<PAGE>
As filed with the Securities and Exchange Commission on November 30, 1995
Registration No. 33-
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------
FORM S-4
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
--------------
TMS, INC.
(Exact name of registrant as specified in its charter)
--------------
<TABLE>
<S> <C> <C>
Oklahoma 7371 91-109855
(State or other jurisdiction (Primary Standard Industrial Classification Code Number) (I.R.S. Employer
of incorporation or Identification No.)
organization)
</TABLE>
206 WEST SIXTH AVENUE
STILLWATER, OKLAHOMA 74074
(405) 377-0880
(Address, including zip code, and telephone number, including
area code, of principal executive offices)
MAXWELL STEINHARDT, PRESIDENT
TMS, INC.
206 WEST SIXTH AVENUE
STILLWATER, OKLAHOMA 74074
(405) 377-0880
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
COPIES TO:
----------
DOUGLAS A. BRANCH, ESQ.
PHILLIPS MCFALL MCCAFFREY
MCVAY & MURRAH, P.C.
12TH FLOOR, 211 NORTH ROBINSON
OKLAHOMA CITY, OKLAHOMA 73102
(405) 235-4100
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: Upon the
Effective Date of the Merger of SCC Acquisition Corp. with and into Sequoia
Computer Corporation, as set forth in Section 2.01 of the Plan of Reorganization
and Agreement of Merger, included as Exhibit I to the Proxy Statement -
Prospectus forming a part of this Registration Statement.
If any of the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. [_]
______________
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
=============================================================================================================================
Proposed
Proposed maximum
maximum aggregate Amount of
Amount to be offering price offering price registration
Title of each class of securities to be registered registered per share (1) (1) fee
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common Stock, $.05 par value 5,000,000 $ .49 $ 2,450,000 $ 845.00
=============================================================================================================================
</TABLE>
(1)Estimated solely for the purpose of calculating the registration fee pursuant
to Rule 457.
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
TMS, INC.
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
ITEM PROSPECTUS
NO. ITEM HEADING OR PAGE
- ---- ---- ---------------
A. INFORMATION ABOUT THE TRANSACTION
<S> <C> <C>
1. Forepart of the Registration Statement and Outside Front
Cover Page of Prospectus................................ Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus.............................................. Available Information; Documents
Incorporated by Reference; Table of
Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges and
Other Information....................................... Summary; Risk Factors
4. Terms of the Transaction................................ Summary; The Merger Agreement;
Background of the Merger; Certain Federal
Income Tax Consequences of the Merger;
Rights of Dissenting Shareholders;
Description of Sequoia Stock; Comparative
Rights of TMS Shareholders and Sequoia
Shareholders
5. Pro Forma Financial Information......................... Pro Forma Financial Information;
Summary - Selected Financial Information
6. Material Contacts with the Company Being Acquired....... Background of the Merger
7. Additional Information Required for Reoffering by
Persons and Parties Deemed to be Underwriters........... Not Applicable
8. Interests of Named Experts and Counsel.................. Legal Matters; Experts
9. Disclosure of Commission Position on Indemnification
for Securities Acts Liabilities......................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants............. Not Applicable
11. Incorporation of Certain Documents by Reference......... Not Applicable
12. Information with Respect to S-2 or S-3 Registrants...... Business of TMS
13. Incorporation of Certain Documents by Reference......... Documents Incorporated by Reference
14. Information with Respect to Registrants Other than S-2
or S-3 Registrants...................................... Not Applicable
C. INFORMATION ABOUT THE COMPANY BEING ACQUIRED
15. Information with Respect to S-3 Companies............... Not Applicable
16. Information with Respect to S-2 or S-3 Companies........ Not Applicable
17. Information with Respect to Companies Other Than S-2
or S-3 Companies........................................ Summary - Summary Selected Financial
Information; Information with Respect to
Sequoia; Pro Forma Financial Information
D. VOTING AND MANAGEMENT INFORMATION
18. Information if Proxies, Consents or Authorizations are to
be Solicited............................................ Summary, Notice of Special Meeting of
Shareholders; General Information; Rights
of Dissenting Shareholders; Background of
the Merger - Interests of Certain Persons in
the Merger; Information with Respect to
Sequoia - Directors and Executive
Officers, and - Compensation of Directors
19. Information if Proxies, Consents or Authorizations are to
be Solicited or in an Exchange Offer.................... Not Applicable
</TABLE>
<PAGE>
SEQUOIA COMPUTER CORPORATION
433 AIRPORT BOULEVARD, SUITE 414
BURLINGAME, CALIFORNIA 94010
Dear Shareholder of
Sequoia Computer Corporation:
You are cordially invited to a Special Meeting of the Shareholders (the
"Meeting") of Sequoia Computer Corporation, a California corporation (the
"Company" or "Sequoia") at which you will be asked to vote upon a merger (the
"Merger") of SCC Acquisition Corp. ("SAC"), a wholly-owned subsidiary of TMS,
Inc. ("TMS"), with and into the Company. If the Merger is approved and
consummated, you will be entitled to receive 2.837 shares of TMS Common Stock,
$.05 par value ("TMS Common Stock"), for each share of Common Stock of the
Company that you own.
Enclosed are a Notice of Special Meeting of Shareholders and a Proxy
Statement - Prospectus for the Meeting to be held at 10:00 a.m., P.S.T., on
December __, 1995, at the Company's office located at 433 Airport Boulevard,
Suite 414, Burlingame, California.
The Board of Directors has carefully reviewed and considered the terms and
conditions of the Plan of Reorganization and Agreement of Merger (the "Merger
Agreement") pertaining to the Merger. On the basis of all factors which it
deemed relevant, the Board of Directors has concluded that the Merger Agreement
and the Merger contemplated thereby are fair to and in the best interests of the
Company's shareholders. The terms of the Merger, as well as other important
information, are contained in the enclosed Proxy Statement - Prospectus. Also
being delivered herewith in connection with the Merger is the TMS Annual Report
to Shareholders for the year ended August 31, 1995, and the TMS Notice of Annual
Meeting and Proxy Statement for the 1995 Annual Meeting of Shareholders. You are
urged to read the Proxy Statement - Prospectus and the accompanying documents
carefully.
THE BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND
RECOMMENDS THAT YOU VOTE FOR THE MERGER.
Under California law, the Merger may not be consummated unless approved by
the holders of at least a majority of all outstanding shares of Common Stock. I
and other shareholders have either agreed in the Merger Agreement, or have
granted proxies, to vote all of our shares in favor of the approval of the
Merger Agreement.
Shareholders who do not vote to approve and adopt the Merger Agreement and
who properly exercise dissenters' rights of appraisal with respect to their
shares, and otherwise comply with the provisions of Section 1300 et seq., of the
California Corporations Code, will be entitled, if the Merger is consummated, to
seek appraisal of the "fair value" of their shares instead of receiving shares
of TMS Common Stock. Such provisions of the California Corporations Code are
appended as Exhibit II to the Proxy Statement which accompanies this letter.
Very truly yours,
Dana R. Allen
Chairman of the Board
of Directors
__________________, 1995
<PAGE>
SEQUOIA COMPUTER CORPORATION
433 AIRPORT BOULEVARD, SUITE 414
BURLINGAME, CALIFORNIA 94010
_______________
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON DECEMBER __, 1995
A special meeting (the "Meeting") of the shareholders of Sequoia Computer
Corporation, a California corporation (the "Company"), will be held on December
__, 1995 at 10:00 a.m., P.S.T., at the Company's offices located at 433 Airport
Boulevard, Suite 414, Burlingame, California, for the following purposes:
1. To consider and act on the Plan of Reorganization and Agreement of
Merger (the "Merger Agreement") pursuant to which SCC Acquisition Corp. ("SAC"),
a wholly-owned subsidiary of TMS, Inc. ("TMS"), will be merged with and into the
Company, and each outstanding share of Common Stock of the Company (other than
shares owned by shareholders who have validly perfected their appraisal rights
under California law) will be converted into the right to receive 2.837 shares
of TMS Common Stock; and
2. To transact such other business as may properly come before the Meeting
and any and all adjournments or postponements thereof.
The Board of Directors is not currently aware of any other business to come
before the Meeting.
Under California law, holders of Common Stock who do not vote to approve
the Merger Agreement and who follow certain procedural requirements mandated by
California law are entitled to appraisal rights with respect to the Merger. See
"Rights of Dissenting Shareholders" in the accompanying Proxy Statement -
Prospectus and Exhibit II thereto.
THE CLOSE OF BUSINESS ON NOVEMBER 6, 1995, HAS BEEN FIXED BY THE BOARD OF
DIRECTORS AS THE RECORD DATE FOR THE DETERMINATION OF THE SHAREHOLDERS ENTITLED
TO NOTICE OF AND TO VOTE AT THE MEETING, AND ANY AND ALL ADJOURNMENTS AND
POSTPONEMENTS THEREOF. AS OF THE RECORD DATE, CERTAIN SHAREHOLDERS HAVE AGREED
UNDER THE MERGER AGREEMENT, OR HAVE GRANTED PROXIES TO TMS, TO VOTE
APPROXIMATELY 59.5% OF THE OUTSTANDING COMMON STOCK OF THE COMPANY IN FAVOR OF
THE MERGER. YOUR ATTENTION IS DIRECTED TO THE PROXY STATEMENT - PROSPECTUS
ATTACHED TO THIS NOTICE.
PLEASE COMPLETE, DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY
BUT NOT LATER THAN _______________, 1995 IN THE ENCLOSED ENVELOPE WHETHER OR NOT
YOU PLAN TO ATTEND THE SPECIAL MEETING. PROXIES MAY BE REVOKED AT ANY TIME
BEFORE THEY ARE VOTED BY NOTIFYING THE SECRETARY OF SUCH REVOCATION IN WRITING,
AT THE MEETING, OR BY SUBMITTING A LATER DATED PROXY.
By Order of the Board of Directors
Susan Allen, Secretary
ALL SHAREHOLDERS ARE CORDIALLY INVITED TO ATTEND THE MEETING.
PLEASE DO NOT SEND IN ANY STOCK CERTIFICATES AT THIS TIME.
<PAGE>
SEQUOIA COMPUTER CORPORATION TMS, INC.
433 AIRPORT BOULEVARD, SUITE 414 206 WEST SIXTH AVENUE
BURLINGAME, CALIFORNIA 94010 STILLWATER, OKLAHOMA 74074
PROXY STATEMENT - PROSPECTUS
FOR THE SPECIAL MEETING OF SHAREHOLDERS
OF SEQUOIA COMPUTER CORPORATION
TO BE HELD ON DECEMBER __, 1995
_______________
TMS, Inc., an Oklahoma corporation ("TMS") has filed a Registration
Statement on Form S-4 with the Securities and Exchange Commission (the
"Commission") under the Securities Act of 1933, as amended, covering its common
stock, $.05 par value (the "TMS Common Stock"), to be issued in connection with
the proposed merger (the "Merger") described in this Proxy Statement -
Prospectus. Also being delivered herewith are the TMS Annual Report to
Shareholders for the year ended August 31, 1995, and the TMS Notice of Annual
Meeting and Proxy Statement for the 1995 Annual Meeting of Shareholders. This
Proxy Statement - Prospectus also constitutes the Proxy Statement of Sequoia
Computer Corporation ("Sequoia" or the "Company") to be used in connection with
a Special Meeting of Shareholders to be held on December __, 1995, including any
adjournments thereof, to consider and vote upon the Merger of a wholly-owned
subsidiary of TMS into Sequoia pursuant to which Sequoia will become a wholly-
owned subsidiary of TMS.
This Proxy Statement - Prospectus is first being sent to shareholders of
Sequoia on or about __________________, 1995.
THE SHARES OF TMS COMMON STOCK TO BE ISSUED IN THE MERGER HAVE NOT BEEN
APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY
STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT - PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE MERGER INVOLVES CERTAIN RISKS TO SEQUOIA SHAREHOLDERS. SEE "RISKS OF
THE MERGER."
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS, OTHER THAN THOSE CONTAINED IN THIS PROXY STATEMENT -PROSPECTUS
IN CONNECTION WITH THE MERGER, AND IF GIVEN OR MADE, SUCH INFORMATION OR
REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY TMS OR
SEQUOIA. THIS PROXY STATEMENT - PROSPECTUS DOES NOT CONSTITUTE AN OFFER OF ANY
SECURITIES OTHER THAN THE SECURITIES TO WHICH IT RELATES TO ANY PERSON TO WHOM
IT IS UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION IN ANY STATE OR OTHER
JURISDICTION. NEITHER THE DELIVERY OF THIS PROXY STATEMENT - PROSPECTUS NOR ANY
SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT
THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
The date of this Proxy Statement - Prospectus is ___________________, 1995.
<PAGE>
AVAILABLE INFORMATION
TMS is subject to the informational requirements of the Securities and
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Commission. Such reports, proxy statements and other information can be
inspected and copied at the public reference facilities of the Commission at
Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549; New York Regional
Office, Seven World Trade Center, New York, New York 10048; and Chicago Regional
Office, 500 W. Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of
such materials can be obtained from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at prescribed
rates. This Proxy Statement - Prospectus does not contain all of the information
set forth in the Registration Statement, certain parts of which are omitted in
accordance with the rules and regulations of the Commission. The Registration
Statement and any amendments thereto, including exhibits filed as a part
thereof, are available for inspection and copying as set forth above.
DOCUMENTS INCORPORATED BY REFERENCE
The following documents heretofore filed by TMS with the Commission under
the Exchange Act are incorporated herein by reference: (a) Annual Report on Form
10-K for the year ended August 31, 1995 (the "1995 TMS 10-K"), (b) Notice of
Annual Meeting of Shareholders and Proxy Statement dated _____________, 1995
(the "1995 TMS Proxy Statement"); (c) Form 8-K Current Report filed with the
Commission on October 16, 1995; (d) information in the 1995 TMS 10-K or the 1995
TMS Proxy Statement furnished in accordance with: (i) Item 101(b), (c)(1)(i) and
(d) of Regulation S-K, segments, principal products or services, foreign and
domestic operations and export sales, (ii) Item 201 of Regulation S-K, market
price of and dividends on TMS Common Stock and related shareholder matters,
(iii) Item 301 of Regulation S-K, selected financial data, (iv) Item 302 of
Regulation S-K, supplementary financial information; (v) Item 303 of Regulation
S-K, management's discussion and analysis of financial conditions and results of
operations; (vi) Item 304 of Regulation S-K, changes in and disagreements with
accountants on accounting and financial disclosure; (vii) Item 401 of Regulation
S-K, directors and executive officers; (viii) Item 402, executive compensation;
and (ix) Item 403, certain relationships and related transactions.
Any statements contained in a document incorporated by reference herein
shall be deemed to be modified or superseded for purposes hereof to the extent
that a statement contained herein (or in any other subsequently filed document
which also is incorporated by reference herein) modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part hereof except as modified or superseded. All information
appearing in this Proxy Statement - Prospectus is qualified in its entirety by
the information and financial statements (including notes thereto) appearing in
the documents incorporated herein by reference.
This Proxy Statement - Prospectus incorporates documents by reference which
are not presented herein or delivered herewith. These documents (other than
exhibits thereto) are available without charge, upon written or oral request by
any person to whom this Proxy Statement - Prospectus has been delivered, from
Vice President, Finance and Administration, TMS, Inc., 206 West Sixth Avenue,
Stillwater, Oklahoma 74074 (telephone 405/377-0880). In order to ensure timely
delivery of the documents, any request should be made before December __, 1995.
-2-
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
INTRODUCTION.........................................................................
AVAILABLE INFORMATION................................................................
DOCUMENTS INCORPORATED BY REFERENCE..................................................
SUMMARY..............................................................................
RISKS FACTORS........................................................................
THE MERGER AGREEMENT.................................................................
General...........................................................................
The Merger........................................................................
Conditions, Representations and Covenants.........................................
Termination; Amendments; Waiver...................................................
GENERAL INFORMATION..................................................................
Vote Required.....................................................................
Voting Rights and Procedures......................................................
Conversion of Shares in the Merger................................................
Exchange of Certificates..........................................................
Fractional Shares.................................................................
Registration......................................................................
Accounting Treatment..............................................................
BACKGROUND OF THE MERGER.............................................................
Recommendation of Sequoia's Board of Directors; Sequoia's Reasons for the Merger..
TMS's Reasons for the Merger......................................................
Effective Date of the Merger......................................................
UNAUDITED PRO FORMA FINANCIAL INFORMATION............................................
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER................................
RIGHTS OF DISSENTING SHAREHOLDERS....................................................
BUSINESS OF TMS......................................................................
INFORMATION WITH RESPECT TO SEQUOIA..................................................
Business of Sequoia...............................................................
Management's Discussion and Analysis of Certain Relevant Factors..................
Legal Proceedings of Sequoia......................................................
Changes in and Disagreements with Accountants of Sequoia..........................
Market for Sequoia Stock and Dividends............................................
Security Ownership of Certain Beneficial Owners...................................
Security Ownership of Management..................................................
Directors and Executive Officers of Sequoia.......................................
Compensation of Directors and Executive Officers..................................
Certain Relationships and Related Transactions....................................
DESCRIPTION OF SEQUOIA STOCK.........................................................
</TABLE>
-3-
<PAGE>
<TABLE>
<S> <C>
COMPARATIVE RIGHTS OF TMS SHAREHOLDERS AND SEQUOIA SHAREHOLDERS......................
LEGAL MATTERS........................................................................
EXPERTS..............................................................................
INDEX TO FINANCIAL STATEMENTS........................................................
EXHIBITS
I. Plan of Reorganization and Agreement of Merger, dated as of November 7,
1995, by and among Sequoia Computer Corporation, TMS, Inc. and SCC
Acquisition Corp.
II. Section 1300 of the California Corporations Code et seq.
</TABLE>
-4-
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY
The following is a summary of certain information contained elsewhere in
This Proxy Statement -Prospectus or in documents delivered herewith. Certain
capitalized terms are defined elsewhere. All statements in the following
summary are qualified by and are made subject to the more detailed information
contained elsewhere in this Proxy Statement - Prospectus and the Exhibits
attached hereto.
GENERAL INFORMATION
TMS, Inc.: TMS, Inc., an Oklahoma corporation
("TMS"), is a computer software products
and services company. The principal
executive offices of TMS are located at
206 West Sixth Avenue, Stillwater,
Oklahoma 74074, and its telephone number
is: (405) 377-0880. See "Business of TMS."
Sequoia Computer Corporation: Sequoia Computer Corporation, a California
corporation ("Sequoia" or the "Company"),
is engaged in the business of developing
and marketing document image enhancement
and forms processing software. The
principal executive offices of the Company
are located at 433 Airport Boulevard,
Suite 414, Burlingame, California 94010,
and its telephone number is: (415) 696-
8750. See "Information with Respect to
Sequoia - Business of Sequoia."
Merger Agreement: Effective November 7, 1995, TMS, SCC
Acquisition Corp., an Oklahoma corporation
and wholly-owned subsidiary of TMS
("SAC"), and Sequoia entered into a Plan
of Reorganization and Agreement of Merger
(the "Merger Agreement") providing for the
merger of SAC into Sequoia as a result of
which Sequoia would become a wholly-owned
subsidiary of TMS (the "Merger").
Date, Time and Place December __, 1995, at 10:00 a.m. P.S.T.,
of Meeting: at 433 Airport Boulevard, Suite 414,
Burlingame, California.
Purpose: To approve the Merger Agreement which
provides, among other things, for the
merger of SAC with and into the Company.
The Merger Agreement is attached hereto as
Exhibit I.
Record Date: Close of business on November 6, 1995.
Vote Required: The affirmative vote of at least a
majority of the outstanding shares of
Sequoia Stock will be required to approve
and adopt the Merger. Directors, officers
and management employees of Sequoia
beneficially owned 763,852 shares of
Sequoia Stock on the Record Date
(approximately 59.5% of the Sequoia Stock
then outstanding). Dana R. Allen and
certain other Sequoia shareholders, who
own 756,719 shares of Sequoia Stock
(approximately 58.9% of the outstanding
Sequoia Stock), have either agreed in the
Merger Agreement, or have granted proxies
to TMS, to vote all of their shares in
favor of the Merger Agreement. Approval of
the Merger Agreement is assured by such
agreement and proxies.
- --------------------------------------------------------------------------------
-5-
<PAGE>
- --------------------------------------------------------------------------------
The Merger; Merger Consideration: Upon consummation of the Merger, SAC will
be merged with and into Sequoia and
Sequoia will become a wholly-owned
subsidiary of TMS. In the Merger, each
share of Sequoia Stock issued and
outstanding immediately prior to the
Merger (other than shares held by any
shareholder who shall have perfected his
or her right to dissent under the
California Corporation Code) will be
converted into 2.837 shares of common
stock, $.05 par value, of TMS (the "TMS
Common Stock").
Determination and The Board of Directors of the Company on
Recommendation of November 6, 1995, determined that the
Directors: terms of the Merger Agreement, including
the Merger Consideration to be received by
the Sequoia shareholders, were fair to the
shareholders of the Company and
recommended adoption of the Merger
Agreement by the shareholders. See
"Background of the Merger."
Effective Date Subject to the terms and conditions of the
of the Merger: Merger Agreement, the Merger will become
effective (the "Effective Date") upon the
filing of certain documents with the
Secretary of State of Oklahoma and the
Secretary of State of California. The
Effective Date is currently expected to be
the date of the Meeting.
Conversion of Sequoia Stock; Each share of Sequoia Stock outstanding at
Exchange of Certificates: the Effective Date (other than shares held
of record by Dissenting Shareholders) will
be converted into the right to receive
2.837 shares of TMS Common Stock.
Surrender of Certificates: Promptly after the Effective Date, a
letter of transmittal with instructions
will be mailed to all holders of record of
Sequoia Stock at the close of business on
the Effective Date of the Merger for use
in surrendering their certificates
representing Sequoia Stock. Certificates
should not be surrendered until the letter
of transmittal is received and completed.
Tax Consequences The Merger is intended to qualify as a
to Shareholders: tax-free reorganization within the
meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the
"Code"). Due to the individual nature of
tax consequences, each shareholder is
urged to consult his own tax adviser with
respect to the tax consequences to him of
the Merger, including the effects of
state, local, foreign and other tax laws.
See "Certain Federal Income Tax
Consequences of the Merger."
Rights of Dissenting Holders of Sequoia Stock who do not vote
Shareholders: in favor of the Merger Agreement may
dissent from the Merger and elect upon
written notice to the Company to have the
fair value of their shares (determined as
of September 6, 1995, which was the day
before first announcement of the terms of
the Merger) judicially appraised and paid
to them in cash. Such shareholders must:
(i) vote against the Merger or abstain
from voting for the Merger; (ii) submit a
demand in writing, no later than 30 days
after the Approval Date, that Sequoia
purchase the shareholder's shares and pay
the fair market value of the shares in
cash; and (iii) within 30 days after the
Approval Date, submit the shares to be
purchased to be stamped with a legend
identifying them as dissenting shares. The
"Approval Date" is the date Sequoia mails
notice of shareholder approval of the
Merger to shareholders. The full text of
Chapter 13 of the Corporations Code is
attached to this Proxy Statement as
Exhibit II. Any deviation from such
requirements may result in a termination
of dissenters' appraisal rights. See
"Rights of Dissenting Shareholders."
- --------------------------------------------------------------------------------
-6-
<PAGE>
- --------------------------------------------------------------------------------
SUMMARY SELECTED FINANCIAL INFORMATION
The following tables summarize selected historical and pro forma financial
information concerning TMS and Sequoia which has been derived from, and is
qualified in its entirety by, the more detailed financial statements and notes
thereto included elsewhere herein.
<TABLE>
<CAPTION>
TMS, INC.
As of and For Fiscal Years Ended August 31,
--------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues............................ $4,221,120 $3,436,761 $2,800,865 $2,123,922 $2,694,740
Net Income (Loss)................... 771,481 350,621 430,053 (316,169) 104,127
Net Income (Loss) Per
Common and Common
Equivalent Share.................. .08 .04 .05 (.04) .01
Total Assets........................ 3,131,737 1,782,209 1,310,186 1,039,134 1,210,540
Long-Term Liabilities............... 378,265 --- --- 181,268 259,101
Cash Dividends Declared
Per Common Share.................. --- --- --- --- ---
</TABLE>
<TABLE>
<CAPTION>
SEQUOIA COMPUTER CORPORATION
As of and for Fiscal Years
Ended August 31,
-----------------------------
1995 1994
---- ----
<S> <C> <C>
Revenues............................ $988,949 $535,323
Net Income.......................... 212,525 227,662 /(1)/
Net Income Per Common and Common
Equivalent Share.................. .16 .17 /(1)/
Total Assets........................ 750,830 445,291
Long-Term Liabilities............... 63,204 25,783
Cash Dividends Declared
Per Common Share.................. --- ---
</TABLE>
/(1)/Includes the cumulative effect of a change in accounting principle of
$157,768 ($.12 per share) relating to the adoption by the Company on
September 1, 1993 of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes ("SFAS No. 109").
<TABLE>
<CAPTION>
TMS, INC. (PRO FORMA)
AS OF AUGUST 31, 1995
AND FOR
FISCAL YEARS ENDED
AUGUST 31, 1995 AND 1994
--------------------------
1995 1994
---- ----
<S> <C> <C>
Revenues............................ $5,210,069 3,972,084
Net Income /(2)/.................... 984,006 420,515
Net Income Per Common
and Common Equivalent Share /(2)/. .08 .03
Total Assets........................ 3,819,363 N/A
Long-Term Liabilities............... 378,265 N/A
Cash Dividends Declared Per
Common Share...................... --- ---
</TABLE>
/(2)/Fiscal 1994 has been adjusted for the effects of SFAS No. 109. See note 4
of the Pro Forma Financial Information, included on page 18 of this Proxy
Statement - Prospectus, for further discussion.
- --------------------------------------------------------------------------------
-7-
<PAGE>
- --------------------------------------------------------------------------------
COMPARATIVE PER SHARE DATA
The following table presents historical data for TMS and Sequoia and pro
forma per share data giving effect to the Merger on the basis described in the
notes to the unaudited pro forma combined financial statements included
elsewhere herein. The table should be read in conjunction with the historical
financial statements of TMS and Sequoia and the unaudited pro forma combined
financial statements which statements are included elsewhere in the Proxy
Statement -Prospectus or incorporated herein by reference. The pro forma per
share data are not necessarily indicative of actual results had the Merger
occurred on the dates assumed or future results.
<TABLE>
<CAPTION>
TMS SEQUOIA
------------------------------------ --------------------------------------
Equivalent
Historical Pro Forma Historical Pro Forma /(1)/
---------- --------- ---------- ---------------
<S> <C> <C> <C> <C>
Book value per share:
As of August 31, 1995................. $.27 .23 .49 .65
Net Income per share:
Year ended August 31, 1995............ .08 .08 .16 .23
Year ended August 31, 1994............ .04 .03 .05/(2)/ .09
Cash dividends declared per share:
Year ended August 31, 1995............ --- --- --- ---
Year ended August 31, 1994............ --- --- --- ---
</TABLE>
________________________________
/(1)/Equivalent pro forma amounts have been calculated by multiplying the pro
forma net income per share and book value per share of TMS by the exchange
ratio (2.837:1) so that the per share amounts are equated to the respective
values of one share of Sequoia Stock.
/(2)/Excludes income of $157,768 or $0.12 per share, attributable to the
cumulative effect of a required change in the method of accounting for
income taxes.
On September 7, 1995, the trading day immediately preceding the first
public announcement of the Merger, the market price (average of ask and bid
prices) for TMS Common Stock was $.64 per share.
- --------------------------------------------------------------------------------
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RISK FACTORS
In addition to the other information in this Proxy Statement -Prospectus,
the following risk factors should be considered carefully in evaluating TMS, its
business and the Merger.
Variability of Quarterly Operating Results. TMS revenues and operating
results can vary substantially from quarter to quarter. License revenues, which
represented approximately 55% of total revenues in fiscal 1995, are difficult to
forecast because of factors such as the size and timing of individual license
transactions, changes in customer budgets and deployments of units incorporating
TMS software, and general economic conditions. In recent years, TMS has
emphasized software development services as a means of mitigating the
variability of revenues and operating results, and the principal growth in TMS
revenues has been in the area of services. Although TMS currently has a backlog
of software development services and document conversion services, there is no
assurance that TMS will be able to maintain that backlog.
Competition and Market Trends. The computer software market is highly
competitive. As the markets in which TMS products and services are sold continue
to develop and as TMS enters new markets, TMS expects that additional
competitors will enter those markets and that competition will become more
intense. Some of TMS competitors or potential competitors have greater
financial, marketing, or technical resources than TMS. These competitors may be
able to adapt more quickly to new or emerging technologies and standards or
changes in customer requirements or may be able to devote greater resources to
the promotion and sale of their products than TMS. Many of these competitors
market, or can potentially market, their products directly to the ultimate
consumers of such products and may have more ability to control pricing and
marketing decisions which may affect their revenues. There can be no assurance
that TMS will be able to continue competing successfully in this industry.
Continued investment in research and product development and in marketing will
be required to permit TMS to compete successfully, and there is no assurance
that TMS will have the necessary capital resources to fund that investment.
Possible Volatility of Stock Price; No Current Listing on Stock Exchange.
Trading of TMS Common Stock has been limited; however, if trading becomes more
active, the trading price in the future could be subject to wide fluctuations in
response to quarterly variations in operating results, announcements of
technological innovations or new products by TMS or its competitors, as well as
other events or factors. TMS is not currently eligible for inclusion on the
NASDAQ Stock Market or any other stock exchange and eligibility for such
inclusion following completion of the Merger is subject to compliance with
several requirements, such as a minimum market price of TMS Common Stock.
Therefore, there is no assurance that TMS will qualify for inclusion on the
NASDAQ Stock Market or that a liquid trading market in TMS Common Stock will
develop. In addition, the stock market has from time to time experienced extreme
price and volume fluctuations which have particularly affected the stock price
of many high technology companies and which often have been unrelated to the
operating performance of these companies. These broad market fluctuations may
adversely affect the market price of TMS Common Stock.
Risks of Software Product Development. The future success of TMS will
depend on its ability to develop and release, on a timely basis, new software
products and upgrades. TMS has historically engaged in software development
services for customers and it derives revenues from such services and licensing
revenue from the customer's future use of the software developed by TMS. The
software development process is inherently unpredictable. Development time and
the achievability of design objectives may not be determinable until very late
in the development process. Problems and delays in product development may
result in the delay or cancellation of planned product or service offerings by
TMS and its strategic partners, and such problems and delays could have an
adverse effect on TMS operating results of TMS. Consequently, the receipt of
service and licensing revenue from these customers will also be delayed. There
can be no assurance that TMS will not experience similar problems and delays in
the future, resulting in material adverse effects on TMS operating results.
Furthermore, no complex software product is totally free of errors, and
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<PAGE>
significant errors may go undetected for some time. Discovery of significant
errors may delay or cancel product releases and, if not discovered until after
product release, may necessitate recall of products by TMS and its strategic
partners and expose TMS to substantial expense and claims for reimbursement.
Dependence on Key Personnel. TMS believes that its continued success will
depend in large part upon its ability to attract and retain highly-skilled
technical, managerial and marketing personnel. Competition for such personnel in
the software industry is intense, and TMS has from time to time experienced
difficulty in locating candidates with appropriate qualifications. There can be
no assurance that TMS will be successful in attracting and retaining the
personnel it requires to develop and market new and enhanced products and
conduct its operations successfully.
Dependence on Proprietary Technology. TMS relies on a combination of trade
secret, copyright and trademark laws, nondisclosure agreements and other
contractual provisions and technical measures to protect its proprietary rights.
There can be no assurance that these protections will be adequate or that TMS's
competitors will not independently develop technologies that are substantially
equivalent or superior to the technology of TMS. TMS makes source code available
to certain of its customers and this may increase the likelihood of
misappropriation or other misuse of the intellectual property of TMS.
Furthermore, TMS has no patents, and existing copyright laws afford only limited
protection. In addition, the laws of certain countries in which the TMS's
products are or may be licensed do not protect its products and intellectual
property rights to the same extent as the laws of the United States.
There can be no assurance that a third party will not assert that TMS's
technology violates its patents in the future. As the number of software
products in the industry increases and the functionality of these products
further overlap, TMS believes that software developers may become increasingly
subject to infringement claims. Any such claims, with or without merit, can be
time consuming and expensive to defend.
Potential Issuance of Preferred Stock; Anti-Takeover Provisions. The Board
of Directors of TMS has the authority to issue up to 1,000,000 shares of
Preferred Stock and to fix the rights, preferences, privileges and restrictions,
including voting rights, of these shares without any further vote or action by
the shareholders. The rights of the holders of TMS Common Stock will be subject
to, and may be adversely affected by, the rights of the holders of any Preferred
Stock that may be issued in the future. The issuance of the Preferred Stock,
while providing desirable flexibility in connection with possible acquisitions
and other corporate purposes, could have the effect of making it more difficult
for a third party to acquire a majority of the outstanding voting stock of TMS,
thereby delaying, deferring or preventing a change in control of TMS.
Furthermore, such Preferred Stock may have other rights, including economic
rights, senior to the TMS Common Stock, and as a result, the issuance of such
stock could have a material adverse effect on the market value of the TMS Common
Stock. TMS has no present plans to issue shares of Preferred Stock. TMS may in
the future adopt other measures that may have the effect of delaying, deferring
or preventing a change in control of TMS. Certain of such measures may be
adopted without any further vote or action by the shareholders. TMS has no
present plans to adopt any such measures. TMS is also afforded the protection of
Section 1145 of the Oklahoma General Corporation Act, which could delay or
prevent a change in control of the company, impede a merger, consolidation or
other business combination involving TMS or discourage a potential acquiror from
making a tender offer or otherwise attempting to obtain control of the company.
No Dividends on TMS Stock. TMS has never paid a cash dividend on TMS Common
Stock and TMS does not currently intend to pay cash dividends on TMS Common
Stock in the foreseeable future.
Voting Power of Officers and Directors. Subsequent to the Merger, the
officers and directors of TMS, inclusive of Dana R. Allen, Chairman and Chief
Executive Officer of Sequoia, will retain voting power of approximately 32.1% of
the issued and outstanding shares of TMS Common Stock and therefore will be able
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<PAGE>
exert a significant degree of influence in the election of the Board of
Directors and the control over the affairs of TMS.
Future Acquisitions. TMS may in the future pursue acquisitions of
complementary products, technologies and businesses. Future acquisitions by TMS
may result in potentially dilutive issuances of equity securities, the
incurrence of additional debt and amortization expenses related to goodwill and
other intangible assets, which could adversely affect the profitability of TMS.
In addition, acquisitions involve numerous risks, including difficulties in the
assimilation of the operations, products and personnel of the acquired company,
the diversion of management's attention from other business concerns, risks of
entering markets in which TMS has limited or no direct prior experience, and the
potential loss of key employees of the acquired company. TMS is continually
reviewing product and technology acquisition opportunities, although there are
currently no discussions, commitments or agreements, other than the Merger,
which would be material to TMS. In the event that such an acquisition does
occur, there can be no assurance as to the effect thereof on the business,
financial condition or results of operation of TMS.
THE MERGER AGREEMENT
GENERAL
The following is a summary of certain provisions of the Merger Agreement,
which is attached as Exhibit I to this Proxy Statement -Prospectus. Such summary
is qualified in its entirety by reference to the Merger Agreement.
THE MERGER
The Merger shall be consummated by the filing a Certificate of Merger with
the Secretary of State of the State of Oklahoma and the filing of an Officers
Certificate and a Merger Agreement with the Secretary of State of the State of
California. The Merger will occur at a closing which will occur as promptly as
practical following the time at which the shareholders of the Company shall have
adopted the Merger Agreement. The Merger Agreement provides that, at the
Effective Date and subject to the satisfaction of certain conditions, SAC will
be merged with and into the Company. Following the Merger, the Company will
continue as the surviving corporation (the "Surviving Corporation") and the
separate existence of SAC shall cease. In the Merger: (i) each share of Sequoia
Stock issued and outstanding immediately prior to the Effective Date (other than
shares held by Dissenting Shareholders) will be converted into the right to
receive 2.837 shares of TMS Common Stock, upon the surrender of the certificate
formerly representing such share of Sequoia Stock; and (ii) each outstanding
share of SAC's common stock will be converted into one share of Sequoia Stock.
Upon the Effective Date of the Merger, options to purchase Sequoia Stock
will be converted to entitle the holders thereof to purchase 2.837 shares of TMS
Common Stock for each share of Sequoia Stock purchasable under such options at
an exercise price equal to 35.24% of the exercise price under such options.
Shareholders of the Company holding greater than 59% of the Sequoia Stock
outstanding on the Record Date have agreed to vote or have granted proxies to
TMS to vote, their shares of Sequoia Stock in favor of the Merger Agreement, and
therefore sufficient voting power to approve the Merger Agreement without the
affirmative vote of any of the other shareholders of the Company has been
provided for in the Merger Agreement.
CONDITIONS, REPRESENTATIONS AND COVENANTS
The respective obligations of the parties to consummate the Merger are
subject to the following conditions, among others: (i) the approval of the
Merger Agreement by the affirmative vote of the holders of
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<PAGE>
a majority of the shares of Sequoia Stock outstanding as of the Record Date;
(ii) no writ, order, decree or injunction issued by any court of competent
jurisdiction exists which prohibits or restricts the consummation of the Merger;
and (iii) all necessary consents and approvals of any governmental authority or
other third party shall have been obtained and which are presently filed with
the appropriate governmental authorities.
In addition, the obligations of TMS and SAC to effect the Merger are
further subject to certain conditions, including that: (i) the representations
and warranties of the Company contained in the Merger Agreement are true and
correct in all material respects at and on the Effective Date (except for
changes permitted by the Merger Agreement); (ii) the Company shall have
performed all of its covenants contained in the Merger Agreement required to be
performed by it prior to the Effective Date; (iii) an employment contract
between the Company and Dana R. Allen and certain other employees of Sequoia are
in effect; (iv) an opinion letter has been received by TMS from Myers, Hawley,
Morley, Myers & McDonnell, counsel to the Company; (v) the Company has furnished
certain compliance certificates to TMS; (vi) no material adverse change shall
have occurred in the business, financial condition, operations or prospects of
the Company since August 31, 1995; and (vii) there be no more than 15,000 shares
subject to rights exercised by dissenting shareholders under the California
Corporations Code. The obligations of the Company are subject to certain
conditions, including that: (i) the representations and warranties of TMS and
SAC contained in the Merger Agreement are true and correct in all material
respect at and on the Effective Date (except for changes permitted by the Merger
Agreement); (ii) TMS and SAC shall have performed all of their covenants
contained in the Merger Agreement that are required to be performed by them
prior to the Effective Date; (iii) an opinion letter has been received by the
Company from Fellers, Snider, Blankenship, Bailey & Tippens, P.C., counsel to
TMS; (iv) TMS and SAC have furnished certain compliance certificates to the
Company; (v) that no material adverse change shall have occurred in the
business, financial condition, operations or prospects of TMS since August 31,
1995; and (vi) Dana R. Allen shall have been elected to the Board of Directors
of TMS.
In the Merger Agreement, the Company has represented and warranted to TMS
and SAC, among other things: (i) that it and each of its subsidiaries is duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation and has all requisite power and authority to
own, lease, and operate its properties and to carry on its business as now being
conducted in all material respects; (ii) that there has been no material change
in its capitalization since August 31, 1995; (iii) that it has full corporate
power and authority to execute and deliver the Merger Agreement and consummate
the transactions contemplated thereby; (iv) that other than referenced
approvals, no consent or approval is necessary for the consummation of the
Merger and the Merger will not conflict with the corporate documents of the
Company or violate any applicable laws; (v) that the information supplied by the
Company for this Proxy Statement - Prospectus is neither false nor misleading;
(vi) that the documents furnished by Sequoia pursuant to the Agreement contain
no untrue statement of a material fact or omits to state a material fact
required to be stated therein necessary in order to make the statements therein,
in light of the circumstances in which they were made, not misleading; (vii)
that no fees are owed to any brokers or investment bankers by the Company;
(viii) that its employee benefit plans do not violate applicable laws; (ix) that
there has been no material adverse change in the Company's business since August
31, 1995; (x) that all material contracts of the Company have been made
available to SAC; (xi) that all such contracts have been complied with by the
Company; (xii) that the Company has paid all taxes which have become due and has
filed all relevant tax returns; (xiii) that there is no litigation with respect
to the Company that would materially and adversely affect the value of the
Company; (xiv) that the Company's business is conducted in substantial
compliance with law; (xv) that the books of the Company are complete and
correct; (xvi) that the Company's insurance policies are in full force and
effect; and (xvii) that the Company has not received written notice of its
default under any material agreement.
In the Merger Agreement, TMS has represented and warranted to the Company,
among other things: (i) that TMS and SAC is each a corporation duly organized,
validly existing and in good standing under the laws of the state of their
organization and has all requisite corporate power and authority to own, lease
and operate their properties and to carry on their business as now being
conducted in all material respects; (ii) that
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<PAGE>
they have full corporate power and authority to execute and deliver the Merger
Agreement and to consummate the transactions contemplated thereby; (iii) that
the execution and delivery of the Merger Agreement will not conflict with or
result in a breach of any provision of their Certificate of Incorporation by
Bylaws; (iv) that reports filed by TMS with the Securities and Exchange
Commission do not contain any untrue statement of a material fact or omits 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; (v) that no representation or warranty by TMS or SAC in
the Merger Agreement contains any untrue statement of a material fact or omits
to state a material fact required to be stated therein necessary in order to
make the statements therein, in light of the circumstances in which they were
made, not misleading; (vi) that no fees are owed to any brokers or investment
bankers by TMS or SAC; and (vii) SAC holds sufficient shares of TMS Common Stock
to consummate the Merger.
The Company has, among other things, agreed to conduct its operations
according to its ordinary and usual course of business and consistent with past
practice. In that regard, the Company has agreed that it will not, except as
otherwise expressly provided in the Merger Agreement, engage in certain types of
transactions including to: (i) issue, sell, set aside or pledge, or authorize or
propose the issuance, sale or pledge of any shares of capital stock of any class
(including Sequoia Stock) or securities convertible into such shares, or any
rights, warrants or options to acquire any such shares or other convertible
securities; (ii) purchase or otherwise acquire, or propose to purchase or
otherwise acquire, any outstanding shares of Sequoia Stock; (iii) declare or pay
any dividend on or distribution of any shares of its capital stock; (iv) propose
or adopt any amendments to its Articles of Incorporation or Bylaws; (v) alter
any financial arrangement with any employee of the Company; (vi) sell, mortgage
or dispose of any material portion of the Company's assets; (vii) enter into any
material contracts except in the ordinary course of business; (viii) propose,
recommend or authorize any merger besides the Merger; or (ix) agree in writing
or propose to take any of the foregoing actions or any action which would make
any representation or warranty in the Merger Agreement untrue or incorrect.
Under the Merger Agreement, the Company has agreed to give SAC and its
authorized representatives access to the personnel, offices, and other
facilities and to the books and records of the Company and agreed to permit TMS
to make such inspections as it may require and to cause its officers to furnish
TMS with financial and operating data and other information with respect to the
business and properties of the Company as SAC may from time to time request.
Except as set forth in the Merger Agreement, or as required by applicable
law, the Merger Agreement provides that the Company shall not, 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 TMS or an affiliate or associate of
TMS) concerning any merger, sale of assets, sale of shares of Sequoia Stock or
similar transaction involving the Company or any subsidiary of the Company.
The Merger Agreement provides that, subject to its terms, each of the
parties will use its best efforts to take or cause to be taken, all actions, and
do, or cause to be done, all necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by the Merger Agreement and will use its best efforts to obtain all
necessary consents to the Merger. If at any time after the Effective Date any
further action is necessary or desirable to carry out the purposes of the Merger
Agreement, the parties have agreed that the proper officers and directors of
each party shall take all such necessary action.
The Merger Agreement provides that TMS, SAC and the Company will consult
with each other before issuing any press release or otherwise making any public
statements with respect to the Merger and shall not issue any such press release
or make any such public statement prior to such consultation, except as may be
required by law.
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TERMINATION; AMENDMENTS; WAIVER
The Merger Agreement may be terminated and the Merger contemplated thereby
may be abandoned at any time prior to the Effective Date notwithstanding
approval thereof by the shareholders of the Company: (i) by the written mutual
consent of the duly authorized Board of Directors of SAC and the Company; (ii)
by SAC or by the Company, if any representation or warranty of the other party
is or becomes untrue in any material respect or if the other party materially
breaches any of its covenants or agreements in the Merger Agreement; or (iii) by
SAC or the Company if the Effective Date shall not have occurred on or before
December 31, 1995; provided that this termination right shall not be available
to any party whose failure to fulfill any obligation under the Merger Agreement
causes or results in the failure of the Effective Date to occur on or before
such date.
The Merger Agreement may be amended, by actions taken by or on behalf of
the Board of Directors of the Company and TMS at any time before the Effective
Date but, after the approval of the shareholders of the Company, no amendment
shall decrease the consideration of 2.837 shares of TMS Common Stock to be
received by shareholders for each share held by them.
The Merger Agreement provides that all costs and expenses incurred in
connection with the transactions contemplated thereby shall be paid by the party
incurring such expenses.
GENERAL INFORMATION
VOTE REQUIRED
Approval of the Merger Agreement requires the affirmative vote of the
holders of a majority (more than 50%) of the outstanding Sequoia Stock. Each
holder of Sequoia Stock as of the Record Date is entitled to one vote for each
Sequoia Stock held. On the Record Date, there were 1,284,180 shares of Sequoia
Stock outstanding.
Approval of the Merger Agreement by the shareholders of TMS is not
required. The Board of Directors of SAC and the Board of Directors of TMS, as
the sole shareholder of SAC, have approved the Merger and the Merger Agreement.
VOTING RIGHTS AND PROCEDURES
Any person signing and mailing the enclosed proxy may vote in person if in
attendance at the Meeting. Proxies may be revoked at any time before they are
voted by notifying the Secretary of such revocation, in writing, at the Meeting,
or by submitting a later dated proxy. Sequoia shareholders are encouraged to
vote on the matters to come before the Meeting by marking their preferences on
the enclosed proxy and by dating, signing, and returning the proxy in the
enclosed envelope. If a preference is not indicated on a proxy, the proxy will
be voted "FOR" the proposal to approve the Merger Agreement.
It is not anticipated that matters other than those described above and in
the Notice of Special Meeting, to which this Proxy Statement is appended, will
be brought before the Meeting for action, but if any other matters properly come
before the Meeting, it is intended that votes thereon will be cast pursuant to
said proxies in accordance with the best judgment of the proxy holders.
With respect to the tabulation of votes on any other matter, abstentions
are treated as present or represented and entitled to vote at the Meeting, while
non-votes by nominees are treated as not being present or represented and not
entitled to vote at the Meeting.
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CONVERSION OF SHARES IN THE MERGER
At the Effective Date, each share of Sequoia Stock issued and outstanding
immediately prior thereto (other than shares of Sequoia Stock held by any
shareholder who shall have perfected his or her right to dissent under the
California Corporations Code) will be automatically converted into the right to
receive 2.837 shares of TMS Common Stock.
EXCHANGE OF CERTIFICATES
American Stock Transfer, as exchange agent (the "Exchange Agent"), will
provide transmittal forms to the Sequoia shareholders to be used in forwarding
their certificates for shares of Sequoia Stock into which their Sequoia shares
were converted in the Merger. Until such surrender, certificates representing
Sequoia Stock will be deemed to represent the number of TMS Common Stock into
which such shares of Sequoia Stock were converted in the Merger, except that the
holders of Sequoia certificates will not be entitled to receive dividends on any
other distributions from TMS until such certificates are so surrendered. When
such certificates are surrendered, the holders of TMS certificates issued in the
Merger will be paid, without interest, any dividends or other distributions
which may have become payable with respect to such TMS Common Stock since the
Effective Date.
FRACTIONAL SHARES
No certificates representing fractional shares will be issued by TMS in
respect of TMS Common Shares issued pursuant to the Merger and no TMS dividend,
stock split or interest will relate to any fractional share. No fractional share
interests will entitle the owner thereof to vote or to any rights of a
shareholder of TMS. In lieu of any such fractional shares, TMS shall deliver
whole shares of TMS Common Stock by rounding down to the next number if the
fraction is less than .5 and rounding up to the next highest number if the
fraction is .5 or greater.
REGISTRATION
TMS has registered the TMS Common Stock issuable upon conversion of the
Sequoia Stock in the Merger pursuant to a filing with the Commission of a
Registration Statement on Form S-4 with respect to, and will take any actions
necessary under the state blue sky securities laws in connection with, the
issuance of such shares.
ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling-of-interests" for
accounting and financial reporting.
BACKGROUND OF THE MERGER
RECOMMENDATION OF SEQUOIA'S BOARD OF DIRECTORS
THE BOARD OF DIRECTORS OF SEQUOIA BELIEVE THAT THE MERGER IS IN THE BEST
INTERESTS OF SEQUOIA AND ITS SHAREHOLDERS, AND UNANIMOUSLY RECOMMENDS TO ITS
SHAREHOLDERS THAT THEY VOTE FOR THE APPROVAL OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY.
The Directors of Sequoia (the "Board") believes the Merger is fair from a
financial point of view and that the Merger and the other transactions
contemplated in connection with the Merger are in the best interest of both
Sequoia and its shareholders. The Board believes Sequoia and TMS will benefit
from the Merger by
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combining operations and by establishing a larger organization and revenue base
to attract customers requiring more substantial resources than either company
fields alone. It is expected that the synergies resulting from the Merger will
enhance the ability of the combined companies to compete in the competitive
document imaging software market. In addition, the Board believes that the
Merger will provide Sequoia shareholders with a route to liquidity for their
investment in Sequoia. THEREFORE, THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS
THAT SEQUOIA SHAREHOLDERS VOTE FOR APPROVAL OF THE MERGER.
SEQUOIA'S REASONS FOR THE MERGER
The Board of Directors of Sequoia has unanimously determined that the
Merger is advisable and in the best interest of Sequoia and its shareholders. In
making this determination, the Board of Directors considered a variety of
factors, including: benefit from the Merger by combining operations and by
establishing a larger organization and revenue base to attract customers
requiring more substantial resources than either company fields alone; the
Merger Consideration in relation to the present fair market value of Sequoia
Stock, the current value of Sequoia or Sequoia Stock in a negotiated transaction
and in relation to the Board's estimate of the future value of Sequoia as an
independent entity based upon Sequoia's historical and projected results of
operations; Sequoia's current financial and capital position and current and
projected cash flows; the replacement value, tangible book value and going
concern value of Sequoia's assets; the competitive environment for data image
conversion software companies generally; the compatibility of the respective
business and management philosophies of Sequoia and TMS, and the social, legal
and economic effects of the Merger upon the employees, suppliers, customers,
shareholders and other constituents of Sequoia, and the communities in which
Sequoia operates.
PERCENTAGE OWNERSHIP FOLLOWING THE MERGER
Assuming that none of the outstanding options to purchase Sequoia's Stock
are exercised prior to the Effective Date and no exercise of dissenters rights
by Sequoia shareholders, immediately following the consummation of the Merger,
Sequoia shareholders will beneficially own TMS Common Stock representing
approximately 30.1% of the outstanding shares.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
As provided in the Merger Agreement, upon the consummation of the Merger,
Dana R. Allen, Chairman and Chief Executive Officer of Sequoia, will be elected
to the Board of Directors of TMS. Additionally, in considering the
recommendation of the Board of Directors of Sequoia with respect to the Merger,
Sequoia shareholders should also be aware that certain members of the Board and
officers of Sequoia have interests that may present them with potential
conflicts of interest. See "--Execution of Employment and Non-Competition
Agreements."
OFFICERS, DIRECTORS AND EMPLOYEES
The Plan of Reorganization provides that Dana R. Allen is to be nominated
to the Board of Directors of TMS prior to and as a condition to the Merger.
Further, although TMS will have no obligation to continue to employ persons
currently employed by Sequoia, it is anticipated that subsequent to the Merger
the present employees of Sequoia, including officers, will continue to be
employed by Sequoia at the salary or wage rates, terms, conditions and benefits
in effect as of the Effective Date. Moreover, all indemnification provisions
currently in effect under Sequoia's Articles of Incorporation or bylaws with
respect to officers, directors, employees and agents of Sequoia will be
continued in full force and effect.
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EXECUTION OF EMPLOYMENT AND NON-COMPETITION AGREEMENTS
In connection with and as a condition to the consummation of the Merger,
Sequoia is required to exert its best efforts to execute a three (3) year
employment agreement with Dana R. Allen. Under such employment contract, Sequoia
may terminate the above individual at any time for cause, or such individual may
be terminated without cause upon the payment of $__________.
STOCK OPTIONS AND WARRANTS
In the event the Merger is consummated, Sequoia's stock options and
warrants will be converted into options or warrants to purchase shares of TMS
Common Stock with each such option or warrant being converted into the right to
purchase 2.837 shares of TMS Common Stock for each share of Sequoia Common Stock
purchasable under such option or warrant at an exercise price equal to 35.24% of
the exercise price per share of Sequoia Common Stock under such option or
warrant. Each of the remaining terms and conditions of the outstanding Sequoia
stock options and warrants shall remain in full force and affect and shall be
assumed and accepted by TMS upon the consummation of the Merger.
TMS'S REASONS FOR THE MERGER
TMS is acquiring Sequoia as part of its overall strategy of acquiring
independent software companies. TMS believes that the Merger will enable TMS to
expand its capabilities, provide it with the opportunity to serve additional
customers in the software industry, and position it to meet emerging trends
within that industry. In addition, the combination of revenues and assets of
Sequoia will contribute to improving the ability of TMS to include TMS Common
Stock on the Nasdaq Stock Market.
EFFECTIVE DATE OF THE MERGER
If the Merger Agreement is approved by the requisite vote of the Sequoia
shareholders, and the other conditions to the Merger are satisfied or waived,
the Merger will become effective upon the filing of a Certificate of Merger with
the Secretary of State of the State of Oklahoma and an Officer's Certificate and
Merger Agreement with the Secretary of State of the State of California. It is
presently contemplated that the Effective Date will occur on or about _________,
1995.
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
Set forth on the following pages is certain unaudited pro forma combined
financial information with respect to the Merger, including an unaudited pro
forma combined balance sheet as of August 31, 1995 and unaudited pro forma
combined statements of operations for the years ended August 31, 1995 and 1994.
The pro forma combined balance sheet has been prepared on the basis that the
Merger occurred on August 31, 1995. The pro forma combined statements of
operations have been prepared on the basis that the Merger occurred at the
beginning of each year presented. The Merger is expected to qualify as a
"pooling-of-interests" for accounting and financial reporting, and has been
structured to qualify as a tax free reorganization. The unaudited pro forma
combined financial statements should be read in conjunction with the notes
thereto and the financial statements of TMS and Sequoia included elsewhere or
incorporated herein. The pro forma combined results of operations are not
necessarily indicative of future operations of TMS or results that actually
would have occurred had the Merger been effected on the dates indicated.
-17-
<PAGE>
<TABLE>
<CAPTION>
TMS, INC.
UNAUDITED PRO FORMA
COMBINED BALANCE SHEET
AUGUST 31, 1995
TMS/SEQUOIA
TMS SEQUOIA PRO FORMA MERGER
ASSETS HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
------ ---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Current Assets:
Cash and cash equivalents $114,189 290,049 --- 404,238
Short-term investments --- 4,673 --- 4,673
Trade accounts receivable 976,744 266,112 --- 1,242,856
Allowance for returns and doubtful accounts (64,185) (35,133) --- (99,318)
Contract service work in process 87,187 --- --- 87,187
Deferred income taxes 180,000 27,623 --- 207,623
Prepaid expenses and other current assets 32,050 9,026 --- 41,076
----------- ---------- ------------ -------------
Total current assets 1,325,985 562,350 --- 1,888,335
----------- ---------- ------------ -------------
Property and equipment 2,011,271 138,703 --- 2,149,974
Less accumulated depreciation 564,497 102,370 --- 666,867
and amortization ----------- ---------- ------------ -------------
Net property and equipment 1,446,774 36,333 --- 1,483,107
----------- ---------- ------------ -------------
Other assets:
Capitalized software development costs, net 204,984 134,578 --- 339,562
Deferred income taxes 140,000 --- 63,204 (3) 76,796
Other assets 13,994 17,569 --- 31,563
----------- ---------- ------------ -------------
Total other assets 358,978 152,147 63,204 447,921
----------- ---------- ------------ -------------
Total assets $3,131,737 750,830 63,204 3,819,363
=========== ========== ============ =============
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Note payable 75,000 --- --- 75,000
Current installments of long-term debt 17,846 --- --- 17,846
Accounts payable 74,371 29,292 100,000 (6) 203,663
Accrued payroll and commissions 231,491 22,461 --- 253,952
Other liabilities 7,323 12,217 --- 19,540
Deferred revenue 93,013 --- --- 93,013
----------- ---------- ------------ -------------
Total current liabilities 499,044 63,970 100,000 663,014
Long-term debt, net of current installments 378,265 --- --- 378,265
Deferred income taxes --- 63,204 (63,204)(3) ---
----------- ---------- ------------ -------------
Total liabilities 877,309 127,174 36,796 1,041,279
----------- ---------- ------------ -------------
Shareholders' Equity:
Preferred stock --- 105,000 (105,000)(1) ---
Common stock 420,247 527,086 (344,925)(2) 602,408
Additional paid-in capital 10,546,914 --- 449,925 (2) 10,996,839
Unamortized deferred compensation (3,810) --- --- (3,810)
Accumulated deficit (8,708,923) (8,430) (100,000)(6) (8,817,353)
----------- ---------- ------------ -------------
Total shareholders' equity 2,254,428 623,656 (100,000) 2,778,084
Commitments and contingencies
=========== ========== ============ =============
$ 3,131,737 750,830 63,204 3,819,363
=========== ========== ============ =============
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements.
-18-
<PAGE>
TMS, INC.
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1995
<TABLE>
<CAPTION>
1995
TMS/SEQUOIA
TMS SEQUOIA PRO FORMA MERGER
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Software development and document $ 1,889,672 --- --- 1,889,672
conversion services
Licensing and royalties 2,331,448 988,949 --- 3,320,397
----------- ---------- ------------ -----------------
4,221,120 988,949 --- 5,210,069
----------- ---------- ------------ -----------------
Operating costs and expenses:
Software development and document 1,109,253 --- --- 1,109,253
conversion services
Selling, general and administrative 2,205,511 640,309 --- 2,845,820
Research and development 470,559 --- --- 470,559
----------- ---------- ------------ -----------------
3,785,323 640,309 --- 4,425,632
----------- ---------- ------------ -----------------
Operating income 435,797 348,640 --- 784,437
Other income (expense):
Interest income 4,837 9,570 --- 14,407
Interest expense (11,305) --- --- (11,305)
Other, net 26,312 (384) --- 25,928
----------- ---------- ------------ -----------------
Income before income taxes 455,641 357,826 --- 813,467
Income tax (expense) benefit 315,840 (145,301) --- 170,539
----------- ---------- ------------ -----------------
Net income $ 771,481 212,525 --- 984,006
=========== ========== ============ =================
Net income per common and common $ 0.08 0.16 0.08
equivalent share =========== ========== =================
Weighted average common and common 9,188,351 1,343,739 13,105,194 (5)
equivalent shares =========== ========== =================
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements.
-19-
<PAGE>
TMS, INC.
UNAUDITED PRO FORMA COMBINED
STATEMENT OF OPERATIONS
YEAR ENDED AUGUST 31, 1994
<TABLE>
<CAPTION>
1994
TMS/SEQUOIA
TMS SEQUOIA PRO FORMA MERGER
HISTORICAL HISTORICAL ADJUSTMENTS PRO FORMA
---------- ---------- ----------- ---------
<S> <C> <C> <C> <C>
Revenue:
Software development and document $1,216,935 --- --- 1,216,935
conversion services
Licensing and royalties 2,219,826 535,323 --- 2,755,149
---------- --------- ----------- ----------
3,436,761 535,323 --- 3,972,084
---------- --------- ----------- ----------
Operating costs and expenses:
Software development and document 721,826 --- --- 721,826
conversion services
Selling, general and administrative 1,903,706 420,711 --- 2,324,417
Research and development 471,462 --- --- 471,462
---------- --------- ----------- ----------
3,096,994 420,711 --- 3,517,705
---------- --------- ----------- ----------
Operating Income 339,767 114,612 --- 454,379
Other income (expense):
Interest income 4,424 2,140 --- 6,564
Interest expense (1,075) --- --- (1,075)
Other, net 9,205 2,733 --- 11,938
---------- --------- ----------- ----------
Income before income taxes and cumulative 352,321 119,485 --- 471,806
effect of change in accounting principle
Income tax (expense) benefit (1,700) (49,591) --- (51,291)
---------- --------- ----------- ----------
Income before cumulative effect of change $ 350,621 69,894 --- 420,515
in accounting principle ========== ========= =========== ==========
Income before cumulative effect of change $ 0.04 0.05 0.03
in accounting principle per common and ========== ========= ==========
common equivalent share
Weighted average common and common 9,012,191 1,347,652 12,768,824
equivalent shares ========== ========= ==========
</TABLE>
See accompanying notes to the unaudited pro forma combined financial statements.
-20-
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
(1) Holders of Sequoia preferred stock converted their holdings to common stock
at the rate of one share of common stock for one share of preferred stock
subsequent to August 31, 1995, but prior to the Merger. Adjustments
reflects conversion of Sequoia preferred stock.
(2) Adjustment reflects the exchange of Sequoia common shares at August 31,
1995 (1,214,180) and Sequoia common shares resulting from the conversion of
the Sequoia preferred stock (70,000) for 2.837 shares of TMS common shares,
and the resulting increase in additional paid-in-capital. At August 31,
1995, after giving effect to the Merger, TMS would have had outstanding
12,048,166 common shares, par value, $.05.
(3) Adjustment reflects offset of TMS' non-current deferred tax asset by the
amount of Sequoia's non-current deferred tax liability.
(4) Sequoia adopted Statement of Financial Accounting Standards No. 109 (SFAS
No. 109), Accounting for Income Taxes, as of September 1, 1993, and
recorded the cumulative effect of the accounting change in their 1994
Statement of Operations. The cumulative effect of the accounting change
($157,768) has been excluded from the 1994 unaudited pro forma combined
statement of operations.
(5) In calculating the 1995 and 1994 pro forma weighted average common and
common equivalent shares, the 2.837 exchange ratio was applied to the
Sequoia stock options and the exercise price was adjusted to 35.24% of the
Sequoia exercise price. Dilutive effect of Sequoia stock options was
determined by reference to market prices of TMS common stock.
(6) Merger costs estimated at approximately $80,000 to $100,000 have been
excluded from the pro forma combined statements of operations and will be
charged to operations in the first and second quarter of fiscal year 1996,
as incurred. The pro forma combined balance sheet gives effect to such
expenses as if they had been incurred as of August 31, 1995.
-21-
<PAGE>
CERTAIN FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
The following discussion summarizes certain federal income tax
considerations involved in exchange of Sequoia Stock for TMS Common Stock in the
Merger. The Merger will constitute a tax-free reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the "Code").
No gain or loss will be recognized by a holder of Sequoia Stock upon the
exchange of Sequoia Stock solely for TMS Common Stock. The aggregate basis of
the TMS Common Stock received in the Merger by a holder of Sequoia Stock will be
the same as the aggregate basis of Sequoia Stock surrendered in exchange
therefor. The holding period of the TMS Common Stock received in the Merger by a
holder of Sequoia Stock will include the holding period of Sequoia Stock
surrendered in exchange therefor, provided that the holder held Sequoia Stock as
capital assets as of the Effective Date.
THE FEDERAL INCOME TAX DISCUSSION SET FORTH ABOVE IS INCLUDED FOR GENERAL
INFORMATION ONLY. DUE TO THE INDIVIDUAL NATURE OF TAX CONSEQUENCES, EACH
SHAREHOLDER IS URGED TO CONSULT HIS TAX ADVISOR WITH RESPECT TO THE TAX
CONSEQUENCES TO HIM OF THE MERGER AND THE EXERCISE OF STATUTORY RIGHTS OF
DISSENTING SHAREHOLDERS, INCLUDING THE EFFECTS OF STATE, LOCAL, FOREIGN AND
OTHER TAX LAWS.
RIGHTS OF DISSENTING SHAREHOLDERS
Pursuant to Chapter 13 of the California Corporations Code (the
"Corporations Code"), any Sequoia shareholder who desires to receive the fair
market value of his or her Sequoia Common Stock in cash rather than to retain
his or her shares of Sequoia Common Stock as part of the Merger may do so if he
or she complies with the provisions of the Corporations Code pertaining to the
exercise of dissenters' rights. The following is a summary of such provisions of
the Corporations Code and is qualified in its entirety by reference to such
provisions, copies of which are attached to this Proxy Statement - Prospectus as
Exhibit II.
Sequoia shareholders have the right to dissent from approval of the Merger
and to demand payment in cash for their shares. In general, to perfect the right
to dissent, a shareholder must take the following actions: (a) vote against the
Merger or abstain from voting for the Merger; (b) submit a demand in writing, no
later than 30 days after the Approval Date (as such term is defined below), that
Sequoia purchase the Shareholder's shares and pay the Shareholder the fair
market value of the shares in cash; and (c) within 30 days after the Approval
Date, submit the certificates representing the shares to be purchased to be
stamped with a legend identifying them as dissenting shares. The "Approval Date"
is the date Sequoia mails notice of shareholder approval of the Merger pursuant
to Section 1301 of the Corporations Code. Such notice will notify shareholders
of the Approval Date as well as the address to which demands for payment by
dissenting shareholders should be sent. Such notice will constitute an offer by
Sequoia to buy any dissenting shares.
The demand for payment must state the number and class of the shares held
of record by the shareholder that the shareholder wants Sequoia to purchase. The
demand must state what the shareholder claims to be the fair market value of the
shares as of the day before the first announcement of the Merger, which was
September 8, 1995. The statement of fair market value constitutes an offer by
the shareholder to sell the shares at such price. Assuming that the Merger is
approved by the required vote, shareholders who do not meet those requirements
are bound by the terms of the Merger Agreement.
If a dissenting shareholder and Sequoia agree that the shares are
dissenting shares and agree upon the fair market value for the shares, Sequoia
will pay the dissenting shareholder the agreed value with interest at the legal
rate from the date of such agreement, within thirty (30) days after the date of
the agreement or within thirty (30) days after any statutory or contractual
conditions to the Merger are satisfied, whichever is later.
-22-
<PAGE>
If, within six months after the Approval Date, Sequoia denies that the shares
are dissenting shares, or Sequoia and the shareholder fail to agree upon the
fair market value of the shares, then the shareholder or Sequoia may seek a
court determination of whether the shares are dissenting shares, the fair
markets value of the dissenting shares, or both. The shareholder may recover the
amount the court determines to be the fair market value of each dissenting share
multiplied by the number of dissenting shares Sequoia must purchase, plus
interest at the legal rate from the date of judgment. The judgment is payable
only upon endorsement and delivery to Sequoia of the certificates for the shares
described in the judgment. The cost of the action shall be apportioned as the
court considers equitable, but if the court's appraisal exceeds the price
offered, Sequoia shall pay the costs (including in the discretion of the court
attorneys' fees, fees of expert witnesses and interest at the legal rate from
the date upon which Sequoia notified shareholders of the Approval Date), if the
value awarded by the court for the shares is more than 125% of the price offered
by Sequoia. The dissenting shareholder and persons claiming under the
shareholder will be bound by the terms of the Merger Agreement if the
shareholder transfers the shares before submitting them to be legended or
withdraws the demand that Sequoia purchase the shares, or if, within six months
after the Approval Date, Sequoia and the shareholder have neither agreed on the
fair market value of the shares nor filed a petition as set forth above.
A vote in favor of the Merger Agreement constitutes a waiver of dissenters'
rights under Chapter 13 of the Corporations Code. Because a proxy which does not
contain voting instructions will, unless revoked, be voted FOR approval and
adoption of the Merger Agreement and the transactions contemplated thereby, a
holder of shares of Sequoia Stock who votes by proxy and who wishes to exercise
his or her dissenter's rights must, after notifying Sequoia of his or her
intention to dissent, either (a) vote AGAINST the approval and adoption of the
Merger Agreement and the transactions contemplated thereby or (b) abstain from
voting on the approval and adoption of the Merger Agreement and the transactions
contemplated thereby. Further, a vote against approval of the Merger Agreement
or abstaining to vote for the Merger Agreement does not satisfy the requirement
of a written demand for payment or the other actions required by Chapter 13 of
the Corporations Code to perfect dissenters' rights. Such written demand for
payment must be in addition to and separate from any proxy regarding the Merger
Agreement.
Failure to follow the provisions of Chapter 13 of the Corporations Code
will result in a loss of dissenters' rights. In addition, if Sequoia and TMS
abandon the Merger, the right of a dissenting shareholder to be paid the fair
market value of his or her shares will cease.
BUSINESS OF TMS
TMS, Inc. ("TMS") has been engaged in the computer software industry since
1981. TMS licenses computer software products and provides software development
services to enable information delivery through electronic publishing and
electronic image management.
TMS operations include products and services used by corporations,
governments and large institutions. TMS products are primarily text and image
retrieval "toolkits," which are software development products that allow
customers to develop new software applications or customize existing
applications. In addition, TMS offers off-the-shelf products for customers that
do not have software development resources. Services include software
development and the conversion of paper documents for use in electronic
publishing environments. TMS emphasizes the development of software for
customers desiring new or custom applications, and document conversion for
customers desiring to convert paper and other media to electronic form.
The executive offices of TMS are located at 206 West Sixth Avenue,
Stillwater, Oklahoma, and its telephone number is (405) 377-0880.
-23-
<PAGE>
INFORMATION WITH RESPECT TO SEQUOIA
BUSINESS OF SEQUOIA
Sequoia was founded on September 9, 1987. Sequoia is in the business of
producing innovative software products in the document imaging industry.
Sequoia's principal place of business is located in Burlingame, California and
as of October 31, 1995, Sequoia had 12 employees.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF CERTAIN RELEVANT FACTORS
The Company's operating results have reflected certain trends. The
Company's revenues from the sales of ScanFix toolkits have declined as license
revenues have increased due to the sales of software products developed with
those toolkits. The Company believes revenues from FormFix will increase since
the product's toolkit was released in the last fiscal year.
Gross margin (i.e., net sales less cost of sales) for fiscal 1995 was
94.5%, and the Company believes that gross margin for fiscal 1996 will decline
due to increased sales and marketing expenditures in fiscal 1996. The Company
has no data reflecting industry gross margins.
For fiscal 1995, the Company estimates that domestic government sales were
less than 10% of total domestic sales, and estimates that foreign sales were 28%
of total sales.
LEGAL PROCEEDINGS OF SEQUOIA
Sequoia does not have any material pending or threatened litigation.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS OF SEQUOIA
There have been no changes in or disagreements with the independent
accountants of Sequoia during the two most recent fiscal years or any subsequent
interim period.
MARKET FOR SEQUOIA AND DIVIDENDS
There is no public or established private market for Sequoia Stock. No
dividends have been paid on Sequoia Stock since its incorporation.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Sequoia shareholders of record at the close of business on October 31,
1995, will be entitled to one vote for each share of Sequoia Common Stock then
held. As of that date, Sequoia had 1,284,180 shares of Common Stock issued and
outstanding. As of the date of this Proxy Statement -Prospectus, management of
Sequoia knows of no persons other than those listed below who are deemed to be
the beneficial owners, as such term is defined in Rule 13d-3 promulgated under
the Exchange Act, of more than 5% of the shares of Sequoia Stock.
-24-
<PAGE>
<TABLE>
<CAPTION>
BENEFICIAL OWNER SHARES
- ---------------- BENEFICIALLY PERCENT OF
OWNED OWNERSHIP
----- ----------
<S> <C> <C>
Dana R. Allen 731,719/(1)/ 59.3%
3149 Page Street
Redwood City, CA 90463
Susan Allen 111,193/(2)/ 9.2%
3149 Page Street
Redwood City, CA 90463
EMG Capital, Inc. 98,278 8.1%
1127 Pope Street
St. Helena, CA 94574
</TABLE>
_________________________
/(1)/Includes stock options for the purchase of 12,000 shares of Sequoia Stock
with an option exercise price of $1.50 per share.
/(2)/Includes stock options for the purchase of 104,393 shares of Sequoia Stock
with option exercise prices ranging from $1.25 to $1.50 per share.
SECURITY OWNERSHIP OF MANAGEMENT
The following table sets forth the security ownership of the directors of
Sequoia and of the directors and executive officers of Sequoia as a group as of
October 31, 1995:
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
OWNED
--------------
<S> <C>
Dana R. Allen/(1)/........................................... 731,719
Susan Allen/(2)/............................................. 111,193
Hubert R. Granger, Jr./(3)/.................................. 45,333
Lawrence Kubo/(4)/........................................... 12,000
David Howe................................................... 4,000
-------
All Directors and Executive Officers as a Group (5 persons).. 904,245
=======
</TABLE>
_________________________
/(1)/Includes stock options for the purchase of 12,000 shares of Sequoia Stock
with an option exercise price of $1.50 per share.
/(2)/Includes stock options for the purchase of 104,393 shares of Sequoia Stock
with option exercise prices ranging from $1.25 to $1.50 per share.
/(3)/Includes stock options for the purchase of 12,000 shares of Sequoia Stock
with an option exercise price of $1.50 per share.
/(4)/Includes stock options for the purchase of 12,000 shares of Sequoia Stock
with an option exercise price of $1.50 per share.
-25-
<PAGE>
DIRECTORS AND EXECUTIVE OFFICERS OF SEQUOIA
The directors and executive officers of Sequoia are set forth below:
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<C> <C> <C>
Dana R. Allen 42 Chairman of the Board of Directors,
President and Chief Executive Officer
H. R. Granger 53 Director
Larry Kubo 45 Director
David Howe 45 Chief Financial Officer
Susan Allen 36 Secretary
</TABLE>
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the cash compensation paid by Sequoia for
the fiscal year ended August 31, 1995 to Dana R. Allen, Sequoia's Chief
Executive Officer.
<TABLE>
<CAPTION>
Name Cash Compensation Paid
---- ----------------------
<S> <C>
Dana R. Allen $61,988
</TABLE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Sequoia has no material business relationships with, did not engage in any
material transactions with and had no material indebtedness due from, any of its
directors and officers or any member of their families or their affiliates.
DESCRIPTION OF SEQUOIA STOCK
The only classes of capital stock of Sequoia authorized by the Articles of
Incorporation of Sequoia, as amended, consist of 20,000,000 shares of common
stock, no par value ("Sequoia Stock") and 10,000,000 shares of preferred stock,
of which 70,000 shares have been designated as Series A Preferred Stock, and
none of the authorized shares of such series are outstanding. There were
1,284,180 shares of Sequoia Stock issued and outstanding on the Record Date.
Holders of Sequoia Stock are entitled to one vote for each share of Sequoia
Stock held on all matters submitted to a vote of shareholders. Pursuant to the
Articles of Incorporation of Sequoia, in the election of directors, shareholders
are permitted to cumulate their votes. All issued and outstanding shares of
Sequoia Stock are fully paid and non-assessable.
COMPARATIVE RIGHTS OF TMS SHAREHOLDERS AND SEQUOIA SHAREHOLDERS
If the proposed Merger is consummated, the Sequoia shareholders will become
holders of shares of TMS Common Stock. Thereafter, the rights and privileges of
such shareholders will be governed by the provisions of the Oklahoma General
Corporation Act (the "OGCA") and the Certificate of Incorporation and Bylaws of
TMS. A comparison of the various rights of a shareholder of Sequoia as governed
by the Corporations Code and Sequoia's Articles of Incorporation and Bylaws,
with such rights of a shareholder of
-26-
<PAGE>
TMS as governed by the OGCA and the Certificate of Incorporation and Bylaws of
TMS is set forth below. This summary does not purport to be a complete statement
of all of the differences in the rights of such holders and is qualified in its
entirety by reference to the above-mentioned laws, Certificate of Incorporation
and Bylaws.
DISSENTERS' RIGHTS
Under the Corporations Code, shareholder who dissent from certain corporate
actions, such as mergers and other corporate "reorganizations," may in certain
circumstances, demand appraisal of, and obtain payment for, the "fair value" of
their shares by following the procedures prescribed in Chapter 13 of the
Corporations Code. Such statutory procedures are described elsewhere in this
Proxy Statement - Prospectus. Although shareholders of an Oklahoma corporation
who dissent from such corporate actions are also provided appraisal rights, the
right to dissent and therefore exercise appraisal rights must be exercised in a
different manner than that required under the Corporations Code. Specifically,
under the OGCA, shareholders who desire to exercise their appraisal rights and
dissent from such corporate action must provide express written notice of their
intent to exercise such rights prior to the holding of the shareholder vote for
approval of the action. Abstention from, or merely voting against approval is
not sufficient under the OGCA for providing notice of one's intent to exercise
his or her appraisal rights. In contrast, under the Corporations Code, Sequoia
shareholders are permitted to exercise their appraisal rights and thereby
dissent from such corporate actions at any time within 30 days after shareholder
approval of the corporate action provided that the shareholder voted against the
corporate action or abstained from voting thereon.
CUMULATIVE VOTING
The right of Sequoia shareholders to cumulate their votes in connection
with the election of Directors is guaranteed by the Corporations Code.
Cumulative voting provisions are intended to aid minority shareholders in
securing representation on the Board of Directors. At each election of
directors, every shareholder entitled to vote in such election has the right to
demand, before the taking of such vote, to vote, in person or by proxy, the
number of shares owned by him or her for as many persons as there are directors
to be elected and for whose election he or she has a right to vote, or cumulate
his or her votes by giving one candidate as many votes as the number of such
directors multiplied by the number of his or her shares, or by distributing such
votes on the same principle among any number of such candidates.
Under the OGCA, cumulative voting is only allowed if it is so provided for
in a corporation's Certificate of Incorporation. As the Certificate of
Incorporation of TMS does not include a provision granting shareholders the
right to cumulate votes, no such rights will be available to Sequoia
Shareholders subsequent to the Merger. Accordingly, the holders of more than 51%
of the shares will be able to elect the Board of Directors and minority
shareholders will not be able to elect a representative to the Board.
RIGHT TO CALL SPECIAL MEETINGS
Under the Corporations Code, shareholder(s) entitled to cast at least 10%
of the votes at the meeting may, upon request in writing to the Chairman of the
Board, President, Vice President or Secretary of the corporation, demand that a
special meeting of the corporation's shareholders be held. The OGCA has no
corresponding provision and special meetings of shareholders may only be called
by the corporation's board of directors. As a consequence, shareholders have no
right to require that the corporation hold a special meeting to address issues
of concern that may be raised by shareholders.
-27-
<PAGE>
RIGHT TO APPROVE AND REMOVE DIRECTORS
Under the Corporations Code, shareholders: (i) are entitled to elect
directors to fill vacancies which are not filled by the board of directors; (ii)
may hold a special meeting to elect a completely new board of directors when the
filling of a vacancy by the board of directors results in a board of directors
in which less than a majority of directors were elected by the shareholders; and
(iii) provided that the suit is brought by holder of ten (10%) or greater of any
class of outstanding securities, may bring suit to remove a director of the
basis of fraudulent or dishonest acts or gross abuse of authority or discretion
with reference to the corporation and may bar the reelection of any director so
removed for a period prescribed by the court. None of these rights are available
to shareholders of an Oklahoma corporation.
RIGHT TO REVIEW CORPORATE BOOKS AND RECORDS
Under the Corporations Code, shareholders are granted broad rights to
obtain copies of and review corporate accounting books and minutes of board and
shareholder meetings upon written demand and may review such records at any
reasonable time during the corporation's usual business hours. While
shareholders are provided similar rights under the OGCA, the corporation may
require that the shareholder provide the corporation with a proper purpose
before permitting the shareholder to inspect such books and records.
INDEMNIFICATION OF OFFICERS AND DIRECTORS
The Corporations Code and the OGCA both provide for the indemnification of
officers and directors of the corporation under certain circumstances. There is
a distinction however, between the implementation of the indemnification
provisions of each state's law. Specifically, under the Corporations Code, an
officer or director is not entitled to receive indemnification in the event of
any settlement of any judicial or other proceeding unless the settlement is
approved by the court. Approval of the court is not required under the OGCA.
LEGAL MATTERS
The validity of the TMS Common Stock offered hereby will be passed upon for
TMS by Phillips McFall McCaffrey McVay & Murrah, P.C.
EXPERTS
The financial statements and schedule of TMS as of August 31, 1995 and
1994, and for each of the years in the three-year period ended August 31, 1995
have been incorporated by reference herein and in the Registration Statement in
reliance upon the report of KPMG Peat Marwick LLP, independent certified public
accountants, incorporated by reference herein, and upon the authority of said
firm as experts in accounting and auditing.
The financial statements of Sequoia as of August 31, 1995 and 1994, and for
each of the years in the two-year period ended August 31, 1995, have been
included herein and in the Registration Statement in reliance upon the report of
KPMG Peat Marwick LLP, independent certified public accountants, appearing
elsewhere herein, and upon the authority of said firm as experts in accounting
and auditing.
-28-
<PAGE>
INDEX TO FINANCIAL STATEMENTS AND
FINANCIAL STATEMENT SCHEDULE
<TABLE>
<CAPTION>
Page
----
<S> <C>
TMS, Inc.:
The financial statements of TMS, Inc. and the independent auditors' report
thereon are included in the annual report on Form 10-K for the year ended
August 31, 1995, and are incorporated herein by reference.
Sequoia Computer Corporation (dba Sequoia Data Corporation)
Independent Auditors' Report F-2
Balance Sheets as of August 31, 1995 and 1994 F-3
Statements of Earnings, Years ended August 31, 1995 and 1994 F-4
Statements of Shareholders' Equity, Years ended August 31, 1995 and 1994 F-5
Statements of Cash Flows, Years ended August 31, 1995 and 1994 F-6
Notes to Financial Statements F-7
</TABLE>
F-1
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Sequoia Computer Corporation:
We have audited the accompanying balance sheets of Sequoia Computer Corporation
(the Company), dba Sequoia Data Corporation, as of August 31, 1995 and 1994, and
the related statements of earnings, shareholders' equity, and cash flows for the
years then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
As discussed in Note 10 to these financial statements, the Company is expected
to merge with TMS, Inc., a publicly held computer software company, early in the
Company's fiscal 1996, subject to negotiation and execution of a definitive
agreement between the two companies.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Sequoia Computer Corporation as
of August 31, 1995 and 1994, and the results of its operations and its cash
flows for the years then ended in conformity with generally accepted accounting
principles.
As discussed in Notes 2 and 8 to the financial statements, in 1994 the Company
adopted the provisions of Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes.
KPMG Peat Marwick LLP
San Jose, California
October 6, 1995
F-2
<PAGE>
SEQUOIA COMPUTER CORPORATION
(dba Sequoia Data Corporation)
Balance Sheets
August 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets 1995 1994
------ ---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $290,049 45,075
Short-term investments 4,673 84,673
Trade accounts receivable, net of allowance for returns and
doubtful accounts of $35,133 in 1995 and $64,799 in 1994 230,979 85,590
Other receivables 1,073 8,102
Prepaid expenses 7,953 -
Deferred income taxes 27,623 134,704
-------- --------
Total current assets 562,350 358,144
Property and equipment, net 36,333 29,045
Capitalized software development costs, net 134,578 48,336
Patent costs 17,569 9,766
-------- --------
$ 750,830 445,291
======== ========
Liabilities and Shareholders' Equity
------------------------------------
Current liabilities:
Accounts payable $ 29,292 9,852
Commissions payable 22,461 17,938
Other accrued liabilities 12,217 1,587
-------- --------
Total current liabilities 63,970 29,377
-------- --------
Deferred income taxes 63,204 25,783
-------- --------
Shareholders' equity:
Series A preferred stock, no par value; 10,000,000 shares
authorized; 70,000 shares issued and outstanding as of
August 31, 1995 and 1994 105,000 105,000
Common stock, no par value; 20,000,000 shares authorized;
1,214,180 and 1,200,180 shares issued and outstanding as of
August 31, 1995 and 1994, respectively 527,086 506,086
Accumulated deficit (8,430) (220,955)
-------- --------
Total shareholders' equity 623,656 390,131
Commitments and contingencies
-------- --------
$ 750,830 445,291
======== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
SEQUOIA COMPUTER CORPORATION
(dba Sequoia Data Corporation)
Statements of Earnings
Years ended August 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Net sales $ 988,949 535,323
Cost of sales 54,828 52,639
-------- -------
Gross profit 934,121 482,684
-------- -------
Operating expenses:
General and administrative 278,728 207,603
Sales and marketing 306,753 160,469
-------- -------
Operating expenses 585,481 368,072
-------- -------
Earnings from operations 348,640 114,612
-------- -------
Other income (expense) (384) 2,733
Interest income 9,570 2,140
-------- -------
Total other income 9,186 4,873
-------- -------
Earnings before income tax provision 357,826 119,485
and cumulative effect of change in accounting principle
Provision for income taxes 145,301 49,591
-------- -------
Earnings before cumulative effect of change in accounting principle 212,525 69,894
Cumulative effect of change in accounting principle - 157,768
-------- -------
Net earnings $ 212,525 227,662
======== =======
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
SEQUOIA COMPUTER CORPORATION
(dba Sequoia Data Corporation)
Statements of Shareholders' Equity
Years ended August 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
------------------------ ----------------------------
Shares Amount Shares Amount
------------ ----------- ------------- --------------
<S> <C> <C> <C> <C>
Preferred stock:
Balance, beginning and end of year 70,000 $ 105,000 70,000 $ 105,000
========= --------- ========= ---------
Common stock:
Balance, beginning of year 1,200,180 506,086 1,198,780 505,142
Exercise of stock options 14,000 21,000 1,400 944
--------- --------- --------- ---------
Balance, end of year 1,214,180 527,086 1,200,180 506,086
========= --------- ========= ---------
Accumulated deficit:
Balance, beginning of year (220,955) (448,617)
Net earnings 212,525 227,662
--------- ---------
Balance, end of year (8,430) (220,955)
--------- ---------
Total shareholders' equity $ 623,656 $ 390,131
========= =========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
SEQUOIA COMPUTER CORPORATION
(dba Sequoia Data Corporation)
Statements of Cash Flows
Years ended August 31, 1995 and 1994
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 212,525 227,662
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 37,611 15,712
Realized loss from sale of short-term investments 1,957 -
Cumulative effect of change in accounting principle - (157,768)
Deferred income taxes 144,501 48,791
Issuance of common stock under options in
exchange for services rendered 9,000 -
Changes in operating assets and liabilities:
Trade accounts receivable, net (145,389) 4,326
Other receivables 7,028 (1,219)
Prepaid expenses and other current assets (7,953) 2,043
Accounts payable 19,440 (1,907)
Commissions payable 4,523 7,719
Deferred revenue - (23,900)
Other accrued liabilities 10,630 (12,829)
-------- --------
Net cash provided by operating activities 293,873 108,630
-------- --------
Cash flows from investing activities:
Capital expenditures (18,352) (11,969)
Purchase of short-term investments - (84,673)
Proceeds from the sale of short-term investments 78,043 -
Additions to software development costs (112,787) (52,606)
Additions to patent costs (7,803) -
-------- --------
Net cash used in investing activities (60,899) (149,248)
-------- --------
Cash flows provided by financing activities - proceeds from
issuance of common stock 12,000 944
-------- --------
Net increase (decrease) in cash and cash equivalents 244,974 (39,674)
Cash and cash equivalents at beginning of year 45,075 84,749
-------- --------
Cash and cash equivalents at end of year $ 290,049 45,075
======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for income taxes $ 1,268 800
======== ========
</TABLE>
See accompanying notes to financial statements.
F-6
<PAGE>
SEQUOIA COMPUTER CORPORATION
(dba Sequoia Data Corporation)
Notes to Financial Statements
August 31, 1995 and 1994
(1) DESCRIPTION OF COMPANY
Sequoia Computer Corporation (the Company), dba Sequoia Data Corporation,
was incorporated in the state of California in 1987. The Company develops
and markets innovative software products in the document image processing,
image enhancement, forms processing, and data entry industries. The
Company's products include ScanFix, FormFix, and GrayFix software tool
kits.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Revenue Recognition
Revenue is recognized at the time of shipment, net of allowances for
estimated future product returns.
Cash and Cash Equivalents
Cash and cash equivalents consist primarily of highly liquid money market
accounts carried at cost plus accrued interest, which approximates market
value.
Short-Term Investments
The Company has adopted Statement of Financial Accounting Standards (SFAS)
No. 115, Accounting for Certain Investments in Debt and Equity Securities,
for investments held as of September 1, 1994. Under the provisions of
SFAS No. 115, the Company has classified its investments as "available-for-
sale." Such investments are recorded at fair value and unrealized gains and
losses, if material, are reported as a separate component of equity until
realized. The cost of securities sold is based upon the specific
identification method. There was no cumulative effect on earnings as a
result of the adoption of SFAS No. 115.
Property and Equipment
Property and equipment are stated at cost. Depreciation is computed using
the straight-line method over the estimated useful lives of the respective
assets, which range from three to seven years.
Capitalized Software Development Costs
The Company capitalizes software development costs after the technological
feasibility of the product has been established in accordance with SFAS No.
86, Accounting for the Cost of Computer Software to be Sold, Leased, or
Otherwise Marketed. Such costs are amortized using the straight-line
method over the estimated economic life of the product, which is generally
two years from the date of product release. The amortization expense was
$26,545 and $4,270 for each of the years ended August 31, 1995 and 1994,
respectively.
(Continued)
F-7
<PAGE>
SEQUOIA COMPUTER CORPORATION
(dba Sequoia Data Corporation)
Notes to Financial Statements
Income Taxes
Effective September 1, 1993, the Company adopted the provisions of SFAS No.
109, Accounting for Income Taxes, and has reported the cumulative effect of
that change in the method of accounting for income taxes in the
accompanying 1994 statement of earnings. SFAS No. 109 prescribes an asset
and liability approach that results in the recognition of deferred tax
assets and liabilities for the expected future tax consequences of events
that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS No. 109 generally
considers all expected future events other than future enactments of
changes in tax laws or rates.
Patent Costs
Patent costs are comprised of capitalized costs associated with obtaining
patent rights for certain software products. Such costs will be amortized
over the useful life of the patents on the straight-line method once the
patents have been obtained.
(3) PROPERTY AND EQUIPMENT
Property and equipment consisted of the following as of August 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Furniture and fixtures $ 39,170 35,333
Computer equipment and software 89,147 74,631
Motor vehicles 10,386 10,386
-------- -------
138,703 120,350
Less accumulated depreciation 102,370 91,305
-------- -------
$ 36,333 29,045
======== =======
</TABLE>
(4) SHORT-TERM INVESTMENTS
Short-term investments consisted of the following as of August 31:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Corporate bond $ 4,673 4,673
Government bond mutual fund - 80,000
-------- -------
$ 4,673 84,673
======== =======
</TABLE>
The values of the short-term investments included in the accompanying
balance sheets as of August 31, 1995 and 1994 are at cost and approximate
fair value. During December 1994, the Company sold its investment in a
government bond mutual fund for a realized loss of $1,957.
(Continued)
F-8
<PAGE>
SEQUOIA COMPUTER CORPORATION
(dba Sequoia Data Corporation)
Notes to Financial Statements
The cost and estimated fair value of available-for-sale investments as of
August 31, 1995, by contractual maturity, was as follows:
<TABLE>
<CAPTION>
Estimated
---------
Cost fair value
---- ----------
<S> <C> <C>
Corporate bond maturing in 2005 $ 4,673 4,673
===== =====
</TABLE>
(5) SHAREHOLDERS' EQUITY
At the discretion of the Board of Directors, the Company grants incentive
options to employees, including officers and directors, and warrants to
nonemployees (collectively referred to as options). Options become
exercisable at such times and under such conditions as determined by the
Board of Directors at the date of grant. To date, all options have been
issued with an exercise price no less than the fair value at the date of
grant. The fair value of the Company's stock is determined by the Board of
Directors. As of August 31, 1995, 578,656 options were outstanding of
which 444,656 were vested, and as of August 31, 1994, 564,020 options were
outstanding of which 499,020 were vested.
Activity associated with the Company's stock options for the years ended
August 31, 1995 and 1994 is as follows:
<TABLE>
<CAPTION>
Options Price
outstanding per share
----------- ---------
<S> <C> <C>
Balance as of August 31, 1993 437,670 $ .15 - 1.50
Options granted 136,750 1.50
Options exercised (1,400) .67
Options expired or canceled (9,000) 1.25
------- ----------
Balance as of August 31, 1994 564,020 .15 - 1.50
Options granted 122,480 1.50
Options exercised (14,000) 1.50
Options expired or canceled (93,844) .90 - 1.25
------- ----------
Balance as of August 31, 1995 578,656 .15 - 1.50
======= ==========
</TABLE>
(6) PREFERRED STOCK
Each share of Series A preferred stock is convertible at the option of the
shareholder at a rate of one share of common stock for one share of Series
A preferred stock. Preferred stock would be automatically converted by the
Company to common stock on the occurrence of any major event.
In addition, preferred stock shareholders have preference over common stock
shareholders in a liquidation, and would receive the first 15 cents per
share of any dividend announced by the Company, on a noncumulative basis.
To date, no dividends have been announced by the Company.
(Continued)
F-9
<PAGE>
SEQUOIA COMPUTER CORPORATION
(dba Sequoia Data Corporation)
Notes to Financial Statements
(7) RETIREMENT SAVINGS PLAN
The Company has established a retirement savings plan that is available to
to all employees with a minimum of five years of service. Employees may
elect to contribute up to 15% of their annual salary, subject to special
limitiations imposed by the Internal Revenue Service. The Company made no
contributions to the plan for the years ended August 31, 1995 and 1994.
(8) INCOME TAXES
As discussed in Note 2, the Company adopted SFAS No. 109 as of September 1,
1993. The cumulative effect of this change in accounting for income taxes
of $157,768 was determined as of September 1, 1993, and is reported
separately in the accompanying statement of earnings for the year ended
August 31, 1994.
Income tax expense for the years ended August 31, 1995 and 1994 consisted
of:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Current:
Federal $ - -
State 800 800
-------- ------
800 800
Deferred:
Federal 110,892 37,600
State 33,609 11,191
-------- ------
144,501 48,791
-------- ------
$ 145,301 49,591
======== ======
</TABLE>
As of August 31, 1995, the Company has federal net operating loss
carryforwards of approximately $273,000, which expire in the years 2005
through 2008.
The state of California allows 50% of net operating losses incurred to be
carried forward for five years. Accordingly, the Company has a net
operating loss carryforward for state tax purposes of approximately $32,000
as of August 31, 1995. The carryforward expires in the year 1998.
The Internal Revenue Code of 1986 and the California Conformity Act of 1987
substantially restrict the ability of a corporation to utilize existing net
operating losses in the event of an "ownership change" of the Company, as
defined.
(Continued)
F-10
<PAGE>
SEQUOIA COMPUTER CORPORATION
(dba Sequoia Data Corporation)
Notes to Financial Statements
The tax effect of differences that give rise to significant portions of
deferred tax assets and liabilities are presented below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred asset:
Deferred state taxes $ 9,552 -
Net operating loss carryover 95,864 162,566
--------- -------
105,416 162,566
Less valuation allowance - -
--------- -------
Net deferred asset 105,416 162,566
--------- -------
Deferred tax liability:
Cash method of accounting employed for tax purposes (77,792) (25,986)
Software development expenses capitalized for book purposes (63,204) (25,783)
Deferred state taxes - (1,876)
--------- -------
Net deferred liability (140,996) (53,645)
--------- -------
Net deferred asset (liability) $ (35,580) 108,921
========= =======
</TABLE>
The Company believes that it is more likely than not that the results of
future operations will generate significant taxable earnings to realize the
deferred tax asset, thus, no valuation allowance has been provided.
The difference between the effective income tax rate and the federal
statutory rate of 34% is as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Statutory federal income tax rate $ 121,661 40,625
State tax, net of federal benefit 22,710 7,914
Other 930 1,052
-------- ------
$ 145,301 49,591
======== ======
</TABLE>
(9) COMMITMENTS AND CONTINGENCIES
The Company leases office space for its headquarters facility. The lease
term expires on June 1, 1996 with an option to renew for an additional 25
months. The minimum future commitment under this lease is approximately
$17,000. Rental expense amounted to approximately $22,266 and $18,840 for
the years ended August 31, 1995 and 1994, respectively.
In the normal course of business, the Company is from time to time involved
in various asserted and unasserted claims. In the opinion of management,
the ultimate disposition of such matters will not have a material effect on
the Company's financial position.
(Continued)
F-11
<PAGE>
(10) SUBSEQUENT EVENTS
On September 6, 1995, the Company entered into a Letter of Intent for a
plan of merger with TMS, Inc. (TMS), a publicly held computer software
company. On September 21, 1995, the Company and TMS agreed to amend the
Letter of Intent for changes in the number of TMS shares to be issued for
all of the issued and outstanding shares of the Company's common stock.
Under the amended Letter of Intent, TMS will issue a maximum of 5,000,000
shares of its common stock in exchange for all outstanding shares of the
Company's common stock. In addition, holders of the Company's common stock
options at the time of the merger will receive TMS common stock options of
corresponding value. The Company anticipates that the merger will be
consummated during the first quarter of the Company's fiscal 1996 and will
be accounted for using the pooling-of-interests method. Consummation of
the merger is subject to several conditions, including negotiation and
execution of a definitive agreement.
In addition, in anticipation of the merger, the holders of all of the
preferred stock converted their holdings to common stock in October at the
rate of one share of common stock for one share of preferred stock, as
outlined in Note 6.
F-12
<PAGE>
EXHIBIT I
PLAN OF REORGANIZATION AND
AGREEMENT OF MERGER
BY AND AMONG
TMS, INC.
(AN OKLAHOMA CORPORATION)
AND
SCC ACQUISITION CORP.
(AN OKLAHOMA CORPORATION)
AND
SEQUOIA COMPUTER CORPORATION
(A CALIFORNIA CORPORATION)
AND
DANA R. ALLEN
NOVEMBER 7, 1995
<PAGE>
PLAN OF REORGANIZATION AND
AGREEMENT OF MERGER
THIS PLAN OF REORGANIZATION AND AGREEMENT OF MERGER is made this 7th day
of November, 1995, by and among TMS, Inc., an Oklahoma corporation ("TMS"), SCC
Acquisition Corp. ("SAC"), an Oklahoma corporation and a wholly-owned subsidiary
of TMS, Sequoia Computer Corporation, a California corporation ("Sequoia"), and
Dana R. Allen, an individual (the "Seller").
WHEREAS, the respective Boards of Directors of TMS, SAC, and Sequoia have
determined that it is desirable for the general welfare and advantage of their
respective corporations and their respective shareholders that SAC be merged
into Sequoia, and that Sequoia be the surviving corporation, and Sequoia shall
thereby become a wholly-owned subsidiary of TMS pursuant to this Agreement and
in accordance with the applicable statutes of the States of Oklahoma and
California, upon the terms and conditions set forth below; and
WHEREAS, the respective Boards of Directors of TMS, SAC and Sequoia
desire to adopt a Plan of Reorganization resulting in a tax-free reorganization
within the meaning of the Internal Revenue Code of 1986 as amended;
NOW, THEREFORE, in consideration of the mutual agreements,
representations and warranties contained herein, and subject to the conditions
contained herein, it is agreed that SAC shall be merged into Sequoia, and that
the terms and conditions of the Merger, the manner of effecting the Merger, and
other provisions relating thereto, shall be as hereinafter set forth in this
Agreement.
ARTICLE I
DEFINITIONS
As used in this Agreement, the terms identified below in this Article I
shall have the meanings indicated, unless a different and common meaning of the
term is clearly indicated by the context, and variants and derivatives of the
following terms shall have correlative meanings. To the extent that certain of
the definitions set forth below express agreements between or among parties to
this Agreement, or contain representations or warranties or covenants of a
party, the parties agree to the same by execution of this Agreement. The parties
to this Agreement agree that agreements, representations, warranties and
covenants expressed in any part or provision of this Agreement shall for all
purposes of this Agreement be treated in the same manner as other such
agreements, representations, warranties and covenants contained elsewhere in
this Agreement, and the Article or Section of this Agreement within which such
an agreement, repre sentation, warranty or covenant appears shall have no
separate meaning or effect on the same.
1-2
<PAGE>
1.01. AFFILIATE: When used with respect to a person, an "affiliate" of
that person is a person Controlling, Controlled by or under Common Control with
that person.
1.02. AGREEMENT: This Plan of Reorganization and Agreement of Merger,
including all of its schedules and exhibits and all other documents specifically
referred to in this Agreement that have, prior to the date of this Agreement,
been delivered by a party to this Agreement to another such party in connection
with the Merger or this Agreement.
1.03. AUDITED FINANCIAL STATEMENTS: The balance sheet, income
statement, statement of shareholders' equity and statement of changes in
financial position or, in each instance, equivalent statements as commonly
provided to shareholders, as at August 31, 1995 and for the two years then ended
in the case of Sequoia and as at August 31, 1995 and for the three years then
ended in the case of TMS, in each instance as reported on by Auditors.
1.04. AUDITORS: KPMG Peat Marwick, LLP.
1.05. BENEFIT PLAN: Any plan, fund, program, policy, arrangement or
contract, whether formal or informal, which is in the nature of (i) an employee
pension benefit plan (as defined in Section 3(2) of ERISA) or (ii) an employee
welfare benefit plan (as described in Section 3(1) of ERISA).
1.06. CLOSING: The completion of the Merger, to take place as described
in Article II.
1.07. CLOSING DATE: The date on which the Closing actually occurs,
which shall be December 31, 1995, unless otherwise agreed by the parties, but
shall not in any event be prior to satisfaction or waiver of the conditions to
Closing set forth in Article VIII hereof.
1.08. CLOSING TIME: The time at which the Closing actually occurs. All
events that are to occur at the Closing Time shall, for all purposes, be deemed
to occur simultaneously, except to the extent, if at all, that a specific order
of occurrence is otherwise described.
1.09. CODE: The Internal Revenue Code of 1986, as amended and in effect
at the time of execution of the Agreement.
1.10. CONSIDERATION: The number of shares of TMS Common Stock to be
issued pursuant to the Merger, as provided in Article II.
1.11. CONTROL: Generally, the power to direct the management or affairs
of an entity.
1.12. COUNSEL TO SAC AND TMS: Fellers, Snider, Blankenship, Bailey &
Tippens, P.C.
1.13. COUNSEL TO SEQUOIA AND THE SELLER: Myers, Hawley, Morley, Myers &
McDonnell.
I-3
<PAGE>
1.14. ENTITY: A corporation, partnership, sole proprietorship, joint
venture or other form of organization formed for the conduct of a business
whether active or passive.
1.15. ERISA: The Employee Retirement Income Security Act of 1974, as
amended and in effect at the time of execution of the Agreement.
1.16. EXCHANGE ACT: The Securities Exchange Act of 1934, as amended to
the date as of which any reference thereto is relevant under this Agreement,
including any substitute or replacement statute adopted in place or lieu
thereof.
1.17. GAAP: Generally Accepted Accounting Principles, as in effect on
the date of this Agreement. All references herein to financial statements
prepared in accordance with GAAP shall mean in accordance with GAAP consistently
applied throughout the periods to which reference is made.
1.18. INTELLECTUAL PROPERTY: All domestic and foreign patents, patent
rights, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names and copyrights.
1.19. INVENTORIES: The stock of raw materials, work-in-process and
finished goods, including but not limited to finished goods purchased for
resale, held by Sequoia for manufactur ing, assembly, processing, finishing,
sale or resale to others (including other Subsidiaries or divisions of Sequoia),
from time to time in the ordinary course of the business of Sequoia in the form
in which such inventories then are held or after manufacturing, assembling,
finishing, processing, incorporating with other goods or items, refining or the
like.
1.20. IRS: The Internal Revenue Service.
1.21. LIABILITIES: At any point in time (the "Determination Time"), the
obligations of a person or Entity, whether known or unknown, contingent or
absolute, recorded on its books or not, arising or resulting in any way from
facts, events, agreements, obligations or occurrences that existed or transpired
at a prior point in time, or resulted from the passage of time to the
Determination Time, but not including obligations accruing or payable after the
Determination Time to the extent (but only to the extent) that such obligations
(i) arise under previously existing agreements for services, benefits or other
considerations and (ii) accrue or become payable with respect to services,
benefits or other considerations received by the person or Entity after the
Determination Time.
1.22. MERGER: The transaction described in Section 2.01 hereof by which
TMS shall become the owner of the business heretofore conducted by Sequoia, in
the manner described in said Section 2.1, with the rights regarding such
business provided for in this Agreement.
1.23. NON-VESTED RIGHTS: All options, warrants, rights and convertible
securities to purchase or to acquire Sequoia Common Stock, that are not and will
not become exercisable as of the Closing Date.
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1.24. PARENT: With respect to any corporation, partnership, joint
venture or other entity, an entity of which that entity is, directly or
indirectly through one or more other Parents, a Subsidiary.
1.25. PAYABLES: Liabilities of a party arising from the borrowing of
money or the incurring of obligations for merchandise or goods purchased.
1.26. PROPRIETARY RIGHTS: All Intellectual Property, know-how, customer
lists and all similar types of intangible property developed, created or owned
by Sequoia, licensed by or to Sequoia, or used by Sequoia in connection with its
business, or necessary or desirable to the conduct of its business as conducted
and as proposed to be conducted, whether or not the same are entitled to legal
protection.
1.27. PROXY STATEMENT: The document prepared by Sequoia for submission
to its shareholders soliciting their proxies to permit the persons to whom
proxies are thereby granted to vote in favor of the consummation of the Merger.
1.28. RECEIVABLES: Accounts Receivable, notes receivable and other
obligations appearing on the books of Sequoia, and customarily reflected in
balance sheets of entities prepared in accordance with GAAP, indicating monies
owed to the entity.
1.29. REGISTRATION: Registration under the Securities Act.
1.30. RIGHTS: Non-Vested Rights and Vested Rights.
1.31. SAC: SCC Acquisition Corp., an Oklahoma corporation, a wholly-
owned subsidiary of TMS.
1.32. SEC: The Securities and Exchange Commission.
1.33. SECURITIES ACT: The Securities Act of 1933, as amended to the
date as of which any reference thereto is relevant under this Agreement,
including any substitute or replacement statute adopted in place or lieu
thereof.
1.34. SELLER: Dana R. Allen, who is a holder of Sequoia Common Stock
and who is a party hereto.
1.35. SEQUOIA: Sequoia Computer Corporation, a California corporation,
doing business as "Sequoia Data Corporation." Sequoia shall include Sequoia and
each of its Subsidiaries, as an entirety, and representations as to Sequoia
contained herein shall be deemed to mean Sequoia and each of its Subsidiaries,
both separately and together as a consolidated whole, unless and except to the
extent expressly indicated otherwise.
1.36. SEQUOIA BALANCE SHEET: The most recent Balance Sheet included in
the Audited Financial Statements of Sequoia.
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1.37. SEQUOIA COMMON STOCK: Common stock, no par value, of Sequoia.
1.38. SEQUOIA DISCLOSURE DOCUMENT: The document delivered by Sequoia to
SAC containing certain disclosures regarding Sequoia as described in Article V
hereof.
1.39. SEQUOIA FACILITIES: The warehouses, stores, plants, production
facilities, manufacturing facilities, processing facilities, fixtures and
improvements owned or leased by Sequoia or otherwise used by Sequoia in
connection with the operation of its business or leased or subleased by Sequoia
to others.
1.40. SEQUOIA SHAREHOLDERS: The holders of all issued and outstanding
shares of Sequoia Common Stock on the Closing Date.
1.41. SUBSIDIARY: With respect to any Entity, another Entity of which
fifty percent (50%) or more of the effective voting power, or the effective
power to elect a majority of the board of directors or similar governing body,
or fifty percent (50%) or more of the true equity interest is owned by such
first Entity, directly or indirectly.
1.42. SURVIVING CORPORATION: The surviving corporation in the Merger.
1.43. TMS: TMS, Inc., an Oklahoma corporation.
1.44. TMS BALANCE SHEET: The most recent Balance Sheet included in the
Audited Financial Statements of TMS.
1.45. TMS COMMON STOCK: Shares of common stock, $.05 par value, of TMS.
1.46. VESTED RIGHTS: All options, warrants, rights and convertible
securities that are exercisable or may become exercisable as of the Closing Date
to purchase or to acquire Sequoia Common Stock.
ARTICLE II
THE MERGER
2.01. THE MERGER. On the Closing Date, and at the Closing Time, subject
in all instances to each of the terms, conditions, provisions and limitations
contained in this Agreement, SAC will merge with and into Sequoia, by the
filing: (a) with the Secretary of State of the State of Oklahoma of a fully
executed Certificate of Merger in the form attached hereto as Exhibit 2.01(a) in
all material respects, and (b) with the Secretary of State of the State of
California: (i) a fully executed Officer's Certificate signed by the President
and Secretary of Sequoia in the form attached hereto as Exhibit 2.01(b)(i) in
all material respects, (ii) a fully executed Officers's Certificate signed by
the President and Secretary of TMS, in the form attached hereto as Exhibit
2.01(b)(ii), and a Merger Agreement, in the form attached hereto as Exhibit
2.01(b) in all
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material respects, and (iii) a copy of this Agreement. As described in said
Exhibits, upon the occurrence of the Merger, (i) Sequoia shall be the Surviving
Corporation; (ii) each share of Sequoia Common Stock outstanding prior to the
Merger will, by said occurrence and with no further action on the part of the
holder thereof, be transformed and converted into the right to receive, upon
surrender of the certificate for such share of Sequoia Common Stock, the
Consideration; (iii) each share of common stock of SAC outstanding prior to the
Merger will, by said occurrence and with no further action on the part of the
holder thereof, be transformed and converted into 100 shares of Sequoia Common
Stock, so that thereafter TMS will be the sole and exclusive owner of equity
securities of Sequoia; (iv) the then-serving officers and directors of SAC will
be the officers and directors of the Surviving Corporation; (v) Sequoia, the
Surviving Corporation, as such, shall be the owner of all of the business,
assets, rights and other attributes theretofore held by either SAC or Sequoia;
(vi) the separate existence of SAC shall cease; (vii) the name of the Surviving
Corporation shall thereafter be "Sequoia Data Corporation"; (viii) the Articles
of Incorporation and Bylaws of Sequoia in effect at the Closing Time shall
thereafter be the Articles of Incorporation and Bylaws of the Surviving
Corporation, except as such may be amended by the terms of this Agreement; and
(ix) Sequoia shall become a wholly-owned subsidiary of TMS.
2.02. CONSIDERATION. Pursuant to the Merger each Sequoia Shareholder
shall be entitled to receive at the Closing, in respect of each share of Sequoia
Common Stock outstanding immediately prior to the Merger owned by such Sequoia
Shareholder (and upon surrender of the certificate therefor, duly endorsed and
in all respects in proper form for transfer), the Consideration, to be payable
as provided in Article III.
2.03. CLOSING. The closing hereunder shall take place at the offices of
Fellers, Snider, Blankenship, Bailey & Tippens, P.C., 120 North Robinson, Suite
2400, Oklahoma City, Oklahoma, or at such other place as SAC and Sequoia may
agree upon, on the Closing Date.
2.04. PARTIES TO THE AGREEMENT AND TRANSACTION. To the extent that any
provision of this Agreement calls for agreement by Sequoia as a party hereto,
such provision shall mean Sequoia as it exists prior to the consummation of the
Merger. If, after such consummation, such a provision requires amendment,
modification, interpretation, etc., the same may be accomplished by (but only
by) a majority in interest of those receiving the Consideration as a result of
the Merger, and not by Sequoia, if Sequoia comes to be Controlled by TMS as a
result of the Merger.
ARTICLE III
CONVERSION AND EXCHANGE OF SEQUOIA COMMON STOCK
3.01. CONVERSION AND EXCHANGE OF SHARES. The manner of converting the
shares of Sequoia Common Stock issued and outstanding immediately prior to the
Closing Time of the Merger into shares of TMS Common Stock shall be as follows:
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(a) At the Closing Time:
(i) Each share of Sequoia Common Stock issued and
outstanding immediately prior to the Closing Time shall, by virtue of the
Merger and without any action on the part of the holder thereof,
automatically be converted into 2.837 fully paid and nonassessable shares
of TMS Common Stock (which, assuming 1,284,180 shares of Sequoia Common
Stock outstanding, shall equal 3,643,219 shares of TMS Common Stock).
(b) After the Closing Time.
(i) Each Sequoia Shareholder shall be entitled, upon
surrender to TMS of an outstanding certificate or certificates (duly
endorsed and in all respects in proper form for transfer), theretofore
representing shares of Sequoia Common Stock, to receive therefor a
certificate or certificates representing the number of full shares of TMS
Common Stock to which such Sequoia Shareholder is entitled. Until so
surrendered, each such outstanding certificate which prior to the Closing
Time represented shares of Sequoia Common Stock shall be deemed for all
corporate purposes (subject to the further provisions of this Section
3.01(b)(i)) to evidence ownership of the number of shares of TMS Common
Stock into which such shares of Sequoia Common Stock shall have been so
converted. After the Closing Date, there shall be no further registry of
transfers on the records of shares of Sequoia Common Stock outstanding
immediately prior to the Closing Date, and, if certificates representing
such shares are presented to TMS, they shall be canceled and exchanged
for TMS Common Stock as herein provided.
(ii) Neither certificates nor scrip for fractional shares of
TMS Common Stock will be issued, but TMS shall issue and deliver whole
shares of TMS Common Stock taking into account any fractional shares
created by reason of the Merger by rounding down to the next lowest
number if such fraction is less than .5, and rounding up to the next
highest number if such fraction is .5 or greater.
3.02. VESTED RIGHTS AND NON-VESTED RIGHTS. At Closing, all unexercised
Vested Rights and Non-Vested Rights will be converted to options to purchase
shares of TMS Common Stock, with each such Right entitling the holder thereof to
purchase 2.837 shares of TMS Common Stock for each share of Sequoia Common Stock
purchasable thereunder, at an exercise price equal to 35.24% of the exercise
price per share of Sequoia Common Stock under such Right. The expiration date of
Vested Rights which, by their terms in effect as of the date of this Agreement,
expire on or before the Closing Date, shall be extended to a date ninety (90)
days following the Closing Date.
3.03. DIVIDENDS; TRANSFER TAXES. No dividends or other distributions
that are declared after the Closing Date on TMS Common Stock and are payable to
the holders of record thereof after the Closing Date will be paid to persons
entitled by reason of the Merger to receive
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certificates representing TMS Common Stock until such persons surrender their
certificates which prior to the Closing Date represented Sequoia Common Stock.
Upon such surrender, there shall be paid to the person in whose name the
certificates representing such TMS Common Stock shall be issued, any dividends
or other distributions which shall have become payable with respect to such TMS
Common Stock between the Closing Date and the time of such surrender. In no
event shall the person entitled to receive such dividends or other distributions
be entitled to receive interest on such dividends or other distributions be
entitled to receive interest on such dividends or other distributions. If any
cash or certificate representing TMS Common Stock is to be paid to or issued in
a name other than that in which the certificate surrendered in exchange therefor
is registered, it shall be a condition of such exchange that the certificate so
surrendered shall be properly endorsed and otherwise in proper form for transfer
and that the person requesting such exchange shall pay to TMS any transfer or
other taxes required by reason of the issuance of the certificates for such TMS
Common Stock in a name other than that of the registered holder of the
certificate surrendered, or shall establish to the satisfaction of TMS that such
tax has been paid or is not applicable. Notwithstanding the foregoing, neither
TMS nor any party hereto shall be liable to Sequoia for any TMS Common Shares or
dividends or other distributions thereon delivered to a public official pursuant
to applicable escheat or unclaimed property laws. No fees or other charges shall
be assessed or imposed by TMS or any person acting for or on behalf of TMS, upon
holders of Sequoia Common Stock who surrender such shares for exchange in
connection with this Agreement.
3.04. DISSENTING SHARES. The provisions of Section 3.01 through 3.03
inclusive shall not apply to Sequoia Common Stock (the "Dissenting Shares") held
by Sequoia Shareholders who do not vote such Sequoia Common Stock in favor of
the approval and adoption of this Agreement and the Merger and who deliver a
written notice to Sequoia in the manner required by Section 1300 et seq. on the
California Corporation Law, stating the intention to demand payment of the fair
value of such Sequoia Common Stock if the Merger is effected, and if such
Sequoia Shareholders take all other action required in the manner provided in
Section 1300 et seq. of the California Corporation Law. Such holders shall be
entitled to payment for such Sequoia Common Stock in accordance with the
provisions of Section 1300 et seq. of the California Corporation Law if
applicable.
3.05. NON-DILUTION. In the event that, at any time after the date
hereof and prior to the Effective Date, TMS shall effect (a) a dividend upon TMS
Common Stock payable in TMS Common Stock or in the common stock, preferred stock
or other securities of TMS or any affiliated corporation, (b) a split or
combination of outstanding TMS Common Stock into a greater or smaller number of
TMS Common Stock, or (c) any reorganization or reclassification of TMS Common
Stock, or any liquidation, or any consolidation or merger with another
corporation, or the sale of all or substantially all of its assets to another
person (collectively, any "Organic Change"), in such a way that holders of
outstanding TMS Common Stock shall be entitled to receive (either directly, or
upon subsequent liquidation) cash, stock, securities, or other property with
respect to or in exchange for such TMS Common Stock, then, as a condition of
provisions shall be made whereby the Sequoia Shareholders immediately prior to
the Effective Date, other than holders of Dissenting Shares ("Sequoia
Shareholders") shall be entitled, under the same terms otherwise applicable to
their receipt of the TMS Common Stock in the Merger,
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to become entitled to receive on the Effective Date, in lieu thereof or in
addition to the TMS Common Stock to which such Sequoia Shareholders are entitled
immediately prior to such dividend, split, combination or Organic Change, such
cash, stock, securities, or other property which Sequoia Shareholders would have
owned or been entitled to receive if the Sequoia Shareholders had owned the TMS
Common Stock, immediately prior to the happening of such event or the record
date therefor, and in any such case appropriate provisions shall also be made
with respect to Sequoia Shareholders' rights and interests to the end that the
provisions of this Section 3.05 shall thereafter be applicable in relation to
any stock, securities, or other property thereafter payable or deliverable to
Sequoia Shareholders pursuant to the earlier application of the provisions of
this Section 3.05.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF TMS AND SAC
TMS and SAC hereby represents and warrants to Sequoia and to the
Seller:
4.01. ORGANIZATION AND QUALIFICATION. Each of TMS and SAC will prior
to the Closing be a corporation duly organized, validly existing and in good
standing under the laws of its respective jurisdiction of incorporation and has
the requisite corporate power and authority to carry on its business as it is
now being conducted. Each of TMS and SAC is, or will prior to the Closing be
duly qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of its properties owned or leased or
the nature of its activities makes such qualification necessary.
4.02. AUTHORITY RELATIVE TO THIS AGREEMENT. TMS and SAC each has the
requisite corporate power and authority to enter into this Agreement and to
carry out its respective obligations hereunder. The execution and delivery of
this Agreement and the consummation of the transactions contemplated hereby have
been duly authorized and approved by the governing bodies of TMS and SAC and no
other corporate proceedings on the part of TMS or SAC are necessary to approve
and adopt this Agreement or to approve the consummation of the Merger, including
delivery of the Consideration. This Agreement has been duly and validly executed
and delivered by SAC and by TMS and constitutes a valid and binding Agreement of
SAC and TMS, enforceable in accordance with its terms.
4.03. ABSENCE OF BREACH; NO CONSENTS. The execution, delivery and
performance of this Agreement, and the performance by SAC and TMS of its
obligations hereunder (except for compliance with any regulatory or licensing
laws applicable to the business of SAC, all of which, to the extent applicable
to TMS and SAC, will be satisfied in all material respects prior to the Closing)
do not, except as disclosed in Schedule 4.03, (i) conflict with or result in a
breach of any of the provisions of the Certificates of Incorporation or By-Laws
of TMS or SAC, (ii) contravene any law, rule or regulation of any State of or of
the United States, or any applicable foreign jurisdiction, or any order, writ,
judgment, injunction, decree, determination or award, or cause the suspension or
revocation of any authorization, consent, approval or license, presently
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in effect, which affects or binds TMS or SAC or any of its or their material
properties, except where such contravention will not have a material adverse
effect on the business, condition (financial or otherwise) or operations of TMS
or SAC, (iii) conflict with or result in a material breach of or default under
any material indenture or loan or credit Agreement or any other material
Agreement or instrument to which TMS or SAC is a party or by which it or they or
any of its or their material properties may be affected or bound, (iv) require
the authorization, consent, approval or license of any third party of such a
nature that the failure to obtain the same would have a material adverse effect
on the business of TMS or SAC, or (v) constitute grounds for the loss or
suspension of any permits, licenses or other authorizations material to the
business of TMS or SAC.
4.04. BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with this
Agreement or the Merger or any related transaction based upon any agreements,
written or oral, made by or on behalf of TMS or SAC.
4.05. CAPITALIZATION. The authorized capital stock of TMS consists
of 50,000,000 shares of TMS Common Stock and 1,000,000 shares of preferred
stock. There is no other capital stock authorized for issuance. As of the date
of the TMS Balance Sheet, 8,404,947 shares of TMS Common Stock were validly
issued and outstanding, fully paid and nonassessable, no shares of TMS Common
Stock were held in treasury, and no shares were reserved for issuance, nor were
there outstanding any options, warrants, convertible instruments or other
rights, agreements or commitments to acquire TMS Common Stock, except as
described in the Audited Financial Statements of TMS or in the Public Reports
(as defined in Section 4.07).
4.06. INVESTMENT. TMS is acquiring the shares of Sequoia Common
Stock for its own account without a view to the distribution thereof within the
meaning of the Securities Act, and will not directly or indirectly offer or sell
the shares of Sequoia Common Stock or solicit any offer to purchase such shares,
other than in conformity with the Securities Act. TMS acknowledges that the
shares of Sequoia Common Stock have not been registered under the Securities
Act, and TMS will not transfer any such shares except in compliance with such
Securities Act or an opinion that registration is not required under the
Securities Act, and a legend to that effect shall be placed on the certificates
representing the shares of Sequoia Common Stock.
4.07. FILINGS WITH THE SEC. TMS has filed Quarterly Reports on Form
10-Q for the fiscal quarters ended May 31, 1995 (the "Most Recent TMS Fiscal
Quarter End"), February 28, 1995 and November 30, 1994, and a Form 10-K Annual
Report for the fiscal year ended August 31, 1995 with the SEC as required under
the Securities Act and the Securities Exchange Act of 1934 (the "Exchange Act")
(collectively, the "Public Reports"). Each of the Public Reports has complied
with the Securities Act and the Exchange Act in all material respects. None of
the Public Reports, as of their respective dates, contained any untrue statement
of a material fact or omitted to state a material fact necessary in order to
make the statements made therein, in light of the circumstances under which they
were made, not misleading.
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4.08. FINANCIAL STATEMENTS. The Audited Financial Statements of TMS and
the financial statements included in or incorporated by reference into the
Public Reports (including the related notes and schedules) have been prepared in
accordance with GAAP, applied on a consistent basis throughout the periods
covered thereby, and present fairly the financial condition of TMS as of the
indicated dates and the results of operations of TMS for the indicated periods;
provided, however, that the interim statements are subject to normal year-end
adjustments, consistent with the past practices of TMS.
4.09. EVENTS SUBSEQUENT TO THE DATE OF THE TMS BALANCE SHEET. Since the
date of the TMS Balance Sheet, there has not been any material adverse change in
the business, financial condition, operations or results of operations of TMS
taken as a whole.
4.10. ENVIRONMENT, HEALTH AND SAFETY. Except as set forth in the Public
Reports: (i) TMS has complied with all Environmental, Health and Safety Laws,
and has not been notified that any action, suit, proceeding, hearing,
investigation, charge, complaint, claim, demand, or notice has been filed or
commenced against TMS alleging any failure to so comply; and (ii) TMS has no
liability for damage to any site, location, or body of water (surface or
subsurface), for any illness of or personal injury to any employee or other
individual, or for any reason under any Environmental, Health, and Safety Law.
4.11. OWNERSHIP OF ASSETS. Each of TMS and its Subsidiaries has, except
as disclosed in the Public Reports or the TMS Financial Statements, good,
marketable and insurable title, or valid, effective and continuing leasehold
rights in the case of leased property, to all real property (as to which, in the
case of owned property, such title is fee simple) and all personal property
owned or leased by it or used by it in the conduct of its business in such a
manner as to create the appearance or reasonable expectation that the same is
owned or leased by it, free and clear of all liens, claims, encumbrances and
charges, except liens for taxes not yet due and minor imperfections of title and
encumbrances, if any, which singly and in the aggregate are not substantial in
amount and do not materially detract from the value of the property subject
thereto or materially impair the use thereof. TMS does not know of any potential
action by any party, governmental or other, and no proceedings with respect
thereto have been instituted of which TMS has notice, that would materially
affect the ability of Sequoia to use and to utilize each of such assets in its
business or in the business of its Subsidiaries. TMS has received no notices
from any mortgagee regarding any properties owned by TMS.
4.12. PROPRIETARY RIGHTS. (i) TMS and each of its Subsidiaries possesses
full ownership of, or adequate and enforceable long-term licenses or other
rights to use (without payment), all Proprietary Rights owned by or registered
in the name of TMS or any of its Subsidiaries or used in the business of TMS or
any of its Subsidiaries. No claim is pending or, to the best of knowledge of
TMS, threatened to the effect that the operations of TMS infringe upon or
conflict with the asserted rights of any other person under any Intellectual
Property, and there is no basis for any such claim (whether or not pending or
threatened). No claim is pending or threatened to the effect that the
Proprietary Rights owned or licensed by TMS, or which TMS otherwise has the
right to use, is invalid or unenforceable by TMS, and there is no basis for any
such claim (whether or not pending or threatened). To the best knowledge of TMS,
all technical
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information developed by and belonging to TMS which has not been patented has
been kept confidential. TMS has not granted or assigned to any other person or
entity any right to manufacture, have manufactured, assemble or sell the
services of TMS, except for standard value-added reseller agreements.
(i) To the best knowledge of TMS, no third party has claimed or
has reason to claim that any person employed by or affiliated with TMS has: (a)
violated or may be violating any of the terms or conditions of his employment,
non-competition or non-disclosure agreement with such third party, (b) disclosed
or may be disclosing or utilized or may be utilizing any trade secret or
proprietary information or documentation of such third party or (c) interfered
or may be interfering in the employment relationship between such third party
and any of its present or former employees. No third party has requested
information from TMS which suggests that such a claim might be contemplated. To
the best knowledge of TMS, no person employed by or affiliated with TMS has
employed or proposes to employ any trade secret or any information or
documentation proprietary to any former employer, and to the best knowledge of
TMS, no person employed by or affiliated with TMS has violated any confidential
relationship which such person may have had with any third party, in connection
with the development, manufacture or sale of any proposed service of TMS and TMS
has no reason to believe there will be any such employment or violation. To the
best knowledge of TMS, neither the execution or delivery of this Agreement, nor
the carrying on of the business of TMS as officers, employees or agents by any
officer, director or key employee of TMS, nor the conduct or proposed conduct of
the business of TMS, will conflict with or result in a breach of the terms,
conditions or provisions of or constitute a default under any contract, covenant
or instrument under which any such person is obligated.
4.13. UNDISCLOSED LIABILITIES. Except as otherwise set forth in the
Public Reports, TMS has no Liabilities except for: (i) Liabilities set forth on
the face of the Most Recent Balance Sheet of TMS (or in any notes thereto); and
(ii) Liabilities which have arisen after the Most Recent TMS Fiscal Quarter End
in the ordinary course of business.
4.14. LEGAL COMPLIANCE. Except as otherwise disclosed in the Public
Reports, TMS has complied with all applicable laws (including rules,
regulations, codes, plans, injunctions, judgments, orders, decrees, rulings and
charges thereunder) of federal, state, local and foreign governments and all
agencies thereof, except where the failure to so comply would not have a
material adverse effect upon the financial condition or operations of TMS, and
no action, suit, proceeding, hearing, investigation, charge, complaint, claim,
demand, or notice has been filed or commenced against TMS alleging any failure
to so comply.
4.15. LITIGATION. Except as otherwise set forth in the Public Reports,
TMS is not: (i) subject to any outstanding injunction, judgment, order, decree,
ruling, or charge; or (ii) a party or threatened to be made a party to any
action, suit, proceeding, hearing, or investigation of, in, or before any court
or quasi-judicial or administrative agency of any federal, state, local, or
foreign jurisdiction of or before any arbitrator, the result of which could have
a material adverse effect on its financial condition or operations of TMS.
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4.16. PRODUCT LIABILITY. Except as otherwise set forth in the Public
Records, TMS has no liability arising out of any injury to individuals or
property as a result of the ownership, possession, or use of any product
manufactured or sold by TMS, the result of which could have a material adverse
effect on its business or operations.
4.17. FOREIGN CORRUPT PRACTICES ACT. TMS has not taken any action which
would cause it to be in violation of the Foreign Corrupt Practices Act of 1977,
as amended, or any rules and regulations thereunder. To the best knowledge of
TMS after due inquiry, there is not now, and there has never been, any
employment by TMS of, or beneficial ownership in TMS by, any governmental or
political official in any country in the world.
4.18. VOTING IN FAVOR OF THE MERGER. The Merger and the other agreements
and transactions contemplated by the Agreement have been voted in favor of and
adopted by the Board of Directors of TMS.
4.19. FULL DISCLOSURE. The documents, certificates and other writings
furnished or to be furnished by or on behalf of TMS to Sequoia pursuant to the
provisions of this Agreement, taken together in the aggregate, do not and will
not contain any untrue statement of a material fact, or omit to state any
material fact necessary to make the statements made, in the light of the
circumstances under which they are made, not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF
THE SELLER AND SEQUOIA
The Seller and Sequoia represent and warrant to SAC and TMS as
follows:
5.01. ORGANIZATION AND QUALIFICATION. Sequoia and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation and has all
requisite corporate and other power and authority to carry on its business as it
is now being conducted. Sequoia and each of its Subsidiaries is duly qualified
as a foreign corporation to do business, and is in good standing, in each
jurisdiction in which the character of the properties owned or leased by it or
the nature of its activities is such that such qualification is required by
applicable law.
5.02. CAPITALIZATION. The authorized capital stock of Sequoia consists
of 20,000,000 shares of Sequoia Common Stock and 10,000,000 shares of preferred
stock, 70,000 shares of which have been designated as Series A Preferred Stock.
There is no other capital stock authorized for issuance. As of the date of this
Agreement: (i) 1,284,180 shares of Sequoia Common Stock were validly issued and
outstanding, fully paid and nonassessable, no shares of Sequoia Common Stock
were held in treasury, and no shares were reserved for issuance; (ii) there were
Vested Rights to acquire 444,656 shares of Sequoia Common Stock and Non-Vested
Rights to acquire 144,000 shares of Sequoia Common Stock; and (iii) no other
Vested Rights, Non-
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Vested Rights, options, warrants, convertible instruments or other rights,
agreements or commitments to acquire Sequoia Common Stock were outstanding,
except as fully and completely described in the Sequoia Disclosure Document.
From the date of this Agreement to the Closing Date, no shares of Sequoia
capital stock, or options, warrants or other rights, agreements or commitments
(contingent or otherwise) obligating Sequoia or any of its Subsidiaries to issue
shares of capital stock (except for the issuance of Sequoia Common Stock
exercise of Vested Rights) shall have been issued.
5.03. AUTHORITY RELATIVE TO THIS AGREEMENT. The Seller has the requisite
capacity, power and authority to enter into this Agreement and to carry out his
obligations hereunder. This Agreement has been duly and validly executed and
delivered by Sequoia and by Seller and constitutes a valid and binding Agreement
of Sequoia and Seller enforceable in accordance with its terms. Sequoia has all
requisite corporate power and authority to enter into this Agreement and to
carry out the Merger contemplated hereby, and its doing so has been duly and
sufficiently authorized, subject only to governmental regulatory approvals and
shareholder approval as and to the extent specifically set forth elsewhere in
this Agreement.
5.04. ABSENCE OF BREACH; NO CONSENTS. The execution, delivery and
performance of this Agreement, and the performance by Sequoia of its obligations
hereunder do not, except as disclosed in Schedule 5.04, (i) conflict with or
result in a breach of any of the provisions of the Articles of Incorporation or
By-Laws of Sequoia or of any of its Subsidiaries, (ii) contravene any law,
ordinance, rule or regulation of any State or political subdivision thereof or
of the United States (except for the compliance with regulatory or licensing
laws all of which, to the extent applicable to Sequoia (and to the extent within
the control of Sequoia), will be satisfied in all material respects prior to the
Closing), or of any applicable foreign jurisdiction or any order, writ,
judgment, injunction, decree, determination or award of any court or other
authority having jurisdiction, or cause the suspension or revocation of any
authorization, consent, approval or license, presently in effect, which affects
or binds the Seller, Sequoia or any of its Subsidiaries or any of its or their
material properties, except where such contravention will not have a material
adverse effect on the business, condition (financial or otherwise) or operations
of Sequoia and its Subsidiaries, taken as a whole, and will not have a material
adverse effect on the validity of this Agreement or on the validity of the
consummation of the Merger, (iii) conflict with or result in a material breach
of or default under any material indenture or loan or credit agreement or any
other material agreement or instrument to which Sequoia or any of its
Subsidiaries is a party or by which it or they or any of its or their material
properties may be affected or bound, (iv) other than consents disclosed in the
Sequoia Disclosure Document, require the authorization, consent, approval or
license of any third party, or (v) constitute grounds for the loss or suspension
of any permits, licenses or other authorizations used in the business of
Sequoia.
5.05. BROKERS. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with this
Agreement or the Merger or any related transaction based upon any agreements,
written or oral, made by or on behalf of Company or any of its subsidiaries.
Sequoia does not have any obligation to pay finder's or broker's fees or
commissions in connection with the exercise of options to renew or extend real
estate leases to which Sequoia is a party.
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5.06. FINANCIAL STATEMENTS. Sequoia has heretofore delivered to SAC the
Audited Financial Statements of Sequoia. All of the historical financial
statements contained in the Audited Financial Statements were prepared from the
books and records of Sequoia, were prepared in accordance with GAAP, and fairly
and accurately reflect the financial position and condition of Sequoia as at the
dates and for the periods indicated. Without limiting the foregoing, at the date
of the Sequoia Balance Sheet, Sequoia shall have owned each of the assets
included in preparation of the Sequoia Balance Sheet, and the valuation of such
assets in the Sequoia Balance Sheet shall not be more than their fair saleable
value (on an item by item basis) at that date; and Sequoia shall have had no
Liabilities, other than those included in the Sequoia Balance Sheet or in
amounts in excess of those included for such liabilities in the Sequoia Balance
Sheet. From the date hereof through the Closing Date, Sequoia will continue to
prepare financial statements on the same basis that it has done so in the past,
will promptly deliver the same to SAC, and agrees that from and after such
delivery the foregoing representations will be applicable to each financial
statement so prepared and delivered.
5.07. ABSENCE OF MATERIAL DIFFERENCES FROM DISCLOSURE DOCUMENT. Except
as specifically disclosed in Sequoia Disclosure Document:
(i) No Undisclosed Liabilities. Neither Sequoia nor any of its
Subsidiaries has any Liabilities which are not adequately reflected or
reserved against on the face of the Sequoia Balance Sheet, except
Liabilities incurred since the date of the Sequoia Balance Sheet in the
ordinary course of business and consistent with past practice, without
limiting the foregoing, (a) there are no unpaid leasehold improvements at
any of Sequoia's facilities or locations for which Sequoia is or will be
responsible, (b) there are no deferred rents due to lessors at or with
respect to any of such facilities or locations, and (c) the Sequoia
Disclosure Document sets forth, as a part thereof, each Liability of
Sequoia, in an amount in excess of $10,000 and the aggregate amount of
Liabilities to each person to whom such aggregate exceeds $10,000.
(ii) No Material Adverse Change, Etc. Since the date of the
Sequoia Balance Sheet, other than as contemplated or caused by this
Agreement, there has not been (a) any material adverse change in the
operations, financial condition, assets, business, prospects or results
of operations of Sequoia; (b) any damage, destruction or loss, whether
covered by insurance or not, having a material adverse effect on the
operations, financial conditions, assets, business, prospects or results
of operations of Sequoia; (c) any entry into or termination of any
material commitment, contract, agreement or transaction (including,
without limitation, any material borrowing or capital expenditure or sale
or other disposition of any material asset or assets) other than this
Agreement and agreements executed in the ordinary course of business; (d)
any redemption, repurchase or other acquisition for value of its capital
stock by Sequoia, or any issuance of capital stock of Sequoia or any
subsidiary or of securities convertible into or rights to acquire any
such capital stock or any dividend or distribution declared, set aside or
paid on capital stock of Sequoia; (e) any transfer of or rights granted
under any material leases, licenses, agreements, patents, trademarks,
tradenames or copyrights; (f) any sale or other disposition of any asset
of Sequoia or any Subsidiary, or any mortgage, pledge or
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imposition of any lien or other encumbrance on any asset of Sequoia other
than in the ordinary course of business, or any agreement relating to any
of the foregoing; or (g) any default or breach by Sequoia or any
Subsidiary in any material respect under any contract, license or permit.
Since the date of the Sequoia Balance Sheet, Sequoia and its Subsidiaries
have conducted their businesses only in the ordinary and usual course,
and, without limiting the foregoing, no changes have been made in (a)
executive compensation levels, (b) the manner in which other employees of
Sequoia and its Subsidiaries are compensated, or (c) supplemental
benefits provided to such employees, or (d) inventory levels in relation
to sales levels, except, in any such case, in the ordinary course of
business and, in any event, without material adverse effect on the
financial condition or results of operations of Sequoia.
(iii) Taxes. Sequoia and its Subsidiaries have properly filed or
caused to be filed all federal, state, local and foreign income and other
tax returns, reports and declarations that are required by applicable law
to be filed by them, and have paid, or made full and adequate provision
for the payment of, all federal, state, local and foreign income and
other taxes properly due for the periods covered by such returns, reports
and declarations, except such taxes, if any, as shall be adequately
reserved against in the Sequoia Balance Sheet.
(iv) Litigation. (a) No material investigation or review by any
governmental entity with respect to Sequoia or any of its Subsidiaries is
pending or, to the best of the knowledge of Sequoia, threatened (other
than inspections and reviews customarily made of businesses such as that
of Sequoia), nor has any governmental entity indicated to Sequoia an
intention to conduct the same, and (b) there is no action, suit or
proceeding pending or, to the best of the knowledge of Sequoia,
threatened against or affecting Sequoia or its Subsidiaries at law or in
equity, or before any federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality. The
Sequoia Disclosure Document includes a brief description of each
litigation matter included therein except claims for amounts of less than
$1,000.
(v) Employees, Etc. There are, except as disclosed on the Sequoia
Disclosure Document, no collective bargaining, bonus, profit sharing,
compensation or other plans, agreements, trusts, funds or arrangements
maintained by Sequoia or any Subsidiary for the benefit of their
directors, officers or employees, and there are no employment,
consulting, severance or indemnification arrangements, agreements or
understandings between Sequoia or any of its Subsidiaries, on the one
hand, and any current or former directors, officers or other employees
(or affiliates thereof of Sequoia or any of its Subsidiaries, on the
other hand). The Sequoia Disclosure Document identifies each person whose
income from Sequoia in the fiscal year ended on the date of Sequoia
Balance Sheet exceeded, or whose income from Sequoia in the fiscal year
begun immediately thereafter is at a rate exceeding, $75,000 per annum,
and describes any contractual arrangement for the employment or
compensation of each such person. Sequoia is not, and following the
Closing will not be, bound by any express or implied contract or
agreement to employ, directly or as a consultant or otherwise, any person
for any specific period of time or until
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any specific age except as specified in agreements in writing identified
in the Sequoia Disclosure Document or executed pursuant to the provisions
hereof, if any.
(vi) Compliance With Laws. Each of Sequoia and its Subsidiaries
is in substantial compliance with all, and has received no notice of any
violation of any, laws or regulations applicable to its operations,
including without limitation the use of premises occupied by it, or with
respect to which compliance is a condition of engaging in any aspect of
the business of Sequoia and its Subsidiaries and each has all permits,
licenses, zoning rights and other governmental authorizations necessary
to conduct its business as presently conducted.
(vii) Ownership of Assets. Each of Sequoia and its Subsidiaries
has, except as disclosed in the Sequoia Disclosure Document, good,
marketable and insurable title, or valid, effective and continuing
leasehold rights in the case of leased property, to all real property (as
to which, in the case of owned property, such title is fee simple) and
all personal property owned or leased by it or used by it in the conduct
of its business in such a manner as to create the appearance or
reasonable expectation that the same is owned or leased by it, free and
clear of all liens, claims, encumbrances and charges, except liens for
taxes not yet due and minor imperfections of title and encumbrances, if
any, which singly and in the aggregate are not substantial in amount and
do not materially detract from the value of the property subject thereto
or materially impair the use thereof. Sequoia does not know of any
potential action by any party, governmental or other, and no proceedings
with respect thereto have been instituted of which Sequoia has notice,
that would materially affect Sequoia's ability to use and to utilize each
of such assets in its business or in the business of its Subsidiaries.
Sequoia has received no notices from any mortgagee regarding any
properties owned by Sequoia. The Sequoia Disclosure Document contains a
detailed listing of all assets that consist of (a) accounts receivable as
provided in clause (xii) below, (b) miscellaneous current assets in
excess of $25,000, (c) prepaid expenses in excess of $10,000 (d) real
property, and (e) gross aggregate additions for each of the past four
years, by location, of (A) buildings and improvements, (B) furniture and
fixtures, (C) leasehold improvements, or (D) automobiles and trucks.
(viii) Proprietary Rights. a. Sequoia and each of its Subsidiaries
possesses full ownership of, or adequate and enforceable long-term
licenses or other rights to use (without payment), all Proprietary
Rights owned by or registered in the name of Sequoia or any of its
Subsidiaries or used in the business of Sequoia or any of its
Subsidiaries. Set forth in the Sequoia Disclosure Document is a
list and brief description of all Intellectual Property of
Sequoia, and all applications for such which are in the process of
being prepared, owned by or registered in the name of Sequoia, or
of which Sequoia is a licensor or licensee or in which Sequoia has
any right, and in each case a brief description of such right. No
claim is pending or, to the best of Sequoia's knowledge,
threatened to the effect that the operations of Sequoia infringe
upon or conflict with the asserted rights of any other person
under any Intellectual Property, and there is no basis for any
such claim (whether or not pending or threatened). No claim is
pending or threatened to the effect that
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the Proprietary Rights owned or licensed by Sequoia, or which
Sequoia otherwise has the right to use, is invalid or
unenforceable by Sequoia, and there is no basis for any such claim
(whether or not pending or threatened). All prior art known to
Sequoia which may or be or may have been pertinent to the
examination of any United States patent or patent application
listed in the Sequoia Disclosure Document has been cited to the
United States Patent and Trademark Office. To the best of
Sequoia's knowledge, all technical information developed by and
belonging to Sequoia which has not been patented has been kept
confidential. Sequoia has not granted or assigned to any other
person or entity any right to manufacture, have manufactured,
assemble or sell the services of Sequoia.
b. To the best of Sequoia's knowledge, no third party has
claimed or has reason to claim that any person employed by or
affiliated with Sequoia has: (1) violated or may be violating any
of the terms or conditions of his employment, non-competition or
non-disclosure agreement with such third party, (2) disclosed or
may be disclosing or utilized or may be utilizing any trade secret
or proprietary information or documentation of such third party or
(3) interfered or may be interfering in the employment
relationship between such third party and any of its present or
former employees. No third party has requested information from
Sequoia which suggests that such a claim might be contemplated. To
the best of Sequoia's knowledge, no person employed by or
affiliated with Sequoia has employed or proposes to employ any
trade secret or any information or documen tation proprietary to
any former employer, and to the best of Sequoia's knowledge, no
person employed by or affiliated with Sequoia has violated any
confidential relationship which such person may have had with any
third party, in connection with the development, manufacture or
sale of any proposed service of Sequoia and Sequoia has no reason
to believe there will be any such employment or violation. To the
best of Sequoia's knowledge, neither the execution or delivery of
this Agreement, nor the carrying on of the business of Sequoia as
officers, employees or agents by any officer, director or key
employee of Sequoia, nor the conduct or proposed conduct of the
business of Sequoia, will conflict with or result in a breach of
the terms, conditions or provisions of or constitute a default
under any contract, covenant or instrument under which any such
person is obligated.
(ix) Subsidiaries, Etc. Except as set forth in the Sequoia
Disclosure Document, Sequoia has no Subsidiaries, and neither Sequoia nor
any of its Subsidiaries described in the Sequoia Disclosure Document is a
partner of or joint venturer with any other person or Entity. All of the
issued and outstanding shares of capital stock of each Subsidiary are
owned of record and beneficially by Sequoia or another Subsidiary of
Sequoia, are validly issued, fully paid and nonassessable and are owned
free and clear of all liens, charges, claims, pledges, security
interests, equities, encumbrances, reservations or contractual
restrictions on transfer of any nature whatsoever; and no Subsidiary has
outstanding any securities, warrants, options or other rights convertible
into or exchangeable or exercisable for any shares of its capital stock,
and there are no contracts, commitments, understand-
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ings, arrangements or restrictions by which any Subsidiary is bound to
issue shares of its capital stock.
(x) Employee Benefit Plans. Neither Sequoia nor any Entity
required to be aggregated with Sequoia under Sections 414(b), (c), (m) or
(n) of the Code sponsors, maintains, has any obligation to contribute to,
has any liability under, or is otherwise a party to, any Benefit Plan.
With respect to each Benefit Plan in the Sequoia Disclosure Document, to
the extent applicable:
(a) Each such Benefit Plan has been maintained and
operated in all material respects in compliance with its terms and
with all applicable provisions of ERISA, the Code and all
regulations, rulings and other authority issued thereunder;
(b) All contributions required by law to have been made
under each such Benefit Plan (without regard to any waivers
granted under Section 412 of the Code) to any fund or trust
established thereunder or in connection therewith have been made
by the due date thereof;
(c) Each such Benefit Plan intended to qualify under
Section 401(a) of the Code is the subject of a favorable unrevoked
determination letter issued by the Internal Revenue Service as to
its qualified status under the Code, which determination letter
may still be relied upon as to such tax qualified status, and no
circumstances have occurred that would adversely affect the tax
qualified status of any such Benefit Plan;
(d) The actuarial present value of all accrued benefits
under each such Benefit Plan subject to Title IV of ERISA did not,
as of the latest valuation date of such Benefit Plan, exceed the
then current value of the assets of such Benefit Plan allocable to
such benefits, all as based upon the actuarial assumptions and
methods currently used for such Benefit Plan;
(e) None of such Benefit Plans that are "employee welfare
benefit plans" as defined in Section 3(1) of ERISA provides for
continuing benefits or coverage for any participant or beneficiary
of a participant after such participant's termination of
employment; and
(f) Neither Sequoia nor any trade or business (whether not
incorporated) under common control with Sequoia within the meaning
of Section 401 of ERISA has, or at any time has had, any
obligation to contribute to any "multiemp loyer plan" as defined
in Section 3(37) of ERISA.
(xi) Facilities. Sequoia Facilities are (as to physical plant
and structure) structurally sound and none of Sequoia Facilities, nor any
of the vehicles or other equipment used by Sequoia in connection with its
business, has any material defects and
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all of them are in all material respects in good operating condition and
repair and are adequate for the uses to which they are being put; none of
such Sequoia Facilities, vehicles or other equipment is in need of
maintenance or repairs except for ordinary, routine maintenance and
repairs which are not material in nature or cost. Sequoia is not in
breach, violation or default of any lease with respect to or as a result
of which the other party (whether lessor, lessee, sublessor or sublessee)
thereto has the right to terminate the same, and Sequoia has not received
notice of any claim or assertion that it is or may be in any such breach,
violation or default.
(xii) Accounts Receivable. All accounts receivable of Sequoia and
each Subsidiary, whether reflected in the Sequoia Balance Sheet or
otherwise, represent transactions in the ordinary course of business, and
are current and collectible net of any reserves shown on such Balance
Sheet (which reserves are adequate and were calculated consistent with
past practice). The Sequoia Disclosure Document specifically identifies
(a) the aging of Receivables, (b) each Receivable in excess of $10,000,
(c) each Receivable in an amount in excess of $1,000 that is more than 90
days past due, and (d) each receivable from a person or Entity from whom
the aggregate of such Receivables exceeds $25,000.
(xiii) Inventories. All Inventories of Sequoia and its
Subsidiaries reflected in the Sequoia Balance Sheet, are of a quality and
quantity usable and salable in the ordinary course of business, except
for obsolete items and items of below-standard quality, all of which are
in the aggregate immaterial to the business, financial condition, results
of oper ations or prospects of Sequoia. Items included in such
Inventories are carried on the books of Sequoia, and are valued on the
Sequoia Balance Sheet, at the lower of cost or market and, in any event,
at not greater than their net realizable value, on an item by item basis,
after appropriate deduction for costs of completion, marketing costs,
transportation expense and allocation of overhead.
(xiv) Contracts. Except as identified in the Sequoia Disclosure
Document, Sequoia has no contracts, agreements or understandings, written
or verbal, provided however, that Sequoia may have, and the Sequoia
Disclosure Document need not identify, any such contracts, agreements or
understandings that fall into one of the following categories: (a) those
that are terminable on notice of less than 32 days and do not involve
payments or obligations of more than $1,000 in any period of 31 days or
less (on termination or otherwise); or (b) those that involve aggregate
payments or obligations of less than $5,000. The Sequoia Disclosure
Document shall, however, identify each contract otherwise exempt from
disclosure by (b) above if Sequoia's obligations, in the aggregate, under
all such contracts, agreements or understandings with persons or entities
similarly situated (e.g., all non-union employees, all suppliers, all
licensees, all landlords, etc.) exceeds $25,000 per annum. The Sequoia
Disclosure Document includes a brief summary of each such contract,
agreement or understanding identified therein, or of the type of such
contracts and the aggregate exposure or commitment under similar
contracts in the case of contracts included by reason of the preceding
sentence. Without in any respect limiting the foregoing, the Sequoia
Disclosure Document contains a description
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of all leases of properties by Sequoia, including all amendments,
supplements, extensions and modifications thereof, identifying, inter
alia, the date each such document was executed and its effective period.
Sequoia is not a party to any executory contract to sell or transfer any
part of any leasehold interest of Sequoia other than this Agreement. True
and accurate copies of all leases, and of all amendments, supplements,
extensions and modifications thereof, have heretofore been delivered to
SAC by Sequoia.
(xv) Accounts Payable. The accounts payable reflected on the
Sequoia Balance Sheet will, and those reflected in the most recent
balance sheet included in the Unaudited Financial Statements do, and
those reflected on the books of Sequoia at the time of the Closing will,
reflect all amounts owed by Sequoia in respect of trade accounts due and
other short-term liabilities commonly identified as accounts payable, and
the actual Liability of Sequoia in respect of such obligations was not,
and will not be, on any of such dates, in excess of the amounts so
reflected on the balance sheets or the books of Sequoia, as the case may
be.
(xvi) Labor Matters. Except as set forth in the Sequoia
Disclosure Document, there are no activities or controversies, including,
without limitation, any labor organizing activities, election petitions
or proceedings, proceedings preparatory thereto, unfair labor practice
complaints, labor strikes, disputes, slowdowns or work stoppages, pending
or, to the best of the knowledge of Sequoia, threatened, between Sequoia
or any of its Subsidiaries and any of its or their employees.
(xvii) Insurance. Sequoia and its Subsidiaries have insurance
policies in full force and effect which provide for coverages which are
usual and customary in the business of Sequoia and its Subsidiaries as to
amount and scope, and are adequate to protect Sequoia against any
reasonably foreseeable risk of loss, including business interruption. The
Sequoia Disclosure Document identifies each of Sequoia's insurance
policies, indicating the carrier, amount of coverage, annual premium,
risks covered, placing broker or agent and other relevant information as
to each. Sequoia has not within the past three (3) years received any
notice of cancellation of any insurance agreement.
(xviii) Title to and Utilization of Real Properties. Except as
disclosed in the Sequoia Disclosure Document, Sequoia owns fee simple,
insured title to all real property identified therein or in any document
referred to herein as owned by Sequoia and, has unbridled right to use
the same, and is not aware of any claim, notice or threat to the effect
that its right to own and use such property is subject in any way to any
challenge, claim, assertion of rights, proceedings toward condemnation or
confiscation in whole or in part, or is otherwise subject to challenge.
(xix) Foreign Corrupt Practices Act. Sequoia has not taken any
action which would cause it to be in violation of the Foreign Corrupt
Practices Act of 1977, as amended, or any rules and regulations
thereunder. To the best of Sequoia knowledge after due inquiry, there is
not now, and there has never been, any employment by Sequoia
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of, or beneficial ownership in Sequoia by, any governmental or political
official in any country in the world.
5.08. FULL DISCLOSURE. The documents, certificates and other writings
furnished or to be furnished by or on behalf of Sequoia to SAC pursuant to the
provisions of this Agreement, taken together in the aggregate, do not and will
not contain any untrue statement of a material fact, or omit to state any
material fact necessary to make the statements made, in the light of the
circumstances under which they are made, not misleading.
5.09. ACTIONS SINCE BALANCE SHEET DATE. Except as set forth on the
Sequoia Disclosure Document, from the date of this Agreement through the Closing
Date, Sequoia will have taken no actions that would be prohibited under the
provisions of this Agreement (without the prior consent of SAC).
ARTICLE VI
COVENANTS OF TMS AND SAC
6.01. AFFIRMATIVE COVENANTS. From the date hereof through the Closing
Date, each of TMS and SAC will take every action reasonably required of it in
order to ensure the prompt and expedient consummation of the Merger
substantially as contemplated hereby, and will exert all reasonable efforts to
cause the same to be consummated, provided in all instances that the repre
sentations and warranties of the Company and the Seller herein are and remain
true and accurate and that the covenants and agreements of Sequoia and of the
Seller herein are honored.
6.02. COOPERATION. TMS and SAC shall cooperate with Sequoia and the
Seller and their counsel, accountants and agents in every way in carrying out
the transactions contemplated herein, and in delivering all documents and
instruments deemed reasonably necessary or useful by Counsel to Sequoia.
6.03. EXPENSES. Whether or not the Merger is consummated, all costsand
expenses incurred by TMS and SAC in connection with this Agreement and the
Mergers contemplated hereby shall be borne by them.
6.04. PUBLICITY. Prior to the Closing any written news releases by TMS
and SAC pertaining to this Agreement or the Merger shall be reviewed and
approved prior to release by Sequoia, provided, however, that such review and
approval shall not be required of releases by TMS and SAC if prior review and
approval would prevent the timely and accurate dissemination of such press
release as required to comply, in the judgment of counsel, with any applicable
law, rule or policy.
6.05. UPDATING OF EXHIBITS AND DISCLOSURE DOCUMENTS. TMS and SAC shall
notify Sequoia of any changes, additions or events which may cause any change in
or addition to any Schedules or Exhibits delivered by it under this Agreement,
promptly after the occurrence of the
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same and at the Closing by the delivery of updates of all Schedules and
Exhibits. No notification made pursuant to this Section shall be deemed to cure
any breach of any representation or warranty made in this Agreement unless
Sequoia specifically agrees thereto in writing nor shall any such notification
be considered to constitute or give rise to a waiver by Sequoia of any condi
tion set forth in this Agreement.
6.06. REGISTRATION. TMS agrees that promptly following the execution
hereof, it will commence preparation of a registration statement on Form S-4 (or
such other form as may be appropriate) under the Securities Act, and will
otherwise proceed promptly to satisfy the requirements of the Securities Act
with respect to the Merger, including those of Rule 145 if applicable. TMS
represents that, insofar as the information contained in the same relates to TMS
(including information incorporated therein by reference), the Prospectus
contained in said registration statement will (A) comply as to form with the
relevant requirements of the form on which it is filed and (B) not contain, as
of the effective date thereof, any untrue statement of a material fact or any
omission to state a material fact necessary to make the statements contained
therein, in light of the circumstances under which they are made, not
misleading. TMS further agrees that it will, within ninety days of the Closing
of the Merger, file a Registration Statement of Form S-8 (or such other form as
may be appropriate) under the Securities Act, covering the issuance of TMS
Common Stock upon the exercise of Vested Rights and Non-Vested Rights that are
held by employees of Sequoia.
ARTICLE VII
COVENANTS OF THE SELLER AND OF SEQUOIA
7.01. AFFIRMATIVE COVENANTS. From the date hereof through the Closing
Date, Sequoia and the Seller will take every action reasonably required of each
of them in order to ensure the prompt and expedient consummation of the Merger
substantially as contemplated hereby, and will exert all reasonable efforts to
cause the same to be consummated.
7.02. EMPLOYMENT CONTRACTS. Pending the Closing, and effective upon the
consummation of the Merger, Sequoia will exert its best efforts to execute
three-year employment contracts with each of the persons identified on Schedule
7.02, at an annual salary equal to that set forth for such individual in such
Schedule, in the form of Exhibit 7.02. Sequoia will also execute a non-
competition agreement with Dana R. Allen, Seller hereunder, the provisions of
which will preclude such of the Seller from engaging in business competitive
with that of Sequoia, directly or indirectly, alone or in collaboration with
others, except with the written consent of SAC or as a shareholder of less than
1% of the common stock of a publicly-held company engaged in one or more of such
businesses, which agreement of such Seller agrees to execute.
7.03. NAME. The Seller agrees that following consummation of the Merger
he shall make no attempt to make any use of the name "Sequoia Data Corporation,"
"Sequoia Computer Corporation" or any name utilizing the word "Sequoia" in
conjunction with operations in any
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respect in competition with those of Sequoia as its business was conducted prior
to the Closing, or authorize others to do so, without the consent of TMS.
7.04. ACCESS AND INFORMATION. Sequoia shall afford to SAC and its
accountants, counsel and other representatives reasonable access during normal
business hours throughout the period prior to the Closing to all of its and its
Subsidiaries properties, books, contracts, commitments, records (including, but
not limited to, tax returns) and personnel and, during such period, Sequoia
shall furnish promptly to SAC (i) all written communications to its directors or
to its shareholders generally, (ii) internal monthly financial statements when
and as available, and (iii) all other information concerning its or any of its
subsidiaries' business, properties and personnel as SAC may reasonably request,
but no investigation pursuant to this Section 7.04 shall affect any
representations or warranties of Sequoia, or the conditions to the obligations
of SAC to consummate the Merger contained in this Agreement. In the event of the
termination of this Agreement, SAC will, and will cause its representatives to,
deliver to Sequoia or destroy all documents, work papers and other material, and
all copies thereof, obtained by it or on its behalf from Sequoia (or any
subsidiary) as a result of this Agreement or in connection herewith, whether so
obtained before or after the execution hereof, and will hold in confidence all
confidential information that has been designated as such by Sequoia in writing
or by appropriate and obvious notation, and will not use any such confidential
information except in connection with the Merger, until such time as such
information is otherwise publicly available. TMS and its representatives shall
assert their rights hereunder in such manner as to minimize interference with
the business of Sequoia.
7.05. NO SOLICITATION. Sequoia and its respective Subsidiaries, the
Seller and those acting on behalf of any of them will not, and Sequoia will use
its best efforts to cause its officers, employees, agents and representatives
(including any investment banker) to not, directly or indirectly, solicit,
encourage or initiate any discussions with, or negotiate or otherwise deal with,
or provide any information to, any person or Entity other than TMS, SAC and
their respective officers, employees and agents, concerning any merger, sale of
substantial assets or similar transaction involving Sequoia or any subsidiary or
division of Sequoia or any sale of any of its capital stock or of any subsidiary
or division. Sequoia will notify SAC immediately upon receipt of any inquiry,
offer or proposal relating to any of the foregoing. None of the foregoing shall
prohibit providing information to others in a manner in keeping with the
ordinary conduct of Sequoia's business, or providing information to government
authorities.
7.06. CONDUCT OF BUSINESS PENDING THE MERGER. Sequoia and the Seller
covenant and agree, severally and jointly, with TMS that, prior to the
consummation of the Merger or the termination of this Agreement pursuant to its
terms, unless TMS shall otherwise consent in writing, which consent shall not be
unreasonably withheld or delayed, and except as otherwise contemplated by this
Agreement or disclosed in the Sequoia Disclosure Document, Sequoia will comply
with each of the following:
(a) its business and the business of its Subsidiaries shall be
conducted only in the ordinary and usual course, it shall use reasonable
efforts and shall cause each of its Subsidiaries to use reasonable
efforts to keep intact its and their
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business organizations and good will, keep available the services of
their respective officers and employees and maintain good relationships
with suppliers, lenders, creditors, distributors, employees, customers
and others having business or financial relationships with them, and it
shall immediately notify SAC of any event or occurrence or emergency
material to, and not in the ordinary and usual course of business of, it
or any of its Subsidiaries;
(b) it shall not (i) amend its Articles of Incorporation or By-
Laws or (ii) split, combine or reclassify any of its outstanding
securities or declare, set aside or pay any dividend or other
distribution or make any exchange for or redemption of any such
securities payable in cash, stock or property with respect to such
securities;
(c) neither it nor any of its Subsidiaries shall (i) issue or
agree to issue any additional shares of, or rights of any kind to acquire
any shares of, its capital stock of any class or (ii) enter into any
contract, agreement, commitment or arrangement with respect to any of the
foregoing;
(d) neither it nor any of its Subsidiaries shall create, incur or
assume any long-term or short-term indebtedness for money borrowed or
make any capital expenditures or commitment for capital expenditures,
except in the ordinary course of business and consistent with past
practice;
(e) neither it nor any of its Subsidiaries shall (i) adopt, enter
into or amend any bonus, profit sharing, compensation, stock option,
warrant, pension, retirement, deferred compensation, employment,
severance, termination or other employee benefit plan, agreement, trust
fund or arrangement for the benefit or welfare of any officer, director
or employee, except as provided in Section 7.02 hereof, or (ii) agree to
any material (in relation to historical compensation) increase in the
compensation payable or to become payable to, or any increase in the
contractual term of employment of, any officer, director or employee
except, with respect to employees who are not officers or directors, in
the ordinary course of business in accordance with past practice;
(f) neither it nor any of its Subsidiaries shall sell, lease,
mortgage, encumber, or otherwise dispose of or grant any interest in any
of its assets or properties except for sales, encumbrances and other
dispositions or grants in the ordinary course of business and consistent
with past practice and except for liens for taxes not yet due or liens or
encumbrances that are not material in amount or effect and do not impair
the use of the property, or as specifically provided for or permitted in
this Agreement;
(g) neither it nor any of its Subsidiaries shall enter into, or
terminate, any material contract, agreement, commitment or understanding;
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(h) neither it nor any of its Subsidiaries shall enter into any
agreement, commitment or understanding, whether in writing or otherwise,
with respect to any of the foregoing;
(i) it will continue properly and promptly to file when due all
federal, state, local, foreign and other tax returns, reports and
declarations required to be filed by it, and will pay, or make full and
adequate provision for the payment of, all taxes and governmental charges
due from or payable by it;
(j) it will comply with all laws and regulations applicable to it
and its operations; and
(k) it will maintain in full force and effect insurance coverage
of a type and amount customary in its business.
7.07. COOPERATION. Sequoia and the Seller shall cooperate with SAC and
its counsel, accountants and agents in every way in carrying out the
transactions contemplated herein, and in delivering all documents and
instruments deemed reasonably necessary or useful by SAC.
7.08. EXPENSES. Whether or not the Merger is consummated, all costs and
expenses incurred by Sequoia and by the Seller in connection with this Agreement
and the Merger shall be paid by Sequoia and by such Seller, respectively.
7.09. PUBLICITY. Prior to the Closing any written news releases by
Sequoia or the Seller pertaining to this Agreement or the Merger shall be
reviewed and approved prior to release by SAC; provided, however, that such
review and approval shall not be required of releases by Sequoia if prior review
and approval would prevent the timely and accurate dissemination of such press
release as required to comply, in the judgment of counsel, with any applicable
law, rule or policy.
7.10. UPDATING OF EXHIBITS AND DISCLOSURE DOCUMENTS. Sequoia shall
notify SAC of any changes, additions or events which may cause any material
change in or addition to the Sequoia Disclosure Document or any Schedules or
Exhibits delivered by it under this Agreement promptly after the occurrence of
the same and again at the Closing by delivery of appropriate updates to the
Sequoia Disclosure Document and to all such Schedules and Exhibits. No such
notification made pursuant to this Section shall be deemed to cure any breach of
any representation or warranty made in this Agreement unless SAC specifically
agrees thereto in writing nor shall any such notification be considered to
constitute or give rise to a waiver by SAC of any condition set forth in this
Agreement.
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ARTICLE VIII
CONDITIONS TO CLOSING
8.01. CONDITIONS TO OBLIGATION OF SAC. The obligation of SAC to effect
the Merger shall be subject to the fulfillment at or prior to the Closing of the
following conditions, unless SAC shall waive such fulfillment:
(a) This Agreement and the transactions contemplated hereby shall
have received all approvals, consents, authorizations and waivers from
governmental and other regulatory agencies and other third parties
(including lenders, holders of debt securities and lessors) required to
consummate the Merger (including the expiration of any applicable waiting
period under regulation or statute), which, either individually or in the
aggregate, if not obtained would have a material adverse effect on the
financial condition, results of operations or business of SAC and its
Subsidiaries, taken as a whole (after the Closing); and
(b) There shall not be in effect a preliminary or permanent
injunction or other order by any federal or state court which prohibits
the consummation of the Merger; and
(c) Sequoia, the Seller and their affiliated Entities shall have
performed in all material respects each of their agreements and
obligations contained in this Agreement required to be performed on or
prior to the Closing and shall have complied with all material
requirements, rules and regulations of all regulatory authorities having
jurisdiction; and
(d) The representations and warranties of the Seller and of
Sequoia set forth in this Agreement shall be true in all material
respects as of the date of this Agreement and, except in such respects
as, do not materially and adversely affect the business, financial
condition, operations or prospects of Sequoia, as of the Closing Time as
if made as of such time; and
(e) No material adverse change shall have taken place in the
business, financial condition, operations or prospects of Sequoia since
the date of the Sequoia Balance Sheet other than those, if any, that
result from the changes permitted by, and transactions contemplated by,
this Agreement; and
(f) SAC shall have received from Sequoia an officer's
certificate, executed by the Chief Executive Officer, President and the
Chief Financial Officer of Sequoia (in their capacities as such) dated
the Closing Date, as to the satisfaction of the conditions in paragraphs
(c), (d) and (e) above; and
(g) SAC shall have received, no later than thirty-five (35) days
from the date of this Agreement, confirmation of the satisfaction of the
conditions specified in Section 8.02(j).
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(h) There shall be no more than 15,000 Dissenting Shares; and
(i) No later than thirty (30) days following the date of this
Agreement, TMS shall have obtained proxies from Sequoia Shareholders
(other than the Seller) to vote no less than Twenty-Five Thousand
(25,000) shares of Sequoia Common Stock owned by them in favor of the
Merger, subject to the satisfaction of the conditions set forth in
Section 8.02; and
(j) No later than thirty (30) days following the date of this
Agreement, TMS and Sequoia shall have agreed upon a business plan
delineating the funding and operation of Sequoia as a subsidiary of TMS
following the Closing Date; and
(k) SAC shall have received, on and as of the Closing Date, an
opinion of Counsel to Sequoia, substantially as to the matters set forth
in Sections 5.01, 5.02, 5.03, 5.04 (to the best of the knowledge of such
counsel as to parts (ii), (iii), (iv) and (v)), 5.07 (iv) through (xi)
and (xiv) (to the best of the knowledge of such counsel), 5.09 (to the
best of the knowledge of such counsel) of this Agreement, and as to the
Proxy Statement referred to in Section 9.02 below and the compliance of
that document with the requirements of the Exchange Act, all subject to
customary limitations reasonably acceptable to Counsel to SAC.
8.02. CONDITIONS TO OBLIGATION OF SEQUOIA AND THE SELLER. The
obligation of Sequoia and the Seller to effect the Merger shall be subject to
the fulfillment at or prior to the Closing of the following conditions, unless
Sequoia shall waive such fulfillment:
(a) This Agreement and the Merger shall have received all
approvals, consents, authorizations and waivers from governmental and
other regulatory agencies and other third parties (including lenders,
holders of debt securities and lessors) required by law to consummate the
Merger (including the expiration of any applicable waiting period under
regulation or statute), which, either individually or in the aggregate,
if not obtained would have a material adverse effect on the financial
condition, results of operations or business of Sequoia and its
Subsidiaries, taken as a whole (after the Closing); and
(b) There shall not be in effect a preliminary or permanent
injunction or other order by any federal or state authority which
prohibits the consummation of the Merger; and
(c) SAC and TMS shall have performed in all material respects all
of their agreements and obligations contained in this Agreement required
to be performed on or prior to the Closing and shall have complied with
all material requirements, rules and regulations of all regulatory
authorities having jurisdiction; and
(d) The representations and warranties of TMS and SAC set forth
in this Agreement shall be true in all material respects as of the date
of this Agreement and,
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except in such respects as do not materially and adversely affect the
business of TMS and its Subsidiaries, taken as a whole, as of the Closing
Date as if made as of such time; and
(e) No material adverse change shall have taken place in the
business, financial condition, operations or prospects of TMS since the
date of the TMS Balance Sheet other than those, if any, that result from
the changes permitted by, and transactions contemplat ed by, this
Agreement; and
(f) Since the Date of this Agreement, TMS shall have issued no
shares of TMS Common Stock or granted any options or rights to purchase
TMS Common Stock, at a price per share less than the market price of TMS
Common Stock on the date of such issuance or grant, except for the grant
or exercise of stock options under existing stock option plans of TMS;
and
(g) Sequoia and the Seller shall have received from each of TMS
and SAC an officers' certificate, executed by their Chief Financial
Officers and the Presidents (in their capacities as such), dated the
Closing Date, as to the satisfaction of the conditions of paragraphs (c),
(d), (e) and (f) above (to the best of their knowledge where
appropriate); and
(h) Dana R. Allen shall have been elected to the Board of
Directors of TMS; and
(i) No later than thirty (30) days following the date of this
Agreement, TMS and Sequoia shall have agreed upon a business plan
delineating the funding and operation of Sequoia as a subsidiary of TMS
following the Closing Date; and
(j) No later than thirty (30) days following the date of this
Agreement, Sequoia shall have received an opinion of Counsel to Sequoia,
that the Merger satisfies the requirements of Section 368 of the Code;
and
(k) Sequoia and the Seller shall have received, on and as of the
Closing Date, an opinion of Counsel to SAC and TMS, substantially as to
the matters set forth in Sec tions 4.01, 4.02, 4.03 and 4.05 (to the best
of the knowledge of such Counsel), as well as to the effectiveness of the
Form S-4 Registration Statement referenced in Section 6.06, and all
subject to customary limitations, reasonably satisfactory in form and
substance to Sequoia, and such other closing documents and instruments as
Sequoia shall reasonably request, in each case reasonably satisfactory in
form and substance to Sequoia and its counsel.
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ARTICLE IX
SECURITIES AND SECURITY HOLDERS
9.01. MEETING OF SHAREHOLDERS. Sequoia and the Seller agree that, as
soon as practicable after the execution of this Agreement, they will commence
activities toward convening a meeting of Sequoia Shareholders to vote upon the
approval by such shareholders of the Merger. Such activities shall include,
without limitation, preparation of the Proxy Statement; filing of the Proxy
Statement with the SEC as required by law; responding to any comments thereon by
the SEC in a prompt manner; establishing a record date for Sequoia Shareholders
entitled to vote on the Merger; complying with applicable legal requirements
under the Exchange Act regarding the giving of notice as to such record date;
mailing a notice of the meeting, Proxy Statement and form of proxy to Sequoia
Shareholders; and in all other respects taking all action required. At such
meeting, the Seller agrees to vote all of the shares of Sequoia Common Stock
held by him in favor of the Merger, provided in all instances that the
representations and warranties of SAC and TMS in this Agreement are and remain
true and accurate and the agreements and covenants of SAC and TMS in this
Agreement are honored.
9.02. PROXY STATEMENT. The Proxy Statement, including, without
limitation, the contents thereof, and the timing and manner of use thereof, will
comply with all requirements of the Exchange Act and of any state law applicable
thereto, and, without limiting the foregoing, will not, at the time the same is
mailed to Sequoia Shareholders, contain any untrue statement of a material fact
or omit to state any material fact necessary to make the statements therein, in
light of the circumstances under which they are made, not misleading. To the
extent that such Proxy Statement is part of the registration statement referred
to in Section 6.06 above, the foregoing representations shall remain in effect
and Sequoia shall be responsible for all information regarding Sequoia contained
in such registration statement.
ARTICLE X
TERMINATION, AMENDMENT, WAIVER
10.01. TERMINATION. This Agreement and the Merger may be terminated at
any time prior to the Closing, whether before or after any approval by
shareholders:
(a) By mutual consent of SAC and Sequoia; or
(b) By either SAC or Sequoia, upon written notice to the other,
if the conditions to such party's obligations to consummate the Merger,
in the case of SAC, as provided in Section 8.01, or, in the case of
Sequoia, as provided in Section 8.02, cannot reasonably be satisfied on
or before December 31, 1995 unless the failure of condition is the result
of the material breach of this Agreement by the party seeking to
terminate.
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10.02. AMENDMENT. This Agreement may be amended by Sequoia and SAC by
action taken at any time but after the Merger has been approved by the Sequoia
Shareholders no amendment shall be made which materially reduces the
Consideration or which in any way materially and adversely affects the rights of
Sequoia or its shareholders without the further approval of such Sequoia
Shareholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of Sequoia and SAC. By executing this Agreement, the
Seller appoints Sequoia the agent and attorney-in-fact of such Seller to the
extent (but only to the extent) necessary to bind the Seller to amendments to
this Agreement approved by Sequoia to the limited extent set forth in this
Section 10.02
10.03. WAIVER. At any time prior to the Closing Date, SAC or Sequoia, by
action taken by their respective Boards of Directors, may (a) extend the time
for the performance of any of the obligations or other acts of the other parties
hereto, (b) waive any inaccuracies in the representations and warranties
contained herein or in any document delivered pursuant hereto or (c) 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 an instrument in writing signed on behalf of such
party.
10.04. RELIEF. In the event of liability on the part of any party in
accordance with the provisions of this Agreement, the parties recognize and
acknowledge that monetary measures of damages will not reasonably be calculable
and that specific performance and injunctive relief should therefore be
available to the other party.
ARTICLE XI
GENERAL PROVISIONS
11.01. ARBITRATION. In the event that there shall be a dispute arising
out of or relating to this Agreement, the Merger, any document referred to
herein or centrally related to the subject matter hereof, or the subject matter
of any of the same, the parties agree that such dispute shall be submitted to
binding arbitration in Dallas, Texas, under the auspices of, and pursuant to the
rules of, the American Arbitration Association as then in effect, or such other
procedures as the parties may agree to at the time, before a tribunal of three
arbitrators, one of which shall be selected by each of the parties to the
dispute and the third of which shall be selected by the two arbitrators so
selected. Any award issued as a result of such arbitration shall be final and
binding between the parties, and shall be enforceable by any court having
jurisdiction over the party against whom enforcement is sought.
11.02. NOTICES. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or mailed by
registered or certified mail (return receipt requested) to the parties at the
following addresses (or at such other address for a party as shall be specified
by like notice):
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A. If to SAC or TMS:
206 West Sixth Avenue
Stillwater, Oklahoma 74074
Attention: Maxwell Steinhardt, President
with a copy to:
Douglas A. Branch, Esq.
Fellers, Snider, Blankenship, Bailey & Tippens, P.C.
2400 First National Center
120 North Robinson
Oklahoma City, Oklahoma 73102-7875
B. If to Sequoia, the Seller, any of them or any Affiliate of
any of them:
433 Airport Boulevard, Suite 414
Burlingame, California 94010
Attention: Dana R. Allen, President
with a copy to:
Alexander P. Myers, Esq.
Myers, Hawley, Morley, Myers & McDonnell
166 Main Street
Post Office Box 280
Los Altos, California 94023-0280
11.03. INTERPRETATION. 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.
11.04. SURVIVAL OF REPRESENTATIONS, WARRANTIES, ETC. The
representations, warranties, covenants and agreements of the parties contained
herein shall survive the Closing and any investigation of the other party made
prior thereto. Representations and warranties shall so survive for a period of
three (3) years from the Closing. Covenants and agreements shall survive for the
longer of three (3) years from the Closing or one (1) year after they were to
have been performed and were capable of performance.
11.05. DEMINIMIS CLAIMS. No party shall bring any action against any
other party hereto with respect to the subject matter hereof unless the
aggregate amount of all claims so brought in relation to the subject matter of
this Agreement exceeds $25,000, provided, however, that the foregoing shall not
prevent or preclude actions seeking injunctive or other equitable forms of
relief.
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11.06. MISCELLANEOUS. This Agreement (a) constitutes the entire
agreement and supersedes all other prior agreements and understandings, both
written and oral, between the parties, with respect to the subject matter
hereof, except as specifically provided otherwise or referred to herein, so that
no such external or separate agreements relating to the subject matter of this
Agreement shall have any effect or be binding, unless the same is referred to
specifically in this Agreement or is executed by the parties after the date
hereof; (b) is not intended to confer upon any other person any rights or
remedies hereunder; (c) shall not be assigned by operation of law or otherwise
except for assignment of all or any part of the rights of SAC hereunder, which
may be freely assigned by SAC so long as the obligations of SAC under this
Agreement remain obligations of TMS; and (d) shall be governed in all respects,
including validity, interpretation and effect, by the internal laws of the State
of Oklahoma, without regard to the principles of conflict of laws thereof. This
Agreement may be executed in two or more counterparts which together shall
constitute a single agreement.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
signed on the date first written above by their respective officers thereunto
duly authorized.
SCC ACQUISITION CORP.
By:_____________________________________
Maxwell Steinhardt, President
ATTEST:
_________________________________________
Deborah D. Mosier, Secretary
TMS, INC.
By:_____________________________________
Maxwell Steinhardt, President
ATTEST:
_________________________________________
Deborah D. Mosier, Assistant Secretary
SEQUOIA COMPUTER CORPORATION
By:_____________________________________
Dana R. Allen, President
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ATTEST:
________________________________________
Susan Allen, Secretary
SELLER:
________________________________________
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<PAGE>
EXHIBIT II
(S) 1300. REORGANIZATION OR SHORT-FORM MERGER; DISSENTING SHARES;
CORPORATE PURCHASE AT FAIR MARKET VALUE; DEFINITIONS
(a) If the Approval of the outstanding shares (Section 152) of a
corporation is required for a reorganization under subdivisions (a) and (b) or
subdivision (e) or (f) of Section 1201, each shareholder of the corporation is
entitled to vote on the transaction and each shareholder of a subsidiary
corporation in a short-form merger may, by complying with this chapter, require
the corporation in which the shareholder holds shares to purchase for cash at
their fair market value the shares owned by the shareholder which are dissenting
shares as defined in subdivision (b). The fair market value shall be determined
as of the day before the first announcement of the terms of the proposed
reorganization or short-form merger, excluding any appreciation or depreciation
in consequence of the proposed action, but adjusted for any stock split, reverse
stock split, or share dividend which becomes effective thereafter.
(b) As used in this chapter, "dissenting shares" means share which
come within all of the following descriptions:
(c) Which were not immediately prior to the reorganization or short-
form merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or (B)
listed on the list of OTC margin stocks issued by the Board of Governors of the
Federal Reserve System, and the notice of meeting of shareholders to act upon
the reorganization summarizes this section and Section 1301, 1302, 1303 and
1304; provided, however, that this provision does not apply to any shares with
respect to which there exists any restriction on transfer imposed by the
corporation or by any law or regulation; and provided, further, that this
provision does not apply to any class of shares described in * * * subparagraph
(A) or (B) if demands for payment are filed with respect to 5 percent or more of
the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not voted in
favor of the reorganization or, (B) if described in * * * subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph), were
voted against the reorganization, or which were held of record on the effective
date of a short-form merger; provided, however, that * * * subparagraph (A)
rather than * * * subparagraph (B) of this paragraph applies in any case where
the approval required by Section 1201 is sought by written consent rather than
at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the
recordholder of dissenting shares and includes a transferee of record.
(S) 1301. NOTICE TO HOLDERS OF DISSENTING SHARES IN REORGANIZATIONS;
DEMAND FOR PURCHASE; TIME; CONSENTS
(a) If, in the case of a reorganization, any shareholders of a
corporation have a right under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, to require the corporation to
purchase their shares for cash, such corporation shall mail to each such
shareholder a notice of the approval of the reorganization by its outstanding
shares (Section 152) within 10 days after the date of such approval, accompanied
by a copy of Sections 1300, 1302, 1303, 1304 and this section, a statement of
the price
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determined by the corporation to represent the fair market value of the
dissenting shares, and a brief description of the procedure to be followed if
the shareholder desires to exercise the shareholder's right under such sections.
The statement of price constitutes an offer by the corporation to purchase at
the price stated any dissenting shares as defined in subdivision (b) of Section
1300, unless they lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to
purchase the shareholder's shares for cash under Section 1300, subject to
compliance with paragraphs (3) and (4) of subdivision (b) thereof, and who
desires the corporation to purchase such shares shall make written demand upon
the corporation for the purchase of such shares and payment to the shareholder
in cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of shares held of
record by the shareholder which the shareholder demands that the corporation
purchase and shall contain a statement of what such shareholder claims to be the
fair market value of those shares as of the day before the announcement of the
proposed reorganization or short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
(S) 1302. SUBMISSION OF SHARE CERTIFICATES FOR ENDORSEMENT;
UNCERTIFIED SECURITIES
Within 30 days after the date on which notice of the approval by the
outstanding shares or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder, the shareholder shall submit to the corporation at
its principal office or at the office of any transfer agent thereof, (a) if the
share are certificated securities, the shareholder's certificates representing
any shares which the shareholder demands that the corporation purchase, to be
stamped or endorsed with a statement that the shares are dissenting shares or to
be exchanged for certificates of appropriate denomination so stamped or endorsed
or (b) if the shares are uncertificated securities, written notice of the number
of shares which the shareholder demands that the corporation purchase. Upon
subsequent transfers of the dissenting shares on the books of the corporation,
the new certificates, initial transaction statement, and other written
statements issued therefor shall bear a like statement, together with the name
of the original dissenting holder of the shares.
(S) 1303. PAYMENT OF AGREED PRICE WITH INTEREST; AGREEMENT FIXING
FAIR MARKET VALUE; FILING; TIME OF PAYMENT
(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the share, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306, payment of the fair
market value of dissenting shares shall be made within 30 days after the amount
thereof has been agreed or within 30 days after any statutory or contractual
conditions to the reorganization are satisfied, whichever is later, and in the
case of certificated securities, subject to surrender of the certificates
therefor, unless provided otherwise by agreement.
II-2
<PAGE>
(S) 1304. ACTION TO DETERMINE WHETHER SHARES ARE DISSENTING SHARES OR
FAIR MARKET VALUE; LIMITATION; JOINDER; CONSOLIDATION;
DETERMINATION OF ISSUES; APPOINTMENT OF APPRAISERS
(a) If the corporation denies that the shares are dissenting shares,
or the corporation and the shareholder fail to agree upon the fair market value
of the shares, then the shareholder demanding purchase of such shares as
dissenting shares or any interested corporation, within six months after the
date on which notice of the approval by the outstanding shares (Section 152) or
notice pursuant to subdivision (i) of Section 1110 was mailed to the
shareholder, but not thereafter, may file a complaint in the superior court of
the proper county praying the court to determine whether the shares are
dissenting shares or the fair market value of the dissenting shares or both or
may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiffs or be
joined as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues.
If the status of the shares as dissenting shares is in issue, the court shall
first determine that issue. If the fair market value of the dissenting shares is
in issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
(S) 1305. REPORT OF APPRAISERS; CONFIRMATION; DETERMINATION BY COURT;
JUDGMENT; PAYMENT; APPEAL; COSTS
(a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share. Within the time
fixed by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a
report within 10 days from the date of their appointment or within such further
time as may be allowed by the court or the report is not confirmed by the court,
the court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be
rendered against the corporation for payment of an amount equal to the fair
market value of each dissenting share multiplied by the number of dissenting
shares which any dissenting shareholder who is a party, or who has intervened,
is entitled to require the corporation to purchase, with interest thereof at the
legal rate from the date on which judgment is entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
II-3
<PAGE>
(S) 1306. PREVENTION OF IMMEDIATE PAYMENT; STATUS AS CREDITORS;
INTEREST
To the extent that the provisions of Chapter 5 prevent the payment to any
holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
(S) 1307. DIVIDENDS ON DISSENTING SHARES
Cash dividends declared and paid by the corporation upon the dissenting
shares after the date of approval of the reorganization by the outstanding
shares (Section 152) and prior to payment for the shares by the corporation
shall be credited against the total amount to be paid by the corporation
therefor.
(S) 1308. RIGHTS OF DISSENTING SHAREHOLDERS PENDING VALUATION;
WITHDRAWAL OF DEMAND FOR PAYMENT
Except as expressly limited in this chapter, holders of dissenting shares
continue to have all the rights and privileges incident to their shares, until
the fair market value of their shares is agreed upon or determined. A dissenting
shareholder may not withdraw a demand for payment unless the corporation
consents thereto.
(S) 1309. TERMINATION OF DISSENTING SHARE AND SHAREHOLDER STATUS
Dissenting shares lose their status as dissenting shares and the holders
thereof cease to be dissenting shareholders and cease to be entitled to require
the corporation to purchase their shares upon the happening of any of the
following:
(a) The corporation abandons the reorganization. Upon abandonment of
the reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter all
necessary expenses incurred in such proceedings and reasonable attorneys' fees.
(b) The shares are transferred prior to their submission for
endorsement in accordance with Section 1302 or are surrendered for conversion
into shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon
the status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice of
the approval by the outstanding shares or notice pursuant to subdivision (i) of
Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
(S) 1310. SUSPENSION OF RIGHT TO COMPENSATION OR VALUATION
PROCEEDINGS; LITIGATION OF SHAREHOLDERS' APPROVAL
If litigation is instituted to test the sufficiency or regularity of the
votes of the shareholders in authorizing a reorganization, any proceedings under
Sections 1304 and 1305 shall be suspended until final determination of such
litigation.
II-4
<PAGE>
(S) 1311. EXEMPT SHARES
This chapter, except Section 1312, does not apply to classes of shares
whose terms and provisions specifically set forth the amount to be paid in
respect to such shares in the event of a reorganization or merger.
(S) 1312. RIGHT OF DISSENTING SHAREHOLDER TO ATTACK, SET ASIDE OR
RESCIND MERGER OR REORGANIZATION; RESTRAINING ORDER OR
INJUNCTION; CONDITIONS
(a) No shareholder of a corporation who has a right under this chapter
to demand payment of cash for the shares held by the shareholder shall have
right at law or in equity to attach the validity of the reorganization or short-
form merger, or to have the reorganization or short-form merger set aside or
rescinded, except in any action to test whether the number of shares required to
authorize or approve the reorganization have been legally voted in favor
thereof; but the holder of shares of a class whose terms and provisions
specifically set forth the amount to be paid in respect to them in the event of
a reorganization or short-form merger is entitled to payment in accordance with
those terms and provisions or, if the principal terms of the reorganization are
approved pursuant to subdivision (b) of Section 1202, is entitled to payment in
accordance with the terms and provisions of the approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with another party
to the reorganization or short-form merger, subdivision (a) shall not apply to
any shareholder of such party who has not demanded payment of cash for such
shareholder's shares pursuant to this chapter; but if the shareholder institutes
any action to attack the validity of the reorganization or short-form merger or
to have the reorganization or short-form merger set aside or rescinded, the
shareholder shall not thereafter have any right to demand payment of cash for
the shareholder's shares pursuant to this chapter. The court in any action
attacking the validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded shall not restrain or
enjoin the consummation of the transaction except upon 10 days prior notice to
the corporation and upon a determination by the court that clearly no other
remedy will adequately protect the complaining shareholder or the class of
shareholders of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger set aside or rescinded, (1)
a party to a reorganization or short-form merger which controls another party to
the reorganization or short-form merger shall have the burden of proving that
the transaction is just and reasonable as to the shareholders of the controlled
party; and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable, as
to the shareholders of any party so controlled.
II-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Oklahoma General Corporation Act grants every corporation the power
to indemnify any person who was or is a party or is threatened to be made a
party to any threatened, pending, or completed action, suit, or proceeding,
whether civil, criminal, administrative, or investigative (other than by action
by or in the right of the corporation) by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines, and amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit, or proceeding if he acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
corporation, and with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful.
The Oklahoma statute also grants every corporation the power to indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee, or agent of the corporation, or is or was
serving at the request of the corporation as a director, officer, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise against expenses, including attorneys' fees, actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue, or matter as to
which such person shall have been adjudged to be liable for negligence or
misconduct in the performance of his duty to the corporation unless and only to
the extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the court shall deem proper.
The Oklahoma statute provides that to the extent that a director,
officer, employee, or agent of a corporation has been successful on the merits
or otherwise in defense of any action, suit, or proceeding referred to in the
statute, or in defense of any claim, issue, or matter therein, he shall be
indemnified against expenses, including attorneys' fees, actually incurred by
him in connection therewith.
Articles Nine and Ten of the Registrant's Certificate of Incorporation
indemnify and exculpate the directors, officers, employees, and agents of the
Registrant from and against certain liabilities. Article Nine provides that the
Registrant shall indemnify to the full extent permitted under the Oklahoma
General Corporation Act any director, officer, employee, or agent of the
Registrant. Article Ten provides that a director of the Registrant shall have no
personal liability to the Registrant or its shareholders for monetary damages
for breach of fiduciary duty as a director, except for liability (a) for any
breach of the director's duty of loyalty to the Registrant or its shareholders,
(b) for acts
II-1
<PAGE>
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (c) for acts or omissions specified in Section 1053 of
the Oklahoma General Corporation Act regarding the unlawful payment of dividends
and the unlawful purchase or redemption of the Registrant's stock, and (d) for
any transaction from which the director derived an improper personal benefit.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
<TABLE>
<CAPTION>
EXHIBIT
NUMBER NAME OF EXHIBIT
- -------
<S> <C>
2.1 Agreement and Plan of Merger dated November 7, 1995, by and among
the Registrant, Sequoia Computer Corporation, SCC Acquisition
Corp., and Dana R. Allen (included as Exhibit I to the Proxy
Statement - Prospectus, except for exhibits and schedules which
will be supplied supplementally to the Commission upon request).
3.1 Certificate of Incorporation of the Registrant, as amended.
3.2 Bylaws of the Registrant, as amended, incorporated by reference
herein to the Registrant's Form 8-K Current Report dated June 4,
1993.
4.1 Specimen of Common Stock Certificate.*
5 Opinion regarding legality.*
10.1 Employee Stock Option Plan, incorporated herein by reference to
Exhibit No. 10.1 to the Registrant's Form 10 Registration
Statement, filed with the Commission on January 15, 1990 (the
"Form 10").
10.2 Senior Employee Stock Option Plan, incorporated herein by
reference to Exhibit No. 10.2 to the Registrant's Form 10.
10.3 Employee Incentive Stock Option Plan, incorporated herein by
reference to Exhibit No. 10.2 to the Registrant's Form 10.
10.4 Form of Engineering Services Agreement between the Registrant and
The Toro Company, incorporated herein by reference to Exhibit No.
10.4 to the Registrant's Form 10-K for the fiscal year ended
August 31, 1995.
10.5 Form of Engineering Services Agreement between the Registrant and
POWERCOM-2000, Inc. ("POWERCOM"), incorporated herein by reference
to Exhibit No. 10.7 to the Registrant's Form 10-K for the fiscal
year ended August 31, 1994.
10.6 Form of Value Added Reseller Agreement/Software Product License
Agreement between the Registrant and POWERCOM, incorporated herein
by reference to Exhibit No. 10.8 to the Registrant's Form 10-K for
the fiscal year ended August 31, 1994.
</TABLE>
II-2
<PAGE>
<TABLE>
<S> <C>
10.7 Form of Engineering Services Agreement (Document Conversion)
between the Registrant and POWERCOM, incorporated herein by
reference to Exhibit No. 10.9 to the Registrant's Form 10-K for
the fiscal year ended August 31, 1994.
10.8 Construction Contract for renovation of office building between
the Registrant and Mike Ebert Construction Company, incorporated
herein by reference to Exhibit No. 10.8 to the Registrant's Form
10-K for the fiscal year ended August 31, 1995.
10.9 Real Estate Purchase Contract dated October 29, 1993, between the
Registrant and the City of Stillwater, Oklahoma, incorporated
herein by reference to Exhibit No. 10.10 to the Registrant's Form
10-K for the fiscal year ended August 31, 1994.
23.1 Consent of KPMG Peat Marwick LLP.
23.2 Consent of Phillips McFall McCaffrey McVay & Murrah, P.C.*
</TABLE>
_________________________
* To be filed by amendment.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the provisions described under Item 22, above, or
otherwise, the Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses incurred or paid by a director, officer or
controlling person of the registrant in the successful defense of any action,
suit or proceeding) is asserted against the registrant by such director, officer
or controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
The undersigned registrant hereby undertakes that for purposes of
determining any liability under the Securities Act of 1933, each filing of the
registrant's annual report pursuant to section 13(a) or section 15(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to section 15(d) of the
Securities Exchange Act of 1934) that is incorporated by reference in the
registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11, or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first
II-3
<PAGE>
class mail or other equally prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
The undersigned Registrant hereby undertakes as follows: prior to any
public offering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters, in addition to the information called
for by the other Items of the applicable form.
The Registrant undertakes that every prospectus (i) that is filed
pursuant to the immediately preceding paragraph or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securities Act of 1933 and is used
in connection with the offering of securities subject to Rule 415, will be filed
as a part of an amendment to the registration statement and will not be used
until such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective amendment
shall be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the bona fide offering hereof.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
registrant has duly caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Stillwater,
State of Oklahoma, on November 29, 1995.
TMS, INC.
By: /s/ J. Richard Phillips
---------------------------------------
J. Richard Phillips
Chief Executive Officer
Know all men by these presents, that each person whose signature appears
below constitutes and appoints J. Richard Phillips and Maxwell Steinhardt, and
each or either of them, as his true and lawful attorneys-in-fact and agents,
with full power of substitution, for him, and in his name, place and stead, in
any and all capacities to sign any or all amendments or post-effective amendment
to this registration statement, and to file the same, with all exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, granting unto the said attorneys-in-fact and agents full power and
authority to do and perform each and every act and thing requisite and necessary
to be done in and about the premises, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue
hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities and on the date indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
<S> <C> <C>
/s/ J. Richard Phillips Chairman of the Board of November 29, 1995
- ----------------------------------
J. Richard Phillips, Directors and Chief
Principal Executive Officer Executive Officer
/s/ Maxwell Steinhardt President and Director November 29, 1995
- ----------------------------------
Maxwell Steinhardt
/s/ Dale E. May Vice President, Finance November 29, 1995
- ---------------------------------- and Administration
Dale E. May
Principal Financial and
Accounting Officer
/s/ Doyle E. Cherry Director November 29, 1995
- ----------------------------------
Doyle E. Cherry
/s/ James R. Ray, M.D. Director November 29, 1995
- ----------------------------------
James R. Rau, M.D.
/s/ Marshall C. Wicker Director November 29, 1995
- ----------------------------------
Marshall C. Wicker
/s/ Dana R. Allen Director Nominee November 29, 1995
- ----------------------------------
Dana R. Allen
</TABLE>
II-5
<PAGE>
SEQUOIA COMPUTER CORPORATION
433 AIRPORT BLVD., SUITE 414
BURLINGAME, CALIFORNIA 94010
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SEQUOIA
COMPUTER CORPORATION (THE "COMPANY"). THE UNDERSIGNED HEREBY APPOINTS DANA R.
ALLEN AND DAVID HOWE, AS PROXIES, EACH WITH THE POWER TO APPOINT HIS SUBSTITUTE,
AND HEREBY APPOINTS AND AUTHORIZES THEM TO REPRESENT AND VOTE AS DESIGNATED
BELOW, ALL OF THE SHARES OF COMMON STOCK OF THE COMPANY HELD OF RECORD BY THE
UNDERSIGNED ON NOVEMBER 6, 1995, AT THE ANNUAL MEETING OF SHAREHOLDERS TO BE
HELD ON _________________, OR ANY ADJOURNMENT THEREOF.
1. PROPOSAL to approve the Plan of Reorganization and Agreement of Merger
between the Company, SCC Acquisition Corp., and TMS, Inc.
[_] FOR [_] AGAINST [_] ABSTAIN
2. In their discretion, the Proxies are authorized to vote upon such
other business as may properly come before the meeting or any
adjournment thereof.
(Continued and to be signed on the reverse side.)
<PAGE>
THIS PROXY, WHEN PROPERLY EXECUTED, DATED AND DELIVERED, WILL BE VOTED
IN THE MANNER DIRECTED HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO DIRECTION IS
MADE, THIS PROXY WILL BE VOTED FOR PROPOSALS 1 AND 2.
Please sign exactly as name appears
below. When shares are held by joint
tenants, both should sign. When
signing as attorney or as executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
Dated:__________________________, 19___
x______________________________________
(Signature)
x______________________________________
(Signature, if held jointly)
PLEASE SIGN, DATE AND RETURN THE PROXY
CARD PROMPTLY USING THE ENCLOSED
ENVELOPE.
<PAGE>
<TABLE>
<CAPTION>
PLACE AT WHICH
IT APPEARS IN
EXHIBIT SEQUENTIALLY
NUMBER NAME OF EXHIBIT NUMBER PAGES
------- --------------- ------------
<S> <C> <C>
2.1 Agreement and Plan of Merger dated Included as Exhibit I to the Proxy
November 7, 1995, by and among the Statement - Prospectus, except for exhibits
Registrant, Sequoia Computer Corporation, and schedules which will be supplied
SCC Acquisition Corp., and Dana R. supplementally to the Commission upon
Allen. request.
3.1 Certificate of Incorporation of the
Registrant, as amended.
3.2 Bylaws of the Registrant, as amended. Incorporated by reference herein to the
Registrant's Form 8-K Current Report
dated June 4, 1993.
4.1 Specimen of Common Stock Certificate. *
5 Opinion regarding legality. *
10.1 Employee Stock Option Plan. Incorporated herein by reference to Exhibit
No. 10.1 to the Registrant's Form 10
Registration Statement, filed with the
Commission on January 15, 1990 (the
"Form 10").
10.2 Senior Employee Stock Option Plan. Incorporated herein by reference to Exhibit
No. 10.2 to the Registrant's Form 10.
10.3 Employee Incentive Stock Option Plan. Incorporated herein by reference to Exhibit
No. 10.2 to the Registrant's Form 10.
10.4 Form of Engineering Services Agreement Incorporated herein by reference to Exhibit
between the Registrant and The Toro No. 10.4 to the Registrant's Form 10-K for
Company. the fiscal year ended August 31, 1995.
10.5 Form of Engineering Services Agreement Incorporated herein by reference to Exhibit
between the Registrant and POWERCOM- No. 10.7 to the Registrant's Form 10-K for
2000, Inc. ("POWERCOM"). the fiscal year ended August 31, 1994.
10.6 Form of Value Added Reseller Incorporated herein by reference to Exhibit
Agreement/Software Product License No. 10.8 to the Registrant's Form 10-K for
Agreement between the Registrant and the fiscal year ended August 31, 1994.
POWERCOM.
10.7 Form of Engineering Services Agreement Incorporated herein by reference to Exhibit
(Document Conversion) between the No. 10.9 to the Registrant's Form 10-K for
Registrant and POWERCOM. the fiscal year ended August 31, 1994.
10.8 Construction Contract for renovation of Incorporated herein by reference to Exhibit
office building between the Registrant and No. 10.8 to the Registrant's Form 10-K for
Mike Ebert Construction Company. the fiscal year ended August 31, 1995.
10.9 Real Estate Purchase Contract dated Incorporated herein by reference to Exhibit
October 29, 1993, between the Registrant No. 10.10 to the Registrant's Form 10-K
and the City of Stillwater, Oklahoma. for the fiscal year ended August 31, 1994.
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
23.1 Consent of KPMG Peat Marwick LLP. *
23.2 Consent of Phillips, McFall, McCaffrey, *
McVay & Murrah, P.C.
</TABLE>
________________________
* To be filed by amendment.
<PAGE>
EXHIBIT 3.1
CERTIFICATE OF INCORPORATION
OF
TMS, INC.
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
The undersigned incorporator, whose name and address is shown below, being a
person legally competent to enter into contracts, under the provisions of the
Oklahoma General Corporation Act, does hereby adopt the following Certificate of
Incorporation:
ARTICLE I
NAME
----
The name of this Corporation is: TMS, INC.
ARTICLE II
REGISTERED AGENT
----------------
The name and address of the registered agent of the Corporation in the State
of Oklahoma is Winfrey D. Houston, 110 West Third Street, P.O. Box 1358,
Stillwater, Oklahoma 74076.
ARTICLE III
DURATION
--------
The duration of the Corporation is perpetual.
ARTICLE IV
PURPOSES
--------
The objectives and purposes for which the Corporation is organized is for any
lawful act or activity for which a corporation may be organized under the
general corporation law of the State of Oklahoma, now or hereafter in effect,
and to do any of such things as fully and to the same extent as natural persons
might or could do, including but not limited to the development, production and
marketing of computer software.
ARTICLE V
INCORPORATOR
------------
<PAGE>
The name and address of the Incorporator is Herbert F. Hewett, One North
Hudson, Sixth Floor, Oklahoma City, Oklahoma 73102.
ARTICLE VI
AUTHORIZED CAPITAL
------------------
The maximum number of shares of stock to be issued by the Corporation shall be
20,000,000 and such stock shall be Common Stock, $.05 par value.
ARTICLE VII
ATTRIBUTES OF STOCK
-------------------
Each share of Common Stock shall be equal to each other share of Common Stock
and, when issued, shall be fully paid and nonassessable, and the private
property of shareholders shall not be liable for corporate debts. The holders of
Common Stock of the Corporation shall each be entitled to share in any dividends
of the Corporation ratably, if, as, and when declared by the Board of Directors.
Each holder of record of Common Stock shall have one vote for each share of
Common Stock outstanding in his name on the books of the Corporation and shall
be entitled to vote said stock.
ARTICLE VIII
BOARD OF DIRECTORS
------------------
The number of directors of this Corporation shall be as specified in the
Bylaws, and such number may from time to time be increased or decreased under
the Bylaws or any amendment, or change thereof, upon resolution of the Board of
Directors. The number of directors to be elected at the first meeting of the
shareholders is a minimum of one (1). Directors and officers need not be
shareholders. In case of vacancies in the Board of Directors, including
vacancies occurring by reason of an increase in the number of Directors, a
majority of the remaining members of the Board, even though less than a quorum,
may elect directors to fill such vacancies to hold office until the next annual
meeting of the shareholders.
ARTICLE IX
INDEMNIFICATION
---------------
Any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (whether or not by or in the right of
the Corporation) by reason of the fact that he is or was a director, officer,
incorporator, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, incorporator, employee, or
agent of another corporation, partnership, joint venture, trust, or other
enterprise (including an employee benefit plan), shall be entitled to be
indemnified by the Corporation to the full extent then
<PAGE>
permitted by law against expenses (including attorneys' fees), judgments, fines
(including excise taxes assessed on a person with respect to an employee benefit
plan), and amounts paid in settlement incurred by him in connection with such
action, suit, or proceeding; provided, however, that the Corporation shall not
indemnify any such person in relation to matters as to which he shall be
adjudged in such action, suit or proceeding to be liable for gross negligence or
willful misconduct, or to have not acted in good faith and in a manner he
reasonably believed to be in or not opposed to the best interests of the
Corporation. Such right of indemnification shall inure whether or not the claim
asserted is based on matters which antedate the adoption of this Article IX.
Such right of indemnification shall continue as to a person who has ceased to be
a director, officer, incorporator, employee, or agent and shall inure to the
benefit of the heirs and personal representatives of such a person. The
indemnification provided by this Article IX shall not be deemed exclusive of any
other rights which may be provided now or in the future under any provisions
currently in effect or hereafter adopted by the Bylaws, by any agreement, by
vote of shareholders, by resolution of disinterested directors, by provision of
law, or otherwise.
ARTICLE X
EXCULPATORY PROVISIONS
----------------------
No director of the Corporation shall be liable to the Corporation or any of
its shareholders for monetary damages for breach of fiduciary duty as a
director, provided that this provision does not eliminate the liability of the
director (i) for any breach of the director's duty of loyalty to the Corporation
or its shareholders, (ii) for acts or omissions not in good faith or which
involve intentional misconduct or a knowing violation of law, (iii) under
Section 1053 of the Oklahoma General Corporation Act, or (iv) for any
transaction from which the director derived an improper personal benefit. For
purposes of the prior sentence, the term "damages" shall, to the extent
permitted by law, include without limitation, any judgment, fine, amount paid in
settlement, penalty, punitive damages, excise or other tax assessed with respect
to an employee benefit plan, or expense of any nature (including, without
limitation, counsel fees and disbursements). Each person who serves as a
director of the Corporation while this Article X is in effect shall be deemed to
be doing so in reliance on the provisions of this Article X, and neither the
amendment or repeal of this Article X, nor the adoption of any provision of this
Certificate of Incorporation inconsistent with this Article X, shall apply to or
have any effect on the liability or alleged liability of any director or the
Corporation for, arising out of, based upon, or in connection with any acts or
omissions of such director occurring prior to such amendment, repeal, or
adoption of an inconsistent provision. The provisions of this Article X are
cumulative and shall be in addition to and independent of any and all other
limitations on or eliminations of the liabilities of directors of the
Corporation, as such, whether such limitations or eliminations arise under or
are created by any law, rule, regulation, bylaw, agreement, vote of shareholders
or disinterested directors, or otherwise.
If the Oklahoma General Corporation Act is amended to further limit or
eliminate liability of this Corporation's directors for breach of fiduciary
duty, then a director of this Corporation shall not be liable for any such
breach to the fullest extent permitted by the Oklahoma General Corporation Act
as so amended. If the Oklahoma General Corporation Act is amended to increase or
expand liability of the Corporation's directors for breach of fiduciary duty, no
such amendment shall apply to or have any effect on the liability or alleged
liability of any director of this Corporation for or with respect to any acts or
omissions of such director occurring prior to the time of such amendment or
otherwise adversely affect any right or protection of a director of this
Corporation existing at the time of such amendment.
<PAGE>
ARTICLE XI
MERGERS, SALES OF ASSETS AND AMENDMENTS
TO THE CERTIFICATE OF INCORPORATION
-----------------------------------
The Corporation shall not, without the approval of the holders of two-thirds
(2/3) of the outstanding shares of each class of voting stock of the Corporation
(i) enter into any contract, agreement or plan of merger of the Corporation;
(ii) enter into any contract, agreement or plan to sell all or substantially all
of the assets of the Corporation; or (iii) amend this Article XI of this
Certificate of Incorporation.
ARTICLE XII
COMPROMISE OR ARRANGEMENT BY
CORPORATION WITH CREDITORS OR SHAREHOLDERS
------------------------------------------
Whenever a compromise or arrangement is proposed between this Corporation and
its creditors or any class of them and/or between this Corporation and its
shareholders or any class of them, any court of equitable jurisdiction within
the State of Oklahoma, on the application in a summary way of this Corporation
or of any creditor or shareholder thereof or on the application of any receiver
or receivers appointed for this Corporation under the provisions of Section 1106
of the Oklahoma General Corporation Act or on the application of trustees in
dissolution or of any receiver or receivers appointed for this Corporation under
the provisions of Section 1100 of the Oklahoma General Corporation Act, may
order a meeting of the creditors or class of creditors, and/or of the
shareholders or class of shareholders of this Corporation, as the case may be,
to be summoned in such manner as the court directs. If a majority in number
representing three-fourths (3/4) in value of the creditors or class of
creditors, and/or of the shareholders or class of shareholders of this
Corporation, as the case may be, agree to any compromise or arrangement and to
any reorganization of this Corporation as a consequence of such compromise or
arrangement, the compromise or arrangement and the reorganization, if sanctioned
by the court to which the application has been made, shall be binding on all the
creditors or class of creditors, and/or on all the shareholders or class of
shareholders, of this Corporation, as the case may be, and also on this
Corporation.
Signed at Oklahoma City, Oklahoma, this 20th day of April, 1990.
_____________________________________________
Herbert F. Hewett
One North Hudson, Suite 600
Oklahoma City, Oklahoma 73102
<PAGE>
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
TMS, INC.
STATE OF OKLAHOMA )
) SS:
COUNTY OF OKLAHOMA )
TO THE SECRETARY OF STATE OF THE STATE OF OKLAHOMA:
TMS, INC., a corporation organized and existing under the laws of the State
of Oklahoma (the "Corporation"), DOES HEREBY CERTIFY:
FIRST: that at a meeting of the Board of Directors of the Corporation held
and convened, a resolution was duly adopted setting forth two proposed
amendments to the Certificate of Incorporation, and declaring said amendments
advisable and setting a date for a meeting of shareholders of the Corporation
for consideration thereof. The resolutions setting forth the proposed
amendments are as follows:
BE IT RESOLVED, that the Certificate of Incorporation of the Corporation be
amended by revising Article VI to read in its entirety as follows:
ARTICLE VI
AUTHORIZED CAPITAL
------------------
The total number of shares of all classes of stock which the
Corporation shall have the authority to issue is 51,000,000 shares, divided
into classes designated as follows: (1) 50,000,000 shares of common stock,
par value $.05 per share (the "Common Stock"); and (2) 1,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock").
BE IT FURTHER RESOLVED, that the Certificate of Incorporation of the
Corporation be amended by revising Article VII to read in its entirety as
follows:
ARTICLE VII
ATTRIBUTES OF STOCK
-------------------
The designations, powers, preferences and rights, and the
qualifications, limitations or restrictions thereof, for each class of
stock of the Corporation shall be as follows:
<PAGE>
Common Stock: Each share of Common Stock shall be equal to each other
------------
share of Common Stock and, when issued, shall be fully paid and non-
assessable, and the personal property of shareholders shall not be liable
for corporate debts. Subject to any preferential rights of the holders of
Preferred Stock, the holders of Common Stock of the Corporation shall each
be entitled to share in any dividends of the Corporation ratably, if, as
and when declared by the Board of Directors.
Each holder of record of Common Stock shall have one vote for each
share of Common Stock outstanding in his name on the books of the
Corporation and shall be entitled to vote said stock.
Preferred Stock: Shares of Preferred Stock may be issued from time to
---------------
time in one or more series as determined by the Board of Directors. All
shares of Preferred Stock shall be of equal rank and shall be identical,
except in respect of the particulars fixed by the Board of Directors for
each series as provided herein. All shares of any one series shall be
identical in all respects with all the other shares of such series, except
that shares of any one series issued at different times may differ as to
the dates from which dividends thereon shall be cumulative.
The Board of Directors is hereby authorized, by resolution or
resolutions to provide, out of the unissued shares of Preferred Stock not
then allocated to any series of Preferred Stock, for one or more series of
Preferred Stock. Before any shares of any such series are issued, the Board
of Directors shall fix and determine, and is hereby expressly authorized
and empowered to fix and determine, by resolution or resolutions, the
powers, designations, preferences and relative, participating, optional or
other rights, if any, and the qualifications, limitations or restrictions
thereof, if any, and in connection therewith, the Board of Directors is
expressly authorized and empowered to fix and determine any or all of the
following provisions of the shares of such series:
(i) the designation of such series and the number of shares which
shall constitute such series;
(ii) the annual dividend rate payable on shares of such series,
expressed in a dollar amount per share, and the date or dates from
which such dividends shall commence to accrue and shall be cumulative;
(iii) the price or prices at which and the terms and conditions,
if any, on which shares of such series may be redeemed;
(iv) the amounts payable upon such series, in the event of the
voluntary or involuntary liquidation, distribution of assets
-2-
<PAGE>
(other than payment of dividends), dissolution, or winding up of the
affairs of the Corporation;
(v) the sinking funds or mandatory redemption provisions, if any,
for the redemption or purchase of shares of such series;
(vi) the extent of the voting powers, if any, of the shares of
such series;
(vii) the terms and conditions, if any, on which shares of such
series may be converted into shares of stock of the Corporation or any
class or classes thereof; and
(viii) any other preferences and relative, participating,
optional or other special rights, and any qualifications, limitations
or restrictions of such preferences or rights, of shares of such
series.
SECOND: That thereafter, pursuant to a resolution of its Board of
Directors, a meeting of shareholders was duly called and held upon due notice to
the shareholders of the Corporation of the aforementioned proposed amendments,
at which meeting the necessary number of shares of Common Stock as required by
statute and the Certificate of Incorporation was voted in favor of the
amendments.
THIRD: That said amendments were duly adopted in accordance with
Section 1077 of the Oklahoma General Corporation Act.
IN WITNESS WHEREOF, the undersigned has caused this Certificate to be
signed by its Chairman and Chief Executive Officer, and attested to by its
Secretary this __________ day of __________________, 1995.
TMS, INC.
By:
-----------------------------------------
ATTEST: J. Richard Phillips, Chairman
and Chief Executive Officer
- ------------------------------------
Marshall C. Wicker, Secretary
-3-
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENTS
The Board of Directors and Stockholders
TMS, Inc:
We consent to the use of our report contained in TMS, Inc.'s 1995 annual report
on Form 10-K incorporated herein by reference and to the reference to our firm
under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
Oklahoma City, Oklahoma
November 29, 1995
The Board of Directors
Sequoia Computer Corporation:
We consent to the use of our report included herein and to the reference to our
firm under the heading "Experts" in the prospectus.
KPMG Peat Marwick LLP
San Jose, California
November 29, 1995
