM OR ON
BEHALF OF, HOLDERS OF SHARES IN ANY JURISDICTION IN WHICH THE MAKING OF THE
OFFER OR ACCEPTANCE THEREOF WOULD NOT BE IN COMPLIANCE WITH THE LAWS OF SUCH
JURISDICTION.
2
<PAGE>
INSTRUCTIONS WITH RESPECT TO THE OFFER TO PURCHASE
FOR CASH ALL OF THE OUTSTANDING SHARES OF
COMMON STOCK
OF
CARNEGIE GROUP, INC.
The undersigned acknowledge(s) receipt of your letter enclosing the Offer to
Purchase dated October 7, 1998 and the related Letter of Transmittal (which
together constitute the "Offer") relating to the offer by Logica Acquisition
Corp., a Delaware corporation and wholly owned subsidiary of Logica Inc., a
Delaware corporation and wholly owned subsidiary of Logica plc, a public
limited company organized under the laws of England, to purchase all of the
outstanding shares of common stock, par value $.01 (the "Shares"), of Carnegie
Group, Inc., a Delaware corporation, at $5.00 per Share, net to the seller in
cash, without interest.
This will instruct you to tender the number of Shares indicated below (or if
no number is indicated below, all Shares) that are held by you for the account
of the undersigned, upon the terms and subject to the conditions set forth in
the Offer.
Dated: , 1998 SIGN HERE
------------------------------------------
------------------------------------------
Number of Shares to be Tendered:* Signature(s)
Shares ------------------------------------------
------------------------------------------
Please print name(s) here
------------------------------------------
------------------------------------------
Address(es)
------------------------------------------
(Area Code and Telephone Number)
------------------------------------------
(Tax Identification or Social Security
No(s).)
- --------
* I understand that if I sign this instruction form without indicating a
lesser number of Shares in the space above, all Shares held by you for my
account will be tendered.
3
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE THE
PAYER. Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by
only one hyphen: i.e. 00-0000000. The table below will help determine the
number to give the payer.
NAME. If you are an individual, you must generally enter the name shown on
your social security card. However, if you have changed your last name, for
instance, due to marriage, without informing the Social Security
Administration of the name change please enter your first name, the last name
shown on your social security card, and your new last name.
<TABLE>
<CAPTION>
GIVE THE NAME AND
FOR THIS TYPE OF ACCOUNT: SOCIAL SECURITY NUMBER OF:
------------------------- --------------------------
<C> <S> <C>
1. Individual The individual
2. Two or more individuals The actual owner of the account or, if combined
(joint account) funds, the first individual on the account(1)
3. Custodian account of a The minor(2)
minor
(Uniform Gift to Minors
Act)
4. (a) The usual revocable The grantor-trustee(1)
savings trust
account (grantor is
also trustee)
(b) So-called trust The actual owner(1)
account that is not a
legal or valid trust
under state law
5. Sole proprietorship The owner(3)
account
6. Sole Proprietorship The owner(3)
7. A valid trust, estate, or Legal entity(4)
pension trust
8. Corporate The corporation
9. Association, club, The organization
religious, charitable,
educational, or other
tax-exempt organization
10. Partnership The partnership
11. A broker or registered The broker or nominee
nominee
12. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a state
or local government,
school district, or
prison)
that receives
agricultural program
payments.
</TABLE>
- --------
(1) List above the signature line first and circle the name of the person
whose number you furnish.
(2) List first and circle minor's name and furnish the minor's social security
number.
(3) You must show your individual name, but you may also enter your business
or "doing business as" name. You may use your social security number or
employer identification number.
(4) List first and circle the name of the legal trust, estate, or pension
trust. (Do not furnish the TIN of the personal representative or trustee
unless the legal entity itself is not designated in the account title.)
NOTE: If no name above the signature line is listed when more than one name
appears in the registration, the number will be considered to be that of the
first name appearing in the registration.
Section references are to the Internal Revenue Code.
PURPOSE OF FORM. A person who is required to file an information return with
the IRS must get your correct TIN to report, for example, income paid to you,
real estate transactions, mortgage interest you paid, the acquisition or
abandonment or secured property, cancellation of debt, or contributions you
made to an IRA. Use Form W-9 to give your correct TIN to the requester (the
person requesting your TIN) and, when applicable,
1
<PAGE>
(1) to certify the TIN you are giving is correct (or you are waiting for a
number to be issued), (2) to certify you are not subject to backup
withholding, or (3) to claim exemption from backup withholding if you are an
exempt payee.
NOTE: If a requester gives you a form other than a W-9 to request your TIN,
you must use the requester's form if it is substantially similar to Form W-9.
WHAT IS BACKUP WITHHOLDING? Persons making certain payments to you must
withhold and pay to the IRS 31% of such payments under certain conditions.
This is called "backup withholding." Payments that could be subject to backup
withholding include interest, dividends, broker and barter exchange
transactions, rents, royalties, nonemployee pay, and certain payments from
fishing boat operators. Real estate transactions are not subject to backup
withholding.
If you give the requester your correct TIN, make the proper certifications,
and report all your taxable interest and dividends on your tax return,
payments you receive will not be subject to backup withholding. Payments you
receive will be subject to backup withholding if:
1. You do not furnish your TIN to the requester, or
2. The IRS tells the requester that you furnished an incorrect TIN, or
3. The IRS tells you that you are subject to backup withholding because you
did not report all your interest and dividends on your tax return (for
reportable interest and dividends only), or
4. You do not certify to the requester that you are not subject to backup
withholding under 3 above (for reportable interest and dividend accounts
opened after 1983 only), or
5. You do not certify your TIN.
Certain payees and payments are exempt from backup withholding and
information reporting. See below.
HOW TO GET A TIN: If you do not have a TIN, apply for one immediately. To
apply for an SSN, get Form SS-5 from your local Social Security Administration
office. Get Form W-7 to apply for an Individual TIN or Form SS-4 to apply for
an EIN. You can get Forms W-7 and SS-4 from the IRS by calling 1-800-TAX-FORM
(1-800-829-3676).
If you do not have a TIN, check the box titled "Applied For" in the space
for the TIN, sign and date the form, and give it to the requester. Generally,
you will then have 60 days to get a TIN and give it to the requester. If the
requester does not receive your TIN within 60 days, backup withholding, if
applicable, will begin and continue until you furnish your TIN.
NOTE: Checking the box titled "Applied For" on the form means that you have
already applied for a TIN OR that you intend to apply for one soon.
As soon as you receive your TIN, complete another Form W-9, include your
TIN, sign and date the form, and give it to the requester.
PAYEES EXEMPT FROM BACKUP WITHHOLDING. Individuals (including sole
proprietors) are not exempt from backup withholding. Corporations are exempt
from backup withholding for certain payments, such as interest and dividends.
If you are exempt from backup withholding, you should still complete Form W-
9 to avoid possible erroneous backup withholding. Enter your correct TIN in
Part I, write "Exempt" in Part II, and sign and date the form. If you are a
nonresident alien or a foreign entity not subject to backup withholding, give
the requester a completed FORM W-8, Certificate of Foreign Status.
2
<PAGE>
The following is a list of payees exempt from backup withholding and for
which no information reporting is required. For interest and dividends, all
listed payees are exempt except item (9). For broker transactions, payees
listed in (1) through (13) and a person registered under the Investment
Advisers Act of 1940 who regularly acts as a broker are exempt. Payments
subject to reporting under sections 6041 and 6041A are generally exempt from
backup withholding only if made to payees described in items (1) and (7),
except a corporation that provides medical and health care services or bills
and collects payments for such services is not exempt from backup withholding
or information reporting. Only payees described in items (2) through (6) are
exempt from backup withholding for barter exchange transactions and patronage
dividends.
(1) A corporation. (2) An organization exempt from tax under section 501(a),
or an IRA, or a custodial account under section 403(b)(7) if the account
satisfies the requirements of section 401(f)(2). (3) The United States or any
of its agencies or instrumentalities. (4) A state, the District of Columbia, a
possession of the United States, or any of their political subdivisions or
instrumentalities. (5) A foreign government or any of its political
subdivisions, agencies, or instrumentalities. (6) An international
organization or any of its agencies or instrumentalities. (7) A foreign
central bank of issue. (8) A dealer in securities or commodities required to
register in the United States or a possession of the United States. (9) A
future commission merchant registered with the Commodity Futures Trading
Commission. (10) A real estate investment trust. (11) An entity registered at
all times during the tax year under the Investment Company Act of 1940. (12) A
common trust fund operated by a bank under section 584(a). (13) A financial
institution. (14) A middleman known in the investment community as a nominee
or listed in the most recent publication of the American Society of Corporate
Secretaries, Inc., Nominee List. (15) A trust exempt from tax under section
664 or described in section 4947.
Payments of dividends and patronage dividends that are generally exempt from
backup withholding include the following:
. Payments to nonresident aliens subject to withholding under section 1441.
. Payments to partnerships not engaged in a trade or business in the United
States and that have at least one nonresident partner.
. Payments of patronage dividends not paid in money.
. Payments made by certain foreign organizations.
. Section 404(k) payments made by an ESOP.
Payments of interest that generally are exempt from backup withholding
include the following:
. Payments of interest on obligations issued by individuals. Note: You may
be subject to backup withholding if this interest is $600 or more and is
paid in the course of the payer's trade or business and you have not
provided your correct TIN to the payer.
. Payments of tax-exempt interest (including exempt-interest dividends
under section 852).
. Payments described in section 6049(b)(5) to nonresident aliens.
. Payments on tax-free covenant bonds under section 1451.
. Payments made by certain foreign organizations.
. Mortgage interest paid to you.
Payments that are not subject to information reporting are also not subject
to backup withholding. For details, see sections 6041, 6041A, 6042, 6044,
6045, 6049, 6050A, and 6050N, and their regulations.
PRIVACY ACT NOTICE. Section 6109 requires you to give your correct TIN to
persons who must file information returns with the IRS to report interest,
dividends, and certain other income paid to you, mortgage interest you paid,
the acquisition or abandonment of secured property, cancellation of debt, or
contributions you made to an IRA. The IRS uses the numbers for identification
purposes and to help verify the accuracy of your tax return. The IRS may also
provide this information to the Department of Justice for civil and criminal
litigation and to cities, states and the District of Columbia to carry out
their tax laws.
3
<PAGE>
You must provide your TIN whether or not you are required to file a tax
return. Payers must generally withhold 31% of taxable interest, dividends, and
certain other payments to a payee who does not give a TIN to a payer. Certain
penalties may also apply.
PENALTIES
(1) FAILURE TO FURNISH TIN. If you fail to furnish your TIN to a requester,
you are subject to a penalty of $50 for each such failure unless your
failure is due to reasonable cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING. If you
make a false statement with no reasonable basis that results in no backup
withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION. Willfully falsifying
certifications or affirmations may subject you to criminal penalties
including fines and/or imprisonment.
(4) MISUSE OF TINS. If the requester discloses or uses TINs in violation of
federal law, the requester may be subject to civil and criminal penalties.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE INTERNAL
REVENUE SERVICE
4
<PAGE>
FOR IMMEDIATE RELEASE
CONTACT: EITHNE EGAN JOE ORLANDO
LOGICA IMEDIA, INC.
617-476-8000 973-267-8500
[email protected] [email protected]
LOGICA TO ACQUIRE CARNEGIE GROUP FOR $35 MILLION
LOGICA LOOKS TO EXPAND ITS PRESENCE IN THE GROWING GLOBAL CUSTOMER CARE AND
CONTACT ARENA
LEXINGTON, MA--OCTOBER 1, 1998--Logica plc today announced that it has entered
into a definitive agreement to acquire Nasdaq-listed Carnegie Group, Inc.,
[NASDAQ: CGIX], a provider of solutions in the areas of customer management
and sophisticated decision support systems. Under the terms of the agreement,
which has been unanimously approved by the board of directors of both
companies, Logica will acquire Carnegie Group for $5.00 per common share,
payable in cash, for a total consideration of approximately $35 million.
The proposed acquisition is expected to significantly enhance Logica's
ability to provide leading edge customer contact and customer care solutions
and advanced decision support solutions to its financial services,
telecommunications, energy and utilities, and automotive clients globally.
Founded in 1983 at Carnegie Mellon University, Carnegie Group has been
successful in penetrating the US marketplace for customer relationship
management solutions. Headquartered in Pittsburgh, Pennsylvania and with 300
staff in seven US locations, Carnegie Group currently generates its largest
proportion of revenues from telecommunications operators. Key customers
include USWest Communications, Bell South Telecommunications, and First USA
Bank.
Carnegie Group's board of directors has agreed to recommend acceptance of
the offer to its shareholders and will be accepting the offer in respect of
their own shareholding. Full details of the tender offer will be issued to
Carnegie Group's shareholders on or before October 8, 1998. Following the
issue of the tender offer document, Carnegie Group's shareholders will have a
minimum of 20 business days to tender their shares. Any shares not purchased
in the offer will be acquired for the same price, in cash pursuant to a
second-step merger. The offer will be conditional upon Logica achieving over
50% acceptance and other customary closing conditions. Shareholders and
directors holding approximately 18% of the outstanding shares have agreed to
tender their shares to the deal.
"This acquisition will create excellent synergy and accelerate growth
opportunities for Logica and Carnegie Group," comments Corey V. Torrence,
President and CEO of Logica Inc. "Together, we are well positioned to meet the
explosive global demand for customer care solutions."
"This is a very exciting opportunity for Carnegie Group," states Dennis
Yablonsky, CEO of Carnegie Group. "Becoming part of a successful worldwide
company like Logica, with its excellent pedigree and strong technical
heritage, is good news for our customers, our staff, and our shareholders."
Upon completion of the acquisition, Carnegie Group will form a separate
customer contact division within Logica Inc, reporting directly to Mr.
Torrence. The new division will be known as Logica Carnegie Group and will be
run by Mr. Yablonsky, from its existing headquarters in Pittsburgh, PA.
"We have been seeking to expand our business in North America and are
pleased to have attracted an exciting company specializing in a high growth
segment of our market," said Mario Anid, Logica's corporate development
director.
<PAGE>
ABOUT THE TRANSACTION
Carnegie Group employs 300 full-time staff in seven locations in the US. The
new company will increase Logica's US headcount by 60% and will strengthen its
focus on customer contact and customer care solutions. The acquisition is a
further step in Logica's growth strategy. It is envisaged that the acquisition
will have no material effect on Logica's earnings in 1998/99 (before goodwill
amortization) and that it will be earnings-enhancing in 1999/2000.
ABOUT CARNEGIE GROUP
Carnegie Group, Inc. is based in Pittsburgh, Pennsylvania and has
demonstrated success in penetrating the US marketplace for customer
relationship management and advanced decision support solutions.
For the year ended 31 December 1997, Carnegie Group earned revenues of $29.4
million, with profits before tax of $0.2 million. Net assets on December 31,
1997 were $24.1 million.
For the half-year to 30 June 1998, Carnegie Group earned revenues of $16.2
million with profits before tax and acquisition related goodwill write-off of
$638,000. Net assets were $22.0 million.
ABOUT LOGICA
Logica is a leading provider of business engineered, content-rich solutions
for the Energy & Utilities, Telecommunications, Financial Services and
Automotive markets. The company's expertise is in systems integration,
consulting, products and core process out-tasking/applications management. In
collaboration with its partners around the world, Logica helps its clients
achieve sustainable, profitable growth, by maximizing the value of their core
assets. Logica's success is driven by its people, and is delivered through
focused industry, process and application expertise enabled by technology. The
company offers it products and services through innovative, flexible business
partnerships and measures its success by the impact it has on its clients'
results.
With its North American headquarters in Lexington, MA, Logica has 550 staff
based in North America and offices in Dearborn, Fort Lauderdale, Houston, New
York, Orlando, San Francisco, Toronto and Williamsburg.
Logica plc was founded in London in 1969 and now has offices in 23 countries
and 6,500 employees worldwide. Today Logica is a leading international
computer consultancy, systems integration and software company with clients
across diverse markets including finance, telecommunications, energy and
utilities, industry, government, defense, transport and space. For the fiscal
year ending June 1998, Logica's revenue was $790 million ((Pounds)473
million).
Logica's home page can be found at http://www.logica.com.
NOTE:
Statements which are not historical facts are forward-looking statements
made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements involve risks
and uncertainties that could cause actual results to differ materially from
anticipated results, including the assumption that the combination is
consummated. Neither Logica nor Carnegie Group undertakes any obligation to
publicly release any revisions to forward-looking statements to reflect events
or circumstances or changes in expectations after the date of this press
release or the occurrence of anticipated events.
<PAGE>
1 October 1998
LOGICA TO ACQUIRE CARNEGIE GROUP FOR $35 MILLION
*LOGICA TO EXPAND ITS PRESENCE IN THE GROWING GLOBAL CUSTOMER CARE AND CONTACT
ARENA
Logica plc today announced that it has entered into a definitive agreement to
acquire Nasdaq-listed Carnegie Group, Inc., a provider of solutions in the
areas of customer management and sophisticated decision support systems. Under
the terms of the agreement, which has been unanimously approved by the board
of directors of both companies, Logica will acquire Carnegie Group for $5.00
per common share, payable in cash, for a total consideration of approximately
$35 million ((Pounds)21 million/1/). The acquisition will be financed by
medium-term US dollar bank borrowings.
Founded in 1983 at Carnegie Mellon University and headquartered in
Pittsburgh, Pennsylvania, Carnegie Group has 300 staff in seven US locations.
The company currently generates its largest proportion of revenues from
telecommunications operators. Key customers include USWest Communications,
Bell South Telecommunications, and First USA Bank. In the decision support
area, accounting for 25% of the business, key customers include the US Army,
DARPA and the US Air Force. For the year ended 31 December 1997, Carnegie
Group earned revenues of $29.4 million, with profits before tax of $0.2
million. Net assets were $24.1 million. For the half-year to 30 June 1998,
Carnegie Group's unaudited results were revenues of $16.2 million with profits
before tax and acquisition-related write-off of $0.6 million.
Carnegie Group's board of directors has agreed to recommend acceptance of
the offer to its shareholders and will be accepting the offer in respect of
their own shareholdings. Full details of the tender offer will be issued to
Carnegie Group's shareholders on or before 8 October 1998. Following the issue
of the tender offer document, Carnegie Group's shareholders will have a
minimum of 20 business days to tender their shares. The offer will be
conditional on Logica achieving over 50% acceptance and other customary
closing conditions. Shareholders and directors holding approximately 18% of
the outstanding shares have agreed to tender their shares to the deal. Any
shares not purchased in the offer will be acquired for the same price in cash
pursuant to a second step merger.
The acquisition will create synergy for both organisations and enhance
growth prospects. Logica's leading position in providing customer contact and
customer care solutions to the telecommunications, financial services and
energy and utilities markets will give valuable access to new channels for
delivery of Carnegie Group's repeatable capabilities. Upon completion of the
acquisition, Carnegie Group will form a separate customer contact division
within Logica Inc., Logica's North American operating subsidiary, reporting to
Logica Inc. president and chief executive Corey V. Torrence. The new division
will be known as Logica Carnegie Group. It is envisaged that the acquisition
will have no material effect on Logica's earnings in 1998/99 (before goodwill
amortisation) and that it will be earnings-enhancing in 1999/2000.
"We have been seeking to expand our business in North America and are
pleased to have attracted a company specialising in an exciting high growth
segment of our market. Carnegie Group will also give our North American
operations more critical mass, increasing our North American headcount by
60%," said Mario Anid, Logica's corporate development director. "At Logica we
continue to concentrate on value-added, repeatable IT solutions in global
markets with significant growth potential. Carnegie Group fits our acquisition
criteria and we believe that it will make a major contribution to Logica's
business in the future in tandem with our other recent acquisitions."
- --------
/1/ For the purpose of this announcement, an exchange rate of 1.692 US dollar
to 1 Pound sterling has been used.
<PAGE>
NOTES TO EDITORS
ABOUT CARNEGIE GROUP
Carnegie Group, Inc is based in Pittsburgh, Pennsylvania and has demonstrated
success in penetrating the US marketplace for customer relationship management
and advanced decision support solutions. The company helps clients in the
financial services, government, manufacturing, and telecommunications
industries improve business processes, customer relations, productivity and
market position. It has 300 staff across offices in Pittsburgh, Denver,
Washington DC, Edison/New Jersey, Atlanta, Oakland and St Louis.
ABOUT LOGICA
Founded in 1969, Logica plc is a leading international computer consultancy,
systems integration and software company. Logica's clients operate across
diverse markets including finance, telecommunications, energy and utilities,
industry, government, defence, transport and space. Logica currently has 6,500
staff in 23 countries worldwide.
For the financial year ended 30 June 1998, Logica announced record pre-tax
profits of (Pounds)41.8 million on revenues of (Pounds)473.0 million. This
represented revenue growth of 40%, while earnings per share have compounded at
38% over the past five years, reaching 42.3p in the year. At 28 September
1998, Logica's market capitalisation was (Pounds)1,555 million.
For further information:
Will Cameron/Anna Bailey
Logica
Tel: +44 171 446 1786
Email: [email protected]
Web Page www.logica.com
Web news service www.newsdesk.com
Reg Hoare/Mike Tate
Ludgate Communications
Tel: +44 171 253 2252
<PAGE>
AUDITORS' REPORT TO THE SHAREHOLDERS OF LOGICA PLC
We have audited the financial statements on pages 40 to 60 (including the
additional disclosures on pages 35 to 36 relating to the remuneration of the
directors specified for our review by the London Stock Exchange) which have been
prepared under the historical cost convention and the accounting policies set
out on page 60.
Respective responsibilities of directors and auditors
As described on page 36 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements made
by the directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material mis-statement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion, the financial statements give a true and fair view of the state
of affairs of the company and the group at 30 June 1998 and of the profit and
cash flow of the group for the year then ended and have been properly prepared
in accordance with the Companies Act 1985.
PricewaterhouseCoopers
Chartered Accountants and Registered Auditors
1 Embankment Place
London WC2N 6NN 8 September 1998
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Consolidated Profit and Loss Account
- ----------------------------------------------------------------------------------------------------------------------
For Year Ended 30 June 1998 1997
Note (pound)'000 (pound)'000
<S> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
Consolidated turnover - continuing operations 1 431,843 338,465
- acquisition 1 41,114 0
-----------------------------------------------------------------------------------------------------------------
Total consolidated turnover 1 472,957 338,465
-----------------------------------------------------------------------------------------------------------------
-----------------------------------------------------------------------------------------------------------------
Operating profit - continuing operations 1 35,275 27,669
- acquisition 1 4,368 0
-----------------------------------------------------------------------------------------------------------------
Operating profit 2 39,643 27,669
Share of operating profit in associate 2 715 498
-----------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before interest 40,358 28,167
Net interest receivable/(payable) - group 5 1,476 (34)
- associate (9) 15
-----------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation 41,825 28,148
Tax on profit on ordinary activities 6 (11,854) (8,815)
-----------------------------------------------------------------------------------------------------------------
Profit on ordinary activities after taxation 29,971 19,333
Dividends paid and proposed 7 (8,515) (5,848)
-----------------------------------------------------------------------------------------------------------------
Retained profit for the financial year 22 21,456 13,485
-----------------------------------------------------------------------------------------------------------------
Earnings per share 9 42.3p 30.3p*
Dividends per share 7 11.75p 9.4p
* - earnings per share have been adjusted to take account of the bonus element of the rights issue that took place
on 22 August 1997.
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
Statement of Total Recognised Gains and Losses
- ----------------------------------------------------------------------------------------------------------------------
For Year Ended 30 June
1998 1997
Note (pound)'000 (pound)'000
<S> <C> <C> <C>
Profit attributable to shareholders 22 29,971 19,333
Currency translation differences 22 (1,794) (1,821)
----------------------------------------------------------------------------------------------------------------
Total recognised gains and losses 28,177 17,512
----------------------------------------------------------------------------------------------------------------
All gains and losses recognised above are based on historical costs and arise from continuing operations.
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
At 30 June 1998 1997
Note (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C>
Fixed assets
Tangible assets 10 33,005 24,429
Investments 11 6,423 6,098
Investment in associate 11 2,014 1,910
- ---------------------------------------------------------------------------------------------------------------
41,442 32,437
Current assets
Debtors 13 117,466 98,909
Cash at bank and in hand 24 77,455 23,557
- -------------------------------------------------------------------------------------------------
194,921 122,466
- -------------------------------------------------------------------------------------------------
Creditors - amounts falling due within one year
Borrowings 14 (18,448) (4,240)
Other creditors 16 (126,930) (76,000)
- -------------------------------------------------------------------------------------------------
(145,378) (80,240)
- -------------------------------------------------------------------------------------------------
Net current assets 49,543 42,226
Total assets less current liabilities 90,985 74,663
Creditors - amounts falling due after
more than one year
Borrowings 14 (5,021) (10,978)
Other creditors 17 (2,979) (52)
Provisions for liabilities and charges 18 (110) (396)
- ---------------------------------------------------------------------------------------------------------------
Net assets 82,875 63,237
- ---------------------------------------------------------------------------------------------------------------
Capital and reserves
Share capital 21 7,380 6,393
Share premium account 22 71,451 16,402
Special reserve 22 158 158
Other reserves 22 2,484 2,510
Profit and loss account 22 1,402 37,774
- ---------------------------------------------------------------------------------------------------------------
Shareholders' funds - equity 82,875 63,237
- ---------------------------------------------------------------------------------------------------------------
</TABLE>
Dr M P Read
A F Given
Directors
9 September 1998
<PAGE>
- --------------------------------------------------------------------------------
Consolidated Cash Flow Statement
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
For Year ended 30 June Note 1998 1997
(pound)'000 (pound)'000
<S> <C> <C> <C>
Net cash inflow from operating activities 23 76,017 27,541
---------------------------------------------------------------------------------------------------------------
Dividends received from associate 11 136 83
---------------------------------------------------------------------------------------------------------------
Returns on investments and servicing of finance
Interest received 2,810 427
Interest paid (1,012) (461)
Interest element of finance lease rental payments (72) 0
---------------------------------------------------------------------------------------------------------------
Net cash inflow/(outflow) from returns on investments
and servicing of finance 1,726 (34)
---------------------------------------------------------------------------------------------------------------
Taxation
United Kingdom corporation tax paid (6,562) (5,602)
Overseas tax paid (2,547) (2,663)
---------------------------------------------------------------------------------------------------------------
Tax paid (9,109) (8,265)
---------------------------------------------------------------------------------------------------------------
Capital expenditure and financial investment
Purchase of tangible assets (13,580) (8,241)
Sale of tangible assets 83 0
Purchase of own shares by Employee Share Ownership Plan Trust 11 (637) (661)
Sale of own shares by Employee Share Ownership Plan Trust 11 271 559
---------------------------------------------------------------------------------------------------------------
Net cash outflow for capital expenditure and
financial investment (13,863) (8,343)
---------------------------------------------------------------------------------------------------------------
Acquisitions
Purchase of subsidiary undertakings (59,223) (19,541)
Net cash acquired with subsidiary undertakings 3,803 (156)
---------------------------------------------------------------------------------------------------------------
Net cash outflow for acquisitions (55,420) (19,697)
---------------------------------------------------------------------------------------------------------------
Equity dividends paid (6,842) (5,193)
---------------------------------------------------------------------------------------------------------------
Net cash outflow before use of liquid resources
and financing (7,355) (13,908)
---------------------------------------------------------------------------------------------------------------
Management of liquid resources
Cash placed on deposit (25,455) 0
Cash withdrawn from deposit 0 1,796
---------------------------------------------------------------------------------------------------------------
Net cash (outflow)/inflow from management of liquid resources (25,455) 1,796
---------------------------------------------------------------------------------------------------------------
Financing
Shares issued (net of expenses) 56,036 1,486
New bank loans drawdown 10,786 19,097
Repayment of bank loans (4,570) (1,750)
Capital element of finance lease rental payments (478) 0
---------------------------------------------------------------------------------------------------------------
Net cash inflow from financing 61,774 18,833
---------------------------------------------------------------------------------------------------------------
Increase in cash in the period 24 28,964 6,721
---------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------
Company Balance Sheet
- --------------------------------------------------------
<TABLE>
<CAPTION>
At 30 June 1998 1997
Note (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C>
Fixed assets
Investments 11 99,715 48,390
Current assets
Debtors 13 5,055 5,798
Cash at bank and in hand 8,530 29
- -------------------------------------------------------------------------------------------------------------------
13,585 5,827
- -------------------------------------------------------------------------------------------------------------------
Creditors - amounts falling
due within one year
Other creditors 16 (8,390) (5,072)
- -------------------------------------------------------------------------------------------------------------------
Net current assets 5,195 755
Total assets less current liabilities 104,910 49,145
Creditors - amounts falling due after
more than one year
Deferred consideration for acquisitions (969) 0
- -------------------------------------------------------------------------------------------------------------------
Net assets 103,941 49,145
- -------------------------------------------------------------------------------------------------------------------
Capital and reserves
Share capital 21 7,380 6,393
Share premium account 22 71,451 16,402
Special reserve 22 23,261 23,261
Profit and loss account 22 1,849 3,089
- -------------------------------------------------------------------------------------------------------------------
Shareholders' funds - equity 103,941 49,145
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Dr M P Read
A F Given
Directors
9 September 1998
<PAGE>
----------------------------------------------------
Notes to the Financial Statements
----------------------------------------------------
<TABLE>
<CAPTION>
1 SEGMENTAL INFORMATION
a) Geographic areas - analysis by location of operations
Total turnover Inter-segment External turnover
turnover
1998 1997 1998 1997 1998 1997
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
United Kingdom 236,463 182,347 (5,757) (1,244) 230,706 181,103
Continental Europe 133,307 103,440 (6,346) (5,524) 126,961 97,916
North America 51,161 37,770 (2,003) (2,281) 49,158 35,489
Asia Pacific/Middle East 26,602 24,354 (1,584) (397) 25,018 23,957
---------------------------------------------------------------------------------------------------------------------------------
Consolidated turnover - continuing operations 447,533 347,911 (15,690) (9,446) 431,843 338,465
Acquisition - Ireland 41,114 0 0 0 41,114 0
---------------------------------------------------------------------------------------------------------------------------------
Total consolidated turnover - group 488,647 347,911 (15,690) (9,446) 472,957 338,465
- associate 7,016 5,655
---------------------------------------------------------------------------------------------------------------------------------
Profit before taxation
1998 1997
(pound)'000 (pound)'000
United Kingdom 22,057 17,456
Continental Europe 8,719 6,924
North America 3,818 2,408
Asia Pacific / Middle East 681 881
---------------------------------------------------------------------------------------------------------------------------------
Operating profit - continuing operations 35,275 27,669
Acquisition - Ireland 4,368 0
---------------------------------------------------------------------------------------------------------------------------------
Operating profit 39,643 27,669
Share of operating profit in associate 715 498
---------------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before interest 40,358 28,167
Net interest receivable/(payable) - group 1,476 (34)
- associate (9) 15
---------------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation 41,825 28,148
---------------------------------------------------------------------------------------------------------------------------------
Net assets
1998 1997
(pound)'000 (pound)'000
United Kingdom 19,382 42,898
Continental Europe 1,501 10,437
North America 8,108 5,872
Asia Pacific / Middle East (1,441) (675)
Acquisition - Ireland 5,212 0
---------------------------------------------------------------------------------------------------------------------------------
32,762 58,532
Cash less bank borrowings 55,369 8,340
Dividends proposed (5,256) (3,635)
---------------------------------------------------------------------------------------------------------------------------------
Net assets 82,875 63,237
---------------------------------------------------------------------------------------------------------------------------------
b) Geographic markets - analysis by location of client External turnover
1998 1997
(pound)'000 (pound)'000
United Kingdom/Ireland 213,061 152,553
Continental Europe 142,379 111,323
North America 63,920 34,549
Asia Pacific/Middle East 53,597 40,040
---------------------------------------------------------------------------------------------------------------------------------
Total consolidated turnover 472,957 338,465
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
External turnover and profit before taxation for each geographic area exclude
any contribution from the associate.
In the opinion of the directors the group operated only one class of business
throughout the year, that of the provision of information technology services.
<PAGE>
------------------------------------------------------
Notes to the Financial Statements
------------------------------------------------------
<TABLE>
<CAPTION>
1998 1997
2 OPERATING PROFIT Note (pound)'000 (pound)'000
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
Total consolidated Turnover 472,957 338,465
---------------------------------------------------------------------------------------------------------------------------
Materials and other external charges 107,714 63,813
Staff costs 3 219,799 168,644
Depreciation of tangible fixed assets
- owned assets 10 8,314 6,537
- under finance leases 10 282
Loss on disposal of fixed assets 11 114
Auditors' remuneration and expenses - group 304 266
Auditors' remuneration and expenses - company 49 42
Fees paid to auditors' for non - audit related work (UK) 63 135
Fees paid to auditors' for non - audit related work (Overseas) 143 145
Hire of plant and machinery 6,196 5,285
Other operating lease rentals 10,922 8,421
Other operating charges 81,447 58,029
Own work capitalised (1,930) (635)
---------------------------------------------------------------------------------------------------------------------------
Operating costs 433,314 310,796
---------------------------------------------------------------------------------------------------------------------------
Operating profit 39,643 27,669
Share of operating profit in associate 715 498
---------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before interest 40,358 28,167
---------------------------------------------------------------------------------------------------------------------------
3 STAFF
Staff numbers 1998 1997 1998 1997
---------------------------------------------------------------------------------------------------------------------------
Year end Year end Average Average
Staff were based as follows:
United Kingdom 2,748 2,414 2,640 2,291
Continental Europe 2,455 1,912 2,152 1,396
North America 501 378 454 403
Asia Pacific/Middle East 247 197 241 216
Ireland 208 0 183 0
---------------------------------------------------------------------------------------------------------------------------
Total excluding associate 6,159 4,901 5,670 4,306
Associate 224 197 210 184
---------------------------------------------------------------------------------------------------------------------------
Total including associate 6,383 5,098 5,880 4,490
---------------------------------------------------------------------------------------------------------------------------
1998 1997
Staff costs (pound)'000 (pound)'000
Wages and salaries 185,812 145,387
Social security costs 25,596 17,202
Other pension costs 8,391 6,055
---------------------------------------------------------------------------------------------------------------------------
219,799 168,644
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
There are voluntary pension schemes in the UK, The Netherlands,
Belgium, Hong Kong and Australia, all of which are defined
contribution schemes. The defined contributions, consisting of
a fixed percentage of salary and voluntary contributions, are
charged to the profit and loss account in the period to which
they relate.
There are no unfunded liabilities in these schemes.
4 DIRECTORS
Directors' emoluments and interests are included within the report of the
remuneration committee on pages 33 to 36.
<PAGE>
-------------------------------------
Notes to the Financial Statements
-------------------------------------
<TABLE>
<CAPTION>
1998 1997
5 INTEREST (pound)'000 (pound)'000
<S> <C> <C>
Interest payable on bank loans and overdrafts (1,012) (461)
Interest payable on other loans and finance leases (72) 0
Discount on deferred consideration (250) 0
---------------------------------------------------------------------------------------------------------------------
Total interest and similar charges payable (1,334) (461)
Interest receivable 2,810 427
---------------------------------------------------------------------------------------------------------------------
Net interest receivable/(payable) 1,476 (34)
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
1998 1997
6 TAXATION (pound)'000 (pound)'000
<S> <C> <C>
United Kingdom taxation
Corporation tax at the rate of 31.0% (1997: 32.5%) 7,618 6,830
Double taxation relief (149) (646)
Deferred taxation (569) (360)
---------------------------------------------------------------------------------------------------------------------
6,900 5,824
---------------------------------------------------------------------------------------------------------------------
Overseas taxation
Corporation taxes 4,701 2,839
Deferred taxation (148) (101)
---------------------------------------------------------------------------------------------------------------------
4,553 2,738
---------------------------------------------------------------------------------------------------------------------
Share of associate 401 253
---------------------------------------------------------------------------------------------------------------------
Tax on profit on ordinary activities 11,854 8,815
---------------------------------------------------------------------------------------------------------------------
</TABLE>
There are tax losses amounting to (pound)18.6 million which may
be available for relief against profits of certain subsidiary
undertakings in future years. Losses of (pound)15.8 million
relate to the USA.
<TABLE>
<CAPTION>
7 DIVIDENDS PAID AND PROPOSED 1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Interim dividend of 4.5p (1997 - 3.6p) 3,259 2,213
Final dividend of 7.25p (1997 - 5.8p) 5,256 3,635
---------------------------------------------------------------------------------------------------------------------
Total dividend 8,515 5,848
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
8 PROFIT ATTRIBUTABLE TO MEMBERS OF THE
HOLDING COMPANY 1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
---------------------------------------------------------------------------------------------------------------------
Dealt with in the accounts of the company 7,275 5,494
---------------------------------------------------------------------------------------------------------------------
</TABLE>
As permitted under Section 230(1) of the Companies Act 1985,
the Company has not presented its own profit and loss account.
9 EARNINGS PER SHARE
Earnings per share of 42.3p are based on the profit after tax
of (pound)29,971,000 and on a weighted average of 70,829,354
shares. Last year's earnings per share of 30.3p was based on
the profit after tax of (pound)19,333,000 and on a weighted
average of 63,844,408 shares. The average number of shares for
the year to 30 June 1997 has been adjusted by the bonus element
inherent in the rights issue that took place on 22 August 1997.
<PAGE>
------------------------------------------------------
Notes to the Financial Statements
-------------------------------------------------------
<TABLE>
<CAPTION>
10 TANGIBLE ASSETS Freehold Short Equipment Total
Land and Leaseholds and Plant
Buildings
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Cost
1 July 1997 3,933 10,121 45,264 59,318
Translation differences (2) (183) (1,041) (1,226)
Acquisition of businesses 0 264 4,227 4,491
Additions 52 3,324 9,568 12,944
Own work capitalised 0 0 1,930 1,930
Disposals 0 (248) (9,971) (10,219)
------------------------------------------------------------------------------------------------------------
30 June 1998 3,983 13,278 49,977 67,238
------------------------------------------------------------------------------------------------------------
Depreciation
1 July 1997 531 4,192 30,166 34,889
Translation differences 0 (85) (554) (639)
Acquisition of businesses 0 142 1,366 1,508
Provided 36 921 7,639 8,596
Released on disposals 0 (235) (9,886) (10,121)
------------------------------------------------------------------------------------------------------------
30 June 1998 567 4,935 28,731 34,233
------------------------------------------------------------------------------------------------------------
Net book value at 30 June 1998 3,416 8,343 21,246 33,005
------------------------------------------------------------------------------------------------------------
Net book value at 30 June 1997 3,402 5,929 15,098 24,429
------------------------------------------------------------------------------------------------------------
</TABLE>
Assets held under finance leases, capitalised and included in equipment and
plant have a cost of (pound)1,985,000 (1997:(pound) nil) and an aggregate
depreciation of (pound)426,000 (1997:(pound)nil) and hence a net book value
of (pound)1,559,000 (1997:(pound)nil)
11 INVESTMENTS
<TABLE>
<CAPTION>
GROUP Associated undertaking
------------------------------------------
Shares Retained Total Trade Own shares Total
at cost Profits Investments (ESOP)
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
1 July 1997 906 1,004 1,910 467 5,631 6,098
Translation differences 0 (65) (65) (2) (42) (44)
Additions 0 0 0 3 637 640
Disposals 0 0 0 0 (271) (271)
Dividends received 0 (136) (136) 0 0 0
Share of retained profit for the year 0 305 305 0 0 0
----------------------------------------------------------------------------------------------------------------------------
30 June 1998 906 1,108 2,014 468 5,955 6,423
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
All investments are unlisted.
The group accounts for its own shares held by the Employee Share Ownership
Plan Trust as a fixed asset investment. The Logica Employee Share Ownership
Plan Trust is a discretionary trust which was established in September 1990
for the benefit of Logica staff. It has an independent, professional trustee
(Mourant & Co Trustees Limited) and is currently financed by advances from
the group. Costs of administering the Employee Share Ownership Plan Trust are
charged to the profit and loss account as they occur. The trust purchases the
company's shares in the market, for use in connection with the company's
all-employee and discretionary share option schemes, and long-term bonus
scheme.
At 30 June 1998 the Employee Share Ownership Plan Trust owned 1,302,965
shares (1997:1,252,441 shares). Of this shareholding 889,118 shares (1997:
848,597 shares) are under option to employees, and 413,847 shares (1997:
403,844 shares) are held as a hedge for the long term bonus scheme. The
Trustee has agreed under the Trust Deed dated 26 September 1990 to waive, at
the company's discretion, all rights to any future dividends which may be
payable on any shares in the company held in the trust, save 0.01p per share.
Such waivers of dividends payable during the year ended 30 June 1998 amounted
to (pound)134,954 (1997:(pound)111,614).
<TABLE>
<CAPTION>
COMPANY Subsidiary undertakings Advance to
-----------------------------------------------
Shares Loans Total ESOP Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C>
Cost
1 July 1997 14,245 35,527 49,772 5,067 54,839
Additions 51,446 0 51,446 0 51,446
Disposals 0 0 0 (121) (121)
----------------------------------------------------------------------------------------------------------------------
30 June 1998 65,691 35,527 101,218 4,946 106,164
----------------------------------------------------------------------------------------------------------------------
Provisions
1 July 1997 and 30 June 1998 (787) (5,662) (6,449) 0 (6,449)
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Net book value at 30 June 1998 64,904 29,865 94,769 4,946 99,715
----------------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------------
Net book value at 30 June 1997 13,458 29,865 43,323 5,067 48,390
----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-------------------------------------------
Notes to the Financial Statements
-------------------------------------------
<TABLE>
<CAPTION>
1998 1997
12 CAPITAL COMMITMENTS (pound)'000 (pound)'000
<S> <C> <C>
Capital expenditure contracted for but not provided 263 270
------------------------------------------------------------------------------------------------------------------
<CAPTION>
1998 1997
13 DEBTORS (pound)'000 (pound)'000
<S> <C> <C>
Group
Trade debtors 82,147 58,886
Amounts owed by associate 276 266
Other debtors 5,797 4,296
Prepayments and accrued income 8,290 6,297
Amounts recoverable on contracts 15,514 25,400
Deferred taxation (see note 19) 1,817 1,145
Taxation recoverable 1,497 185
Advance corporation tax 2,128 2,434
------------------------------------------------------------------------------------------------------------------
117,466 98,909
------------------------------------------------------------------------------------------------------------------
Company
Amounts owed by subsidiary undertakings 4,401 4,303
Other debtors 651 586
Advance corporation tax 3 909
------------------------------------------------------------------------------------------------------------------
5,055 5,798
------------------------------------------------------------------------------------------------------------------
<CAPTION>
1998 1998 1997 1997
Amounts due Amounts due Amounts due Amounts due
within one year after one year within one year after one year
(pound)'000 (pound)'000 (pound)'000 (pound)'000
14 BORROWINGS
<S> <C> <C> <C> <C>
Secured
Bank loan 83 149 0 0
Obligations under finance leases 598 784 0 0
Unsecured
Overdrafts 439 0 18 0
Bank loans 17,328 4,088 4,222 10,978
------------------------------------------------------------------------------------------------------------------
18,448 5,021 4,240 10,978
------------------------------------------------------------------------------------------------------------------
Maturity of borrowings
Debt
Within one year 17,850 4,240
Between one and two years 4,171 6,756
Between two and five years 66 4,222
Over five years 0 0
------------------------------------------------------------------------------------------------------------------
22,087 15,218
------------------------------------------------------------------------------------------------------------------
Finance leases
Within one year 598 0
Between one and two years 556 0
Between two and five years 228 0
Over five years 0 0
------------------------------------------------------------------------------------------------------------------
1,382 0
------------------------------------------------------------------------------------------------------------------
</TABLE>
The bank loan is secured by a fixed and floating charge over
the assets of Aldiscon Limited. The borrowings are denominated
in French francs, Belgian francs, Irish punts and US dollars
and the weighted average interest rate amounts to 4.5% (1997:
4.25%).
15 DERIVATIVES AND FINANCIAL INSTRUMENTS
Treasury risk management
The group uses financial instruments to manage interest and foreign currency
risk. The group enters into derivatives to lower funding costs or to achieve
greater certainty of future costs. Interest rate swaps and interest rate caps
are used from time to time by the group to manage interest rate risk. The
group has clearly defined policies for the management of foreign exchange
risk requiring subsidiaries to hedge all material exposures back into the
currency in which their results are measured.
<PAGE>
------------------------------------
Notes to the Financial Statements
------------------------------------
<TABLE>
<CAPTION>
1998 1997
16 OTHER CREDITORS (pound)'000 (pound)'000
Amounts falling due within one year:
<S> <C> <C>
Group
Payments received on account 28,214 7,904
Trade creditors 18,228 11,491
Accruals and other creditors 38,302 25,239
Amounts owed to associate 6 0
Taxation and other state creditors 32,196 25,297
Deferred consideration for acquisitions 2,600 0
Advance corporation tax 2,128 2,434
Dividends proposed 5,256 3,635
----------------------------------------------------------------------------------------------------------------------
126,930 76,000
----------------------------------------------------------------------------------------------------------------------
Company
Accruals and other creditors 531 528
Deferred consideration for acquisitions 2,600 0
Advance corporation tax 3 909
Dividends proposed 5,256 3,635
----------------------------------------------------------------------------------------------------------------------
8,390 5,072
----------------------------------------------------------------------------------------------------------------------
<CAPTION>
1998 1997
17 OTHER CREDITORS (pound)'000 (pound)'000
<S> <C> <C>
Amounts falling due after more than one year:
Deferred consideration for acquisitions 2,887 0
Other creditors 92 52
----------------------------------------------------------------------------------------------------------------------
2,979 52
----------------------------------------------------------------------------------------------------------------------
<CAPTION>
1998 1997
18 PROVISIONS FOR LIABILITIES AND CHARGES (pound)'000 (pound)'000
<S> <C> <C>
Post-retirement benefits 110 396
----------------------------------------------------------------------------------------------------------------------
</TABLE>
The movement in the provision comprises amounts paid of (pound)15,000 (1997:
(pound)22,000), a release of (pound)252,000 (1997: (pound)554,000) in respect
of premiums not payable due to the better than expected performance from
underlying investments, a transfer to other creditors:amounts falling due
within one year of (pound)21,000 (1997: (pound)22,000) and an unfavourable
exchange movement of (pound)2,000 (1997: favourable movement of
(pound)52,000).
<TABLE>
<CAPTION>
19 DEFERRED TAXATION
Full provision is made in the accounts for deferred taxation
as follows: 1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Accelerated capital allowances 0 (187)
Other short-term timing differences (1,817) (958)
----------------------------------------------------------------------------------------------------------------------
(1,817) (1,145)
----------------------------------------------------------------------------------------------------------------------
1 July (1,145) (782)
Translation differences (38) (2)
Transfer 83 100
(Release) in respect of current year (717) (461)
----------------------------------------------------------------------------------------------------------------------
30 June (1,817) (1,145)
----------------------------------------------------------------------------------------------------------------------
</TABLE>
The deferred taxation asset is included in note 13.
<PAGE>
------------------------------------------------------
Notes to the Financial Statements
------------------------------------------------------
20 OTHER FINANCIAL COMMITMENTS
At 30 June 1998 there were annual commitments under operating
leases as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------- -------------------------------
Land and Other Land and Other
Buildings Buildings
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Expiring within one year 865 990 1,247 1,237
Expiring in the second to fifth years 3,194 5,106 2,745 4,310
Expiring after five years 6,822 4,485
----------------------------------------------------------------------------------------------------------------------
10,881 6,096 8,477 5,547
----------------------------------------------------------------------------------------------------------------------
<CAPTION>
21 CALLED UP SHARE CAPITAL 1998 1997
(pound)'000 (pound)'000
Authorised share capital
120,000,000 ordinary shares of 10p each 12,000 8,000
Called up share capital
73,801,965 ordinary shares of 10p each 7,380 6,393
During the year 612,086 shares were issued under
share option schemes as follows:
Exercise Number
price (pence Exercised
Granted per share)
1987 268.35 2,049
1988 372.76 4,098
1989 318.11 7,685
1989 356.17 3,074
1990 161.98 1,112
1990 287.86 4,099
1991 200.00 9,354
1992 153.00 2,048
1992 149.30 294,799
1992 164.91 25,620
1993 249.80 529
1993 272.25 3,074
1994 277.13 94,139
1994 259.56 2,565
1994 288.84 149,254
1995 424.00 612
1995 413.74 209
1996 602.07 1,618
1996 868.46 6,148
-------------------------------------------------------------------
612,086
-------------------------------------------------------------------
</TABLE>
On 22 August 1997, 9,134,126 shares were issued pursuant to the rights issue
( 1-for-7 issue at 605p). In addition on 11 September 1997 250,000 warrants
were granted to SDF Inc at an exercise price of 797.5p (see note 26) and, of
these, 125,000 have been exercised as at 30 June 1998. SDF Inc exercised a
further 12,500 warrants on 6 August 1998.
During the year 1,337,232 options were granted over both unissued and
existing shares under employee share option schemes at prices ranging from
742p to 1365p and exercisable from 1998 to 2008. Options granted under SAYE
schemes were granted at a 20% discount to market price. Discretionary options
were granted at market price. Of the options granted during the year 809,500
options granted at 928p and 82,000 options granted at 1365p only become
exercisable if the growth in the company's earnings per share over any three
year period has exceeded the growth in the Retail Prices Index over that
period by an average of at least 7 per cent per annum.
At 30 June 1998 there were 3,578,076 options which had been granted under
employee share option schemes at prices ranging from 161p to 1365p and
exercisable between 1998 and 2008.
22 SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
Share Share Special Other Profit
Capital premium reserve reserves and loss
account account Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Group
1 July 1997 6,393 16,402 158 2,510 37,774 63,237
Exchange difference 0 (26) (1,768) (1,794)
Issue of share capital
- rights issue for acquisition 913 54,350 55,263
- employee share option scheme 61 1,288 1,349
- warrants exercised by SDF Inc. 13 984 997
Profit attributable to shareholders 29,971 29,971
Dividends paid and proposed (8,515) (8,515)
Share issue expenses (1,573) (1,573)
Goodwill on acquisition (see Note 26) (56,060) (56,060)
-------------------------------------------------------------------------------------------------------------------------------
30 June 1998 7,380 71,451 158 2,484 1,402 82,875
-------------------------------------------------------------------------------------------------------------------------------
Company
1 July 1997 6,393 16,402 23,261 0 3,089 49,145
Issue of share capital
- rights issue for acquisition 913 54,350 55,263
- employee share option scheme 61 1,288 1,349
- warrants exercised by SDF Inc. 13 984 997
Profit attributable to shareholders 7,275 7,275
Dividends paid and proposed (8,515) (8,515)
Share issue expenses (1,573) (1,573)
-------------------------------------------------------------------------------------------------------------------------------
30 June 1998 7,380 71,451 23,261 0 1,849 103,941
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The cumulative amount of goodwill written off to reserves since 1 July 1990
amounts to (pound)85,403,000 (1997: (pound)29,343,000).
<PAGE>
---------------------------------------------------
Notes to the Financial Statements
---------------------------------------------------
<TABLE>
<CAPTION>
23 RECONCILIATION OF OPERATING PROFIT TO
NET CASH INFLOW FROM OPERATING ACTIVITIES
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Operating profit 39,643 27,669
Add: depreciation and loss on disposal of fixed assets 8,607 6,651
(Increase) in debtors (2,355) (11,699)
Increase in creditors 30,122 4,920
-------------------------------------------------------------------------------------------------------------------------------
Net cash inflow from operating activities 76,017 27,541
-------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
24 ANALYSIS OF NET FUNDS
Balance at Balance at
1 July Cash inflow/ Acquisitions Exchange Other 30 June
1997 (outflow) Differences Changes 1998
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
Net cash:
Cash at bank and in hand 23,557 54,838 0 (940) 77,455
Less: deposits treated as liquid resources (2,000) (25,455) (27,455)
----------------------------------------------------------------------------------
21,557 29,383 0 (940) 50,000
Bank overdrafts (18) (419) 0 (2) (439)
----------------------------------------------------------------------------------
21,539 28,964 0 (942) 49,561
----------------------------------------------------------------------------------
Liquid resources:
Deposits included in cash 2,000 25,455 27,455
----------------------------------------------------------------------------------
Debt:
Debt falling due within one year (4,222) (6,216) (7,571) (18,009)
Debt falling due after one year (10,978) 478 (1,224) 57 6,646 (5,021)
----------------------------------------------------------------------------------
(15,200) (5,738) (1,224) 57 (925) (23,030)
----------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------------
Net funds 8,339 48,681 (1,224) (885) (925) 53,986
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Liquid resources comprise short-term deposits with banks which mature within
one month of inception.
<TABLE>
<CAPTION>
25 RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET FUNDS
1998 1997
(pound)'000 (pound)'000
<S> <C> <C>
Increase in net cash in the period 28,964 6,721
Cash outflow/(inflow) from increase/(decrease) in liquid resources 25,455 (1,796)
Cash inflow from increase in debt 478 (17,347)
--------------------------------------------------------------------------------------------------------------------------------
Change in net debt resulting from cash flows 54,897 (12,422)
Debt and financing acquired with subsidiary (1,224) (156)
New finance leases (925)
Translation differences (885) 822
--------------------------------------------------------------------------------------------------------------------------------
Movement in net funds in the period 51,863 (11,756)
Net funds at 1 July 1997 8,339 20,095
--------------------------------------------------------------------------------------------------------------------------------
Net funds at 30 June 1998 60,202 8,339
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
--------------------------------------------------------
Notes to the Financial Statements
--------------------------------------------------------
26 ACQUISITIONS
All acquisitions have been accounted for under the acquisition method of
accounting.
Aldiscon Limited
The acquisition of Aldiscon Limited, a company registered in Ireland, was
completed on 1 August 1997. The consideration paid or payable is as follows:
(i) a fixed amount of IR(pound)52.4 million ((pound)47.0 million) excluding
costs of the acquisition.
(ii) an amount contingent upon Logica Aldiscon achieving certain performance
criteria in the period to 30 June 1998, the maximum amount payable being
IR(pound)4.5 million ((pound)3.8 million). This is expected to be paid
subject only to the continued employment of certain of the vendors.
The acquisition was funded by a rights issue which raised (pound)53.7 million
net of expenses.
Logica Aldiscon contributed (pound)7,550,000 to the group net operating cash
flows, received (pound)115,000 in respect of net returns on investments and
servicing of finance, paid (pound)268,000 in respect of taxation and utilised
(pound)2,005,000 for capital expenditure.
In its last financial year to 31 March 1997 Aldiscon Limited made a profit
after taxation of IR(pound)3.1 million. For the period since that date to the
date of acquisition, Aldiscon Limited's management accounts show:
IR(pound)million
-------------------------------------------------------------------------
Turnover 10.5
-------------------------------------------------------------------------
Operating loss (0.5)
-------------------------------------------------------------------------
Loss before taxation (0.5)
Taxation -
-------------------------------------------------------------------------
Loss attributable to shareholders (0.5)
Exchange adjustments -
-------------------------------------------------------------------------
Total recognised losses for the period (0.5)
-------------------------------------------------------------------------
The provisional fair value to the group is shown below:
<TABLE>
<CAPTION>
Book value of Revaluation Accounting Provisional
assets acquired adjustments policy fair value
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Intangible fixed assets 35 0 (35) 0
Tangible fixed assets 2,074 0 422 2,496
Debtors/ work in progress 12,939 (937) 1,365 13,367
Cash at bank and in hand 2,712 0 0 2,712
Creditors (8,748) (886) 0 (9,634)
Taxation (334) (622) 0 (956)
Borrowings (853) 0 0 (853)
------------------------------------------------------------------------------------------------------------------------------
Net assets acquired 7,825 (2,445) 1,752 7,132
------------------------------------------------------------------------------------------------------------------------------
Goodwill 44,065
----------------
51,197
----------------
------------------------------------------------------------------------------------------------------------------------------
Satisfied by:
Cash (including costs of the acquisition of(pound)831,000) 47,831
Contingent consideration (discounted) 3,366
------------------------------------------------------------------------------------------------------------------------------
51,197
----------------
</TABLE>
The main adjustments are:
Intangible fixed assets
Capitalised patents of (pound)35,000 have been written off to bring Aldiscon
into line with Logica's accounting policy on intangible assets.
Tangible fixed assets
The net book value of fixed assets was adjusted to realign Aldiscon fixed
asset depreciation policies with those of Logica.
Debtors/work in progress
Reversal of general work in progress provision of (pound)90,000 to conform
with Logica accounting policy. Logica revenue recognition policy was applied
against Aldiscon's open projects as at 1 August 1997 resulting in an
acceleration of revenue recognition compared to Aldiscon's existing policy.
The impact was an increase in debtors of (pound)2.9 million and an increase
in accrued costs associated with those revenues of (pound)1.4 million.
Specific provisions of (pound)937,000 were made for all debts more than 12
months old at the date of acquisition. There has been no movement in this
provision to 30 June 1998.
Creditors
Provisions were established in respect of a planned US office relocation
entered into prior to the acquisition date ((pound)246,000) and identified
social security exposures ((pound)640,000).
Taxation
Provisions were established to cover specific tax exposures identified.
Movements on fair value provisions
An amount of (pound)123,000 of the provision for the US office relocation has
been utilised in the period since acquisition to cover the rent on the
property for the period since it was vacated and other costs of relocation.
<PAGE>
------------------------------------------
Notes to the Financial Statements
------------------------------------------
26 ACQUISITIONS (cont'd)
Delog Conseil SA
The acquisition of Delog Conseil SA, a company registered in France, was
completed on 29 May 1998. The consideration paid or payable is as follows:
(i) an initial consideration of FFr 19.7 million ((pound)2.0 million)
(ii) an amount contingent upon Delog achieving certain performance criteria
in the period to 30 June 1999. If the criteria are met the amount payable
will be FFr 20.6 million ((pound)2.1 million).
In its last financial year, prior to acquisition, to 31 December 1997, Delog
Conseil SA made a profit after taxation of FFr 1.6 million. For the period
since that date to the date of acquisition, Delog Conseil SA made a profit
after tax of FFr 3.5 million.
The provisional fair value to the group is shown below:
<TABLE>
<CAPTION>
Accounting Provisional
Book value of policy fair value to
assets acquired adjustments the group
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Intangible fixed assets 1 (1) 0
Tangible fixed assets 38 38
Debtors 910 910
Cash at bank and in hand 786 786
Creditors (553) (553)
Taxation (578) (578)
-------------------------------------------------------------------------------------------------------------------------
Net assets acquired 604 (1) 603
-----------------------------------------------------------------------------------------------------
Goodwill 3,525
--------------------
4,128
--------------------
-------------------------------------------------------------------------------------------------------------------------
Satisfied by:
Cash (including costs of the acquisition of(pound)142,000) 2,142
Contingent consideration (discounted) 1,986
-------------------------------------------------------------------------------------------------------------------------
4,128
--------------------
</TABLE>
Administra-CIM/Hardi SA
The acquisition of Administra-CIM/Hardi SA/NV, a company registered in
Belgium, was completed on 30 June 1998. The total consideration payable is
BEF 579.6 million ((pound)9.3 million). In its last financial year, prior to
acquisition, to 31 March 1998, Administra-CIM/Hardi SA/NV made a profit after
taxation of BEF 34.7 million.
For the period since that date to the date of acquisition,
Aministra-CIM/Hardi SA/NV made a profit after tax of BEF 17.0 million.
The provisional fair value to the group is shown below:
<TABLE>
<CAPTION>
Provisional
Book value of Fair value fair value to
assets acquired adjustments the group
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Tangible fixed assets 479 0 479
Investments 3 0 3
Debtors 4,195 0 4,195
Cash at bank and in hand 317 0 317
Creditors (3,340) 0 (3,340)
Borrowings (375) 0 (375)
-----------------------------------------------------------------------------------------------------------------------
Net assets acquired 1,279 0 1,279
---------------------------------------------------------------------------------------------------
Goodwill 8,058
--------------------
9,337
--------------------
-----------------------------------------------------------------------------------------------------------------------
Satisfied by:
Cash 9,337
-----------------------------------------------------------------------------------------------------------------------
</TABLE>
SDF Inc. (formerly Precision Software Inc.)
In September 1997 the group settled a claim brought by SDF Inc against Logica
Inc. relating to the purchase consideration payable by Logica Inc. for
certain assets of SDF Inc in May 1994. The resultant payment of US$750,000
((pound)449,000) represents additional purchase consideration which has
increased the goodwill element of the acquisition. This amount has been
written off against reserves.
Logica France SA (formerly Axime Ingenierie SA)
There has been no movement during the year to the provisional fair value
adjustments established for Axime Ingenierie in the prior year.
27 Contingent liabilities
Subsidiary undertakings have provided indemnities to their bankers in support
of performance bonds and guarantees amounting to (pound)7,232,000 (1997 -
(pound)7,406,000). The company provides certain guarantees for its subsidiary
undertakings in the normal course of business.
<PAGE>
-------------------------------------------------------------
Notes to the Financial Statements
--------------------------------------------------------------
28 RELATED PARTY TRANSACTIONS
Larry Quinn (chief executive of Logica Aldiscon) is a non-executive director
of Apion NI Ltd. Apion provides technical services to Logica Aldiscon on an
arm's length basis with the knowledge and approval of the Aldiscon Board.
During the 11 months of Logica ownership in 1997/98 Logica Aldiscon purchased
services to the value of IR(pound)660,504 from Apion NI Ltd. During the 4
months prior to acquisition but after the last Aldiscon statutory accounts
the value of these services was IR(pound)633,467. Paul Tierney (finance
director of Logica Aldiscon) is a non-executive director of Apion NI Ltd.
During the year the group purchased information technology services and
product licences from its associate, Logicasiel SpA, to the value of
(pound)21,000 (1997: (pound)4,000). At 30 June 1998 (pound)6,000
(1997:(pound)4,000) was payable in respect of purchases.
During the year the group sold information technology services and product
licences to Logicasiel SpA to the value of (pound)227,000
(1997:(pound)135,000). At 30 June 1998 (pound)92,000 (1997: (pound)200,000)
was receivable in respect of sales.
All transactions between the group and its associate, Logicasiel SpA, have
been at arms' length.
29 POST BALANCE SHEET EVENTS
The acquisition of the Quaestor retail banking solutions product suite and
certain other assets from the Synectics group was completed on 13 August
1998. Following the acquisition the employment contracts of the development
team (approximately 75 staff) were assigned to Logica. The initial
consideration, which was funded out of cash, was (pound)8.0 million. Further
consideration up to a maximum of (pound)22.0 million may be payable dependent
on the future profitability of the business. At the date of acquisition the
estimated value of the net assets acquired was (pound)0.3 million.
30 PRINCIPAL OPERATING SUBSIDIARY UNDERTAKINGS
<TABLE>
<S> <C>
Logica UK Limited (England) Delog Conseil SA (France)*
Ayrlink Limited (England) * Logica Svenska AB (Sweden) *
Aldiscon Limited (Ireland) Logica s.r.o. (Czech Republic)*
Aldiscon Inc (USA) * Logica Inc (USA) *
Logica SA (France) * Logica International Private Limited (India) *
Logica S.a.r.l (Luxembourg) * PT Logica (Indonesia) *
Logica BV (Netherlands) * Logica Pty Limited (Australia)*
Logica GmbH (Germany) * Logica New Zealand Limited (New Zealand)*
Logica Consulting AG (Switzerland)* Logica (Malaysia) Sdn Bhd (Malaysia) *
Logica SA/NV (Belgium) * Logica Pte Limited (Singapore) *.
Administra-CIM/Hardi SA (Belgium)* Logica Limited (Hong Kong) *
Hardi SA/NV (Belgium) *
</TABLE>
All subsidiaries are wholly owned and all subsidiaries, except Aldiscon
Limited, principally operate in their country of incorporation.
* The shareholdings in these companies are held by a wholly owned subsidiary
of the parent undertaking.
31 ASSOCIATED UNDERTAKING
Logicasiel SpA (Italy) is owned 55% by a subsidiary of Finsiel SpA and 45% by
Logica which holds 613,642 ordinary shares of 1,000 lire each. Logicasiel SpA
principally operates in its country of incorporation.
<PAGE>
Five Year Record
- ----------------
<TABLE>
<CAPTION>
1998 1997 1996 1995 1994
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C>
CONSOLIDATED TURNOVER 472,957 338,465 284,810 250,135 209,952
Profit on ordinary activities before interest * 40,358 28,167 24,101 19,803 13,154
Interest - group and associates * 1,467 (19) 609 507 389
---------------------------------------------------------------------------------
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 41,825 28,148 24,710 20,310 13,543
---------------------------------------------------------------------------------
Profit on ordinary activities after taxation 29,971 19,333 16,580 13,150 8,485
Shareholders' funds 82,875 63,237 70,340 56,401 48,932
EARNINGS PER SHARE ** 42.3p 30.3p 26.4p 21.2p 13.7p
Dividends per share (net) 11.75p 9.40p 7.80p 6.25p 5.00p
Staff numbers at year end *** 6,383 5,098 3,801 3,816 3,387
---------------------------------------------------------------------------------
</TABLE>
* Profit on ordinary activities before interest and Interest - group and
associates for the years ended 30 June 1994, 1995, 1996 and 1997 have been
restated in accordance with FRS9 Associates and Joint Ventures.
** Earning per share for the years ended 30 June 1994, 1995, 1996 and 1997 have
been adjusted to take account of the bonus element of the rights issue that
took place on 22 August 1997.
*** Staff numbers include staff employed by the associate.
<PAGE>
ACCOUNTING POLICIES
-------------------
1 Basis of accounting
The accounts are prepared under the historical cost convention and in
accordance with the Companies Act 1985 and applicable UK accounting
standards applied consistently throughout the year.
2 Basis of consolidation
The financial statements include the accounts of Logica plc and all its
subsidiary and associated undertakings. The results of companies or
businesses acquired or disposed of during the year are dealt with from the
date of acquisition or to date of disposal.
The results of associated undertakings are equity accounted for and
calculated from the latest available audited accounts, adjusted to
incorporate periods not covered by audited accounts.
3 Turnover
Turnover represents the value of work done for clients including
attributable profit and after adjusting for all foreseeable future losses
but excluding local sales taxes.
Turnover from the sale of software products to customers is recognised on
the following basis:
40% on the receipt of order from the customer
40% on delivery to the customer
20% on final customer acceptance.
4 Recognition of profits
Profit on contracts for the supply of professional services at pre-
determined rates is taken as and when the work is billed, irrespective of
the duration of the contract.
Profit is taken on fixed price contracts while the contract is in progress,
having regard to the proportion of the total contract which has been
completed at the balance sheet date. Provision is made for all foreseeable
future losses.
<PAGE>
5 Amounts recoverable on contracts
Amounts recoverable on contracts represent turnover which has not yet been
invoiced to clients. Such amounts are separately disclosed within Debtors.
The valuation of amounts recoverable on fixed price contracts is adjusted
to take up profit to date or foreseeable losses in accordance with the
accounting policy for recognition of profits.
Other amounts recoverable on contracts are valued at the lower of cost or
estimated net realisable value.
Cost comprises:
- professional amounts recoverable valued at the cost of salaries and
associated payroll expenses of employees engaged on assignments and a
proportion of attributable overheads
- unbilled expenses incurred and equipment purchased for clients in
connection with specific contracts.
6 Research and development
Research costs are written off in the year in which they are incurred
unless they are to be reimbursed by third parties. Development costs are
also written off in the year in which they are incurred unless they are to
be reimbursed by third parties.
7 Depreciation
Depreciation is provided at rates calculated to write down the cost of
tangible fixed assets over their estimated useful lives on a straight line
basis. The annual rates of depreciation used are as follows:
Leaseholds equally over life of lease
Office equipment 10%
Computer equipment 25%
Motor cars 25%
Plant 20%
<PAGE>
8 Foreign currency transactions
Transactions in foreign currencies are translated at the rate of exchange
on the date of the transaction or, if hedged, at the rate of exchange under
the related forward exchange contract. Assets and liabilities in foreign
currencies are translated at the year end rate of exchange or, if hedged,
at the forward contract rate. The exchange differences are taken to the
profit and loss account.
The results of overseas subsidiaries and associated undertakings are
translated into sterling at average rates for the year. The net assets of
overseas subsidiary undertakings and related foreign currency debt
financing those assets together with investments in overseas associated
undertakings are translated at year end exchange rates. The exchange
differences are taken to reserves and reported in the statement of total
recognised gains and losses.
9 Interest rate transactions
Interest rate swap receipts and payments are accrued so as to match the net
income or cost with the related finance expense. No amounts are recognised
in respect of future periods.
10 Non-pension post-employment benefits
The cost of providing post-employment benefits, other than pensions, is
charged to the profit and loss account so as to spread the regular cost
over the service lives of employees.
11 Deferred taxation
Provision is made for deferred taxation to take account of timing
differences between the treatment of certain items for accounts purposes
and their treatment for tax purposes. The provision is maintained to the
extent that the timing differences are expected, with reasonable
probability, to reverse in the foreseeable future.
12 Leases
Assets financed by leasing agreements that give rights approximating to
ownership are treated as if they had been purchased outright. The amount
capitalised is the present value of the minimum lease payments payable
during the lease term. The corresponding leasing commitments are shown as
obligations to the lessor. Lease payments are treated as consisting of
capital and interest elements and the interest is charged to the profit and
loss account on a constant periodic rate of charge basis.
Operating lease rentals are charged to the profit and loss account on a
straight line basis over the life of the lease.
13 Goodwill
Goodwill, being the difference between the cost of businesses acquired and
the fair value of their separable net assets, is offset against reserves as
it arises.
<PAGE>
AUDITOR'S REPORT TO THE SHAREHOLDERS OF LOGICA PLC
We have audited the financial statements on pages 26 to 44 (including the
additional disclosures on pages 22 to 23 relating to the remuneration of the
directors specified for our review by the London Stock Exchange) which have been
prepared under the historical cost convention and the accounting policies set
out on page 44.
Respective responsibilities of directors and auditors
As described on page 24 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with Auditing Standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements made
by the directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the company's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion, the financial statements give a true and fair view of the state
of affairs of the company and the group at 30 June 1997 and of the profit and
cash flow of the group for the year then ended and have been properly prepared
in accordance with the Companies Act 1985.
Price Waterhouse
Chartered Accountants and Registered Auditors
Southwark Towers, 32 London Bridge Street
London SE1 9SY 8 September 1997
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Consolidated Profit and Loss Account
- --------------------------------------------------------------------------------------------------------------------------------
For Year Ended 30 June 1997 1996
Note (pound)'000 (pound)'000
<S> <C> <C> <C>
---------------------------------------------------------------------------------------------------------------------------
Consolidated turnover - continuing operations 1 311,457 284,810
- acquisition 1 27,008 0
---------------------------------------------------------------------------------------------------------------------------
Total consolidated turnover 1 338,465 284,810
---------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------
Operating profit - continuing operations 1 26,699 23,638
- acquisition 1 970 0
---------------------------------------------------------------------------------------------------------------------------
Operating profit 2 27,669 23,638
Share of profits of associated undertakings 2 513 524
---------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before interest 28,182 24,162
Interest 5 (34) 548
---------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation 28,148 24,710
Taxation on ordinary activities 6 (8,815) (8,130)
---------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities after taxation 19,333 16,580
Dividends paid and proposed 7 (5,848) (4,820)
---------------------------------------------------------------------------------------------------------------------------
Retained profit for the year 21 13,485 11,760
---------------------------------------------------------------------------------------------------------------------------
Earnings per share 9 31.0p 27.1p
Dividends per share 7 9.4p 7.8p
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------------------
Statement of Total Recognised Gains and Losses
- --------------------------------------------------------------------------------------------------------------------------------
For Year Ended 30 June
1997 1996
Note (pound)'000 (pound)'000
<S> <C> <C> <C>
Profit attributable to shareholders 21 19,333 16,580
Currency translation differences 21 (1,821) (389)
---------------------------------------------------------------------------------------------------------------------------
Total recognised gains and losses 17,512 16,191
---------------------------------------------------------------------------------------------------------------------------
</TABLE>
All gains and losses recognised above are based on historical costs and
arise from continuing operations.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------
Consolidated Balance Sheet
- ---------------------------------------------------------------------------------------------------------------------------
At 30 June 1997 1996
Note (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C>
Fixed assets
Tangible assets 10 24,429 22,677
Investments 11 8,008 8,033
- ----------------------------------------------------------------------------------------------------------------------------
32,437 30,710
Current assets
Debtors 13 98,909 77,174
Cash at bank and in hand 23 23,557 20,105
- ------------------------------------------------------------------------------------------------------------
122,466 97,279
- ------------------------------------------------------------------------------------------------------------
Creditors-amounts falling due within one year
Borrowings 14 (4,240) (10)
Other creditors 15 (76,000) (56,130)
- ------------------------------------------------------------------------------------------------------------
(80,240) (56,140)
- ------------------------------------------------------------------------------------------------------------
Net current assets 42,226 41,139
- ----------------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 74,663 71,849
Creditors- amounts falling due after
more than one year
Borrowings 14 (10,978) 0
Other creditors 16 (52) (463)
Provisions for liabilities and charges 17 (396) (1,046)
- ----------------------------------------------------------------------------------------------------------------------------
Net assets 63,237 70,340
- ----------------------------------------------------------------------------------------------------------------------------
Capital and reserves
Share capital 20 6,393 6,332
Share premium account 21 16,402 14,977
Special reserve 21 158 143
Other reserves 21 2,510 2,666
Profit and loss account 21 37,774 46,222
- ----------------------------------------------------------------------------------------------------------------------------
Shareholders' funds-equity 63,237 70,340
- ----------------------------------------------------------------------------------------------------------------------------
</TABLE>
Dr M P Read
A F Given
Directors
8 September 1997
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------------------
Consolidated Cash Flow Statement
- -----------------------------------------------------------------------------------------------------------------------
For Year ended 30 June Note 1997 1996
(pound)'000 (pound)'000
<S> <C> <C> <C>
Net cash inflow from operating activities 22 27,541 20,065
--------------------------------------------------------------------------------------------------------------------
Returns on investments and servicing of finance
Interest received 427 645
Interest paid (461) (92)
Interest element of finance lease rental payments 0 (5)
Dividends received from associated undertakings 11 83 455
--------------------------------------------------------------------------------------------------------------------
Net cash inflow from returns on investments
and servicing of finance 49 1,003
--------------------------------------------------------------------------------------------------------------------
Taxation
United Kingdom corporation tax paid (5,602) (4,524)
Overseas tax paid (2,663) (1,490)
--------------------------------------------------------------------------------------------------------------------
Tax paid (8,265) (6,014)
--------------------------------------------------------------------------------------------------------------------
Capital expenditure and financial investment
Purchase of tangible assets (8,241) (8,277)
Sale of tangible assets 0 11
Purchase of own shares by ESOP Trust 11 (661) (2,619)
Sale of own shares by ESOP Trust 11 559 674
--------------------------------------------------------------------------------------------------------------------
Net cash outflow for capital expenditure and
financial investment (8,343) (10,211)
--------------------------------------------------------------------------------------------------------------------
Acquisitions and disposals
Purchase of subsidiary undertaking (19,541) 0
Net overdrafts acquired with subsidiary (156) 0
Sale of associated undertaking 0 380
--------------------------------------------------------------------------------------------------------------------
Net cash (outflow)/inflow for acquisitions and disposals (19,697) 380
--------------------------------------------------------------------------------------------------------------------
Equity dividends paid (5,193) (4,580)
--------------------------------------------------------------------------------------------------------------------
Net cash (outflow)/inflow before use of liquid resources
and financing (13,908) 643
--------------------------------------------------------------------------------------------------------------------
Management of liquid resources
Cash placed on deposit 0 (1,478)
Cash withdrawn from deposit 1,796 0
--------------------------------------------------------------------------------------------------------------------
Net cash inflow from management of liquid resources 1,796 (1,478)
--------------------------------------------------------------------------------------------------------------------
Financing
Shares issued (net of expenses) 1,486 2,568
New bank loans drawdown 19,097 0
Repayment of new bank loans (1,750) 0
Capital element of finance lease rental payments 0 0
--------------------------------------------------------------------------------------------------------------------
Net cash inflow from financing 18,833 2,568
--------------------------------------------------------------------------------------------------------------------
Increase in cash in the period 23 6,721 1,733
--------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
- --------------------------------------------------------------------------------
Company Balance Sheet
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
At 30 June 1997 1996
Note (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C>
Fixed assets - Investments 11 48,390 49,429
Current assets
Debtors 13 5,798 852
Cash at bank and in hand 29 4,901
- --------------------------------------------------------------------------------------------------------------------------
Creditors-amounts falling 5,827 5,753
due within one year
Other creditors 15 (5,072) (7,169)
- --------------------------------------------------------------------------------------------------------------------------
Net current assets/(liabilities) 755 (1,416)
- --------------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 49,145 48,013
- --------------------------------------------------------------------------------------------------------------------------
Capital and reserves
Share capital 20 6,393 6,332
Share premium account 21 16,402 14,977
Special reserve 21 23,261 23,261
Profit and loss account 21 3,089 3,443
- --------------------------------------------------------------------------------------------------------------------------
Shareholders' funds-equity 49,145 48,013
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
Dr M P Read
A F Given
Directors
8 September 1997
<PAGE>
--------------------------------------------------------
Notes to the Financial Statements
--------------------------------------------------------
1 SEGMENTAL INFORMATION
a) Geographic areas - analysis by location of operations
<TABLE>
<CAPTION>
Total turnover Inter-segment External turnover
turnover
1997 1996 1997 1996 1997 1996
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
United Kingdom 182,347 168,672 (1,244) (5,384) 181,103 163,288
Continental Europe - excluding acquisition 76,022 63,899 (5,114) (2,403) 70,908 61,496
Acquisition 27,418 0 (410) 0 27,008 0
---------------------------------------------------------------------------------------------------------------------------------
Continental Europe - including acquisition 103,440 63,899 (5,524) (2,403) 97,916 61,496
North America 37,770 38,616 (2,281) (1,051) 35,489 37,565
Asia Pacific/Middle East 24,354 22,536 (397) (75) 23,957 22,461
---------------------------------------------------------------------------------------------------------------------------------
Total consolidated turnover 347,911 293,723 (9,446) (8,913) 338,465 284,810
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
Total consolidated turnover 347,911 293,723 (9,446) (8,913) 338,465 284,810
Less: acquisition (27,418) 0 410 0 (27,008) 0
---------------------------------------------------------------------------------------------------------------------------------
Consolidated turnover - continuing operations 320,493 293,723 (9,036) (8,913) 311,457 284,810
---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Profit before taxation
1997 1996
(pound)'000 (pound)'000
United Kingdom 17,456 15,922
Continental Europe - excluding acquisition 5,954 5,874
Acquisition 970 0
---------------------------------------------------------------------------------------------------------------------------------
Continental Europe - including acquisition 6,924 5,874
North America 2,408 1,254
Asia Pacific/Middle East 881 588
---------------------------------------------------------------------------------------------------------------------------------
Operating profit 27,669 23,638
Share of profits of associated undertakings 513 524
---------------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before interest 28,182 24,162
Net interest (34) 548
---------------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation 28,148 24,710
---------------------------------------------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------------------------------------------
Operating profit 27,669 23,638
Less: acquisition (970) 0
---------------------------------------------------------------------------------------------------------------------------------
Operating profit - continuing operations 26,699 23,638
---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Net assets
1997 1996
(pound)'000 (pound)'000
<S> <C> <C>
United Kingdom 42,898 37,440
Continental Europe 10,437 10,056
North America 5,872 5,538
Asia Pacific/Middle East (675) 191
---------------------------------------------------------------------------------------------------------------------------------
58,532 53,225
Cash less bank borrowings 8,340 20,095
Dividends proposed (3,635) (2,980)
---------------------------------------------------------------------------------------------------------------------------------
Net assets 63,237 70,340
---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
b) Geographic markets - analysis by location of client External turnover
1997 1996
(pound)'000 (pound)'000
<S> <C> <C>
United Kingdom 152,553 135,742
Continental Europe - excluding aquisition 84,315 79,312
Acquisition 27,008 0
---------------------------------------------------------------------------------------------------------------------------------
Continental Europe - including aquisition 111,323 79,312
North America 34,549 35,920
Asia Pacific/Middle East 40,040 33,836
---------------------------------------------------------------------------------------------------------------------------------
Total consolidated turnover 338,465 284,810
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
External turnover and profit before taxation for each geographic area exclude
any contribution from associated undertakings.
In the opinion of the directors the group operated only one class of business
throughout the year, that of the provision of information technology services.
<PAGE>
--------------------------------------------------------
Notes to the Financial Statements
--------------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
2 OPERATING PROFIT Note (pound)'000 (pound)'000
<S> <C> <C> <C>
--------------------------------------------------------------------------------------------------------------------
Consolidated Turnover 338,465 284,810
--------------------------------------------------------------------------------------------------------------------
Materials and other external charges 63,813 52,124
Staff costs 3 168,644 142,231
Depreciation 10 6,537 5,465
Loss/(profit) on disposal of fixed assets 114 (307)
Auditors' remuneration and expenses - group 266 241
Auditors' remuneration and expenses - company 42 41
Fees paid to auditors' for non-audit related work (UK) 135 108
Fees paid to auditors' for non-audit related work (Overseas) 145 163
Hire of plant and machinery 5,285 1,998
Operating lease rentals 8,421 11,522
Other operating charges 58,029 47,586
Own work capitalised (635) 0
--------------------------------------------------------------------------------------------------------------------
Operating Costs 310,796 261,172
--------------------------------------------------------------------------------------------------------------------
Operating profit 27,669 23,638
Share of profits of associated undertakings 513 524
--------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before interest 28,182 24,162
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
3 STAFF
Staff numbers 1997 1996
--------------------------------------------------------------------------------------------------------------------
Average staff numbers employed during the year were based as
follows:
United Kingdom 2,291 2,304
Continental Europe 1,396 667
North America 403 455
Asia Pacific/Middle East 216 188
--------------------------------------------------------------------------------------------------------------------
Total excluding associated undertakings 4,306 3,614
--------------------------------------------------------------------------------------------------------------------
Total staff numbers at 30 June 4,901 3,623
--------------------------------------------------------------------------------------------------------------------
The average number of staff employed worldwide during the year,
including associated undertakings, was 4,490 compared with
3,795 in 1996.
Staff costs (pound)'000 (pound)'000
Wages and salaries 145,387 125,376
Social security costs 17,202 11,416
Other pension costs 6,055 5,439
--------------------------------------------------------------------------------------------------------------------
168,644 142,231
--------------------------------------------------------------------------------------------------------------------
</TABLE>
There are voluntary pension schemes in the UK, The Netherlands, Belgium, Hong
Kong and Australia, all of which are defined contribution schemes. The defined
contributions, consisting of a fixed percentage of salary and voluntary
contributions, are charged to the profit and loss account in the period to
which they relate.
There are no unfunded liabilities in these schemes.
4 DIRECTORS
Directors emoluments and interests are included within the report of the
remuneration committee on pages 21 to 24.
<PAGE>
------------------------------------------------------
Notes to the Financial Statements
------------------------------------------------------
<TABLE>
<S> <C> <C>
1997 1996
5 INTEREST (pound)'000 (pound)'000
Interest receivable 427 645
Interest payable and other financing costs (461) (97)
---------------------------------------------------------------------------------------------------------------------
(34) 548
---------------------------------------------------------------------------------------------------------------------
1997 1996
6 TAXATION (pound)'000 (pound)'000
United Kingdom taxation
Corporation tax at the rate of 32.5% (1996: 33%) 6,830 6,368
Double taxation relief (646) (475)
Deferred taxation (360) (380)
---------------------------------------------------------------------------------------------------------------------
5,824 5,513
---------------------------------------------------------------------------------------------------------------------
Overseas taxation
Overseas taxes 2,839 2,450
Deferred taxation (101) 117
---------------------------------------------------------------------------------------------------------------------
2,738 2,567
---------------------------------------------------------------------------------------------------------------------
Associated undertakings 253 50
---------------------------------------------------------------------------------------------------------------------
Tax on profit on ordinary activities 8,815 8,130
---------------------------------------------------------------------------------------------------------------------
<CAPTION>
There are substantial unutilised tax losses which may be available for relief
against profits of certain subsidiary undertakings in future years.
7 DIVIDENDS PAID AND PROPOSED 1997 1996
(pound)'000 (pound)'000
Interim dividend of 3.6p (1996 - 3.0p) 2,213 1,840
Final dividend of 5.8p (1996 - 4.8p) 3,635 2,980
---------------------------------------------------------------------------------------------------------------------
Total dividend 5,848 4,820
---------------------------------------------------------------------------------------------------------------------
8 PROFIT ATTRIBUTABLE TO MEMBERS OF THE
HOLDING COMPANY 1997 1996
(pound)'000 (pound)'000
---------------------------------------------------------------------------------------------------------------------
Dealt with in the accounts of the Company 5,494 4,916
---------------------------------------------------------------------------------------------------------------------
</TABLE>
As permitted under Section 230(1) of the Companies Act 1985, the Company has
not presented its own profit and loss account.
9 EARNINGS PER SHARE
Earnings per share of 31.0p are based on the profit after tax of
(pound)19,333,000 and on a weighted average of 62,301,511 shares.
Last year's earnings per share of 27.1p were based on the profit
after tax of (pound)16,580,000 and on a weighted average of
61,263,881 shares.
<PAGE>
---------------------------------------------------------
Notes to the Financial Statements
---------------------------------------------------------
<TABLE>
<CAPTION>
10 TANGIBLE ASSETS Freehold Short Equipment Total
Land and Leaseholds and Plant
Buildings
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Cost
1 July 1996 3,940 9,796 41,288 55,024
Translation differences (22) (372) (2,269) (2,663)
Acquisition of businesses 0 0 1,842 1,842
Additions 15 1,507 6,320 7,842
Own work capitalised 0 0 635 635
Disposals 0 (810) (2,552) (3,362)
------------------------------------------------------------------------------------------------------------------------
30 June 1997 3,933 10,121 45,264 59,318
------------------------------------------------------------------------------------------------------------------------
Depreciation
1 July 1996 497 4,557 27,293 32,347
Translation differences (1) (257) (1,420) (1,678)
Acquisition of businesses 0 0 1,039 1,039
Provided 35 685 5,817 6,537
Released on disposals 0 (793) (2,563) (3,356)
------------------------------------------------------------------------------------------------------------------------
30 June 1997 531 4,192 30,166 34,889
------------------------------------------------------------------------------------------------------------------------
Net book value at 30 June 1997 3,402 5,929 15,098 24,429
------------------------------------------------------------------------------------------------------------------------
Net book value at 30 June 1996 3,443 5,239 13,995 22,677
------------------------------------------------------------------------------------------------------------------------
<CAPTION>
11 INVESTMENTS
GROUP Associated undertaking
-----------------------------------------
Shares Retained Total Trade Own shares Total
at cost Profits Investments (ESOP)
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
1 July 1996 906 1,054 1,960 476 5,597 8,033
Translation differences 0 (227) (227) (9) (68) (304)
Additions 0 0 0 0 661 661
Disposals 0 0 0 0 (559) (559)
Dividends received 0 (83) (83) 0 0 (83)
Share of retained profit for the year 0 260 260 0 0 260
-----------------------------------------------------------------------------------------------------------------------------
30 June 1997 906 1,004 1,910 467 5,631 8,008
-----------------------------------------------------------------------------------------------------------------------------
</TABLE>
All investments are unlisted.
The group accounts for its advance to the Employee Share Ownership Plan Trust
as a fixed asset investment. The Logica Employee Share Ownership Plan Trust
is a discretionary trust which was established in September 1990 for the
benefit of Logica staff. It has an independent, professional trustee (Mourant
& Co Trustees Limited) and is currently financed by advances from the group.
Costs of administering the Employee Share Ownership Plan Trust are charged to
the profit and loss account as they occur. The trust purchases the company's
shares in the market, for use in connection with the company's all-employee
and discretionary share option schemes, and long-term bonus scheme. At 30
June 1997 the Employee Share Ownership Plan Trust owned 1,252,441 shares
(1996:1,406,057 shares). Of this shareholding 848,597 shares (1996: 1,008,886
shares) are under option to employees, and 403,844 shares (1996: 397,171
shares) are held as a hedge for the long term bonus scheme. The Trustee has
agreed under the Trust Deed dated 26 September 1990 to waive, at the
company's discretion, all rights to any future dividends which may be payable
on any shares in the company held in the trust, save 0.01p per share. Such
waivers of dividends payable during the year ended 30 June 1997 amounted to
(pound)111,614 (1996:(pound)106,183).
<TABLE>
<CAPTION>
COMPANY Subsidiary undertakings
------------------------------------- Associated Own shares
Shares Loans Total undertaking (ESOP) Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
COST
1 July 1996 14,245 35,527 49,772 906 5,200 55,878
Additions 0 0 0 0 328 328
Disposals 0 0 0 0 (461) (461)
Transfers 0 0 0 (906) 0 (906)
-------------------------------------------------------------------------------------------------------------------------
30 June 1997 14,245 35,527 49,772 0 5,067 54,839
-------------------------------------------------------------------------------------------------------------------------
PROVISIONS
at 1 July 1996 and 30 June 1997 (787) (5,662) (6,449) 0 0 (6,449)
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Net book value at 30 June 1997 13,458 29,865 43,323 0 5,067 48,390
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
Net book value at 30 June 1996 13,458 29,865 43,323 906 5,200 49,429
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-------------------------------------------------
Notes to the Financial Statements
-------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
12 CAPITAL COMMITMENTS (pound)'000 (pound)'000
<S> <C> <C>
Capital expenditure contracted for but not provided 270 833
<CAPTION>
1997 1996
13 DEBTORS (pound)'000 (pound)'000
<S> <C> <C>
Group
Trade debtors 58,886 43,124
Amounts owed by associated undertaking 266 381
Other debtors 4,296 2,357
Prepayments and accrued income 6,297 5,740
Amounts recoverable on contracts 25,400 24,661
Deferred taxation (See note 18) 1,145 782
Taxation recoverable 185 72
Advance corporation tax 2,434 57
------------------------------------------------------------------------------------------------------
98,909 77,174
------------------------------------------------------------------------------------------------------
Company
Amounts owed by subsidiary undertakings 4,303 0
Other debtors 586 795
Advance corporation tax 909 57
------------------------------------------------------------------------------------------------------
5,798 852
------------------------------------------------------------------------------------------------------
<CAPTION>
1997 1996
(pound)'000 (pound)'000
14 BORROWINGS
<S> <C> <C>
Overdrafts 18 10
Bank loans 15,200 0
------------------------------------------------------------------------------------------------------
15,218 10
------------------------------------------------------------------------------------------------------
Analysis of repayment
Within one year:
Overdrafts 18 10
Bank loans 4,222 0
---------------- ---------------
4,240 10
---------------- ---------------
Between one and two years:
Bank loans 6,756 0
---------------- ---------------
Between two and five years:
Bank loans 4,222 0
---------------- ---------------
</TABLE>
Bank loans at 30 June 1997 consist of loans denominated in French francs at a
fixed interest rate of 4.25%.
<PAGE>
---------------------------------------------------
Notes to the Financial Statements
---------------------------------------------------
<TABLE>
<CAPTION>
1997 1996
15 OTHER CREDITORS (pound)'000 (pound)'000
Amounts falling due within one year:
<S> <C> <C>
Group
Payments received on account 7,904 5,568
Trade creditors 11,491 11,172
Accruals and other creditors 25,239 18,902
Amounts owed to associated undertaking 0 1
Taxation and other state creditors 25,297 16,285
Advance corporation tax 2,434 1,222
Dividends proposed 3,635 2,980
-------------------------------------------------------------------------------------------------------
76,000 56,130
-------------------------------------------------------------------------------------------------------
Company
Amounts owed to subsidiary undertakings 0 2,884
Accruals and other creditors 528 1,305
Advance corporation tax 909 0
Dividends proposed 3,635 2,980
-------------------------------------------------------------------------------------------------------
5,072 7,169
-------------------------------------------------------------------------------------------------------
<CAPTION>
1997 1996
16 OTHER CREDITORS (pound)'000 (pound)'000
Amounts falling due after more than one year :
<S> <C> <C>
Other creditors 52 463
-------------------------------------------------------------------------------------------------------
<CAPTION>
1997 1996
17 PROVISIONS FOR LIABILITIES AND CHARGES (pound)'000 (pound)'000
<S> <C> <C>
Post-retirement benefits 396 1,046
-------------------------------------------------------------------------------------------------------
</TABLE>
The movement in the provision comprises amounts paid of (pound)22,000
(1996: (pound)142,000), net adjustments in respect of ex-employees who died
during the year of (pound)nil (1996: (pound)72,000), a release of
(pound)554,000 (1996: (pound)241,000) in respect of premiums not payable due
to the better than expected performance from underlying investments, a
transfer to other creditors:amounts falling due within one year of
(pound)22,000, less (pound)nil (1996: (pound)24,000) charged to the profit
and loss account in respect of current employees and beneficiaries who left
the group during the year and a favourable exchange movement of (pound)52,000
(1996: unfavourable movement of (pound)25,000).
<TABLE>
<CAPTION>
18 DEFERRED TAXATION
Full provision is made in the accounts for deferred taxation
as follows: 1997 1996
(pound)'000 (pound)'000
<S> <C> <C>
Accelerated capital allowances (187) (21)
Other short term timing differences (958) (761)
-------------------------------------------------------------------------------------------------------
(1,145) (782)
-------------------------------------------------------------------------------------------------------
1 July (782) (514)
Translation differences (2) (5)
Transfer 100 0
(Release) in respect of current year (461) (263)
-------------------------------------------------------------------------------------------------------
30 June (1,145) (782)
-------------------------------------------------------------------------------------------------------
</TABLE>
The deferred taxation asset is included in note 13.
<PAGE>
--------------------------------------------------------------------
Notes to the Financial Statements
--------------------------------------------------------------------
<TABLE>
<CAPTION>
19 OTHER FINANCIAL COMMITMENTS
At 30 June 1997 there were annual commitments under operating leases as
follows:
1997 1996
-------------------------------- --------------------------------
Land and Other Land and Other
Buildings Buildings
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Expiring within one year 1,247 1,237 1,152 1,477
Expiring in the second to fifth years 2,745 4,310 2,568 4,921
Expiring after five years 4,485 5,969 0
-----------------------------------------------------------------------------------------------------------------
8,477 5,547 9,689 6,398
-----------------------------------------------------------------------------------------------------------------
<CAPTION>
20 CALLED UP SHARE CAPITAL 1997 1996
(pound)'000 (pound)'000
Authorised share capital
80,000,000 Ordinary Shares of 10p each 8,000 8,000
Called up share capital
63,930,753 Ordinary Shares of 10p each 6,393 6,332
During the year 614,490 shares were issued
under share option schemes as follows:
Exercise Number
price (pence Exercised
Granted per share)
1986 206 10,000
1986 207 3,478
1987 275 2,000
1987 310 14,000
1988 240 22,000
1988 382 11,000
1989 326 9,000
1990 166 22,585
1990 295 68,500
1991 200 179,060
1992 153 8,005
1992 169 35,000
1992 186 1,500
1993 212 1,000
1993 252 97,000
1993 256 6,212
1993 279 21,500
1994 284 79,500
1994 296 23,000
1995 424 150
---------------------------------------------------------------------
614,490
---------------------------------------------------------------------
</TABLE>
During the year 1,308,110 options were granted over both unissued and
existing shares under employee share option schemes at prices ranging from
617p to 943p and exercisable from 1997 to 2007. Options granted under SAYE
schemes were granted at a 20% discount to market price. Discretionary options
were granted at market price. Of the options granted during the year 9,000
options granted at 755p, 802,500 options granted at 890p and 44,000 granted
at 943p only become exercisable if the growth in the company's earnings per
share over any three year period has exceeded the growth in the Retail Prices
Index over that period by an average of at least 7 per cent per annum.
At 30 June 1997 there were 3,322,285 options which had been granted under
employee share option schemes at prices ranging from 153p to 943p and
exercisable between 1997 and 2007.
<TABLE>
<CAPTION>
21 SHAREHOLDERS' FUNDS
Share Share Special Other Profit
Capital premium reserve reserves and loss
account account Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
-----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Group
1 July 1996 6,332 14,977 143 2,666 46,222 70,340
Exchange difference 0 0 15 (156) (1,680) (1,821)
Issue of share capital 61 0 0 0 0 61
Share premium account 0 1,425 0 0 0 1,425
Profit attributable to shareholders 0 0 0 0 19,333 19,333
Dividends paid and proposed 0 0 0 0 (5,848) (5,848)
Goodwill on acquisition (see Note 25) 0 0 0 0 (20,253) (20,253)
--------------------------------------------------------------------------------------------------------------------------------
30 June 1997 6,393 16,402 158 2,510 37,774 63,237
--------------------------------------------------------------------------------------------------------------------------------
Company
1 July 1996 6,332 14,977 23,261 0 3,443 48,013
Issue of share capital 61 0 0 0 0 61
Share premium account 0 1,425 0 0 0 1,425
Profit attributable to shareholders 0 0 0 0 5,494 5,494
Dividends paid and proposed 0 0 0 0 (5,848) (5,848)
--------------------------------------------------------------------------------------------------------------------------------
30 June 1997 6,393 16,402 23,261 0 3,089 49,145
--------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The cumulative amount of goodwill written off to reserves since 1 July 1990
amounts to (pound)29,343,000 (1996: (pound)9,090,000).
<PAGE>
--------------------------------------------------------
Notes to the Financial Statements
--------------------------------------------------------
<TABLE>
<CAPTION>
22 RECONCILIATION OF OPERATING PROFIT TO
NET CASH INFLOW FROM OPERATING ACTIVITIES
1997 1996
(pound)'000 (pound)'000
<S> <C> <C>
Operating profit 27,669 23,638
Add: Depreciation and loss on disposal of fixed assets 6,651 5,533
Less: Profit on disposal of associated undertaking/trade investment 0 (375)
Debtors - (increase)/decrease (11,699) (14,624)
Creditors - (decrease)/increase 4,920 5,893
-------------------------------------------------------------------------------------------------------------------------------
Net cash inflow from operating activities 27,541 20,065
-------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
23 ANALYSIS OF NET FUNDS
Balance at Balance at
1 July Cash inflow/ Acquisition Exchange Other 30 June
1996 (outflow) Differences Changes 1997
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
Net cash:
Cash at bank and in hand 20,105 4,784 13 (1,345) 23,557
Less: deposits treated as liquid resources (3,796) 1,796 (2,000)
--------------------------------------------------------------------------------
16,309 6,580 13 (1,345) 21,557
Bank overdrafts (10) 141 (169) 20 (18)
--------------------------------------------------------------------------------
16,299 6,721 (156) (1,325) 21,539
--------------------------------------------------------------------------------
Liquid resources:
Deposits included in cash 3,796 (1,796) 2,000
--------------------------------------------------------------------------------
Debt:
Debt falling due within one year 0 (4,222) (4,222)
Debt falling due after one year 0 (17,347) 2,147 4,222 (10,978)
--------------------------------------------------------------------------------
0 (17,347) 0 2,147 0 (15,200)
--------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------------
Net funds 20,095 (12,422) (156) 822 0 8,339
-------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
24 RECONCILIATION OF NET CASH FLOW TO MOVEMENT
IN NET FUNDS
1997 1996
(pound)'000 (pound)'000
<S> <C> <C>
Increase in net cash in the period 6,721 1,733
Cash (inflow)/outflow from (decrease)/increase in liquid resources (1,796) 1,478
Cash inflow from increase in debt (17,347) 0
Change in net debt resulting from cash flows (12,422) 3,211
Cash and overdrafts acquired with subsidiary (156) 0
Translation differences 822 (149)
-------------------------------------------------------------------------------------------------------------------------------
Movement in net funds in the period (11,756) 3,062
Net funds at 1 July 1996 20,095 17,033
-------------------------------------------------------------------------------------------------------------------------------
Net funds at 30 June 1997 8,339 20,095
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
------------------------------------------------
Notes to the Financial Statements
------------------------------------------------
25 ACQUISITION
On 4 December 1996 Logica acquired Axime Ingenierie SA, a company registered
in France, Axime Luxembourg Sarl and assets of the Belgian subsidiary of
Groupe Axime SA from Groupe Axime SA for a total consideration of
(pound)19,697,000. The acquisitions of Axime Ingenierie SA and Axime
Luxembourg Sarl have been accounted for under the acquisition method of
accounting.
The loss after taxation of Axime Ingenierie SA in the period from 1 July 1996
to 4 December 1996 was (pound)276,000. In the financial year ended 30 June
1996 the loss after taxation was (pound)141,000.
The fair value to the group is shown below:
<TABLE>
<CAPTION>
Book value of Revaluation Fair value to
assets acquired adjustments the group
(pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C>
Tangible fixed assets 803 803
Work in progress 1,579 (a) (325) 1,254
Debtors 12,091 (60) 12,031
Cash at bank and in hand (156) (156)
Creditors (14,083) (b) (405) (14,488)
--------------------------------------------------------------------------------------------------------------
Net assets acquired 234 (790) (556)
--------------------------------------------------------------------------------
Goodwill 20,253
----------------
19,697
----------------
--------------------------------------------------------------------------------------------------------------
Satisfied by:
Cash 19,697
--------------------------------------------------------------------------------------------------------------
</TABLE>
The main adjustments are:
a) Revaluation of work in progress following a technical assessment of
project risks.
b) Provisions to cover specific tax and social security exposures together
with a general provision for exposures not covered in the warranty clause
in the acquisition agreement.
Movements on fair value provision
An amount of (pound)235,000 has been released unused since the difficulties
identified with certain projects have been reduced as a result of employing
Logica project management skills. An amount of (pound)75,000 has been used to
cover losses incurred on contracts which were identified at the time of the
acquisition.
The subsidiary companies acquired during the year contributed
(pound)1,746,000 to the group net operating cash flows, paid (pound)2,000 in
respect of net returns on investments and servicing of finance, paid
(pound)nil in respect of taxation and utilised (pound)277,000 for capital
expenditure.
The tax charge for the year has benefitted from the use of (pound)499,000 of
tax losses in Axime Ingenierie at the date of acquisition.
The names of Axime Ingenierie SA and Axime Luxembourg Sarl have been changed
to Logica SA and Logica Sarl respectively.
26 CONTINGENT LIABILITIES
Subsidiary undertakings have provided indemnities to their bankers in support
of performance bonds and guarantees amounting to (pound)7,406,000 (1996 -
(pound)9,627,000). The company provides certain guarantees for its subsidiary
undertakings in the normal course of business.
The company is aware of the following claims which involve legal proceedings
against the group.
i) A claim against Logica Inc, and Logica plc as guarantor, by SDF Inc. The
claim arises out of Logica Inc's purchase of certain assets of SDF Inc,
formerly known as Precision Software Inc, in May 1994. SDF Inc is claiming
entitlement to additional earn-out payments, related damages and legal costs.
The claim is being vigorously defended and a trial has been scheduled for
January 1998.
ii) A claim against Logica UK Limited in respect of a systems integration
project undertaken for the National Rivers Authority, which has since been
subsumed into the Environment Agency. The Environment Agency (acting on
behalf of the National Rivers Authority) is alleging breach of contract and
misrepresentation (including fraudulent misrepresentation and deceit) and is
claiming entitlement to repayment of monies advanced and damages. These
allegations are being vigorously defended and Logica has lodged a
counterclaim, claiming damages due to wrongful contract termination. A trial
has been scheduled for January 1998.
iii) Logica UK Limited has taken action against the Oslo Bors (the local
Stock Exchange in Oslo) for the wrongful rescission of a system supply
contract, claiming entitlement to remuneration for additional work performed
under the contract, payment of an unpaid invoice and damages. The Oslo Bors
has counterclaimed against Logica UK Limited for breach of contract, seeking
to recover monies advanced under the contract and damages; this counterclaim
is being vigorously defended. A trial has been scheduled for January 1998.
The Directors are of the opinion, having regard to legal advice received, the
Group's insurance arrangements and provisions held, that it is unlikely that
these matters will have a significant effect on the Group's financial
position, results of operations or liquidity.
<PAGE>
- ---------------------------------------------------------------------
Notes to the Financial Statements
- ---------------------------------------------------------------------
27 RELATED PARTY TRANSACTIONS
During the year the group purchased information technology services and
product licences from an associate undertaking, Logicasiel SpA, a company
registered in Italy, to the value of (pound)4,000 (1996: (pound)28,000). At
30 June 1997 (pound)4,000 (1996: (pound)nil) was payable in respect of
purchases.
During the year the group sold information technology services and product
licences to Logicasiel SpA to the value of (pound)135,000
(1996: (pound)173,000). At 30 June 1997 (pound)200,000 (1996: (pound)215,000)
was receivable in respect of sales.
All transactions between the group and its associate undertaking, Logicasiel
SpA, have been at arms' length.
28 POST BALANCE SHEET EVENT
Acquisition of Aldiscon Limited
On 1 August 1997 Logica acquired 97.92 per cent of the issued ordinary share
capital of Aldiscon Limited, a company registered in Ireland, for
approximately IR(pound)51.3 million (approximately (pound)46.0 million), of
which approximately IR(pound)28.8 million was payable in cash with the
balance being satisfied by the issue of loan notes. Prior to 30 June 1999,
Logica will also acquire, through the exercise of an option, the outstanding
2.08 per cent for further consideration of approximately IR(pound)1.1
million. In addition, deferred consideration of IR(pound)4.5 million may be
payable over a three year period if Aldiscon meets an agreed performance
criterion in the 15 month period ending 30 June 1998.
To finance the acquisition of Aldiscon, Logica raised approximately
(pound)52.5 million, net of expenses, by way of a 1-for-7 rights issue at
605p per new ordinary share. The rights issue proceeds were applied
principally to repay short-term borrowings that were incurred for the
acquisition and to secure the bank guarantee and ultimate repayment of the
loan notes issued to some of the vendors of Aldiscon.
Aldiscon is engaged primarily in the development and sale of advanced network
systems and services to wireless telecommunications carriers worldwide. Since
its foundation in 1988, Aldiscon has become a leader in providing Short
Message Service Centres ("SMSCs") to digital wireless operators worldwide,
with over 140 live sites in the Americas, Europe and the Asia Pacific region
which support the relevant GSM, PCS, CDMA and Japanese technology standards.
In addition, Aldiscon has capabilities in intelligent networks and roaming to
support the digital cellular industry.
In the year to 31 March 1997, Aldiscon recorded turnover of IR(pound)30.1
million (1996: IR(pound)16.6 million) which resulted in operating profits of
IR(pound)3.6 million (1996: IR(pound)1.8 million). As at 31 March, 1997 the
consolidated net assets of Aldiscon were IR(pound)9.5 million which included
cash balances of IR(pound)3.7 million.
Aldiscon trades under the name Logica Aldiscon.
29 PRINCIPAL OPERATING SUBSIDIARY UNDERTAKINGS
Logica UK Limited (England)
Aldiscon Limited (Ireland)
Logica SA (France)*
Logica Sarl (Luxembourg)*
Logica BV (Netherlands)*
Logica GmbH (Germany)*
Logica Consulting AG (Switzerland)*
Logica SA (Belgium)*
Logica Svenska AB (Sweden)*
Logica s.r.o. (Czech Republic)*
Logica Inc (USA)*
Logica Pty Limited (Australia)*
Logica New Zealand Limited (New Zealand)*
Logica Limited (Hong Kong)*
Logica (Malaysia) Sdn Bhd (Malaysia)*
Logica Pte Limited (Singapore)*
All subsidiaries are wholly owned, except Logica Aldiscon which is 97.92%
owned, and all subsidiaries principally operate in their country of
incorporation.
* The shareholdings in these companies are held by a wholly owned subsidiary of
the parent undertaking.
30 ASSOCIATED UNDERTAKING
Logicasiel SpA (Italy) is owned 55% by Data Management SpA and 45% by Logica,
which holds 613,642 ordinary shares of 1,000 lire each. Logicasiel SpA
(Italy) principally operates in its country of incorporation.
<PAGE>
ACCOUNTING POLICIES
-------------------
1 BASIS OF ACCOUNTING
The accounts are prepared under the historical cost convention and in
accordance with the Companies Act 1985 and applicable UK accounting
standards applied consistently throughout the year.
2 BASIS OF CONSOLIDATION
The financial statements include the accounts of Logica plc and all its
subsidiary and associated undertakings. The results of companies or
businesses acquired or disposed during the year are dealt with from the
date of acquisition or to the date of disposal.
The results of associated undertakings are calculated from the latest
available audited accounts adjusted to incorporate periods not covered by
audited accounts.
3 TURNOVER
Turnover represents the value of work done for clients including
attributable profit and after adjusting for all foreseeable future losses
but excluding local sales taxes.
4 RECOGNITION OF PROFITS
Profit on contracts for the supply of professional services at pre-
determined rates is taken as and when the work is billed, irrespective of
the duration of the contract.
Profit is taken on fixed price contracts while the contract is in
progress, having regard to the proportion of the total contract which has
been completed at the balance sheet date. Provision is made for all
foreseeable future losses.
5 AMOUNTS RECOVERABLE ON CONTRACTS
Amounts recoverable on contracts represent turnover which has not yet been
invoiced to clients. Such amounts are separately disclosed within Debtors.
The valuation of amounts recoverable on fixed price contracts is adjusted
to take up profit to date or foreseeable losses in accordance with the
accounting policy for recognition of profits.
Other amounts recoverable on contracts are valued at the lower of cost or
estimated net realisable value.
Cost comprises:
- professional amounts recoverable valued at the cost of salaries and
associated payroll expenses of employees engaged on assignments and a
proportion of attributable overheads
- unbilled expenses incurred and equipment purchased for clients in
connection with specific contracts.
<PAGE>
6 RESEARCH AND DEVELOPMENT
Research costs are written off in the year in which they are incurred
unless they are to be reimbursed by third parties. Development costs are
also written off in the year in which they are incurred unless they are to
be reimbursed by third parties or result in the production of an
identifiable, saleable product.
7 DEPRECIATION
Depreciation is provided at rates calculated to write down the cost of
tangible fixed assets over their estimated useful lives on a straight-line
basis. The annual rates of depreciation used are as follows:
Leaseholds equally over life of lease
Office equipment 10%
Computer equipment 25%
Motor cars 25%
Plant 20%
8 FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are translated at the rate of exchange
on the date of the transaction or, if hedged, at the rate of exchange under
the related forward exchange contract. Assets and liabilities in foreign
currencies are translated at the year end rate of exchange or, if hedged,
at the forward contract rate. The exchange differences are taken to the
profit and loss account.
The results of overseas subsidiary and associated undertakings are
translated into sterling at average rates for the year. The net assets of
overseas subsidiary undertakings and related foreign currency debt
financing those assets, together with investments in overseas associated
undertakings, are translated at year end exchange rates. The exchange
differences are taken to reserves and reported in the statement of total
recognised gains and losses.
9 NON-PENSION POST-EMPLOYMENT BENEFITS
The cost of providing post-employment benefits, other than pensions, is
charged to the profit and loss account so as to spread the regular cost
over the service lives of employees.
10 DEFERRED TAXATION
Provision is made for deferred taxation to take account of timing
differences between the treatment of certain items for accounts purposes
and their treatment for tax purposes. The provision is maintained to the
extent that the timing differences are expected, with reasonable
probability, to reverse in the foreseeable future.
<PAGE>
11 LEASES
Assets financed by leasing agreements that give rights approximately to
ownership are treated as if they had been purchased outright. The amount
capitalised is the present value of the minimum lease payments payable
during the lease term. The corresponding leasing commitments are shown as
obligations to the lessor. Lease payments are treated as consisting of
capital and interest elements and the interest is charged to the profit and
loss account on a constant periodic rate of charge basis.
Operating lease rentals are charged to the profit and loss account on a
straight line basis over the life of the lease.
12 GOODWILL
Goodwill, being the difference between the cost of businesses acquired and
the fair value of their separable net assets, is offset against reserves as
it arises.
<PAGE>
AUDITOR'S REPORT TO THE SHAREHOLDERS OF LOGICA PLC
We have audited the financial statements on pages 34 to 48 (including the
additional disclosures on pages 29 to 32 relating to the remuneration of the
directors specified for our review by the London Stock Exchange) which have been
prepared under the historical cost convention and the accounting policies set
out on pages 47 to 48.
Respective Responsibilities of directors and auditors
As described on page 32 the company's directors are responsible for the
preparation of financial statements. It is our responsibility to form an
independent opinion, based on our audit, on those statements and to report our
opinion to you.
Basis of opinion
We conducted our audit in accordance with auditing standards issued by the
Auditing Practices Board. An audit includes examination, on a test basis, of
evidence relevant to the amounts and disclosures in the financial statements.
It also includes an assessment of the significant estimates and judgements made
by the directors in the preparation of the financial statements, and of whether
the accounting policies are appropriate to the group's circumstances,
consistently applied and adequately disclosed.
We planned and performed our audit so as to obtain all the information and
explanations which we considered necessary in order to provide us with
sufficient evidence to give reasonable assurance that the financial statements
are free from material misstatement, whether caused by fraud or other
irregularity or error. In forming our opinion we also evaluated the overall
adequacy of the presentation of information in the financial statements.
Opinion
In our opinion, the financial statements give a true and fair view of the state
of affairs of the company and the group at 30 June 1996 and of the profit and
cash flows of the group for the year then ended and have been properly prepared
in accordance with the Companies Act 1985.
Price Waterhouse
Chartered Accountants and
Registered Auditors
London 11 September 1996
<PAGE>
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Consolidated Profit and Loss Account
- ------------------------------------------------------------------------------------------------------------------------------
For Year Ended 30 June 1996 1995
Note (pound)'000 (pound)'000
<S> <C> <C> <C>
------------------------------------------------------------------------------------------------------------------------
Consolidated turnover 1 284,810 250,135
------------------------------------------------------------------------------------------------------------------------
Operating profit 2 23,638 19,405
Share of profits of associated undertakings 2 524 429
------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before interest 24,162 19,834
Interest 5 548 476
------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before taxation 24,710 20,310
Taxation on ordinary activities 6 (8,130) (7,160)
------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities after taxation 16,580 13,150
Dividends paid and proposed 7 (4,820) (3,800)
------------------------------------------------------------------------------------------------------------------------
Retained profit for the year 20 11,760 9,350
------------------------------------------------------------------------------------------------------------------------
Earnings per share 9 27.1p 21.7p
Dividends per share 7 7.8p 6.25p
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------
Statement of Total Recognised Gains and Losses
- ------------------------------------------------------------------------------------------------------------------------------
For Year Ended 30 June
1996 1995
Note (pound)'000 (pound)'000
<S> <C> <C> <C>
Profit attributable to shareholders 20 16,580 13,150
Currency translation differences arising on
foreign currency net investments 20 (389) 923
------------------------------------------------------------------------------------------------------------------------
Total recognised gains and losses 16,191 14,073
------------------------------------------------------------------------------------------------------------------------
</TABLE>
All gains and losses recognised above are based on historical costs and
arise from continuing operations.
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------------------
Consolidated Balance Sheet
- ---------------------------------------------------------------------------------------------------------------------------------
At 30 June 1996 1995
Note (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C>
Fixed assets
Tangible assets 10 22,677 19,940
Investments 11 8,033 6,046
- ---------------------------------------------------------------------------------------------------------------------------------
30,710 25,986
Current assets
Debtors 13 77,174 62,624
Cash at bank and in hand 22 20,105 18,317
- -----------------------------------------------------------------------------------------------------------------
97,279 80,941
- -----------------------------------------------------------------------------------------------------------------
Creditors-amounts falling due within one year
Bank loans and overdrafts 22 (10) (1,284)
Other 14 (56,130) (47,362)
- -----------------------------------------------------------------------------------------------------------------
(56,140) (48,646)
- -----------------------------------------------------------------------------------------------------------------
Net current assets 41,139 32,295
- ---------------------------------------------------------------------------------------------------------------------------------
Total assets less current liabilities 71,849 58,281
Creditors- amounts falling due after 15 (463) (428)
more than one year
Provisions for liabilities and charges 16 (1,046) (1,452)
- ---------------------------------------------------------------------------------------------------------------------------------
Net assets 70,340 56,401
- ---------------------------------------------------------------------------------------------------------------------------------
Capital and reserves
Share capital 19 6,332 6,219
Share premium account 20 14,977 12,522
Special reserve 20 143 143
Other reserves 20 2,666 2,946
Profit and loss account 20 46,222 34,571
- ---------------------------------------------------------------------------------------------------------------------------------
Shareholders' funds-equity 70,340 56,401
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Dr M P Read
A F Given
Directors
11 September 1996
<PAGE>
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------------------------------
Consolidated Cash Flow Statement
- ----------------------------------------------------------------------------------------------------------------------
For Year ended 30 June Note 1996 1995
(pound)'000 (pound)'000
<S> <C> <C> <C>
Net cash inflow from operating activities 21 20,065 16,918
Returns on investments and servicing of finance
Interest received 645 693
Interest paid (92) (191)
Interest element of finance lease rental payments (5) (26)
Dividends received from associated undertakings 11 455 172
Dividends paid to shareholders (4,580) (3,246)
--------------- -----------------
Net cash outflow from returns on investments (3,577) (2,598)
and servicing of finance --------------- -----------------
Taxation
United Kingdom corporation tax paid (4,524) (2,724)
Overseas tax paid (1,490) (2,134)
--------------- -----------------
Tax paid (6,014) (4,858)
--------------- -----------------
Investing activities
Purchase of tangible assets (8,277) (6,263)
Purchase of investments 11 0 (120)
Purchase of business undertakings 0 (2,617)
Purchase of own shares by ESOP Trust 11 (2,619) (1,221)
Sale of tangible assets 11 82
Sale of investments 380 286
Sale of own shares by ESOP Trust 11 674 473
--------------- -----------------
Net cash (outflow) from investing activities (9,831) (9,380)
--------------- -----------------
Net cash inflow before financing 643 82
=============== =================
Financing
Shares issued (net of expenses) 2,568 998
Capital element of finance lease rental payments 0 (74)
--------------- -----------------
Net cash inflow from financing 2,568 924
Increase in cash and cash equivalents 22 3,211 1,006
=============== =================
</TABLE>
<PAGE>
- ---------------------------------------------------
Company Balance Sheet
- ---------------------------------------------------
<TABLE>
<CAPTION>
At 30 June 1996 1995
Note (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C>
Fixed assets - Investments 11 49,429 47,515
Current assets
Debtors 13 852 1,299
Cash at bank and in hand 4,901 2
- ------------------------------------------------------------------------------------------------------------
5,753 1,301
Creditors-amounts falling
due within one year 14 (7,169) (3,467)
- ------------------------------------------------------------------------------------------------------------
Net current assets (1,416) (2,166)
- ------------------------------------------------------------------------------------------------------------
Net assets 48,013 45,349
- ------------------------------------------------------------------------------------------------------------
Capital and reserves
Share capital 19 6,332 6,219
Share premium account 20 14,977 12,522
Special reserve 20 23,261 23,261
Profit and loss account 20 3,443 3,347
- ------------------------------------------------------------------------------------------------------------
Shareholders' funds-equity 48,013 45,349
- ------------------------------------------------------------------------------------------------------------
</TABLE>
Dr MP Read
A F Given
Directors
11 September 1996
<PAGE>
-------------------------------------------------------------------------
Notes to the Financial Statements
-------------------------------------------------------------------------
1 SEGMENTAL INFORMATION
a) Geographic areas - analysis by location of operations
<TABLE>
<CAPTION>
Total turnover Inter-segment External turnover
turnover
1996 1995 1996 1995 1996 1995
pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
United Kingdom 168,672 152,826 (5,384) (5,253) 163,288 147,573
Continental Europe 63,899 47,993 (2,403) (2,590) 61,496 45,403
North America 38,616 42,374 (1,051) (3,367) 37,565 39,007
Asia Pacific and Middle East 22,536 18,383 (75) (231) 22,461 18,152
---------------------------------------------------------------------------------------------------------------------------------
Consolidated turnover 293,723 261,576 (8,913) (11,441) 284,810 250,135
---------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
Net assets Profit before taxation
1996 1995 1996 1995
(pound)'000 (pound)'000 (pound)'000 (pound)'000
United Kingdom 37,440 34,323 15,922 13,798
Continental Europe 10,056 6,177 5,874 4,662
North America 5,538 2,812 1,254 647
Asia Pacific and Middle East 191 (1,204) 588 298
--------------------------------------------------------------------------------------------------------------------------------
53,225 42,108 23,638 19,405
Share of profits of associated undertakings - - 524 429
--------------------------------------------------------------------------------------------------------------------------------
Total segment 53,225 42,108 24,162 19,834
Cash less bank borrowings / net interest 20,095 17,033 548 476
Dividends proposed (2,980) (2,740) - -
--------------------------------------------------------------------------------------------------------------------------------
Net assets / profit before taxation 70,340 56,401 24,710 20,310
--------------------------------------------------------------------------------------------------------------------------------
<CAPTION>
b) Geographic markets - analysis by location of client External turnover
1996 1995
(pound)'000 (pound)'000
United Kingdom 135,742 124,175
Continental Europe 79,312 65,202
North America 35,920 35,452
Asia Pacific and Middle East 33,836 25,306
---------------------------------------------------------------------------------------------------------------------------------
Consolidated turnover 284,810 250,135
---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
External turnover and operating profit for each geographical area exclude any
contribution from associated undertakings.
In the opinion of the directors the group operated only one class of business
throughout the year, that of the provision of information technology
services.
<TABLE>
<CAPTION>
1996 1995
2 OPERATING PROFIT Note (pound)'000 (pound)'000
------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Consolidated Turnover 284,810 250,135
------------------------------------------------------------------------------------------------------------------------------
Materials and other external charges 52,124 48,335
Staff costs 3 142,231 127,362
Depreciation 10 5,465 4,595
(Profit) on disposal of fixed assets (307) (232)
Auditors' remuneration and expenses 282 262
Fees paid to auditors' for non - audit related work (UK) 108 112
Fees paid to auditors' for non - audit related work (Overseas) 163 94
Hire of plant and machinery 1,998 1,417
Operating lease rentals 11,522 11,692
Other operating charges 47,586 37,093
------------------------------------------------------------------------------------------------------------------------------
Operating Costs 261,172 230,730
------------------------------------------------------------------------------------------------------------------------------
Operating profit 23,638 19,405
Share of profits of associated undertakings 524 429
------------------------------------------------------------------------------------------------------------------------------
Profit on ordinary activities before interest 24,162 19,834
------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
-------------------------------------------------------
Notes to the Financial Statements
-------------------------------------------------------
<TABLE>
<CAPTION>
3 STAFF
1996 1995
Staff numbers
Average staff numbers employed during the year were based as
follows:
<S> <C> <C>
United Kingdom 2,304 2,101
Continental Europe 667 546
North America 455 538
Asia Pacific and Middle East 188 173
--------------------------------------------------------------------------------------------------------
Total 3,614 3,358
--------------------------------------------------------------------------------------------------------
Total staff numbers at 30 June 3,623 3,472
<CAPTION>
The average number of staff employed worldwide during the year, including
associated undertakings, was 3,795 compared with 3,688 in 1995.
<S> <C> <C>
Staff costs (pound)'000 (pound)'000
Wages and salaries 125,376 111,670
Social security costs 11,416 11,056
Other pension costs 5,439 4,636
--------------------------------------------------------------------------------------------------------
142,231 127,362
--------------------------------------------------------------------------------------------------------
</TABLE>
There are voluntary pension schemes in the UK, Netherlands, Belgium, Hong
Kong and Australia, all of which are defined contribution schemes. The
defined contributions, consisting of a fixed percentage of salary and
voluntary contributions, are charged to the profit and loss account in the
period to which they relate. There are no unfunded liabilities in these
schemes.
4 DIRECTORS
Directors emoluments and interests are included within the report of the
remuneration committee on pages 29 to 32.
<PAGE>
-----------------------------------------------------------
Notes to the Financial Statements
-----------------------------------------------------------
<TABLE>
<CAPTION>
1996 1995
5 INTEREST (pound)'000 (pound)'000
<S> <C> <C>
Interest receivable 645 693
Interest payable and other financing costs (97) (217)
------------------------------------------------------------------------------------------------------------
548 476
------------------------------------------------------------------------------------------------------------
<CAPTION>
1996 1995
6 TAXATION (pound)'000 (pound)'000
<S> <C> <C>
United Kingdom taxation
Corporation tax (at the rate of 33%) 6,368 5,586
Double taxation relief (475) (425)
Deferred taxation (380) (305)
------------------------------------------------------------------------------------------------------------
5,513 4,856
------------------------------------------------------------------------------------------------------------
Overseas taxation
Overseas taxes 2,450 2,157
Deferred taxation 117 (11)
------------------------------------------------------------------------------------------------------------
2,567 2,146
------------------------------------------------------------------------------------------------------------
Associated undertakings 50 158
------------------------------------------------------------------------------------------------------------
Taxation on ordinary activities 8,130 7,160
------------------------------------------------------------------------------------------------------------
</TABLE>
There are substantial unutilised tax losses which may be available for relief
against profits of certain subsidiary undertakings in future years.
<TABLE>
<CAPTION>
7 DIVIDENDS PAID AND PROPOSED 1996 1995
(pound)'000 (pound)'000
<S> <C> <C>
Interim dividend of 3p (1995 - 1.75p) 1,840 1,060
Final dividend of 4.8p (1995 - 4.50p) 2,980 2,740
------------------------------------------------------------------------------------------------------------
Total dividend 4,820 3,800
------------------------------------------------------------------------------------------------------------
<CAPTION>
8 PROFIT ATTRIBUTABLE TO MEMBERS OF THE 1996 1995
HOLDING COMPANY (pound)'000 (pound)'000
<S> <C> <C>
Dealt with in the accounts of the Company 4,916 3,002
</TABLE>
As permitted under Section 230(1) of the Companies Act 1985, the Company has
not presented its own profit and loss account.
9 EARNINGS PER SHARE
Earnings per share of 27.1p are based on the profit after tax of
(pound)16,580,000 and on a weighted average of 61,263,881 shares. Last year's
earnings per share of 21.7p were based on the profit after tax of
(pound)13,150,000 and on a weighted average of 60,571,831 shares.
<PAGE>
----------------------------------------------
Notes to the Financial Statements
----------------------------------------------
<TABLE>
<CAPTION>
10 TANGIBLE ASSETS Freehold Short Equipment Total
Land and Leaseholds and Plant
Buildings
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Cost
1 July 1995 3,836 9,922 36,497 50,255
Translation differences 8 (36) 18 (10)
Additions 96 902 7,279 8,277
Disposals 0 (992) (2,506) (3,498)
----------------------------------------------------------------------------------------------------------------
30 June 1996 3,940 9,796 41,288 55,024
----------------------------------------------------------------------------------------------------------------
Depreciation
1 July 1995 456 5,007 24,852 30,315
Translation differences 0 (31) 17 (14)
Provided 41 573 4,851 5,465
Released on disposals 0 (992) (2,427) (3,419)
----------------------------------------------------------------------------------------------------------------
30 June 1996 497 4,557 27,293 32,347
----------------------------------------------------------------------------------------------------------------
Net book value at 30 June 1996 3,443 5,239 13,995 22,677
----------------------------------------------------------------------------------------------------------------
Net book value at 30 June 1995 3,380 4,915 11,645 19,940
----------------------------------------------------------------------------------------------------------------
<CAPTION>
11 INVESTMENTS
GROUP Associated Undertakings
----------------------------------------
Shares Retained Total Trade Own shares Total
at cost Profits Investments (ESOP)
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
1 July 1995 911 980 1,891 476 3,679 6,046
Translation differences 0 55 55 0 (27) 28
Additions 0 0 0 0 2,619 2,619
Disposals (5) 0 (5) 0 (674) (679)
Dividends received 0 (455) (455) 0 0 (455)
Share of retained profit for the year 0 474 474 0 0 474
-------------------------------------------------------------------------------------------------------------------------------
30 June 1996 906 1,054 1,960 476 5,597 8,033
-------------------------------------------------------------------------------------------------------------------------------
</TABLE>
All investments are unlisted.
The group accounts for its advance to the Employee Share Ownership Plan Trust
as a fixed asset investment. The Logica Employee Share Ownership Plan Trust
is a discretionary trust which was established in September 1990 for the
benefit of Logica staff. It has an independent, professional trustee (Mourant
& Co Trustees Limited) and is currently financed by advances from the group.
Costs of administering the Employee Share Ownership Plan Trust are charged to
the profit and loss account as they occur. The trust purchases the company's
shares in the market, for use in connection with the group's all employee and
discretionary share option schemes, and share related bonus scheme.
At 30 June 1996 the Employee Share Ownership Plan Trust owned 1,406,057
shares (1995:1,382,918 shares). Of this shareholding 1,008,886 shares (1995:
743,951 shares) are under option to employees, and 397,171 shares (1995:
617,500 shares) are held as a hedge for the share related bonus scheme. The
Trustee has agreed under the Trust Deed dated 26 September 1990 to waive, at
the company's discretion, all rights to any future dividends which may be
payable on any shares in the company held in the trust, save 0.01p per share.
Such waivers of dividends payable during the year ended 30 June 1996 amounted
to (pound)106,183 (1995:(pound)68,881).
<TABLE>
<CAPTION>
COMPANY Subsidiary undertakings
------------------------------------ Associated Own shares
Shares Loans Total Undertakings (ESOP) Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C> <C> <C>
COST
1 July 1995 14,245 35,527 49,772 911 3,281 53,964
Additions 0 0 0 0 2,390 2,390
Disposals 0 0 0 (5) (471) (476)
--------------------------------------------------------------------------------------------------------------------------
30 June 1996 14,245 35,527 49,772 906 5,200 55,878
--------------------------------------------------------------------------------------------------------------------------
PROVISIONS
at 1 July 1995 and 30 June 1996 (787) (5,662) (6,449) 0 0 (6,449)
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
Net book value at 30 June 1996 13,458 29,865 43,323 906 5,200 49,429
--------------------------------------------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------------------------------------------
Net book value at 30 June 1995 13,458 29,865 43,323 911 3,281 47,515
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
---------------------------------------------
Notes to the Financial Statements
---------------------------------------------
<TABLE>
<CAPTION>
1996 1995
12 CAPITAL COMMITMENTS (pound)'000 (pound)'000
<S> <C> <C>
Capital expenditure authorised and contracted 833 1,022
Capital expenditure authorised but not contracted 398 415
<CAPTION>
13 DEBTORS 1996 1995
Group (pound)'000 (pound)'000
<S> <C> <C>
Trade debtors 43,124 37,904
Amounts owed by associated undertakings 381 440
Other debtors 2,357 1,575
Prepayments and accrued income 5,740 5,699
Amounts recoverable on contracts 24,661 16,422
Deferred taxation (See note 17) 782 514
Taxation recoverable 72 20
Advance corporation tax 57 50
---------------------------------------------------------------------------------------------
77,174 62,624
---------------------------------------------------------------------------------------------
Company
Amounts owed by subsidiary undertakings 0 486
Other debtors 795 763
Advance corporation tax 57 50
---------------------------------------------------------------------------------------------
852 1,299
---------------------------------------------------------------------------------------------
<CAPTION>
14 CREDITORS 1996 1995
Amounts falling due within one year (pound)'000 (pound)'000
<S> <C> <C>
Group
Payments received on account 5,568 4,699
Trade creditors 11,172 11,777
Accruals and other creditors 18,902 14,399
Amounts owed to associated undertakings 1 21
Taxation and other state creditors 16,285 12,784
Advance corporation tax 1,222 942
Dividends proposed 2,980 2,740
---------------------------------------------------------------------------------------------
56,130 47,362
---------------------------------------------------------------------------------------------
Company
Amounts owed to subsidiary undertakings 2,884 0
Accruals and other creditors 1,305 685
Advance corporation tax 0 42
Dividends proposed 2,980 2,740
---------------------------------------------------------------------------------------------
7,169 3,467
---------------------------------------------------------------------------------------------
<CAPTION>
15 CREDITORS 1996 1995
Amounts falling due after more than one year : (pound)'000 (pound)'000
<S> <C> <C>
Other creditors 463 428
---------------------------------------------------------------------------------------------
463 428
---------------------------------------------------------------------------------------------
16 PROVISIONS FOR LIABILITIES AND CHARGES 1996 1995
(pound)'000 (pound)'000
Post retirement benefits 1,046 1,452
---------------------------------------------------------------------------------------------
</TABLE>
The movement in the provision comprises premiums paid of (pound)142,000
(1995: (pound)136,000), net adjustments in respect of ex-employees who died
during the year of (pound)72,000 (1995: (pound)nil), a release of
(pound)241,000 (1995: (pound)nil) in respect of premiums not payable due to
the better than expected performance from underlying investments, less
(pound)24,000 (1995: (pound)91,000) charged to the profit and loss account in
respect of current employees and beneficiaries who left the group during the
year and an unfavourable exchange movement of (pound)25,000 (1995: favourable
movement of (pound)42,000).
<TABLE>
<CAPTION>
17 DEFERRED TAXATION
Full provision is made in the accounts for 1996 1995
deferred taxation as follows: (pound)'000 (pound)'000
<S> <C> <C>
Accelerated capital allowances (21) (133)
Other short term timing differences (761) (381)
---------------------------------------------------------------------------------------------
(782) (514)
---------------------------------------------------------------------------------------------
The movement in the provision comprises:
1 July 1995 (514) (200)
Translation differences (5) 2
(Release)/Provision in respect of current year (263) (316)
---------------------------------------------------------------------------------------------
30 June 1996 (782) (514)
---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
----------------------------------------------
Notes to the Financial Statements
----------------------------------------------
18 OTHER FINANCIAL COMMITMENTS
At 30 June 1996 there were annual commitments under operating leases as
follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------- --------------------------------
Land and Other Land and Other
Buildings Buildings
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Expiring within one year 1,152 1,477 1,500 1,398
Expiring in the second to fifth years 2,568 4,921 3,744 4,234
Expiring after five years 5,969 0 5,815 0
--------------------------------------------------------------------------------------------------------------------
9,689 6,398 11,059 5,632
--------------------------------------------------------------------------------------------------------------------
<CAPTION>
19 SHARE CAPITAL 1996 1995
(pound)'000 (pound)'000
<S> <C> <C>
Authorised share capital
80,000,000 Ordinary Shares of 10p each 8,000 8,000
Called up share capital
63,316,263 Ordinary Shares of 10p each 6,332 6,219
</TABLE>
During the year 1,127,422 shares were issued under share option schemes as
follows:
<TABLE>
<CAPTION>
Exercise Number
price (pence Exercised
Granted per share)
<S> <C> <C>
1985 165 4,362
1986 155 80,000
1986 206 50,000
1986 207 5,217
1987 248 1,718
1987 275 49,000
1987 277 2,814
1987 310 63,000
1988 240 57,000
1988 349 1,222
1988 382 34,000
1989 295 20,065
1989 326 53,000
1989 365 70,000
1990 166 336,315
1990 295 110,500
1991 200 6,875
1991 241 1,500
1992 153 7,160
1992 169 127,800
1992 186 24,000
1993 212 3,500
1993 217 15,000
1993 258 3,374
-------------------------------------------------------------------
1,127,422
-------------------------------------------------------------------
</TABLE>
During the year 816,446 options were granted over both unissued and existing
shares under employee share option schemes at prices ranging from 424p to
484p and exercisable from 1996 to 2006. Options granted under SAYE schemes
were granted at a 10% discount to market price. Discretionary options were
granted at market price. Of the options granted during the year 585,500
options granted at 482p, and 11,000 options granted at 484p only become
exercisable if in each of 2 consecutive financial years of the company
beginning not earlier than 1 July 1995 and ending not later than 30 June 2000
the earnings per share of the company have been in excess of 30p.
At 30 June 1996 there were 3,273,043 options which had been granted under
employee share option schemes at prices ranging from 153p to 484p and
exercisable between 1996 and 2006.
20 SHAREHOLDERS' FUNDS
<TABLE>
<CAPTION>
Share Share Special Other Profit
Capital premium reserve reserves and loss
account account Total
(pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000 (pound)'000
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Group
1 July 1995 6,219 12,522 143 2,946 34,571 56,401
Exchange difference 102 (491) (389)
Issue of share capital 113 113
Share premium account 2,455 2,455
Profit attributable to shareholders 16,580 16,580
Dividends paid and proposed (4,820) (4,820)
Transfers to other reserves (382) 382 0
----------------------------------------------------------------------------------------------------------------------------
30 June 1996 6,332 14,977 143 2,666 46,222 70,340
----------------------------------------------------------------------------------------------------------------------------
Company
1 July 1995 6,219 12,522 23,261 0 3,347 45,349
Issue of share capital 113 113
Share premium account 2,455 2,455
Profit attributable to shareholders 4,916 4,916
Dividends paid and proposed (4,820) (4,820)
----------------------------------------------------------------------------------------------------------------------------
30 June 1996 6,332 14,977 23,261 0 3,443 48,013
----------------------------------------------------------------------------------------------------------------------------
</TABLE>
The cumulative amount of goodwill written off to reserves since 1 July 1990
amounts to (pound)9,090,000 (1995: (pound)9,090,000).
<PAGE>
- -------------------------------------------------------------------------------
Notes to the Financial Statements
- -------------------------------------------------------------------------------
21 NET CASH INFLOW FROM OPERATING ACTIVITIES
<TABLE>
<CAPTION>
1996 1995
(pound)'000 (pound)'000
<S> <C> <C>
Operating profit 23,638 19,405
Add: Depreciation and loss on disposal of fixed assets 5,533 4,622
Less: Profit on disposal of associated undertaking/trade investment (375) (259)
Less: (increase) in debtors (14,624) (6,110)
Add: increase/(decrease) in creditors 5,893 (740)
-------------- ----------------
20,065 16,918
============== ================
</TABLE>
22 ANALYSIS OF CASH BALANCES
<TABLE>
<CAPTION>
Balance at Balance at
1 July Cash inflow/ Exchange 30 June
1995 (outflow) Differences 1996
(pound)'000 (pound)'000 (pound)'000 (pound)'000
<S> <C> <C> <C> <C>
Cash at bank and in hand 18,317 1,914 (126) 20,105
Bank loans and overdrafts (1,284) 1,297 (23) (10)
----------------------------------------------------------
Total cash and cash equivalents 17,033 3,211 (149) 20,095
==========================================================
</TABLE>
Cash and cash equivalents represents balances net of advances that are within
three months of maturity at the date of their inception.
23 CONTINGENT LIABILITIES
Subsidiary undertakings have provided indemnities to their bankers in support
of performance bonds and guarantees amounting to (pound)9,627,000 (1995 -
(pound)7,359,000). The company provides certain guarantees for its subsidiary
undertakings in the normal course of business.
The company is aware of the following claims which involve legal proceedings
against the group.
i) A claim against Logica Inc, and Logica plc as guarantor, by SDF Inc. The
claim arises out of Logica Inc's purchase of certain assets of SDF Inc,
formerly known as Precision Software Inc, in May 1994. SDF Inc is claiming
entitlement to additional earn out payments, related damages and legal costs.
The claim is being vigorously defended.
ii) A claim against Logica UK Limited in respect of a systems integration
project undertaken for the National Rivers Authority. The Environment Agency
(acting on behalf of the National Rivers Authority) is alleging breach of
contract and misrepresentation and is claiming entitlement to repayment of
moneys advanced and damages. Logica has lodged a counterclaim, claiming
damages due to wrongful contract termination.
iii) Logica UK Limited has taken action against the Oslo Bors (the local
Stock Exchange in Oslo) for the wrongful rescission of a system supply
contract, claiming entitlement to remuneration for additional work performed
under the contract, payment of an unpaid invoice and damages. The Oslo Bors
has counterclaimed against the company for breach of contract, seeking to
recover moneys advanced under the contract and damages.
The directors are of the opinion, having regard to legal advice received, the
group's insurance arrangements and provisions held, that it is unlikely that
these matters will have a material effect on the group's financial position,
results of operations or liquidity.
<PAGE>
- ------------------------------------------------------------------------
Notes to the Financial Statements
- ------------------------------------------------------------------------
24 PRINCIPAL OPERATING SUBSIDIARY UNDERTAKINGS
Logica UK Limited (England)
Logica BV (Netherlands)*
Logica GmbH (Germany)*
Logica Consulting AG(Switzerland)* formerly Logica Informatik AG
Logica SA (Belgium)*
Logica Svenska AB(Sweden)*
Logica s.r.o (Czech Republic)*
Logica Inc (USA)*
Logica Pty Limited (Australia)*
Logica New Zealand Limited (New Zealand)*
Logica Limited (Hong Kong)*
Logica (Malaysia) Sdn Bhd (Malaysia)*
Logica Pte Limited (Singapore)*.
All subsidiaries are wholly owned and principally operate in their country
of incorporation.
* The shareholdings in these companies are held by a wholly owned subsidiary
of the parent undertaking.
25 ASSOCIATED UNDERTAKINGS
Logicasiel SpA (Italy) is owned 55% by Data Management SpA and 45% by
Logica, which holds 613,642 ordinary shares of 1,000 lire each. Logicasiel
SpA (Italy) principally operates in its country of incorporation.
Logica disposed of its interest in Speedwing Logica Limited (England) during
the period.
<PAGE>
ACCOUNTING POLICIES
-------------------
1 BASIS OF ACCOUNTING
The accounts are prepared under the historical cost convention and in
accordance with the Companies Act 1985 and applicable UK accounting
standards applied consistently throughout the year.
2 BASIS OF CONSOLIDATION
The financial statements include the accounts of Logica plc and all its
subsidiary and associated undertakings. The results of companies or
businesses acquired or disposed during the year are dealt with from the
date of acquisition or to date of disposal.
The results of associated undertakings are calculated from the latest
available audited accounts, adjusted to incorporate periods not covered by
audited accounts.
3 TURNOVER
Turnover represents the value of work done for clients including
attributable profit and after adjusting for all foreseeable future losses
but excluding local sales taxes.
4 RECOGNITION OF PROFITS
Profit on contracts for the supply of professional services at pre-
determined rates is taken as and when the work is billed, irrespective of
the duration of the contract.
Profit is taken on fixed price contracts while the contract is in progress,
having regard to the proportion of the total contract which has been
completed at the balance sheet date. Provision is made for all foreseeable
future losses.
5 AMOUNTS RECOVERABLE ON CONTRACTS
Amounts recoverable on contracts represent turnover which has not yet been
invoiced to clients. Such amounts are separately disclosed within Debtors.
The valuation of amounts recoverable on fixed price contracts is adjusted
to take up profit to date or foreseeable losses in accordance with the
accounting policy for recognition of profits.
Other amounts recoverable on contracts are valued at the lower of cost or
estimated net realisable value.
Cost comprises:
- professional amounts recoverable valued at the cost of salaries and
associated payroll expenses of employees engaged on assignments and a
proportion of attributable overheads
- unbilled expenses incurred and equipment purchased for clients in
connection with specific contracts.
<PAGE>
6 RESEARCH AND DEVELOPMENT
Research costs are written off in the year in which they are incurred
unless they are to be reimbursed by third parties. Development costs are
also written off in the year in which they are incurred unless they are to
be reimbursed by third parties or result in the production of an
identifiable, saleable product.
7 DEPRECIATION
Depreciation is provided at rates calculated to write down the cost of
tangible fixed assets over their estimated useful lives on a straight line
basis. The annual rates of depreciation used are as follows:
Leaseholds equally over life of lease
Office equipment 10%
Computer equipment 25%
Motor cars 25%
Plant 20%
8 FOREIGN CURRENCY TRANSACTIONS
Transactions in foreign currencies are translated at the rate of exchange
on the date of the transaction or, if hedged, at the rate of exchange under
the related forward exchange contract. Assets and liabilities in foreign
currencies are translated at the year end rate of exchange or, if hedged,
at the forward contract rate. The exchange differences are taken to the
profit and loss account.
The results of overseas subsidiary and associated undertakings are
translated into sterling at average rates for the year. The net assets of
overseas subsidiary undertakings and related foreign currency debt
financing those assets, together with investments in overseas associated
undertakings, are translated at year end exchange rates. The exchange
differences are taken to reserves and reported in the statement of total
recognised gains and losses.
<PAGE>
9 NON-PENSION POST-EMPLOYMENT BENEFITS
The cost of providing post-employment benefits, other than pensions, is
charged to the profit and loss account so as to spread the regular cost
over the service lives of employees.
10 DEFERRED TAXATION
Provision is made for deferred taxation to take account of timing
differences between the treatment of certain items for accounts purposes
and their treatment for tax purposes. The provision is maintained to the
extent that the timing differences are expected, with reasonable
probability, to reverse in the foreseeable future.
11 LEASES
Assets financed by leasing agreements that give rights approximating to
ownership are treated as if they had been purchased outright. The amount
capitalised is the present value of the minimum lease payments payable
during the lease term. The corresponding leasing commitments are shown as
obligations to the lessor. Lease payments are treated as consisting of
capital and interest elements and the interest is charged to the profit and
loss account on a constant periodic rate of charge basis.
Operating lease rentals are charged to the profit and loss account on a
straight line basis over the life of the lease.
12 GOODWILL
Goodwill, being the difference between the cost of businesses acquired and
the fair value of their separable net assets, is offset against reserves as
it arises.
<PAGE>
This announcement is neither an offer to purchase nor a solicitation of
an offer to sell Shares. The Offer is made solely by the Offer to
Purchase, dated October 7, 1998, and the related Letter of Transmittal.
Capitalized terms not defined in this notice have the respective
meanings ascribed to such terms in the Offer to Purchase. The Offer is
being made to all holders of Shares. The Purchaser is not aware of any
jurisdiction where the making of the Offer is prohibited by any
administrative or judicial action pursuant to any valid state statute.
If the Purchaser becomes aware of any valid state statute prohibiting
the making of the Offer or the acceptance of Shares pursuant thereto,
the Purchaser will make a good faith effort to comply with any such
state statute. If, after such good faith effort, the Purchaser cannot
comply with any such state statute, the Offer will not be made to (nor
will tenders be accepted from or on behalf of) the holders of Shares in such
state. In any jurisdiction where the securities, blue sky or other laws require
the Offer to be made by a licensed broker or dealer, the Offer shall be deemed
to be made on behalf of the Purchaser by Donaldson, Lufkin & Jenrette Securities
Corporation or by one or more registered brokers or dealers licensed under the
laws of such jurisdiction.
Notice of Offer to Purchase for Cash All
Outstanding Shares of Common Stock
of
Carnegie Group, Inc.
at
$5.00 Net Per Share
by
Logica Acquisition Corp.,
a wholly owned subsidiary of
Logica Inc.,
a wholly owned subsidiary of
Logica plc
THE OFFER AND WITHDRAWAL RIGHTS WILL EXPIRE AT 12:00 MIDNIGHT, NEW YORK
CITY TIME, ON WEDNESDAY, NOVEMBER 4, 1998 UNLESS THE OFFER IS EXTENDED.
Logica Acquisition Corp., a Delaware corporation ("Purchaser") and a
wholly owned subsidiary of Logica Inc., a Delaware corporation
("Parent"), is offering to purchase all outstanding shares of common
stock, par value $.01 per share (the "Shares"), of Carnegie Group, Inc.,
a Delaware corporation (the "Company"), at a purchase price of $5.00 per
Share, net to the seller in cash without interest (the "Offer Price"),
upon the terms and subject to the conditions set forth in the Offer to
Purchase, dated October 7, 1998 (the "Offer to Purchase"), and in the
related Letter of Transmittal (which together constitute the "Offer").
The Parent has formed the Purchaser in connection with the Offer and the
Merger Agreement (as defined below). The Parent is a wholly owned
subsidiary of Logica plc, a public limited company organized under the
laws of England ("Logica plc").
The Offer is being made pursuant to an Agreement and Plan of Merger,
dated as of September 30, 1998 (the "Merger Agreement"), by and among
the Company, the Parent and the Purchaser. Pursuant to the Merger
Agreement, and subject to the terms and conditions thereof, the
Purchaser will be merged with and into the Company (the "Merger"). At
the effective time of the Merger, (i) each Share not beneficially owned
by the Parent, the Purchaser or any other direct or indirect subsidiary
of the Parent immediately prior thereto (other than those Shares held in
the treasury of the Company and Shares held by holders who perfect any
appraisal rights that they may have under Delaware law) will be canceled
and retired and be converted into the right to receive in cash an amount
per Share equal to the highest price per Share paid by the Purchaser
<PAGE>
pursuant to the Offer, without interest thereon, and (ii) the Company
will become a wholly owned subsidiary of the Parent.
The Board of Directors of the Company has unanimously determined that
the Offer and the Merger are fair to and in the best interests of the
Company and its stockholders, has approved the Offer, the Merger
Agreement and the Merger, and recommends that the holders of Shares
accept the Offer and tender their Shares pursuant to the Offer.
The Offer is conditioned upon, among other things, there being validly
tendered and not withdrawn prior to the expiration of the Offer that
number of Shares which would represent at least a majority of all
outstanding Shares on a fully diluted basis.
Upon the terms and subject to the conditions of the Offer (including, if
the Offer is extended or amended, the terms and conditions of any extension or
amendment), the Purchaser will accept for payment and thereby purchase, at the
Offer Price, all Shares validly tendered prior to the Expiration Date and not
properly withdrawn.
For purposes of the Offer, the Purchaser will be deemed to have accepted
for payment, and thereby purchased, Shares validly tendered and not withdrawn
if, as and when the Purchaser gives oral or written notice to ChaseMellon
Shareholder Services, L.L.C. (the "Depositary") of the Purchasers acceptance for
payment of such Shares pursuant to the Offer. In all cases, payment for Shares
purchased pursuant to the Offer will be made only after timely receipt by the
Depositary of (i) certificates for such Shares, or timely confirmation of the
book-entry transfer of such Shares into the Depositarys account at the Book-
Entry Transfer Facility, (ii) either a properly completed and duly executed
Letter of Transmittal (or facsimile thereof) with any required signature
guarantees, or an Agents Message, and (iii) any other required documents.
Subject to the terms and conditions of the Merger Agreement, the Purchaser
reserves the right, at any time or from time to time, to extend for any reason
the period during which the Offer is open, by giving oral or written notice of
such extension to the Depositary. The Purchaser also expressly reserves the
right, at any time or from time to time, to delay the acceptance for payment of,
or payment for, Shares tendered pursuant to the Offer, terminate the Offer,
waive any conditions to the consummation of the Offer, or amend or modify the
terms and conditions of the Offer, in each case in accordance with the terms of
the Merger Agreement by giving oral or written notice of such modification to
the Depositary. Any such extension, delay in acceptance for payment or payment,
termination, waiver or amendment or modification will be followed as promptly as
practicable by public announcement thereof, and such announcement in the case of
an extension will be issued no later than 9:00 a.m., New York City time, on the
next business day after the previously scheduled Expiration Date. During any
extension of the Offer, all Shares previously tendered and not withdrawn will
remain subject to the Offer and subject to the right of the tendering holder to
withdraw such holders Shares. If the conditions of the Offer are not satisfied
prior to the Expiration Date, the Purchaser, subject to the terms of the Merger
Agreement, may (i) decline to accept for payment, or purchase or pay for, any of
the Shares tendered and terminate the Offer, (ii) extend the Offer and retain
the Shares (subject to withdrawal rights) which have been tendered during the
period for which the Offer is extended, or (iii) waive any one or more of the
conditions of or otherwise amend the Offer. There can be no assurance that the
Purchaser will exercise its right to extend the Offer or waive any of the
conditions of the Offer.
Shares tendered pursuant to the Offer may be withdrawn at any time prior to
the Expiration Date and, unless theretofore accepted for payment by Purchaser
pursuant to the Offer, may also be withdrawn at any time after December 5, 1998.
For a withdrawal to be effective, a written, telegraphic, telex or facsimile
transmission of notice of withdrawal must be timely received by the Depositary
at one of its addresses set forth in the Offer to Purchase. Any such notice of
withdrawal must specify the name of the person who tendered the Shares to be
withdrawn, the number of Shares to be withdrawn and the names in which the
certificates
<PAGE>
evidencing the Shares to be withdrawn are registered, if different from
that of the person who tendered such Shares. If certificates for Shares
have been delivered or otherwise identified to the Depositary, then,
prior to the physical release of such certificates, the tendering holder
must also submit the serial numbers shown on the particular certificates
representing the Shares to be withdrawn and the signature(s) on the
notice of withdrawal must be guaranteed by an Eligible Institution which
is a participant in an approved Signature Guarantee Medallion Program,
except in the case of Shares tendered for the account of the Eligible
Institution. If Shares have been tendered pursuant to the procedures for book-
entry transfer, any notice of withdrawal must also specify the name and number
of the account at the Book-Entry Transfer Facility to be credited with the
withdrawn Shares.
Pursuant to the Merger Agreement, the Company has agreed promptly to
furnish to the Purchaser a list of names and addresses of all record holders of
Shares and a security position listing of Shares held in stock depositories,
each as of a recent date, and to promptly furnish the Purchaser with such
additional information, including updated lists of shareholders, mailing labels
and security position listings, and such other assistance as the Purchaser or
its agents may reasonably request. This Offer to Purchase and the related Letter
of Transmittal will be mailed by the Purchaser to record holders of Shares and
will be furnished to brokers, commercial banks, trust companies and similar
persons whose names, or the names of whose nominees, appear on the Companys
shareholder list or, if applicable, who are listed as participants in a clearing
agencys security position listing. The Offer to Purchase and the related Letter
of Transmittal contain important information which holders of Shares are urged
to read carefully before making any decision with respect to the Offer. The
information required to be disclosed by Rule 14d-6(e)(1)(vii) of the General
Rules and Regulations of the Securities Exchange Act of 1934, as amended, is
contained in the Offer to Purchase and is incorporated in this notice by
reference.
Requests for copies of the Offer to Purchase, the related Letter of
Transmittal and other tender offer materials may be directed to the Information
Agent as set forth below, and copies will be furnished promptly at the
Purchasers expense. The Purchaser will not pay any fees or commissions to any
broker or dealer or any other person (other than the Dealer Manager, the
Depositary and the Information Agent) for soliciting tenders of Shares pursuant
to the Offer.
The Information Agent for the Offer is:
D.F. King & Co., Inc.
77 Water Street
New York, New York 10005
Banks and Brokers Call Collect: (212) 269-5550
All Others Call Toll Free: (800) 714-3312
The Dealer Manager for the Offer is:
Donaldson, Lufkin & Jenrette
277 Park Avenue
New York, New York 10172
Call Collect: (212) 892-7995
October 7, 1998
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
AMONG
LOGICA INC.,
LOGICA ACQUISITION CORP.
AND
CARNEGIE GROUP, INC.
DATED AS OF SEPTEMBER 30, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
ARTICLE I--The Offer...................................................... 1
1.1 The Offer......................................................... 1
1.2 Company Actions................................................... 2
1.3 Board Representation.............................................. 3
ARTICLE II--The Merger.................................................... 4
2.1 The Merger........................................................ 4
2.2 Effective Time.................................................... 4
2.3 Closing........................................................... 4
2.4 Directors and Officers............................................ 4
2.5 Stockholders' Meeting............................................. 4
2.6 Merger Without Meeting of Stockholders............................ 5
2.7 Conversion of Securities.......................................... 5
2.8 Company Stock Options and Related Matters......................... 5
2.9 Taking of Necessary Action; Further Action........................ 6
ARTICLE III--Payment for Shares; Dissenting Shares........................ 6
3.1 Payment for Shares of Company Common Stock........................ 6
3.2 Dissenting Shares................................................. 7
ARTICLE IV--Representations and Warranties of Parent and Acquisition Sub.. 8
4.1 Organization...................................................... 8
4.2 Authorization; Validity of Agreement; Necessary Action............ 8
4.3 Consents and Approvals; No Violations............................. 9
4.4 Information in Proxy Statement.................................... 9
4.5 Required Financing................................................ 9
ARTICLE V--Representations and Warranties of the Company.................. 9
5.1 Existence; Good Standing; Authority; Compliance With Law.......... 9
5.2 Authorization, Validity and Effect of Agreements.................. 10
5.3 Capitalization.................................................... 10
5.4 Subsidiaries...................................................... 11
5.5 Other Interests................................................... 11
5.6 No Violation; Consents............................................ 11
5.7 SEC Documents..................................................... 12
5.8 Litigation........................................................ 12
5.9 Absence of Certain Changes........................................ 12
5.10 Taxes............................................................. 13
5.11 Books and Records................................................. 13
5.12 Properties........................................................ 14
5.13 Intellectual Property............................................. 15
5.14 Environmental Matters............................................. 18
5.15 Employee Benefit Plans............................................ 18
5.16 Labor Matters..................................................... 20
5.17 No Brokers........................................................ 20
5.18 Opinion of Financial Advisors..................................... 21
5.19 Related Party Transactions........................................ 21
5.20 Potential Conflicts of Interest................................... 21
5.21 Contracts and Commitments......................................... 21
5.22 Year 2000......................................................... 22
</TABLE>
(i)
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<C> <S> <C>
5.23 Vote Required for Merger......................................... 22
5.24 Suppliers and Customers.......................................... 22
5.25 Insurance........................................................ 22
5.26 Disclosure....................................................... 23
5.27 Definition of the Company's Knowledge............................ 23
ARTICLE VI--Conduct of Business Pending the Merger....................... 23
6.1 Conduct of Business by the Company............................... 23
ARTICLE VII--Additional Agreements....................................... 25
7.1 Other Filings.................................................... 25
7.2 Additional Agreements............................................ 25
7.3 Fees and Expenses................................................ 25
7.4 No Solicitations................................................. 25
7.5 Officers' and Directors' Indemnification......................... 26
7.6 Access to Information; Confidentiality........................... 27
7.7 Financial and Other Statements................................... 27
7.8 Right to Board Materials......................................... 27
7.9 Advice of Change................................................. 28
7.10 Public Announcements............................................. 28
ARTICLE VIII--Conditions to the Merger................................... 29
8.1 Conditions to the Obligations of Each Party to Effect the Merger. 29
ARTICLE IX--Termination, Amendment and Waiver............................ 29
9.1 Termination...................................................... 29
9.2 Effect of Termination............................................ 30
9.3 Amendment........................................................ 31
9.4 Extension; Waiver................................................ 31
ARTICLE X--General Provisions............................................ 31
10.1 Notices.......................................................... 31
10.2 Interpretation................................................... 32
10.3 Non-Survival of Representations, Warranties, Covenants and
Agreements...................................................... 32
10.4 Miscellaneous.................................................... 32
10.5 Assignment....................................................... 32
10.6 Severability..................................................... 32
10.7 Choice of Law/Consent to Jurisdiction............................ 32
10.8 Counterparts..................................................... 33
10.9 No Agreement Until Executed...................................... 33
ANNEX A.................................................................. 35
</TABLE>
(ii)
<PAGE>
SCHEDULES AND EXHIBITS
<TABLE>
<CAPTION>
SCHEDULE TITLE
-------- -----
<C> <S>
Schedule 4.3 Exceptions to Parent's Representations
Schedule 5.1(c) Licenses, Permits and Authorizations
Schedule 5.1(d) Organizational Documents
Schedule 5.3 Options
Schedule 5.4 Subsidiaries
Schedule 5.5 Other Interests
Schedule 5.6 Third Party Consents
Schedule 5.8 Litigation
Schedule 5.10 Taxes
Schedule 5.12 Properties
Schedule 5.13(a) Trademarks, Patents and Copyrights
Schedule 5.13(b) Royalties
Schedule 5.13(j) Transfers of Intellectual Property Rights
Schedule 5.15 Employee Benefit Plans
Schedule 5.19 Related Party Transactions
Schedule 5.20 Conflicts of Interest
Schedule 5.21 Contracts and Commitments
Schedule 5.22 Year 2000 Compliance
Schedule 5.24 Changes with Respect to Suppliers and Customers
Schedule 5.25 Insurance
Schedule 5.27 Definition of Knowledge
Schedule 6.1(c) Matters Affecting Assets
Schedule 6.1(d) Matters Affecting Indebtedness
<CAPTION>
EXHIBIT
-------
<C> <S>
A Form of Option Termination Agreement
</TABLE>
(iii)
<PAGE>
AGREEMENT AND PLAN OF MERGER
Agreement and Plan of Merger (the "Agreement"), dated as of September 30,
1998, by and among Logica Inc., a Delaware corporation ("Parent"), Logica
Acquisition Corp., a Delaware corporation and a wholly-owned subsidiary of
Parent ("Acquisition Sub"), and Carnegie Group, Inc., a Delaware corporation
(the "Company").
Recitals
Whereas, the Board of Directors of each of Parent, Acquisition Sub and the
Company has approved, and deems it advisable and in the best interests of its
respective stockholders to consummate, the acquisition of the Company by
Parent upon the terms and subject to the conditions set forth herein; and
Whereas, as a condition to the willingness of Parent and Acquisition Sub to
enter into this Agreement, certain stockholders of the Company (the "Principal
Stockholders") have entered into Tender Agreements, dated as of the date
hereof, with Parent and Acquisition Sub (the "Tender Agreements"), pursuant to
which each Principal Stockholder has agreed, among other things, to tender
pursuant to the Offer (as hereinafter defined) all shares (the "Shares") of
common stock, par value $.01 per share, of the Company (the "Company Common
Stock") owned by such Principal Stockholder, all upon the terms and conditions
set forth in such Tender Agreements;
Now, Therefore, in consideration of the mutual covenants and agreements set
forth herein, Parent, Acquisition Sub and the Company hereby agree as follows:
ARTICLE I
The Offer
1.1 The Offer.
(a) Provided that this Agreement shall not have been terminated in
accordance with its terms, Acquisition Sub shall, as soon as practicable after
the date hereof, (but in no event later than five business days following the
public announcement of the Offer), commence (within the meaning of Rule 14d-2
under the Securities Exchange Act of 1934, as amended, and the rules and
regulations thereunder (the "Exchange Act")) an offer to purchase (as such
offer to purchase may be amended in accordance with the terms of this
Agreement, the "Offer") all of the issued and outstanding Shares at a price of
not less than $5.00 per Share, net to the seller in cash (less applicable
withholding taxes, if any) (such price, or such other price per Share as may
be paid in the Offer, being referred to herein as the "Offer Price"). After
the commencement of the Offer, the Offer and the obligation of Acquisition Sub
to accept for payment and pay for Shares tendered pursuant to the Offer shall
be subject only to the conditions set forth in Annex A hereto and the
condition that there be validly tendered and not withdrawn prior to the
expiration of the Offer at least a majority of the Shares on a fully diluted
basis (the "Minimum Percentage"). Parent and Acquisition Sub expressly reserve
the right to waive any condition set forth in Annex A, to change the form or
amount payable per Share in the Offer (including the Offer Price) and to make
any other changes in the terms and conditions of the Offer; provided, however,
that without the prior written consent of the Company, Parent shall not amend,
or permit to be amended, the Offer to (i) decrease the Offer Price, (ii)
change the consideration into a form other than cash, (iii) amend (other than
to waive) the Minimum Condition or the other conditions set forth in Annex A,
or (iv) reduce the maximum number of Shares to be purchased in the Offer;
provided further, however, that if on the initial scheduled expiration date of
the Offer, which shall be 20 business days after the date the Offer is
commenced, all conditions to the Offer shall not have been satisfied or
waived, Acquisition Sub may, from time to time, in its sole discretion, extend
the expiration date, provided, however, that such expiration date, as
extended, shall be no later than December 31, 1998. Acquisition Sub shall, on
the terms and subject to the prior satisfaction or waiver of the conditions of
the Offer, accept for payment and
1
<PAGE>
pay for Shares tendered as soon as it is legally permitted to do so under
applicable law. Notwithstanding the foregoing, if, immediately prior to the
initial expiration date of the Offer (as it may be extended), the Shares
tendered and not withdrawn pursuant to the Offer equal less than 90% of the
Shares on a fully diluted basis, Acquisition Sub may, in its sole discretion,
extend the Offer for a period not to exceed 10 business days, notwithstanding
that all conditions to the Offer are satisfied as of such expiration date of
the Offer; provided, however, that prior to such extension the Acquisition Sub
shall waive its right to assert any of the conditions set forth in Annex A
other than the Minimum Condition. The Offer shall be made by means of an offer
to purchase (the "Offer to Purchase") containing the terms set forth in this
Agreement, the Minimum Percentage and the conditions set forth in Annex A
hereto.
(b) As soon as practicable after the date the Offer is commenced, Parent and
Acquisition Sub shall file or cause to be filed with the Securities and
Exchange Commission (the "Commission") a Tender Offer Statement on Schedule
14D-1 (together with all amendments or supplements thereto, the "Schedule 14D-
1"), which shall include as an exhibit or incorporate by reference, the Offer
to Purchase (or portions thereof) and forms of the related letter of
transmittal and summary advertisement (such Schedule 14D-1, the Offer to
Purchase and related documents, together with all amendments or supplements
thereto, are collectively referred to herein as the "Offer Documents"). The
Offer Documents will comply in all material respects with the provisions of
applicable federal securities laws and, on the date filed with the Commission
and on the date first published, sent or given to the Company's stockholders,
shall not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they were made,
not misleading, except that no representation is made by Parent or Acquisition
Sub with respect to information furnished by the Company for inclusion in the
Offer Documents. The information supplied in writing by the Company for
inclusion in the Offer Documents and by Parent or Acquisition Sub for
inclusion in the Schedule 14D-9 (as hereinafter defined) will not contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they were made, not
misleading. Parent, Acquisition Sub and the Company each agrees promptly to
amend or supplement any information provided by it for use in the Offer
Documents if and to the extent that such information shall have become false
or misleading in any material respect or as otherwise required by applicable
federal securities laws, and Parent and Acquisition Sub each further agrees to
take all steps necessary to cause the Offer Documents, as so amended or
supplemented, to be filed with the Commission and disseminated to the holders
of Shares, in each case as and to the extent required by applicable federal
securities laws. The Company and its counsel shall be given a reasonable
opportunity to review and comment upon the Offer Documents and all amendments
and supplements thereto prior to the filing thereof with the Commission or the
dissemination thereof to the holders of Shares.
1.2 Company Actions.
(a) The Company hereby approves of and consents to the Offer and represents
and warrants that the Board of Directors of the Company (the "Company Board"),
at a meeting duly called and held, has unanimously (i) determined that this
Agreement and the transactions contemplated hereby, including the Offer and
the Merger taken together, are fair to and in the best interests of the
Company and its stockholders, (ii) approved this Agreement, the Tender
Agreements and the transactions contemplated hereby and thereby, including,
without limitation, the Merger (as hereinafter defined) and the Offer
(collectively, the "Transactions"), and such approval constitutes approval of
the Transactions for purposes of Section 203 of the Delaware General
Corporation Law, as amended (the "DGCL"), and (iii) resolved to recommend that
the stockholders of the Company accept the Offer, tender their Shares
thereunder to Acquisition Sub and, if required by applicable law, approve and
adopt this Agreement and the Merger, subject to the Company's rights under
Section 7.4 hereof.
(b) Concurrently with the commencement of the Offer and the filing by or on
behalf of Parent and Acquisition Sub of the Schedule 14D-1, the Company shall
file with the Commission and disseminate to the holders of Shares a
Solicitation/Recommendation Statement on Schedule 14D-9 (together with all
amendments or supplements thereto, the "Schedule 14D-9"), containing (among
other things) the recommendation referred
2
<PAGE>
to in clause (iii) of Section 1.2(a) hereof, subject to the Company's rights
under Section 7.4 hereof. The Schedule 14D-9 will comply in all material
respects with the provisions of applicable federal securities laws and, on the
date filed with the Commission and on the date first published, sent or given
to the Company's stockholders, shall not contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading, except that no
representation is made by the Company with respect to information furnished by
Parent or Acquisition Sub for inclusion in the Schedule 14D-9. The Company,
Parent and Acquisition Sub each agrees promptly to correct, amend or
supplement any information provided by it for use in the Schedule 14D-9 if and
to the extent that such information shall have become false or misleading in
any material respect or as otherwise required by applicable federal securities
laws, and the Company further agrees to take all steps necessary to cause the
Schedule 14D-9, as so amended or supplemented, to be filed with the Commission
and disseminated to the holders of Shares, in each case as and to the extent
required by applicable federal securities laws. Parent, Acquisition Sub and
their counsel shall be given a reasonable opportunity to review and comment
upon the Schedule 14D-9 and all amendments and supplements thereto prior to
the filing thereof with the Commission or the dissemination thereof to the
holders of Shares.
(c) In connection with the Offer, the Company shall promptly furnish Parent
and Acquisition Sub with a list of the names and addresses of all record
holders of Shares and security position listings of Shares, each as of a
recent date, and shall promptly furnish Parent and Acquisition Sub with such
additional information, including updated lists of the stockholders of the
Company, lists of the holders of the Company's outstanding stock options,
mailing labels, security position listings and such other assistance and
information as Parent or Acquisition Sub or their agents may reasonably
request. Subject to the requirements of applicable law, and except for such
steps as are necessary to disseminate the Offer Documents and any other
documents necessary to consummate the Offer, each of Parent and Acquisition
Sub shall use the information described in the preceding sentence only in
connection with the Offer, and if this Agreement is terminated in accordance
with its terms, each of them shall, upon the Company's request, deliver to the
Company all such information and any copies or extracts thereof then in its
possession or under its control.
(d) The Company represents and warrants that it has been advised, as of the
date hereof, that all of its directors and executive officers intend to tender
their Shares pursuant to the Offer.
1.3 Board Representation. Promptly upon the purchase of Shares pursuant to
the Offer, Parent shall be entitled to designate such number of directors,
rounded up to the next whole number, on the Company Board as is equal to the
product of (a) the total number of directors on the Company Board (after
giving effect to the directors designated by Parent pursuant to this sentence)
and (b) the percentage that the total votes represented by such number of
Shares in the election of directors of the Company so purchased bears to the
total votes represented by the number of Shares outstanding. In furtherance
thereof, the Company shall, upon request by Parent, promptly increase the size
of the Company Board and/or exercise its best efforts to secure the
resignations of such number of its directors as is necessary to enable
Parent's designees to be elected to the Company Board and shall take all
actions to cause Parent's designees to be so elected to the Company Board. At
such time, the Company shall also cause persons designated by Parent to
constitute at least the same percentage (rounded up to the next whole number)
as is on the Company Board of (i) each committee of the Company Board, (ii)
each board of directors (or similar body) of each Company Subsidiary (as
hereinafter defined) and (iii) each committee (or similar body) of each such
board. The Company shall take, at its expense, all action required pursuant to
Section 14(f) and Rule 14f-1 of the Exchange Act in order to fulfill its
obligations under this Section 1.3 and shall include in the Schedule 14D-9 to
its stockholders such information with respect to the Company and its officers
and directors as is required by such Section 14(f) and Rule 14f-1 in order to
fulfill its obligations under this Section 1.3. Parent will supply to the
Company in writing and be solely responsible for any information with respect
to itself and its nominees, officers, directors and affiliates required by
such Section 14(f) and Rule 14f-1. The provisions of this Section 1.3 are in
addition to and shall not limit any rights which Acquisition Sub, Parent or
any of their affiliates may have as a holder or beneficial owner of Shares as
a matter of law with respect to the election of directors or otherwise. In the
event that Parent's designees are elected to the Company Board,
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until the Effective Time, the Company Board shall have at least three
directors who are directors on the date hereof (the "Independent Directors"),
provided that, in such event, if the number of Independent Directors shall be
reduced below three for any reason whatsoever, any remaining Independent
Directors (or Independent Director, if there be only one remaining) shall be
entitled to designate persons to fill such vacancies who shall be deemed to be
Independent Directors for purposes of this Agreement or, if no Independent
Director then remains, the other directors shall designate three persons to
fill such vacancies who shall not be stockholders, affiliates or associates of
Parent or Acquisition Sub and such persons shall be deemed to be Independent
Directors for purposes of this Agreement. Notwithstanding anything in this
Agreement to the contrary, in the event that Parent's designees are elected to
the Company Board, after the acceptance for payment of Shares pursuant to the
Offer and prior to the Effective Time (as hereinafter defined), the
affirmative vote of a majority of the Independent Directors shall be required
to (a) amend or terminate this Agreement by the Company, (b) exercise or waive
any of the Company's rights, benefits or remedies hereunder, or (c) extend the
time for performance of Parent's and Acquisition Sub's respective obligations
hereunder.
ARTICLE II
The Merger
2.1 The Merger. Subject to the terms and conditions of this Agreement, at
the Effective Time (as hereinafter defined), the Company and Acquisition Sub
shall consummate a merger (the "Merger") pursuant to which (a) Acquisition Sub
shall be merged with and into the Company and the separate corporate existence
of Acquisition Sub shall thereupon cease, (b) the Company shall be the
successor or surviving corporation in the Merger (sometimes hereinafter
referred to as the "Surviving Corporation") and shall continue to be governed
by the laws of the State of Delaware, and (c) the separate corporate existence
of the Company with all its rights, privileges, immunities, powers and
franchises shall continue unaffected by the Merger. The Certificate of
Incorporation of Acquisition Sub (the "Certificate of Incorporation"), as in
effect immediately prior to the Effective Time, shall be the Certificate of
Incorporation of the Surviving Corporation until thereafter amended as
provided by law and such Certificate of Incorporation, and (y) the Bylaws of
Acquisition Sub (the "Bylaws"), as in effect immediately prior to the
Effective Time, shall be the Bylaws of the Surviving Corporation until
thereafter amended as provided by law, by such Certificate of Incorporation or
by such Bylaws. The Merger shall have the effects specified in the DGCL.
2.2 Effective Time. As promptly as practicable after all of the conditions
set forth in Article VIII shall have been satisfied or, if permissible, waived
by the party entitled to the benefit of the same, Acquisition Sub and the
Company shall duly execute and file a certificate of merger (the "Certificate
of Merger") with the Secretary of State of the State of Delaware in accordance
with the DGCL. The Merger shall become effective at such time as the
Certificate of Merger is filed with the Secretary of State of the State of
Delaware or at such later time as is specified in the Certificate of Merger
(the "Effective Time").
2.3 Closing. The closing of the Merger (the "Closing") shall take place at
such time and on a date to be specified by the parties, which shall be no
later than the second business day after satisfaction or waiver of all of the
conditions set forth in Article VIII hereof (the "Closing Date"), at the
offices of Goodwin, Procter & Hoar llp, Exchange Place, Boston, Massachusetts
02109, unless another date or place is agreed to by the parties hereto.
2.4 Directors and Officers. The directors and officers of Acquisition Sub
immediately prior to the Effective Time shall be the initial directors and
officers of the Surviving Corporation, each to hold office in accordance with
the Certificate of Incorporation and Bylaws of the Surviving Corporation.
2.5 Stockholders' Meeting.
(a) If required by applicable law in order to consummate the Merger, the
Company, acting through the Company Board, shall, in accordance with
applicable law:
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(i) duly call, give notice of, convene and hold a special meeting of its
stockholders (the "Special Meeting") as promptly as practicable following
the acceptance for payment and purchase of Shares by Acquisition Sub
pursuant to the Offer for the purpose of considering and taking action upon
the approval of the Merger and the adoption of this Agreement;
(ii) prepare and file with the Commission a preliminary proxy or
information statement relating to the Merger and this Agreement and use its
best efforts (x) to obtain and furnish the information required to be
included by the Commission in the Proxy Statement (as hereinafter defined)
and, after consultation with Parent, to respond promptly to any comments
made by the Commission with respect to the preliminary proxy or information
statement and cause a definitive proxy or information statement, including
any amendment or supplement thereto (the "Proxy Statement"), to be mailed
to its stockholders, provided that no amendment or supplement to the Proxy
Statement will be made by the Company without the consultation and approval
of Parent and its counsel, and to obtain the necessary approvals of the
Merger and this Agreement by its stockholders; and
(iii) include in the Proxy Statement the recommendation of the Company
Board that stockholders of the Company vote in favor of the approval of the
Merger and the adoption of this Agreement.
2.6 Merger Without Meeting of Stockholders. Notwithstanding Section 2.5
hereof, in the event that Parent, Acquisition Sub or any other Parent
Subsidiary (as hereinafter defined) shall acquire at least 90% of the
outstanding shares of each class of capital stock of the Company, pursuant to
the Offer or otherwise, the parties hereto shall, at the request of Parent and
subject to Article VIII hereof, take all necessary and appropriate action to
cause the Merger to become effective as soon as practicable after such
acquisition, without a meeting of stockholders of the Company, in accordance
with Section 253 of the DGCL.
2.7 Conversion of Securities. At the Effective Time, by virtue of the Merger
and without any action on the part of Acquisition Sub, the Company or the
holders of any Shares:
(a) Each issued and outstanding Share held by the Company as a treasury
Share or held by any direct or indirect Company Subsidiary and each issued and
outstanding Share owned by Parent, Acquisition Sub or any other direct or
indirect Parent Subsidiary immediately prior to the Effective Time, shall be
canceled and retired and cease to exist without any conversion thereof and no
payment or distribution shall be made with respect thereto;
(b) Each Share issued and outstanding immediately prior to the Effective
Time, other than (i) those Shares referred to in Section 2.7(a) and (ii)
Dissenting Shares (as hereinafter defined), shall be cancelled and shall be
converted automatically into and represent the right to receive the kind and
amount of consideration (without interest) equal to the kind and amount of
consideration paid per Share pursuant to the Offer (the "Merger
Consideration") payable, without interest, to the holder of such Share upon
surrender, in the manner provided in Section 3.1, of the Certificate (as
hereinafter defined) that formerly evidenced such Share. All of the
Certificates evidencing Shares, by virtue of the Merger and without any action
on the part of the stockholders of the Company or the Company, shall be deemed
to be no longer outstanding, shall not be transferable on the books of the
Surviving Corporation, and shall represent solely the right to receive the
amount set forth in this Section 2.7(b); and
(c) The shares of common stock, par value $.01 per share, of Acquisition Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchangeable for, in the aggregate, One Thousand (1,000)
validly issued, fully paid and non-assessable shares of common stock, par
value $.01 per share, of the Surviving Corporation, which shall constitute all
of the issued and outstanding shares of common stock of the Surviving
Corporation immediately following the Effective Time.
2.8 Company Stock Options and Related Matters.
(a) Each option (collectively, the "Options") granted under the Company's
1989 Stock Option Plan (the "1989 Plan"), 1995 Stock Option Plan (the "1995
Plan") and Long-Term Incentive Stock Option Plan (the
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"Long-Term Plan" and, together with the 1989 Plan and the 1995 Plan, the
"Stock Option Plans"), which is outstanding (whether or not currently
exercisable) as of immediately prior to the Effective Time and which has not
been exercised or canceled prior thereto shall, at the Effective Time, be
cancelled and upon the surrender and cancellation of the option agreement
representing such Option and delivery of an Option Termination (as hereinafter
defined), Parent shall (x) pay to the holder thereof cash in an amount equal
to the product of (i) the number of Shares provided for in such Option and
(ii) the excess, if any, of the Merger Consideration over the exercise price
per Share provided for in such Option, which cash payment shall be treated as
compensation and shall be net of any applicable federal or state withholding
tax (the "Option Consideration"). The Company shall take all actions necessary
to ensure that (i) all Options, to the extent not exercised prior to the
Effective Time, shall terminate and be cancelled as of the Effective Time and
thereafter be of no further force or effect, (ii) no Options are granted after
the date of this Agreement, and (iii) at the Effective Time, the Stock Option
Plans and all Options issued thereunder shall terminate. The Company shall
obtain, prior to the expiration of the Offer, the consent, in the form
attached as Exhibit A hereto, from each holder of an Option providing for,
among other things, the termination of such Option (each such document, an
"Option Termination").
(b) Except as may be otherwise agreed to by Parent or Acquisition Sub and
the Company, the Stock Option Plans and the Company's 1995 Employee Stock
Purchase Plan (the "Purchase Plan") shall terminate as of the Effective Time
and the provisions in any other plan, program or arrangement providing for the
issuance or grant of any other interest in respect of the capital stock of the
Company or any of its Subsidiaries shall be deleted as of the Effective Time
and no holder of Options or any participant in any Stock Option Plan or the
Purchase Plan or any other plans, programs or arrangements shall have any
right thereunder to acquire any equity securities of the Company, the
Surviving Corporation or any Subsidiary thereof. In connection with the
foregoing, the parties hereby agree that participants in the Purchase Plan
will not be entitled to purchase any shares under the Purchase Plan for the
period or periods beginning on or after October 1, 1998 and ending on or
before the Effective Time and, after the Effective Time, any amounts which
have been withheld from participants under the Purchase Plan will be returned
without interest thereto to such participants.
2.9 Taking of Necessary Action; Further Action. Each of Parent, Acquisition
Sub and the Company shall use its best efforts to take all such action as may
be necessary or appropriate in order to effectuate the Merger under the DGCL
as promptly as practicable. If at any time after the Effective Time any
further action is necessary or desirable to carry out the purposes of this
Agreement and to vest the Surviving Corporation with full right, title and
possession to all assets, property, rights, privileges, powers and franchises
of both of the Company and Acquisition Sub, the officers of such corporations
are fully authorized in the name of their corporation or otherwise to take,
and shall take, all such lawful and necessary action.
ARTICLE III
Payment for Shares; Dissenting Shares
3.1 Payment for Shares of Company Common Stock.
(a) Prior to the Effective Time, Parent shall designate a bank or trust
company to act as agent for the holders of the Shares in connection with the
Merger (the "Paying Agent") for purposes of effecting the exchange for the
Merger Consideration of Certificates which, prior to the Effective Time,
represented Shares entitled to receive the Merger Consideration pursuant to
Section 2.7(b).
(b) Immediately prior to the Effective Time, Parent or Acquisition Sub shall
deposit in trust with the Paying Agent cash in an aggregate amount equal to
the product of (i) the number of Shares issued and outstanding immediately
prior to the Effective Time (other than shares owned by, or issuable upon
conversion of other securities to, the Company, Parent, Acquisition Sub or any
direct or indirect Parent Subsidiary (as hereinafter defined) or the Company
and Shares known immediately prior to the Effective Time to be Dissenting
Shares) and (ii) the Merger Consideration (such aggregate amount being
hereinafter referred to as the "Payment Fund").
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The Paying Agent shall, pursuant to irrevocable instructions, make the
payments referred to in Section 2.7(b) out of the Payment Fund.
(c) Promptly after the Effective Time, the Surviving Corporation shall cause
the Paying Agent to mail to each person who was a record holder of an
outstanding certificate or certificates which immediately prior to the
Effective Time represented Shares (the "Certificates"), whose Shares were
converted pursuant to Section 2.7(b) into the right to receive the Merger
Consideration, a letter of transmittal (which shall specify that delivery
shall be effected and risk of loss and title to Certificates shall pass, only
upon proper delivery of the Certificates to the Paying Agent and shall be in
such form and have such other provisions as Parent and the Company may
reasonably specify) and instructions for its use in surrendering Certificates
in exchange for payment of the Merger Consideration. Upon the surrender to the
Paying Agent of such a Certificate, together with such duly executed letter of
transmittal and any other required documents, the holder thereof shall be
paid, without interest thereon, the Merger Consideration to which such holder
is entitled hereunder, and such Certificate shall forthwith be canceled. Until
so surrendered, each such Certificate shall, after the Effective Time,
represent solely the right to receive the Merger Consideration into which the
Shares such Certificate theretofore represented shall have been converted
pursuant to Section 2.7(b), and the holder thereof shall not be entitled to be
paid any cash to which such holder otherwise would be entitled. In case any
payment pursuant to this Section 3.1 is to be made to a holder other than the
registered holder of a surrendered Certificate, it shall be a condition of
such payment that the Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
exchange shall pay to the Paying Agent any transfer or other taxes required by
reason of the payment of such cash to a person other than the registered
holder of the Certificate surrendered, or that such person shall establish to
the satisfaction of the Paying Agent that such tax has been paid or is not
applicable.
(d) Promptly following the date which is six months after the Effective
Time, the Paying Agent shall return to the Surviving Corporation all cash,
certificates and other instruments in its possession that constitute any
portion of the Payment Fund (including, without limitation, all interest and
other income received by the Paying Agent in respect of all funds made
available to it), and the Paying Agent's duties shall terminate. Thereafter,
each holder of a Certificate shall be entitled to look to the Surviving
Corporation (subject to applicable abandoned property, escheat and similar
laws) only as a general creditor thereof with respect to any Merger
Consideration, without interest, that may be payable upon due surrender of the
Certificate or Certificates held by them. Notwithstanding the foregoing,
neither the Paying Agent nor any party hereto shall be liable to a holder of
Certificates that prior to the Effective Time evidenced Shares for any Merger
Consideration delivered pursuant hereto to a public official pursuant to
applicable abandoned property, escheat or other similar laws.
(e) At the Effective Time, the Company Common Stock transfer books shall be
closed and no transfer of Shares shall be made thereafter. If, after the
Effective Time, Certificates are presented to the Surviving Corporation or the
Paying Agent, they shall be canceled and exchanged for the Merger
Consideration as provided in Section 2.7(b), subject to applicable law in the
case of Dissenting Shares.
(f) In the event any Certificate shall have been lost, stolen or destroyed,
upon the making of an affidavit of that fact by the person claiming such
Certificate to be lost, stolen or destroyed and, if required by Parent or the
Surviving Corporation, upon the posting by such person of a bond in such
amount as Parent or the Surviving Corporation may reasonably direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Paying Agent will issue in exchange for such lost, stolen or
destroyed Certificate, the cash representing the Merger Consideration
deliverable in respect thereof pursuant to this Agreement.
3.2 Dissenting Shares.
(a) Any Shares outstanding immediately prior to the Effective Time as to
which the holder thereof shall have not voted in favor of the Merger or
consented thereto in writing and as to which the holder thereof shall have
validly exercised such holder's appraisal rights, if any, under Section 262 of
the DGCL ("Dissenting Shares") shall not, after the Effective Time, be
entitled to vote for any purpose or be entitled to the payment of dividends or
other distributions (except dividends or other distributions payable to
stockholders of record prior
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to the Effective Time), nor shall such Dissenting Shares be converted into the
right to receive the Merger Consideration hereunder. Such holders of
Dissenting Shares duly making demand for appraisal (hereinafter referred to as
"Dissenting Stockholders") shall be entitled to receive payment of the
appraised value of such Dissenting Shares in accordance with the provisions of
such Section 262 of the DGCL, except that all Shares held by stockholders who
shall fail to perfect, or shall have effectively withdrawn or lost, such
stockholders' right to appraisal of such Shares under Section 262 of the DGCL
shall thereupon be deemed to have been converted into and to have become
exchangeable for, as of the Effective Time, the right to receive the Merger
Consideration, without any interest thereon. The Company shall give Parent
prompt notice of any demands for appraisal received by the Company,
withdrawals of such demands and any other instrument served pursuant to
Section 262 of the DGCL and received by the Company, and Parent shall be
entitled to direct all negotiations and proceedings with respect to demands
for appraisal under the DGCL. The Company shall not, except with the prior
written consent of Parent, make any payment with respect to any demands for
appraisal, or settle or offer to settle, any such demands.
(b) Each Dissenting Stockholder who becomes entitled under the DGCL to
payment for Dissenting Shares shall receive payment therefor after the
Effective Time from the Surviving Corporation (but only after the amount
thereof shall have been agreed upon or finally determined pursuant to the
DGCL) and such Shares shall be canceled.
ARTICLE IV
Representations and Warranties of
Parent and Acquisition Sub
Parent and Acquisition Sub jointly and severally hereby represent and
warrant to the Company as follows:
4.1 Organization. Each of Parent and Acquisition Sub is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate or other power and authority and
all necessary governmental approvals to own, lease and operate its properties
and to carry on its business as now being conducted, except where the failure
to be so organized, existing and in good standing or to have such power,
authority, and governmental approvals would not have a material adverse effect
on the business, results of operations and financial condition of Parent and
its Subsidiaries (the "Parent Subsidiaries") taken as a whole (a "Parent
Material Adverse Effect"). Parent and each of the Parent Subsidiaries is duly
qualified or licensed to do business and in good standing in each jurisdiction
in which the property owned, leased or operated by it or the nature of the
business conducted by it makes such qualification or licensing necessary,
except where the failure to be so duly qualified or licensed and in good
standing would not, individually or in the aggregate, have a Parent Material
Adverse Effect.
4.2 Authorization; Validity of Agreement; Necessary Action. Each of Parent
and Acquisition Sub has full corporate power and authority to execute and
deliver this Agreement and to consummate the Transactions. The execution,
delivery and performance by Parent and Acquisition Sub of this Agreement and
the consummation of the Transactions have been duly authorized by the Board of
Directors of Parent (the "Parent Board") and the Board of Directors of
Acquisition Sub (the "Acquisition Sub Board") and by Parent as the sole
stockholder of Acquisition Sub, and except as set forth in Section 4.3 of the
schedule attached to this Agreement setting forth exceptions to Parent's and
Acquisition Sub's representations and warranties set forth herein, no other
corporate action on the part of Parent and Acquisition Sub is necessary to
authorize the execution and delivery by Parent and Acquisition Sub of this
Agreement and the consummation of the Transactions. This Agreement has been
duly executed and delivered by Parent and Acquisition Sub and, assuming due
and valid authorization, execution and delivery hereof by the Company, is a
valid and binding obligation of each of Parent and Acquisition Sub, as the
case may be, enforceable against each of them in accordance with its terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
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4.3 Consents and Approvals; No Violations. Except as set forth in Section
4.3 of the schedule attached to this Agreement setting forth exceptions to
Parent's and Acquisition Sub's representations and warranties set forth herein
and except for filings, permits, authorizations, consents and approvals as may
be required under, and other applicable requirements of, the Exchange Act, the
HSR Act (as hereinafter defined), state securities or state "Blue Sky" laws
and the DGCL, none of the execution, delivery or performance of this Agreement
by Parent or Acquisition Sub, the consummation by Parent or Acquisition Sub of
the Transactions or compliance by Parent or Acquisition Sub with any of the
provisions hereof will (i) conflict with or result in any breach of any
provision of the respective certificates of incorporation or bylaws of Parent
or Acquisition Sub, (ii) require any filing with, or permit, authorization,
consent or approval of, any Governmental Entity (as hereinafter defined),
(iii) result in a violation or breach of, or constitute (with or without due
notice or lapse of time or both) a default (or give rise to any right of
termination, cancellation or acceleration) under, any of the terms, conditions
or provisions of any note, bond, mortgage, indenture, lease, license,
contract, agreement or other instrument or obligation to which Parent or any
of the Parent Subsidiaries is a party or by which any of them or any of their
respective properties or assets may be bound, or (iv) violate any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent, any of
the Parent Subsidiaries or any of their properties or assets, excluding from
the foregoing clauses (ii), (iii) and (iv) such violations, breaches or
defaults which would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
4.4 Information in Proxy Statement. None of the information supplied by
Parent or Acquisition Sub specifically for inclusion or incorporation by
reference in the Proxy Statement will, as of the date mailed to the Company's
stockholders and at the time of any meeting of the Company's stockholders to
be held in connection with the Merger, contain any untrue statement of a
material fact or omit to state any material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading.
4.5 Required Financing. Parent PLC has or has available to it, and will make
available to Parent, all funds necessary to satisfy Parent's and Acquisition
Sub's obligations under this Agreement to purchase all outstanding Shares
pursuant to the Offer and the Merger.
ARTICLE V
Representations and Warranties of the Company
Except as set forth in the disclosure schedules delivered at or prior to the
execution hereof to Parent and Acquisition Sub, which shall refer to the
relevant Sections of this Agreement (the "Company Disclosure Schedule"), the
Company represents and warrants to Parent and Acquisition Sub as follows:
5.1 Existence; Good Standing; Authority; Compliance With Law.
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Except as set forth in
Section 5.1 of the Company Disclosure Schedule, the Company is duly licensed
or qualified to do business as a foreign corporation and is in good standing
under the laws of any other state of the United States in which the character
of the properties owned or leased by it therein or in which the transaction of
its business makes such qualification necessary, except where the failure to
be so licensed or qualified could not reasonably be expected to have a Company
Material Adverse Effect (as defined below). For purposes of this Agreement, a
Company Material Adverse Effect shall mean a material adverse effect on the
current business, results of operations or financial condition of the Company
and the Company Subsidiaries (as hereinafter defined) taken as a whole, other
than any actions, omissions, changes, events or effects that (i) are primarily
related to a general drop in stock prices in the United States or the United
Kingdom that are primarily due to political or economic turmoil or (ii) are
primarily related to or result from the announcement or pendency of the Offer
and/or the Merger, including disruptions to the Company's business or the
Company's Subsidiaries' businesses, and their respective employees, customers
and suppliers. Notwithstanding anything to the contrary
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provided herein, fully diluted earnings per share (calculated in accordance
with generally accepted accounting principles consistently applied) of the
Company for the fiscal quarter ending September 30, 1998 of $0.00 or more
shall not be deemed to have a Company Material Adverse Effect. The Company has
all requisite corporate power and authority to own, operate, lease and
encumber its properties and carry on its business as now conducted.
(b) Each of the Company Subsidiaries is a corporation duly incorporated or
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the corporate power and
authority to own its properties and to carry on its business as it is now
being conducted, and is duly qualified to do business and is in good standing
in each jurisdiction in which the ownership of its property or the conduct of
its business requires such qualification, except for jurisdictions in which
such failure to be so qualified or to be in good standing could not reasonably
be expected to have a Company Material Adverse Effect. None of the Company
Subsidiaries is a partnership, limited liability company or other entity other
than an entity organized as a corporation under the laws of any state of the
United States.
(c) Neither the Company nor any of the Company Subsidiaries is in violation
of any order of any court, governmental authority or arbitration board or
tribunal, or any law, ordinance, governmental rule or regulation to which the
Company or any Company Subsidiary or any of their respective properties or
assets is subject, where such violation could have a Company Material Adverse
Effect. The Company and the Company Subsidiaries have obtained all licenses,
permits and other authorizations and have taken all actions required by
applicable law or governmental regulations in connection with their businesses
as now conducted, where the failure to obtain any such license, permit or
authorization or to take any such action could have a Company Material Adverse
Effect. Section 5.1(c) of the Company Disclosure Schedule sets forth all
material licenses, permits and other authorizations used in the business or
properties (whether owned, leased or managed) of the Company or any of the
Company Subsidiaries.
(d) Copies of the Restated Certificate of Incorporation of the Company (the
"Company Certificate") and Amended and Restated Bylaws of the Company (the
"Company Bylaws") and the other charter documents, bylaws, organizational
documents and partnership, limited liability company and joint venture
agreements (and in each such case, all amendments thereto) of each of the
Company Subsidiaries are listed in Section 5.1(d) of the Company Disclosure
Schedule, and the copies of such documents, which have previously been
delivered to Parent and its counsel, are true and correct.
5.2 Authorization, Validity and Effect of Agreements. Each of the Company
and the Company Subsidiaries has the requisite power and authority to enter
into the Transactions and to execute and deliver this Agreement. The Company
Board has approved this Agreement and the Transactions. In connection with the
foregoing, the Company Board has taken such actions and votes as are necessary
on its part to render the provisions of Section 203 of the DGCL and all other
applicable takeover statutes inapplicable to this Agreement and the
Transactions. Subject only to the approval of this Agreement by the holders of
the Company Common Stock, if required, the execution by the Company of this
Agreement and consummation of the Transactions have been duly authorized by
all requisite corporate action on the part of the Company. This Agreement,
assuming due and valid authorization, execution and delivery thereof by Parent
and Acquisition Sub, constitutes a valid and legally binding obligation of the
Company, enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.
5.3 Capitalization.
(a) The authorized capital stock of the Company consists of 20,000,000
Shares of Company Common Stock and 5,000,000 shares of preferred stock, par
value $.01 per share, of the Company (the "Company Preferred Stock"). As of
the date of this Agreement, (i) 6,556,424 Shares of Company Common Stock were
issued and outstanding, (ii) 522,001, 696,875 and 340,000 Options were
outstanding under the 1989 Plan, 1995 Plan and Long-Term Plan, respectively,
(iii) 522,001, 800,000 and 340,000 Shares of Company Common Stock were
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reserved for issuance upon the exercise of outstanding Options to acquire
Shares of Company Common Stock pursuant to the 1989 Plan, 1995 Plan and Long-
Term Plan, respectively, subject to adjustment on the terms set forth in the
Stock Option Plans, (iv) no shares of Company Preferred Stock were issued and
outstanding, and (v) 242,400 Shares of Company Common Stock and no shares of
Company Preferred Stock were held in the treasury of the Company. As of the
date of this Agreement, the Company had no Shares of Company Common Stock
reserved for issuance other than as described above. All such issued and
outstanding shares of capital stock of the Company are duly authorized,
validly issued, fully paid, nonassessable and free of preemptive rights. The
Company has no outstanding bonds, debentures, notes or other obligations the
holders of which have the right to vote (or which are convertible into or
exercisable for securities having the right to vote) with the stockholders of
the Company on any matter. Except for the Options (all of which have been
issued under the Stock Option Plans), there are not at the date of this
Agreement any existing options, warrants, calls, subscriptions, convertible
securities, or other rights, agreements or commitments which obligate the
Company to issue, transfer or sell any shares of capital stock of the Company.
Section 5.3 of the Company Disclosure Schedule sets forth a full list of the
Options, including the name of the person to whom such Options have been
granted, the number of shares subject to each Option, the per share exercise
price for each Option and the vesting schedule for each Option. Except as set
forth in Section 2.8 hereof and Section 5.3 of the Company Disclosure
Schedule, the vesting schedule of all Options shall not be changed or affected
by the execution of this Agreement or consummation of the Transactions. There
are no agreements or understandings to which the Company or any Company
Subsidiary is a party with respect to the voting of any shares of capital
stock of the Company or which restrict the transfer of any such shares, nor
does the Company have knowledge of any third party agreements or
understandings with respect to the voting of any such shares or which restrict
the transfer of any such shares. There are no outstanding contractual
obligations of the Company or any Company Subsidiary to repurchase, redeem or
otherwise acquire any shares of capital stock, partnership interests or any
other securities of the Company or any Company Subsidiary. Except as set forth
in Section 5.3 of the Company Disclosure Schedule, neither the Company nor any
Company Subsidiary is under any obligation, contingent or otherwise, by reason
of any agreement to register the offer and sale or resale of any of their
securities under the Securities Act of 1933, as amended, and the rules and
regulations promulgated thereunder (the "Securities Act").
5.4 Subsidiaries. The Company owns directly or indirectly each of the
outstanding shares of capital stock of each of the Company Subsidiaries. Each
of the outstanding shares of capital stock in each of the Company Subsidiaries
having corporate form is duly authorized, validly issued, fully paid and
nonassessable. Each of the outstanding shares of capital stock of each of the
Company Subsidiaries is owned, directly or indirectly, by the Company free and
clear of all liens, pledges, security interests, claims or other encumbrances.
The following information for each Subsidiary (as defined in Section 10.2
hereof) of the Company (each, a "Company Subsidiary") as of the date hereof is
set forth in Section 5.4 of the Company Disclosure Schedule: (i) its name and
jurisdiction of incorporation or organization; (ii) its authorized capital
stock or share capital; and (iii) the name of each stockholder and the number
of issued and outstanding shares of capital stock or share capital held by it.
5.5 Other Interests. Except as set forth in Section 5.5 of the Company
Disclosure Schedule, neither the Company nor any Company Subsidiary owns
directly or indirectly any interest or investment (whether equity or debt) in
any corporation, partnership, limited liability company, joint venture,
business, trust or other entity (other than investments in short-term
investment securities).
5.6 No Violation; Consents. Except as set forth in Section 5.6 of the
Company Disclosure Schedule, neither the execution and delivery by the Company
of this Agreement nor consummation by the Company of the Transactions in
accordance with the terms hereof, will: (i) conflict with or result in a
breach of any provisions of the Company Certificate, the Company Bylaws, or
the organizational documents of the Company or any Company Subsidiary; (ii)
violate, or conflict with, or result in a breach of any provision of, or
constitute a default (or an event which, with notice or lapse of time or both,
would constitute a default) under, or result in the termination or in a right
of termination or cancellation of, or accelerate the performance required by,
or result in the creation of any lien, security interest, charge or
encumbrance upon any of the properties of the Company or
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the Company Subsidiaries under, or result in being declared void, voidable or
without further binding effect, any of the terms, conditions or provisions of
(x) any note, bond, mortgage, indenture, deed of trust or (y) any license,
franchise, permit, lease, contract, agreement or other instrument, commitment
or obligation to which the Company or any of the Company Subsidiaries is a
party, or by which the Company or any of the Company Subsidiaries or any of
their properties is bound (collectively, the "Company Agreements"); or (iii)
other than the filings provided for in Article II of this Agreement, the Hart-
Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), the Exchange
Act or applicable state securities and "Blue Sky" laws (collectively, the
"Regulatory Filings"), require any consent, approval or authorization of, or
declaration, filing or registration with, any governmental or regulatory
authority, except where the failure to obtain any such consent, approval or
authorization of, or declaration, filing or registration with, any
governmental or regulatory authority would not have a Company Material Adverse
Effect. Section 5.6 of the Company Disclosure Schedule sets forth a list of
all third party consents and approvals required to be obtained by the Company
in connection with this Agreement prior to consummation of any of the
Transactions. Notwithstanding the foregoing, the failure to disclose in
Section 5.6 of the Company Disclosure Letter any violation, conflict, breach,
default, termination, cancellation, lien, security interest, charge,
encumbrance or other matter referred to in clause (ii) above with respect to a
Company Agreement which would not reasonably be expected to have a Company
Material Adverse Effect shall not in and of itself be deemed to have caused a
failure of the condition set forth in paragraph (c) of Annex A hereto.
5.7 SEC Documents. The Company has filed all required forms, reports and
documents with the Commission since the Company's initial public offering in
November 1995 (collectively, the "Company SEC Reports"), all of which were
prepared in accordance with the applicable requirements of the Exchange Act,
the Securities Act and the rules and regulations promulgated thereunder (the
"Securities Laws"). All required Company SEC Reports have been filed with the
Commission and constitute all forms, reports and documents required to be
filed by the Company under the Securities Laws since the Company's initial
public offering in November 1995. As of their respective dates, the Company
SEC Reports (i) complied as to form in all material respects with the
applicable requirements of the Securities Laws and (ii) did not contain any
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements made therein, in the
light of the circumstances under which they were made, not misleading. Each of
the consolidated balance sheets of the Company included in or incorporated by
reference into the Company SEC Reports (including the related notes and
schedules) fairly presents the consolidated financial position of the Company
and the Company Subsidiaries as of its date and each of the consolidated
statements of income, retained earnings and cash flows of the Company included
in or incorporated by reference into the Company SEC Reports (including any
related notes and schedules) fairly presents the results of operations,
retained earnings or cash flows, as the case may be, of the Company and the
Company Subsidiaries for the periods set forth therein (subject, in the case
of unaudited statements, to normal year-end audit adjustments which would not
be material in amount or effect), in each case in accordance with generally
accepted accounting principles consistently applied during the periods
involved, except as may be noted therein and except, in the case of the
unaudited statements, as permitted by Form 10-Q pursuant to Section 13 or
15(d) of the Exchange Act.
5.8 Litigation. Except as set forth on Schedule 5.8, there are (i) no
continuing orders, injunctions or decrees of any court, arbitrator or
governmental authority to which the Company or any Company Subsidiary is a
party or by which any of its properties or assets are bound or to which any of
its directors, officers, employees or, agents, in such capacities, is a party
or by which any of their properties or assets are bound, and (ii) no actions,
suits or proceedings pending against the Company or any Company Subsidiary or
against any of its directors, officers, employees or agents, in such
capacities, or, to the best knowledge of the Company, threatened against the
Company or any Company Subsidiary or against any of its directors, officers,
employees or agents, at law or in equity, or before or by any federal or state
commission, board, bureau, agency or instrumentality.
5.9 Absence of Certain Changes. Except as disclosed in the Company SEC
Reports filed with the SEC prior to the date hereof since December 31, 1997,
the Company and the Company Subsidiaries have conducted their businesses only
in the ordinary course of business and there has not been: (i) any Company
Material
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Adverse Effect; (ii) as of the date hereof, any declaration, setting aside or
payment of any dividend or other distribution with respect to the Company
Common Stock; (iii) any material commitment, contractual obligation
(including, without limitation, any management or franchise agreement, any
lease (capital or otherwise) or any letter of intent), borrowing, liability,
guaranty, capital expenditure or transaction (each, a "Commitment") entered
into by the Company or any of the Company Subsidiaries outside the ordinary
course of business except for Commitments for expenses of attorneys,
accountants and investment bankers incurred in connection with the
Transactions; or (iv) any material change in the Company's accounting
principles, practices or methods.
5.10 Taxes.
(a) Neither the Company nor any Company Subsidiaries has any material tax
liability for unpaid Taxes, as defined below, which has not been paid, accrued
for or reserved on the Company's audited balance sheet as of December 31, 1997
or has incurred any material tax liability for unpaid Taxes or any other
liabilities for unpaid Taxes other than in the ordinary course business since
that date. "Taxes" shall mean all federal, state, local, foreign, and other
taxes, including without limitation, income taxes, estimated taxes,
alternative minimum taxes, excise taxes, sales taxes, use taxes, value-added
taxes, gross receipts taxes, franchise taxes, capital stock taxes, employment
and payroll-related taxes, withholding taxes, stamp taxes, transfer taxes,
windfall profit taxes, environmental taxes and real and personal property
taxes, whether or not measured in whole or in part by net income, and all
deficiencies, or other additions to tax, interest, fines and penalties.
(b) Except as set forth on Schedule 5.10 of the Company Disclosure Schedule,
the Company and each of the Company Subsidiaries has timely filed all federal,
state, local and foreign tax returns required to be filed by any of them
through the date hereof, and all such returns completely and accurately set
forth the amount of any Taxes relating to the applicable period.
(c) Neither the Internal Revenue Service (the "IRS") nor any other
governmental authority is now asserting by written notice to the Company or
any Company Subsidiary or, to the best knowledge of the Company and the
Company Subsidiaries, threatening to assert against the Company or any Company
Subsidiary any deficiency or claim for additional Taxes. There is no dispute
or claim concerning any material tax liability of the Company or any Company
Subsidiary, either claimed or raised by any governmental authority, or as to
which any director or officer of the Company or any Company Subsidiary has
reason to believe may be claimed or raised by any federal or state
governmental authority. No material claim has ever been made by a taxing
authority in a jurisdiction where the Company does not file reports and
returns that the Company is or may be subject to taxation by that
jurisdiction. There are no security interests on any of the assets of the
Company or any Company Subsidiary that arose in connection with any failure
(or alleged failure) to pay any Taxes. The Company has never entered into a
closing agreement pursuant to Section 7121 of the Internal Revenue Code of
1986, as amended (the "Code").
(d) The Company has not received written notice of any audit of any tax
return filed by the Company, and the Company has not been notified by any tax
authority that any such audit is contemplated or pending. Neither the Company
nor any of the Company Subsidiaries has executed or filed with the IRS or any
other taxing authority any agreement now in effect extending the period for
assessment or collection of any income or other Taxes, and no extension of
time with respect to any date on which a tax return was or is to be filed by
the Company is in force. True, correct and complete copies of all federal,
state and local income or franchise tax returns filed by the Company and each
of the Company Subsidiaries and all communications relating thereto have been
delivered to Parent or made available to representatives of Parent.
(e) The Company and each Company Subsidiary have withheld and paid all Taxes
required to have been withheld and paid in connection with amounts paid or
owing to any employee, independent contractor, creditor, stockholder or other
party.
5.11 Books and Records.
(a) The books of account and other financial records of the Company and each
of the Company Subsidiaries are true, complete and correct in all material
respects, have been maintained in accordance with good business
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practices, and are accurately reflected in all material respects in the
financial statements included in the Company SEC Reports.
(b) The minute books and other records of the Company and each of the
Company Subsidiaries have been made available to Parent and Acquisition Sub,
contain in all material respects accurate records of all meetings and
accurately reflect in all material respects all other corporate action of the
stockholders and directors and any committees of the Company Board and the
boards of directors of each of the Company Subsidiaries and all actions of the
partners or managers of each of the Company Subsidiaries, as applicable.
5.12 Properties.
(a) All of the real estate properties owned or leased by the Company or any
of the Company Subsidiaries are set forth in Section 5.12 of the Company
Disclosure Schedule. The Company has no ownership interest in any real
property other than the properties owned by the Company or the Company
Subsidiaries and set forth in Section 5.12 of the Company Disclosure Schedule.
Except as set forth in Section 5.12 of the Company Disclosure Schedule, the
Company or such Company Subsidiary owns fee simple title to each of the real
properties identified in Section 5.12 of the Company Disclosure Schedule (the
"Company Properties"), free and clear of liens, mortgages or deeds of trust,
claims against title, charges which are liens, security interests or other
encumbrances on title (collectively, "Encumbrances"), and the Company
Properties are not subject to any easements, rights of way, covenants,
conditions, restrictions or other written agreements, laws, ordinances and
regulations materially affecting building use or occupancy, or reservations of
an interest in title (collectively, "Property Restrictions"), except for (i)
Encumbrances, Property Restrictions and other matters set forth in Section
5.12 of the Company Disclosure Schedule, (ii) Property Restrictions imposed or
promulgated by law or any governmental body or authority with respect to real
property, including zoning regulations, that do not materially and adversely
affect the current use of the property, materially detract from the value of
or materially interfere with the present use of the property, (iii)
Encumbrances and Property Restrictions disclosed on existing title policies or
reports or current surveys (in either case copies of which title reports and
surveys have been delivered or made available to Parent and are listed in
Section 5.12 of the Company Disclosure Schedule), and (iv) mechanics',
carriers', suppliers', workmen's or repairmen's liens and other Encumbrances,
Property Restrictions and other limitations of any kind, if any, which,
individually or in the aggregate, are not material in amount, do not
materially detract from the value of or materially interfere with the present
use of any of the Company Properties subject thereto or affected thereby, and
do not otherwise materially impair business operations conducted by the
Company and the Company Subsidiaries and which have arisen or been incurred
only in the ordinary course of business. Valid policies of title insurance
have been issued insuring the Company's or the applicable Company Subsidiary's
fee simple (or leasehold to the extent disclosed in Section 5.12 of the
Company Disclosure Schedule) title to each of the Company Properties in
amounts at least equal to the purchase price thereof, and such policies are,
as of the date hereof, in full force and effect and no material claim has been
made against any such policy and the Company has no knowledge of any facts or
circumstances which would constitute the basis for such a claim. Except as set
forth in Section 5.12 of the Company Disclosure Schedule, (A) no certificate,
permit or license from any governmental authority having jurisdiction over any
of the Company Properties or any agreement, easement or other right which is
necessary to permit the lawful use and operation by the Company of the
buildings and improvements on any of the Company Properties as currently
operated or which is necessary to permit the lawful use and operation by the
Company of all driveways, roads and other means of egress and ingress to and
from any of the Company Properties (a "REA Agreement") has not been obtained
and is not in full force and effect, and to the Company's knowledge, there is
no pending threat of modification or cancellation of any of the same nor is
the Company nor any Company Subsidiary currently in default under any REA
Agreement and the Company Properties are in full compliance with all
governmental permits, licenses and certificates, except for such defaults
which or where such noncompliance could not reasonably be expected to have a
Company Material Adverse Effect; (B) no written notice of any material
violation of any federal, state or municipal law, ordinance, order, regulation
or requirement affecting any portion of any of the Company Properties has been
issued to the Company by any governmental authority; (C) to the Company's
knowledge, there are no material structural defects relating to any of the
Company Properties; (D) to the Company's knowledge, there is no Company
Property whose building systems are not in working order in
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any material respect; and (E) to the Company's knowledge, there is no physical
damage for which the Company is responsible to any Company Property in excess
of $25,000 for which there is no insurance in effect covering the full cost of
the restoration.
(b) The use and occupancy by the Company of each of the Company Properties
complies in all material respects with all applicable codes and zoning laws
and regulations, and the Company has no knowledge of any pending or threatened
proceeding or action that will in any manner affect the size of, use of,
improvements on, construction on, or access to any of the Company Properties,
with such exceptions as are not material and do not interfere with the use
made by the Company of such Company Properties. Neither the Company nor any of
the Company Subsidiaries has received any written notice to the effect that
(x) any betterment assessments have been levied against, or any condemnation
or rezoning proceedings are pending or threatened with respect to any of the
Company Properties or (y) any zoning, building or similar law, code,
ordinance, order or regulation is or will be violated by the continued
maintenance, operation or use of any buildings or other improvements on any of
the Company Properties or by the continued maintenance, operation or use of
the parking areas which, with respect to either (x) or (y) would individually
or in the aggregate result in a Company Material Adverse Effect. There are no
outstanding abatement proceedings or appeals to which the Company or any of
the Company Subsidiaries is a party with respect to the assessment of any
Company Property for the purpose of real property taxes, and there are no
agreements to which the Company or any of the Company Subsidiaries is a party
with any governmental authority with respect to such assessments or tax rates
on any Company Property.
(c) The Company and the Company Subsidiaries own good and marketable title,
free and clear of all Encumbrances, to all of the personal property and assets
shown on the Company's balance sheet at December 31, 1997 as reflected in the
Company SEC Reports (the "Balance Sheet") or acquired after December 31, 1997,
except for (A) assets which have been disposed of to nonaffiliated third
parties since December 31, 1997 in the ordinary course of business, (B)
Encumbrances reflected in the Balance Sheet, (C) Encumbrances or imperfections
of title which are not, individually or in the aggregate, material in
character, amount or extent and which do not materially detract from the value
or materially interfere with the present or presently contemplated use of the
assets subject thereto or affected thereby, and (D) Encumbrances for current
Taxes not yet due and payable. All of the machinery, equipment and other
tangible personal property and assets owned or used by the Company and the
Company Subsidiaries are, to the Company's knowledge, in good condition and
repair, except for ordinary wear and tear not caused by neglect, and are
useable in the ordinary course of business. The personal property and assets
reflected on the Balance Sheet or acquired after December 31, 1997, the rights
under the Company Agreements and the Intellectual Property (as hereinafter
defined) owned or used by the Company under valid license, collectively
include all assets necessary to provide, produce, sell and license the
services and products currently provided, produced, sold and licensed by the
Company and the Company Subsidiaries and to conduct the business of the
Company and the Company Subsidiaries as presently conducted or as currently
contemplated to be conducted.
5.13 Intellectual Property.
(a) Section 5.13(a) of the Company Disclosure Schedule contains an accurate
and complete schedule setting forth (x) all Trademarks, Patents, and
registered Copyrights (as each such term is hereinafter defined) which are
owned by the Company or any of the Company Subsidiaries and (y) all Licenses
(as hereinafter defined) to which the Company or any of the Company
Subsidiaries is a party (other than software licensed to the Company or to any
of the Company Subsidiaries under nonexclusive shrinkwrap or other standard
software licenses granted to end-user customers by third parties in the
ordinary course of business of such third parties' businesses ("Standard Third
Party Software")), such schedule indicating, as to each such License, whether
the Company or any of the Company Subsidiaries is the licensee or licensor,
whether it is royalty bearing, the territory, whether it is exclusive or
nonexclusive, and the nature of the licensed property.
(b) Except as set forth in Section 5.13(b) of the Company Disclosure
Schedule, neither the Company nor any of the Company Subsidiaries is under any
obligation to pay any royalty or other compensation to any third party or to
obtain any approval or consent for the use of any Intellectual Property used
in or necessary for its
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business as currently conducted or as currently proposed to be conducted. None
of the Intellectual Property owned by the Company or by any of the Company
Subsidiaries, or to the Company's best knowledge, licensed to the Company or
to any of the Company Subsidiaries, is subject to any outstanding judgment,
order, decree, stipulation, injunction or charge. There is no claim, charge,
complaint, action, suit, proceeding, hearing, investigation or demand pending
or, to the Company's knowledge, threatened, which challenges the legality,
validity, enforceability, or the Company's or any of the Company Subsidiaries'
use or ownership of any of the Intellectual Property owned by the Company or
any of the Company Subsidiaries or, to the Company's knowledge, licensed to
the Company or to any of the Company Subsidiaries. Neither the Company nor any
of its Subsidiaries has agreed to indemnify any person for or against any
interference, infringement, misappropriation, or other conflict with respect
to any Intellectual Property, except as may be contained within the Licenses
set forth in Section 5.13(a) of the Company Disclosure Schedule.
(c) No breach or default (or event which with notice or lapse of time or
both would result in an event of default) by the Company or any of the Company
Subsidiaries exists or has occurred within the last 12 months under any
License or other agreement pursuant to which the Company or any of the Company
Subsidiaries uses any Intellectual Property owned by a third party or has
granted any third party the right to use its Intellectual Property except
where such breach or default could not reasonably be expected to result in a
termination of a material License or other agreement or otherwise in a Company
Material Adverse Effect, and the consummation of the Transactions will not
violate or conflict with or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default), result in a
forfeiture under, or constitute a basis for termination of any such License or
other agreement.
(d) The Company and the Company Subsidiaries own all items of Intellectual
Property set forth as owned by them in Schedule 5.13(a) and own or have the
right to use all items of Intellectual Property necessary to provide, produce,
sell and license the services and products currently provided, produced, sold
and licensed by the Company and the Company Subsidiaries and to conduct the
business of the Company and the Company Subsidiaries as presently conducted or
as currently proposed to be conducted, free and clear of all Encumbrances,
other than the delegations set forth in the Licenses or other agreements under
which the Company has been granted the right to use Intellectual Property of
third parties.
(e) The conduct of the Company's and the Company Subsidiaries' businesses,
the Intellectual Property owned or used by the Company and the Company
Subsidiaries, and the products or services produced, sold or licensed by or
under development by the Company and the Company Subsidiaries do not, to the
Company's knowledge, infringe any Intellectual Property rights of any person
or give rise to any material obligations to any person as a result of co-
authorship, co-inventorship, or an express or implied contract for any use or
transfer. To the Company's knowledge, the Company and the Company Subsidiaries
have received no notice of any allegations that the Company's and the Company
Subsidiaries' use of any of the Intellectual Property infringes upon or is in
conflict with any Intellectual Property of any third party, and no basis
exists for any such allegations.
(f) Neither the Company nor any of the Company Subsidiaries has sent or
otherwise communicated to any other person any notice, charge, claim or
assertion of any present, impending or threatened infringement by any other
person of any Intellectual Property of the Company and the Company
Subsidiaries and, to the Company's knowledge, there are no such infringements.
(g) None of the Company's and the Company Subsidiaries' products or services
incorporate, are based upon or are derived or adapted from, any Intellectual
Property of any other person in violation of any statutory or other legal
obligation known to the Company or any agreement to which the Company or any
of the Company Subsidiaries is a party or by which it is bound.
(h) All of the Company's and the Company Subsidiaries' Patents, Trademarks
and Copyrights issued by, registered with or filed with the United States
Patent and Trademark Office or Register of Copyrights or the corresponding
offices of other countries have been so duly registered, filed in or issued,
as the case may be, have
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been properly maintained and renewed in accordance with all applicable
provisions of law and administrative regulations, and the Company and the
Company Subsidiaries, as the case may be, are the record owners thereof. The
Company and the Company Subsidiaries have reasonably maintained the
confidentiality of their trade secrets and other confidential Intellectual
Property, and there have been no acts or omissions by the Company or the
Company Subsidiaries, the result of which would be to compromise the rights of
the Company or the Company Subsidiaries to apply for or enforce appropriate
legal protection of such Intellectual Property, except where such acts or
omissions would not reasonably be expected to result in a Company Material
Adverse Effect.
(i) Since December 31, 1992, each of the Company's and the Company
Subsidiaries' employees, officers and agents, and each independent contractor
retained by the Company or any of the Company Subsidiaries to develop for or
otherwise work with or to perform functions providing access to, any
Intellectual Property of the Company has entered into a written agreement with
the Company or such Company Subsidiary (x) providing that all of the Company's
and the Company Subsidiaries' Intellectual Property is confidential and
proprietary to the Company or such Company Subsidiary, and (y) obligating the
disclosure and transfer to the Company or any such Company Subsidiary, in
consideration for no more than normal salary and continued employment or
consultant fees, as the case may be, of all inventions, developments and work
product which during the period of his or her employment or consultancy with
the Company or any of the Company Subsidiaries, as the case may be, such
employee, officer, agent, or independent contractor made or makes that related
or relate to any subject matter with which such employee's, officer's,
agent's, or independent contractor's work for the Company or any of the
Company Subsidiaries was concerned, or, in the case of employees, officers and
agents, are made during such person's period of employment (or contractual
relationship) or in connection therewith. To the Company's knowledge, no
present or former employees, officers, directors or independent contractors of
the Company or any of the Company Subsidiaries have asserted any claim, or
have any valid claim or valid right, to any of the Company's or any of the
Company Subsidiaries' Intellectual Property used in or necessary for the
conduct of the Company's or the Company Subsidiaries' business as now
conducted or as currently proposed to be conducted. To the Company's
knowledge, no employee, officer, agent or director of the Company or any of
the Company Subsidiaries is a party to or otherwise bound by any agreement
with or obligated to any other person (including, any former employer) which
conflicts with any obligation or commitment of such employee to the Company or
any of the Company Subsidiaries under any agreement to which he or she is a
party or otherwise.
(j) Section 5.13(j) of the Company Disclosure Schedule identifies each
person to whom the Company or any of the Company Subsidiaries has sold or
otherwise transferred any interest or rights to any Intellectual Property
other than transfers pursuant to the development or license agreements with
customers entered into in the ordinary course of business or from whom the
Company or any Company Subsidiary has purchased rights in any Intellectual
Property other than purchases pursuant to development or license agreements
with customers entered into in the ordinary course of business, and the date,
if applicable, of each such sale, transfer or purchase.
(k) The Company and each of the Company Subsidiaries have preserved and
reasonably maintained notes and records (including, without limitation,
drawings, flowcharts, prototypes and models) relating to its material knowhow,
inventions, processes, procedures, drawings, specifications, designs, plans,
written proposals, technical data, works of authorship and other proprietary
technical information of material value to the Company, sufficient to cause
such proprietary information to be readily identified, understood and
available.
(l) As used in this Agreement, "Intellectual Property" means all of the
following: (i) U.S. and foreign registered and unregistered trademarks, trade
dress, service marks, logos, trade names, corporate names and all
registrations and applications to register the same (the "Trademarks"); (ii)
issued U.S. and foreign patents and pending patent applications, patent
disclosures, and any and all divisions, continuations, continuations-in-part,
reissues, reexaminations, and extensions thereof, any counterparts claiming
priority therefrom, utility models, patents of importation/confirmation,
certificates of invention and like statutory rights (the "Patents"); (iii)
U.S. and foreign registered and unregistered copyrights (including, but not
limited to, those in computer software and databases), rights of publicity and
all registrations and applications to register the same (the "Copyrights");
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(iv) all categories of trade secrets as defined in the Uniform Trade Secrets
Act including, but not limited to, business information; (v) all licenses and
agreements pursuant to which the Company has acquired rights in or to any of
the Trademarks, Patents, Copyrights, or licenses and agreements pursuant to
which the Company has licensed or transferred the right to use any of the
foregoing, other than Standard Third Party Software which is commercially
available for licensing at a price of less than $5,000.00 per copy, not
including site licenses ("Licenses"); and (vi) all software know how and other
proprietary rights which are used or held for use in the Company's business as
now conducted or currently proposed to be conducted, other than Standard Third
Party Software which is commercially available for licensing at a price of
less than $5,000.00 per copy, not including site licenses.
5.14 Environmental Matters. The Company and the Company Subsidiaries are in
compliance with all Environmental Laws (as defined below), except for any
noncompliance that, either singly or in the aggregate, would not reasonably be
expected to have Company Material Adverse Effect. As used in this Agreement,
"Environmental Laws" shall mean all federal, state and local laws, rules,
regulations, ordinances and orders that purport to regulate the release of
hazardous substances or other materials into the environment, or impose
requirements relating to environmental protection. The Company has previously
made available to Parent copies of all documents concerning any environmental
or health and safety matter adversely affecting the Company and copies of
environmental audits or risk assessments, site assessments, documentation
regarding off-site disposal of Hazardous Materials (as defined below), spill
control plans and material correspondence with any federal, state or local
government, court, administrative agency, commission, or other governmental
authority, domestic or foreign, regarding the foregoing. As used in this
Agreement, "Hazardous Materials" means any "hazardous waste" as defined in
either the United States Resource Conservation and Recovery Act or regulations
adopted pursuant to said act, any "hazardous substances" or "hazardous
materials" as defined in the United States Comprehensive Environmental
Response, Compensation and Liability Act and, to the extent not included in
the foregoing, any medical waste, oil or fractions thereof, pollutants or
contaminants. There is no administrative or judicial enforcement proceeding
pending, or to the best knowledge of the Company threatened, against the
Company or any Company Subsidiary under any Environmental Law. Neither the
Company nor any Company Subsidiary or, to the best knowledge of the Company,
any legal predecessor of the Company or any Company Subsidiary, has received
any written notice that it is potentially responsible under any Environmental
Law for response costs or natural resource damages, as those terms are defined
under the Environmental Laws, at any location and neither the Company nor any
Company Subsidiary has transported or disposed of, or allowed or arranged for
any third party to transport or dispose of, any waste containing Hazardous
Materials at any location included on the National Priorities List, as defined
under the Comprehensive Environmental Response, Compensation, and Liability
Act, or any location proposed for inclusion on that list or at any location on
any analogous state list. The Company has no knowledge of any release on the
real property owned or leased by the Company or any Company Subsidiary or
predecessor entity of Hazardous Materials in a manner that could result in an
order to perform a response action or in material liability under the
Environmental Laws and, to the Company's knowledge, there is no hazardous
waste treatment, storage or disposal facility, underground storage tank,
landfill, surface impoundment, underground injection well, friable asbestos or
PCB's, as those terms are defined under the Environmental Laws, located at any
of the real property owned or leased by the Company or any Company Subsidiary
or predecessor entity or facilities utilized by the Company or the Company
Subsidiaries.
5.15 Employee Benefit Plans.
(a) Section 5.15 of the Company Disclosure Schedule sets forth a list of
every Company Benefit Plan (as hereinafter defined) that has been maintained
by the Company or an Affiliate (as hereinafter defined) at any time during the
six-year period ending on the date hereof.
(b) Each Company Benefit Plan which has been intended to qualify under
Section 401(a) of the Code has received a favorable determination or approval
letter from the IRS regarding its qualification under such section and neither
the Company nor any Affiliate knows, or should reasonably know, that any such
Company Benefit Plan has been maintained in a manner that would preclude
qualified status, from the effective date of such
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Company Benefit Plan through and including the date hereof (or, if earlier,
the date that all of such Company Benefit Plan's assets, if any, were
distributed), or otherwise fails to satisfy the relevant requirements to
provide tax-favored benefits under Code Section 401(a). Each asset held under
any such Company Benefit Plan may be liquidated or terminated without the
imposition of any redemption fee, surrender charge or comparable liability. No
partial termination (within the meaning of Section 411(d)(3) of the Code) has
occurred with respect to any Company Benefit Plan that has been intended to
qualify under Section 401(a) of the Code.
(c) Neither the Company nor any Affiliate knows of any failure of any party
to comply with any laws applicable with respect to the Company Benefit Plans.
With respect to any Company Benefit Plan, there has been no (i) "prohibited
transaction," as defined in Section 406 of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), or Code Section 4975, for which an
exemption is not available or (ii) material failure to comply with any
provision of ERISA, other applicable law, or any agreement, or (iii) non-
deductible contribution, which, in the case of any of (i), (ii) or (iii),
could reasonably be expected to subject the Company or any Affiliate to
liability (including, without limitation, through any obligation of
indemnification or contribution) for any damages, penalties, or taxes, or any
other material loss or expense. No litigation or governmental administrative
proceeding (or investigation) or other proceeding (other than those relating
to routine claims for benefits) is pending or, to the Company's knowledge,
threatened with respect to any such Company Benefit Plan. All payments and/or
contributions required to have been made (under the provisions of any
agreements or other governing documents or applicable law) with respect to all
Company Benefit Plans, for all periods prior to the date hereof, either have
been made or have been accrued (and all such unpaid but accrued amounts are
described on Section 5.15 of the Company Disclosure Schedule).
(d) No Company Benefit Plan is subject to Title IV of ERISA or is a
Multiemployer Plan. None of the Company Benefit Plans has ever provided health
care or any other non-pension benefits to any employees after their employment
is terminated (other than as required by part 6 subtitle B of title I of
ERISA) or has ever promised to provide such post-termination benefits.
(e) With respect to each Company Benefit Plan, complete and correct copies
of the following documents (if applicable to such Company Benefit Plan) have
previously been delivered to the Parent: (i) all documents embodying or
governing such Company Benefit Plan, and any funding medium for the Company
Benefit Plan (including, without limitation, trust agreements) as they may
have been amended to the date hereof; (ii) the most recent IRS determination
or approval letter with respect to such Company Benefit Plan under Code
Section 401(a), and any applications for determination or approval
subsequently filed with the IRS; (iii) the three most recently filed IRS Forms
5500, with all applicable schedules and accountants' opinions attached
thereto; (iv) the summary plan description for such Company Benefit Plan (or
other descriptions of such Company Benefit Plan provided to employees) and all
modifications thereto; (v) any insurance policy (including any fiduciary
liability insurance policy or fidelity bond) related to such Company Benefit
Plan; (vi) any registration statement or other filing made pursuant to any
federal or state securities law; and (vii) all correspondence to and from any
state or federal agency within the last six years with respect to such Company
Benefit Plan.
(f) Each Company Benefit Plan required to be listed on Section 5.15 of the
Company Disclosure Schedule may be amended, terminated, or otherwise modified
by the Company to the greatest extent permitted by applicable law, including
the elimination of any and all future benefit accruals under any Company
Benefit Plan and no employee communications or provision of any Company
Benefit Plan document has failed to effectively reserve the right of the
Company or the Affiliate to so amend, terminate or otherwise modify such
Company Benefit Plan.
(g) The Purchase Plan and each Stock Option Plan have been maintained in
compliance with all applicable requirements of federal and state securities
laws including (without limitation, if applicable) the requirements that the
offering of interests in such Stock Option Plan and Purchase Plan be
registered under the Securities Act and/or state "Blue Sky" laws.
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(h) Each Company Benefit Plan has complied with the applicable notification
and other applicable requirements of the Consolidated Omnibus Budget
Reconciliation Act of 1985, Health Insurance Portability and Accountability
Act of 1996, the Newborns' and Mothers' Health Protection Act of 1996, and the
Mental Health Parity Act of 1996.
(i) For purposes of this Section:
(i) "Company Benefit Plan" means (A) all employee benefit plans within
the meaning of ERISA Section 3(3) maintained by the Company or any
Affiliate, including, but not limited to, multiple employer welfare
arrangements (within the meaning of ERISA Section 3(40)), plans to which
more than one unaffiliated employer contributes and employee benefit plans
(such as foreign or excess benefit plans) which are not subject to ERISA;
(B) all stock option plans, stock purchase plans, bonus or incentive award
plans, severance pay policies or agreements, deferred compensation
agreements, supplemental income arrangements, vacation plans, and all other
employee benefit plans, agreements, and arrangements (including any
informal arrangements) not described in (A) above maintained by the Company
or any Affiliate, including without limitation, any arrangement intended to
comply with Code Section 120, 125, 127, 129 or 137; and (C) all plans or
arrangements providing compensation to employee and non-employee directors
maintained by the Company or any Affiliate. In the case of a Company
Benefit Plan funded through a trust described in Code Section 401(a), or
any other funding vehicle, each reference to such Company Benefit Plan
shall include a reference to such trust, organization or other vehicle;
(ii) An entity "maintains" a Company Benefit Plan if such entity
sponsors, contributes to, or provides benefits under or through such
Company Benefit Plan, or has any obligation (by agreement or under
applicable law) to contribute to or provide benefits under or through such
Company Benefit Plan, or if such Company Benefit Plan provides benefits to
or otherwise covers employees of such entity (or their spouses, dependents,
or beneficiaries);
(iii) An entity is an "Affiliate" of the Company for purposes of this
Section 5.15 if it would have ever been considered a single employer with
the Company under ERISA Section 4001(b) or part of the same "controlled
group" as the Company for purposes of ERISA Section 302(d)(8)(C); and
(iv) "Multiemployer Plan" means an employee pension or welfare benefit
plan to which more than one unaffiliated employer contributes and which is
maintained pursuant to one or more collective bargaining agreements.
5.16 Labor Matters. Neither the Company nor any Company Subsidiary is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor union organization.
There is no unfair labor practice or labor arbitration proceeding pending or,
to the knowledge of the Company, threatened against the Company or any of the
Company Subsidiaries relating to their business, except for any such
proceeding which could not reasonably be expected to have a Company Material
Adverse Effect. To the Company's knowledge there are no organizational efforts
with respect to the formation of a collective bargaining unit presently being
made or threatened involving employees of the Company or any of the Company
Subsidiaries.
5.17 No Brokers. Neither the Company nor any of the Company Subsidiaries has
entered into any contract, arrangement or understanding with any person or
firm which may result in the obligation of such entity or Parent or
Acquisition Sub to pay any finder's fees, brokerage or agent's commissions or
other like payments in connection with the negotiations leading to this
Agreement or consummation of the Transactions, except that the Company has
retained Updata Capital, Inc. ("Updata") and Parker/Hunter Incorporated
("Parker/Hunter") as its financial advisors in connection with the
Transactions. Other than the foregoing arrangements and Parent's arrangements
with Donaldson, Lufkin & Jenrette Securities Corporation, the Company is not
aware of any claim for payment of any finder's fees, brokerage or agent's
commissions or other like payments in connection with the negotiations leading
to this Agreement or consummation of the Transactions. The Company has
previously delivered to Parent and its counsel true and correct copies of the
agreements relating to the Company's engagement of Updata and Parker/Hunter.
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5.18 Opinion of Financial Advisors. The Company has received the opinions of
Updata and Parker/Hunter to the effect that, as of the date hereof, the Offer
Price and the Merger Consideration are fair to the holders of the Company
Common Stock from a financial point of view, and has delivered a true and
correct copy of such opinion to Parent.
5.19 Related Party Transactions. Set forth in Section 5.19 of the Company
Disclosure Schedule is a list of all arrangements, agreements and contracts
entered into by the Company or any of the Company Subsidiaries (which are or
will be in effect as of or after the date of this Agreement) with (i) any
consultant (excluding legal counsel, accountants and financial advisors) (x)
involving payments in excess of $10,000 or (y) which may not be terminated at
will by the Company or Company Subsidiary which is a party thereto or (ii) any
person who is an officer, director or affiliate of the Company or any of the
Company Subsidiaries, any relative of any of the foregoing or any entity of
which any of the foregoing is an affiliate. All such documents are listed in
Section 5.19 of the Company Disclosure Schedule and the copies of such
documents, which have previously been provided or made available to Parent and
its counsel, are true and correct copies.
5.20 Potential Conflicts of Interest. Except as set forth in Schedule 5.20,
no officer of the Company or any of the Company Subsidiaries owns, directly or
indirectly, any interest in (excepting not more than 1% stock holdings for
investment purposes in securities of publicly held and traded companies) or is
an officer, director, employee or consultant of any person which is a
competitor, lessor, lessee, customer or supplier of the Company or any of the
Company Subsidiaries; and no officer or director of the Company or any of the
Company Subsidiaries (i) owns, directly or indirectly, in whole or in part,
any Intellectual Property which the Company or any of the Company Subsidiaries
is using or the use of which is necessary for the business of the Company or
any of the Company Subsidiaries, (ii) to the Company's knowledge, has any
claim, charge, action or cause of action against the Company or any of the
Company Subsidiaries, except for claims for accrued vacation pay, accrued
benefits under the Company Benefit Plans and similar matters and agreements
existing on the date hereof, (iii) has made, on behalf of the Company or any
of the Company Subsidiaries, any payment or commitment to pay any material
commission, fee or other amount to, or to purchase or obtain or otherwise
contract to purchase or obtain any goods or services material to the Company
from, any other person of which any officer or director of the Company, or, to
the Company's knowledge, a relative of any of the foregoing, is a partner or
stockholder (except stock holdings solely for investment purposes in
securities of publicly held and traded companies), (iv) owes any money to the
Company or any of the Company Subsidiaries, or (v) is owed any money by the
Company or any of the Company Subsidiaries.
5.21 Contracts and Commitments. Section 5.21 of the Company Disclosure
Schedule sets forth (i) all notes, debentures, bonds and other evidence of
indebtedness which are secured or collateralized by mortgages, deeds of trust
or other security interests in the Company Properties or personal property of
the Company or any of the Company Subsidiaries, or by any direct or indirect
ownership interest in the Company or any of the Company Subsidiaries, (ii)
each Commitment entered into by the Company or any of the Company Subsidiaries
which may result in total payments by or liability of the Company or any
Company Subsidiary in excess of $25,000 individually and $100,000 in the
aggregate for a series of Commitments to the same third party, (iii) all
leases and subleases entered into by the Company or any of the Company
Subsidiaries as lessor, sublessor, lessee or sublessee which may result in
total payments or liability in excess of $25,000 individually and $100,000 in
the aggregate for a series of leases or subleases with the same third party,
(iv) all material contracts between (A) the Company and US West, Inc. and its
affiliated entities and (B) the Company and Bell South Corporation and its
affiliated entities and contracts performed on behalf of Bell South and its
affiliated entities by Andersen Consulting LLP (the "Customer Contracts") and
(v) all other Company Agreements which individually would reasonably be
expected to result in payments to the Company in excess of $25,000
individually and $100,000 in the aggregate for a series of Company Agreements
with the same third party, or otherwise materially affect the Company's
present operations. The foregoing are listed in Section 5.21 of the Company
Disclosure Schedule and the copies of such documents, which have previously
been provided to Parent and its counsel, are true and correct. Each of (i) the
Customer Contracts and (ii) the other documents described in said Section 5.21
of the Company Disclosure Schedule (which term specifically excludes the
Customer Contracts) is legally valid and
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binding and in full force and effect, except in the case of the Material
Contracts where the failure to be legally valid and binding and in full force
and effect would not have a Company Material Adverse Effect, and there are no
material defaults thereunder by the Company, or to the Company's knowledge by
any other party thereto, except in the case of the Material Contracts those
defaults that could not reasonably be expected to have a Company Material
Adverse Effect. All joint venture agreements to which the Company or any of
the Company Subsidiaries is a party are set forth in Section 5.21 of the
Company Disclosure Schedule and neither the Company nor any of the Company
Subsidiaries is in default with respect to any obligations thereunder, which
individually or in the aggregate, are material.
5.22 Year 2000. Except as set forth in Section 5.22 of the Company
Disclosure Schedule, the Company has identified and analyzed both internally
developed and acquired software which is material to its operations or which
has been or is being provided or delivered to customers and utilizes date
embedded codes that may experience operations problems when the Year 2000 is
reached and, where problems have arisen, has made, or has coordinated with
customers, suppliers, financial institutions and others with which it has
business relationships that are material to the Company's business to make,
all necessary modifications to the identified software to make such software
Year 2000 compliant. Except as disclosed in the Company SEC Reports, the
Company and the Company Subsidiaries have not incurred, and do not expect to
incur, significant operating expenses or been required, or expect to be
required, to invest heavily in computer systems improvements to be Year 2000
compliant, and business operations have not been disrupted and, to the
Company's knowledge, its customers have not experienced any material
interruption of service as a result of making such software Year 2000
compliant. Section 5.22 of the Company Disclosure Schedule identifies all
outstanding Year 2000 compliance problems known to the Company relating to its
software (including, without limitation, software provided or delivered to
customers), with a correct and materially complete statement of the status of
the Company's efforts to correct such problems. "Year 2000 compliant" means,
with respect to the Company's information technology, the information
technology is designed to be used prior to, during and after the calendar Year
2000 A.D., and the information technology used during each such time period
will accurately receive, provide and process date/time data (including,
without limitation, calculating, comparing and sequencing) from, into and
between the 20th and 21st centuries, including the years 1999 and 2000, and
leap-year calculations and will not materially malfunction, cease to function,
or provide invalid or incorrect results as a result of date/time data, to the
extent that other information technology, used in combination with the
information technology being acquired, properly exchanges date/time data with
it. "Information technology," means computer software, computer firmware,
computer hardware (whether general or specific purpose), and other similar or
related items of automated, computerized, or software system(s) that are used
or relied on by the Company and the Company Subsidiaries in the conduct of its
business.
5.23 Vote Required for Merger. The affirmative vote of the holders of a
majority of the outstanding Shares is the only vote of the holders of any
class or series of the Company's capital stock necessary to approve this
Agreement and the Transactions in connection with the consummation of the
Merger.
5.24 Suppliers and Customers. Except as set forth on Schedule 5.24, since
December 31, 1997, no material licensor, vendor, supplier, licensee or
customer of the Company or any of the Company Subsidiaries has canceled or
otherwise materially and adversely modified its relationship with the Company
or any of the Company Subsidiaries and, to the Company's knowledge, (i) no
such person has expressed any intention to do so, and (ii) the consummation of
the Transactions will not adversely affect any of such relationships.
5.25 Insurance. The Company and the Company Subsidiaries are covered by
insurance in scope and amount customary and reasonable for the businesses in
which they are engaged. Except as disclosed on Section 5.25 of the Disclosure
Schedule, each insurance policy to which the Company or any of the Company
Subsidiaries is a party is in full force and effect and will not require any
consent as a result of the consummation of the transactions contemplated by
this Agreement. Neither the Company nor any of the Company Subsidiaries is in
material breach or default (including with respect to the payment of premiums
or the giving of notices) under any insurance policy to which it is a party,
and no event has occurred which, with notice or the lapse of
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time, would constitute such a material breach or default by the Company or any
of the Company Subsidiaries or would permit termination, modification or
acceleration, under such policies; and the Company has not received any notice
from the insurer disclaiming coverage or reserving rights with respect to any
material claim or any such policy in general.
5.26 Disclosure. The representations, warranties and statements made by the
Company in this Agreement and in the Company Disclosure Schedule and in the
certificates and the Company Disclosure Schedule delivered pursuant hereto do
not contain any untrue statement of a material fact, and, when taken together
with each other and the Company SEC Reports, do not omit to state any material
fact necessary to make such representations, warranties and statements, in
light of the circumstances under which they are made, not misleading.
5.27 Definition of the Company's Knowledge. As used in this Agreement, the
phrase "to the knowledge of the Company" or any similar phrase means, after
due inquiry of the Company's employees, advisors and representatives and
reasonable investigation of the Company's books and records, the actual
knowledge of those individuals identified in Section 5.27 of the Company
Disclosure Schedule.
ARTICLE VI
Conduct of Business Pending the Merger
6.1 Conduct of Business by the Company. During the period from the date of
this Agreement to the Effective Time, except as otherwise contemplated by this
Agreement, the Company shall, and shall cause each of the Company Subsidiaries
to, carry on their respective businesses in the usual, regular and ordinary
course, consistent with past practice, and use their best efforts to preserve
intact their present business organizations, keep available the services of
their present advisors, managers, officers and employees and preserve their
relationships with customers, suppliers, licensors and others having business
dealings with them and continue existing contracts as in effect on the date
hereof (for the term provided in such contracts). Without limiting the
generality of the foregoing, neither the Company nor any of the Company
Subsidiaries will (except as expressly permitted by this Agreement or as
contemplated by the Offer or the Transactions contemplated hereby or to the
extent that Parent shall otherwise consent in writing):
(a) (i) declare, set aside or pay any dividend or other distribution
(whether in cash, stock, or property or any combination thereof) in respect of
any of its capital stock, (ii) split, combine or reclassify any of its capital
stock or (iii) repurchase, redeem or otherwise acquire any of its securities,
except, in the case of clause (iii), for the acquisition of Shares from
holders of Options in full or partial payment of the exercise price payable by
such holders upon exercise of Options outstanding on the date of this
Agreement;
(b) authorize for issuance, issue, sell, deliver or agree or commit to
issue, sell or deliver (whether through the issuance or granting of options,
warrants, commitments, subscriptions, rights to purchase or otherwise) any
stock of any class or any other securities (including indebtedness having the
right to vote) or equity equivalents (including, without limitation, stock
appreciation rights) (other than the issuance of Shares upon the exercise of
Options outstanding on the date of this Agreement in accordance with their
present terms);
(c) acquire, sell, lease, encumber, transfer or dispose of any assets
outside the ordinary course of business which are material to the Company or
any of the Company Subsidiaries (whether by asset acquisition, stock
acquisition or otherwise), except pursuant to obligations in effect on the
date hereof which have been disclosed in writing to Parent and Acquisition Sub
prior to the date hereof and set forth on Schedule 6.1(c) of the Company
Disclosure Schedule;
(d) (i) incur any amount of indebtedness for borrowed money, guarantee any
indebtedness, issue or sell debt securities or warrants or rights to acquire
any debt securities, guarantee (or become liable for) any debt of others, make
any loans, advances or capital contributions, mortgage, pledge or otherwise
encumber any material
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assets, create or suffer any material lien thereupon other than in the
ordinary course of business consistent with prior practice or (ii) incur any
short-term indebtedness for borrowed money, except, in each such case,
pursuant to credit facilities in existence on the date hereof which have been
disclosed in writing to Parent and Acquisition Sub prior to the date hereof
and set forth on Schedule 6.1(d) of the Company Disclosure Schedule and as
necessary to carry on the Company's business in the usual, regular and
ordinary course, consistent with past practice;
(e) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than any payment, discharge or satisfaction (i) in the ordinary course of
business consistent with past practice, or (ii) in connection with the
Transactions;
(f) change any of the accounting principles or practices used by it (except
as required by generally accepted accounting principles, in which case written
notice shall be provided to Parent and Acquisition Sub prior to any such
change);
(g) except as required by law, (i) enter into, adopt, amend or terminate any
Company Benefit Plan, (ii) enter into, adopt, amend or terminate any
agreement, arrangement, plan or policy between the Company or any of the
Company Subsidiaries and one or more of their directors or officers, or (iii)
except for normal increases in the ordinary course of business consistent with
past practice, increase in any manner the compensation or fringe benefits of
any director, officer or employee or pay any benefit not required by any
Company Benefit Plan or arrangement as in effect as of the date hereof;
(h) adopt any amendments to the Company Certificate or the Company Bylaws,
except as expressly provided by the terms of this Agreement;
(i) enter into a new agreement or amend any existing agreement which could
reasonably be expected to have a Company Material Adverse Effect;
(j) adopt a plan of complete or partial liquidation or resolutions providing
for or authorizing such a liquidation or a dissolution, merger, consolidation,
restructuring, recapitalization or reorganization;
(k) enter into or amend, extend or otherwise alter any collective bargaining
agreement;
(l) settle or compromise any litigation (whether or not commenced prior to
the date of this Agreement) other than settlements or compromises or
litigation where the amount paid (after giving effect to insurance proceeds
actually received) in settlement or compromise does not exceed $10,000;
(m) grant any new or modified severance or termination arrangement or
increase or accelerate any benefits payable under its severance or termination
pay policies in effect on the date hereof, except as required under the
present terms of any employment agreement or severance agreement in effect on
the date of this Agreement;
(n) enter into any transaction, contract or arrangement with any affiliate,
except as required under the present terms of any contract or arrangement with
any such affiliate in effect on the date of this Agreement;
(o) enter into any other material agreement outside the ordinary course of
business;
(p) enter into an agreement to take any of the foregoing actions; or
(q) authorize any of, or commit or agree to take any of, or take any
corporate action in furtherance of, any of the foregoing actions.
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ARTICLE VII
Additional Agreements
7.1 Other Filings. As promptly as practicable, the Company, Parent and
Acquisition Sub each shall properly prepare and file any other filings
required under the Exchange Act or any other federal or state law relating to
the Merger and the Transactions (including filings, if any, required under the
HSR Act) (collectively, "Other Filings"). Each of Parent and the Company shall
promptly notify the other of the receipt of any comments on, or any request
for amendments or supplements to, any Other Filings by the Commission or any
other Governmental Entity or official, and each of the Company and Parent
shall supply the other with copies of all correspondence between it and each
of its Subsidiaries and representatives, on the one hand, and the Commission
or the members of its staff or any other appropriate governmental official, on
the other hand, with respect to any of the Other Filings. The Company, Parent
and Acquisition Sub each shall use its respective best efforts to obtain and
furnish the information required to be included in any Other Filings.
7.2 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use its best efforts to take,
or cause to be taken, all actions 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 and to cooperate
with each other in connection with the foregoing, including the taking of such
actions as are necessary to obtain any necessary consents, approvals, orders,
exemptions and authorizations by or from any public or private third party,
including without limitation any that are required to be obtained under any
federal, state or local law or regulation or any contract, agreement or
instrument to which the Company or any Company Subsidiary is a party or by
which any of their respective properties or assets are bound, to defend all
lawsuits or other legal proceedings challenging this Agreement or the
consummation of the Transactions, to cause to be lifted or rescinded any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the Transactions, and to effect all necessary
registrations and Other Filings, including, but not limited to, filings under
the HSR Act, if any, and submissions of information requested by governmental
authorities. For purposes of the foregoing sentence, the obligation of the
Company, Parent and Acquisition Sub to use their "best efforts" to obtain
waivers, consents and approvals to loan agreements, leases and other contracts
shall not include any obligation to agree to an adverse modification of the
terms of such documents or to prepay or incur additional obligations to such
other parties.
7.3 Fees and Expenses. Except as set forth in Section 9.2 hereof, whether or
not the Merger is consummated, all fees, costs and expenses incurred in
connection with this Agreement and the Transactions shall be paid by the party
incurring such costs or expenses. Notwithstanding the foregoing, upon
consummation of the Merger, Parent may be reimbursed by the Company for all
costs and expenses incurred by Parent and Acquisition Sub in connection with
this Agreement and the Transactions.
7.4 No Solicitations.
(a) Except as explicitly permitted hereunder, the Company shall not, and
shall not authorize or permit any of its officers, directors or employees or
any investment banker, financial advisor, attorney, accountant or other
representative retained by it to, directly or indirectly, (i) solicit,
initiate or encourage (including by way of furnishing non-public information),
or take any other action to facilitate, any inquiries or the making of any
proposal that constitutes, or may reasonably be expected to lead to, an
Acquisition Proposal (as hereinafter defined), or (ii) participate in any
discussions or negotiations regarding an Acquisition Proposal; provided,
however, that if, at any time prior to the approval of this Agreement by the
holders of Company Common Stock, the Company Board determines in good faith,
based on the advice of independent legal counsel, that failure to do so would
be reasonably likely to constitute a breach of its fiduciary duties to the
Company's stockholders under applicable law, the Company, in response to a
bona fide written Acquisition Proposal that (A) was unsolicited or that did
not otherwise result from a breach of this Section 7.4, and (B) is reasonably
likely to lead to a Superior Proposal (as hereinafter defined), may (x)
furnish non-public information with respect to the Company to the person who
made such Acquisition Proposal pursuant to a customary confidentiality
agreement
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containing terms no more favorable to such person than those contained in the
Confidentiality Agreement (as hereinafter defined) and (y) participate in
negotiations regarding such Acquisition Proposal. Without limiting the
foregoing, it is understood that any violation of the restrictions set forth
in the preceding sentence by any director or officer of the Company or any of
the Company Subsidiaries or any investment banker, financial advisor,
attorney, accountant or other representative of the Company or any of the
Company Subsidiaries, shall be deemed to be a breach of this Section 7.4 by
the Company.
(b) The Company Board shall not (1) withdraw or modify, or propose to
withdraw or modify, in a manner adverse to Parent or Acquisition Sub, its
approval or recommendation of this Agreement, the Offer or the Merger, (2)
approve or recommend an Acquisition Proposal to its stockholders or (3) cause
the Company to enter into any letter of intent, agreement in principle,
acquisition agreement or other agreement with respect to an Acquisition
Proposal (except for the confidentiality agreement referred to in clause (x)
of Section 7.4(a) hereof) unless there is a Superior Proposal outstanding and
the Company Board shall have (A) determined in good faith, based on the advice
of independent legal counsel, that failure to do so would be reasonably likely
to constitute a breach of its fiduciary duties to the Company's stockholders
under applicable law, and (B) terminated this Agreement pursuant to Section
9.1(c)(ii).
(c) Nothing contained in this Section 7.4 shall prohibit the Company from at
any time taking and disclosing to its stockholders a position contemplated by
Rule 14e-2 promulgated under the Exchange Act; provided, however, that neither
the Company nor the Company Board shall, except as permitted by Section
7.4(b), propose to approve or recommend an Acquisition Proposal.
(d) The Company shall promptly (but in any event within one day) advise
Parent orally and in writing of any Acquisition Proposal (including amendments
or proposed amendments) or any inquiry regarding the making of an Acquisition
Proposal including any request for information, the material terms and
conditions of such request, Acquisition Proposal or inquiry and the identity
of the person making such request, Acquisition Proposal or inquiry. The
Company shall promptly (but in any event within one day) keep Parent fully
informed of the status and details (including amendments or proposed
amendments) of any such request, Acquisition Proposal or inquiry.
(e) As used in this Agreement, the term "Acquisition Proposal" shall mean
any proposed or actual (i) merger, consolidation or similar transaction
involving the Company, (ii) sale, lease or other disposition, directly or
indirectly, by merger, consolidation, share exchange or otherwise, of any
assets of the Company or the Company Subsidiaries representing 15% or more of
the consolidated assets of the Company and the Company Subsidiaries, (iii)
issue, sale or other disposition of (including by way of merger,
consolidation, share exchange or any similar transaction) securities (or
options, rights or warrants to purchase, or securities convertible into, such
securities) representing 15% or more of the votes associated with the
outstanding securities of the Company, (iv) transaction in which any person
shall acquire beneficial ownership (as such term is defined in Rule 13d-3
under the Exchange Act), or the right to acquire beneficial ownership, or any
"group" (as such term is defined under the Exchange Act) shall have been
formed which beneficially owns or has the right to acquire beneficial
ownership of, 15% or more of the outstanding Shares, (v) recapitalization,
restructuring, liquidation, dissolution, or other similar type of transaction
with respect to the Company or (vi) transaction which is similar in form,
substance or purpose to any of the foregoing transactions; provided, however,
that the term "Acquisition Proposal" shall not include the Offer, the Merger
and the Transactions.
(f) As used in this Agreement, a "Superior Proposal" means any bona fide
Acquisition Proposal, which is not subject to the receipt of any necessary
financing and which the Company Board determines in its good faith judgment,
based on the advice from an independent financial advisor, is superior to the
Company's stockholders from a financial point of view to the Offer and the
Merger.
7.5 Officers' and Directors' Indemnification. Parent agrees that all rights
to indemnification existing in favor of, and all limitations on the personal
liability of, the directors, officers, employees and agents of the Company and
the Company Subsidiaries provided for in the Company Certificate or Company
Bylaws as in
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effect as of the date hereof with respect to matters occurring prior to the
Effective Time, and including the Offer and the Merger, shall continue in full
force and effect for a period of not less then six (6) years from the
Effective Time; provided, however, that all rights to indemnification in
respect of any claims (a "Claim") asserted or made within such period shall
continue until the disposition of such Claim. At or prior to the Effective
Time, Parent shall purchase directors' and officers' liability insurance
coverage for the Company's directors and officers in a form reasonably
acceptable to the Company which shall provide such directors and officers with
coverage for six (6) years following the Effective Time of not less than the
existing coverage under, and have other terms not materially less favorable to
the insured persons than, the directors' and officers' liability insurance
coverage presently maintained by the Company; provided, however, than in any
event the total aggregate cost of such policy shall not exceed $250,000 (the
"Maximum Amount"); and provided, further, that if such coverage cannot be
obtained for such cost, the Company will maintain, for such six-year period,
the maximum amount of comparable coverage as shall be available for the
Maximum Amount on such terms.
7.6 Access to Information; Confidentiality. From the date hereof until the
Effective Time, the Company shall, and shall cause each of the Company
Subsidiaries and each of the Company's and Company Subsidiaries' officers,
employees and agents to, afford to Parent and to the officers, employees and
agents of Parent complete access at all reasonable times to such officers,
employees, agents, properties, books, records and contracts, and shall furnish
Parent such financial, operating and other data and information as Parent may
reasonably request. Prior to the Effective Time, Parent and Acquisition Sub
shall hold in confidence all such information on the terms and subject to the
conditions contained in that certain confidentiality agreement between
Acquisition Sub and the Company dated August 27, 1998 (the "Confidentiality
Agreement"). The Company hereby waives the provisions of the Confidentiality
Agreement as and to the extent necessary to permit the making and consummation
of the Transactions. Upon the Merger, such Confidentiality Agreement shall
terminate.
7.7 Financial and Other Statements. Notwithstanding anything contained in
Section 7.6, during the term of this Agreement, the Company shall also provide
to Parent the following documents and information:
(a) As soon as reasonably available, but in no event more than 45 days after
the end of each fiscal quarter ending after the date of this Agreement, the
Company will deliver to Parent its Quarterly Report on Form 10-Q as filed
under the Exchange Act. As soon as reasonably available, but in no event more
than 90 days after the end of each fiscal year ending after the date of this
Agreement, the Company will deliver to Parent its Annual Report on Form 10-K,
as filed under the Exchange Act. The Company will also deliver to Parent,
contemporaneously with its being filed with the Commission, a copy of each
Current Report on Form 8-K.
(b) Promptly upon receipt thereof, the Company will furnish to Parent copies
of all internal control reports submitted to the Company or any Company
Subsidiary by independent accountants in connection with each annual, interim
or special audit of the books of the Company or any such Company Subsidiary
made by such accountants.
(c) As soon as practicable, the Company will furnish to Parent copies of all
such financial statements and reports as it or any Company Subsidiary shall
send to its stockholders, the Commission or any other regulatory authority, to
the extent any such reports furnished to any such regulatory authority are not
confidential and except as legally prohibited thereby.
(d) As soon as practicable, the Company will furnish to Parent (i) monthly
profit and loss statements, (ii) a listing of accounts receivable, including
aging, as of the end of each month, (iii) inventory analysis as of the end of
each month, (iv) a listing of accounts payable, including aging, as of the end
of each month, and (v) such additional financial data as Parent may reasonably
request.
7.8 Right to Board Materials. From the date hereof until the earlier to
occur of the consummation of the Offer or the termination of this Agreement in
accordance with its terms, the Company shall provide Parent and Acquisition
Sub copies of all notices, minutes, consents and other written materials that
it provides to its directors; provided, however, that Parent and Acquisition
Sub shall hold in confidence all information so
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provided; provided further, however, that the Company shall not be obligated
to provide any such materials concerning the transactions contemplated hereby
or by any Acquisition Proposal (other than as contemplated by Section 7.4
hereof).
7.9 Advice of Change. Each party will promptly advise the other of (i) any
change or the occurrence or non-occurrence of any event that has had or could
reasonably be expected to have a Company Material Adverse Effect or a Parent
Material Adverse Effect, as the case may be, or which could be reasonably
likely to cause any representation or warranty contained in this Agreement to
be untrue or inaccurate under circumstances in which such untruth or
inaccuracy is reasonably likely to result in the condition to the Offer set
forth in paragraph (c) of Annex A hereto to fail to be satisfied, and (ii) any
failure of such party to comply with or satisfy any covenant, condition or
agreement to be complied with or satisfied by it under this Agreement under
circumstances in which such failure is reasonably likely to result in the
condition to the Offer set forth in paragraph (e) of Annex A hereto to fail to
be satisfied.
7.10 Public Announcements. The Company and Parent shall consult with each
other before issuing any press release or otherwise making any public
statements with respect to this Agreement or any of the Transactions and shall
not issue any such press release or make any such public statement without the
prior consent of the other party, which consent shall not be unreasonably
withheld; provided, however, that a party may, without the prior consent of
the other party, issue such press release or make such public statement as may
be required by law or the applicable rules of any stock exchange or of Nasdaq
if it has used its best efforts to consult with the other party and to obtain
such party's consent but has been unable to do so in a timely manner. In this
regard, the parties shall make a joint public announcement of the Offer and
the Transactions contemplated thereby no later than (i) the close of trading
on the Nasdaq Stock Market on the day this Agreement is signed, if such
signing occur during a business day or (ii) the opening of trading on the
Nasdaq Stock Market on the business day following the date on which this
Agreement is signed, if such signing does not occur during a business day.
7.11 Employee Benefit Arrangements
(a) Except as may otherwise be agreed to by the parties thereto, after the
Closing Parent shall cause Acquisition Sub or the Company to honor all
obligations under the existing terms of the employment and severance
agreements to which the Company or any Company Subsidiary is presently a
party. For a period of up to twelve months following the Effective Time as
determined by Parent in its sole discretion (the "Transition Period"),
employees of the Company will continue to participate in the employee benefit
plans of the Company on substantially similar terms to those currently in
effect. Following the Transition Period, the Company's employees will be
permitted to participate in the employees benefit plans of Parent as in effect
on the date thereof on terms substantially similar to those provided to
employees of Parent. Nothing contained in this Section 7.11 shall be construed
to grant any right of continued employment to any present employee of the
Company or any of the Company Subsidiaries.
(b) If any employee of the Company or any of the Company Subsidiaries
becomes a participant in any employee benefit plan, practice or policy of
Parent, any of its affiliates or the Surviving Corporation, such employee
shall be given credit under such plan for all service prior to the Effective
Time with the Company and the Company Subsidiaries and prior to the time such
employee becomes such a participant, for purpose of eligibility (including,
without limitation, waiting periods) and vesting but not for any other
purposes for which such service is either taken into account or recognized
(including, without limitation, benefit accrual); provided, however, that such
employees will be given credit for such service for purposes of any vacation
policy. In addition, if any employees of the Company or any of the Company
Subsidiaries employed as of the Closing Date become covered by a medical plan
of Parent, any of its affiliates or the Surviving Corporation, such medical
plan shall not impose any exclusion on coverage for preexisting medical
conditions with respect to these employees.
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ARTICLE VIII
Conditions to the Merger
8.1 Conditions to the Obligations of Each Party to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the fulfillment or waiver, where permissible, at or prior to the Closing Date,
of each of the following conditions:
(a) Stockholder Approval. If required by applicable law, this Agreement and
the Transactions, including the Merger, shall have been approved and adopted
by the affirmative vote of the stockholders of the Company to the extent
required by the DGCL and the Company Certificate.
(b) Hart-Scott-Rodino Act. Any waiting period (and any extension thereof)
applicable to the consummation of the Merger under the HSR Act shall have
expired or been terminated.
(c) Other Regulatory Approvals. All necessary approvals, authorizations and
consents of any governmental or regulatory entity required to consummate the
Merger shall have been obtained and remain in full force and effect, and all
waiting periods relating to such approvals, authorizations and consents shall
have expired or been terminated.
(d) No Injunctions, Orders or Restraints; Illegality. No preliminary or
permanent injunction or other order, decree or ruling issued by a court of
competent jurisdiction or by a governmental, regulatory or administrative
agency or commission nor any statute, rule, regulation or executive order
promulgated or enacted by any governmental authority shall be in effect which
would (i) make the consummation of the Merger illegal, or (ii) otherwise
restrict, prevent or prohibit the consummation of any of the Transactions,
including the Merger.
(e) Purchase of Shares in Offer. Parent, Acquisition Sub or their affiliates
shall have purchased Shares pursuant to the Offer.
ARTICLE IX
Termination, Amendment and Waiver
9.1 Termination. This Agreement may be terminated at any time prior to the
Effective Time, whether before or after stockholder approval thereof:
(a) by the mutual written consent of the Parent or Acquisition Sub and the
Company.
(b) by either of the Company or the Parent or the Acquisition Sub:
(i) if the Offer is terminated, withdrawn or expires pursuant to its
terms without any Shares having been purchased thereunder; provided,
however, that neither Parent, Acquisition Sub nor the Company may terminate
this Agreement pursuant to this Section 9.1 (b) (i) if such party has
materially breached this Agreement; or
(ii) if any Governmental Entity shall have issued an order, decree or
ruling or taken any other action (which order, decree, ruling or other
action the parties hereto shall use their best efforts to lift), which
permanently restrains, enjoins or otherwise prohibits the acceptance for
payment of, or payment for, Shares pursuant to the Offer or the Merger.
(c) by the Company:
(i) if (x) Parent or Acquisition Sub shall have failed to commence the
Offer on or prior to five business days following the date of the initial
public announcement of the Offer; or (y) Parent or Acquisition Sub shall
not have purchased Shares pursuant to the Offer by December 31, 1998; or
(z) the Offer shall have been terminated without Parent or Acquisition Sub
having purchased any Shares in the Offer.
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(ii) in connection with entering into a definitive agreement to effect a
Superior Proposal in accordance with Section 7.4(b)(3) hereof; provided,
however, that the Company shall provide Parent with written notice not
later than 12:00 noon two business days in advance of any date that it
intends to exercise its termination rights and enter into such agreement
(which notice shall specify proposed terms of such agreement and the
identity of the persons making such proposal); and provided further,
however, that prior to any such termination pursuant to this Section
9.1(c)(ii) the Company shall have made all payments to Parent required by
Section 9.2(b); or
(iii) if Parent or Acquisition Sub shall have breached in any material
respect any of their respective representations, warranties, covenants or
other agreements contained in this Agreement, which breach cannot be or has
not been cured within 15 days after the giving of written notice to Parent
or Acquisition Sub except, in any case, for such breaches which are not
reasonably likely to affect adversely Parent's or Acquisition Sub's ability
to consummate the Offer or the Merger, provided, however, that no cure
period shall be applicable under any circumstances to the matters set forth
in Section 9.1(c)(i).
(d) by the Parent or Acquisition Sub:
(i) if, prior to the commencement of the Offer, due to an occurrence that
if occurring after the commencement of the Offer would result in a failure
to satisfy any of the conditions set forth in Annex A hereto under
circumstances in which such failure could not reasonably be expected to be
cured within 15 days after the giving of written notice by Parent or
Acquisition Sub, Parent or Acquisition Sub shall have failed to commence
the Offer on or prior to five business days following the date of the
initial public announcement of the Offer;
(ii) if, prior to the purchase of Shares pursuant to the Offer, the
Company shall have breached any representation, warranty, covenant or other
agreement contained in this Agreement which breach (A) would give rise to
the failure of a condition set forth in paragraph (c) or (e) of Annex A
hereto, and (B) cannot be or has not been cured within 15 days after the
giving of written notice to the Company; or
(iii) if, prior to the purchase of Shares pursuant to the Offer, Parent
or Acquisition Sub is entitled to terminate the Offer as a result of (x)
the occurrence of any event set forth in Annex A hereto, or (y) in the case
of the conditions set forth in paragraph (c) or (e) of Annex A hereto, the
failure of any such condition under circumstances in which such failure
could not reasonably be expected to be cured within 15 days after the
giving of written notice to the Company.
9.2 Effect of Termination.
(a) In the event of the termination of this Agreement pursuant to Section
9.1 hereof, this Agreement shall forthwith become null and void and have no
effect, without any liability on the part of any party hereto or its
affiliates, trustees, directors, officers or stockholders and all rights and
obligations of any party hereto shall cease except for the agreements
contained in Sections 7.3, 9 and 10; provided, however, that nothing contained
in this Section 9.2 shall relieve any party from liability for any fraud or
willful breach of this Agreement.
(b) If (i) Parent and Acquisition Sub terminate this Agreement pursuant to
Section 9.1(d)(ii) by reason of a willful breach by the Company or (ii) the
Company terminates this Agreement pursuant to Section 9.1(c)(ii), then the
Company shall pay to Parent an amount in cash equal to the sum of (x)
$2,000,000 (the "Termination Fee"), plus (y) Parent's out-of-pocket costs and
expenses in connection with this Agreement and the Transactions, including
without limitation, fees and disbursements of its outside legal counsel,
investment bankers, accountants and other consultants retained by or on behalf
of Parent together with the other out-of-pocket costs incurred by it in
connection with analyzing, structuring, participating in the negotiations of
the terms and conditions, arranging financing, conducting due diligence and
other activities related to the Offer and the Merger and the Transactions,
including, without limitation, commitment fees paid to potential lenders
(collectively, the "Parent Expenses"); provided, however, that the aggregate
amount of all Parent Expenses to be reimbursed by the Company shall not exceed
$1,000,000.
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(c) Any payment required by this Section 9.2 shall be payable by the Company
to Parent by wire transfer of immediately available funds to an account
designated by Parent and, in the case of any termination by Parent or
Acquisition Sub contemplated by Section 9.2(b)(i), shall be payable within two
days after demand therefor is made by Parent. The parties acknowledge and
agree that the provisions of this Section 9.2 are included herein in order to
induce Parent and Acquisition Sub to enter into this Agreement and to
reimburse Parent and Acquisition Sub for incurring the costs and expenses
related to entering into this Agreement and consummating the Transactions. In
the event that the Company shall fail to pay the Termination Fee and Parent
Expenses when due, the terms "Termination Fee" and "Parent Expenses" shall be
deemed to include (i) interest on such unpaid Termination Fee and Parent
Expenses, commencing on the date such amount or amounts become due, at a rate
per annum equal to the rate of interest publicly announced by Citibank, N.A.
from time to time, in the City of New York, as such bank's Prime Rate, and
(ii) any and all costs and expenses (including without limitation attorneys'
fees and disbursements) incurred by Parent and/or Acquisition Sub in enforcing
their rights under this Section 9.2.
9.3 Amendment. This Agreement may be amended by the parties hereto by an
instrument in writing signed on behalf of each of the parties hereto at any
time before or after any approval hereof by the stockholders of the Company
and Acquisition Sub, but in any event following authorization by the
Acquisition Sub Board and the Company Board; provided, however, that after any
such stockholder approval, no amendment shall be made which by law requires
further approval by stockholders without obtaining such approval.
9.4 Extension; Waiver. At any time prior to the Closing, the parties hereto
may, to the extent legally allowed, (i) extend the time for the performance of
any of the obligations or other acts of the other parties hereto, (ii) waive
any inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (iii) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part of a
party hereto to any such extension or waiver shall be valid only if set forth
in a written instrument signed on behalf of such party.
ARTICLE X
General Provisions
10.1 Notices. All notices and other communications given or made pursuant
hereto shall be in writing and shall be deemed to have been duly given or made
as of the date delivered or sent if delivered personally or sent by cable,
telegram, telecopier or telex or sent by prepaid overnight carrier to the
parties at the following addresses (or at such other addresses as shall be
specified by the parties by like notice):
(a) if to Parent or Acquisition Sub:
Logica Inc.
32 Hartwell Avenue
Lexington, MA 02421
with a copy to:
Goodwin, Procter & Hoar llp
Exchange Place
Boston, Massachusetts 02109
Attn: Thomas P. Storer, P.C.
Joseph L. Johnson III, Esq.
(b) if to the Company:
Carnegie Group, Inc.
Five PPG Place
Pittsburgh, PA 15222
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with a copy to:
Morgan, Lewis & Bockius, LLP
One Oxford Center
32nd Floor
Pittsburgh, PA 15219
Attn: Marlee Myers, Esq.
10.2 Interpretation. When a reference is made in this Agreement to
subsidiaries of Parent, Acquisition Sub or the Company, the word "Subsidiary"
means any corporation more than 50% of whose outstanding voting securities, or
any partnership, joint venture or other entity more than 50% of whose total
equity interest, is directly or indirectly owned by Parent, Acquisition Sub or
the Company, as the case may be. The headings contained in this Agreement are
for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
10.3 Non-Survival of Representations, Warranties, Covenants and
Agreements. Except for Section 7.3, 7.5, 7.6 (except as provided therein),
7.11 and 10.7 none of the representations, warranties, covenants and
agreements contained in this Agreement or in any instrument delivered pursuant
to this Agreement shall survive the Effective Time, and thereafter there shall
be no liability on the part of either Parent, Acquisition Sub or the Company
or any of their respective officers, directors or stockholders in respect
thereof. Except as expressly set forth in this Agreement, there are no
representations or warranties of any party hereto, express or implied.
10.4 Miscellaneous. This Agreement (i) constitutes, together with the
Confidentiality Agreement, Annex A hereto, the Company Disclosure Letter and
the schedule referred to in Section 4.3 hereof, the entire agreement and
supersedes all of the prior agreements and understandings, both written and
oral, among the parties, or any of them, with respect to the subject matter
hereof, (ii) shall be binding upon and inure to the benefits of the parties
hereto and their respective successors and assigns and is not intended to
confer upon any other person (except as set forth below) any rights or
remedies hereunder and (iii) may be executed in two or more counterparts which
together shall constitute a single agreement. Section 7.5 and Section 7.11 are
intended to be for the benefit of those persons described therein and the
covenants contained therein may be enforced by such persons. The parties
hereto agree that irreparable damage would occur in the event that any of the
provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties shall be entitled to an injunction or injunctions to prevent breaches
of this Agreement and to enforce specifically the terms and provisions hereof
in the Delaware Courts (as hereinafter defined), this being in addition to any
other remedy to which they are entitled at law or in equity.
10.5 Assignment. Except as expressly permitted by the terms hereof, neither
this Agreement nor any of the rights, interests or obligations hereunder shall
be assigned by any of the parties hereto without the prior written consent of
the other parties.
10.6 Severability. If any provision of this Agreement, or the application
thereof to any person or circumstance is held invalid or unenforceable, the
remainder of this Agreement, and the application of such provision to other
persons or circumstances, shall not be affected thereby, and to such end, the
provisions of this Agreement are agreed to be severable.
10.7 Choice of Law/Consent to Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
regard to its rules of conflict of laws. Each of the Company, Parent and
Acquisition Sub hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of Delaware and of the
United States of America located in the State of Delaware (the "Delaware
Courts") for any litigation arising out of or relating to this Agreement and
the Transactions (and agrees not to commence any litigation relating thereto
except in such courts), waives any objection to the laying of venue of any
such litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in any
inconvenient forum. Each of the
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parties hereto agrees, (a) to the extent such party is not otherwise subject
to service of process in the State of Delaware, to appoint and maintain an
agent in the State of Delaware as such party's agent for acceptance of legal
process, and (b) that service of process may also be made on such party by
prepaid certified mail with a proof of mailing receipt validated by the United
States Postal Service constituting evidence of valid service. Service made
pursuant to (a) or (b) above shall have the same legal force and effect as if
served upon such party personally within the State of Delaware. For purposes
of implementing the parties' agreement to appoint and maintain an agent for
service of process in the State of Delaware, each such party does hereby
appoint The Corporation Trust Company, 1209 Orange Street, Wilmington, New
Castle County, Delaware 19801, as such agent.
10.8 Counterparts. This Agreement may be signed in any number of
counterparts, each of which shall be an original, with the same effect as if
the signatures thereto and hereto were upon the same instrument.
10.9 No Agreement Until Executed. Irrespective of negotiations among the
parties or the exchanging of drafts of this Agreement, this Agreement shall
not constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Section 203 of the
Delaware General Corporation Law and any applicable provision of the Company's
certificate of incorporation, the terms of this Agreement, and (ii) this
Agreement is executed by the parties hereto.
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In Witness Whereof, Parent, Acquisition Sub and the Company have caused this
Agreement to be executed as of the date first written above by their respective
officers thereunto duly authorized.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
Logica Acquisition Corp.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President
Carnegie Group, Inc.
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
Title:President and Chief
Executive Officer
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ANNEX A
OFFER CONDITIONS
The capitalized terms used in this Annex A have the meanings set forth in
the attached Agreement, except that the term "Agreement" shall be deemed to
refer to the attached Agreement attached together with this Annex A.
Notwithstanding any other provision of the Offer or the Agreement and
subject to Rule 14c-1(c) under the Exchange Act, Acquisition Sub shall not be
required to accept for payment or pay for any Shares and may delay the
acceptance for payment of and payment for any Shares and may amend or
terminate the Offer and not accept for payment any Shares, if (i) there shall
not have been validly tendered to Acquisition Sub pursuant to the Offer and
not withdrawn immediately prior to the expiration of the Offer, at least that
number of Shares that, when taken as a whole with all other Shares owned or
acquired by Acquisition Sub (whether pursuant to the Offer or otherwise),
constitutes at least that number of Shares on a fully diluted basis
constituting the Minimum Percentage (the "Minimum Condition"), (ii) prior to
the time of payment for any such Shares, any applicable waiting period (and
any extension thereof) under the HSR Act in respect of the Offer shall not
have expired or been terminated, or (iii) at any time on or after the date of
the Agreement, and prior to the acceptance for payment of Shares or the
payment therefor any of the following conditions exist or shall occur or
remain in effect:
(a) There shall have been any statute, rule, regulation, order or
injunction enacted, promulgated, entered or enforced by any state or
federal government or governmental authority or by any United States or
state court of competent jurisdiction (a "Governmental Entity") which (i)
restrains or prohibits the making of the Offer or the Closing, (ii)
restricts, prevents or prohibits the ownership or operation by Parent (or
any Parent Subsidiaries) of any portion of the Company's or the Company
Subsidiaries' business, properties or assets which is material to the
Company as a whole, or compels Parent (or any Parent Subsidiaries) to
dispose of or hold separate any portion of the Company's or the Company
Subsidiaries' business, properties or assets which is material to the
Company as a whole, (iii) imposes any material limitation on the ability of
Parent or Acquisition Sub effectively to acquire or to hold or to exercise
full rights of ownership of the Shares, including, without limitation, the
right to vote the Shares purchased by Parent or Acquisition Sub on all
matters presented to the stockholders of the Company, (iv) imposes any
limitations on the ability of Parent or Parent Subsidiaries to control in
any material respect the business, properties and operations of the
Company, or (v) which otherwise results in a Company Material Adverse
Effect;
(b) There shall have occurred (i) any general suspension of trading in,
or limitation on prices for, securities on the New York Stock Exchange, the
American Stock Exchange or Nasdaq which shall continue for more than 24
hours, (ii) the declaration of a banking moratorium or any suspension of
payments in respect of banks in the United States or the United Kingdom
(whether or not mandatory), (iii) the commencement of a war, armed
hostilities or other international or national calamity directly or
indirectly involving the United States or the United Kingdom which has a
material adverse effect on Parent PLC's ability to borrow sufficient funds
under its bank facilities to purchase and pay for the Shares pursuant to
the Offer and the Merger in accordance with the terms of the Merger
Agreement, or (iv) any limitation (whether or not mandatory) by any United
States or United Kingdom governmental authority or agency on the extension
of credit by banks or other financial institutions which has a material
adverse effect on Parent PLC's ability to borrow sufficient funds under its
bank facilities to purchase and pay for the Shares pursuant to the Offer
and the Merger in accordance with the terms of the Merger Agreement;
(c) Any of the representations and warranties of the Company set forth in
the Agreement (i) specifically concerning the Customer Contracts in Section
5.21 hereof or (ii) that are qualified as to Company Material Adverse
Effect shall not have been, or shall cease to be, true and correct (whether
because of circumstances or events occurring in whole or in part prior to,
on or after the date of the Agreement) or any of the representations and
warranties of the Company set forth in the Agreement that are not so
qualified shall not have been, or cease to be, true and correct (whether
because of circumstances or events occurring in whole or in part prior to,
on or after the date of the Agreement) under circumstances in which such
failure to be true and correct results in a Company Material Adverse
Effect;
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(d) Since the date of the Agreement, there has occurred any change that,
when taken together with all other such changes, has a Company Material
Adverse Effect;
(e) The Company shall not have performed all obligations required to be
performed by it under the Agreement, including, without limitation, the
covenants contained in Article 2, 6 or 7 thereof, except where any failure
to perform (i) would, individually or in the aggregate, not materially
impair or significantly delay the ability of Acquisition Sub to consummate
the Offer; (ii) has been caused by or results from a material breach of
this Agreement by Parent or Acquisition Sub; or (iii) does not have a
Company Material Adverse Effect (provided, however, that the foregoing
exceptions shall not apply to the covenants contained in Article 2);
(f) The Agreement shall have been terminated in accordance with its
terms;
(g) A tender or exchange offer for some portion of or all the Shares
shall have been publicly proposed to be made or shall have been made by
another person with respect to the Shares;
(h) Parent shall have learned that any person, entity or "group" (within
the meaning of Section 13(d) of the Exchange Act) shall have acquired
beneficial ownership of more than 5% of the Shares, through the acquisition
of Shares, the formation of a group or otherwise, or shall have been
granted any right, option or warrant, conditional or otherwise, to acquire
ownership of more than 5% of the Shares; provided, however, that the
acquisition of beneficial ownership of more than 5% of the Shares but less
than 15% of the Shares by any such person, entity or "group" as
contemplated by the foregoing shall not be deemed a failure of this
condition provided that such Shares were acquired and are held by such
person, entity or "group" solely as a passive investment and not (x) with a
purpose or effect of changing or influencing control of the Company, or (y)
in connection with or as a participant in any transaction having that
purpose or effect, in each case other than the Offer;
(i) Any consent, authorization, order or approval of (or filing or
registration with) any governmental commission, board, other regulatory
body or other third party required to be made or obtained by the Company or
any of the Company Subsidiaries or affiliates in connection with the
execution, delivery and performance of this Agreement shall not have been
obtained or made, except where the failure to have obtained or made any
such consent, authorization, order, approval, filing or registration, would
not have a Company Material Adverse Effect;
(j) Any Principal Stockholder who has executed a Tender Agreement shall
have failed to tender his or her Shares or the option set forth in
Paragraph 3 of any of the Tender Agreements shall not be in full force and
effect in accordance with the terms thereof, or any United States federal
or state court of competent jurisdiction shall have issued an injunction or
taken any other action permanently restraining, enjoining or otherwise
prohibiting the enforcement of any of the terms of any Tender Agreement.
(k) The Company is unable to obtain waivers (on terms reasonably
satisfactory to Parent and Acquisition Sub) with respect to any default,
termination, acceleration of payment or performance or modification clause
contained in any contract, agreement, commitment, or lease, to which the
Company or any of the Company Subsidiaries is a party or by which the
Company or any of the Company Subsidiaries, or their respective properties
or assets is bound, except where the failure to have so obtained such
waiver or waivers does not have a Company Material Adverse Effect.
The foregoing conditions (i) may be asserted by Parent or Acquisition Sub
regardless of the circumstances (including any action or inaction by Parent or
Acquisition Sub or any of its affiliates other than a material breach of the
Agreement), and (ii) are for the sole benefit of Parent, Acquisition Sub and
their respective affiliates. The foregoing conditions may be waived by Parent,
in whole or in part, at any time and from time to time, in the sole discretion
of Parent. The foregoing conditions may be considered to be material to the
Offer. The failure by Parent or Acquisition Sub at any time to exercise any of
the foregoing rights will not be deemed a waiver of any right and each right
will be deemed an ongoing right which may be asserted at any time and from
time to time.
Should the Offer be terminated due to the foregoing provisions, all tendered
Shares not theretofore accepted for payment shall promptly be returned to the
tendering stockholders.
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LOGICA INC.
32 HARTWELL AVENUE
LEXINGTON, MA 02173-3103
August 27, 1998
Carnegie Group, Inc.
Five PPG Place
Pittsburgh, PA 15222
Ladies and Gentlemen:
In connection with our mutual consideration of a potential transaction (the
"Proposed Transaction") involving the acquisition of Carnegie Group, Inc., a
Delaware corporation ("Seller"), by Logica Inc., a Delaware corporation, or an
affiliate thereof ("Buyer"), Buyer has requested certain information
concerning Seller, and Seller, in turn, has requested certain information
concerning Buyer. This information is confidential and proprietary to the
respective parties and not otherwise available. Each party agrees that, in
consideration of, and as a condition to, furnishing such information, it will
abide by the following:
1. Confidentiality Agreement. Each of Buyer and Seller, as applicable (each,
a "Receiving Party"), hereby agrees to treat all information, whether written
or oral, concerning Seller or Buyer, as applicable (each a "Disclosing
Party"), or any of their respective affiliates, subsidiaries or divisions,
which the Disclosing Party or any directors, officers, employees, partners,
agents or representatives (collectively, the "Representatives") of the
Disclosing Party furnishes, whether before or after the date of this
agreement, to the Receiving Party or its Representatives, together with all
originals or copies of all reports, analyses, compilations, data, studies and
other materials which contain or otherwise reflect or are generated from such
information (collectively, the "Evaluation Material"), confidential and in
accordance with the provisions of this agreement. Notwithstanding the
foregoing, the term "Evaluation Material" shall not for the purposes of this
agreement include any information which (a) at the time of disclosure or
thereafter is generally available to and known by the public other than as a
result of a disclosure by the Receiving Party or its Representatives, (b) was
or becomes available to the Receiving Party on a nonconfidential basis from a
source other than the Disclosing Party or any of its Representatives, provided
that such source is not bound by a confidentiality agreement with, or other
contractual, legal or fiduciary obligation to, the Disclosing Party, or (c)
has been independently acquired by the Receiving Party without violating any
of the obligations of the Receiving Party or its Representatives under this
agreement or any other confidentiality agreement, or under any other
contractual, legal or fiduciary obligations of the Receiving Party or its
Representatives. The fact that information included in the Evaluation Material
is or becomes otherwise available to the Receiving Party or its
Representatives under clauses (a), (b) or (c) above shall not relieve the
Receiving Party or its Representatives of the prohibitions set forth in this
agreement.
2. Use of Evaluation Material and Confidentiality.
(a) Subject to paragraph (b) below, the Evaluation Material will be kept
confidential by the Receiving Party and its Representatives and will not,
without the prior written consent of the Disclosing Party, be disclosed, in
whole or in part, to any third party by the Receiving Party or any of its
Representatives in any manner whatsoever, and will not be used by the
Receiving Party or any of its Representatives, directly or indirectly, for any
purpose other than in connection with the Receiving Party's evaluation of the
Proposed Transaction. In addition, the Receiving Party hereby agrees to
disclose that the Receiving Party is evaluating the Proposed Transaction and
to transmit Evaluation Material to only those of its Representatives who need
to know the information for the purpose of evaluating the Proposed Transaction
and are informed by the Receiving Party of the confidential nature of the
information. The Receiving Party agrees not to make any such disclosure or
transmission unless the Receiving Party is satisfied that its Representatives
will act in accordance herewith. The Receiving Party agrees that it will be
responsible for any breach of any of the provisions of this agreement by any
of its Representatives and the Receiving Party agrees to take, at its sole
expense, all reasonable measures to
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restrain its Representatives from prohibited or unauthorized disclosure or use
of the Evaluation Material (including, without limitation, the initiation of
court proceedings).
(b) In the event that the Receiving Party or any of its Representatives are
requested or required (by oral questions, interrogatories, requests for
information or documents, subpoena, civil investigative demand or similar
process) to disclose (a) any Evaluation Material, (b) any information relating
to the opinion, judgment or recommendation of any such person concerning the
Disclosing Party, its affiliates or subsidiaries, or (c) any other information
supplied to the Receiving Party in the course of the Receiving Party's, or its
Representatives', dealings with the Disclosing Party, the Receiving Party will
promptly notify the Disclosing Party of such request or requirement so that
the Disclosing Party may seek an appropriate protective order or waive
compliance with the provisions of this agreement, and/or take any other
mutually agreed action. If, in the absence of a protective order or the
receipt of a waiver hereunder, the Receiving Party or any of its
Representatives are, in the reasonable opinion of such person's counsel,
compelled to disclose information or else stand liable for contempt or suffer
other censure or significant penalty, the Receiving Party or such
Representative may disclose that portion of the requested information which
such person's counsel advises such person in writing that such person is
compelled to disclose. In any event, the Receiving Party and its
Representatives will furnish only that portion of the information which is
legally required and will exercise its best efforts to obtain reliable
assurance that confidential treatment will be accorded the information. In
addition, neither the Receiving Party nor any of its Representatives will
oppose action by the Disclosing Party to obtain an appropriate protective
order or other reliable assurance that such confidential treatment will be so
accorded and the Receiving Party and its Representatives shall cooperate with
the Disclosing Party to obtain such order or other assurance.
3. Nondisclosure of Negotiations. Except as otherwise expressly permitted
hereby, without the prior written consent of the Disclosing Party, the
Receiving Party will not, and will direct its Representatives not to, disclose
to any person the fact that any discussions (or any other discussions between
or involving the Receiving Party and the Disclosing Party) with respect to the
matters contemplated hereby are taking, have taken or are proposed to take
place or other facts with respect to such discussions, including the status
thereof, or the fact (if such becomes the case) that any Evaluation Material
has been made available to the Receiving Party, nor otherwise make any public
disclosure, whether written or oral, with respect to this agreement or the
actions or transactions contemplated hereby; provided, however, that a party
may, without the prior consent of the other party, issue such press release or
make such public statement as may be required by law (including, without
limitation, the provisions of the federal securities laws) or the applicable
rules of any stock exchange or Nasdaq if it has used its reasonable best
efforts to consult with the other party prior to issuing such release or
making such public statement and to obtain such party's prior consent, but has
been unable to do so in a timely manner. No request or proposal to amend,
modify or waive any provision of this agreement shall be made or solicited
except in a non-public and confidential manner. The term "person" as used in
this agreement shall be broadly interpreted to include, without limitation,
any corporation, company, partnership or individual.
4. Federal Securities Laws. The Receiving Party hereby acknowledges that it
and its Representatives are aware that the United States securities laws
prohibit any person who has material, non-public information concerning a
company from purchasing or selling securities of such company or from
communicating such information to any other person under circumstances in
which it is reasonably foreseeable that such person is likely to purchase or
sell such securities.
5. Exclusivity. Seller and Buyer will negotiate in good faith and will use
their best efforts to enter into a definitive agreement setting forth, among
other things, the price and terms of the Proposed Transaction by September 22,
1998 (the "Exclusivity Period"). Buyer's obligations under the previous
sentence are subject to, among other things, its satisfactory completion of a
due diligence investigation of Seller's business, properties, assets,
financial condition and prospects. Seller agrees to cooperate fully with Buyer
in its due diligence investigation of Seller during the Exclusivity Period.
Until the expiration of the Exclusivity Period, neither Seller nor any of its
Representatives shall (and Seller shall use its best efforts to cause all of
its Representatives not to), directly or indirectly, solicit, initiate,
knowingly encourage or enter into any agreement with respect to or participate
in negotiations with, provide any confidential information to, enter into any
agreement with or
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<PAGE>
otherwise cooperate in any way in connection with, any Third Party (as
hereinafter defined) concerning any Competing Transaction (as hereinafter
defined). Seller agrees to terminate, immediately following the execution of
this agreement, all pending discussions or negotiations with any Third Party
with respect to any possible Competing Transaction. For purposes of this
agreement, the term "Third Party" shall mean any individual, group (as defined
in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act")), corporation, partnership, or other entity other than Buyer
or any of its Representatives, and the term "Competing Transaction" shall mean
any of the following involving the Seller: (i) any merger, consolidation,
business combination, or other similar transaction, (ii) any sale, lease,
exchange, mortgage, pledge, transfer or other disposition of all or
substantially all of the assets of Seller, or (iii) any tender offer or
exchange offer for, or other offer to acquire, 20% or more of the outstanding
shares of Seller's Common Stock.
6. Standstill. Buyer agrees that until the earlier of (i) the date that is
six months immediately following the date of this agreement or (ii) the date
on which Buyer and Seller enter into a definitive agreement concerning the
Proposed Transaction, unless specifically requested by Seller, neither Buyer
nor any of its Representatives will in any manner, directly or indirectly, (a)
effect, offer or propose (whether publicly or otherwise) to effect, or cause
or participate in or in any way assist any other person to effect an offer or
propose (whether publicly or otherwise) to effect, (i) any acquisition of any
securities (or beneficial ownership thereof) of Seller which would result in
Buyer beneficially owning (as determined in accordance with Rule 13d-3
promulgated under the Exchange Act) any outstanding shares of Seller's Common
Stock; (ii) any tender or exchange offer, merger or other business combination
involving Seller; (iii) any recapitalization, restructuring, liquidation,
dissolution or other extraordinary transaction with respect to Seller; or (iv)
any "solicitation" of "proxies" (as such terms are defined in the rules
enacted under the Exchange Act) to vote any voting securities of Seller; (b)
form, join or in any way participate in a group or otherwise act, alone or in
concert with others, to seek to control or influence the management, Board of
Directors or policies of Seller; (c) take any action which might force Seller
to make a public announcement regarding any of the types of matters set forth
in subsection (a) above; or (d) enter into any discussions or arrangements
with any Third Party with respect to any of the foregoing.
Notwithstanding the preceding paragraph, if (i) a Third Party makes an
unsolicited offer relating to a Competing Transaction, or (ii) the Board of
Directors of Seller decides to pursue offers from Third Parties relating to a
Competing Transaction, Seller agrees to promptly notify Buyer of the terms
thereof and release Buyer from the provisions of this Section 6. If after
considering such Third Party offer or offers the Board of Directors of Seller
decides to pursue negotiations with a Third Party, Seller also agrees to allow
Buyer to make a proposal to the Board of Directors of Seller. The procedures
for making such proposal shall be substantially similar to the procedures
applicable to such Third Party or Third Parties in the submission of their
proposals.
Notwithstanding the foregoing, it is understood that any financial advisor
to either Seller or Buyer may be a full service securities firm and as such,
may, from time to time effect transactions for its own account or the account
of its customers, and hold positions in securities of either Seller or Buyer
or other companies or entities (information on which may be included in the
Evaluation Material), in the ordinary course of its business as a broker-
dealer, investment adviser, block positioner, or investment banker so long as
(i) such financial advisor has established a "Chinese Wall" between
individuals working on the transaction involving Seller and Buyer and those
individuals involved in effectuating trades of securities, and (ii) and such
purchases, sales or dealings are made only in accordance with such "Chinese
Wall" policies and in accordance with applicable law.
7. Return of Evaluation Material. The Receiving Party and its
Representatives will keep a written record of the location of the Evaluation
Material and will, promptly upon the request of the Disclosing Party and, in
any event, if the Receiving Party and the Disclosing Party do not enter into
an agreement with respect to the Proposed Transaction within 90 days of the
date hereof, will return to the Disclosing Party all copies of the Evaluation
Material furnished to the Receiving Party and in its possession or in the
possession of its Representatives, without retaining a copy thereof. The
Receiving Party and its Representatives will destroy any analyses,
compilations, studies or other documents prepared by or for the Receiving
Party's, or its Representatives', internal use which include, utilize or
reflect the Evaluation Material. Such destruction will be confirmed by the
Receiving Party upon request, in writing. Notwithstanding the return or
destruction of the
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<PAGE>
Evaluation Material, the Receiving Party and its Representatives will continue
to be bound by its obligations of confidentiality hereunder.
8. No Definitive Agreement. The Receiving Party agrees that unless and until
a definitive agreement between the Disclosing Party and the Receiving Party
with respect to the Proposed Transaction has been executed and delivered,
neither the Disclosing Party nor the Receiving Party will be under any legal
obligation of any kind whatsoever with respect to any such transaction by
virtue of this or any written or oral expression with respect to such a
transaction by any of the Receiving Party's or the Disclosing Party's
respective Representatives except, in the case of this agreement, for the
matters specifically agreed to herein.
9. Accuracy of Evaluation Material. The Receiving Party hereby acknowledges
that although the Disclosing Party has endeavored to include in the Evaluation
Material information known to the Disclosing Party and that it believes to be
relevant to the Receiving Party's evaluation, the Receiving Party understands
that neither the Disclosing Party nor any of its Representatives makes any
representation or warranty as to the accuracy or completeness of the
Evaluation Material. The Receiving Party agrees that it shall assume full
responsibility for all conclusions it derives from the Evaluation Material and
that neither the Disclosing Party nor any of its Representatives shall have
any liability with respect to the Evaluation Material or any use thereof. The
Receiving Party further acknowledges that it is not entitled to rely on the
accuracy or completeness of the Evaluation Material.
10. Remedies. The Receiving Party agrees that money damages would not be a
sufficient remedy for any breach of this agreement by the Receiving Party or
any of its Representatives, and that in addition to all other remedies, the
Disclosing Party shall be entitled to seek specific performance and injunctive
or other equitable relief as a remedy for any such breach, and the Receiving
Party further agrees to waive and to use its best efforts to cause its
Representatives to waive, any requirement for the securing or posting of any
bond in connection with any such remedy.
11. Waiver and Amendment. The Receiving Party understands and agrees that no
failure or delay by the Disclosing Party or any of its Representatives in
exercising any right, power or privilege hereunder will operate as a waiver
thereof, nor will any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any right, power or privilege
hereunder. The agreements set forth herein may only be waived or modified by
an agreement in writing signed on behalf of the parties hereto.
12. Successors and Assigns. This agreement shall inure to the benefit of and
be enforceable by the Disclosing Party and its successors.
13. Severability. In case provisions of this agreement shall be invalid,
illegal or unenforceable, the validity, legality and enforceability of the
remaining provisions of the agreement shall not in any way be affected or
impaired thereby.
14. Governing Law; Venue. The validity, interpretation, performance and
enforcement of this agreement shall be governed by the laws of the State of
Delaware. The parties hereto hereby irrevocably and unconditionally consent to
the exclusive jurisdiction of the courts of the State of Delaware and the
United States District Court for the District of Delaware for any action, suit
or proceeding arising out of or relating to this agreement or the Proposed
Transaction, and agree not to commence any action, suit or proceeding related
thereto except in such courts. The parties hereto further hereby irrevocably
and unconditionally waive any objection to the laying of venue of any action,
suit or proceeding arising out of or relating to this agreement in the courts
of the State of Delaware or the United States District Court for the District
of Delaware, and hereby further irrevocably and unconditionally waive and
agree not to plead or claim in any such court that any such action, suit or
proceeding brought in any such court has been brought in an inconvenient
forum. Each of the parties hereto further agrees that service of any process,
summons, notice or document by U.S. registered mail to its address set forth
above shall be effective service of process for any action, suit or proceeding
brought against it in any such court.
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15. Counterparts. This agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
shall constitute the same agreement.
16. Termination. This Agreement and the obligations of the parties hereunder
shall terminate and be of no further force or effect on and after the date
that is the fifth anniversary of the date of this Agreement.
Please acknowledge your agreement to the foregoing by countersigning this
agreement in the place provided below and returning it to the undersigned.
Very truly yours,
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
Accepted and Agreed to,
this 27th day of August, 1998:
Carnegie Group, Inc.
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
Title:President and Chief
Executive Officer
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LOGICA INC.
32 HARTWELL AVENUE
LEXINGTON, MA 02173-3103
September 22, 1998
Carnegie Group, Inc.
Five PPG Place
Pittsburgh, PA 15222
Ladies and Gentlemen:
Reference is made to that certain letter agreement dated as of August 27,
1998 (the "August 27th Letter Agreement") between Carnegie Group, Inc.
("Seller") and Logica Inc., relating to the mutual consideration of a
potential transaction involving the acquisition of Seller by Logica Inc. or an
affiliate thereof ("Buyer"). Pursuant to Section 11 of the August 27th Letter
Agreement, the Buyer and Seller hereby agree that the reference to "September
22, 1998" appearing in the first sentence of Section 5 of the August 27th
Letter Agreement shall be deleted and replaced with "September 30, 1998."
Except as specifically provided for in the preceding sentence, all of the
terms and provisions of the August 27th Letter Agreement shall remain in full
force and effect.
Please acknowledge your agreement to the foregoing by countersigning this
agreement in the place provided below and returning it to the undersigned.
Very truly yours,
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
Accepted and Agreed to,
this 22nd day of September, 1998:
Carnegie Group, Inc.
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
Title:President and Chief
Executive Officer
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TENDER AGREEMENT
Agreement, dated as of September 30, 1998, among Logica Inc., a Delaware
corporation ("Parent"), Logica Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent (the "Purchaser"), Carnegie Group, Inc., a
Delaware corporation (the "Company"), and the stockholders of the Company
signatory hereto (collectively referred to herein as the "Stockholders" and
each, a "Stockholder").
Witnesseth:
Whereas, concurrently with the execution and delivery of this Agreement,
Parent, the Purchaser and the Company, have entered into an Agreement and Plan
of Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"), pursuant to which Purchaser will be merged with and into
the Company (the "Merger");
Whereas, in furtherance of the Merger, Parent and the Company desire that as
soon as practicable (and not later than five business days) after the
execution and delivery of the Merger Agreement, the Purchaser shall commence a
cash tender offer (the "Offer") to purchase at a price of $5.00 per share all
outstanding shares of Company Common Stock (as defined in Section 1 hereof)
including all of the Shares (as defined in Section 2 hereof) beneficially
owned by Stockholders; and
Whereas, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement;
Now, Therefore, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(b) "Company Common Stock" shall mean at any time the Common Stock, par
value $.01 per share, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(d) Capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Merger Agreement.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into the Merger
Agreement, each of the Stockholders hereby agrees to validly tender (or cause
the record owner of such shares to validly tender), and not to withdraw,
pursuant to and in accordance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer pursuant to Section 1.1 of
the Merger Agreement and Rule 14d-2 under the Exchange Act, the number of
shares of Company Common Stock set forth opposite such Stockholder's name on
Schedule I hereto (the "Existing Shares", and together with any shares
acquired by such Stockholder in any capacity after the date hereof and prior
to the termination of this Agreement whether upon the exercise of Options or
by means of purchase, dividend, distribution or otherwise, the "Shares"), all
of which are Beneficially Owned by such Stockholder. Each Stockholder hereby
acknowledges and agrees that Parent's and the Purchaser's obligation to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
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(b) Upon acceptance and payment therefor by Purchaser, the transfer by the
Stockholders of the Shares to Purchaser in the Offer shall pass to and
unconditionally vest in the Purchaser good and valid title to the Shares, free
and clear of all Encumbrances.
(c) The Stockholders hereby permit Parent and the Purchaser to publish and
disclose in the Offer Documents and, if approval of the Company's stockholders
is required under applicable law, the Proxy Statement (including all documents
and schedules filed with the SEC), their identity and ownership of the Shares
and the nature of their commitments, arrangements and understandings under
this Agreement.
3. Option to Acquire Shares. In order to induce Parent and the Purchaser to
enter into the Merger Agreement, each Stockholder hereby grants to Parent an
irrevocable option (a "Stock Option") to purchase such Stockholder's Shares
(the "Option Shares") at an amount (the "Purchase Price") equal to the Offer
Price. If (i) the Offer is terminated, abandoned or withdrawn by Parent or the
Purchaser due to the failure of paragraph (g) or (h) of the conditions set
forth in Annex A to the Merger Agreement, or (ii) the Merger Agreement is
terminated by the Company pursuant to Section 9.1(c)(ii) thereof, each Stock
Option shall, in any such case, become exercisable, in whole or in part, upon
the first to occur of any such event and remain exercisable in whole or in
part until the date which is 60 days after the date of the occurrence of such
event (the "60 Day Period"), so long as: (i) all waiting periods under the HSR
Act required for the purchase of the Option Shares upon such exercise shall
have expired or been waived, and (ii) there shall not be in effect any
preliminary or final injunction or other order issued by any Governmental
Entity prohibiting the exercise of the Stock Options pursuant to this
Agreement; provided, however, that if all HSR Act waiting periods shall not
have expired or been waived or there shall be in effect any such injunction or
order, in each case on the expiration of the 60 Day Period, the 60 Day Period
shall be extended until five (5) business days after the later of (A) the date
of expiration or waiver of all HSR Act waiting periods or (B) the date of
removal or lifting of such injunction or order. In the event that Parent
wishes to exercise a Stock Option, Parent shall send a written notice (the
"Notice") to the Stockholders identifying the place and date (not less than
two nor more than five (5) business days from the date of the Notice) for the
closing of such purchase.
4. Additional Agreements.
(a) Voting Agreement. Each Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted)
the Shares (if any) then held of record or Beneficially Owned by such
Stockholder, (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms thereof and each
of the other actions contemplated by the Merger Agreement and this Agreement
and any actions required in furtherance thereof and hereof; and (ii) against
any Acquisition Proposal and against any action or agreement that would
impede, frustrate, prevent or nullify this Agreement, or result in a breach in
any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or which
would result in any of the conditions set forth in Annex A to the Merger
Agreement or set forth in Article VIII of the Merger Agreement not being
fulfilled.
(b) No Inconsistent Arrangements. Each of the Stockholders hereby covenants
and agrees that, except as contemplated by this Agreement and the Merger
Agreement, it shall not (i) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of such Stockholder's Shares, Options or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares,
Options or any interest therein, (iii) grant any proxy, power-of-attorney or
other authorization in or with respect to such Shares or Options, (iv) deposit
such Shares or Options into a voting trust or enter into a voting agreement or
arrangement with respect to such Shares or Options, or (v) take any other
action that would in any way restrict, limit or interfere with the performance
of its obligations hereunder or the transactions contemplated hereby or by the
Merger Agreement.
(c) Grant of Irrevocable Proxy; Appointment of Proxy.
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(i) Each Stockholder hereby irrevocably grants to, and appoints, Parent,
Corey Torrence and Doug Webb, or either of them, in their respective
capacities as officers of Parent, and any individual who shall hereafter
succeed to any such office of Parent, and each of them individually, such
Stockholder's proxy and attorney-in-fact (with full power of substitution),
for and in the name, place and stead of such Stockholder, to vote such
Stockholder's Shares, or grant a consent or approval in respect of the
Shares in favor of any or all of the Transactions and against any
Acquisition Proposal.
(ii) Each Stockholder represents that any proxies heretofore given in
respect of such Stockholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
(iii) Each Stockholder understands and acknowledges that Parent is
entering into the Merger Agreement in reliance upon such Stockholder's
execution and delivery of this Agreement. Each Stockholder hereby affirms
that the irrevocable proxy set forth in this Section 4(c) is given in
connection with the execution of the Merger Agreement, and that such
irrevocable proxy is given to secure the performance of the duties of such
Stockholder under this Agreement. Each Stockholder hereby further affirms
that the irrevocable proxy is coupled with an interest and may under no
circumstances be revoked. Each Stockholder hereby ratifies and confirms all
that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable
in accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law.
(d) No Solicitation. Each Stockholder hereby agrees, in the capacity as a
Stockholder or otherwise, that neither such Stockholder nor any of its
Subsidiaries or affiliates shall (and such Stockholder shall use its best
efforts to cause its officers, directors, employees, representatives and
agents, including, but not limited to, investment bankers, attorneys and
accountants, not to), directly or indirectly, encourage, solicit, participate
in or initiate discussions or negotiations with, or provide any information
to, any corporation, partnership, person or other entity or group (other than
Parent, any of its affiliates or representatives) concerning any Acquisition
Proposal or take any other action prohibited by Section 7.4 of the Merger
Agreement. Each Stockholder will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. Each Stockholder will immediately communicate to
Parent the terms of any proposal, discussion, negotiation or inquiry (and will
disclose any written materials received by such Stockholder in connection with
such proposal, discussion, negotiation or inquiry) and the identity of the
party making such proposal or inquiry which it may receive in respect of any
such transaction.
(e) Waiver of Appraisal Rights. Each Stockholder hereby waives any rights of
appraisal or rights to dissent from the Merger that such Stockholder may have.
5. Representations and Warranties of the Stockholders. Each Stockholder
hereby represents and warrants to Parent as follows:
(a) Ownership of Shares. Such Stockholder is the record and Beneficial
Owner of the Shares, as set forth on Schedule I. On the date hereof, the
Existing Shares constitute all of the Shares owned of record or
Beneficially Owned by such Stockholder. Such Stockholder has sole voting
power and sole power to issue instructions with respect to the matters set
forth in Sections 2, 3 and 4 hereof, sole power of disposition, sole power
of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Existing Shares with no limitations, qualifications
or restrictions on such rights, subject to applicable securities laws and
the terms of this Agreement.
(b) Power; Binding Agreement. Each Stockholder has the legal capacity,
power and authority to enter into and perform all of such Stockholder's
obligations under this Agreement. The execution, delivery and performance
of this Agreement by such Stockholder will not violate any other agreement
to which such Stockholder is a party including, without limitation, any
voting agreement, proxy arrangement, pledge agreement, shareholders
agreement or voting trust. This Agreement has been duly and validly
executed and delivered by such Stockholder and constitutes a valid and
binding agreement of such Stockholder, enforceable against such Stockholder
in accordance with its terms. There is no beneficiary or holder of a
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<PAGE>
voting trust certificate or other interest of any trust of which such
Stockholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such Stockholder of the
transactions contemplated hereby.
(c) No Conflicts. Except for filings under the HSR Act and the Exchange
Act, (i) no filing with, and no permit, authorization, consent or approval
of, any Governmental Entity is necessary for the execution of this
Agreement by such Stockholder and the consummation by such Stockholder of
the transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by such Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby or compliance by such
Stockholder with any of the provisions hereof shall (A) conflict with or
result in any breach of any organizational documents applicable to the
Stockholder, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
loan agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which such Stockholder is a party or by which such Stockholder
or any of its properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation applicable
to such Stockholder or any of its properties or assets.
(d) No Encumbrances. Except as permitted by this Agreement, the Shares
and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee
or custodian for the benefit of such Stockholder, free and clear of all
Encumbrances, proxies, voting trusts or agreements, understandings or
arrangements or any other rights whatsoever, except for any such
Encumbrances or proxies arising hereunder.
(e) No Finder's Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
(f) Reliance by Parent. Each Stockholder understands and acknowledges
that Parent is entering into, and causing Purchaser to enter into, the
Merger Agreement in reliance upon such Stockholder's execution and delivery
of this Agreement. Each of Parent, Purchaser and the Company acknowledges
and agrees that in the event of any willful breach by any Stockholder of
the provisions of Section 4(d) hereof, Parent and Purchaser shall be
entitled to receive from the Company, and the Company shall be obligated to
pay to Parent and Purchaser, the amounts set forth in Section 9.2(b) of the
Merger Agreement in accordance with Section 9.2(c) of the Merger Agreement.
Each of Parent, Purchaser and the Company acknowledges and agrees that the
amounts payable to Parent and Purchaser pursuant to the preceding sentence
shall be Parent's and Purchaser's sole remedy (other than specific
performance) for any breach by any Stockholder of the provisions of Section
4(d) hereof.
6. Representations and Warranties of Parent and the Purchaser. Each of
Parent and the Purchaser hereby represents and warrants to the Stockholders as
follows:
(a) Power; Binding Agreement. Each of Parent and the Purchaser has the
corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance
of this Agreement by each of Parent and the Purchaser will not violate any
other agreement to which either of them is a party. This Agreement has been
duly and validly executed and delivered by each of Parent and the Purchaser
and constitutes a valid and binding agreement of each of Parent and the
Purchaser, enforceable against each of Parent and the Purchaser in
accordance with its terms.
(b) No Conflicts. Except for filings under the HSR Act and the Exchange
Act, (i) no filing with, and no permit, authorization, consent or approval
of, any Governmental Entity is necessary for the execution of this
Agreement by each of Parent and the Purchaser and the consummation by each
of Parent and the Purchaser of the transactions contemplated hereby and
(ii) none of the execution and delivery of this Agreement by each of Parent
and the Purchaser, the consummation by each of Parent and the Purchaser of
the transactions contemplated hereby or compliance by each of Parent and
the Purchaser with any of the
4
<PAGE>
provisions hereof shall (A) conflict with or result in any breach of any
organizational documents applicable to either of Parent or the Purchaser,
(B) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third party
right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, loan
agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which either of Parent or the Purchaser is a party or by which
either of Parent or the Purchaser or any of their properties or assets may
be bound, or (C) violate any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to either of Parent or the Purchaser
or any of their properties or assets.
7. Further Assurances. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
8. Stop Transfer. The Stockholders shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer
is made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged.
9. Termination. Except as provided in Section 3 hereof, the covenants and
agreements contained herein with respect to the Shares shall terminate upon
the termination of the Merger Agreement in accordance with its terms;
provided, however, that during the term of the Stock Option, the Stockholders
shall ensure that the representations and warranties set forth in Section 5
continue to be true and correct.
10. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation
of law or otherwise, including, without limitation, a Stockholder's heirs,
guardians, administrators or successors. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) Assignment. This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the other parties, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned Subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
(d) Amendments Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(e) 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 given) by hand delivery or telecopy (with a confirmation
copy sent for next day delivery via courier service, such as Federal Express),
or by any courier service, such as Federal Express, providing proof of
delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
5
<PAGE>
If to a Stockholder:
to such Stockholder's address set forth on Schedule I hereto
If to a Parent or
the Purchaser: Logica Inc.
32 Hartwell Avenue
Lexington, MA 02421
Attention: Corey Torrence, President
Telephone No.: (617) 476-8000
Telecopy No.: (617) 476-8010
copy to: Goodwin, Procter & Hoar llp
Exchange Place
Boston, MA 02109
Attention: Joseph L. Johnson III, Esq.
Telephone No.: (617) 570-1000
Telecopy No.: (617) 523-1231
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore in
the event of any such breach the aggrieved party shall be entitled to the
remedy of specific performance of such covenants and agreements and injunctive
and other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity (subject to Section 4(f) hereof).
(h) Remedies Cumulative. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative or exclusive, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party (subject to Section 4(f)
hereof).
(i) No Waiver. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(j) No Third Party Beneficiaries. Subject to the provisions of Section
10(c), this Agreement is not intended to be for the benefit of, and shall not
be enforceable by, any person or entity who or which is not a party hereto.
(k) Choice of Law/Consent to Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
regard to its rules of conflict of laws. Each party hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States of America located in the
State of Delaware (the "Delaware Courts") for
6
<PAGE>
any litigation arising out of or relating to this Agreement and the
Transactions (and agrees not to commence any litigation relating thereto
except in such courts), waives any objection to the laying of venue of any
such litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in any
inconvenient forum. Each of the parties hereto agrees, (a) to the extent such
party is not otherwise subject to service of process in the State of Delaware,
to appoint and maintain an agent in the State of Delaware as such party's
agent for acceptance of legal process, and (b) that service of process may
also be made on such party by prepaid certified mail with a proof of mailing
receipt validated by the United States Postal Service constituting evidence of
valid service. Service made pursuant to (a) or (b) above shall have the same
legal force and effect as if served upon such party personally within the
State of Delaware. For purposes of implementing the parties' agreement to
appoint and maintain an agent for service of process in the State of Delaware,
each such party does hereby appoint The Corporation Trust Company, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19801, as such agent.
(l) Descriptive Headings. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(m) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
(n) No Agreement Until Executed. Irrespective of negotiations among the
parties or the exchanging of drafts of this Agreement, this Agreement shall
not constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Section 203 of the
Delaware General Corporation Law and any applicable provision of the Company's
certificate of incorporation, the terms of this Agreement, including, without
limitation, (x) the Stock Option and (y) the irrevocable proxy and voting
provisions set forth in Section 4 of this Agreement, and (ii) this Agreement
is executed by parties hereto.
7
<PAGE>
In Witness Whereof, the undersigned have caused this Agreement to be duly
executed as of the day and year first above written.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
Logica Acquisition Corp.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President
Carnegie Group, Inc.
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
Title:President and Chief
Executive Officer
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
/s/ Veronica Yablonsky
By: _________________________________
Name: Veronica Yablonsky
8
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND OPTIONS
NAME AND ADDRESS OF STOCKHOLDER BENEFICIALLY OWNED
- ------------------------------- ------------------
<S> <C>
Dennis Yablonsky and Veronica Yablonsky...................... 108,000
[address]
</TABLE>
9
<PAGE>
TENDER AGREEMENT
Agreement, dated as of September 30, 1998, among Logica Inc., a Delaware
corporation ("Parent"), Logica Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent (the "Purchaser"), Carnegie Group, Inc., a
Delaware corporation (the "Company"), and the stockholders of the Company
signatory hereto (collectively referred to herein as the "Stockholders" and
each, a "Stockholder").
Witnesseth:
Whereas, concurrently with the execution and delivery of this Agreement,
Parent, the Purchaser and the Company, have entered into an Agreement and Plan
of Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"), pursuant to which Purchaser will be merged with and into
the Company (the "Merger");
Whereas, in furtherance of the Merger, Parent and the Company desire that as
soon as practicable (and not later than five business days) after the
execution and delivery of the Merger Agreement, the Purchaser shall commence a
cash tender offer (the "Offer") to purchase at a price of $5.00 per share all
outstanding shares of Company Common Stock (as defined in Section 1 hereof)
including all of the Shares (as defined in Section 2 hereof) beneficially
owned by Stockholders; and
Whereas, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement;
Npw, Therefore, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(b) "Company Common Stock" shall mean at any time the Common Stock, par
value $.01 per share, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(d) Capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Merger Agreement.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into the Merger
Agreement, each of the Stockholders hereby agrees to validly tender (or cause
the record owner of such shares to validly tender), and not to withdraw,
pursuant to and in accordance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer pursuant to Section 1.1 of
the Merger Agreement and Rule 14d-2 under the Exchange Act, the number of
shares of Company Common Stock set forth opposite such Stockholder's name on
Schedule I hereto (the "Existing Shares", and together with any shares
acquired by such Stockholder in any capacity after the date hereof and prior
to the termination of this Agreement whether upon the exercise of Options or
by means of purchase, dividend, distribution or otherwise, the "Shares"), all
of which are Beneficially Owned by such Stockholder. Each Stockholder hereby
acknowledges and agrees that Parent's and the Purchaser's obligation to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
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<PAGE>
(b) Upon acceptance and payment therefor by Purchaser, the transfer by the
Stockholders of the Shares to Purchaser in the Offer shall pass to and
unconditionally vest in the Purchaser good and valid title to the Shares, free
and clear of all Encumbrances.
(c) The Stockholders hereby permit Parent and the Purchaser to publish and
disclose in the Offer Documents and, if approval of the Company's stockholders
is required under applicable law, the Proxy Statement (including all documents
and schedules filed with the SEC), their identity and ownership of the Shares
and the nature of their commitments, arrangements and understandings under
this Agreement.
3. Option to Acquire Shares. In order to induce Parent and the Purchaser to
enter into the Merger Agreement, each Stockholder hereby grants to Parent an
irrevocable option (a "Stock Option") to purchase such Stockholder's Shares
(the "Option Shares") at an amount (the "Purchase Price") equal to the Offer
Price. If (i) the Offer is terminated, abandoned or withdrawn by Parent or the
Purchaser due to the failure of paragraph (g) or (h) of the conditions set
forth in Annex A to the Merger Agreement, or (ii) the Merger Agreement is
terminated by the Company pursuant to Section 9.1(c)(ii) thereof, each Stock
Option shall, in any such case, become exercisable, in whole or in part, upon
the first to occur of any such event and remain exercisable in whole or in
part until the date which is 60 days after the date of the occurrence of such
event (the "60 Day Period"), so long as: (i) all waiting periods under the HSR
Act required for the purchase of the Option Shares upon such exercise shall
have expired or been waived, and (ii) there shall not be in effect any
preliminary or final injunction or other order issued by any Governmental
Entity prohibiting the exercise of the Stock Options pursuant to this
Agreement; provided, however, that if all HSR Act waiting periods shall not
have expired or been waived or there shall be in effect any such injunction or
order, in each case on the expiration of the 60 Day Period, the 60 Day Period
shall be extended until five (5) business days after the later of (A) the date
of expiration or waiver of all HSR Act waiting periods or (B) the date of
removal or lifting of such injunction or order. In the event that Parent
wishes to exercise a Stock Option, Parent shall send a written notice (the
"Notice") to the Stockholders identifying the place and date (not less than
two nor more than five (5) business days from the date of the Notice) for the
closing of such purchase.
4. Additional Agreements.
(a) Voting Agreement. Each Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted)
the Shares (if any) then held of record or Beneficially Owned by such
Stockholder, (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms thereof and each
of the other actions contemplated by the Merger Agreement and this Agreement
and any actions required in furtherance thereof and hereof; and (ii) against
any Acquisition Proposal and against any action or agreement that would
impede, frustrate, prevent or nullify this Agreement, or result in a breach in
any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or which
would result in any of the conditions set forth in Annex A to the Merger
Agreement or set forth in Article VIII of the Merger Agreement not being
fulfilled.
(b) No Inconsistent Arrangements. Each of the Stockholders hereby covenants
and agrees that, except as contemplated by this Agreement and the Merger
Agreement, it shall not (i) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of such Stockholder's Shares, Options or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares,
Options or any interest therein, (iii) grant any proxy, power-of-attorney or
other authorization in or with respect to such Shares or Options, (iv) deposit
such Shares or Options into a voting trust or enter into a voting agreement or
arrangement with respect to such Shares or Options, or (v) take any other
action that would in any way restrict, limit or interfere with the performance
of its obligations hereunder or the transactions contemplated hereby or by the
Merger Agreement.
(c) Grant of Irrevocable Proxy; Appointment of Proxy.
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<PAGE>
(i) Each Stockholder hereby irrevocably grants to, and appoints, Parent,
Corey Torrence and Doug Webb, or either of them, in their respective
capacities as officers of Parent, and any individual who shall hereafter
succeed to any such office of Parent, and each of them individually, such
Stockholder's proxy and attorney-in-fact (with full power of substitution),
for and in the name, place and stead of such Stockholder, to vote such
Stockholder's Shares, or grant a consent or approval in respect of the
Shares in favor of any or all of the Transactions and against any
Acquisition Proposal.
(ii) Each Stockholder represents that any proxies heretofore given in
respect of such Stockholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
(iii) Each Stockholder understands and acknowledges that Parent is
entering into the Merger Agreement in reliance upon such Stockholder's
execution and delivery of this Agreement. Each Stockholder hereby affirms
that the irrevocable proxy set forth in this Section 4(c) is given in
connection with the execution of the Merger Agreement, and that such
irrevocable proxy is given to secure the performance of the duties of such
Stockholder under this Agreement. Each Stockholder hereby further affirms
that the irrevocable proxy is coupled with an interest and may under no
circumstances be revoked. Each Stockholder hereby ratifies and confirms all
that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable
in accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law.
(d) No Solicitation. Each Stockholder hereby agrees, in the capacity as a
Stockholder or otherwise, that neither such Stockholder nor any of its
Subsidiaries or affiliates shall (and such Stockholder shall use its best
efforts to cause its officers, directors, employees, representatives and
agents, including, but not limited to, investment bankers, attorneys and
accountants, not to), directly or indirectly, encourage, solicit, participate
in or initiate discussions or negotiations with, or provide any information
to, any corporation, partnership, person or other entity or group (other than
Parent, any of its affiliates or representatives) concerning any Acquisition
Proposal or take any other action prohibited by Section 7.4 of the Merger
Agreement. Each Stockholder will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. Each Stockholder will immediately communicate to
Parent the terms of any proposal, discussion, negotiation or inquiry (and will
disclose any written materials received by such Stockholder in connection with
such proposal, discussion, negotiation or inquiry) and the identity of the
party making such proposal or inquiry which it may receive in respect of any
such transaction.
(e) Waiver of Appraisal Rights. Each Stockholder hereby waives any rights of
appraisal or rights to dissent from the Merger that such Stockholder may have.
5. Representations and Warranties of the Stockholders. Each Stockholder
hereby represents and warrants to Parent as follows:
(a) Ownership of Shares. Such Stockholder is the record and Beneficial
Owner of the Shares, as set forth on Schedule I. On the date hereof, the
Existing Shares constitute all of the Shares owned of record or
Beneficially Owned by such Stockholder. Such Stockholder has sole voting
power and sole power to issue instructions with respect to the matters set
forth in Sections 2, 3 and 4 hereof, sole power of disposition, sole power
of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Existing Shares with no limitations, qualifications
or restrictions on such rights, subject to applicable securities laws and
the terms of this Agreement.
(b) Power; Binding Agreement. Each Stockholder has the legal capacity,
power and authority to enter into and perform all of such Stockholder's
obligations under this Agreement. The execution, delivery and performance
of this Agreement by such Stockholder will not violate any other agreement
to which such Stockholder is a party including, without limitation, any
voting agreement, proxy arrangement, pledge agreement, shareholders
agreement or voting trust. This Agreement has been duly and validly
executed and delivered by such Stockholder and constitutes a valid and
binding agreement of such Stockholder, enforceable against such Stockholder
in accordance with its terms. There is no beneficiary or holder of a
3
<PAGE>
voting trust certificate or other interest of any trust of which such
Stockholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such Stockholder of the
transactions contemplated hereby.
(c) No Conflicts. Except for filings under the HSR Act and the Exchange
Act, (i) no filing with, and no permit, authorization, consent or approval
of, any Governmental Entity is necessary for the execution of this
Agreement by such Stockholder and the consummation by such Stockholder of
the transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by such Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby or compliance by such
Stockholder with any of the provisions hereof shall (A) conflict with or
result in any breach of any organizational documents applicable to the
Stockholder, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
loan agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which such Stockholder is a party or by which such Stockholder
or any of its properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation applicable
to such Stockholder or any of its properties or assets.
(d) No Encumbrances. Except as permitted by this Agreement, the Shares
and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee
or custodian for the benefit of such Stockholder, free and clear of all
Encumbrances, proxies, voting trusts or agreements, understandings or
arrangements or any other rights whatsoever, except for any such
Encumbrances or proxies arising hereunder.
(e) No Finder's Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
(f) Reliance by Parent. Each Stockholder understands and acknowledges
that Parent is entering into, and causing Purchaser to enter into, the
Merger Agreement in reliance upon such Stockholder's execution and delivery
of this Agreement. Each of Parent, Purchaser and the Company acknowledges
and agrees that in the event of any willful breach by any Stockholder of
the provisions of Section 4(d) hereof, Parent and Purchaser shall be
entitled to receive from the Company, and the Company shall be obligated to
pay to Parent and Purchaser, the amounts set forth in Section 9.2(b) of the
Merger Agreement in accordance with Section 9.2(c) of the Merger Agreement.
Each of Parent, Purchaser and the Company acknowledges and agrees that the
amounts payable to Parent and Purchaser pursuant to the preceding sentence
shall be Parent's and Purchaser's sole remedy (other than specific
performance) for any breach by any Stockholder of the provisions of Section
4(d) hereof.
6. Representations and Warranties of Parent and the Purchaser. Each of
Parent and the Purchaser hereby represents and warrants to the Stockholders as
follows:
(a) Power; Binding Agreement. Each of Parent and the Purchaser has the
corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance
of this Agreement by each of Parent and the Purchaser will not violate any
other agreement to which either of them is a party. This Agreement has been
duly and validly executed and delivered by each of Parent and the Purchaser
and constitutes a valid and binding agreement of each of Parent and the
Purchaser, enforceable against each of Parent and the Purchaser in
accordance with its terms.
(b) No Conflicts. Except for filings under the HSR Act and the Exchange
Act, (i) no filing with, and no permit, authorization, consent or approval
of, any Governmental Entity is necessary for the execution of this
Agreement by each of Parent and the Purchaser and the consummation by each
of Parent and the Purchaser of the transactions contemplated hereby and
(ii) none of the execution and delivery of this Agreement by each of Parent
and the Purchaser, the consummation by each of Parent and the Purchaser of
the transactions contemplated hereby or compliance by each of Parent and
the Purchaser with any of the
4
<PAGE>
provisions hereof shall (A) conflict with or result in any breach of any
organizational documents applicable to either of Parent or the Purchaser,
(B) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third party
right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, loan
agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which either of Parent or the Purchaser is a party or by which
either of Parent or the Purchaser or any of their properties or assets may
be bound, or (C) violate any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to either of Parent or the Purchaser
or any of their properties or assets.
7. Further Assurances. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
8. Stop Transfer. The Stockholders shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer
is made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged.
9. Termination. Except as provided in Section 3 hereof, the covenants and
agreements contained herein with respect to the Shares shall terminate upon
the termination of the Merger Agreement in accordance with its terms;
provided, however, that during the term of the Stock Option, the Stockholders
shall ensure that the representations and warranties set forth in Section 5
continue to be true and correct.
10. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation
of law or otherwise, including, without limitation, a Stockholder's heirs,
guardians, administrators or successors. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) Assignment. This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the other parties, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned Subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
(d) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(e) 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 given) by hand delivery or telecopy (with a confirmation
copy sent for next day delivery via courier service, such as Federal Express),
or by any courier service, such as Federal Express, providing proof of
delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
5
<PAGE>
If to a Stockholder:
to such Stockholder's address set forth on Schedule I hereto
If to a Parent or
the Purchaser: Logica Inc.
32 Hartwell Avenue
Lexington, MA 02421
Attention: Corey Torrence, President
Telephone No.: (617) 476-8000
Telecopy No.: (617) 476-8010
copy to: Goodwin, Procter & Hoar llp
Exchange Place
Boston, MA 02109
Attention: Joseph L. Johnson III, Esq.
Telephone No.: (617) 570-1000
Telecopy No.: (617) 523-1231
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore in
the event of any such breach the aggrieved party shall be entitled to the
remedy of specific performance of such covenants and agreements and injunctive
and other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity (subject to Section 4(f) hereof).
(h) Remedies Cumulative. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative or exclusive, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party (subject to Section 4(f)
hereof).
(i) No Waiver. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(j) No Third Party Beneficiaries. Subject to the provisions of Section
10(c), this Agreement is not intended to be for the benefit of, and shall not
be enforceable by, any person or entity who or which is not a party hereto.
(k) Choice of Law/Consent to Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
regard to its rules of conflict of laws. Each party hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States of America located in the
State of Delaware (the "Delaware Courts") for
6
<PAGE>
any litigation arising out of or relating to this Agreement and the
Transactions (and agrees not to commence any litigation relating thereto
except in such courts), waives any objection to the laying of venue of any
such litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in any
inconvenient forum. Each of the parties hereto agrees, (a) to the extent such
party is not otherwise subject to service of process in the State of Delaware,
to appoint and maintain an agent in the State of Delaware as such party's
agent for acceptance of legal process, and (b) that service of process may
also be made on such party by prepaid certified mail with a proof of mailing
receipt validated by the United States Postal Service constituting evidence of
valid service. Service made pursuant to (a) or (b) above shall have the same
legal force and effect as if served upon such party personally within the
State of Delaware. For purposes of implementing the parties' agreement to
appoint and maintain an agent for service of process in the State of Delaware,
each such party does hereby appoint The Corporation Trust Company, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19801, as such agent.
(l) Descriptive Headings. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(m) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
(n) No Agreement Until Executed. Irrespective of negotiations among the
parties or the exchanging of drafts of this Agreement, this Agreement shall
not constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Section 203 of the
Delaware General Corporation Law and any applicable provision of the Company's
certificate of incorporation, the terms of this Agreement, including, without
limitation, (x) the Stock Option and (y) the irrevocable proxy and voting
provisions set forth in Section 4 of this Agreement, and (ii) this Agreement
is executed by parties hereto.
7
<PAGE>
In Witness Whereof, the undersigned have caused this Agreement to be duly
executed as of the day and year first above written.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
Logica Acquisition Corp.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President
Carnegie Group, Inc.
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
Title:President and Chief
Executive Officer
/s/ John W. Manzetti
By: _________________________________
Name: John W. Manzetti
8
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND OPTIONS
NAME AND ADDRESS OF STOCKHOLDER BENEFICIALLY OWNED
- ------------------------------- ------------------
<S> <C>
John W. Manzetti............................................ 40,000
[address]
</TABLE>
9
<PAGE>
TENDER AGREEMENT
Agreement, dated as of September 30, 1998, among Logica Inc., a Delaware
corporation ("Parent"), Logica Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent (the "Purchaser"), Carnegie Group, Inc., a
Delaware corporation (the "Company"), and the stockholders of the Company
signatory hereto (collectively referred to herein as the "Stockholders" and
each, a "Stockholder").
Witnesseth:
Whereas, concurrently with the execution and delivery of this Agreement,
Parent, the Purchaser and the Company, have entered into an Agreement and Plan
of Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"), pursuant to which Purchaser will be merged with and into
the Company (the "Merger");
Whereas, in furtherance of the Merger, Parent and the Company desire that as
soon as practicable (and not later than five business days) after the
execution and delivery of the Merger Agreement, the Purchaser shall commence a
cash tender offer (the "Offer") to purchase at a price of $5.00 per share all
outstanding shares of Company Common Stock (as defined in Section 1 hereof)
including all of the Shares (as defined in Section 2 hereof) beneficially
owned by Stockholders; and
Whereas, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement;
Now, Therefore, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(b) "Company Common Stock" shall mean at any time the Common Stock, par
value $.01 per share, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(d) Capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Merger Agreement.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into the Merger
Agreement, each of the Stockholders hereby agrees to validly tender (or cause
the record owner of such shares to validly tender), and not to withdraw,
pursuant to and in accordance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer pursuant to Section 1.1 of
the Merger Agreement and Rule 14d-2 under the Exchange Act, the number of
shares of Company Common Stock set forth opposite such Stockholder's name on
Schedule I hereto (the "Existing Shares", and together with any shares
acquired by such Stockholder in any capacity after the date hereof and prior
to the termination of this Agreement whether upon the exercise of Options or
by means of purchase, dividend, distribution or otherwise, the "Shares"), all
of which are Beneficially Owned by such Stockholder. Each Stockholder hereby
acknowledges and agrees that Parent's and the Purchaser's obligation to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
1
<PAGE>
(b) Upon acceptance and payment therefor by Purchaser, the transfer by the
Stockholders of the Shares to Purchaser in the Offer shall pass to and
unconditionally vest in the Purchaser good and valid title to the Shares, free
and clear of all Encumbrances.
(c) The Stockholders hereby permit Parent and the Purchaser to publish and
disclose in the Offer Documents and, if approval of the Company's stockholders
is required under applicable law, the Proxy Statement (including all documents
and schedules filed with the SEC), their identity and ownership of the Shares
and the nature of their commitments, arrangements and understandings under
this Agreement.
3. Option to Acquire Shares. In order to induce Parent and the Purchaser to
enter into the Merger Agreement, each Stockholder hereby grants to Parent an
irrevocable option (a "Stock Option") to purchase such Stockholder's Shares
(the "Option Shares") at an amount (the "Purchase Price") equal to the Offer
Price. If (i) the Offer is terminated, abandoned or withdrawn by Parent or the
Purchaser due to the failure of paragraph (g) or (h) of the conditions set
forth in Annex A to the Merger Agreement, or (ii) the Merger Agreement is
terminated by the Company pursuant to Section 9.1(c)(ii) thereof, each Stock
Option shall, in any such case, become exercisable, in whole or in part, upon
the first to occur of any such event and remain exercisable in whole or in
part until the date which is 60 days after the date of the occurrence of such
event (the "60 Day Period"), so long as: (i) all waiting periods under the HSR
Act required for the purchase of the Option Shares upon such exercise shall
have expired or been waived, and (ii) there shall not be in effect any
preliminary or final injunction or other order issued by any Governmental
Entity prohibiting the exercise of the Stock Options pursuant to this
Agreement; provided, however, that if all HSR Act waiting periods shall not
have expired or been waived or there shall be in effect any such injunction or
order, in each case on the expiration of the 60 Day Period, the 60 Day Period
shall be extended until five (5) business days after the later of (A) the date
of expiration or waiver of all HSR Act waiting periods or (B) the date of
removal or lifting of such injunction or order. In the event that Parent
wishes to exercise a Stock Option, Parent shall send a written notice (the
"Notice") to the Stockholders identifying the place and date (not less than
two nor more than five (5) business days from the date of the Notice) for the
closing of such purchase.
4. Additional Agreements.
(a) Voting Agreement. Each Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted)
the Shares (if any) then held of record or Beneficially Owned by such
Stockholder, (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms thereof and each
of the other actions contemplated by the Merger Agreement and this Agreement
and any actions required in furtherance thereof and hereof; and (ii) against
any Acquisition Proposal and against any action or agreement that would
impede, frustrate, prevent or nullify this Agreement, or result in a breach in
any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or which
would result in any of the conditions set forth in Annex A to the Merger
Agreement or set forth in Article VIII of the Merger Agreement not being
fulfilled.
(b) No Inconsistent Arrangements. Each of the Stockholders hereby covenants
and agrees that, except as contemplated by this Agreement and the Merger
Agreement, it shall not (i) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of such Stockholder's Shares, Options or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares,
Options or any interest therein, (iii) grant any proxy, power-of-attorney or
other authorization in or with respect to such Shares or Options, (iv) deposit
such Shares or Options into a voting trust or enter into a voting agreement or
arrangement with respect to such Shares or Options, or (v) take any other
action that would in any way restrict, limit or interfere with the performance
of its obligations hereunder or the transactions contemplated hereby or by the
Merger Agreement.
(c) Grant of Irrevocable Proxy; Appointment of Proxy.
2
<PAGE>
(i) Each Stockholder hereby irrevocably grants to, and appoints, Parent,
Corey Torrence and Doug Webb, or either of them, in their respective
capacities as officers of Parent, and any individual who shall hereafter
succeed to any such office of Parent, and each of them individually, such
Stockholder's proxy and attorney-in-fact (with full power of substitution),
for and in the name, place and stead of such Stockholder, to vote such
Stockholder's Shares, or grant a consent or approval in respect of the
Shares in favor of any or all of the Transactions and against any
Acquisition Proposal.
(ii) Each Stockholder represents that any proxies heretofore given in
respect of such Stockholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
(iii) Each Stockholder understands and acknowledges that Parent is
entering into the Merger Agreement in reliance upon such Stockholder's
execution and delivery of this Agreement. Each Stockholder hereby affirms
that the irrevocable proxy set forth in this Section 4(c) is given in
connection with the execution of the Merger Agreement, and that such
irrevocable proxy is given to secure the performance of the duties of such
Stockholder under this Agreement. Each Stockholder hereby further affirms
that the irrevocable proxy is coupled with an interest and may under no
circumstances be revoked. Each Stockholder hereby ratifies and confirms all
that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable
in accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law.
(d) No Solicitation. Each Stockholder hereby agrees, in the capacity as a
Stockholder or otherwise, that neither such Stockholder nor any of its
Subsidiaries or affiliates shall (and such Stockholder shall use its best
efforts to cause its officers, directors, employees, representatives and
agents, including, but not limited to, investment bankers, attorneys and
accountants, not to), directly or indirectly, encourage, solicit, participate
in or initiate discussions or negotiations with, or provide any information
to, any corporation, partnership, person or other entity or group (other than
Parent, any of its affiliates or representatives) concerning any Acquisition
Proposal or take any other action prohibited by Section 7.4 of the Merger
Agreement. Each Stockholder will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. Each Stockholder will immediately communicate to
Parent the terms of any proposal, discussion, negotiation or inquiry (and will
disclose any written materials received by such Stockholder in connection with
such proposal, discussion, negotiation or inquiry) and the identity of the
party making such proposal or inquiry which it may receive in respect of any
such transaction.
(e) Waiver of Appraisal Rights. Each Stockholder hereby waives any rights of
appraisal or rights to dissent from the Merger that such Stockholder may have.
5. Representations and Warranties of the Stockholders. Each Stockholder
hereby represents and warrants to Parent as follows:
(a) Ownership of Shares. Such Stockholder is the record and Beneficial
Owner of the Shares, as set forth on Schedule I. On the date hereof, the
Existing Shares constitute all of the Shares owned of record or
Beneficially Owned by such Stockholder. Such Stockholder has sole voting
power and sole power to issue instructions with respect to the matters set
forth in Sections 2, 3 and 4 hereof, sole power of disposition, sole power
of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Existing Shares with no limitations, qualifications
or restrictions on such rights, subject to applicable securities laws and
the terms of this Agreement.
(b) Power; Binding Agreement. Each Stockholder has the legal capacity,
power and authority to enter into and perform all of such Stockholder's
obligations under this Agreement. The execution, delivery and performance
of this Agreement by such Stockholder will not violate any other agreement
to which such Stockholder is a party including, without limitation, any
voting agreement, proxy arrangement, pledge agreement, shareholders
agreement or voting trust. This Agreement has been duly and validly
executed and delivered by such Stockholder and constitutes a valid and
binding agreement of such Stockholder, enforceable against such Stockholder
in accordance with its terms. There is no beneficiary or holder of a
3
<PAGE>
voting trust certificate or other interest of any trust of which such
Stockholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such Stockholder of the
transactions contemplated hereby.
(c) No Conflicts. Except for filings under the HSR Act and the Exchange
Act, (i) no filing with, and no permit, authorization, consent or approval
of, any Governmental Entity is necessary for the execution of this
Agreement by such Stockholder and the consummation by such Stockholder of
the transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by such Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby or compliance by such
Stockholder with any of the provisions hereof shall (A) conflict with or
result in any breach of any organizational documents applicable to the
Stockholder, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
loan agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which such Stockholder is a party or by which such Stockholder
or any of its properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation applicable
to such Stockholder or any of its properties or assets.
(d) No Encumbrances. Except as permitted by this Agreement, the Shares
and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee
or custodian for the benefit of such Stockholder, free and clear of all
Encumbrances, proxies, voting trusts or agreements, understandings or
arrangements or any other rights whatsoever, except for any such
Encumbrances or proxies arising hereunder.
(e) No Finder's Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
(f) Reliance by Parent. Each Stockholder understands and acknowledges
that Parent is entering into, and causing Purchaser to enter into, the
Merger Agreement in reliance upon such Stockholder's execution and delivery
of this Agreement. Each of Parent, Purchaser and the Company acknowledges
and agrees that in the event of any willful breach by any Stockholder of
the provisions of Section 4(d) hereof, Parent and Purchaser shall be
entitled to receive from the Company, and the Company shall be obligated to
pay to Parent and Purchaser, the amounts set forth in Section 9.2(b) of the
Merger Agreement in accordance with Section 9.2(c) of the Merger Agreement.
Each of Parent, Purchaser and the Company acknowledges and agrees that the
amounts payable to Parent and Purchaser pursuant to the preceding sentence
shall be Parent's and Purchaser's sole remedy (other than specific
performance) for any breach by any Stockholder of the provisions of Section
4(d) hereof.
6. Representations and Warranties of Parent and the Purchaser. Each of
Parent and the Purchaser hereby represents and warrants to the Stockholders as
follows:
(a) Power; Binding Agreement. Each of Parent and the Purchaser has the
corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance
of this Agreement by each of Parent and the Purchaser will not violate any
other agreement to which either of them is a party. This Agreement has been
duly and validly executed and delivered by each of Parent and the Purchaser
and constitutes a valid and binding agreement of each of Parent and the
Purchaser, enforceable against each of Parent and the Purchaser in
accordance with its terms.
(b) No Conflicts. Except for filings under the HSR Act and the Exchange
Act, (i) no filing with, and no permit, authorization, consent or approval
of, any Governmental Entity is necessary for the execution of this
Agreement by each of Parent and the Purchaser and the consummation by each
of Parent and the Purchaser of the transactions contemplated hereby and
(ii) none of the execution and delivery of this Agreement by each of Parent
and the Purchaser, the consummation by each of Parent and the Purchaser of
the transactions contemplated hereby or compliance by each of Parent and
the Purchaser with any of the
4
<PAGE>
provisions hereof shall (A) conflict with or result in any breach of any
organizational documents applicable to either of Parent or the Purchaser,
(B) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third party
right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, loan
agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which either of Parent or the Purchaser is a party or by which
either of Parent or the Purchaser or any of their properties or assets may
be bound, or (C) violate any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to either of Parent or the Purchaser
or any of their properties or assets.
7. Further Assurances. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
8. Stop Transfer. The Stockholders shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer
is made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged.
9. Termination. Except as provided in Section 3 hereof, the covenants and
agreements contained herein with respect to the Shares shall terminate upon
the termination of the Merger Agreement in accordance with its terms;
provided, however, that during the term of the Stock Option, the Stockholders
shall ensure that the representations and warranties set forth in Section 5
continue to be true and correct.
10. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation
of law or otherwise, including, without limitation, a Stockholder's heirs,
guardians, administrators or successors. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) Assignment. This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the other parties, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned Subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
(d) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(e) 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 given) by hand delivery or telecopy (with a confirmation
copy sent for next day delivery via courier service, such as Federal Express),
or by any courier service, such as Federal Express, providing proof of
delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
5
<PAGE>
If to a Stockholder:
to such Stockholder's address set forth on Schedule I hereto
If to a Parent or
the Purchaser: Logica Inc.
32 Hartwell Avenue
Lexington, MA 02421
Attention: Corey Torrence, President
Telephone No.: (617) 476-8000
Telecopy No.: (617) 476-8010
copy to: Goodwin, Procter & Hoar llp
Exchange Place
Boston, MA 02109
Attention: Joseph L. Johnson III, Esq.
Telephone No.: (617) 570-1000
Telecopy No.: (617) 523-1231
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore in
the event of any such breach the aggrieved party shall be entitled to the
remedy of specific performance of such covenants and agreements and injunctive
and other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity (subject to Section 4(f) hereof).
(h) Remedies Cumulative. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative or exclusive, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party (subject to Section 4(f)
hereof).
(i) No Waiver. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(j) No Third Party Beneficiaries. Subject to the provisions of Section
10(c), this Agreement is not intended to be for the benefit of, and shall not
be enforceable by, any person or entity who or which is not a party hereto.
(k) Choice of Law/Consent to Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
regard to its rules of conflict of laws. Each party hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States of America located in the
State of Delaware (the "Delaware Courts") for
6
<PAGE>
any litigation arising out of or relating to this Agreement and the
Transactions (and agrees not to commence any litigation relating thereto
except in such courts), waives any objection to the laying of venue of any
such litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in any
inconvenient forum. Each of the parties hereto agrees, (a) to the extent such
party is not otherwise subject to service of process in the State of Delaware,
to appoint and maintain an agent in the State of Delaware as such party's
agent for acceptance of legal process, and (b) that service of process may
also be made on such party by prepaid certified mail with a proof of mailing
receipt validated by the United States Postal Service constituting evidence of
valid service. Service made pursuant to (a) or (b) above shall have the same
legal force and effect as if served upon such party personally within the
State of Delaware. For purposes of implementing the parties' agreement to
appoint and maintain an agent for service of process in the State of Delaware,
each such party does hereby appoint The Corporation Trust Company, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19801, as such agent.
(l) Descriptive Headings. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(m) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
(n) No Agreement Until Executed. Irrespective of negotiations among the
parties or the exchanging of drafts of this Agreement, this Agreement shall
not constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Section 203 of the
Delaware General Corporation Law and any applicable provision of the Company's
certificate of incorporation, the terms of this Agreement, including, without
limitation, (x) the Stock Option and (y) the irrevocable proxy and voting
provisions set forth in Section 4 of this Agreement, and (ii) this Agreement
is executed by parties hereto.
7
<PAGE>
In Witness Whereof, the undersigned have caused this Agreement to be duly
executed as of the day and year first above written.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
Logica Acquisition Corp.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President
Carnegie Group, Inc.
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
Title:President and Chief
Executive Officer
/s/ Raj Reddy
By: _________________________________
Name: Raj Reddy
/s/ Anuradha Reddy
By: _________________________________
Name: Anuradha Reddy
/s/ Anuradha Reddy
By: _________________________________
Name: Anuradha Reddy, Trustee,
Geetha Reddy Trust
/s/ Anuradha Reddy
By: _________________________________
Name: Anuradha Reddy, Trustee,
Shyamala Reddy Trust
8
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND OPTIONS
NAME AND ADDRESS OF STOCKHOLDER BENEFICIALLY OWNED
- ------------------------------- ------------------
<S> <C>
Raj Reddy.................................................... 73,000
[address]
Anuradha Reddy............................................... 100,000
[address]
Anuradha Reddy, Trustee, Geetha Reddy Trust.................. 100,000
[address]
Anuradha Reddy, Trustee, Shyamala Reddy Trust................ 100,000
[address]
</TABLE>
9
<PAGE>
TENDER AGREEMENT
Agreement, dated as of September 30, 1998, among Logica Inc., a Delaware
corporation ("Parent"), Logica Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent (the "Purchaser"), Carnegie Group, Inc., a
Delaware corporation (the "Company"), and the stockholders of the Company
signatory hereto (collectively referred to herein as the "Stockholders" and
each, a "Stockholder").
Witnesseth:
Whereas, concurrently with the execution and delivery of this Agreement,
Parent, the Purchaser and the Company, have entered into an Agreement and Plan
of Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"), pursuant to which Purchaser will be merged with and into
the Company (the "Merger");
Whereas, in furtherance of the Merger, Parent and the Company desire that as
soon as practicable (and not later than five business days) after the
execution and delivery of the Merger Agreement, the Purchaser shall commence a
cash tender offer (the "Offer") to purchase at a price of $5.00 per share all
outstanding shares of Company Common Stock (as defined in Section 1 hereof)
including all of the Shares (as defined in Section 2 hereof) beneficially
owned by Stockholders; and
Whereas, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement;
Now, Therefore, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(b) "Company Common Stock" shall mean at any time the Common Stock, par
value $.01 per share, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(d) Capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Merger Agreement.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into the Merger
Agreement, each of the Stockholders hereby agrees to validly tender (or cause
the record owner of such shares to validly tender), and not to withdraw,
pursuant to and in accordance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer pursuant to Section 1.1 of
the Merger Agreement and Rule 14d-2 under the Exchange Act, the number of
shares of Company Common Stock set forth opposite such Stockholder's name on
Schedule I hereto (the "Existing Shares", and together with any shares
acquired by such Stockholder in any capacity after the date hereof and prior
to the termination of this Agreement whether upon the exercise of Options or
by means of purchase, dividend, distribution or otherwise, the "Shares"), all
of which are Beneficially Owned by such Stockholder. Each Stockholder hereby
acknowledges and agrees that Parent's and the Purchaser's obligation to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
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<PAGE>
(b) Upon acceptance and payment therefor by Purchaser, the transfer by the
Stockholders of the Shares to Purchaser in the Offer shall pass to and
unconditionally vest in the Purchaser good and valid title to the Shares, free
and clear of all Encumbrances.
(c) The Stockholders hereby permit Parent and the Purchaser to publish and
disclose in the Offer Documents and, if approval of the Company's stockholders
is required under applicable law, the Proxy Statement (including all documents
and schedules filed with the SEC), their identity and ownership of the Shares
and the nature of their commitments, arrangements and understandings under
this Agreement.
3. Option to Acquire Shares. In order to induce Parent and the Purchaser to
enter into the Merger Agreement, each Stockholder hereby grants to Parent an
irrevocable option (a "Stock Option") to purchase such Stockholder's Shares
(the "Option Shares") at an amount (the "Purchase Price") equal to the Offer
Price. If (i) the Offer is terminated, abandoned or withdrawn by Parent or the
Purchaser due to the failure of paragraph (g) or (h) of the conditions set
forth in Annex A to the Merger Agreement, or (ii) the Merger Agreement is
terminated by the Company pursuant to Section 9.1(c)(ii) thereof, each Stock
Option shall, in any such case, become exercisable, in whole or in part, upon
the first to occur of any such event and remain exercisable in whole or in
part until the date which is 60 days after the date of the occurrence of such
event (the "60 Day Period"), so long as: (i) all waiting periods under the HSR
Act required for the purchase of the Option Shares upon such exercise shall
have expired or been waived, and (ii) there shall not be in effect any
preliminary or final injunction or other order issued by any Governmental
Entity prohibiting the exercise of the Stock Options pursuant to this
Agreement; provided, however, that if all HSR Act waiting periods shall not
have expired or been waived or there shall be in effect any such injunction or
order, in each case on the expiration of the 60 Day Period, the 60 Day Period
shall be extended until five (5) business days after the later of (A) the date
of expiration or waiver of all HSR Act waiting periods or (B) the date of
removal or lifting of such injunction or order. In the event that Parent
wishes to exercise a Stock Option, Parent shall send a written notice (the
"Notice") to the Stockholders identifying the place and date (not less than
two nor more than five (5) business days from the date of the Notice) for the
closing of such purchase.
4. Additional Agreements.
(a) Voting Agreement. Each Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted)
the Shares (if any) then held of record or Beneficially Owned by such
Stockholder, (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms thereof and each
of the other actions contemplated by the Merger Agreement and this Agreement
and any actions required in furtherance thereof and hereof; and (ii) against
any Acquisition Proposal and against any action or agreement that would
impede, frustrate, prevent or nullify this Agreement, or result in a breach in
any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or which
would result in any of the conditions set forth in Annex A to the Merger
Agreement or set forth in Article VIII of the Merger Agreement not being
fulfilled.
(b) No Inconsistent Arrangements. Each of the Stockholders hereby covenants
and agrees that, except as contemplated by this Agreement and the Merger
Agreement, it shall not (i) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of such Stockholder's Shares, Options or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares,
Options or any interest therein, (iii) grant any proxy, power-of-attorney or
other authorization in or with respect to such Shares or Options, (iv) deposit
such Shares or Options into a voting trust or enter into a voting agreement or
arrangement with respect to such Shares or Options, or (v) take any other
action that would in any way restrict, limit or interfere with the performance
of its obligations hereunder or the transactions contemplated hereby or by the
Merger Agreement.
(c) Grant of Irrevocable Proxy; Appointment of Proxy.
(i) Each Stockholder hereby irrevocably grants to, and appoints, Parent,
Corey Torrence and Doug Webb, or either of them, in their respective
capacities as officers of Parent, and any individual who shall
2
<PAGE>
hereafter succeed to any such office of Parent, and each of them
individually, such Stockholder's proxy and attorney-in-fact (with full
power of substitution), for and in the name, place and stead of such
Stockholder, to vote such Stockholder's Shares, or grant a consent or
approval in respect of the Shares in favor of any or all of the
Transactions and against any Acquisition Proposal.
(ii) Each Stockholder represents that any proxies heretofore given in
respect of such Stockholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
(iii) Each Stockholder understands and acknowledges that Parent is
entering into the Merger Agreement in reliance upon such Stockholder's
execution and delivery of this Agreement. Each Stockholder hereby affirms
that the irrevocable proxy set forth in this Section 4(c) is given in
connection with the execution of the Merger Agreement, and that such
irrevocable proxy is given to secure the performance of the duties of such
Stockholder under this Agreement. Each Stockholder hereby further affirms
that the irrevocable proxy is coupled with an interest and may under no
circumstances be revoked. Each Stockholder hereby ratifies and confirms all
that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable
in accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law.
(d) No Solicitation. Each Stockholder hereby agrees, in the capacity as a
Stockholder or otherwise, that neither such Stockholder nor any of its
Subsidiaries or affiliates shall (and such Stockholder shall use its best
efforts to cause its officers, directors, employees, representatives and
agents, including, but not limited to, investment bankers, attorneys and
accountants, not to), directly or indirectly, encourage, solicit, participate
in or initiate discussions or negotiations with, or provide any information
to, any corporation, partnership, person or other entity or group (other than
Parent, any of its affiliates or representatives) concerning any Acquisition
Proposal or take any other action prohibited by Section 7.4 of the Merger
Agreement. Each Stockholder will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. Each Stockholder will immediately communicate to
Parent the terms of any proposal, discussion, negotiation or inquiry (and will
disclose any written materials received by such Stockholder in connection with
such proposal, discussion, negotiation or inquiry) and the identity of the
party making such proposal or inquiry which it may receive in respect of any
such transaction.
(e) Waiver of Appraisal Rights. Each Stockholder hereby waives any rights of
appraisal or rights to dissent from the Merger that such Stockholder may have.
5. Representations and Warranties of the Stockholders. Each Stockholder
hereby represents and warrants to Parent as follows:
(a) Ownership of Shares. Such Stockholder is the record and Beneficial
Owner of the Shares, as set forth on Schedule I. On the date hereof, the
Existing Shares constitute all of the Shares owned of record or
Beneficially Owned by such Stockholder. Such Stockholder has sole voting
power and sole power to issue instructions with respect to the matters set
forth in Sections 2, 3 and 4 hereof, sole power of disposition, sole power
of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Existing Shares with no limitations, qualifications
or restrictions on such rights, subject to applicable securities laws and
the terms of this Agreement.
(b) Power; Binding Agreement. Each Stockholder has the legal capacity,
power and authority to enter into and perform all of such Stockholder's
obligations under this Agreement. The execution, delivery and performance
of this Agreement by such Stockholder will not violate any other agreement
to which such Stockholder is a party including, without limitation, any
voting agreement, proxy arrangement, pledge agreement, shareholders
agreement or voting trust. This Agreement has been duly and validly
executed and delivered by such Stockholder and constitutes a valid and
binding agreement of such Stockholder, enforceable against such Stockholder
in accordance with its terms. There is no beneficiary or holder of a
3
<PAGE>
voting trust certificate or other interest of any trust of which such
Stockholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such Stockholder of the
transactions contemplated hereby.
(c) No Conflicts. Except for filings under the HSR Act and the Exchange
Act, (i) no filing with, and no permit, authorization, consent or approval
of, any Governmental Entity is necessary for the execution of this
Agreement by such Stockholder and the consummation by such Stockholder of
the transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by such Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby or compliance by such
Stockholder with any of the provisions hereof shall (A) conflict with or
result in any breach of any organizational documents applicable to the
Stockholder, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
loan agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which such Stockholder is a party or by which such Stockholder
or any of its properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation applicable
to such Stockholder or any of its properties or assets.
(d) No Encumbrances. Except as permitted by this Agreement, the Shares
and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee
or custodian for the benefit of such Stockholder, free and clear of all
Encumbrances, proxies, voting trusts or agreements, understandings or
arrangements or any other rights whatsoever, except for any such
Encumbrances or proxies arising hereunder.
(e) No Finder's Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
(f) Reliance by Parent. Each Stockholder understands and acknowledges
that Parent is entering into, and causing Purchaser to enter into, the
Merger Agreement in reliance upon such Stockholder's execution and delivery
of this Agreement. Each of Parent, Purchaser and the Company acknowledges
and agrees that in the event of any willful breach by any Stockholder of
the provisions of Section 4(d) hereof, Parent and Purchaser shall be
entitled to receive from the Company, and the Company shall be obligated to
pay to Parent and Purchaser, the amounts set forth in Section 9.2(b) of the
Merger Agreement in accordance with Section 9.2(c) of the Merger Agreement.
Each of Parent, Purchaser and the Company acknowledges and agrees that the
amounts payable to Parent and Purchaser pursuant to the preceding sentence
shall be Parent's and Purchaser's sole remedy (other than specific
performance) for any breach by any Stockholder of the provisions of Section
4(d) hereof.
6. Representations and Warranties of Parent and the Purchaser. Each of
Parent and the Purchaser hereby represents and warrants to the Stockholders as
follows:
(a) Power; Binding Agreement. Each of Parent and the Purchaser has the
corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance
of this Agreement by each of Parent and the Purchaser will not violate any
other agreement to which either of them is a party. This Agreement has been
duly and validly executed and delivered by each of Parent and the Purchaser
and constitutes a valid and binding agreement of each of Parent and the
Purchaser, enforceable against each of Parent and the Purchaser in
accordance with its terms.
(b) No Conflicts. Except for filings under the HSR Act and the Exchange
Act, (i) no filing with, and no permit, authorization, consent or approval
of, any Governmental Entity is necessary for the execution of this
Agreement by each of Parent and the Purchaser and the consummation by each
of Parent and the Purchaser of the transactions contemplated hereby and
(ii) none of the execution and delivery of this Agreement by each of Parent
and the Purchaser, the consummation by each of Parent and the Purchaser of
the transactions contemplated hereby or compliance by each of Parent and
the Purchaser with any of the
4
<PAGE>
provisions hereof shall (A) conflict with or result in any breach of any
organizational documents applicable to either of Parent or the Purchaser,
(B) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third party
right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, loan
agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which either of Parent or the Purchaser is a party or by which
either of Parent or the Purchaser or any of their properties or assets may
be bound, or (C) violate any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to either of Parent or the Purchaser
or any of their properties or assets.
7. Further Assurances. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
8. Stop Transfer. The Stockholders shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer
is made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged.
9. Termination. Except as provided in Section 3 hereof, the covenants and
agreements contained herein with respect to the Shares shall terminate upon
the termination of the Merger Agreement in accordance with its terms;
provided, however, that during the term of the Stock Option, the Stockholders
shall ensure that the representations and warranties set forth in Section 5
continue to be true and correct.
10. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation
of law or otherwise, including, without limitation, a Stockholder's heirs,
guardians, administrators or successors. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) Assignment. This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the other parties, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned Subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
(d) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(e) 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 given) by hand delivery or telecopy (with a confirmation
copy sent for next day delivery via courier service, such as Federal Express),
or by any courier service, such as Federal Express, providing proof of
delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
5
<PAGE>
If to a Stockholder:
to such Stockholder's address set forth on Schedule I hereto
If to a Parent or
the Purchaser: Logica Inc.
32 Hartwell Avenue
Lexington, MA 02421
Attention: Corey Torrence, President
Telephone No.: (617) 476-8000
Telecopy No.: (617) 476-8010
copy to: Goodwin, Procter & Hoar llp
Exchange Place
Boston, MA 02109
Attention: Joseph L. Johnson III, Esq.
Telephone No.: (617) 570-1000
Telecopy No.: (617) 523-1231
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore in
the event of any such breach the aggrieved party shall be entitled to the
remedy of specific performance of such covenants and agreements and injunctive
and other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity (subject to Section 4(f) hereof).
(h) Remedies Cumulative. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative or exclusive, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party (subject to Section 4(f)
hereof).
(i) No Waiver. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(j) No Third Party Beneficiaries. Subject to the provisions of Section
10(c), this Agreement is not intended to be for the benefit of, and shall not
be enforceable by, any person or entity who or which is not a party hereto.
(k) Choice of Law/Consent to Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
regard to its rules of conflict of laws. Each party hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States of America located in the
State of Delaware (the "Delaware Courts") for
6
<PAGE>
any litigation arising out of or relating to this Agreement and the
Transactions (and agrees not to commence any litigation relating thereto
except in such courts), waives any objection to the laying of venue of any
such litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in any
inconvenient forum. Each of the parties hereto agrees, (a) to the extent such
party is not otherwise subject to service of process in the State of Delaware,
to appoint and maintain an agent in the State of Delaware as such party's
agent for acceptance of legal process, and (b) that service of process may
also be made on such party by prepaid certified mail with a proof of mailing
receipt validated by the United States Postal Service constituting evidence of
valid service. Service made pursuant to (a) or (b) above shall have the same
legal force and effect as if served upon such party personally within the
State of Delaware. For purposes of implementing the parties' agreement to
appoint and maintain an agent for service of process in the State of Delaware,
each such party does hereby appoint The Corporation Trust Company, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19801, as such agent.
(l) Descriptive Headings. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(m) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
(n) No Agreement Until Executed. Irrespective of negotiations among the
parties or the exchanging of drafts of this Agreement, this Agreement shall
not constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Section 203 of the
Delaware General Corporation Law and any applicable provision of the Company's
certificate of incorporation, the terms of this Agreement, including, without
limitation, (x) the Stock Option and (y) the irrevocable proxy and voting
provisions set forth in Section 4 of this Agreement, and (ii) this Agreement
is executed by parties hereto.
7
<PAGE>
In Witness Whereof, the undersigned have caused this Agreement to be duly
executed as of the day and year first above written.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
Logica Acquisition Corp.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President
Carnegie Group, Inc.
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
Title:President and Chief
Executive Officer
/s/ Jaime Carbonell
By: _________________________________
Name: Jaime Carbonell
/s/ Jaime Carbonell
By: _________________________________
Name: Jaime Carbonell, Custodian
for Diana Carbonell
/s/ Jaime Carbonell
By: _________________________________
Name: Jaime Carbonell, Custodian
for Isabelle Carbonell
/s/ Jaime Carbonell
By: _________________________________
Name: Jaime Carbonell, Custodian
for Ruben Carbonell
/s/ Jaime Carbonell
By: _________________________________
Name: Jaime Carbonell, Custodian
for Rachel Carbonell
8
<PAGE>
/s/ Jaime Carbonell
By: _________________________________
Name: Jaime Carbonell, In Trust
for Diana Carbonell
/s/ Jaime Carbonell
By: _________________________________
Name: Jaime Carbonell, In Trust
for Isabelle Carbonell
/s/ Jaime Carbonell
By: _________________________________
Name: Jaime Carbonell, In Trust
for Ruben Carbonell
/s/ Jaime Carbonell
By: _________________________________
Name: Jaime Carbonell, In Trust
for Rachel Carbonell
9
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND OPTIONS
NAME AND ADDRESS OF STOCKHOLDER BENEFICIALLY OWNED
- ------------------------------- ------------------
<S> <C>
Jaime Carbonell.............................................. 323,200
[address]
Jaime Carbonell, Custodian for Diana Carbonell............... 4,400
[address]
Jaime Carbonell, Custodian for Isabelle Carbonell............ 6,400
[address]
Jaime Carbonell, Custodian for Ruben Carbonell............... 2,400
[address]
Jaime Carbonell, Custodian for Rachel Carbonell.............. 4,400
[address]
Jaime Carbonell, in Trust for Diana Carbonell................ 1,600
[address]
Jaime Carbonell, in Trust for Isabelle Carbonell............. 1,600
[address]
Jaime Carbonell, in Trust for Ruben Carbonell................ 1,600
[address]
Jaime Carbonell, in Trust for Rachel Carbonell............... 1,600
[address]
</TABLE>
10
<PAGE>
TENDER AGREEMENT
Agreement, dated as of September 30, 1998, among Logica Inc., a Delaware
corporation ("Parent"), Logica Acquisition Corp., a Delaware corporation and a
wholly owned subsidiary of Parent (the "Purchaser"), Carnegie Group, Inc., a
Delaware corporation (the "Company"), and the stockholders of the Company
signatory hereto (collectively referred to herein as the "Stockholders" and
each, a "Stockholder").
Witnesseth:
Whereas, concurrently with the execution and delivery of this Agreement,
Parent, the Purchaser and the Company, have entered into an Agreement and Plan
of Merger (as such agreement may hereafter be amended from time to time, the
"Merger Agreement"), pursuant to which Purchaser will be merged with and into
the Company (the "Merger");
Whereas, in furtherance of the Merger, Parent and the Company desire that as
soon as practicable (and not later than five business days) after the
execution and delivery of the Merger Agreement, the Purchaser shall commence a
cash tender offer (the "Offer") to purchase at a price of $5.00 per share all
outstanding shares of Company Common Stock (as defined in Section 1 hereof)
including all of the Shares (as defined in Section 2 hereof) beneficially
owned by Stockholders; and
Whereas, as an inducement and a condition to entering into the Merger
Agreement, Parent has required that the Stockholders agree, and the
Stockholders have agreed, to enter into this Agreement;
Now, Therefore, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements contained herein, the
parties hereto agree as follows:
1. Definitions. For purposes of this Agreement:
(a) "Beneficially Own" or "Beneficial Ownership" with respect to any
securities shall mean having "beneficial ownership" of such securities (as
determined pursuant to Rule 13d-3 under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(b) "Company Common Stock" shall mean at any time the Common Stock, par
value $.01 per share, of the Company.
(c) "Person" shall mean an individual, corporation, partnership, joint
venture, association, trust, unincorporated organization or other entity.
(d) Capitalized terms used and not defined herein have the respective
meanings ascribed to them in the Merger Agreement.
2. Tender of Shares.
(a) In order to induce Parent and the Purchaser to enter into the Merger
Agreement, each of the Stockholders hereby agrees to validly tender (or cause
the record owner of such shares to validly tender), and not to withdraw,
pursuant to and in accordance with the terms of the Offer, not later than the
fifth business day after commencement of the Offer pursuant to Section 1.1 of
the Merger Agreement and Rule 14d-2 under the Exchange Act, the number of
shares of Company Common Stock set forth opposite such Stockholder's name on
Schedule I hereto (the "Existing Shares", and together with any shares
acquired by such Stockholder in any capacity after the date hereof and prior
to the termination of this Agreement whether upon the exercise of Options or
by means of purchase, dividend, distribution or otherwise, the "Shares"), all
of which are Beneficially Owned by such Stockholder. Each Stockholder hereby
acknowledges and agrees that Parent's and the Purchaser's obligation to accept
for payment and pay for the Shares in the Offer, including the Shares
Beneficially Owned by such Stockholder, is subject to the terms and conditions
of the Offer.
1
<PAGE>
(b) Upon acceptance and payment therefor by Purchaser, the transfer by the
Stockholders of the Shares to Purchaser in the Offer shall pass to and
unconditionally vest in the Purchaser good and valid title to the Shares, free
and clear of all Encumbrances.
(c) The Stockholders hereby permit Parent and the Purchaser to publish and
disclose in the Offer Documents and, if approval of the Company's stockholders
is required under applicable law, the Proxy Statement (including all documents
and schedules filed with the SEC), their identity and ownership of the Shares
and the nature of their commitments, arrangements and understandings under
this Agreement.
3. Option to Acquire Shares. In order to induce Parent and the Purchaser to
enter into the Merger Agreement, each Stockholder hereby grants to Parent an
irrevocable option (a "Stock Option") to purchase such Stockholder's Shares
(the "Option Shares") at an amount (the "Purchase Price") equal to the Offer
Price. If (i) the Offer is terminated, abandoned or withdrawn by Parent or the
Purchaser due to the failure of paragraph (g) or (h) of the conditions set
forth in Annex A to the Merger Agreement, or (ii) the Merger Agreement is
terminated by the Company pursuant to Section 9.1(c)(ii) thereof, each Stock
Option shall, in any such case, become exercisable, in whole or in part, upon
the first to occur of any such event and remain exercisable in whole or in
part until the date which is 60 days after the date of the occurrence of such
event (the "60 Day Period"), so long as: (i) all waiting periods under the HSR
Act required for the purchase of the Option Shares upon such exercise shall
have expired or been waived, and (ii) there shall not be in effect any
preliminary or final injunction or other order issued by any Governmental
Entity prohibiting the exercise of the Stock Options pursuant to this
Agreement; provided, however, that if all HSR Act waiting periods shall not
have expired or been waived or there shall be in effect any such injunction or
order, in each case on the expiration of the 60 Day Period, the 60 Day Period
shall be extended until five (5) business days after the later of (A) the date
of expiration or waiver of all HSR Act waiting periods or (B) the date of
removal or lifting of such injunction or order. In the event that Parent
wishes to exercise a Stock Option, Parent shall send a written notice (the
"Notice") to the Stockholders identifying the place and date (not less than
two nor more than five (5) business days from the date of the Notice) for the
closing of such purchase.
4. Additional Agreements.
(a) Voting Agreement. Each Stockholder shall, at any meeting of the holders
of Company Common Stock, however called, or in connection with any written
consent of the holders of Company Common Stock, vote (or cause to be voted)
the Shares (if any) then held of record or Beneficially Owned by such
Stockholder, (i) in favor of the Merger, the execution and delivery by the
Company of the Merger Agreement and the approval of the terms thereof and each
of the other actions contemplated by the Merger Agreement and this Agreement
and any actions required in furtherance thereof and hereof; and (ii) against
any Acquisition Proposal and against any action or agreement that would
impede, frustrate, prevent or nullify this Agreement, or result in a breach in
any respect of any covenant, representation or warranty or any other
obligation or agreement of the Company under the Merger Agreement or which
would result in any of the conditions set forth in Annex A to the Merger
Agreement or set forth in Article VIII of the Merger Agreement not being
fulfilled.
(b) No Inconsistent Arrangements. Each of the Stockholders hereby covenants
and agrees that, except as contemplated by this Agreement and the Merger
Agreement, it shall not (i) transfer (which term shall include, without
limitation, any sale, gift, pledge or other disposition), or consent to any
transfer of, any or all of such Stockholder's Shares, Options or any interest
therein, (ii) enter into any contract, option or other agreement or
understanding with respect to any transfer of any or all of such Shares,
Options or any interest therein, (iii) grant any proxy, power-of-attorney or
other authorization in or with respect to such Shares or Options, (iv) deposit
such Shares or Options into a voting trust or enter into a voting agreement or
arrangement with respect to such Shares or Options, or (v) take any other
action that would in any way restrict, limit or interfere with the performance
of its obligations hereunder or the transactions contemplated hereby or by the
Merger Agreement.
(c) Grant of Irrevocable Proxy; Appointment of Proxy.
2
<PAGE>
(i) Each Stockholder hereby irrevocably grants to, and appoints, Parent,
Corey Torrence and Doug Webb, or either of them, in their respective
capacities as officers of Parent, and any individual who shall hereafter
succeed to any such office of Parent, and each of them individually, such
Stockholder's proxy and attorney-in-fact (with full power of substitution),
for and in the name, place and stead of such Stockholder, to vote such
Stockholder's Shares, or grant a consent or approval in respect of the
Shares in favor of any or all of the Transactions and against any
Acquisition Proposal.
(ii) Each Stockholder represents that any proxies heretofore given in
respect of such Stockholder's Shares are not irrevocable, and that any such
proxies are hereby revoked.
(iii) Each Stockholder understands and acknowledges that Parent is
entering into the Merger Agreement in reliance upon such Stockholder's
execution and delivery of this Agreement. Each Stockholder hereby affirms
that the irrevocable proxy set forth in this Section 4(c) is given in
connection with the execution of the Merger Agreement, and that such
irrevocable proxy is given to secure the performance of the duties of such
Stockholder under this Agreement. Each Stockholder hereby further affirms
that the irrevocable proxy is coupled with an interest and may under no
circumstances be revoked. Each Stockholder hereby ratifies and confirms all
that such irrevocable proxy may lawfully do or cause to be done by virtue
hereof. Such irrevocable proxy is executed and intended to be irrevocable
in accordance with the provisions of Section 212(e) of the Delaware General
Corporation Law.
(d) No Solicitation. Each Stockholder hereby agrees, in the capacity as a
Stockholder or otherwise, that neither such Stockholder nor any of its
Subsidiaries or affiliates shall (and such Stockholder shall use its best
efforts to cause its officers, directors, employees, representatives and
agents, including, but not limited to, investment bankers, attorneys and
accountants, not to), directly or indirectly, encourage, solicit, participate
in or initiate discussions or negotiations with, or provide any information
to, any corporation, partnership, person or other entity or group (other than
Parent, any of its affiliates or representatives) concerning any Acquisition
Proposal or take any other action prohibited by Section 7.4 of the Merger
Agreement. Each Stockholder will immediately cease any existing activities,
discussions or negotiations with any parties conducted heretofore with respect
to any Acquisition Proposal. Each Stockholder will immediately communicate to
Parent the terms of any proposal, discussion, negotiation or inquiry (and will
disclose any written materials received by such Stockholder in connection with
such proposal, discussion, negotiation or inquiry) and the identity of the
party making such proposal or inquiry which it may receive in respect of any
such transaction.
(e) Waiver of Appraisal Rights. Each Stockholder hereby waives any rights of
appraisal or rights to dissent from the Merger that such Stockholder may have.
5. Representations and Warranties of the Stockholders. Each Stockholder
hereby represents and warrants to Parent as follows:
(a) Ownership of Shares. Such Stockholder is the record and Beneficial
Owner of the Shares, as set forth on Schedule I. On the date hereof, the
Existing Shares constitute all of the Shares owned of record or
Beneficially Owned by such Stockholder. Such Stockholder has sole voting
power and sole power to issue instructions with respect to the matters set
forth in Sections 2, 3 and 4 hereof, sole power of disposition, sole power
of conversion, sole power to demand appraisal rights and sole power to
agree to all of the matters set forth in this Agreement, in each case with
respect to all of the Existing Shares with no limitations, qualifications
or restrictions on such rights, subject to applicable securities laws and
the terms of this Agreement.
(b) Power; Binding Agreement. Each Stockholder has the legal capacity,
power and authority to enter into and perform all of such Stockholder's
obligations under this Agreement. The execution, delivery and performance
of this Agreement by such Stockholder will not violate any other agreement
to which such Stockholder is a party including, without limitation, any
voting agreement, proxy arrangement, pledge agreement, shareholders
agreement or voting trust. This Agreement has been duly and validly
executed and delivered by such Stockholder and constitutes a valid and
binding agreement of such Stockholder, enforceable against such Stockholder
in accordance with its terms. There is no beneficiary or holder of a
3
<PAGE>
voting trust certificate or other interest of any trust of which such
Stockholder is a trustee whose consent is required for the execution and
delivery of this Agreement or the consummation by such Stockholder of the
transactions contemplated hereby.
(c) No Conflicts. Except for filings under the HSR Act and the Exchange
Act, (i) no filing with, and no permit, authorization, consent or approval
of, any Governmental Entity is necessary for the execution of this
Agreement by such Stockholder and the consummation by such Stockholder of
the transactions contemplated hereby and (ii) none of the execution and
delivery of this Agreement by such Stockholder, the consummation by such
Stockholder of the transactions contemplated hereby or compliance by such
Stockholder with any of the provisions hereof shall (A) conflict with or
result in any breach of any organizational documents applicable to the
Stockholder, (B) result in a violation or breach of, or constitute (with or
without notice or lapse of time or both) a default (or give rise to any
third party right of termination, cancellation, material modification or
acceleration) under any of the terms, conditions or provisions of any note,
loan agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which such Stockholder is a party or by which such Stockholder
or any of its properties or assets may be bound, or (C) violate any order,
writ, injunction, decree, judgment, statute, rule or regulation applicable
to such Stockholder or any of its properties or assets.
(d) No Encumbrances. Except as permitted by this Agreement, the Shares
and the certificates representing such Shares are now, and at all times
during the term hereof will be, held by such Stockholder, or by a nominee
or custodian for the benefit of such Stockholder, free and clear of all
Encumbrances, proxies, voting trusts or agreements, understandings or
arrangements or any other rights whatsoever, except for any such
Encumbrances or proxies arising hereunder.
(e) No Finder's Fees. No broker, investment banker, financial advisor or
other person is entitled to any broker's, finder's, financial adviser's or
other similar fee or commission in connection with the transactions
contemplated hereby based upon arrangements made by or on behalf of such
Stockholder.
(f) Reliance by Parent. Each Stockholder understands and acknowledges
that Parent is entering into, and causing Purchaser to enter into, the
Merger Agreement in reliance upon such Stockholder's execution and delivery
of this Agreement. Each of Parent, Purchaser and the Company acknowledges
and agrees that in the event of any willful breach by any Stockholder of
the provisions of Section 4(d) hereof, Parent and Purchaser shall be
entitled to receive from the Company, and the Company shall be obligated to
pay to Parent and Purchaser, the amounts set forth in Section 9.2(b) of the
Merger Agreement in accordance with Section 9.2(c) of the Merger Agreement.
Each of Parent, Purchaser and the Company acknowledges and agrees that the
amounts payable to Parent and Purchaser pursuant to the preceding sentence
shall be Parent's and Purchaser's sole remedy (other than specific
performance) for any breach by any Stockholder of the provisions of Section
4(d) hereof.
6. Representations and Warranties of Parent and the Purchaser. Each of
Parent and the Purchaser hereby represents and warrants to the Stockholders as
follows:
(a) Power; Binding Agreement. Each of Parent and the Purchaser has the
corporate power and authority to enter into and perform all of its
obligations under this Agreement. The execution, delivery and performance
of this Agreement by each of Parent and the Purchaser will not violate any
other agreement to which either of them is a party. This Agreement has been
duly and validly executed and delivered by each of Parent and the Purchaser
and constitutes a valid and binding agreement of each of Parent and the
Purchaser, enforceable against each of Parent and the Purchaser in
accordance with its terms.
(b) No Conflicts. Except for filings under the HSR Act and the Exchange
Act, (i) no filing with, and no permit, authorization, consent or approval
of, any Governmental Entity is necessary for the execution of this
Agreement by each of Parent and the Purchaser and the consummation by each
of Parent and the Purchaser of the transactions contemplated hereby and
(ii) none of the execution and delivery of this Agreement by each of Parent
and the Purchaser, the consummation by each of Parent and the Purchaser of
the transactions contemplated hereby or compliance by each of Parent and
the Purchaser with any of the
4
<PAGE>
provisions hereof shall (A) conflict with or result in any breach of any
organizational documents applicable to either of Parent or the Purchaser,
(B) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third party
right of termination, cancellation, material modification or acceleration)
under any of the terms, conditions or provisions of any note, loan
agreement, bond, mortgage, indenture, license, contract, commitment,
arrangement, understanding, agreement or other instrument or obligation of
any kind to which either of Parent or the Purchaser is a party or by which
either of Parent or the Purchaser or any of their properties or assets may
be bound, or (C) violate any order, writ, injunction, decree, judgment,
statute, rule or regulation applicable to either of Parent or the Purchaser
or any of their properties or assets.
7. Further Assurances. From time to time, at the other party's request and
without further consideration, each party hereto shall execute and deliver
such additional documents and take all such further lawful action as may be
necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this
Agreement.
8. Stop Transfer. The Stockholders shall not request that the Company
register the transfer (book-entry or otherwise) of any certificate or
uncertificated interest representing any of the Shares, unless such transfer
is made in compliance with this Agreement. In the event of a stock dividend or
distribution, or any change in the Company Common Stock by reason of any stock
dividend, split-up, recapitalization, combination, exchange of shares or the
like, the term "Shares" shall refer to and include the Shares as well as all
such stock dividends and distributions and any shares into which or for which
any or all of the Shares may be changed or exchanged.
9. Termination. Except as provided in Section 3 hereof, the covenants and
agreements contained herein with respect to the Shares shall terminate upon
the termination of the Merger Agreement in accordance with its terms;
provided, however, that during the term of the Stock Option, the Stockholders
shall ensure that the representations and warranties set forth in Section 5
continue to be true and correct.
10. Miscellaneous.
(a) Entire Agreement. This Agreement constitutes the entire agreement
between the parties with respect to the subject matter hereof and supersedes
all other prior agreements and understandings, both written and oral, between
the parties with respect to the subject matter hereof.
(b) Binding Agreement. This Agreement and the obligations hereunder shall
attach to the Shares and shall be binding upon any person or entity to which
legal or beneficial ownership of such Shares shall pass, whether by operation
of law or otherwise, including, without limitation, a Stockholder's heirs,
guardians, administrators or successors. Notwithstanding any transfer of
Shares, the transferor shall remain liable for the performance of all
obligations of the transferor under this Agreement.
(c) Assignment. This Agreement shall not be assigned by operation of law or
otherwise without the prior written consent of the other parties, provided
that Parent may assign, in its sole discretion, its rights and obligations
hereunder to any direct or indirect wholly owned Subsidiary of Parent, but no
such assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
(d) Amendments, Waivers, Etc. This Agreement may not be amended, changed,
supplemented, waived or otherwise modified or terminated, except upon the
execution and delivery of a written agreement executed by the parties hereto.
(e) 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 given) by hand delivery or telecopy (with a confirmation
copy sent for next day delivery via courier service, such as Federal Express),
or by any courier service, such as Federal Express, providing proof of
delivery. All communications hereunder shall be delivered to the respective
parties at the following addresses:
5
<PAGE>
If to a Stockholder:
to such Stockholder's address set forth on Schedule I hereto
If to a Parent or
the Purchaser: Logica Inc.
32 Hartwell Avenue
Lexington, MA 02421
Attention: Corey Torrence, President
Telephone No.: (617) 476-8000
Telecopy No.: (617) 476-8010
copy to: Goodwin, Procter & Hoar llp
Exchange Place
Boston, MA 02109
Attention: Joseph L. Johnson III, Esq.
Telephone No.: (617) 570-1000
Telecopy No.: (617) 523-1231
or to such other address as the person to whom notice is given may have
previously furnished to the others in writing in the manner set forth above.
(f) Severability. Whenever possible, each provision or portion of any
provision of this Agreement will be interpreted in such manner as to be
effective and valid under applicable law but if any provision or portion of
any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or portion of any provision in such jurisdiction, and this
Agreement will be reformed, construed and enforced in such jurisdiction as if
such invalid, illegal or unenforceable provision or portion of any provision
had never been contained herein.
(g) Specific Performance. Each of the parties hereto recognizes and
acknowledges that a breach by it of any covenants or agreements contained in
this Agreement will cause the other party to sustain damages for which it
would not have an adequate remedy at law for money damages, and therefore in
the event of any such breach the aggrieved party shall be entitled to the
remedy of specific performance of such covenants and agreements and injunctive
and other equitable relief in addition to any other remedy to which it may be
entitled, at law or in equity (subject to Section 4(f) hereof).
(h) Remedies Cumulative. All rights, powers and remedies provided under this
Agreement or otherwise available in respect hereof at law or in equity shall
be cumulative and not alternative or exclusive, and the exercise of any
thereof by any party shall not preclude the simultaneous or later exercise of
any other such right, power or remedy by such party (subject to Section 4(f)
hereof).
(i) No Waiver. The failure of any party hereto to exercise any right, power
or remedy provided under this Agreement or otherwise available in respect
hereof at law or in equity, or to insist upon compliance by any other party
hereto with its obligations hereunder, and any custom or practice of the
parties at variance with the terms hereof, shall not constitute a waiver by
such party of its right to exercise any such or other right, power or remedy
or to demand such compliance.
(j) No Third Party Beneficiaries. Subject to the provisions of Section
10(c), this Agreement is not intended to be for the benefit of, and shall not
be enforceable by, any person or entity who or which is not a party hereto.
(k) Choice of Law/Consent to Jurisdiction. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware without
regard to its rules of conflict of laws. Each party hereby irrevocably and
unconditionally consents to submit to the exclusive jurisdiction of the courts
of the State of Delaware and of the United States of America located in the
State of Delaware (the "Delaware Courts") for
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<PAGE>
any litigation arising out of or relating to this Agreement and the
Transactions (and agrees not to commence any litigation relating thereto
except in such courts), waives any objection to the laying of venue of any
such litigation in the Delaware Courts and agrees not to plead or claim in any
Delaware Court that such litigation brought therein has been brought in any
inconvenient forum. Each of the parties hereto agrees, (a) to the extent such
party is not otherwise subject to service of process in the State of Delaware,
to appoint and maintain an agent in the State of Delaware as such party's
agent for acceptance of legal process, and (b) that service of process may
also be made on such party by prepaid certified mail with a proof of mailing
receipt validated by the United States Postal Service constituting evidence of
valid service. Service made pursuant to (a) or (b) above shall have the same
legal force and effect as if served upon such party personally within the
State of Delaware. For purposes of implementing the parties' agreement to
appoint and maintain an agent for service of process in the State of Delaware,
each such party does hereby appoint The Corporation Trust Company, 1209 Orange
Street, Wilmington, New Castle County, Delaware 19801, as such agent.
(l) Descriptive Headings. The descriptive headings used herein are inserted
for convenience of reference only and are not intended to be part of or to
affect the meaning or interpretation of this Agreement.
(m) Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed to be an original, but all of which, taken together,
shall constitute one and the same Agreement.
(n) No Agreement Until Executed. Irrespective of negotiations among the
parties or the exchanging of drafts of this Agreement, this Agreement shall
not constitute or be deemed to evidence a contract, agreement, arrangement or
understanding among the parties hereto unless and until (i) the Board of
Directors of the Company has approved, for purposes of Section 203 of the
Delaware General Corporation Law and any applicable provision of the Company's
certificate of incorporation, the terms of this Agreement, including, without
limitation, (x) the Stock Option and (y) the irrevocable proxy and voting
provisions set forth in Section 4 of this Agreement, and (ii) this Agreement
is executed by parties hereto.
7
<PAGE>
In Witness Whereof, the undersigned have caused this Agreement to be duly
executed as of the day and year first above written.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
Logica Acquisition Corp.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President
Carnegie Group, Inc.
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
Title:President and Chief
Executive Officer
/s/ Mark S. Fox
By: _________________________________
Name: Mark S. Fox
/s/ Tressa S. Fox
By: _________________________________
Name: Tressa S. Fox
/s/ Tressa S. Fox
By: _________________________________
Name: Tressa S. Fox, In Trust For
Jacob Fox
8
<PAGE>
SCHEDULE I
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND OPTIONS
NAME AND ADDRESS OF STOCKHOLDER BENEFICIALLY OWNED
- ------------------------------- ------------------
<S> <C>
Mark S. Fox.................................................. 330,556
[address]
Tressa S. Fox................................................ 1,110
[address]
Tressa S. Fox, in Trust for Jacob Fox........................ 1,110
[address]
</TABLE>
9
<PAGE>
EMPLOYMENT AGREEMENT
This Agreement (the "Agreement") is made as of September 30, 1998, by and
between Logica Inc., a Delaware corporation with its headquarters located in
Lexington, Massachusetts (the "Employer"), and Dennis Yablonsky (the
"Executive"), but it shall become effective only in accordance with Section 16
below. In consideration of the mutual covenants contained in this Agreement,
the Employer and the Executive agree as follows:
1. Employment. The Employer agrees to employ the Executive and the Executive
agrees to be employed by the Employer on the terms and conditions set forth in
this Agreement.
2. Capacity. The Executive shall initially serve the Employer as the
Executive Vice President of the Carnegie Group division of the Employer (the
"Carnegie Group"). The Executive shall be responsible for overseeing the
operations of the Carnegie Group and shall report to the President and Chief
Executive Officer of the Employer (the "President and Chief Executive
Officer"). From and after July 1, 1999, the Executive shall also serve the
Employer in such other and additional offices as the Executive may be
requested to serve by the President and the Chief Executive Officer. The
Executive acknowledges and agrees that the Executive's employment by the
Employer is at will and nothing contained in this Agreement shall be construed
as creating any term of employment of the Executive with the Employer. Subject
to the provisions of Section 5(c), the Executive agrees that while he is
employed by the Employer, he may be required to perform the Employer's
business in, or relocate for short term or long term to, geographic locations
other than the location to which he is originally assigned.
3. Compensation and Benefits. The regular compensation and benefits payable
to the Executive under this Agreement shall be as follows:
(a) Salary. For all services rendered by the Executive under this
Agreement, the Employer shall pay the Executive a salary (the "Salary") at
the annual rate of Two Hundred Forty Thousand Dollars ($240,000). The
Salary shall be payable twice per month and, initially, shall be payable at
the rate of $10,000 per payment. The Executive's Salary shall be reviewed
annually beginning on July 1, 1999 in accordance with the Employer's normal
compensation review policies. The Executive's Salary shall not be reduced
below $240,000 in the period up to November 1, 1999 and any increase in the
Executive's Salary effected as a result of the July 1, 1999 annual
compensation review shall be implemented retroactively to April 1, 1999.
(b) Bonus. The Executive shall be entitled to receive such bonus to which
the Executive would otherwise have been entitled under the Carnegie Group,
Inc. Short-Term Incentive Compensation/Bonus Pool (the "Carnegie Bonus
Plan") for the fiscal year ending December 31, 1998 had the Merger (as
defined in the Agreement and Plan of Merger, dated September 30, 1998 (the
"Merger Agreement"), among the Employer, Logica Acquisition Corp. and
Carnegie Group, Inc.) not been consummated. The financial objectives of the
Carnegie Bonus Plan applicable to the Executive shall be based upon the
financial objectives previously provided to the Employer in writing;
provided, however, that all legal, accounting and financial advisors fees
and expenses in connection with the negotiation and execution of the Merger
Agreement and the transactions contemplated thereby incurred by Carnegie
Group, Inc. ("Carnegie") and all severance costs incurred by Carnegie as a
result of the transaction contemplated by the Merger Agreement up to and
including December 31, 1998, as determined in accordance with generally
accepted accounting principles consistently applied, shall be excluded from
the determination of whether such financial objectives have been achieved.
In addition, the Executive shall be eligible to receive a transition bonus
contingent upon the Executive achieving certain objectives that are more
fully described on Exhibit A hereto. If Executive shall be employed by
Employer after July 1, 1999, then from and after such date Executive shall
be entitled to participate in the Logica Management Bonus Scheme pursuant
to the terms then in effect. A general description of the terms of the
Logica Management Bonus Scheme is set forth on Exhibit A hereto.
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<PAGE>
(c) Regular Benefits. The Executive shall also be entitled to participate
in employee benefit plans to the extent provided in Section 7.11 of the
Merger Agreement. Such participation shall be subject to the terms of the
applicable plan documents, generally applicable policies of the Employer
and applicable law. Nothing contained in this Agreement shall be construed
to create any obligation on the part of the Employer to establish any such
plan or to maintain the effectiveness of any such plan which may be in
effect from time to time.
(d) Taxation of Payments and Benefits. The Employer shall undertake to
make deductions, withholdings and tax reports with respect to payments and
benefits under this Agreement to the extent that it reasonably and in good
faith believes that it is required to make such deductions, withholdings
and tax reports. Payments under this Agreement shall be in amounts net of
any such deductions or withholdings. Nothing in this Agreement shall be
construed to require the Employer to make any payments to compensate the
Executive for any adverse tax effect associated with any payments or
benefits or for any deduction or withholding from any payment or benefit.
(e) Exclusivity of Salary and Benefits. The Executive shall not be
entitled to any payments or benefits other than those provided under this
Agreement, the Exhibits attached hereto and the Loan Termination Agreement
of even date herewith between the Executive and Carnegie (the "Loan
Termination Agreement").
(f) Stock Options. In exchange for the cancellation of all options to
acquire shares of common stock of Carnegie held by the Executive
immediately prior to the Effective Time (as defined in the Merger
Agreement), the Executive shall be entitled to receive the consideration
set forth on Exhibit B hereto.
4. Extent of Service. During the Executive's employment under this
Agreement, the Executive shall, subject to the direction and supervision of
the President and Chief Executive Officer of the Employer, devote the
Executive's full business time, best efforts and business judgment, skill and
knowledge to the advancement of the Employer's interests and to the discharge
of the Executive's duties and responsibilities under this Agreement. The
Executive shall not engage in any other business activity.
5. Termination and Severance.
(a) Termination by the Executive. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Executive by written notice to the Board of
Directors at least thirty (30) days prior to such termination.
(b) Termination by the Employer. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Employer upon thirty (30) days' written notice to
the Executive.
(c) Constructive Termination. The Executive's employment hereunder shall
be deemed to have been terminated by the Employer if at any time prior to
the Anniversary Date (as hereinafter defined), the Executive resigns due to
(a) a material diminution by the Employer of the Executive's title or
responsibilities, as that title and those responsibilities existed on the
day prior to the date of resignation by the Executive, (b) any diminution
by the Employer in the Executive's salary, except as specified in this
Agreement, (c) any material diminution by the Employer in the Executive's
benefits or incentives or other forms of compensation except as specified
in this Agreement, or (d) any reassignment of the Executive or relocation
of the Executive outside of the greater Pittsburgh area effected without
the Executive's written consent at the time of reassignement.
(d) Severance Pay. Unless otherwise specifically provided in this
Agreement or otherwise required by law, all compensation and benefits
payable to the Executive under this Agreement shall terminate on the date
of termination of the Executive's employment under this Agreement.
Notwithstanding the foregoing, (A) in the event that the Executive
terminates his employment with the Employer in accordance with Section 5(a)
with an effective date, (i) between the Closing Date and the first
anniversary of the Closing Date (the "Anniversary Date"), the Executive
will not be entitled to receive any compensation or other payments from the
Employer, (ii) on the date which is the Anniversary Date, the Employer
shall continue
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<PAGE>
to pay the Executive's Salary at the rate in effect as of the Closing Date
and the Executive's Benefits (as hereinafter defined) for a period of
twelve (12) months from the termination date, or (iii) on any date after
the Anniversary Date, the Executive will not be entitled to receive any
compensation or other payments from the Employer, and (B) in the event that
the Employer terminates the Executive's employment in accordance with
Section 5(b) or by virtue of Section 5(c) at any time with an effective
date (i) after the Closing Date but on or prior to the date that is twelve
(12) months after the Closing Date, the Employer shall continue to pay the
Executive's Salary at the rate in effect as of the Closing Date until the
second anniversary of the Closing Date and the Executive's Benefits for a
period of twelve (12) months after the termination date, (ii) after the
date that is twelve (12) months after the Closing Date and before the date
which is eighteen (18) months after the Closing Date, the Employer shall
continue to pay the Executive's Salary at the rate in effect as of the
Closing Date and the Executive's Benefits until the second anniversary of
the Closing Date, or (iii) after the date which is eighteen months after
the Closing Date, the Employer shall continue to pay the Executive's Salary
at the rate in effect as of the Closing Date and the Executive's Benefits
for a period of six (6) months after the termination date. For purposes of
this Section 5(d), "Benefits" shall mean the benefits received by the
Executive by virtue of his participation in the Employer's medical and
dental benefit plans. Notwithstanding anything to the contrary provided
herein, upon any termination of the Executive hereunder, the Executive
shall be entitled to the payment of all salary earned and unpaid, and all
accrued but unpaid vacation pay, as of the termination date, and any
unreimbursed business expenses incurred by the Executive up to the
termination date.
6. Confidential Information, Noncompetition and Cooperation.
(a) Confidential Information. As used in this Agreement, "Confidential
Information" means information belonging to the Employer which is of value
to the Employer in the course of conducting its business and the disclosure
of which could result in a competitive or other disadvantage to the
Employer. Confidential Information includes, without limitation, financial
information, reports, and forecasts; inventions, improvements,
copyrightable materials and other intellectual property; working methods
and operations, methodologies, marketing plans and strategies and sales
reports; trade secrets; know-how and other information used in research,
development, marketing, sales and operational activities; programs;
processes; product ideas, models, techniques, designs and formulae;
software; data; customer lists; and business plans, prospects and
opportunities (such as possible acquisitions or dispositions of businesses
or facilities) which have been discussed or considered by the management of
the Employer. Confidential Information also includes any commercial or
technical information, improvements, or things which may be communicated to
the Executive or of which the Executive may learn by virtue of his
employment by the Employer, or of which the Executive may have gained
knowledge, or discovered, invented, or perfected while employed by the
Employer, including without limitation, any ideas or processes relating to
the development, operation, or improvement of any software or other
program, product, tool, article, or process sold, licensed, distributed or
maintained by the Employer or its customers. Confidential Information also
includes the confidential information of others with which the Employer has
a business relationship. Notwithstanding the foregoing, Confidential
Information does not include information in the public domain, unless due
to breach of the Executive's duties under Section 6(b).
(b) Confidentiality. The Executive understands and agrees that the
Executive's employment creates a relationship of confidence and trust
between the Executive and the Employer with respect to all Confidential
Information. At all times, both during the Executive's employment with the
Employer and after its termination, the Executive will keep in confidence
and trust all such Confidential Information, and will not use or disclose
any such Confidential Information without the written consent of the
Employer, except as may be necessary in the ordinary course of performing
the Executive's duties to the Employer.
(c) Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to
Confidential Information, which are furnished to the Executive by the
Employer or are produced by the Executive in connection with the
Executive's employment will be and remain the sole property of the
Employer. The Executive will return to the Employer all such materials and
property as and when requested by the Employer. In any event, the Executive
will return all such
3
<PAGE>
materials and property immediately upon termination of the Executive's
employment for any reason. The Executive will not retain with the Executive
any such material or property or any copies thereof after such termination.
(d) Noncompetition and Nonsolicitation. At any time during the
Executive's employment with the Employer and (A) in the case of any
termination of the Executive's employment hereunder pursuant to Section
5(a), for one (1) year thereafter, and (B) in the case of any termination
of the Executive's employment hereunder pursuant to Section 5(b) or 5(c),
for six (6) months thereafter, the Executive (i) will not, directly or
indirectly, whether as owner, partner, shareholder, consultant, agent,
employee, co-venturer or otherwise, engage, participate, assist or invest
in any Competing Business (as hereinafter defined); (ii) offer to perform
or perform business or services of a kind carried on by the Employer now or
at any time during the Executive's employment by the Employer, or otherwise
solicit employment or business from, consult with or accept employment from
any of the Employer's customers, or any Competing Business; (iii) will
refrain from directly or indirectly employing, attempting to employ,
recruiting or otherwise soliciting, inducing or influencing any person to
leave employment with the Employer (other than terminations of employment
of subordinate employees undertaken in the course of the Executive's
employment with the Employer); and (iv) will refrain from soliciting or
encouraging any customer or supplier to terminate or otherwise modify
adversely its business relationship with the Employer. The Executive
understands that the restrictions set forth in this Section 6(d) are
intended to protect the Employer's interest in its Confidential Information
and established employee, customer and supplier relationships and goodwill,
and agrees that such restrictions are reasonable and appropriate for this
purpose. For purposes of this Agreement, the term "Competing Business"
shall mean (A) from and after July 1, 1999, a business that is competitive
with any business which the Employer or any of its affiliates conducts or
proposes to conduct at any time during the employment of the Executive, and
(B) up to July 1, 1999, a business that is competitive with any business
which Carnegie or any of its subsidiaries conducts or proposes to conduct
at any time during the employment of the Executive. Notwithstanding the
foregoing, the Executive may own up to one percent (1%) of the outstanding
stock of a publicly held corporation which constitutes or is affiliated
with a Competing Business.
(e) Third-Party Agreements and Rights. The Executive hereby confirms that
the Executive is not bound by the terms of any agreement with any previous
employer or other party which restricts in any way the Executive's use or
disclosure of information or the Executive's engagement in any business,
except as set forth on Exhibit C hereto. The Executive represents to the
Employer that the Executive's execution of this Agreement, the Executive's
employment with the Employer and the performance of the Executive's
proposed duties for the Employer will not violate any obligations the
Executive may have to any such previous employer or other party. In the
Executive's work for the Employer, the Executive will not disclose or make
use of any information in violation of any agreements with or rights of any
such previous employer or other party, and the Executive will not bring to
the premises of the Employer any copies or other tangible embodiments of
non-public information belonging to or obtained from any such previous
employment or other party.
(f) The Executive agrees to disclose promptly to the Employer any and all
Developments (as defined below) which are made, invented, developed, or
discovered by the Executive, either singly or jointly with others, in the
course of his employment by the Employer and within six (6) months after
termination of such employment. The Executive also agrees that such
Developments are works made for hire and are or shall become the exclusive
property of the Employer, and that he relinquishes any and all intellectual
property rights and/or other rights in the Developments to the Employer,
including by way of example but without limitation, rights of
identification or authorship and rights of approval with respect to
modifications and limitations on subsequent modifications. In order to
effectuate ownership by the Employer when necessary, the Employee agrees,
without further consideration:
(i) to immediately upon the Employer's request execute all documents
and make all assignments necessary to vest title to such Developments
in the Employer; and
4
<PAGE>
(ii) to assist the Employer in any reasonable manner to obtain for
the benefit of the Employer any patents or copyrights on such
Developments, in any and all countries; and
(iii) to execute when requested any and all patent and copyright
applications and any other lawful documents deemed necessary by the
Employer to carry out the purposes of this Agreement.
If the Executive is called upon to render the assistance described
above to the Employer after termination of employment, he will be
entitled to a fair and reasonable per diem fee in addition to
reimbursement of expenses incurred at the Employer's request.
"Developments" include, by way of example but without limitation, the
following: any and all inventions, improvements, discoveries,
developments, results of research, or useful ideas, whether or not
patentable, which relate in any manner to any software or other
programs, products, work or other business of the Employer or any
customer of the Employer, or to any process, apparatus, equipment, or
article worked on in connection with the Executive's employment by the
Employer.
(g) Litigation and Regulatory Cooperation. During and after the
Executive's employment, the Executive shall cooperate fully with the
Employer in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Employer which relate to events or occurrences that transpired while the
Executive was employed by the Employer or by Carnegie Group, Inc. The
Executive's full cooperation in connection with such claims or actions
shall include, but not be limited to, being available to meet with counsel
to prepare for discovery or trial and to act as a witness on behalf of the
Employer at mutually convenient times. During and after the Executive's
employment, the Executive also shall cooperate fully with the Employer in
connection with any investigation or review of any federal, state or local
regulatory authority as any such investigation or review relates to events
or occurrences that transpired while the Executive was employed by the
Employer. The Employer shall reimburse the Executive for any reasonable
out-of-pocket expenses incurred in connection with the Executive's
performance of obligations pursuant to this Section 6(g).
(h) Injunction. The Executive agrees that it would be difficult to
measure any damages caused to the Employer which might result from any
breach by the Executive of the promises set forth in this Section 6, and
that in any event money damages would be an inadequate remedy for any such
breach. Accordingly, subject to Section 8 of this Agreement, the Executive
agrees that if the Executive breaches, or proposes to breach, any portion
of this Agreement, the Employer shall be entitled, in addition to all other
remedies that it may have, to an injunction or other appropriate equitable
relief to restrain any such breach without showing or proving any actual
damage to the Employer.
7. Consent to Jurisdiction. The parties hereby consent to the jurisdiction
of the Superior Court of the Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts. Accordingly, with
respect to any such court action, the Executive (a) submits to the personal
jurisdiction of such courts; (b) consents to service of process; and (c)
waives any other requirement (whether imposed by statute, rule of court, or
otherwise) with respect to personal jurisdiction or service of process.
8. Integration. This Agreement, the Exhibits attached hereto and the Loan
Termination Agreement constitute the entire agreement between the parties with
respect to the subject matter hereof and supersede all prior agreements
between the parties with respect to any related subject matter.
9. Assignment; Successors and Assigns, etc. Neither the Employer nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employer may assign its rights under this
Agreement without the consent of the Executive in the event that the Employer
shall effect a reorganization, consolidate with or merge into any other
corporation, partnership, organization or other entity, or transfer all or
substantially all of its properties or assets to any other corporation,
partnership, organization or other entity. This Agreement shall inure to the
benefit of and be binding upon the Employer and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
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<PAGE>
10. Enforceability. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of
this Agreement) shall to any extent be declared illegal or unenforceable by a
court of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless made
in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to
the Executive at the last address the Executive has filed in writing with the
Employer or, in the case of the Employer, at its main offices, attention of
the Chief Executive Officer, and shall be effective on the date of delivery in
person or by courier or three (3) days after the date mailed.
13. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Employer.
14. Governing Law. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts, without giving effect to the conflict of laws principles of
such Commonwealth. With respect to any disputes concerning federal law, such
disputes shall be determined in accordance with the law as it would be
interpreted and applied by the United States Court of Appeals for the First
Circuit.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to
be an original; but such counterparts shall together constitute one and the
same document.
16. Effectiveness. This Agreement is conditioned and shall become effective
only upon consummation of the Merger, which shall be deemed to occur only upon
and as of the Closing Date.
In Witness Whereof, this Agreement has been executed as a sealed instrument
by the Employer, by its duly authorized officer, and by the Executive, as of
the Effective Date.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
/s/ Dennis Yablonsky
_____________________________________
Dennis Yablonsky
6
<PAGE>
EXHIBIT A
I. TRANSITION BONUS
For the transition period between November 1, 1998 through June 30, 1999,
upon achievement of 100% of certain financial objectives by the Carnegie Group
(the "Carnegie Group Objectives"), the Executive will be eligible to receive a
cash bonus of $56,250 (the "Objective Bonus"). The Carnegie Group Objectives
shall be based upon the financial objectives previously provided to the
Employer in writing; provided, however, that the severance costs relating to
the employment of the Dennis Yablonsky, John Manzetti, Bruce Russell and
Raymond Kalustyan (collectively, the "Carnegie Group Executive Team") with
Carnegie, and all legal, accounting and financial advisors fees and expenses
in connection with the negotiation and execution of the Merger Agreement and
the transactions contemplated thereby incurred by Carnegie up, as determined
in accordance with generally accepted accounting principles consistently
applied, shall be excluded from the determination of whether the Carnegie
Group Objectives have been achieved. If the Carnegie Group achieves a
percentage between 70% and 100% of the Carnegie Group Objectives, the
Executive will be eligible to receive a bonus equal to that same percentage of
the Objective Bonus, and at a percentage less than 70% of the Carnegie Group
Objectives no bonus will be paid; provided, however, that if between 70% and
100% of the Carnegie Group Objectives are achieved, the President and Chief
Executive Officer may, in his sole discretion, award a higher percentage of
the Objective Bonus but not greater than 100%. To receive more than 100% of
the Objective Bonus, the Executive must achieve at least 100% of the Carnegie
Group Objectives as well as additional quantitative objectives in the areas of
pull through of revenue for the Employer and net savings and efficiencies
generated by the Carnegie Group Executive Team.
II. LOGICA MANAGEMENT BONUS SCHEME
For the fiscal year between July 1, 1999 and June 30, 2000, the Executive
will be entitled to participate in the Logica Management Bonus Scheme as is
then in effect, a current copy of which is attached hereto.
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EXHIBIT B
STOCK OPTIONS
Each Option (as defined in the Merger Agreement) that is outstanding
(whether or not exercisable) as of immediately prior to the Effective Time (as
defined in the Merger Agreement) and which has not been exercised or canceled
prior thereto, shall, at the Effective Time, be canceled, and upon the
surrender and cancellation of the option agreement representing such Option
and delivery of an Option Termination (as defined in the Merger Agreement),
the Executive shall receive the following consideration therefor:
(i) With respect to each Option having an exercise price less than $5.00
per share, the Option Consideration (as defined in the Merger
Agreement); and
(ii) With respect to each Option having an exercise price greater than or
equal to $5.00 per share, an option to acquire such number of ordinary
shares of 10 pence each of Logica plc ("Ordinary Shares") as is
determined pursuant to the formula set forth below:
[(N X EP) / ER] / PLC Share Price
N=Number of shares of common stock of Carnegie represented by the
Option
EP=Exercise Price of the Option
ER= Exchange Rate ($/(Pounds)) (based on the exchange rate in U.S.
Dollars per British Pounds, as reported in the Financial Times on
the date on which the Effective Time occurs)
PLC Share Price= Middle market quotation from the London Stock Exchange
daily official list for an Ordinary Share as reported
on the date on which the Effective Time occurs
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EXHIBIT C
THIRD-PARTY AGREEMENTS
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EMPLOYMENT AGREEMENT
This Agreement (the "Agreement") is made as of September 30, 1998, by and
between Logica Inc., a Delaware corporation with its headquarters located in
Lexington, Massachusetts (the "Employer"), and John Manzetti (the
"Executive"), but it shall become effective only in accordance with Section 16
below. In consideration of the mutual covenants contained in this Agreement,
the Employer and the Executive agree as follows:
1. Employment. The Employer agrees to employ the Executive and the Executive
agrees to be employed by the Employer on the terms and conditions set forth in
this Agreement.
2. Capacity. The Executive shall initially serve the Employer as the Senior
Vice President--Finance and Government Operations of the Carnegie Group
division of the Employer (the "Carnegie Group"). The Executive shall be
responsible for facilitating the transition of the operations of Carnegie
Group, Inc. to the Employer and overseeing the Carnegie Group's government
operations and shall generally report to the Executive Vice President of the
Carnegie Group and for the purposes of the transition and integration to the
President and the Chief Executive Officer of the Employer (the "President and
Chief Executive Officer"). From and after July 1, 1999, the Executive shall
also serve the Employer in such other and additional offices as the Executive
may be requested to serve by the President and Chief Executive Officer. The
Executive acknowledges and agrees that the Executive's employment by the
Employer is at will and nothing contained in this Agreement shall be construed
as creating any term of employment of the Executive with the Employer. Subject
to the provisions of Section 5(c), the Executive agrees that while he is
employed by the Employer, he may be required to perform the Employer's
business in, or relocate for short term or long term to, geographic locations
other than the location to which he is originally assigned.
3. Compensation and Benefits. The regular compensation and benefits payable
to the Executive under this Agreement shall be as follows:
(a) Salary. For all services rendered by the Executive under this
Agreement, the Employer shall pay the Executive a salary (the "Salary") at
the annual rate of Two Hundred Thousand and Four Dollars ($200,004). The
Salary shall be payable twice per month and, initially, shall be payable at
the rate of $8,333.50 per payment. The Executive's Salary shall be reviewed
annually beginning on July 1, 1999 in accordance with the Employer's normal
compensation review policies. The Executive's Salary shall not be reduced
below $200,004 in the period up to November 1, 1999 and any increases in
the Executive's Salary effected as a result of the July 1, 1999 annual
compensation review shall be implemented retroactively to April 1, 1999.
(b) Bonus. The Executive shall be entitled to receive such bonus to which
the Executive would otherwise have been entitled under the Carnegie Group,
Inc. Short-Term Incentive Compensation/Bonus Pool (the "Carnegie Bonus
Plan") for the fiscal year ending December 31, 1998 had the Merger (as
defined in the Agreement and Plan of Merger, dated September 30, 1998 (the
"Merger Agreement"), among the Employer, Logica Acquisition Corp. and
Carnegie Group, Inc.) not been consummated. The financial objectives of the
Carnegie Bonus Plan applicable to the Executive shall be based upon the
financial objectives previously provided to the Employer in writing;
provided, however, that all legal, accounting and financial advisors fees
and expenses in connection with the negotiation and execution of the Merger
Agreement and the transactions contemplated thereby incurred by Carnegie
Group, Inc. ("Carnegie") and all severance costs incurred by Carnegie as a
result of the transactions contemplated by the Merger Agreement up to and
including December 31, 1998, as determined in accordance with generally
accepted accounting principles consistently applied, shall be excluded from
the determination of whether such financial objectives have been achieved.
In addition, the Executive shall be eligible to receive a transition bonus
contingent upon the Executive achieving certain objectives that are more
fully described on Exhibit A hereto. If Executive shall be employed by
Employer after July 1, 1999, then from and after such date Executive shall
be entitled to participate in the Logica Management Bonus Scheme pursuant
to the terms then in effect. A general description of the terms of the
Logica Management Bonus Scheme is set forth on Exhibit A hereto.
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(c) Regular Benefits. The Executive shall also be entitled to participate
in employee benefit plans to the extent provided in Section 7.11 of the
Merger Agreement. Such participation shall be subject to the terms of the
applicable plan documents, generally applicable policies of the Employer
and applicable law. Nothing contained in this Agreement shall be construed
to create any obligation on the part of the Employer to establish any such
plan or to maintain the effectiveness of any such plan which may be in
effect from time to time.
(d) Taxation of Payments and Benefits. The Employer shall undertake to
make deductions, withholdings and tax reports with respect to payments and
benefits under this Agreement to the extent that it reasonably and in good
faith believes that it is required to make such deductions, withholdings
and tax reports. Payments under this Agreement shall be in amounts net of
any such deductions or withholdings. Nothing in this Agreement shall be
construed to require the Employer to make any payments to compensate the
Executive for any adverse tax effect associated with any payments or
benefits or for any deduction or withholding from any payment or benefit.
(e) Exclusivity of Salary and Benefits. The Executive shall not be
entitled to any payments or benefits other than those provided under this
Agreement and the Exhibits attached hereto.
(f) Stock Options. In exchange for the cancellation of all options to
acquire shares of common stock of Carnegie held by the Executive
immediately prior to the Effective Time (as defined in the Merger
Agreement), the Executive shall be entitled to receive the consideration
set forth on Exhibit B hereto.
4. Extent of Service. During the Executive's employment under this
Agreement, the Executive shall, subject to the direction and supervision of
the President and Chief Executive Officer of the Employer, devote the
Executive's full business time, best efforts and business judgment, skill and
knowledge to the advancement of the Employer's interests and to the discharge
of the Executive's duties and responsibilities under this Agreement. The
Executive shall not engage in any other business activity.
5. Termination and Severance.
(a) Termination by the Executive. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Executive by written notice to the Board of
Directors at least thirty (30) days prior to such termination.
(b) Termination by the Employer. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Employer upon thirty (30) days' written notice to
the Executive.
(c) Constructive Termination. The Executive's employment hereunder shall
be deemed to have been terminated by the Employer if at any time prior to
the Nine-Month Anniversary Date (as hereinafter defined), the Executive
resigns due to (a) a material diminution by the Employer of the Executive's
title or responsibilities, as that title and those responsibilities existed
on the day prior to the date of resignation by the Executive, (b) any
diminution by the Employer in the Executive's salary, except as specified
in this Agreement, (c) any material diminution by the Employer in the
Executive's benefits or incentives or other forms of compensation except as
specified in this Agreement, or (d) any reassignment of the Executive or
relocation of the Executive outside of the greater Pittsburgh area effected
without the Executive's written consent at the time of reassignment.
(d) Severance Pay. Unless otherwise specifically provided in this
Agreement or otherwise required by law, all compensation and benefits
payable to the Executive under this Agreement shall terminate on the date
of termination of the Executive's employment under this Agreement.
Notwithstanding the foregoing and subject to Section 8, (A) in the event
that the Executive terminates his employment with the Employer in
accordance with Section 5(a) with an effective date, (i) between the
Closing Date and the nine months following the Closing Date (the "Nine-
Month Anniversary Date"), the Executive will not be entitled to receive any
compensation or other payments from the Employer, (ii) on the date which is
the Nine-Month Anniversary Date, the Employer shall continue to pay the
Executive's Salary at the rate in effect as of the Closing Date and the
Executive's Benefits (as hereinafter defined) for a period of nine (9)
months from the
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termination date, or (iii) on any date after the Nine-Month Anniversary
Date, the Executive will not be entitled to receive any compensation or
other payments from the Employer, and (B) in the event that the Employer
terminates the Executive's employment in accordance with Section 5(b) or by
virtue of Section 5(c) at any time with an effective date (i) after the
Closing Date but on or prior to the date that is nine (9) months after the
Closing Date, the Employer shall continue to pay the Executive's Salary at
the rate in effect as of the Closing Date until the date that is eighteen
(18) months after the Closing Date and the Executive's Benefits until the
date that is nine (9) months after the termination date, or (ii) after the
date that is nine (9) months after the Closing Date, the Employer shall
continue to pay the Executive's Salary at the rate in effect as of the
Closing Date and the Executive's Benefits for a period of six (6) months
after the termination date. For purposes of this Section 5(d), "Benefits"
shall mean the benefits received by the Executive by virtue of his
participation under the Employer's medical and dental benefit plans.
Notwithstanding anything to the contrary provided herein, upon any
termination of the Executive hereunder, the Executive shall be entitled to
the payment of all salary earned and unpaid, and all accrued but unpaid
vacation pay, as of the termination date, and any unreimbursed business
expenses incurred by the Executive up to the termination date.
6. Confidential Information, Noncompetition and Cooperation.
(a) Confidential Information. As used in this Agreement, "Confidential
Information" means information belonging to the Employer which is of value
to the Employer in the course of conducting its business and the disclosure
of which could result in a competitive or other disadvantage to the
Employer. Confidential Information includes, without limitation, financial
information, reports, and forecasts; inventions, improvements,
copyrightable materials and other intellectual property; working methods
and operations, methodologies, marketing plans and strategies and sales
reports; trade secrets; know-how and other information used in research,
development, marketing, sales and operational activities; programs;
processes; product ideas, models, techniques, designs and formulae;
software; data; customer lists; and business plans, prospects and
opportunities (such as possible acquisitions or dispositions of businesses
or facilities) which have been discussed or considered by the management of
the Employer. Confidential Information also includes any commercial or
technical information, improvements, or things which may be communicated to
the Executive or of which the Executive may learn by virtue of his
employment by the Employer, or of which the Executive may have gained
knowledge, or discovered, invented, or perfected while employed by the
Employer, including without limitation, any ideas or processes relating to
the development, operation, or improvement of any software or other
program, product, tool, article, or process sold, licensed, distributed or
maintained by the Employer or its customers. Confidential Information also
includes the confidential information of others with which the Employer has
a business relationship. Notwithstanding the foregoing, Confidential
Information does not include information in the public domain, unless due
to breach of the Executive's duties under Section 6(b).
(b) Confidentiality. The Executive understands and agrees that the
Executive's employment creates a relationship of confidence and trust
between the Executive and the Employer with respect to all Confidential
Information. At all times, both during the Executive's employment with the
Employer and after its termination, the Executive will keep in confidence
and trust all such Confidential Information, and will not use or disclose
any such Confidential Information without the written consent of the
Employer, except as may be necessary in the ordinary course of performing
the Executive's duties to the Employer.
(c) Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to
Confidential Information, which are furnished to the Executive by the
Employer or are produced by the Executive in connection with the
Executive's employment will be and remain the sole property of the
Employer. The Executive will return to the Employer all such materials and
property as and when requested by the Employer. In any event, the Executive
will return all such materials and property immediately upon termination of
the Executive's employment for any reason. The Executive will not retain
with the Executive any such material or property or any copies thereof
after such termination.
(d) Noncompetition and Nonsolicitation. At any time during the
Executive's employment with the Employer and (A) in the case of any
termination of the Executive's employment hereunder pursuant to
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Section 5(a), for one (1) year thereafter, and (B) in the case of any
termination of the Executive's employment hereunder pursuant to Section
5(b) or 5(c), for six (6) months thereafter, the Executive (i) will not,
directly or indirectly, whether as owner, partner, shareholder, consultant,
agent, employee, co-venturer or otherwise, engage, participate, assist or
invest in any Competing Business (as hereinafter defined); (ii) offer to
perform or perform business or services of a kind carried on by the
Employer now or at any time during the Executive's employment by the
Employer, or otherwise solicit employment or business from, consult with or
accept employment from any of the Employer's customers, or any Competing
Business; (iii) will refrain from directly or indirectly employing,
attempting to employ, recruiting or otherwise soliciting, inducing or
influencing any person to leave employment with the Employer (other than
terminations of employment of subordinate employees undertaken in the
course of the Executive's employment with the Employer); and (iv) will
refrain from soliciting or encouraging any customer or supplier to
terminate or otherwise modify adversely its business relationship with the
Employer. The Executive understands that the restrictions set forth in this
Section 6(d) are intended to protect the Employer's interest in its
Confidential Information and established employee, customer and supplier
relationships and goodwill, and agrees that such restrictions are
reasonable and appropriate for this purpose. For purposes of this
Agreement, the term "Competing Business" shall mean (A) from and after July
1, 1999, a business that is competitive with any business which the
Employer or any of its affiliates conducts or proposes to conduct at any
time during the employment of the Executive, and (B) up to July 1, 1999, a
business that is competitive with any business which Carnegie or any of its
subsidiaries conducts or proposes to conduct at any time during the
employment of the Executive. Notwithstanding the foregoing, the Executive
may own up to one percent (1%) of the outstanding stock of a publicly held
corporation which constitutes or is affiliated with a Competing Business.
(e) Third-Party Agreements and Rights. The Executive hereby confirms that
the Executive is not bound by the terms of any agreement with any previous
employer or other party which restricts in any way the Executive's use or
disclosure of information or the Executive's engagement in any business,
except as set forth on Exhibit C hereto. The Executive represents to the
Employer that the Executive's execution of this Agreement, the Executive's
employment with the Employer and the performance of the Executive's
proposed duties for the Employer will not violate any obligations the
Executive may have to any such previous employer or other party. In the
Executive's work for the Employer, the Executive will not disclose or make
use of any information in violation of any agreements with or rights of any
such previous employer or other party, and the Executive will not bring to
the premises of the Employer any copies or other tangible embodiments of
non-public information belonging to or obtained from any such previous
employment or other party.
(f) The Executive agrees to disclose promptly to the Employer any and all
Developments (as defined below) which are made, invented, developed, or
discovered by the Executive, either singly or jointly with others, in the
course of his employment by the Employer and within six (6) months after
termination of such employment. The Executive also agrees that such
Developments are works made for hire and are or shall become the exclusive
property of the Employer, and that he relinquishes any and all intellectual
property rights and/or other rights in the Developments to the Employer,
including by way of example but without limitation, rights of
identification or authorship and rights of approval with respect to
modifications and limitations on subsequent modifications. In order to
effectuate ownership by the Employer when necessary, the Employee agrees,
without further consideration:
(i) to immediately upon the Employer's request execute all documents
and make all assignments necessary to vest title to such Developments
in the Employer; and
(ii) to assist the Employer in any reasonable manner to obtain for
the benefit of the Employer any patents or copyrights on such
Developments, in any and all countries; and
(iii) to execute when requested any and all patent and copyright
applications and any other lawful documents deemed necessary by the
Employer to carry out the purposes of this Agreement.
If the Executive is called upon to render the assistance described
above to the Employer after termination of employment, he will be
entitled to a fair and reasonable per diem fee in addition to
reimbursement of expenses incurred at the Employer's request.
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"Developments" include, by way of example but without limitation, the
following: any and all inventions, improvements, discoveries,
developments, results of research, or useful ideas, whether or not
patentable, which relate in any manner to any software or other
programs, products, work or other business of the Employer or any
customer of the Employer, or to any process, apparatus, equipment, or
article worked on in connection with the Executive's employment by the
Employer.
(g) Litigation and Regulatory Cooperation. During and after the
Executive's employment, the Executive shall cooperate fully with the
Employer in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Employer which relate to events or occurrences that transpired while the
Executive was employed by the Employer or by Carnegie. The Executive's full
cooperation in connection with such claims or actions shall include, but
not be limited to, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of the Employer at
mutually convenient times. During and after the Executive's employment, the
Executive also shall cooperate fully with the Employer in connection with
any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or
occurrences that transpired while the Executive was employed by the
Employer. The Employer shall reimburse the Executive for any reasonable
out-of-pocket expenses incurred in connection with the Executive's
performance of obligations pursuant to this Section 6(g).
(h) Injunction. The Executive agrees that it would be difficult to
measure any damages caused to the Employer which might result from any
breach by the Executive of the promises set forth in this Section 6, and
that in any event money damages would be an inadequate remedy for any such
breach. Accordingly, subject to Section 8 of this Agreement, the Executive
agrees that if the Executive breaches, or proposes to breach, any portion
of this Agreement, the Employer shall be entitled, in addition to all other
remedies that it may have, to an injunction or other appropriate equitable
relief to restrain any such breach without showing or proving any actual
damage to the Employer.
7. Consent to Jurisdiction. The parties hereby consent to the jurisdiction
of the Superior Court of the Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts. Accordingly, with
respect to any such court action, the Executive (a) submits to the personal
jurisdiction of such courts; (b) consents to service of process; and (c)
waives any other requirement (whether imposed by statute, rule of court, or
otherwise) with respect to personal jurisdiction or service of process.
8. Loan Agreement. Each of the Employer, the Executive and Carnegie agrees
that notwithstanding the provisions of Section 1.1 of the Loan Agreement,
dated December 15, 1997 (the "Loan Agreement"), by and between Carnegie and
the Executive, the Principal Sum (as defined in the Loan Agreement), together
with interest as provided in said Section 1.1, shall be repaid in a single
installment on the third anniversary of the Effective Date. Each of the
Employer, the Executive and Carnegie further agrees that one-half of the Net
Portion (as hereinafter defined) of any bonus amount otherwise payable
pursuant to Section 3 hereunder (a "Bonus Amount") shall, in lieu of being
paid to the Executive, be credited against the Principal Sum and the Principal
Sum shall be deemed to have been reduced accordingly. For purposes hereof, the
term "Net Portion" shall mean that portion of any Bonus Amount that remains
after the Employer has withheld all federal, state and local taxes required to
be withheld from such Bonus Amount. In the event of any termination of the
Executive's employment pursuant to Section 5 hereunder, any Salary otherwise
payable to the Executive pursuant to Section 5(d) hereof shall, in lieu of
being paid to the Executive in accordance with said Section 5(d), be credited
against the Principal Sum, plus any accrued interest thereon as provided in
the Loan Agreement, then outstanding as of the date of such termination. Any
Salary remaining after the repayment in full of the Principal Sum and interest
as provided in the foregoing sentence shall be paid by the Employer to the
Executive in accordance with Section 5(d).
9. Integration. This Agreement, the Exhibits attached hereto and the Loan
Agreement constitute the entire agreement between the parties with respect to
the subject matter hereof and supersede all prior agreements between the
parties with respect to any related subject matter.
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10. Assignment; Successors and Assigns, etc. Neither the Employer nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employer may assign its rights under this
Agreement without the consent of the Executive in the event that the Employer
shall effect a reorganization, consolidate with or merge into any other
corporation, partnership, organization or other entity, or transfer all or
substantially all of its properties or assets to any other corporation,
partnership, organization or other entity. This Agreement shall inure to the
benefit of and be binding upon the Employer and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
11. Enforceability. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of
this Agreement) shall to any extent be declared illegal or unenforceable by a
court of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
12. Waiver. No waiver of any provision hereof shall be effective unless made
in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
13. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to
the Executive at the last address the Executive has filed in writing with the
Employer or, in the case of the Employer, at its main offices, attention of
the Chief Executive Officer, and shall be effective on the date of delivery in
person or by courier or three (3) days after the date mailed.
14. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Employer.
15. Governing Law. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts, without giving effect to the conflict of laws principles of
such Commonwealth. With respect to any disputes concerning federal law, such
disputes shall be determined in accordance with the law as it would be
interpreted and applied by the United States Court of Appeals for the First
Circuit.
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to
be an original; but such counterparts shall together constitute one and the
same document.
17. Effectiveness. This Agreement is conditioned and shall become effective
only upon consummation of the Merger, which shall be deemed to occur only upon
and as of the Closing Date.
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In Witness Whereof, this Agreement has been executed as a sealed instrument
by the Employer, by its duly authorized officer, and by the Executive, as of
the Effective Date.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
/s/ John Manzetti
_____________________________________
John Manzetti
Solely With Respect to Section 8:
Carnegie Group, Inc.
/s/ Dennis Yablonsky
By: _________________________________
Name: Dennis Yablonsky
Title:President and Chief
Executive Officer
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EXHIBIT A
I. TRANSITION BONUS
For the transition period between November 1, 1998 through June 30, 1999,
upon achievement of 100% of certain financial objectives by the Carnegie Group
(the "Carnegie Group Objectives"), the Executive will be eligible to receive a
cash bonus of $37,500 (the "Objective Bonus"). The Carnegie Group Objectives
shall be based upon the financial objectives previously provided to the
Employer in writing; provided, however, that the severance costs relating to
the employment of the Dennis Yablonsky, John Manzetti, Bruce Russell and
Raymond Kalustyan (collectively, the "Carnegie Group Executive Team") with
Carnegie Group, Inc., and all legal, accounting and financial advisors fees
and expenses in connection with the negotiation and execution of the Merger
Agreement and the transactions contemplated thereby incurred by Carnegie, as
determined in accordance with generally accepted accounting principles
consistently applied, shall be excluded from the determination of whether the
Carnegie Group Objectives have been achieved. If the Carnegie Group achieves a
percentage between 70% and 100% of the Carnegie Group Objectives, the
Executive will be eligible to receive a bonus equal to that same percentage of
the Objective Bonus, and at a percentage less than 70% of the Carnegie Group
Objectives no bonus will be paid; provided, however, that if between 70% and
100% of the Carnegie Group Objectives are achieved, the President and Chief
Executive Officer may, in his sole discretion, award a higher percentage of
the Objective Bonus but not greater than 100%. To receive more than 100% of
the Objective Bonus, the Executive must achieve at least 100% of the Carnegie
Group Objectives as well as additional quantitative objectives in the areas of
pull through of revenue for the Employer and net savings and efficiencies
generated by the Carnegie Group Executive Team.
II. LOGICA MANAGEMENT BONUS SCHEME
For the fiscal year between July 1, 1999 and June 30, 2000, the Executive
will be entitled to participate in the Logica Management Bonus Scheme as is
then in effect, a current copy of which is attached hereto.
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EXHIBIT B
STOCK OPTIONS
Each Option (as defined in the Merger Agreement) that is outstanding
(whether or not exercisable) as of immediately prior to the Effective Time (as
defined in the Merger Agreement) and which has not been exercised or canceled
prior thereto, shall, at the Effective Time, be canceled, and upon the
surrender and cancellation of the option agreement representing such Option
and delivery of an Option Termination (as defined in the Merger Agreement),
the Executive shall receive the following consideration therefor:
(i) With respect to each Option having an exercise price less than $5.00
per share, the Option Consideration (as defined in the Merger Agreement);
and
(ii) With respect to each Option having an exercise price greater than or
equal to $5.00 per share, an option to acquire such number of ordinary
shares of 10 pence each of Logica plc ("Ordinary Shares") as is determined
pursuant to the formula set forth below:
[(N X EP) / ER] / PLC Share Price
N=Number of shares of common stock of Carnegie represented by the
Option
EP=Exercise Price of the Option
ER= Exchange Rate ($/(Pounds)) (based on the exchange rate in U.S.
Dollars per British Pounds, as reported in the Financial Times on
the date on which the Effective Time occurs)
PLC Share Price= Middle market quotation from the London Stock Exchange
daily official list for an Ordinary Share as reported
on the date on which the Effective Time occurs
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EXHIBIT C
THIRD-PARTY AGREEMENTS
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EMPLOYMENT AGREEMENT
This Agreement (the "Agreement") is made as of September 30, 1998, by and
between Logica Inc., a Delaware corporation with its headquarters located in
Lexington, Massachusetts (the "Employer"), and Bruce Russell (the
"Executive"), but it shall become effective only in accordance with Section 16
below. In consideration of the mutual covenants contained in this Agreement,
the Employer and the Executive agree as follows:
1. Employment. The Employer agrees to employ the Executive and the Executive
agrees to be employed by the Employer on the terms and conditions set forth in
this Agreement.
2. Capacity. The Executive shall initially serve the Employer as the Senior
Vice President--Engineering of the Carnegie Group division of the Employer
(the "Carnegie Group"), and shall be responsible for overseeing the Carnegie
Group's commercial solutions delivery. The Executive initially shall report
to, and be under the supervision of, the Executive Vice President of Carnegie
Group. From and after July 1, 1999, the Executive shall also serve the
Employer in such other and additional offices as the Executive may be
requested to serve by the President and the Chief Executive Officer of the
Employer (the "President and Chief Executive Officer"). The Executive
acknowledges and agrees that the Executive's employment by the Employer is at
will and nothing contained in this Agreement shall be construed as creating
any term of employment of the Executive with the Employer. Subject to the
provisions of Section 5(c), the Executive agrees that while he is employed by
the Employer, he may be required to perform the Employer's business in, or
relocate for short term or long term to, geographic locations other than the
location to which he is originally assigned.
3. Compensation and Benefits. The regular compensation and benefits payable
to the Executive under this Agreement shall be as follows:
(a) Salary. For all services rendered by the Executive under this
Agreement, the Employer shall pay the Executive a salary (the "Salary") at
the annual rate of Two Hundred Thousand and Four Dollars ($200,004). The
Salary shall be payable twice per month and, initially, shall be payable at
the rate of $8,333.50 per payment. The Executive's Salary shall be reviewed
annually beginning on July 1, 1999 in accordance with the Employer's normal
compensation review policies. The Executive's Salary shall not be reduced
below $200,004 in the period up to November 1, 1999 and any increases in
the Executive's Salary effected as a result of the July 1, 1999 annual
compensation review shall be implemented retroactively to April 1, 1999.
(b) Bonus. The Executive shall be entitled to receive such bonus to which
the Executive would otherwise have been entitled under the Carnegie Group,
Inc. Short-Term Incentive Compensation/Bonus Pool (the "Carnegie Bonus
Plan") for the fiscal year ending December 31, 1998 had the Merger (as
defined in the Agreement and Plan of Merger, dated September 30, 1998 (the
"Merger Agreement"), among the Employer, Logica Acquisition Corp. and
Carnegie Group, Inc.) not been consummated. The financial objectives of the
Carnegie Bonus Plan applicable to the Executive shall be based upon the
financial objectives previously provided to the Employer in writing;
provided, however, that all legal, accounting and financial advisors fees
and expenses in connection with the negotiation and execution of the Merger
Agreement and the transactions contemplated thereby incurred by Carnegie
Group, Inc. ("Carnegie") and all severance costs incurred by Carnegie as a
result of the transactions contemplated by the Merger Agreement up to and
including December 31, 1998, as determined in accordance with generally
accepted accounting principles consistently applied, shall be excluded from
the determination of whether such financial objectives have been achieved.
In addition, the Executive shall be eligible to receive a transition bonus
contingent upon the Executive achieving certain objectives that are more
fully described on Exhibit A hereto. If Executive shall be employed by
Employer after July 1, 1999, then from and after such date Executive shall
be entitled to participate in the Logica Management Bonus Scheme pursuant
to the terms then in effect. A general description of the terms of the
Logica Management Bonus Scheme is set forth on Exhibit A hereto.
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(c) Regular Benefits. The Executive shall also be entitled to participate
in employee benefit plans to the extent provided in Section 7.11 of the
Merger Agreement. Such participation shall be subject to the terms of the
applicable plan documents, generally applicable policies of the Employer
and applicable law. Nothing contained in this Agreement shall be construed
to create any obligation on the part of the Employer to establish any such
plan or to maintain the effectiveness of any such plan which may be in
effect from time to time.
(d) Taxation of Payments and Benefits. The Employer shall undertake to
make deductions, withholdings and tax reports with respect to payments and
benefits under this Agreement to the extent that it reasonably and in good
faith believes that it is required to make such deductions, withholdings
and tax reports. Payments under this Agreement shall be in amounts net of
any such deductions or withholdings. Nothing in this Agreement shall be
construed to require the Employer to make any payments to compensate the
Executive for any adverse tax effect associated with any payments or
benefits or for any deduction or withholding from any payment or benefit.
(e) Exclusivity of Salary and Benefits. The Executive shall not be
entitled to any payments or benefits other than those provided under this
Agreement and the Exhibits attached hereto.
(f) Stock Options. In exchange for the cancellation of all options to
acquire shares of common stock of Carnegie held by the Executive
immediately prior to the Effective Time (as defined in the Merger
Agreement), the Executive shall be entitled to receive the consideration
set forth on Exhibit B hereto.
4. Extent of Service. During the Executive's employment under this
Agreement, the Executive shall, subject to the direction and supervision of
the President and Chief Executive Officer of the Employer, devote the
Executive's full business time, best efforts and business judgment, skill and
knowledge to the advancement of the Employer's interests and to the discharge
of the Executive's duties and responsibilities under this Agreement. The
Executive shall not engage in any other business activity.
5. Termination and Severance.
(a) Termination by the Executive. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Executive by written notice to the Board of
Directors at least thirty (30) days prior to such termination.
(b) Termination by the Employer. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Employer upon thirty (30) days' written notice to
the Executive.
(c) Constructive Termination. The Executive's employment hereunder shall
be deemed to have been terminated by the Employer if at any time prior to
the Nine-Month Anniversary Date (as hereinafter defined), the Executive
resigns due to (a) a material diminution by the Employer of the Executive's
title or responsibilities, as that title and those responsibilities existed
on the day prior to the date of resignation by the Executive, (b) any
diminution by the Employer in the Executive's salary, except as specified
in this Agreement, (c) any material diminution by the Employer in the
Executive's benefits or incentives or other forms of compensation except as
specified in this Agreement, or (d) any reassignment of the Executive or
relocation of the Executive outside of the greater Pittsburgh area effected
without the Executive's written consent at the time of reassignment.
(d) Severance Pay. Unless otherwise specifically provided in this
Agreement or otherwise required by law, all compensation and benefits
payable to the Executive under this Agreement shall terminate on the date
of termination of the Executive's employment under this Agreement.
Notwithstanding the foregoing, (A) in the event that the Executive
terminates his employment with the Employer in accordance with Section 5(a)
with an effective date, (i) between the Closing Date and the nine months
following the Closing Date (the "Nine-Month Anniversary Date"), the
Executive will not be entitled to receive any compensation or other
payments from the Employer, (ii) on the date which is the Nine-Month
Anniversary Date, the Employer shall continue to pay the Executive's Salary
at the rate in effect as of the Closing Date and the Executive's Benefits
(as hereinafter defined) for a period of nine (9) months from the
termination date, or
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(iii) on any date after the Nine-Month Anniversary Date, the Executive will
not be entitled to receive any compensation or other payments from the
Employer, and (B) in the event that the Employer terminates the Executive's
employment in accordance with Section 5(b) or by virtue of Section 5(c) at
any time with an effective date (i) after the Closing Date but on or prior
to the date that is nine (9) months after the Closing Date, the Employer
shall continue to pay the Executive's Salary at the rate in effect as of
the Closing Date until the date that is eighteen (18) months after the
Closing Date and the Executive's Benefits until the date that is nine (9)
months after the termination date, or (ii) after the date that is nine (9)
months after the Closing Date, the Employer shall continue to pay the
Executive's Salary at the rate in effect as of the Closing Date and the
Executive's Benefits for a period of six (6) months after the termination
date. For purposes of this Section 5(d), "Benefits" shall mean the benefits
received by the Executive by virtue of his participation under the
Employer's medical and dental benefit plans. Notwithstanding anything to
the contrary provided herein, upon any termination of the Executive
hereunder, the Executive shall be entitled to the payment of all salary
earned and unpaid, and all accrued but unpaid vacation pay, as of the
termination date, and any unreimbursed business expenses incurred by the
Executive up to the termination date.
6. Confidential Information, Noncompetition and Cooperation.
(a) Confidential Information. As used in this Agreement, "Confidential
Information" means information belonging to the Employer which is of value
to the Employer in the course of conducting its business and the disclosure
of which could result in a competitive or other disadvantage to the
Employer. Confidential Information includes, without limitation, financial
information, reports, and forecasts; inventions, improvements,
copyrightable materials and other intellectual property; working methods
and operations, methodologies, marketing plans and strategies and sales
reports; trade secrets; know-how and other information used in research,
development, marketing, sales and operational activities; programs;
processes; product ideas, models, techniques, designs and formulae;
software; data; customer lists; and business plans, prospects and
opportunities (such as possible acquisitions or dispositions of businesses
or facilities) which have been discussed or considered by the management of
the Employer. Confidential Information also includes any commercial or
technical information, improvements, or things which may be communicated to
the Executive or of which the Executive may learn by virtue of his
employment by the Employer, or of which the Executive may have gained
knowledge, or discovered, invented, or perfected while employed by the
Employer, including without limitation, any ideas or processes relating to
the development, operation, or improvement of any software or other
program, product, tool, article, or process sold, licensed, distributed or
maintained by the Employer or its customers. Confidential Information also
includes the confidential information of others with which the Employer has
a business relationship. Notwithstanding the foregoing, Confidential
Information does not include information in the public domain, unless due
to breach of the Executive's duties under Section 6(b).
(b) Confidentiality. The Executive understands and agrees that the
Executive's employment creates a relationship of confidence and trust
between the Executive and the Employer with respect to all Confidential
Information. At all times, both during the Executive's employment with the
Employer and after its termination, the Executive will keep in confidence
and trust all such Confidential Information, and will not use or disclose
any such Confidential Information without the written consent of the
Employer, except as may be necessary in the ordinary course of performing
the Executive's duties to the Employer.
(c) Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to
Confidential Information, which are furnished to the Executive by the
Employer or are produced by the Executive in connection with the
Executive's employment will be and remain the sole property of the
Employer. The Executive will return to the Employer all such materials and
property as and when requested by the Employer. In any event, the Executive
will return all such materials and property immediately upon termination of
the Executive's employment for any reason. The Executive will not retain
with the Executive any such material or property or any copies thereof
after such termination.
(d) Noncompetition and Nonsolicitation. At any time during the
Executive's employment with the Employer and (A) in the case of any
termination of the Executive's employment hereunder pursuant to Section
5(a), for nine (9) months thereafter, and (B) in the case of any
termination of the Executive's
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employment hereunder pursuant to Section 5(b) or 5(c), for six (6) months
thereafter, the Executive (i) will not, directly or indirectly, whether as
owner, partner, shareholder, consultant, agent, employee, co-venturer or
otherwise, engage, participate, assist or invest in any Competing Business
(as hereinafter defined); (ii) offer to perform or perform business or
services of a kind carried on by the Employer now or at any time during the
Executive's employment by the Employer, or otherwise solicit employment or
business from, consult with or accept employment from any of the Employer's
customers, or any Competing Business; (iii) will refrain from directly or
indirectly employing, attempting to employ, recruiting or otherwise
soliciting, inducing or influencing any person to leave employment with the
Employer (other than terminations of employment of subordinate employees
undertaken in the course of the Executive's employment with the Employer);
and (iv) will refrain from soliciting or encouraging any customer or
supplier to terminate or otherwise modify adversely its business
relationship with the Employer. The Executive understands that the
restrictions set forth in this Section 6(d) are intended to protect the
Employer's interest in its Confidential Information and established
employee, customer and supplier relationships and goodwill, and agrees that
such restrictions are reasonable and appropriate for this purpose. For
purposes of this Agreement, the term "Competing Business" shall mean (A)
from and after July 1, 1999, a business that is competitive with any
business which the Employer or any of its affiliates conducts or proposes
to conduct at any time during the employment of the Executive, and (B) up
to July 1, 1999, a business that is competitive with any business which
Carnegie or any of its subsidiaries conducts or proposes to conduct at any
time during the employment of the Executive. Notwithstanding the foregoing,
the Executive may own up to one percent (1%) of the outstanding stock of a
publicly held corporation which constitutes or is affiliated with a
Competing Business.
(e) Third-Party Agreements and Rights. The Executive hereby confirms that
the Executive is not bound by the terms of any agreement with any previous
employer or other party which restricts in any way the Executive's use or
disclosure of information or the Executive's engagement in any business,
except as set forth on Exhibit C hereto. The Executive represents to the
Employer that the Executive's execution of this Agreement, the Executive's
employment with the Employer and the performance of the Executive's
proposed duties for the Employer will not violate any obligations the
Executive may have to any such previous employer or other party. In the
Executive's work for the Employer, the Executive will not disclose or make
use of any information in violation of any agreements with or rights of any
such previous employer or other party, and the Executive will not bring to
the premises of the Employer any copies or other tangible embodiments of
non-public information belonging to or obtained from any such previous
employment or other party.
(f) The Executive agrees to disclose promptly to the Employer any and all
Developments (as defined below) which are made, invented, developed, or
discovered by the Executive, either singly or jointly with others, in the
course of his employment by the Employer and within six (6) months after
termination of such employment. The Executive also agrees that such
Developments are works made for hire and are or shall become the exclusive
property of the Employer, and that he relinquishes any and all intellectual
property rights and/or other rights in the Developments to the Employer,
including by way of example but without limitation, rights of
identification or authorship and rights of approval with respect to
modifications and limitations on subsequent modifications. In order to
effectuate ownership by the Employer when necessary, the Employee agrees,
without further consideration:
(i) to immediately upon the Employer's request execute all documents
and make all assignments necessary to vest title to such Developments
in the Employer; and
(ii) to assist the Employer in any reasonable manner to obtain for
the benefit of the Employer any patents or copyrights on such
Developments, in any and all countries; and
(iii) to execute when requested any and all patent and copyright
applications and any other lawful documents deemed necessary by the
Employer to carry out the purposes of this Agreement.
If the Executive is called upon to render the assistance described
above to the Employer after termination of employment, he will be
entitled to a fair and reasonable per diem fee in addition to
reimbursement of expenses incurred at the Employer's request.
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"Developments" include, by way of example but without limitation, the
following: any and all inventions, improvements, discoveries,
developments, results of research, or useful ideas, whether or not
patentable, which relate in any manner to any software or other
programs, products, work or other business of the Employer or any
customer of the Employer, or to any process, apparatus, equipment, or
article worked on in connection with the Executive's employment by the
Employer.
(g) Litigation and Regulatory Cooperation. During and after the
Executive's employment, the Executive shall cooperate fully with the
Employer in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Employer which relate to events or occurrences that transpired while the
Executive was employed by the Employer or by Carnegie. The Executive's full
cooperation in connection with such claims or actions shall include, but
not be limited to, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of the Employer at
mutually convenient times. During and after the Executive's employment, the
Executive also shall cooperate fully with the Employer in connection with
any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or
occurrences that transpired while the Executive was employed by the
Employer. The Employer shall reimburse the Executive for any reasonable
out-of-pocket expenses incurred in connection with the Executive's
performance of obligations pursuant to this Section 6(g).
(h) Injunction. The Executive agrees that it would be difficult to
measure any damages caused to the Employer which might result from any
breach by the Executive of the promises set forth in this Section 6, and
that in any event money damages would be an inadequate remedy for any such
breach. Accordingly, subject to Section 8 of this Agreement, the Executive
agrees that if the Executive breaches, or proposes to breach, any portion
of this Agreement, the Employer shall be entitled, in addition to all other
remedies that it may have, to an injunction or other appropriate equitable
relief to restrain any such breach without showing or proving any actual
damage to the Employer.
7. Consent to Jurisdiction. The parties hereby consent to the jurisdiction
of the Superior Court of the Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts. Accordingly, with
respect to any such court action, the Executive (a) submits to the personal
jurisdiction of such courts; (b) consents to service of process; and (c)
waives any other requirement (whether imposed by statute, rule of court, or
otherwise) with respect to personal jurisdiction or service of process.
8. Integration. This Agreement and the Exhibits attached hereto constitute
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior agreements between the parties with respect to
any related subject matter.
9. Assignment; Successors and Assigns, etc. Neither the Employer nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employer may assign its rights under this
Agreement without the consent of the Executive in the event that the Employer
shall effect a reorganization, consolidate with or merge into any other
corporation, partnership, organization or other entity, or transfer all or
substantially all of its properties or assets to any other corporation,
partnership, organization or other entity. This Agreement shall inure to the
benefit of and be binding upon the Employer and the Executive, their
respective successors, executors, administrators, heirs and permitted assigns.
10. Enforceability. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of
this Agreement) shall to any extent be declared illegal or unenforceable by a
court of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless made
in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this
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Agreement, or the waiver by any party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed
a waiver of any subsequent breach.
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to
the Executive at the last address the Executive has filed in writing with the
Employer or, in the case of the Employer, at its main offices, attention of
the Chief Executive Officer, and shall be effective on the date of delivery in
person or by courier or three (3) days after the date mailed.
13. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Employer.
14. Governing Law. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts, without giving effect to the conflict of laws principles of
such Commonwealth. With respect to any disputes concerning federal law, such
disputes shall be determined in accordance with the law as it would be
interpreted and applied by the United States Court of Appeals for the First
Circuit.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to
be an original; but such counterparts shall together constitute one and the
same document.
16. Effectiveness. This Agreement is conditioned and shall become effective
only upon consummation of the Merger, which shall be deemed to occur only upon
and as of the Closing Date.
In Witness Whereof, this Agreement has been executed as a sealed instrument
by the Employer, by its duly authorized officer, and by the Executive, as of
the Effective Date.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
/s/ Bruce Russell
_____________________________________
Bruce Russell
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EXHIBIT A
I. TRANSITION BONUS
For the transition period between November 1, 1998 through June 30, 1999,
upon achievement of 100% of certain financial objectives by the Carnegie Group
(the "Carnegie Group Objectives"), the Executive will be eligible to receive a
cash bonus of $37,500 (the "Objective Bonus"). The Carnegie Group Objectives
shall be based upon the financial objectives previously provided to the
Employer in writing; provided, however, that the severance costs relating to
the employment of the Dennis Yablonsky, John Manzetti, Bruce Russell and
Raymond Kalustyan (collectively, the "Carnegie Group Executive Team") with
Carnegie Group, Inc., and all legal, accounting and financial advisors fees
and expenses in connection with the negotiation and execution of the Merger
Agreement and the transactions contemplated thereby incurred by Carnegie, as
determined in accordance with generally accepted accounting principles
consistently applied, shall be excluded from the determination of whether the
Carnegie Group Objectives have been achieved. If the Carnegie Group achieves a
percentage between 70% and 100% of the Carnegie Group Objectives, the
Executive will be eligible to receive a bonus equal to that same percentage of
the Objective Bonus, and at a percentage less than 70% of the Carnegie Group
Objectives no bonus will be paid; provided, however, that if between 70% and
100% of the Carnegie Group Objectives are achieved, the President and Chief
Executive Officer may, in his sole discretion, award a higher percentage of
the Objective Bonus but not greater than 100%. To receive more than 100% of
the Objective Bonus, the Executive must achieve at least 100% of the Carnegie
Group Objectives as well as additional quantitative objectives in the areas of
pull through of revenue for the Employer and net savings and efficiencies
generated by the Carnegie Group Executive Team.
II. LOGICA MANAGEMENT BONUS SCHEME
For the fiscal year between July 1, 1999 and June 30, 2000, the Executive
will be entitled to participate in the Logica Management Bonus Scheme as is
then in effect, a current copy of which is attached hereto.
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EXHIBIT B
STOCK OPTIONS
Each Option (as defined in the Merger Agreement) that is outstanding
(whether or not exercisable) as of immediately prior to the Effective Time (as
defined in the Merger Agreement) and which has not been exercised or canceled
prior thereto, shall, at the Effective Time, be canceled, and upon the
surrender and cancellation of the option agreement representing such Option
and delivery of an Option Termination (as defined in the Merger Agreement),
the Executive shall receive the following consideration therefor:
(i) With respect to each Option having an exercise price less than $5.00
per share, the Option Consideration (as defined in the Merger Agreement);
and
(ii) With respect to each Option having an exercise price greater than or
equal to $5.00 per share, an option to acquire such number of ordinary
shares of 10 pence each of Logica plc ("Ordinary Shares") as is determined
pursuant to the formula set forth below:
[(N X EP) / ER] / PLC Share Price
N=Number of shares of common stock of Carnegie represented by the
Option
EP=Exercise Price of the Option
ER= Exchange Rate ($/(Pounds)) (based on the exchange rate in U.S.
Dollars per British Pounds, as reported in the Financial Times on
the date on which the Effective Time occurs)
PLC Share Price= Middle market quotation from the London Stock Exchange
daily official list for an Ordinary Share as reported
on the date on which the Effective Time occurs
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EXHIBIT C
THIRD-PARTY AGREEMENTS
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EMPLOYMENT AGREEMENT
This Agreement (the "Agreement") is made as of September 30, 1998, by and
between Logica Inc., a Delaware corporation with its headquarters located in
Lexington, Massachusetts (the "Employer"), and Raymond Kalustyan (the
"Executive"), but it shall become effective only in accordance with Section 16
below. In consideration of the mutual covenants contained in this Agreement,
the Employer and the Executive agree as follows:
1. Employment. The Employer agrees to employ the Executive and the Executive
agrees to be employed by the Employer on the terms and conditions set forth in
this Agreement.
2. Capacity. The Executive shall initially serve the Employer as the Vice
President of the Carnegie Group division of the Employer (the "Carnegie
Group"), and shall be responsible for overseeing commercial business
development of the Carnegie Group. The Executive initially shall report to,
and be supervised by, the Executive Vice President of the Carnegie Group. From
and after July 1, 1999, the Executive shall also serve the Employer in such
other and additional offices as the Executive may be requested to serve by the
President and the Chief Executive Officer of the Employer (the "President and
Chief Executive Officer"). The Executive acknowledges and agrees that the
Executive's employment by the Employer is at will and nothing contained in
this Agreement shall be construed as creating any term of employment of the
Executive with the Employer. Subject to the provisions of Section 5(c), the
Executive agrees that while he is employed by the Employer, he may be required
to perform the Employer's business in, or relocate for short term or long term
to, geographic locations other than the location to which he is originally
assigned.
3. Compensation and Benefits. The regular compensation and benefits payable
to the Executive under this Agreement shall be as follows:
(a) Salary. For all services rendered by the Executive under this
Agreement, the Employer shall pay the Executive a salary (the "Salary") at
the annual rate of One Hundred and Fifty Thousand Dollars ($150,000). The
Salary shall be payable twice per month and, initially, shall be payable at
the rate of $6,250 per payment. The Executive's Salary shall be reviewed
annually beginning on July 1, 1999 in accordance with the Employer's normal
compensation review policies. The Executive's Salary shall not be reduced
below $150,000 in the period up to November 1, 1999 and any increases in
the Executive's Salary effected as a result of the July 1, 1999 annual
compensation review shall be implemented retroactively to April 1, 1999.
(b) Bonus. The Executive shall be entitled to receive such bonus to which
the Executive would otherwise have been entitled under the Carnegie Group,
Inc. Short-Term Incentive Compensation/Bonus Pool (the "Carnegie Bonus
Plan") for the fiscal year ending December 31, 1998 had the Merger (as
defined in the Agreement and Plan of Merger, dated September 30, 1998 (the
"Merger Agreement"), among the Employer, Logica Acquisition Corp. and
Carnegie Group, Inc.) not been consummated. The financial objectives of the
Carnegie Bonus Plan applicable to the Executive shall be based upon the
financial objectives previously provided to the Employer in writing;
provided, however, that all legal, accounting and financial advisors fees
and expenses in connection with the negotiation and execution of the Merger
Agreement and the transactions contemplated thereby incurred by Carnegie
Group, Inc. ("Carnegie") and all severance costs incurred by Carnegie as a
result of the transactions contemplated by the Merger Agreement up to and
including December 31, 1998, as determined in accordance with generally
accepted accounting principles consistently applied, shall be excluded from
the determination of whether such financial objectives have been achieved.
In addition, the Executive shall be eligible to receive a transition bonus
contingent upon the Executive achieving certain objectives that are more
fully described on Exhibit A hereto. If Executive shall be employed by
Employer after July 1, 1999, then from and after such date Executive shall
be entitled to participate in the Logica Management Bonus Scheme pursuant
to the terms then in effect. A general description of the terms of the
Logica Management Bonus Scheme is set forth on Exhibit A hereto. In
addition, at the Effective Time (as defined in the Merger Agreement), the
Executive also shall receive a one-time bonus of $50,000, payable in a lump
sum to the Executive.
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(c) Regular Benefits. The Executive shall also be entitled to participate
in employee benefit plans to the extent provided in Section 7.11 of the
Merger Agreement. Such participation shall be subject to the terms of the
applicable plan documents, generally applicable policies of the Employer
and applicable law. Nothing contained in this Agreement shall be construed
to create any obligation on the part of the Employer to establish any such
plan or to maintain the effectiveness of any such plan which may be in
effect from time to time.
(d) Taxation of Payments and Benefits. The Employer shall undertake to
make deductions, withholdings and tax reports with respect to payments and
benefits under this Agreement to the extent that it reasonably and in good
faith believes that it is required to make such deductions, withholdings
and tax reports. Payments under this Agreement shall be in amounts net of
any such deductions or withholdings. Nothing in this Agreement shall be
construed to require the Employer to make any payments to compensate the
Executive for any adverse tax effect associated with any payments or
benefits or for any deduction or withholding from any payment or benefit.
(e) Exclusivity of Salary and Benefits. The Executive shall not be
entitled to any payments or benefits other than those provided under this
Agreement and the Exhibits attached hereto.
(f) Stock Options. In exchange for the cancellation of all options to
acquire shares of common stock of Carnegie held by the Executive
immediately prior to the Effective Time, the Executive shall be entitled to
receive the consideration set forth on Exhibit B hereto. In addition, the
Executive shall be entitled to receive at the Effective Time an option to
acquire 3,000 ordinary shares of 10 pence each of Logica plc ("Ordinary
Shares") having an exercise price equal to the fair market value of an
Ordinary Share at the Effective Time.
(g) Relocation Expenses. In the event that the Executive's employment
with the Employer is terminated in accordance with Section 5(b) or 5(c)
hereof prior to June 1, 1999, the Employer shall reimburse the Executive
for his reasonable relocation expenses, supported by appropriate
documentation, up to a maximum of $25,000.
4. Extent of Service. During the Executive's employment under this
Agreement, the Executive shall, subject to the direction and supervision of
the President and Chief Executive Officer of the Employer, devote the
Executive's full business time, best efforts and business judgment, skill and
knowledge to the advancement of the Employer's interests and to the discharge
of the Executive's duties and responsibilities under this Agreement. The
Executive shall not engage in any other business activity.
5. Termination and Severance.
(a) Termination by the Executive. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Executive by written notice to the Board of
Directors at least thirty (30) days prior to such termination.
(b) Termination by the Employer. Subject to the payment of severance
pursuant to Section 5(d), the Executive's employment under this Agreement
may be terminated by the Employer upon thirty (30) days' written notice to
the Executive.
(c) Constructive Termination. The Executive's employment hereunder shall
be deemed to have been terminated by the Employer if at any time prior to
the Seventh-Month Anniversary Date (as hereinafter defined), the Executive
resigns due to (a) a material diminution by the Employer of the Executive's
title or responsibilities, as that title and those responsibilities existed
on the day prior to the date of resignation by the Executive, (b) any
diminution by the Employer in the Executive's salary, except as specified
in this Agreement, (c) any material diminution by the Employer in the
Executive's benefits or incentives or other forms of compensation except as
specified in this Agreement, or (d) any reassignment of the Executive or
relocation of the Executive outside of the greater Pittsburgh area effected
without the Executive's written consent at the time of reassignment.
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(d) Severance Pay. Unless otherwise specifically provided in this
Agreement or otherwise required by law, all compensation and benefits
payable to the Executive under this Agreement shall terminate on the date
of termination of the Executive's employment under this Agreement.
Notwithstanding the foregoing, (A) in the event that the Executive
terminates his employment with the Employer in accordance with Section 5(a)
with an effective date (i) between the Closing Date and the seven months
following the Closing Date (the "Seventh-Month Anniversary Date"), the
Executive will not be entitled to receive any compensation or other
payments from the Employer, (ii) on the date which is the Seventh-Month
Anniversary Date, the Employer shall continue to pay the Executive's Salary
at the rate in effect as of the Closing Date and the Executive's Benefits
(as hereinafter defined) for a period of six (6) months from the
termination date, or (iii) on any date after the Seventh-Month Anniversary
Date, the Executive will not be entitled to receive any compensation or
other payments from the Employer, and (B) in the event that the Employer
terminates the Executive's employment in accordance with Section 5(b) or by
virtue of Section 5(c) at any time with an effective date (i) after the
Closing Date but on or prior to the date that is seven (7) months after the
Closing Date, the Employer shall continue to pay the Executive's Salary at
the rate in effect as of the Closing Date until the date that is thirteen
(13) months after the Closing Date and the Executive's Benefits until the
date that is six (6) months after the termination date, or (ii) after the
date that is seven (7) months after the Closing Date, the Employer shall
continue to pay the Executive's Salary at the rate in effect as of the
Closing Date and the Executive's Benefits for a period of six (6) months
after the termination date. For purposes of this Section 5(d), "Benefits"
shall mean the benefits received by the Executive by virtue of his
participation in the Employer's medical and dental benefit plans.
Notwithstanding anything to the contrary provided herein, upon any
termination of the Executive hereunder, the Executive shall be entitled to
the payment of all salary earned and unpaid, and all accrued but unpaid
vacation pay, as of the termination date, and any unreimbursed business
expenses incurred by the Executive up to the termination date.
6. Confidential Information, Noncompetition and Cooperation.
(a) Confidential Information. As used in this Agreement, "Confidential
Information" means information belonging to the Employer which is of value
to the Employer in the course of conducting its business and the disclosure
of which could result in a competitive or other disadvantage to the
Employer. Confidential Information includes, without limitation, financial
information, reports, and forecasts; inventions, improvements,
copyrightable materials and other intellectual property; working methods
and operations, methodologies, marketing plans and strategies and sales
reports; trade secrets; know-how and other information used in research,
development, marketing, sales and operational activities; programs;
processes; product ideas, models, techniques, designs and formulae;
software; data; customer lists; and business plans, prospects and
opportunities (such as possible acquisitions or dispositions of businesses
or facilities) which have been discussed or considered by the management of
the Employer. Confidential Information also includes any commercial or
technical information, improvements, or things which may be communicated to
the Executive or of which the Executive may learn by virtue of his
employment by the Employer, or of which the Executive may have gained
knowledge, or discovered, invented, or perfected while employed by the
Employer, including without limitation, any ideas or processes relating to
the development, operation, or improvement of any software or other
program, product, tool, article, or process sold, licensed, distributed or
maintained by the Employer or its customers. Confidential Information also
includes the confidential information of others with which the Employer has
a business relationship. Notwithstanding the foregoing, Confidential
Information does not include information in the public domain, unless due
to breach of the Executive's duties under Section 6(b).
(b) Confidentiality. The Executive understands and agrees that the
Executive's employment creates a relationship of confidence and trust
between the Executive and the Employer with respect to all Confidential
Information. At all times, both during the Executive's employment with the
Employer and after its termination, the Executive will keep in confidence
and trust all such Confidential Information, and will not use or disclose
any such Confidential Information without the written consent of the
Employer, except as may be necessary in the ordinary course of performing
the Executive's duties to the Employer.
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(c) Documents, Records, etc. All documents, records, data, apparatus,
equipment and other physical property, whether or not pertaining to
Confidential Information, which are furnished to the Executive by the
Employer or are produced by the Executive in connection with the
Executive's employment will be and remain the sole property of the
Employer. The Executive will return to the Employer all such materials and
property as and when requested by the Employer. In any event, the Executive
will return all such materials and property immediately upon termination of
the Executive's employment for any reason. The Executive will not retain
with the Executive any such material or property or any copies thereof
after such termination.
(d) Noncompetition and Nonsolicitation. At any time during the
Executive's employment with the Employer and (A) in the case of any
termination of the Executive's employment hereunder pursuant to Section
5(a), for one (1) year thereafter, and (B) in the case of any termination
of the Executive's employment hereunder pursuant to Section 5(b) or 5(c),
for six (6) months thereafter, the Executive (i) will not, directly or
indirectly, whether as owner, partner, shareholder, consultant, agent,
employee, co-venturer or otherwise, engage, participate, assist or invest
in any Competing Business (as hereinafter defined); (ii) offer to perform
or perform business or services of a kind carried on by the Employer now or
at any time during the Executive's employment by the Employer, or otherwise
solicit employment or business from, consult with or accept employment from
any of the Employer's customers, or any Competing Business; (iii) will
refrain from directly or indirectly employing, attempting to employ,
recruiting or otherwise soliciting, inducing or influencing any person to
leave employment with the Employer (other than terminations of employment
of subordinate employees undertaken in the course of the Executive's
employment with the Employer); and (iv) will refrain from soliciting or
encouraging any customer or supplier to terminate or otherwise modify
adversely its business relationship with the Employer. The Executive
understands that the restrictions set forth in this Section 6(d) are
intended to protect the Employer's interest in its Confidential Information
and established employee, customer and supplier relationships and goodwill,
and agrees that such restrictions are reasonable and appropriate for this
purpose. For purposes of this Agreement, the term "Competing Business"
shall mean (A) from and after July 1, 1999, a business that is competitive
with any business which the Employer or any of its affiliates conducts or
proposes to conduct at any time during the employment of the Executive, and
(B) up to July 1, 1999, a business that is competitive with any business
which Carnegie or any of its subsidiaries conducts or proposes to conduct
at any time during the employment of the Executive. Notwithstanding the
foregoing, the Executive may own up to one percent (1%) of the outstanding
stock of a publicly held corporation which constitutes or is affiliated
with a Competing Business.
(e) Third-Party Agreements and Rights. The Executive hereby confirms that
the Executive is not bound by the terms of any agreement with any previous
employer or other party which restricts in any way the Executive's use or
disclosure of information or the Executive's engagement in any business,
except as set forth on Exhibit C hereto. The Executive represents to the
Employer that the Executive's execution of this Agreement, the Executive's
employment with the Employer and the performance of the Executive's
proposed duties for the Employer will not violate any obligations the
Executive may have to any such previous employer or other party. In the
Executive's work for the Employer, the Executive will not disclose or make
use of any information in violation of any agreements with or rights of any
such previous employer or other party, and the Executive will not bring to
the premises of the Employer any copies or other tangible embodiments of
non-public information belonging to or obtained from any such previous
employment or other party.
(f) The Executive agrees to disclose promptly to the Employer any and all
Developments (as defined below) which are made, invented, developed, or
discovered by the Executive, either singly or jointly with others, in the
course of his employment by the Employer and within six (6) months after
termination of such employment. The Executive also agrees that such
Developments are works made for hire and are or shall become the exclusive
property of the Employer, and that he relinquishes any and all intellectual
property rights and/or other rights in the Developments to the Employer,
including by way of example but without limitation, rights of
identification or authorship and rights of approval with respect to
modifications and limitations on subsequent modifications. In order to
effectuate ownership by the Employer when necessary, the Employee agrees,
without further consideration:
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(i) to immediately upon the Employer's request execute all documents
and make all assignments necessary to vest title to such Developments
in the Employer; and
(ii) to assist the Employer in any reasonable manner to obtain for
the benefit of the Employer any patents or copyrights on such
Developments, in any and all countries; and
(iii) to execute when requested any and all patent and copyright
applications and any other lawful documents deemed necessary by the
Employer to carry out the purposes of this Agreement.
If the Executive is called upon to render the assistance described
above to the Employer after termination of employment, he will be
entitled to a fair and reasonable per diem fee in addition to
reimbursement of expenses incurred at the Employer's request.
"Developments" include, by way of example but without limitation, the
following: any and all inventions, improvements, discoveries,
developments, results of research, or useful ideas, whether or not
patentable, which relate in any manner to any software or other
programs, products, work or other business of the Employer or any
customer of the Employer, or to any process, apparatus, equipment, or
article worked on in connection with the Executive's employment by the
Employer.
(g) Litigation and Regulatory Cooperation. During and after the
Executive's employment, the Executive shall cooperate fully with the
Employer in the defense or prosecution of any claims or actions now in
existence or which may be brought in the future against or on behalf of the
Employer which relate to events or occurrences that transpired while the
Executive was employed by the Employer or by Carnegie. The Executive's full
cooperation in connection with such claims or actions shall include, but
not be limited to, being available to meet with counsel to prepare for
discovery or trial and to act as a witness on behalf of the Employer at
mutually convenient times. During and after the Executive's employment, the
Executive also shall cooperate fully with the Employer in connection with
any investigation or review of any federal, state or local regulatory
authority as any such investigation or review relates to events or
occurrences that transpired while the Executive was employed by the
Employer. The Employer shall reimburse the Executive for any reasonable
out-of-pocket expenses incurred in connection with the Executive's
performance of obligations pursuant to this Section 6(g).
(h) Injunction. The Executive agrees that it would be difficult to
measure any damages caused to the Employer which might result from any
breach by the Executive of the promises set forth in this Section 6, and
that in any event money damages would be an inadequate remedy for any such
breach. Accordingly, subject to Section 8 of this Agreement, the Executive
agrees that if the Executive breaches, or proposes to breach, any portion
of this Agreement, the Employer shall be entitled, in addition to all other
remedies that it may have, to an injunction or other appropriate equitable
relief to restrain any such breach without showing or proving any actual
damage to the Employer.
7. Consent to Jurisdiction. The parties hereby consent to the jurisdiction
of the Superior Court of the Commonwealth of Massachusetts and the United
States District Court for the District of Massachusetts. Accordingly, with
respect to any such court action, the Executive (a) submits to the personal
jurisdiction of such courts; (b) consents to service of process; and (c)
waives any other requirement (whether imposed by statute, rule of court, or
otherwise) with respect to personal jurisdiction or service of process.
8. Integration. This Agreement and the Exhibits attached hereto constitute
the entire agreement between the parties with respect to the subject matter
hereof and supersede all prior agreements between the parties with respect to
any related subject matter.
9. Assignment; Successors and Assigns, etc. Neither the Employer nor the
Executive may make any assignment of this Agreement or any interest herein, by
operation of law or otherwise, without the prior written consent of the other
party; provided, however, that the Employer may assign its rights under this
Agreement without the consent of the Executive in the event that the Employer
shall effect a reorganization, consolidate with or merge into any other
corporation, partnership, organization or other entity, or transfer all or
substantially all of its properties or assets to any other corporation,
partnership, organization or other entity. This Agreement
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shall inure to the benefit of and be binding upon the Employer and the
Executive, their respective successors, executors, administrators, heirs and
permitted assigns.
10. Enforceability. If any portion or provision of this Agreement
(including, without limitation, any portion or provision of any section of
this Agreement) shall to any extent be declared illegal or unenforceable by a
court of competent jurisdiction, then the remainder of this Agreement, or the
application of such portion or provision in circumstances other than those as
to which it is so declared illegal or unenforceable, shall not be affected
thereby, and each portion and provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
11. Waiver. No waiver of any provision hereof shall be effective unless made
in writing and signed by the waiving party. The failure of any party to
require the performance of any term or obligation of this Agreement, or the
waiver by any party of any breach of this Agreement, shall not prevent any
subsequent enforcement of such term or obligation or be deemed a waiver of any
subsequent breach.
12. Notices. Any notices, requests, demands and other communications
provided for by this Agreement shall be sufficient if in writing and delivered
in person or sent by a nationally recognized overnight courier service or by
registered or certified mail, postage prepaid, return receipt requested, to
the Executive at the last address the Executive has filed in writing with the
Employer or, in the case of the Employer, at its main offices, attention of
the Chief Executive Officer, and shall be effective on the date of delivery in
person or by courier or three (3) days after the date mailed.
13. Amendment. This Agreement may be amended or modified only by a written
instrument signed by the Executive and by a duly authorized representative of
the Employer.
14. Governing Law. This is a Massachusetts contract and shall be construed
under and be governed in all respects by the laws of the Commonwealth of
Massachusetts, without giving effect to the conflict of laws principles of
such Commonwealth. With respect to any disputes concerning federal law, such
disputes shall be determined in accordance with the law as it would be
interpreted and applied by the United States Court of Appeals for the First
Circuit.
15. Counterparts. This Agreement may be executed in any number of
counterparts, each of which when so executed and delivered shall be taken to
be an original; but such counterparts shall together constitute one and the
same document.
16. Effectiveness. This Agreement is conditioned and shall become effective
only upon consummation of the Merger, which shall be deemed to occur only upon
and as of the Closing Date.
In Witness Whereof, this Agreement has been executed as a sealed instrument
by the Employer, by its duly authorized officer, and by the Executive, as of
the Effective Date.
Logica Inc.
/s/ Corey Torrence
By: _________________________________
Name: Corey Torrence
Title:President and Chief
Executive Officer
/s/ Raymond Kalustyan
_____________________________________
Raymond Kalustyan
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EXHIBIT A
I. TRANSITION BONUS
For the transition period between November 1, 1998 through June 30, 1999,
upon achievement of 100% of certain financial objectives by the Carnegie Group
(the "Carnegie Group Objectives"), the Executive will be eligible to receive a
cash bonus of $26,250 (the "Objective Bonus"). The Carnegie Group Objectives
shall be based upon the financial objectives previously provided to the
Employer in writing; provided, however, that the severance costs relating to
the employment of the Dennis Yablonsky, John Manzetti, Bruce Russell and
Raymond Kalustyan (collectively, the "Carnegie Group Executive Team") with
Carnegie, and all legal, accounting and financial advisors fees and expenses
in connection with the negotiation and execution of the Merger Agreement and
the transactions contemplated thereby incurred by Carnegie, as determined in
accordance with generally accepted accounting principles consistently applied,
shall be excluded from the determination of whether the Carnegie Group
Objectives have been achieved. If the Carnegie Group achieves a percentage
between 70% and 100% of the Carnegie Group Objectives, the Executive will be
eligible to receive a bonus equal to that same percentage of the Objective
Bonus, and at a percentage less than 70% of the Carnegie Group Objectives no
bonus will be paid; provided, however, that if between 70% and 100% of the
Carnegie Group Objectives are achieved, the President and Chief Executive
Officer may, in his sole discretion, award a higher percentage of the
Objective Bonus but not greater than 100%. To receive more than 100% of the
Objective Bonus, the Executive must achieve at least 100% of the Carnegie
Group Objectives as well as additional quantitative objectives in the areas of
pull through of revenue for the Employer and net savings and efficiencies
generated by the Carnegie Group Executive Team.
In addition, the Executive shall be entitled to receive a bonus (the
"Bookings Bonus") for the period ending on December 31, 1998 if the Executive
achieves certain order bookings objectives under the arrangement in effect
between the Executive and Carnegie Group, Inc. on the date hereof (the
"Bookings Bonus Plan"), which objectives have previously been provided to the
Employer in writing The Executive also shall be entitled to receive a Bookings
Bonus for the period between January 1, 1999 to June 30, 1999 under the
Bookings Bonus Plan if he achieves certain booking objectives agreed to by the
Employer and the Executive.
II. LOGICA MANAGEMENT BONUS SCHEME
For the fiscal year between July 1, 1999 and June 30, 2000, the Executive
will be entitled to participate in the Logica Management Bonus Scheme as is
then in effect, a current copy of which is attached hereto.
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EXHIBIT B
STOCK OPTIONS
Each Option (as defined in the Merger Agreement) that is outstanding
(whether or not exercisable) as of immediately prior to the Effective Time (as
defined in the Merger Agreement) and which has not been exercised or canceled
prior thereto, shall, at the Effective Time, be canceled, and upon the
surrender and cancellation of the option agreement representing such Option
and delivery of an Option Termination (as defined in the Merger Agreement),
the Executive shall receive the Option Consideration (as defined in the Merger
Agreement).
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EXHIBIT C
THIRD-PARTY AGREEMENTS
9
