<PAGE> 1
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 1, 1995.
REGISTRATION NO. 33-64603
================================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
AMENDMENT NO. 1
TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
AUTOMATIC DATA PROCESSING, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 7374 22-1467904
(STATE OR OTHER JURISDICTION (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
OF INCORPORATION OR CLASSIFICATION CODE NUMBER) IDENTIFICATION NO.)
ORGANIZATION)
</TABLE>
ONE ADP BOULEVARD
ROSELAND, NEW JERSEY 07068
PHONE: (201) 994-5000
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
JAMES B. BENSON, ESQ.
CORPORATE VICE PRESIDENT AND GENERAL COUNSEL
ONE ADP BOULEVARD
ROSELAND, NEW JERSEY 07068
(201) 994-5000
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
RICHARD S. BORISOFF, ESQ.
PAUL, WEISS, RIFKIND, WHARTON & GARRISON
1285 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10019-6064
(212) 373-3000
------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after this Registration Statement becomes
effective and all other conditions to the Merger, pursuant to the Merger
Agreement described herein, have been satisfied or waived.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
------------------------
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 THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SECTION 8(a), MAY
DETERMINE.
================================================================================
<PAGE> 2
AUTOMATIC DATA PROCESSING, INC.
CROSS-REFERENCE SHEET
PURSUANT TO REGULATION S-K ITEM 501(b)
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LOCATION IN PROXY
FORM S-4 ITEM NUMBER AND CAPTION STATEMENT/PROSPECTUS
-------------------------------- --------------------
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A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus.................. Facing Page of the Registration
Statement; Outside Front Cover Page
of Proxy Statement/Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus...................................... Available Information; Incorporation
of Certain Documents by Reference;
Table of Contents
3. Risk Factors, Ratio of Earnings to Fixed Charges
and Other Information........................... Summary; The Merger; Market Price Per
Share Data; Comparative Per Share
Data
4. Terms of the Transaction........................ The Merger; The Merger Agreement;
Comparison of Stockholder Rights
5. Pro Forma Financial Information................. Not Applicable
6. Material Contracts with the Company Being
Acquired........................................ The Merger; The Merger Agreement
7. Additional Information Required for Reoffering
by persons and Parties Deemed to be
Underwriters. .................................. Not Applicable
8. Interests of Named Experts and Counsel.......... The Merger; Legal Matters; Experts
9. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities.. Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10. Information with Respect to S-3 Registrants..... Available Information; Incorporation
of Certain Documents by Reference;
Selected Financial Data
11. Incorporation of Certain Information by
Reference....................................... Available Information; Incorporation
of Certain Documents by Reference
12. Information with Respect to S-2 or S-3
Registrants..................................... Not Applicable
13. Incorporation of Certain Information by
Reference....................................... Not Applicable
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....................................... Available Information; Incorporation
of Certain Documents by Reference;
Selected Financial Data
17. Information with Respect to Companies Other
Than S-2 or S-3 Companies....................... Not Applicable
18. Information if Proxies, Consents or
Aurhorizations are to be Solicited.............. Outside Front Cover Page of Proxy
Statement/Prospectus; Available
Information; Incorporation of Certain
Documents by Reference; Summary;
Sandy Special Meeting; The Merger;
The Merger Agreement; Security
Ownership of Certain Beneficial
Owners and Management
19. Information if Proxies, Consents or
Aurhorizations Are not to be Solicited or in an
Exchange Offer.................................. Not Applicable
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<PAGE> 3
[SANDY CORPORATION LETTERHEAD]
December 1, 1995
Dear Shareholder:
You are cordially invited to attend the Special Meeting of Shareholders of
Sandy Corporation ("Sandy") which will be held on Thursday, January 4, 1996 at
Sandy's corporate headquarters, located at 1500 West Big Beaver Road, Troy,
Michigan 48084, commencing at 11:00 A.M., local time.
At the meeting you will be asked to consider and approve the Agreement and
Plan of Merger, dated as of August 22, 1995 (together with the Plan of Merger in
the form attached thereto, the "Merger Agreement"), by and among Sandy, ADP
Mergerco, Inc. ("ADP Mergerco") and Automatic Data Processing, Inc. ("ADP")
pursuant to which ADP Mergerco will merge with and into Sandy (the "Merger") and
the shareholders of Sandy will receive ADP Common Stock in exchange for their
Sandy Common Stock and Sandy stock options will be converted into options to
purchase ADP Common Stock.
As discussed in the accompanying Proxy Statement/Prospectus, Bear, Stearns
& Co. Inc., Sandy's financial advisor, has delivered a written opinion to the
Board of Directors of Sandy to the effect that the Merger is fair to the
shareholders of Sandy from a financial point of view. A copy of the opinion is
attached to the Proxy Statement/Prospectus and should be read carefully by
shareholders in its entirety.
YOUR BOARD OF DIRECTORS BELIEVES THAT THE MERGER IS IN THE BEST INTERESTS
OF SANDY AND ITS SHAREHOLDERS. THE BOARD HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND RECOMMENDS THAT YOU VOTE IN FAVOR OF THE MERGER.
You may call toll free 1-800-535-1225 for the then current ten-day average
of the daily per share prices of ADP Common Stock and the Exchange Ratio that
would be calculated if such average were the Average ADP Common Stock Price and
for information on how to change or revoke a proxy previously given (as such
terms are defined in the attached Proxy Statement/Prospectus). The actual
Average ADP Common Stock Price and Exchange Ratio are expected to be calculated
after the close of business on December 29, 1995 and may be obtained by calling
this number after that date.
Your vote is important no matter how large or small your holdings may be.
To assure your representation at the meeting, please complete, sign, date and
return your proxy in the enclosed envelope. If you attend the meeting, you may
revoke your proxy and vote in person if you wish, even if you have previously
returned your proxy.
Sincerely,
/s/ R.A. Ketchledge /s/ William H. Sandy
- ------------------------------------- ------------------------------------
Raymond A. Ketchledge William H. Sandy
President and Chief Operating Officer Chairman and Chief Executive Officer
<PAGE> 4
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD JANUARY 4, 1996
To Shareholders of Sandy Corporation:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Sandy
Corporation, a Michigan corporation ("Sandy"), will be held on Thursday, January
4, 1996 at 11:00 A.M., local time, at Sandy's corporate headquarters, located at
1500 West Big Beaver Road, Troy, Michigan 48084, for the following purposes:
1. To consider and vote upon a proposal to approve the Agreement and
Plan of Merger, dated as of August 22, 1995 (together with the Plan of
Merger in the form attached thereto, the "Merger Agreement"), by and among
Automatic Data Processing, Inc., a Delaware corporation ("ADP"), ADP
Mergerco, Inc., a Michigan corporation and a wholly owned subsidiary of
ADP, and Sandy, the terms and conditions of which are described in the
attached Proxy Statement/Prospectus.
2. To consider and act upon such other business as may properly come
before the meeting or any adjournment thereof.
The close of business on November 27, 1995 has been fixed as the record
date for the determination of shareholders entitled to notice of, and to vote
at, the meeting and any and all adjournments or postponements thereof. The terms
of the Merger Agreement are summarized in the attached Proxy
Statement/Prospectus. A copy of the Merger Agreement is attached to the Proxy
Statement/Prospectus.
A proxy card for the meeting and the Proxy Statement/Prospectus are
enclosed herewith.
By Order of the Board of Directors
Alan V. Kidd,
Secretary
Troy, Michigan
December 1, 1995
YOUR VOTE IS IMPORTANT NO MATTER HOW LARGE OR SMALL YOUR HOLDINGS MAY BE. TO
ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE DATE THE ENCLOSED PROXY, WHICH
IS SOLICITED BY THE BOARD OF DIRECTORS OF SANDY, SIGN EXACTLY AS YOUR NAME
APPEARS THEREON AND RETURN IMMEDIATELY.
<PAGE> 5
SANDY CORPORATION
PROXY STATEMENT
------------------------
AUTOMATIC DATA PROCESSING, INC.
PROSPECTUS
This Proxy Statement and Prospectus ("Proxy Statement/Prospectus") is being
furnished to the holders of common stock, par value $.01 per share ("Sandy
Common Stock"), of Sandy Corporation, a Michigan corporation ("Sandy"), in
connection with the solicitation of proxies by the Board of Directors of Sandy
for use at the Special Meeting of Shareholders of Sandy to be held on Thursday,
January 4, 1996 at Sandy's corporate headquarters, located at 1500 West Big
Beaver Road, Troy, Michigan 48084, commencing at 11:00 A.M., local time, and at
any and all adjournments or postponements thereof (the "Sandy Special Meeting").
This Proxy Statement/Prospectus also constitutes the Prospectus of Automatic
Data Processing, Inc., a Delaware corporation ("ADP"), with respect to the
issuance of up to 1,009,912 shares (after giving effect to the ADP Stock Split
described below) of ADP common stock, par value $.10 per share ("ADP Common
Stock"), to be issued to the shareholders of Sandy in connection with the Merger
described below. Stockholders of ADP will not be voting to approve the Merger.
ADP Common Stock is traded on the New York Stock Exchange, Inc. (the "NYSE")
under the symbol "AUD." On November 14, 1995, ADP announced a two-for-one common
stock split (the "ADP Stock Split") to be distributed on January 1, 1996 to
shareholders of record on December 15, 1995. Unless otherwise indicated, all per
share earnings and dividends and references to ADP Common Stock in this Proxy
Statement/Prospectus do not reflect the increased number of shares of ADP Common
Stock that would be outstanding after giving effect to the ADP Stock Split. On
November 30, 1995, the closing sale price for ADP Common Stock as reported on
the NYSE was $79 5/8 per share.
This Proxy Statement/Prospectus relates to the proposed merger (the
"Merger") of ADP Mergerco, Inc., a Michigan corporation and a wholly owned
subsidiary of ADP ("ADP Mergerco"), with and into Sandy, pursuant to an
Agreement and Plan of Merger, dated as of August 22, 1995 (together with the
Plan of Merger in the form attached thereto, the "Merger Agreement"), by and
among ADP Mergerco, ADP and Sandy. Upon consummation of the Merger, Sandy will
become a wholly owned subsidiary of ADP. Consummation of the Merger is subject
to various conditions, including the approval and adoption of the Merger
Agreement by the holders of a majority of the outstanding shares of Sandy Common
Stock at the Sandy Special Meeting. William H. Sandy, the Chairman and Chief
Executive Officer of Sandy, acting in his individual capacity and as trustee of
certain trusts of which Mr. Sandy is a beneficiary, executed an irrevocable
proxy agreement dated August 22, 1995 (which irrevocable proxy agreement has
subsequently been amended) in favor of ADP. Pursuant to this agreement, as
amended, ADP will have an irrevocable proxy to vote 19.0% of the outstanding
Sandy Common Stock (determined as of November 27, 1995, the record date
established for the Sandy Special Meeting) in favor of the Merger. See "The
Merger -- Interests of Certain Persons in the Merger."
At the Effective Time (as defined below), each share of Sandy Common Stock
issued and outstanding immediately prior to the Effective Time (excluding shares
referred to in the last sentence of this paragraph) will be converted into and
exchangeable for shares of ADP Common Stock at the Exchange Ratio (as defined
below). Thus, each Sandy shareholder shall be entitled to receive (in addition
to cash in lieu of fractional shares) a number of shares of ADP Common Stock
equal to the product (rounded down to the nearest whole number) of (i) the
number of shares of Sandy Common Stock exchanged by such shareholder and (ii)
the Exchange Ratio. If the Average ADP Common Stock Price (as defined below) is
greater than or equal to $58.764 (or $29.382 after giving effect to the ADP
Stock Split) and less than or equal to $71.823 (or $35.911 after giving effect
to the ADP Stock Split), then the exchange ratio shall be (rounded to the
seventh decimal place) (i) $12.00 divided by (ii) the Average ADP Common Stock
Price (the "Exchange Ratio"). If the Average ADP Common Stock Price is less than
$58.764 (or $29.382 after giving effect to the ADP Stock Split), then the
Exchange Ratio shall be 0.2042054 (or 0.4084108 after giving effect to the ADP
Stock Split). If the Average ADP Common Stock Price is greater than $71.823 (or
$35.911 after giving effect to the ADP Stock Split), then the Exchange Ratio
shall be 0.1670771 (or 0.3341542 after giving effect to the ADP Stock Split).
Each share of Sandy Common Stock held as treasury stock of Sandy immediately
prior to the Effective Time shall be canceled, retired and cease to exist, and
no exchange or payment shall be made in respect thereof. See "The
Merger -- General."
All information in this Proxy Statement/Prospectus with respect to ADP
Mergerco and ADP has been provided by ADP. All information contained in this
Proxy Statement/Prospectus with respect to Sandy has been provided by Sandy.
This Proxy Statement/Prospectus and the accompanying form of proxy are
first being mailed to shareholders of Sandy on or about December 1, 1995. A
shareholder who has given a proxy to Sandy may revoke it at any time prior to
its exercise. See "The Sandy Special Meeting -- Record Date; Voting Rights;
Proxies."
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is December 1, 1995.
<PAGE> 6
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN OR INCORPORATED BY REFERENCE IN THIS PROXY
STATEMENT/PROSPECTUS, AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATION
NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED. THIS
PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR THE
SOLICITATION OF AN OFFER TO PURCHASE, ANY OF THE SECURITIES OFFERED BY THIS
PROXY STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY, IN ANY JURISDICTION
TO OR FROM ANY PERSON TO OR FROM WHOM IT IS UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION OF AN OFFER, OR PROXY SOLICITATION, IN ANY SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROXY STATEMENT/PROSPECTUS NOR THE ISSUANCE OR SALE
OF ANY SECURITIES HEREUNDER SHALL UNDER ANY CIRCUMSTANCES CREATE ANY IMPLICATION
THAT THERE HAS BEEN NO CHANGE IN THE INFORMATION SET FORTH HEREIN OR
INCORPORATED BY REFERENCE SINCE THE DATE HEREOF.
AVAILABLE INFORMATION
ADP and Sandy are subject to the informational requirements of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information may be inspected and copied at the Public
Reference Facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549 and at the Commission's regional
offices at 7 World Trade Center, Suite 1300, New York, New York 10048 and at
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661-2511. Copies of such material may be obtained from the Public
Reference Facilities maintained by the Commission at Judiciary Plaza, 450 Fifth
Street, N.W., Room 1024, Washington, D.C. 20549, at prescribed rates. The ADP
Common Stock is listed on the NYSE, the Chicago Stock Exchange and the Pacific
Stock Exchange, and such reports, proxy statements and other information
concerning ADP may be inspected at the offices of the NYSE, 20 Broad Street, New
York, New York 10005, the offices of the Chicago Stock Exchange, 120 South
LaSalle Street, Chicago, Illinois 60603, and the offices of the Pacific Stock
Exchange, 618 South Spring Street, Los Angeles, California 90014 and 310 Pine
Street, San Francisco, California 94104. The Sandy Common Stock is listed on the
American Stock Exchange (the "ASE"), and such reports, proxy statements and
other information concerning Sandy may be inspected at the offices of the ASE,
86 Trinity Place, New York, New York 10006. If the Merger is consummated, the
Sandy Common Stock will be delisted from the ASE, and ADP will take steps to
terminate the registration of the Sandy Common Stock under Section 12 of the
Exchange Act.
ADP has filed with the Commission a Registration Statement on Form S-4 (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This Proxy
Statement/Prospectus, which constitutes a part of the Registration Statement,
does not contain all of the information set forth in the Registration Statement,
certain items of which are contained in schedules and exhibits to the
Registration Statement as permitted by the rules and regulations of the
Commission. Statements made in this Proxy Statement/Prospectus as to the
contents of any contract, agreement or other document referred to are not
necessarily complete. With respect to each such contract, agreement or other
document filed as an exhibit to the Registration Statement, reference is made to
the exhibit for a more complete description of the matter involved, and each
such statement shall be deemed qualified in its entirety by such reference.
Items and information omitted from this Proxy Statement/ Prospectus but
contained in the Registration Statement may be inspected and copied at the
Public Reference Facilities maintained by the Commission at Judiciary Plaza, 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549.
The Merger does not constitute a "significant business combination" for ADP
under the Commission's accounting rules. Therefore, other than under
"Comparative Per Share Data" below, pro forma financial information has not been
included in this Proxy Statement/Prospectus.
2
<PAGE> 7
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES BY REFERENCE CERTAIN DOCUMENTS
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF ANY SUCH
DOCUMENTS, OTHER THAN EXHIBITS TO SUCH DOCUMENTS UNLESS THEY ARE SPECIFICALLY
INCORPORATED BY REFERENCE, ARE AVAILABLE WITHOUT CHARGE TO ANY PERSON, INCLUDING
ANY BENEFICIAL OWNER, TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS DELIVERED UPON
WRITTEN OR ORAL REQUEST TO: SECRETARY, AUTOMATIC DATA PROCESSING, INC., ONE ADP
BOULEVARD, ROSELAND, NEW JERSEY 07068, TELEPHONE (201) 994-5000, OR TO
SECRETARY, SANDY CORPORATION, 1500 WEST BIG BEAVER ROAD, TROY MICHIGAN 48084,
TELEPHONE (810) 649-0800. IN ORDER TO ENSURE TIMELY DELIVERY OF THE DOCUMENTS,
ANY REQUEST SHOULD BE MADE BY DECEMBER 26, 1995.
The following documents which have been filed with the Commission are
incorporated by reference into this Proxy Statement/Prospectus:
1. ADP's Annual Report on Form 10-K for the fiscal year ended June 30, 1995
(File No. 1-5397);
2. ADP's definitive Annual Meeting Proxy Statement filed with the
Commission on September 21, 1995 (File No. 1-5397);
3. ADP's Current Reports on Form 8-K filed with the Commission on September
1, 1995 and November 6, 1995 and ADP's Current Reports on Form 8-K/A filed with
the Commission on November 13, 1995 and November 22, 1995 (File No. 1-5397);
4. ADP's Quarterly Report on Form 10-Q for the quarter ended September 30,
1995 (File No. 1-5397);
5. The description of ADP Common Stock contained in ADP's Registration
Statement on Form 8-A under the Exchange Act (File No. 1-5397) filed with the
Commission on January 21, 1992, including all amendments and reports filed for
the purpose of updating such description; and
6. Sandy's Annual Report on Form 10-K for the fiscal year ended August 31,
1995 (File No. 1-8996).
All documents subsequently filed by ADP or Sandy pursuant to Sections
13(a), 13(c), 14 or 15(d) of the Exchange Act, prior to the termination of the
offering of the ADP Common Stock, shall be deemed to be incorporated by
reference herein and to be a part hereof from the date of filing such documents.
Any statement contained herein or in any document incorporated or deemed to be
incorporated by reference herein shall be deemed to be modified or superseded
for the purposes of this Proxy Statement/Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed to constitute a part of this Proxy Statement/Prospectus, except as
so modified or superseded.
This Proxy Statement/Prospectus is accompanied by a copy of Sandy's Annual
Report on Form 10-K for the fiscal year ended August 31, 1995.
3
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TABLE OF CONTENTS
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SUMMARY............................................................................... 4
BUSINESS OF ADP.................................................................. 4
BUSINESS OF SANDY................................................................ 4
SANDY SPECIAL MEETING............................................................ 5
Time, Place and Date........................................................ 5
Purpose of the Meeting...................................................... 5
Votes Required; Record Date................................................. 5
CHANGE OF VOTE; CALCULATION OF THE EXCHANGE RATIO................................ 5
THE MERGER....................................................................... 6
Merger Consideration........................................................ 6
Exchange of Certificates.................................................... 6
Conditions to the Merger; Termination; Fees and Expenses.................... 7
Listing..................................................................... 7
Dividends................................................................... 7
INTERESTS OF CERTAIN PERSONS IN THE MERGER....................................... 7
CERTAIN FEDERAL INCOME TAX CONSEQUENCES.......................................... 8
COMPARATIVE RIGHTS OF STOCKHOLDERS............................................... 8
SANDY SPECIAL MEETING................................................................. 9
Purpose of The Sandy Special Meeting............................................. 9
Record Date; Voting Rights; Proxies.............................................. 9
Solicitation of Proxies.......................................................... 10
Quorum........................................................................... 10
Required Vote.................................................................... 10
THE MERGER............................................................................ 11
General ......................................................................... 11
Effective Time................................................................... 12
Conversion Of Shares, Procedures For Exchange Of Certificates.................... 12
Background of The Merger......................................................... 13
Recommendation of the Board of Directors of Sandy; Reasons for the Merger........ 15
Opinion of Sandy's Financial Advisor............................................. 15
Certain Considerations........................................................... 18
Interests of Certain Persons in the Merger....................................... 18
Certain Federal Income Tax Consequences.......................................... 19
Anticipated Accounting Treatment................................................. 20
Antitrust Matters................................................................ 20
Federal Securities Law Consequences.............................................. 20
Stock Exchange Listing........................................................... 21
Dividends ....................................................................... 21
Appraisal Rights................................................................. 21
Fees and Expenses................................................................ 21
THE MERGER AGREEMENT.................................................................. 22
Terms of the Merger.............................................................. 22
Exchange of Certificates......................................................... 23
Representations and Warranties................................................... 24
Conduct of Business Pending the Merger........................................... 25
</TABLE>
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Additional Agreements............................................................ 27
Conditions to the Merger......................................................... 27
Termination...................................................................... 29
Amendment and Waiver............................................................. 30
Indemnification and Insurance.................................................... 30
SELECTED FINANCIAL DATA............................................................... 31
Sandy............................................................................ 31
ADP.............................................................................. 32
MARKET PRICE PER SHARE DATA........................................................... 33
Sandy............................................................................ 33
ADP.............................................................................. 33
COMPARATIVE PER SHARE PRICES.......................................................... 34
Sandy............................................................................ 34
ADP.............................................................................. 34
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT........................ 35
COMPARISON OF STOCKHOLDER RIGHTS...................................................... 36
Special Meeting of Shareholders.................................................. 36
Inspection Rights................................................................ 36
Action by Consent of Shareholders................................................ 36
Cumulative Voting................................................................ 36
Dividends and Repurchase of Stock................................................ 36
Classification of The Board of Directors......................................... 37
Removal of Directors............................................................. 37
Vacancies on the Board of Directors.............................................. 37
Exculpation of Directors......................................................... 37
Indemnification of Directors, Officers and Others................................ 37
Interested Director Transaction.................................................. 38
Sale, Lease or Exchange of Assets and Mergers.................................... 38
Amendments to Charter............................................................ 38
Amendments to By-laws............................................................ 38
Appraisal Rights................................................................. 38
"Anti-takeover" Statutes......................................................... 39
OTHER MATTERS......................................................................... 40
LEGAL MATTERS......................................................................... 40
EXPERTS............................................................................... 40
ANNEXES:
A. Agreement and Plan of Merger
B. Opinion of Sandy's Financial Advisor
C. Tax Opinion
</TABLE>
ii
<PAGE> 10
SUMMARY
The following summary is qualified by the detailed information and/or
financial statements included elsewhere, attached to or incorporated by
reference in this Proxy Statement/Prospectus.
BUSINESS OF ADP
ADP is one of the largest independent computing services companies in the
United States offering a wide range of computing services to clients, both large
and small, in industry and finance. ADP's Employer Services offers a
comprehensive range of payroll, tax filing, human resource, direct deposit, cash
management, 40l(k) recordkeeping, timekeeping, and unemployment compensation
management services. These services are provided to over 300,000 clients engaged
in a wide variety of businesses. ADP's Brokerage Services offers a wide range of
services to the investment and brokerage community, including front-office
database, news, analytic and quotation services and back-office stock brokerage
and related financial computing services such as trade processing, cage
management, stock loan accounting, on-line inquiry and data collection,
portfolio reporting, order matching and on-line trading. Through Dealer
Services, ADP offers a service solution which involves selling computer
hardware, licensing computer software and providing software support and
hardware maintenance services to dealers and manufacturers in the automotive,
truck and farm equipment industries throughout the United States, Canada,
Mexico, Germany, France, the Netherlands, the United Kingdom and Taiwan.
Finally, ADP's Automotive Claims Services provides auto repair estimating and
parts availability services to insurance companies, claims adjusters, repair
shops and salvage yards involved in auto collision repair and valuation in the
United States and Canada. The services include automated collision damage repair
estimating for cars and trucks, vehicle valuation services for total losses, and
parts locating and pricing services to auto insurers and repairers to facilitate
the claims settlement and parts locating processes.
On October 27, 1995, ADP acquired control of the GSI Group (as defined
below) when it announced that, pursuant to an ongoing tender offer that was
commenced on October 16, 1995 for all of the outstanding shares of GSI
Participations SCA ("GPSCA") not held by GSI Associes S.A. ("GA"), and all of
the shares of GA, ADP had acquired control over 80% of the outstanding shares of
GPSCA. ADP expects to acquire control of approximately 100% of the outstanding
shares of GPSCA by January 15, 1996, the expiration date for the ongoing tender
offer. If ADP purchases all of the shares of GPSCA not held by GA and all of the
shares of GA, the total purchase price will be approximately FF 2.3 billion
(approximately US $460 million). The transaction may have a slightly dilutive
effect on ADP's earnings per share. Reference is made to the historical
financial statements of the GSI Group and the pro forma financial statements of
ADP and the GSI Group combined, which are incorporated by reference into this
Proxy Statement/Prospectus from ADP's Current Report on Form 8-K/A filed with
the Commission on November 22, 1995.
GPSCA, together with its subsidiaries (collectively, the "GSI Group"), is
the European leader in providing payroll and human resource information
services. The GSI Group also provides facilities management, banking, clearing
and other information services in Europe. The GSI Group's revenues are in excess
of FF 2.0 billion (US $400 million) and it has over 3,000 employees, with
operations in France, Germany, Italy, Spain, Switzerland and the United Kingdom.
BUSINESS OF SANDY
Sandy is a full-service performance improvement company that provides
training, consulting, communication, and marketing support products and services
for major corporations. Sandy was incorporated under the laws of the State of
Michigan in 1971 and provides many products and services to groups, divisions,
and departments within General Motors Corporation, Ford Motor Company, Nissan
Motor Corporation as well as other major corporations. Sandy's products and
services are designed to provide Sandy's clients with enhanced management and
employee performance and, thereby, competitive advantage. Sandy's clients
principally operate in the automotive industry. Other clients over the years
have included companies involved in communications, computer/electronics,
consumer non-durable products, health care, home appliance, hotel,
manufacturing, motorcycle, and retail industries. Sandy offers expertise in
management education, customer
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satisfaction initiatives, sales training, product training, technical training,
quality systems, process improvement, and marketing services, and utilizes its
expertise in these areas to deliver training programs and related services
through a wide range of media, such as video, audio and printed materials,
classroom instruction, computer-based instruction, conferences, meetings and
seminars.
SANDY SPECIAL MEETING
TIME, PLACE AND DATE
The Sandy Special Meeting will be held on Thursday, January 4, 1996 at
Sandy's corporate headquarters, located at 1500 West Big Beaver Road, Troy,
Michigan 48084 at 11:00 A.M., local time.
PURPOSE OF THE MEETING
At the Sandy Special Meeting, holders of Sandy Common Stock will consider
and vote upon a proposal to approve and adopt the Merger Agreement. In
connection with the Merger, each share of Sandy Common Stock will be converted
into the number of shares of ADP Common Stock determined as provided under "The
Merger -- General" in this Proxy Statement/Prospectus.
THE BOARD OF DIRECTORS OF SANDY HAS UNANIMOUSLY APPROVED THE MERGER AND THE
MERGER AGREEMENT AND RECOMMENDS THAT SANDY SHAREHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. SEE "THE MERGER -- BACKGROUND OF THE MERGER,"
"-- RECOMMENDATION OF THE BOARD OF DIRECTORS OF SANDY; REASONS FOR THE MERGER"
AND "-- INTERESTS OF CERTAIN PERSONS IN THE MERGER."
VOTES REQUIRED; RECORD DATE
The Merger will require approval and adoption of the Merger Agreement by
the affirmative vote of the holders of a majority of the outstanding shares of
Sandy Common Stock. Holders of Sandy Common Stock are entitled to one vote per
share. Only holders of Sandy Common Stock at the close of business on November
27, 1995 (the "Sandy Record Date") will be entitled to notice of and to vote at
the Sandy Special Meeting. See "Sandy Special Meeting."
As of the Sandy Record Date, directors and executive officers of Sandy and
their affiliates were beneficial owners of approximately 33.5% of the
outstanding shares of Sandy Common Stock. William H. Sandy, the Chairman and
Chief Executive Officer of Sandy, acting in his individual capacity and as
trustee of certain trusts of which Mr. Sandy is a beneficiary, executed an
irrevocable proxy agreement dated August 22, 1995 (which irrevocable proxy
agreement has subsequently been amended) in favor of ADP. Pursuant to this
agreement, as amended, ADP will have an irrevocable proxy to vote 19.0%
(determined as of the Sandy Record Date) of the outstanding Sandy Common Stock
in favor of the Merger. See "The Merger -- Interests of Certain Persons in the
Merger" and "Security Ownership of Certain Beneficial Owners and Management."
CHANGE OF VOTE; CALCULATION OF THE EXCHANGE RATIO
Sandy shareholders who have delivered a proxy to Sandy may revoke the proxy
at any time prior to its exercise at the Sandy Special Meeting by giving written
notice to the Secretary of Sandy, by signing and returning a later dated proxy
or by voting in person at the Sandy Special Meeting. ACCORDINGLY, SHAREHOLDERS
OF SANDY WHO HAVE EXECUTED AND RETURNED PROXY CARDS TO SANDY IN ADVANCE OF THE
SANDY SPECIAL MEETING MAY CHANGE THEIR VOTE AT ANY TIME PRIOR TO OR AT THE SANDY
SPECIAL MEETING. THE "AVERAGE ADP COMMON STOCK PRICE" AND THE "EXCHANGE RATIO"
(AS SUCH TERMS ARE DEFINED BELOW) ARE EXPECTED TO BE CALCULATED AFTER THE CLOSE
OF BUSINESS ON DECEMBER 29, 1995.
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SANDY SHAREHOLDERS MAY CALL TOLL FREE 1-800-535-1225 FOR THE THEN CURRENT
TEN-DAY AVERAGE OF THE DAILY PER SHARE PRICES OF ADP COMMON STOCK AND THE
EXCHANGE RATIO THAT WOULD BE CALCULATED IF SUCH AVERAGE WERE THE AVERAGE ADP
COMMON STOCK PRICE AND FOR INFORMATION ON HOW TO CHANGE OR REVOKE A PROXY
PREVIOUSLY GIVEN. THE ACTUAL AVERAGE ADP COMMON STOCK PRICE AND EXCHANGE RATIO
ARE EXPECTED TO BE CALCULATED AFTER THE CLOSE OF BUSINESS ON DECEMBER 29, 1995
AND MAY BE OBTAINED BY CALLING THIS NUMBER AFTER THAT DATE.
THE MERGER
MERGER CONSIDERATION
As promptly as practicable after the satisfaction or waiver of the
conditions set forth in the Merger Agreement, the Merger will be consummated by
filing a Certificate of Merger with the Department of Commerce of the State of
Michigan in accordance with the Michigan Business Corporation Act ("MBCA") (the
time of such filing or such later time as is specified in the Certificate of
Merger being the "Effective Time"). At the Effective Time, each share of Sandy
Common Stock issued and outstanding immediately prior to the Effective Time
(excluding shares referred to in the last sentence of this paragraph) will be
converted into and exchangeable for shares of ADP Common Stock at the Exchange
Ratio (as defined below). Thus, each Sandy shareholder shall be entitled to
receive (in addition to cash in lieu of fractional shares) a number of shares of
ADP Common Stock equal to the product (rounded down to the nearest whole number)
of (i) the number of shares of Sandy Common Stock exchanged by such shareholder
and (ii) the Exchange Ratio. If the Average ADP Common Stock Price (as defined
below) is greater than or equal to $58.764 (or $29.382 after giving effect to
the ADP Stock Split) and less than or equal to $71.823 (or $35.911 after giving
effect to the ADP Stock Split), then the exchange ratio shall be (rounded to the
seventh decimal place) (i) $12.00 divided by (ii) the Average ADP Common Stock
Price (the "Exchange Ratio"). If the Average ADP Common Stock Price is less than
$58.764 (or $29.382 after giving effect to the ADP Stock Split), then the
Exchange Ratio shall be 0.2042054 (or 0.4084108 after giving effect to the ADP
Stock Split). If the Average ADP Common Stock Price is greater than $71.823 (or
$35.911 after giving effect to the ADP Stock Split), then the Exchange Ratio
shall be 0.1670771 (or 0.3341542 after giving effect to the ADP Stock Split).
The "Average ADP Common Stock Price" means the average of the daily closing
sales prices of ADP Common Stock as reported on the NYSE Composite Tape for the
10 consecutive full trading days ending on the Determination Date (as defined
below). The "Determination Date" means the third business day immediately prior
to the later of (i) January 4, 1996 (which is the date (as originally scheduled
in the enclosed Notice of Special Meeting of Shareholders, and without giving
effect to any adjournments or postponements) of the Sandy Special Meeting) and
(ii) the date on which the last regulatory approval required to consummate the
Merger has been obtained and all statutory or regulatory waiting periods in
respect thereof have expired or been terminated. Each share of Sandy Common
Stock held as treasury stock of Sandy immediately prior to the Effective Time
shall be canceled, retired and cease to exist, and no exchange or payment shall
be made in respect thereof.
EXCHANGE OF CERTIFICATES
ADP has appointed Chemical Mellon Shareholder Services to act as exchange
agent for the Merger (the "Exchange Agent"). As soon as practicable after the
Effective Time, ADP shall cause the Exchange Agent to mail appropriate and
customary transmittal materials (which shall specify that delivery shall be
effected, and risk of loss and title to the certificates theretofore
representing shares of Sandy Common Stock shall pass, only upon proper delivery
of such certificates to the Exchange Agent) to each holder of Sandy Common Stock
of record as of the Effective Time advising such holder of the effectiveness of
the Merger and the procedure for surrendering to the Exchange Agent outstanding
certificates formerly evidencing Sandy Common Stock in exchange for new
certificates for ADP Common Stock and cash in lieu of fractional shares. Upon
surrender to the Exchange Agent of a certificate formerly representing shares of
Sandy Common Stock, together with duly executed transmittal materials, ADP shall
promptly (i) issue or cause to be issued to the persons entitled thereto a
certificate representing the number of whole shares of ADP Common Stock that
such persons are entitled to receive in the Merger and (ii) distribute or cause
to be distributed to the persons entitled thereto
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cash in lieu of fractional shares (the ADP Common Stock and cash being
collectively the "Merger Consideration"). Upon surrender, each certificate
theretofore evidencing Sandy Common Stock shall be canceled.
At or promptly after the Effective Time, ADP shall deposit the Merger
Consideration with the Exchange Agent (the "Exchange Fund"). After the Effective
Time, ADP shall, on each payment or distribution date, tender to the Exchange
Agent as an addition to the Exchange Fund all dividends and other distributions
applicable to certificates held in the Exchange Fund.
SANDY SHAREHOLDERS SHOULD NOT FORWARD CERTIFICATES FOR SANDY COMMON STOCK
TO THE EXCHANGE AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. SANDY
SHAREHOLDERS SHOULD NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
CONDITIONS TO THE MERGER; TERMINATION; FEES AND EXPENSES
The obligations of ADP and Sandy to consummate the Merger are subject to
various conditions, including, but not limited to: (i) the effectiveness of the
Registration Statement; (ii) obtaining the requisite stockholder approval; (iii)
the receipt by ADP of evidence reasonably satisfactory to it that the Merger
qualifies for "pooling of interests" accounting treatment; (iv) the absence of
any judgment, decree, injunction, ruling or order of any court, governmental
department, commission, agency or instrumentality outstanding against ADP
Mergerco, ADP or Sandy which prohibits or materially restricts or delays the
consummation of the Merger; and (v) a legal opinion reasonably satisfactory to
Sandy and ADP to the effect that the Merger qualifies for federal income tax
purposes as a tax-free reorganization. In addition, ADP's obligation to
consummate the Merger is subject to the condition that the Sandy Adjusted Net
Worth at the Test Date (as such terms are defined in Section 5.1(q) of the
Merger Agreement) is no less than $10,101,187. See "The Merger
Agreement -- Conditions to the Merger." Neither ADP nor Sandy has any present
intention of waiving any conditions to the Merger set forth in the Merger
Agreement. If either ADP or Sandy elects to waive or revise any of the material
terms of or conditions to the Merger, Sandy will resolicit the proxies of its
shareholders.
The Merger Agreement may be terminated at any time prior to the Effective
Time, whether before or after approval of the matters presented in connection
with the Merger by the shareholders of Sandy: (i) by mutual action of the Board
of Directors of each of ADP Mergerco, ADP and Sandy, (ii) by the Board of
Directors of ADP Mergerco, ADP or Sandy if the Merger does not take place on or
before January 31, 1996 or (iii) by the Board of Directors of Sandy in certain
circumstances in the event of a proposed Acquisition Transaction (as defined
below under "The Merger Agreement -- Termination"). See "The Merger
Agreement -- Termination."
LISTING
The shares of ADP Common Stock to be issued in the Merger are authorized
for listing and trading on the NYSE.
DIVIDENDS
ADP expects to continue to declare its regular quarterly dividends. Under
the terms of the Merger Agreement, Sandy is not permitted to declare, set aside
or pay any dividend or other distribution in respect of its capital stock during
the period from the date of the Merger Agreement until the earlier of the
termination of the Merger Agreement and the Effective Time.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Sandy entered into an Employment and Consulting Agreement with William H.
Sandy effective November 4, 1985 (the "Employment and Consulting Agreement").
Under the terms of the Employment and Consulting Agreement, upon completion of
his active employment with Sandy, William H. Sandy is to serve as a consultant
to Sandy for a period of five years. The Employment and Consulting Agreement was
amended in connection with the execution of the Merger Agreement on August 22,
1995 to provide that William H. Sandy's active employment period will end on the
date of the closing of the Merger (the "Closing Date"), and, as a result, the
five-year consulting period will begin on the Closing Date. The amended
Employment and
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Consulting Agreement also requires Sandy to make a payment of $1,475,000 to
William H. Sandy on the Closing Date, in lieu of all future consulting payments,
bonuses (except the fiscal 1995 bonus that has been paid separately to Mr.
Sandy) or benefits to become due to William H. Sandy or to his wife, Marjorie M.
Sandy, under the amended Employment and Consulting Agreement.
In connection with the Merger, the lease agreement, dated February 1, 1994,
between Sandy and 1500 Limited Partnership pertaining to Sandy's Troy, Michigan
headquarters (the "Lease") has been amended effective as of the Closing Date, in
the following manner: (i) an additional improvements allowance of $200,000 will
be made available to the corporation surviving the Merger (the "Surviving
Corporation") immediately after the Closing Date and until December 31, 1996;
(ii) the availability of the last $100,000 of the improvements allowance under
the Lease will be accelerated from February 1, 2000 to the Closing Date so that
the $100,000 allowance will be available immediately after the Closing Date and
until December 31, 1996; and (iii) the Surviving Corporation will be permitted
to self-insure under Sections 11.2, 11.3, 11.4 and 11.5 of the Lease in
accordance with ADP's standard policy. In connection with the effectiveness of
such amendment to the Lease, ADP will guarantee the Surviving Corporation's
obligations under the Lease after the Closing Date. 1500 Limited Partnership is
a Michigan limited partnership owned by, among others, certain directors of
Sandy or their affiliates, including William H. Sandy, the George J. Forrest
Trust, Alan V. Kidd, Alan M. Sandy and Lewis G. Sandy. Sandy's option (which
option would have been exercisable through September 1, 1995) under Section 36
of the Lease to reduce the size of the leased premises by up to approximately
7.6% has been eliminated pursuant to the terms of the Lease, as amended.
William H. Sandy, the Chairman and Chief Executive Officer of Sandy, acting
in his individual capacity and as trustee of certain trusts of which Mr. Sandy
is a beneficiary, executed an irrevocable proxy agreement (which irrevocable
proxy agreement has subsequently been amended) in favor of ADP. Pursuant to this
agreement, as amended, ADP will have an irrevocable proxy to vote 19.0%
(determined as of the Sandy Record Date) of the outstanding Sandy Common Stock
in favor of the Merger.
In addition, there are certain arrangements with respect to stock options
and other rights to acquire Sandy Common Stock held by Sandy's directors and
officers, indemnification and insurance arrangements and other matters which ADP
will assume or has agreed to provide after the Merger. See "The
Merger -- Interests of Certain Persons in the Merger," "The Merger
Agreement -- Indemnification and Insurance" and "Security Ownership of Certain
Beneficial Owners and Management."
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
Counsel to Sandy, Honigman Miller Schwartz and Cohn, has provided a written
opinion to Sandy that (i) the Merger will qualify as a reorganization under
Section 368(a)(1)(A) and Section 368(a)(2)(E) of the Internal Revenue Code of
1986, as amended (the "Code"), (ii) for federal income tax purposes, no gain or
loss will be recognized by any of ADP, ADP Mergerco., or Sandy as a result of
consummation of the Merger and (iii) except for cash received in lieu of
fractional shares, no gain or loss will be recognized for federal income tax
purposes by a holder of Sandy Common Stock upon the exchange of such stock for
ADP Common Stock pursuant to the Merger. Such opinion is based on various
representations, qualifications and assumptions may not apply to holders of
Sandy Common Stock who are subject to special circumstances, and does not
address any foreign, state or local tax consequences of the Merger. Accordingly,
holders of Sandy Common Stock are urged to consult their own tax advisors
concerning the federal, foreign, state or local tax consequences of the Merger
to them. See "The Merger -- Certain Federal Income Tax Consequences."
COMPARATIVE RIGHTS OF STOCKHOLDERS
The rights of shareholders of Sandy currently are governed by Michigan law,
Sandy's Restated Articles of Incorporation and Sandy's By-laws. Upon
consummation of the Merger, shareholders of Sandy will become stockholders of
ADP, which is a Delaware corporation, and their rights as stockholders of ADP
will be governed by the General Corporation Law of the State of Delaware, ADP's
Amended and Restated Certificate of Incorporation and ADP's By-laws. For a
discussion of various differences between the rights of shareholders of Sandy
and the rights of stockholders of ADP, see "Comparison of Stockholder Rights."
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SANDY SPECIAL MEETING
PURPOSE OF THE SANDY SPECIAL MEETING
At the Special Meeting of Shareholders of Sandy Corporation, a Michigan
corporation ("Sandy"), to be held on Thursday, January 4, 1996 at Sandy's
corporate headquarters, located at 1500 West Big Beaver Road, Troy, Michigan
48084, commencing at 11:00 A.M., local time, and at any and all adjournments or
postponements thereof (the "Sandy Special Meeting"), holders of common stock,
par value $.01 per share, of Sandy ("Sandy Common Stock") will consider and vote
upon proposals to approve and adopt the Agreement and Plan of Merger, dated as
of August 22, 1995 (together with the Plan of Merger in the form attached
thereto, the "Merger Agreement"), by and among Automatic Data Processing Inc., a
Delaware corporation ("ADP"), ADP Mergerco, Inc., a Michigan corporation and a
wholly owned subsidiary of ADP ("ADP Mergerco"), and Sandy and such other
matters as may properly be brought before the Sandy Special Meeting. If the
proposed merger (the "Merger") of ADP Mergerco with and into Sandy is approved
and consummated in accordance with the Merger Agreement, at the Effective Time
(as defined below under "The Merger -- Effective Time"), Sandy will become a
wholly owned subsidiary of ADP, and each outstanding share of Sandy Common Stock
will be converted into and exchangeable for shares of common stock, par value
$.10 per share, of ADP ("ADP Common Stock") at the Exchange Ratio (as defined
below under "The Merger -- General"). The Exchange Ratio is expected to be
calculated after the close of business on December 29, 1995.
THE BOARD OF DIRECTORS OF SANDY HAS UNANIMOUSLY APPROVED THE MERGER AND THE
MERGER AGREEMENT AND RECOMMENDS THAT SANDY SHAREHOLDERS VOTE FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT. SEE "THE MERGER -- BACKGROUND OF THE MERGER,"
"-- RECOMMENDATION OF THE BOARD OF DIRECTORS OF SANDY; REASONS FOR THE MERGER"
AND "-- INTERESTS OF CERTAIN PERSONS IN THE MERGER."
RECORD DATE; VOTING RIGHTS; PROXIES
The Sandy Board of Directors (the "Sandy Board") has fixed the close of
business on November 27, 1995 as the record date (the "Sandy Record Date") for
determining holders entitled to notice of and to vote at the Sandy Special
Meeting.
As of the Sandy Record Date, there were 2,326,783 shares of Sandy Common
Stock issued and outstanding, each of which entitles the holder thereof to one
vote. All shares of Sandy Common Stock represented by properly executed proxies
delivered to Sandy will, unless such proxies have been previously revoked, be
voted in accordance with the instructions indicated in such proxies. IF NO
INSTRUCTIONS ARE INDICATED, SUCH SHARES OF SANDY COMMON STOCK WILL BE VOTED IN
FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT. Sandy does not know of
any matters other than as described in the accompanying Notice of Special
Meeting that are to come before the Sandy Special Meeting. If any other matter
or matters are properly presented for action at the Sandy Special Meeting, the
persons named in the enclosed form of proxy and acting thereunder will have the
discretion to vote on such matters in accordance with their best judgment,
unless such authorization is withheld. A shareholder who has given a proxy to
Sandy may revoke it at any time prior to its exercise by giving written notice
thereof to the Secretary of Sandy, by signing and returning a later dated proxy
or by voting in person at the Sandy Special Meeting. Accordingly, Sandy
shareholders who have executed and returned to Sandy proxy cards in advance of
the Sandy Special Meeting may change their vote at any time prior to or at the
Sandy Special Meeting; however, mere attendance at the Sandy Special Meeting
will not in and of itself have the effect of revoking any proxy.
Votes cast by proxy or in person at the Sandy Special Meeting will
determine whether or not a quorum is present at the Sandy Special Meeting and
will be tabulated by election inspectors appointed for the Sandy Special
Meeting. The election inspectors will treat abstentions as shares that are
present and entitled to vote for purposes of determining the presence of a
quorum but as unvoted for purposes of determining the approval
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of any matter submitted to the shareholders for a vote. If a broker indicates on
the proxy that it does not have discretionary authority as to certain shares to
vote on a particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
SOLICITATION OF PROXIES
Sandy will bear its own cost of solicitation of proxies. Brokerage houses,
fiduciaries, nominees and others will be reimbursed for their out-of-pocket
expenses in forwarding proxy materials to beneficial owners of stock held in
their names.
QUORUM
The presence in person or by properly executed proxy of holders of a
majority of the issued and outstanding shares of Sandy Common Stock is necessary
to constitute a quorum at the Sandy Special Meeting.
REQUIRED VOTE
The approval of the Merger Agreement requires the affirmative vote of the
holders of a majority of the outstanding shares of Sandy Common Stock.
Abstentions and broker non-votes will have the effect of votes against approval
of the Merger Agreement. As of the Sandy Record Date, directors and executive
officers of Sandy and their affiliates were beneficial owners of approximately
33.5% of the outstanding shares of Sandy Common Stock. William H. Sandy, the
Chairman and Chief Executive Officer of Sandy, acting in his individual capacity
and as trustee of certain trusts of which Mr. Sandy is a beneficiary, executed
an irrevocable proxy agreement dated August 22, 1995 (which irrevocable proxy
agreement has subsequently been amended) in favor of ADP. Pursuant to this
agreement, as amended, ADP will have an irrevocable proxy to vote 19.0%
(determined as of the Sandy Record Date) of the outstanding Sandy Common Stock
in favor of the Merger. See "The Merger -- Interests of Certain Persons in the
Merger."
THE MATTERS TO BE CONSIDERED AT THE SANDY SPECIAL MEETING ARE OF GREAT
IMPORTANCE TO THE SHAREHOLDERS OF SANDY. ACCORDINGLY, SHAREHOLDERS ARE URGED TO
READ AND CAREFULLY CONSIDER THE INFORMATION PRESENTED IN THIS PROXY
STATEMENT/PROSPECTUS, AND TO COMPLETE, DATE, SIGN AND PROMPTLY RETURN THE
ENCLOSED PROXY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
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THE MERGER
This section of this Proxy Statement/Prospectus, as well as the next
section of this Proxy Statement/ Prospectus entitled "The Merger Agreement,"
describe certain aspects of the proposed Merger. To the extent that it relates
to the Merger Agreement or other agreements described in this Proxy
Statement/Prospectus, the following description does not purport to be complete
and is qualified in its entirety by reference to the Merger Agreement which is
attached as Annex A to this Proxy Statement/Prospectus and is incorporated
herein by reference and such other agreements that are filed as exhibits to the
Registration Statement on Form S-4 (the "Registration Statement") filed by ADP
with the Securities and Exchange Commission (the "Commission") under the
Securities Act of 1933, as amended (the "Securities Act"), with respect to the
securities offered hereby. All shareholders are urged to read the Merger
Agreement in its entirety. On November 14, 1995, ADP announced a two-for-one
common stock split (the "ADP Stock Split") to be distributed on January 1, 1996
to shareholders of record on December 15, 1995. Unless otherwise indicated, all
references to per share earnings and dividends and all other references with
respect to ADP Common Stock in this Proxy Statement/Prospectus do not reflect
the increased number of shares of ADP Common Stock that would be outstanding
after giving effect to the ADP Stock Split.
GENERAL
The Merger Agreement provides that the Merger will be consummated if the
approvals of the Sandy shareholders required therefor are obtained and all other
conditions to the Merger are satisfied or waived. At the Effective Time, ADP
Mergerco will be merged with and into Sandy, and Sandy will become a wholly
owned subsidiary of ADP. As a result, at the Effective Time, each share of Sandy
Common Stock issued and outstanding immediately prior to the Effective Time
(excluding shares referred to in the last sentence of this paragraph) will be
converted into and exchangeable for shares of ADP Common Stock at the Exchange
Ratio (as defined below). Thus, each Sandy shareholder shall be entitled to
receive (in addition to cash in lieu of fractional shares) a number of shares of
ADP Common Stock equal to the product (rounded down to the nearest whole number)
of (i) the number of shares of Sandy Common Stock exchanged by such shareholder
and (ii) the Exchange Ratio. If the Average ADP Common Stock Price (as defined
below) is greater than or equal to $58.764 (or $29.382 after giving effect to
the ADP Stock Split) and less than or equal to $71.823 (or $35.911 after giving
effect to the ADP Stock Split), then the Exchange Ratio shall be (rounded to the
seventh decimal place) (i) $12.00 divided by (ii) the Average ADP Common Stock
Price. If the Average ADP Common Stock Price is less than $58.764 (or $29.382
after giving effect to the ADP Stock Split), then the Exchange Ratio shall be
0.2042054 (or 0.4084108 after giving effect to the ADP Stock Split). If the
Average ADP Common Stock Price is greater than $71.823 (or $35.911 after giving
effect to the ADP Stock Split), then the Exchange Ratio shall be 0.1670771 (or
0.3341542 after giving effect to the ADP Stock Split). The "Average ADP Common
Stock Price" means the average of the daily closing sales prices of ADP Common
Stock as reported on the NYSE Composite Tape (as reported in The Wall Street
Journal or, if not reported thereby, as reported by another authoritative source
as mutually agreed by ADP and Sandy) for the 10 consecutive full trading days
ending on the Determination Date (as defined below). The "Determination Date"
means the third business day immediately prior to the later of (i) January 4,
1996 (which is the date (as originally scheduled in the enclosed Notice of
Special Meeting of Shareholders, and without giving effect to any adjournments
or postponements) of the Sandy Special Meeting) and (ii) the date on which the
last regulatory approval required to consummate the Merger has been obtained and
all statutory or regulatory waiting periods in respect thereof have expired or
been terminated. Each share of Sandy Common Stock held as treasury stock of
Sandy immediately prior to the Effective Time shall be cancelled, retired and
cease to exist, and no exchange or payment shall be made in respect thereof.
No fractional shares of ADP Common Stock will be issued in the Merger. In
lieu of fractional shares, each holder of Sandy Common Stock who otherwise would
be entitled to receive a fractional share of ADP Common Stock will instead
receive cash (without interest) determined by multiplying the Average ADP Common
Stock Price by the fractional share interest to which such holder would
otherwise be entitled.
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EFFECTIVE TIME
Consummation of the Merger will occur upon the filing of a Certificate of
Merger with the Department of Commerce of the State of Michigan or at such later
time as is specified on such certificate (the "Effective Time"). The filing of
the Certificate of Merger will occur as soon as practicable after the
satisfaction or waiver of all conditions to the closing of the transactions
contemplated by the Merger Agreement. The Merger Agreement may be terminated by
any party thereto if the Merger shall not have been consummated on or before
January 31, 1996. See "The Merger Agreement -- Conditions to the Merger" and
"-- Termination."
CONVERSION OF SHARES, PROCEDURES FOR EXCHANGE OF CERTIFICATES
The conversion, at the Exchange Ratio, of Sandy Common Stock into the right
to receive ADP Common Stock will occur automatically at the Effective Time. As
soon as practicable after the Effective Time, ADP shall cause the Exchange Agent
to mail appropriate and customary transmittal materials (which shall specify
that delivery shall be effected, and risk of loss and title to the certificates
theretofore representing shares of Sandy Common Stock shall pass, only upon
proper delivery of such certificates to the Exchange Agent) to each holder of
Sandy Common Stock of record as of the Effective Time advising such holder of
the effectiveness of the Merger and the procedure for surrendering to the
Exchange Agent outstanding certificates formerly evidencing Sandy Common Stock
in exchange for new certificates for ADP Common Stock and cash in lieu of
fractional shares. Upon surrender to the Exchange Agent of a certificate
formerly representing shares of Sandy Common Stock, together with duly executed
transmittal materials, ADP shall promptly (i) issue or cause to be issued to the
persons entitled thereto a certificate representing the number of whole shares
of ADP Common Stock that such persons are entitled to receive in the Merger and
(ii) distribute or cause to be distributed to the persons entitled thereto cash
in lieu of fractional shares (the ADP Common Stock and cash being collectively
the "Merger Consideration"). Upon surrender, each certificate theretofore
evidencing Sandy Common Stock shall be canceled.
At or promptly after the Effective Time, ADP shall deposit the Merger
Consideration with the exchange agent (the "Exchange Agent") for the Merger (the
"Exchange Fund"). After the Effective Time, ADP shall, on each payment or
distribution date, tender to the Exchange Agent as an addition to the Exchange
Fund all dividends and other distributions applicable to certificates held in
the Exchange Fund.
If any issuance of shares of ADP Common Stock in exchange for shares of
Sandy Common Stock is to be made to a person other than the Sandy shareholder in
whose name the certificate is registered at the Effective Time, it will be a
condition of such exchange that the certificate so surrendered be properly
endorsed or otherwise in proper form for transfer and that the Sandy shareholder
requesting such issuance either pay any transfer or other tax required or
establish to the satisfaction of ADP that such tax has been paid or is not
payable.
After the Effective Time, there will be no further transfers of Sandy
Common Stock on the stock transfer books of Sandy. If a certificate representing
Sandy Common Stock is presented for transfer, it will be cancelled and a
certificate representing the appropriate number of full shares of ADP Common
Stock and cash in lieu of fractional shares and any dividends and distributions
will be issued in exchange therefor.
At and after the Effective Time and until surrendered, shares of Sandy
Common Stock will be deemed for all corporate purposes, other than the payment
of dividends and distributions and voting, to evidence ownership of the number
of full shares of ADP Common Stock into which such shares of Sandy Common Stock
were converted at the Effective Time. No dividends or other distributions, if
any, payable to holders of ADP Common Stock will be paid to the holders of any
certificates for shares of Sandy Common Stock until such certificates are
surrendered. Upon surrender of such certificates, all such declared dividends
and distributions which shall have become payable with respect to such whole
shares of ADP Common Stock in respect of a record date after the Effective Time
will be paid to the holder of record of the whole shares of ADP Common Stock
represented by the certificates issued in exchange therefor, without interest.
See "The Merger Agreement -- Exchange of Certificates."
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SANDY SHAREHOLDERS SHOULD NOT FORWARD STOCK CERTIFICATES TO THE EXCHANGE
AGENT UNTIL THEY HAVE RECEIVED TRANSMITTAL LETTERS. SANDY SHAREHOLDERS SHOULD
NOT RETURN STOCK CERTIFICATES WITH THE ENCLOSED PROXY.
BACKGROUND OF THE MERGER
From time to time over the past several years, the Sandy Board has reviewed
Sandy's strategic alternatives for enhancing profitability and maximizing
shareholder value, including the possible expansion of its existing and related
businesses by acquisition, affiliation or sale to an acquiror. In March 1994,
the Sandy Board rejected two unsolicited proposals from Westcott Communications
("Westcott"). These offers, valued at $8 and $12 per share of Sandy Common
Stock, proposed to exchange Westcott common stock for all of the outstanding
Sandy Common Stock. Following Sandy's rejection of the second Westcott proposal,
Ira J. Jaffe, personal legal counsel for William H. Sandy, had discussions with
Gregory Earles, an executive of Westcott, about whether a stock-for-stock
acquisition of all of the outstanding Sandy Common Stock by Westcott could be
negotiated which would be acceptable to Mr. Sandy. Those discussions did not
lead to any agreement or proposal.
In early January 1995, Mr. Jaffe was contacted by Mr. Earles for the
purpose of inquiring whether a cash offer for all of the outstanding Sandy
Common Stock would be considered by Mr. Sandy. Mr. Jaffe advised Mr. Earles
that, in his opinion, it could be productive for Westcott to present a cash
offer.
In late January 1995, Mr. Earles again contacted Mr. Jaffe and on February
3, 1995, Jack Smith, President of Westcott, and other representatives of
Westcott met with Mr. Jaffe in Detroit, Michigan to discuss the possible format
for a cash acquisition of all the outstanding Sandy Common Stock that might be
acceptable to Mr. Sandy personally. On March 19, 1995, Messrs. Jaffe and Sandy
met with Mr. Smith, Carl Westcott, Chairman of the Board and Chief Executive
Officer of Westcott, and legal counsel for Westcott, in Atlanta, Georgia. At
that meeting, Westcott outlined the general terms of a proposed offer which they
intended to make to the Sandy Board and a proposed employment and consulting
agreement for Mr. Sandy. On March 25, 1995, a cash acquisition proposal of $10
per share was received from Westcott.
Raymond A. Ketchledge, President and Chief Operating Officer of Sandy, met
with Messrs. Westcott and Smith in Dallas, Texas on March 26, 1995 to discuss
Westcott's plans for the operation and management of Sandy if a merger took
place. On March 30, 1995, the Sandy Board met in suburban Detroit. During the
March 30th meeting, a special committee of the Sandy Board (the "Special
Committee") was established by the Sandy Board to review the Westcott proposal
and the Special Committee held its organizational meeting. The Special Committee
consisted of outside directors John T. Sheehy, George J. Forrest, Jay W. Lorsch
and Richard J. Burstein, being all of the directors who were not members of, or
related to members of, Sandy's management. The Special Committee elected Mr.
Sheehy as its Chairman.
On April 3, 1995, members of the Special Committee met with Messrs. Smith
and Westcott in Boston, Massachusetts to discuss the March 25th Westcott
proposal. On April 4, 1995, Mr. Sheehy met with a representative of the
investment banking firm of Bear, Stearns & Co. Inc. ("Bear Stearns") regarding
the engagement of Bear Stearns as financial advisors in connection with the
proposed merger with Westcott.
On April 5, 1995, Mr. Ketchledge advised Mr. Sheehy that some members of
Sandy's management were considering whether to make an offer for Sandy. Later on
April 5, 1995, in light of the possible management offer, Mr. Burstein (a member
of Honigman Miller Schwartz and Cohn, Sandy's legal counsel) resigned from the
Special Committee, and Honigman Miller Schwartz and Cohn advised the Special
Committee that it should engage independent counsel. The Special Committee then
engaged Warner, Norcross and Judd LLP to act as independent counsel to represent
the Special Committee.
On April 10, 1995, Messrs. Westcott and Smith held individual and group
meetings with Sandy senior executives in Birmingham, Michigan and over the next
few weeks Sandy and its advisors reviewed the Westcott proposal.
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In late April 1995, Peter Leger, President of the Dealer Services Group of
ADP, contacted Mr. Sandy regarding ADP's possible interest in acquiring Sandy.
At about the same time, Mr. Sheehy was contacted by Harry Durity, ADP's
Corporate Vice President of Worldwide Business Development. Mr. Durity indicated
ADP's interest in acquiring Sandy. A preliminary timetable for conducting
initial due diligence was discussed. ADP did not make any offer for Sandy Common
Stock during this time.
On May 2, 1995, Sandy management informed the Special Committee that they
would not present a management buyout proposal due to management's belief that
it would not be able to obtain financing on a timely basis.
On May 9, 1995, the Sandy Board met to discuss the merger activities. Mr.
Sandy informed the Sandy Board that he decided that he would be willing to
relinquish an employment and consulting agreement proposed by Westcott if to do
so would result in an improved Westcott offer. At this meeting, the Sandy Board
was advised by a representative of Bear Stearns that, based on such decision of
Mr. Sandy and a review of comparable companies, the Westcott offer of $10 per
share was inadequate. The Special Committee recommended that Sandy not accept
the Westcott offer and the Sandy Board authorized Messrs. Sheehy and Burstein to
enter into negotiations with Westcott to obtain an acceptable offer. Messrs.
Sheehy and Burstein informed Messrs. Westcott and Smith on May 13, 1995 that the
$10 offer was inadequate. Messrs. Sheehy and Burstein asked Mr. Westcott to
raise its bid. On May 14, 1995, Westcott informed Messrs. Sheehy and Burstein
that it would increase its bid to $11 per share in cash but would go no higher.
Westcott made no subsequent offer higher than the May 14, 1995 offer of $11 per
share in cash. Sandy deferred formal evaluation of the Westcott $11 per share
offer until negotiations with ADP were concluded.
On May 15, 1995, Mr. Sheehy met with Mr. Durity who confirmed ADP's
interest in acquiring Sandy. On May 18, 1995, Mr. Ketchledge met with Mr. Leger,
Mr. Durity and John Barfitt, Senior Vice President of ADP's Dealer Services
Group, in Chicago for an initial meeting with ADP executives. The meeting
centered around potential synergies and opportunities for the companies.
On May 23, 1995, Mr. Ketchledge and the senior executive group of Sandy met
with ADP executives, including Messrs. Leger, Durity and Barfitt, to discuss
Sandy and ADP operations and potential synergies. During the week of May 22,
1995, Westcott was informed by Mr. Sheehy that another party was involved in
discussions with Sandy regarding a possible merger. On May 31, 1995, Mr. Durity
visited with Sandy senior management in Troy, Michigan as part of the ADP due
diligence effort.
On June 1, 1995, Sandy received a letter from ADP proposing terms and
conditions for the acquisition of Sandy in exchange for ADP Common Stock valued
at $12 per share. On June 2, 1995, a meeting of the Sandy Board was held to
discuss the Westcott and ADP proposals. On June 5, 1995, the Sandy Board met to
discuss further the Westcott and ADP proposals and determined not to accept the
Westcott $11 merger proposal in light of ADP's $12 proposal. On June 6, 1995,
after unsuccessful negotiations with Westcott in an attempt to improve its
offer, ADP and Sandy executed a letter of intent relating to the proposed merger
with ADP at an offer price of $12 per share in ADP Common Stock. The $12 per
share price was not established by Bear Stearns; rather, it was the product of
negotiations between Sandy and ADP.
Throughout June 1995, representatives of ADP continued its due diligence
efforts and, at the same time, negotiations took place with Westcott toward a
possible agreement. On June 21, 1995, Mr. Sheehy informed Mr. Smith that Sandy
had determined not to enter into an agreement with Westcott at the $11 per share
price.
On June 23, 1995, Mr. Durity indicated to Mr. Sheehy that ADP intended to
proceed with the pursuit of a merger with Sandy. On June 30, 1995, ADP confirmed
in writing that it intended to pursue a merger with Sandy. On July 10, 1995,
representatives of Sandy provided ADP with a draft of a proposed merger
agreement. On July 12 and 13, 1995, Mr. Durity met with Mr. Ketchledge and
described proposed employment arrangements for him and other senior Sandy
executives in the event of a merger. Over the ensuing weeks, negotiations
regarding a merger agreement took place.
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<PAGE> 21
On August 16, 1995, the Sandy Board met, received a confirmation from Bear
Stearns as to the fairness of the transaction and unanimously approved the ADP
proposal. On August 22, 1995, the Merger Agreement was executed.
RECOMMENDATION OF THE BOARD OF DIRECTORS OF SANDY; REASONS FOR THE MERGER
The Board of Directors of Sandy has approved the Merger Agreement, has
determined unanimously that the Merger is advisable and fair and in the best
interests of Sandy and its shareholders and recommends that holders of shares of
Sandy Common Stock vote FOR approval and adoption of the Merger Agreement.
In reaching its decision to approve the Merger Agreement and to recommend
that Sandy's shareholders vote for approval and adoption of the Merger
Agreement, the Sandy Board considered, among other things, the following
factors: (i) its knowledge of the business, operations, properties, assets,
financial condition and operating results of Sandy and ADP; (ii) judgments as to
Sandy's future prospects; (iii) presentations by Sandy's management with respect
to Sandy and ADP; (iv) the recommendation of the Special Committee; (v) the
opinion of Bear Stearns as to the fairness of the transaction to the
shareholders of Sandy (see "-- Opinion of Sandy's Financial Advisor" below);
(vi) the terms of the Merger Agreement, which were the product of extensive
arm's length negotiations (see "The Merger Agreement"); (vii) the historical
trading prices, dividend rates and trading activity for Sandy Common Stock and
ADP Common Stock; (viii) the compatibility of the respective business
philosophies of ADP and Sandy; and (ix) the opportunity for Sandy shareholders
to continue to participate, as holders of ADP Common Stock, in the strategic
business performance improvement industry, and to do so by means of a
transaction which is designed to be tax-free to Sandy's shareholders. The Sandy
Board, with the assistance of Sandy's financial advisor, also considered recent
and current market prices of ADP Common Stock, the manner in which the Exchange
Ratio would be calculated and the relationship of the upper and lower limits
thereof to such market prices, and published research reports dealing with the
merits of investing in ADP Common Stock.
The foregoing discussions of the information and factors considered by the
Sandy Board is not intended to be exhaustive. In view of the variety of factors
considered in connection with its evaluation of the Merger, the Sandy Board did
not find it practicable to, and did not, quantify or otherwise assign relative
weights to the specific factors considered in reaching its determination. In
addition, individual members of the Sandy Board may have given different weights
to different factors. For a discussion of the interests of certain members of
Sandy's management and of the Sandy Board in the Merger, see "-- Interests of
Certain Persons in the Merger" below.
OPINION OF SANDY'S FINANCIAL ADVISOR
The Special Committee retained Bear Stearns on April 10, 1995 to render an
opinion to the Sandy Board as to the fairness, from a financial point of view,
of a proposed transaction with Westcott to the public shareholders of Sandy. On
April 26, 1995, Bear Stearns advised the Special Committee that, based on its
review of comparable companies and based on the structure of the proposed
transaction, the consideration of $10 per share offered by Westcott was
inadequate. Bear Stearns did not advise the Special Committee as to the price
which it would then have considered adequate.
On June 6, 1995, the engagement agreement was amended to include
consideration of the Merger. On August 16, 1995, Bear Stearns rendered its oral
opinion to the Board of Directors of Sandy that the ADP offer was superior to
Westcott's offer of $11 per share made on May 14, 1995, and that the Merger was
fair, from a financial point of view, to the public shareholders of Sandy. Bear
Stearns subsequently issued its written opinion to the Board of Directors of
Sandy which has been updated to the date of this Proxy Statement/ Prospectus
(the "Bear Stearns Opinion").
THE FULL TEXT OF THE BEAR STEARNS OPINION IS ATTACHED AS ANNEX B TO THIS
PROXY STATEMENT/PROSPECTUS. HOLDERS OF SANDY COMMON STOCK ARE URGED TO, AND
SHOULD, READ THE BEAR STEARNS OPINION CAREFULLY IN ITS ENTIRETY IN CONJUNCTION
WITH THIS PROXY STATEMENT/PROSPECTUS FOR ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITS OF THE REVIEW BY BEAR STEARNS.
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The Bear Stearns Opinion addresses only the fairness of the Merger, from a
financial point of view, to the shareholders of Sandy and does not constitute a
recommendation to any shareholder of Sandy as to how such shareholder should
vote with respect to the approval of the Merger. The summary of the Bear Stearns
Opinion set forth in this Proxy Statement/Prospectus is qualified in its
entirety by reference to the full text of such opinion.
The Special Committee engaged Bear Stearns as its financial advisor because
Bear Stearns is a nationally recognized investment banking firm and because of
its record and experience in rendering fairness opinions. Bear Stearns, as part
of its investment banking business, is regularly engaged in the valuation of
businesses and securities, mergers and acquisitions, negotiated underwritings,
secondary distributions of securities and private placements. In requesting Bear
Stearns' fairness opinion, the Special Committee did not give any special
instructions to Bear Stearns or impose any limitations upon the scope of the
investigations that Bear Stearns deemed necessary to enable it to deliver its
opinion. During the past five years, neither Bear Stearns nor any affiliate of
Bear Stearns has performed any investment banking or other financial services
for or had any other material relationship with Sandy except those described
herein.
In connection with rendering its written opinion, Bear Stearns, among other
things: (i) reviewed this Proxy Statement/Prospectus in substantially final
form; (ii) reviewed Sandy's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the fiscal years ended August 31, 1993 through 1995; (iii)
reviewed ADP's Annual Reports to Stockholders and Annual Reports on Form 10-K
for the fiscal years ended June 30, 1994 and 1995, its Current Report on Form
8-K filed with the Commission on November 6, 1995, its Current Reports on Form
8-K/A filed with the Commission on November 13, 1995 and November 22, 1995 and
its Quarterly Report on Form 10-Q for the quarter ended September 30, 1995; (iv)
reviewed certain operating and financial information provided to Bear Stearns by
management relating to Sandy's business and prospects; (v) met with certain
members of Sandy's senior management to discuss its operation, historical
financial statements and future prospects; (vi) reviewed the historical prices
and trading volumes of the Sandy Common Stock and ADP Common Stock; (vii)
reviewed publicly available financial data and stock market performance data of
companies which it deemed generally comparable to Sandy; and (viii) conducted
such other studies, analyses, inquiries and investigations as it deemed
appropriate.
Bear Stearns relied upon and assumed, without independent verification, (i)
the accuracy and completeness of all of the financial and other information
provided to it by Sandy and ADP for purposes of its opinion and (ii) the
reasonableness of the assumptions made by the managements of Sandy and ADP with
respect to their publicly disclosed projected financial results and potential
synergies which could be achieved upon consummation of the Merger. Bear Stearns
further relied upon the assurances of the managements of Sandy and ADP that they
are unaware of any facts that would make the information provided to Bear
Stearns incomplete or misleading. In addition, Bear Stearns did not make or seek
to obtain appraisals of Sandy's or ADP's assets and liabilities in rendering its
opinion. The Bear Stearns Opinion is also necessarily based upon the market,
economic and other conditions as in effect on, and the information made
available to it as of, the date of the opinion.
The following is a brief summary of the financial analyses used by Bear
Stearns in connection with providing its oral opinion to the Sandy Board with
respect to the proposal received by Sandy from ADP.
Bear Stearns reviewed and compared the financial and market performance of
Sandy to the financial and market performance of selected publicly traded
companies which it deemed generally comparable to Sandy, i.e., DIMAC, Dimark,
M/A/R/C and, to a lesser extent, AFGL International. Although the comparable
companies were considered similar to Sandy in some respects, none of such
companies possessed a business profile or other characteristics identical to
those of Sandy. For each of the comparable companies, Bear Stearns examined
certain publicly available financial data including, net revenue, operating
margins, earnings before interest, taxes, depreciation and amortization
("EBITDA"), earnings before interest and taxes ("EBIT"), and current and
projected earnings per share. Bear Stearns calculated the ratio of the market
price of Sandy and of each of the comparable company's stock in relation to each
company's earnings per share and the ratio of the enterprise value (i.e., the
total market value of the common stock outstanding plus the par value of total
debt, less cash and cash equivalents) of Sandy and of each of the comparable
companies in relation to each company's EBITDA and EBIT. The ratios of the stock
prices of the comparable companies to
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latest twelve months ("LTM") earnings per share ranged from 10.5x to 27.1x and
had a harmonic mean* of 16.5x, compared to 14.4x for Sandy at the $12 Merger
price. The ratios of the stock prices of the comparable companies to estimated
current year's earnings per share ranged from 12.6x to 24.2x and had a harmonic
mean of 16.4x, compared to 13.3x for Sandy at the $12 Merger price. The ratios
of the stock prices of the comparable companies to estimated next year's
earnings per share ranged from 10.7x to 19.2x and had a harmonic mean of 13.3x,
compared to 12.0x for Sandy at the $12 Merger price. The ratios of the
enterprise value to LTM EBITDA of the comparable companies ranged from 5.5x to
11.2x, and had a harmonic mean of 7.8x, compared to 6.1x for Sandy at the $12
Merger price. The ratios of the enterprise value to LTM EBIT of the comparable
companies ranged from 8.8x to 13.6x and had a harmonic mean of 10.5x, compared
to 6.8x for Sandy at the $12 Merger price. Bear Stearns indicated that, although
the comparable companies operate businesses somewhat similar to Sandy's
business, the comparable companies were as a group superior to Sandy in certain
significant respects. Bear Stearns concluded that Sandy should be expected to
trade at a lower multiple than the comparable companies because Sandy was
dependent on revenues from a small number of clients in a cyclical industry,
lacked the depth in its management team required to grow Sandy significantly
into new areas, had generally grown at a slower rate than the comparable
companies, generally had lower operating margins than the comparable companies
and had a more erratic growth record.
Bear Stearns reviewed the historical market price and volume relating to
Sandy Common Stock and noted that the proposed $12 Merger price represented a
significant premium over the unaffected market price, which Bear Stearns
determined to be in the $7 to $8 range. Bear Stearns noted that Sandy's common
stock had not sold at $12 since 1986, that it was as low as $4.50 in 1993, and
that it had not sold above $9 in more than eight years, other than in connection
with merger proposals.
In evaluating the ADP Common Stock to be received by Sandy shareholders,
Bear Stearns reviewed ADP's earnings and stock trading histories and publicly
available reports on ADP. Bear Stearns also engaged in discussions with ADP. On
the basis of the foregoing, Bear Stearns concluded that the ADP Common Stock to
be received by Sandy shareholders in the Merger should be valued as equivalent
to $12 in cash based on the earnings history of ADP, analysts' research reports,
the historical trading prices and trading volume of ADP, and the number of
shares to be issued in the Merger. Bear Stearns also noted that the ADP
transaction was structured so as to be tax-free for Sandy shareholders until
such time that they sell their shares of ADP Common Stock received as a result
of the Merger.
Based upon the above, Bear Stearns concluded that the Merger was fair, from
a financial point of view, to the public shareholders of Sandy.
The preparation of a fairness opinion is a complex process and is not
necessarily susceptible to partial analysis or summary description. Selecting
portions of the analyses or of the summary set forth above, without considering
the analysis as a whole, could create an incomplete view of the processes
underlying the Bear Stearns Opinion. In arriving at its opinion, Bear Stearns
considered the results of all such analyses. The analyses were prepared solely
for purposes of providing its opinion as to the fairness of the Merger, from a
financial point of view, to the public shareholders of Sandy. As described
above, the Bear Stearns Opinion and presentation to the Sandy Board was one of
many factors taken into consideration by the Sandy Board in making its
determination to approve the Merger. The foregoing summary does not purport to
be a complete description of the analyses performed by Bear Stearns.
Pursuant to the engagement agreement as amended, Sandy agreed to pay Bear
Stearns a fee of $500,000 for its fairness opinion, of which $125,000 was
payable upon execution of the original letter agreement, $125,000 was payable
when Bear Stearns initially rendered its opinion, $50,000 was payable upon
execution of the amendment, and the balance was payable upon mailing of this
Proxy Statement/Prospectus. Sandy also agreed to reimburse Bear Stearns for its
reasonable out-of-pocket expenses and to indemnify Bear Stearns and certain
related persons against certain liabilities in connection with the engagement of
Bear Stearns, including certain liabilities under federal securities laws.
- ---------------
*The harmonic mean is calculated by using the reciprocals of the multiples. The
harmonic mean is used by Bear Stearns because it gives equal weight to equal
dollar investments in the securities whose ratios are being averaged. Bear
Stearns utilizes the harmonic mean in averaging ratios in which price is the
numerator.
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CERTAIN CONSIDERATIONS
In considering whether to approve the Merger Agreement and the transactions
contemplated thereby, shareholders of Sandy should consider the following: (i)
the relative stock prices of ADP Common Stock and Sandy Common Stock at the
Effective Time may vary significantly from the prices as of the date of
execution of the Merger Agreement, the date hereof or the date on which
shareholders of Sandy vote on the Merger due to changes in the business,
operations and prospects of ADP or Sandy, market assessments of the likelihood
that the Merger will be consummated and the timing thereof, general market and
economic conditions, and other factors and (ii) the Exchange Ratio will be set
based on the market price of ADP Common Stock during the 10 consecutive trading
days ending on the Determination Date but will not be greater than 0.2042054 (or
0.4084108 after giving effect to the ADP Stock Split) or less than 0.1670771 (or
0.3341542 after giving effect to the ADP Stock Split). See "-- Interests of
Certain Persons in the Merger" and "The Merger Agreement -- Terms of the Merger"
below.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Sandy Board with respect to the
Merger Agreement and the transactions contemplated thereby, shareholders of
Sandy should be aware that certain members of Sandy's management and the Sandy
Board have certain interests in the Merger that other shareholders of Sandy
generally do not have.
William H. Sandy Employment and Consulting Agreement. Sandy entered into
an Employment and Consulting Agreement with William H. Sandy, the Chairman and
Chief Executive Officer of Sandy, effective November 4, 1985 (the "Employment
and Consulting Agreement"). Under the terms of the Employment and Consulting
Agreement, upon completion of his active employment with Sandy, Mr. Sandy is to
serve as a consultant to Sandy for a period of five years. The Employment and
Consulting Agreement was amended in connection with the execution of the Merger
Agreement on August 22, 1995 to provide that Mr. Sandy's active employment
period will end on the date of the closing of the Merger (the "Closing Date"),
and, as a result, the five-year consulting period will begin on the Closing
Date. The amended Employment and Consulting Agreement also requires Sandy to
make a payment of $1,475,000 to Mr. Sandy on the Closing Date, in lieu of all
future consulting payments, bonuses (except the fiscal 1995 bonus that has been
paid separately to Mr. Sandy) or benefits to become due to Mr. Sandy or to his
wife, Marjorie M. Sandy, under the amended Employment and Consulting Agreement.
Amendment of Lease with 1500 Limited Partnership. In connection with the
Merger, the lease agreement, dated February 1, 1994, between Sandy and 1500
Limited Partnership pertaining to Sandy's Troy, Michigan headquarters (the
"Lease") has been amended effective as of the Closing Date, in the following
manner: (i) an additional improvements allowance of $200,000 will be made
available to the corporation surviving the Merger (the "Surviving Corporation")
immediately after the Closing Date and until December 31, 1996; (ii) the
availability of the last $100,000 of the improvements allowance under the Lease
will be accelerated from February 1, 2000 to the Closing Date so that the
$100,000 allowance will be available immediately after the Closing Date and
until December 31, 1996; and (iii) the Surviving Corporation will be permitted
to self-insure under Sections 11.2, 11.3, 11.4 and 11.5 of the Lease in
accordance with ADP's standard policy. In connection with the effectiveness of
such amendment to the Lease, ADP will guarantee the Surviving Corporation's
obligations under the Lease after the Closing Date. 1500 Limited Partnership is
a Michigan limited partnership owned by, among others, certain directors of
Sandy or their affiliates, including William H. Sandy, the George J. Forrest
Trust, Alan V. Kidd, Alan M. Sandy and Lewis G. Sandy. The Lease, which will
expire on May 31, 2006, provides for gross lease payments by Sandy ranging from
$94,000 to $102,000 per month over the Lease term, plus increases in certain
operating costs on a pass-through basis. Sandy's option (which option would have
been exercisable through September 1, 1995) under Section 36 of the Lease to
reduce the size of the leased premises by up to approximately 7.6% has been
eliminated pursuant to the terms of the Lease, as amended. There are no options
to renew the Lease after May 31, 2006.
Irrevocable Proxy Agreement. William H. Sandy, the Chairman and Chief
Executive Officer of Sandy, acting in his individual capacity and as trustee of
certain trusts of which Mr. Sandy is a beneficiary (the "William Sandy Trusts"),
executed an irrevocable proxy agreement dated August 22, 1995 (as subsequently
amended, the "Irrevocable Proxy Agreement") in favor of ADP. Pursuant to the
Irrevocable Proxy
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<PAGE> 25
Agreement, ADP was granted an irrevocable proxy to vote in favor of the Merger
79,822 shares of Sandy Common Stock owned by Mr. Sandy and the William Sandy
Trusts. In addition, commencing November 26, 1995, the Irrevocable Proxy
Agreement conferred on ADP an irrevocable proxy to vote in favor of the Merger
an additional 362,900 shares of Sandy Common Stock owned by Mr. Sandy and the
William Sandy Trusts. The reason these additional 362,900 shares were not
covered by the Irrevocable Proxy Agreement until November 26, 1995 is that such
shares were until that date subject to certain restrictions contained in the
Shareholder Agreement, dated November 4, 1985, among certain shareholders of
Sandy. Because such Shareholder Agreement expired in accordance with its terms
on November 26, 1995, ADP has a proxy to vote 19.0% (determined as of the Sandy
Record Date) of the outstanding Sandy Common Stock in favor of the Merger
because the Sandy Special Meeting will occur after November 26, 1995.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following is a description of the material federal income tax
consequences of the Merger. This is not a complete description of all the tax
consequences of the Merger and does not address the tax consequences that may be
relevant to particular categories of shareholders subject to special treatment
under certain federal income tax laws, such as dealers in securities, banks,
insurance companies, foreign individuals and entities, tax-exempt organizations
and shareholders who acquired Sandy Common Stock pursuant to an employee stock
option. Each Sandy shareholder's individual circumstances may affect the tax
consequences of the Merger to him or her. No information is provided herein with
respect to the tax consequences of the Merger under foreign, state or local
laws. Moreover, the description set forth below is based on existing law and
currently applicable treasury regulations promulgated under the Internal Revenue
Code of 1986, as amended (the "Code"), current published administrative
positions of the Internal Revenue Service contained in revenue rulings and
revenue procedures, and judicial decisions, all of which are subject to change
either prospectively or retroactively. In consequence, each Sandy shareholder is
advised to consult his or her own tax advisor as to the specific tax
consequences of the Merger to him or her.
Counsel to Sandy, Honigman Miller Schwartz and Cohn, has provided a written
opinion to Sandy, a copy of which is included as Annex C. The opinion provides,
based on certain representations, qualifications and assumptions contained
therein, that the material federal income tax consequences of the Merger, under
currently applicable law, are as follows:
1. The Merger will qualify as a reorganization within the meaning of
Section 368(a)(1)(A) and Section 368(a)(2)(E) of the Code, and ADP, ADP
Mergerco, and Sandy will each be a party to the reorganization within the
meaning of Section 368(b) of the Code;
2. No gain or loss will be recognized by either ADP, ADP Mergerco, or Sandy
as a result of the consummation of the Merger;
3. No gain or loss will be recognized by a holder of Sandy Common Stock
upon the exchange of shares of Sandy Common Stock for shares of ADP Common Stock
pursuant to the Merger, except with respect to cash received in lieu of a
fractional share interest in ADP Common Stock, as discussed below;
4. The receipt of cash in lieu of fractional shares of ADP Common Stock
will be treated as if the fractional shares were distributed as part of the
exchange and then were redeemed by ADP. Under Section 302 of the Code, this
deemed redemption generally will result in a Sandy shareholder recognizing gain
or loss measured by the difference between (i) the amount of cash received, and
(ii) the tax basis allocable to the fractional shares. Any gain or loss
recognized will be capital gain or loss, assuming that the fractional share of
the ADP Common Stock would have been a capital asset in the hands of the Sandy
shareholder, and such gain or loss will be long-term capital gain or loss if the
surrendered Sandy Common Stock has been held for more than one year at the
Effective Time;
5. The adjusted tax basis of the ADP Common Stock received by a holder of
Sandy Common Stock (including any fractional share of the ADP Common Stock
deemed received) pursuant to the Merger will be the same as the adjusted tax
basis of the shares of Sandy Common Stock surrendered in exchange therefor; and
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6. The holding period of the ADP Common Stock received by a holder of Sandy
Common Stock as a result of the Merger will include the holding period of the
shares of Sandy Common Stock surrendered in exchange therefor, provided that
such Sandy Common Stock is held as a capital asset at the Effective Time.
No advance ruling will be requested or received from the Internal Revenue
Service as to the federal income tax consequences of the Merger. An opinion of
counsel is not binding on the Internal Revenue Service and, because no advance
ruling will be obtained from the Internal Revenue Service, there can be no
assurance that the Merger will constitute a tax-free reorganization, or that
other favorable tax treatment will be available to the shareholders of Sandy.
THE FOREGOING OPINION OF COUNSEL TO SANDY MERELY ADDRESSES THE MATERIAL
FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER UNDER CURRENTLY APPLICABLE LAW AND
DOES NOT TAKE INTO CONSIDERATION THE PARTICULAR FACTS AND CIRCUMSTANCES OF ANY
HOLDER OF SHARES OF SANDY COMMON STOCK. EACH HOLDER OF SHARES OF SANDY COMMON
STOCK IS URGED TO CONSULT HIS OR HER OWN TAX ADVISOR AS TO THE FEDERAL INCOME
TAX CONSEQUENCES OF THE MERGER TO HIM OR HER, AND ALSO AS TO ANY STATE, LOCAL,
FOREIGN OR OTHER TAX CONSEQUENCES. THE FOREGOING OPINION OF COUNSEL IS BASED
UPON THE CODE, TREASURY REGULATIONS THEREUNDER AND ADMINISTRATIVE RULINGS AND
COURT DECISIONS AS OF THE DATE HEREOF, ALL OF WHICH ARE SUBJECT TO CHANGE, AND
ANY SUCH CHANGE COULD AFFECT THE CONTINUING VALIDITY OF COUNSEL'S OPINION. SANDY
SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS CONCERNING THE FEDERAL,
STATE, LOCAL AND FOREIGN TAX CONSEQUENCES OF THE MERGER TO THEM.
ANTICIPATED ACCOUNTING TREATMENT
The Merger is expected to qualify as a "pooling of interests" for
accounting and financial reporting purposes. Under this method of accounting,
the recorded assets and liabilities of ADP and Sandy will be carried forward to
the combined corporation at their recorded amounts, subject to any adjustments
required to conform the accounting policies of the two companies. The Merger
Agreement provides that a condition to the consummation of the Merger is the
receipt by ADP of notification, in form and substance reasonably satisfactory to
it, from Deloitte & Touche LLP, independent certified public accountants of ADP,
that the Merger qualifies for "pooling of interests" accounting treatment.
ANTITRUST MATTERS
Pursuant to the requirements of the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), ADP and Sandy each filed a
Notification and Report Form for review under the HSR Act with the Federal Trade
Commission (the "FTC") and the Antitrust Division of the Department of Justice
(the "Antitrust Division"). The waiting periods under the HSR Act with respect
to such filings were terminated on September 11, 1995. Even though the HSR Act
waiting periods were terminated, the FTC or the Antitrust Division could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking divestiture of substantial assets of ADP or
Sandy. Consummation of the Merger is conditioned upon, among other things, the
absence of any judgment, decree, injunction, ruling or order of any court,
governmental department, commission, agency or instrumentality outstanding
against ADP Mergerco, ADP or Sandy which prohibits or materially restricts or
delays the consummation of the Merger. ADP and Sandy do not believe that
consummation of the Merger will result in a violation of any applicable
antitrust laws. However, there can be no assurance that a challenge to the
Merger on antitrust grounds will not be made or, if such a challenge is made, of
the result. ADP and Sandy do not believe that any additional governmental
filings in the United States are required with respect to the Merger, other than
the filing of the Certificate of Merger required to be filed with the Department
of Commerce of the State of Michigan in accordance with the Michigan Business
Corporation Act ("MBCA").
FEDERAL SECURITIES LAW CONSEQUENCES
All ADP Common Stock issued in connection with the Merger will be freely
transferable, except that any ADP Common Stock received by persons who are
deemed to be "affiliates" (as such term is defined under the
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Securities Act) of Sandy or ADP prior to the Merger may be sold by them only in
transactions permitted by the resale provisions of Rule 145 under the Securities
Act ("Rule 145") with respect to affiliates of Sandy, or Rule 144 under the
Securities Act ("Rule 144") with respect to persons who are or become affiliates
of ADP, or as otherwise permitted under the Securities Act. Persons who may be
deemed to be affiliates of Sandy or ADP generally include individuals or
entities that control, are controlled by, or are under common control with, such
corporation and may include certain officers and directors of such corporation
as well as principal stockholders of such corporation.
Affiliates may not sell their shares of ADP Common Stock acquired in
connection with the Merger, except pursuant to an effective registration under
the Securities Act covering such shares or in compliance with Rule 145 (or Rule
144 in the case of persons who are or become affiliates of ADP) or another
applicable exemption from the registration requirements of the Securities Act.
In general, under Rule 145, for two years following the Effective Time, an
affiliate (together with certain related persons) of Sandy would be entitled to
sell shares of ADP Common Stock acquired in connection with the Merger only
through unsolicited "brokers' transactions" or in transactions directly with a
"market maker," as such terms are defined in Rule 145. Additionally, the number
of shares to be sold by an affiliate (together with certain related persons and
certain persons acting in concert) within any three-month period for purposes of
Rule 145 may not exceed the greater of 1% of the outstanding shares of ADP
Common Stock or the average weekly trading volume of such stock during the four
calendar weeks preceding such sale. Rule 145 and Rule 144 would only remain
available, however, to affiliates if ADP remained current with its informational
filings with the Commission under the Exchange Act. Two years after the
Effective Time, an affiliate of Sandy would be able to sell such ADP Common
Stock without such manner of sale or volume limitations provided that ADP was
current with its Exchange Act informational filings and such affiliate was not
then an affiliate of ADP. If such person were an affiliate of ADP, such
limitations would continue to apply under Rule 144. Three years after the
Effective Time, an affiliate of Sandy would be able to sell such shares of ADP
Common Stock without any restrictions so long as such affiliate had not been an
affiliate of ADP for at least three months prior thereto.
STOCK EXCHANGE LISTING
The shares of ADP Common Stock to be issued in the Merger are authorized
for listing and trading on the NYSE.
DIVIDENDS
ADP expects to continue to declare its regular quarterly dividends. Sandy
is not permitted under the terms of the Merger Agreement to declare, set aside
or pay any dividend in cash, stock, property or otherwise in respect of its
capital stock during the period from the date of the Merger Agreement until the
earlier of the termination of the Merger Agreement or the Effective Time.
APPRAISAL RIGHTS
Under the MBCA, the holders of Sandy Common Stock are not entitled to any
appraisal rights with respect to the Merger.
FEES AND EXPENSES
Regardless of whether the Merger is consummated, each of ADP and Sandy will
pay its own respective costs and expenses (including, but not limited to,
attorneys' fees) incurred in connection with the Merger, except in the event
that the Sandy Board terminates the Merger Agreement after having received a
written proposal regarding an Acquisition Transaction (as defined under "The
Merger Agreement -- Termination") which offers more consideration to the
shareholders of Sandy than that offered by ADP, and the Sandy Board recommends
to the shareholders of Sandy that such shareholders accept and/or approve such
Acquisition Transaction. If such event occurs, Sandy will be required to pay
ADP, within one business day after such termination, a fee equal to 4% of the
aggregate purchase price which the third party indicated it would pay in
connection with the proposed Acquisition Transaction which was the basis for
such termination.
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THE MERGER AGREEMENT
The description of the Merger Agreement set forth below does not purport to
be complete and is qualified in its entirety by reference to the Merger
Agreement, a copy of which is attached to this Proxy Statement/ Prospectus as
Annex A and incorporated herein by reference. Statements in this Proxy
Statement/Prospectus with respect to the terms of the Merger are qualified in
their entirety by reference to the Merger Agreement. Sandy Shareholders are
urged to read the full text of the Merger Agreement.
TERMS OF THE MERGER
The Merger. At the Effective Time and subject to and upon the terms and
conditions of the Merger Agreement and the MBCA, ADP Mergerco will be merged
with and into Sandy, the separate corporate existence of ADP Mergerco will
cease, and Sandy will continue as the Surviving Corporation.
Effective Time. As promptly as practicable after the satisfaction or
waiver of the conditions to the Merger set forth in the Merger Agreement, the
Merger will be consummated by filing a Certificate of Merger with the Department
of Commerce of the State of Michigan in accordance with the MBCA.
Articles of Incorporation and By-laws. The Merger Agreement provides that
the Articles of Incorporation and By-laws of ADP Mergerco, as in effect
immediately prior to the Effective Time, will be the Articles of Incorporation
and By-laws of the Surviving Corporation until thereafter amended in accordance
with the provisions therein and as provided by the MBCA.
Directors and Officers. The initial directors of the Surviving Corporation
shall be the directors of ADP Mergerco immediately prior to the Effective Time,
in each case until their successors are elected and qualified, and the officers
of the Surviving Corporation shall be the officers of ADP Mergerco immediately
prior to the Effective Time, in each case until their successors are duly
elected and qualified.
Conversion of Stock. At the Effective Time, each share of Sandy Common
Stock issued and outstanding immediately prior to the Effective Time (excluding
shares referred to in the following paragraph) will be converted into and
exchangeable for shares of ADP Common Stock at the Exchange Ratio.
Each share of Sandy Common Stock held as treasury stock of Sandy
immediately prior to the Effective Time shall be canceled, retired and cease to
exist, and no exchange or payment shall be made in respect thereof.
Each share of common stock of ADP Mergerco issued and outstanding
immediately prior to the Effective Time will be converted into one validly
issued, fully paid and nonassessable share of common stock of the Surviving
Corporation.
Options. All stock options outstanding at the Effective Time (i) under
Sandy's 1985 Performance Incentive Plan, 1989 Performance Incentive Plan or
Director Stock Option Plan and (ii) pursuant to the nonqualified stock option
agreement dated August 8, 1988 between Sandy and Raymond Ketchledge or the
amended nonqualified stock option agreement dated September 1, 1992 between
Sandy and Raymond Ketchledge (collectively, the "Sandy Options") shall, by
virtue of the Merger and without any action on the part of the holders of such
options, be converted into and become options to purchase shares of ADP Common
Stock ("Substitute Options") as follows:
(i) each Substitute Option will cover the number of shares of ADP
Common Stock (rounded down to the nearest whole share) which the holder of
the Sandy Option being replaced would have been entitled to receive in the
Merger had such holder exercised, immediately prior to the Effective Time,
the Sandy Option which the Substitute Option is replacing;
(ii) each Substitute Option will be exercisable for a purchase price
per share (rounded down to the nearest cent) determined by dividing (x) the
purchase price per share of Sandy Common Stock payable upon exercise of the
Sandy Option which the Substitute Option replaced, multiplied by the number
of shares of Sandy Common Stock covered by the Sandy Option, by (y) the
number of shares of ADP
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Common Stock covered by the Substitute Option, as determined in accordance
with clause (i) above; and
(iii) each Substitute Option will be exercisable, over each time
period during which the Sandy Option it replaced would have been
exercisable (taking into account any acceleration in vesting brought about
by the Merger), with respect to that number of shares of ADP Common Stock
(rounded down to the nearest whole share) determined by multiplying (x) the
number of shares of Sandy Common Stock with respect to which the Sandy
Option would have been exercisable during that time period by (y) a
fraction, the numerator of which is the total number of shares of ADP
Common Stock covered by the Substitute Option and the denominator of which
is the total number of shares of Sandy Common Stock covered by the replaced
Sandy Option.
Subject to the foregoing requirements, the terms of each Substitute Option
will be substantially equivalent to the terms of the Sandy Option that it
replaces.
Fractional Shares. No fractional shares of ADP Common Stock, and no
certificates representing such fractional shares, shall be issued upon the
surrender for exchange of certificates representing Sandy Common Stock. In lieu
of any fractional share, ADP shall pay to each holder of Sandy Common Stock who
otherwise would be entitled to receive a fractional share of ADP Common Stock an
amount of cash (without interest) determined by multiplying (a) the Average ADP
Common Stock Price times (b) the fractional share interest to which such holder
would otherwise be entitled.
EXCHANGE OF CERTIFICATES
Exchange Agent. ADP has appointed Chemical Mellon Shareholder Services to
act as Exchange Agent.
Exchange Procedures. As soon as practicable after the Effective Time, ADP
shall cause the Exchange Agent to mail appropriate and customary transmittal
materials (which shall specify that delivery shall be effected, and risk of loss
and title to the certificates theretofore representing shares of Sandy Common
Stock shall pass, only upon proper delivery of such certificates to the Exchange
Agent) to each holder of Sandy Common Stock of record as of the Effective Time
advising such holder of the effectiveness of the Merger and the procedure for
surrendering to the Exchange Agent outstanding certificates formerly evidencing
Sandy Common Stock in exchange for new certificates for ADP Common Stock and
cash in lieu of fractional shares. Upon surrender to the Exchange Agent of a
certificate formerly representing shares of Sandy Common Stock, together with
duly executed transmittal materials, ADP shall promptly (i) issue or cause to be
issued to the persons entitled thereto a certificate representing the number of
whole shares of ADP Common Stock that such persons are entitled to receive in
the Merger and (ii) distribute or cause to be distributed to the persons
entitled thereto cash in lieu of fractional shares as provided above. Upon
surrender, each certificate theretofore evidencing Sandy Common Stock shall be
canceled.
At or promptly after the Effective Time, ADP shall deposit the Merger
Consideration with the Exchange Agent as the Exchange Fund. After the Effective
Time, ADP shall, on each payment or distribution date, tender to the Exchange
Agent as an addition to the Exchange Fund all dividends and other distributions
applicable to certificates held in the Exchange Fund.
Transfers of Ownership. If any certificate evidencing shares of ADP Common
Stock is to be issued to a person other than the person in whose name the
certificate surrendered is registered, it shall be a condition to the issuance
of ADP Common Stock that the certificate so surrendered shall be properly
endorsed or be otherwise in proper form for transfer and that the person
requesting such exchange shall pay all transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
certificate surrendered (or establish to the satisfaction of ADP that such tax
has been paid or is not applicable).
Distributions With Respect to Unexchanged Sandy Common Stock. Until
outstanding certificates formerly representing Sandy Common Stock are
surrendered as provided above, no dividend or distribution payable to holders of
record of ADP Common Stock shall be paid to any holder of such outstanding
certificates. Subject to applicable law, upon surrender of such outstanding
certificates by such holder there
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shall be paid to such holder the amount of any dividends or distributions
(without interest) theretofore payable with respect to such whole shares of ADP
Common Stock, but not paid to such holder, and which dividends or distributions
had a record date occurring subsequent to the Effective Time.
Lost, Stolen or Destroyed Certificates. In the event any certificate for
Sandy Common Stock shall have been lost, stolen or destroyed, the Exchange Agent
shall issue and pay in exchange for such lost, stolen or destroyed certificate,
upon the making of an affidavit of that fact by the holder thereof, such shares
of ADP Common Stock and cash for fractional shares, if any, as may be required
pursuant to this Agreement, provided, however, that ADP, in its discretion and
as a condition precedent to the issuance and payment thereof, may require the
holder of such lost, stolen or destroyed certificate to deliver a bond in such
sum as it may direct as indemnity against any claim that may be made against
ADP, Sandy, the Exchange Agent or any other party with respect to the
certificate alleged to have been lost, stolen or destroyed.
DETAILED INSTRUCTIONS, INCLUDING A TRANSMITTAL LETTER, WILL BE MAILED TO
SANDY SHAREHOLDERS PROMPTLY FOLLOWING THE EFFECTIVE TIME AS TO THE METHOD OF
EXCHANGING CERTIFICATES FORMERLY REPRESENTING SHARES OF SANDY COMMON STOCK.
SANDY SHAREHOLDERS SHOULD NOT SEND CERTIFICATES REPRESENTING THEIR SHARES TO THE
EXCHANGE AGENT PRIOR TO RECEIPT OF THE TRANSMITTAL LETTER.
REPRESENTATIONS AND WARRANTIES
The Merger Agreement contains various representations and warranties of
Sandy, in respect of itself and its subsidiary, and of ADP Megerco and ADP,
jointly and severally. When used with respect to Sandy or ADP, "Material Adverse
Effect" means any material adverse effect on the financial condition, assets,
liabilities, results of operations or business of Sandy and its subsidiary or
ADP and its subsidiaries, as the case may be, in each case taken as a whole.
Representations and Warranties of Sandy. The representations and
warranties of Sandy relate, among other things, to the following matters (which
representations and warranties are subject, in certain cases, to specified
exceptions): (i) corporate organization, standing, qualification and similar
corporate matters, (ii) the authorization, execution, delivery and
enforceability of the Merger Agreement, (iii) the absence of certain regulatory
and third party consent requirements, (iv) good and marketable title to property
and assets and the absence of undisclosed liabilities, (v) the absence of
violations of zoning ordinances, municipal regulations or other rules,
regulations or laws pertaining to Sandy's property, except where such violation
would not have a Material Adverse Effect, (vi) the maintenance of certain
licenses, permits, and other authorizations, (vii) ownership, rights to use and
absence of violations or claims in respect of intellectual property, (viii)
compliance with laws, except where noncompliance would not have a Material
Adverse Effect, (ix) matters pertaining to employee plans, (x) contracts and
agreements, (xi) the absence of claims, actions, suits, proceedings, or
investigations pending against or affecting Sandy, and the absence of any
reasonable basis therefor, (xii) insurance, (xiii) reports and other documents
filed with the Commission, the absence of material misstatements or omissions in
the information contained therein, the fair presentation of the financial
statements contained therein in accordance with generally accepted accounting
principles, and the absence of any material adverse change in Sandy's financial
condition, assets, liabilities, results of operations or business taken as a
whole since August 31, 1994, (xiv) payment of taxes and certain other tax
matters, (xv) business relations, (xvi) the absence of brokers and finders,
(xvii) notes and accounts receivable, (xviii) information furnished by Sandy to
ADP, (xix) capitalization, (xx) options, (xxi) the absence of dividends and
stock purchases, (xxii) subsidiaries, (xxiii) customers, (xxiv) the
recommendation of the Merger by the Sandy Board, (xxv) the absence of any
material untrue statements or omissions in the information that Sandy provides
for inclusion in the Registration Statement and this Proxy Statement/Prospectus,
(xxvi) the shareholder vote needed to approve the Merger, (xxvii) labor matters,
(xxviii) conduct of business in the ordinary course since August 31, 1994,
(xxix) nonapplicability of certain provisions of the MBCA, (xxx) the absence of
actions that would disqualify the Merger from being accounted for as a pooling
of interests, (xxxi) fixed assets and sufficiency of assets, (xxxii) leased
properties, (xxxiii) licensed properties, (xxxiv) loan agreements, debt
instruments and guarantees, (xxxv) employees, employment practices, compensation
and vacations, (xxxvi) capital expenditures, (xxxvii) bank accounts and safe
deposit boxes and
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powers of attorney, (xxxviii) the absence of casualty losses, (xxxix)
transactions with affiliates and (xl) classification of the Merger as a tax-free
reorganization for tax purposes.
Representations and Warranties of ADP Mergerco and ADP. The
representations and warranties of ADP Mergerco and ADP relate to the following
matters (which representations and warranties are subject, in certain cases, to
specified exceptions): (i) corporate organization, standing, qualification and
similar corporate matters, (ii) the authorization, execution, delivery and
enforceability of the Merger Agreement, (iii) good and marketable title to
property and assets and the absence of undisclosed liabilities, (iv) compliance
with laws, except where noncompliance would not have a Material Adverse Effect,
(v) the absence of claims, actions, suits, proceedings or investigations pending
or, to the best of ADP Mergerco's and ADP's knowledge, threatened against or
affecting ADP Mergerco or ADP, except those claims, actions, suits, proceedings
or investigations that would not have a Material Adverse Effect or are set forth
in certain schedules or filings, (vi) reports and other documents filed with the
Commission, the absence of material misstatements or omissions in the
information contained therein, the fair presentation of the financial statements
contained therein in accordance with generally accepted accounting principles,
and the absence of any material adverse change in ADP's financial condition,
assets, liabilities, results of operations or business taken as a whole since
June 30, 1994, (vii) capitalization, (viii) validity of ADP Common Stock, (ix)
options, (x) the absence of additional rights of any persons to any equity
interest in ADP upon the consummation of the Merger, except as contemplated by
the Merger Agreement, (xi) the absence of dividends and stock purchases, (xii)
the absence of material untrue statements or omissions in the information that
ADP provides in the Registration Statement and this Proxy Statement/Prospectus,
(xiii) the absence of brokers and finders and (xiv) classification of the Merger
as a tax-free reorganization for tax purposes.
CONDUCT OF BUSINESS PENDING THE MERGER
Conduct of Business by Sandy. The Merger Agreement provides that, prior to
the Effective Time, unless ADP Mergerco and ADP agree in writing, Sandy will
conduct its business in the ordinary course of business and in a manner
consistent with past practice, and Sandy will use reasonable efforts to preserve
intact its present business organizations. The Merger Agreement further provides
that Sandy will use reasonable efforts to maintain its relationships with its
suppliers and customers, and, if requested by ADP Mergerco or ADP, (i) Sandy
will use reasonable efforts to make reasonable arrangements as reasonably
requested by ADP Mergerco or ADP for representatives of ADP Mergerco or ADP to
meet with customers and suppliers of Sandy, and (ii) Sandy will schedule, as
reasonably requested by ADP Mergerco or ADP, meetings of representatives of ADP
Mergerco or ADP with executive officers of Sandy. Except in connection with the
transactions contemplated by the Merger Agreement, without the prior written
consent of ADP Mergerco and ADP, Sandy has agreed that it will not:
(i) issue, sell, pledge, dispose of or encumber any assets, other than
through sales of goods and/or services to Sandy's customers in the ordinary
course of business, consistent with past practice,
(ii) amend Sandy's Restated Articles of Incorporation, as amended (the
"Sandy Articles"), or Sandy's By-laws (the "Sandy By-laws") in effect at
the date of the Merger Agreement,
(iii) split, combine or reclassify any outstanding shares of Sandy
capital stock, or declare, set aside or pay any dividend payable in cash,
stock, property or otherwise with respect to such shares,
(iv) redeem, purchase, acquire or offer to acquire any shares of Sandy
capital stock,
(v) issue, sell, pledge or dispose of, or agree to issue, sell, pledge
or dispose of, any additional shares of, or securities convertible or
exchangeable for, or any options, warrants or rights of any kind to acquire
any shares of, Sandy capital stock of any class whether pursuant to any
rights agreement, stock plan or otherwise, except that Sandy may issue
shares of Sandy Common Stock in accordance with stock options outstanding
as of the date of the Merger Agreement,
(vi) acquire (by merger, consolidation or acquisition of assets) or be
acquired by any corporation, partnership or other business organization or
division thereof,
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(vii) incur any indebtedness for borrowed money, other than in the
ordinary course of business, consistent with past practice, or issue any
debt securities,
(viii) enter into or modify any material contract, lease or agreement,
other than in the ordinary course of business, consistent with past
practice,
(ix) terminate, modify, assign, waive, release or relinquish any
material contract rights or amend any material rights or claims except as
expressly provided in the Merger Agreement,
(x) other than pursuant to previously existing written plans, written
agreements or regular budgets and standard policies, grant any increase in
the salary or other compensation or benefits to Sandy's directors, officers
or employees or grant any bonus to any employee or enter into any
employment agreement, or make any loan to or enter into any material
transaction of any other nature with any officer, director or employee of
Sandy; provided that Sandy may pay fiscal 1995 bonuses based on earnings
before merger-related costs,
(xi) take any action to institute any new severance or termination pay
practices with respect to any directors, officers or employees of Sandy or
to increase the benefits payable under its severance or termination pay
practices,
(xii) hire new employees, other than in the ordinary course of
business, consistent with past practice,
(xiii) adopt or amend, in any respect, except as may be required by
applicable law or regulation (in which case Sandy will notify ADP Mergerco
and ADP of such amendment or adoption and the reasons therefor), any bonus,
profit sharing, compensation, stock option, restricted stock, pension,
retirement, deferred compensation, employment or other employee benefit
plan, agreement, trust, fund, plan or arrangement for the benefit or
welfare of any directors, officers or employees,
(xiv) except for specified exceptions, make any capital expenditures
or capital commitments in amounts greater than $100,000 in the aggregate,
(xv) make any election for federal income tax purposes,
(xvi) settle or compromise any litigation involving the payment of, or
enter into a settlement agreement to pay over time, an amount in cash,
notes or other property in excess of $50,000, or
(xvii) enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
Conduct of Business by ADP. The Merger Agreement provides that, prior to
the Effective Time, unless Sandy shall otherwise agree in writing:
(i) Neither ADP nor any subsidiary of ADP shall amend its Certificate
of Incorporation (or other such governing document) or By-laws in a manner
which would materially adversely affect the rights of holders of ADP Common
Stock or the ability of ADP to consummate the transactions contemplated by
the Merger Agreement in a timely manner,
(ii) Neither ADP nor any subsidiary of ADP shall make any acquisition
or take any other action that individually or in the aggregate would
materially adversely affect the ability of ADP or ADP Mergerco to
consummate the transactions contemplated by the Merger Agreement in a
timely manner,
(iii) Other than regular quarterly cash dividends which are not in
excess of $.25 per share of ADP Common Stock and any stock split effected
as a stock dividend, ADP shall not declare, set aside, make or pay any
dividend or distribution (whether in cash, stock or property or any
combination thereof) in respect of the ADP Common Stock, and
(iv) ADP shall not agree to do any of the foregoing.
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ADDITIONAL AGREEMENTS
Other Agreements. Subject to the terms and conditions of the Merger
Agreement and to the fiduciary duties of the Sandy Board and the Board of
Directors of ADP, each of the parties to the Merger Agreement has agreed to use
all reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable to consummate and
make effective as promptly as practicable the transactions contemplated by the
Merger Agreement.
Notification of Certain Matters. Pursuant to the Merger Agreement, Sandy
has agreed to give prompt notice to ADP Mergerco and ADP, and ADP Mergerco and
ADP has agreed to give prompt notice to Sandy, of the occurrence of any event
which any such party believes would be likely to cause any of its
representations or warranties contained in the Merger Agreement to be materially
untrue or inaccurate, or any material failure of the notifying party, or such
notifying party's officers, directors, employees or agents, materially to comply
with or satisfy any covenant, condition or agreement in the Merger Agreement.
Access to Information. Pursuant to the Merger Agreement, Sandy will, and
will cause Sandy's officers, directors, employees and agents, including
attorneys and accountants, to afford, from the date of the Merger Agreement to
the Effective Time, the officers, employees and agents of ADP Mergerco and ADP
complete access at all reasonable times to Sandy's officers, employees, agents,
properties, books, records and workpapers, and shall furnish ADP Mergerco and
ADP all financial, operating and other data and information as ADP Mergerco and
ADP may reasonably request. Pursuant to the Merger Agreement, ADP Mergerco and
ADP have agreed to use reasonable efforts not to disrupt Sandy's business.
Public Announcements. Pursuant to the Merger Agreement, ADP Mergerco, ADP,
and Sandy have agreed not to make, issue or release any public announcement or
statement concerning, or acknowledgment of the existence of, or reveal the
terms, conditions or status of, the transactions contemplated by the Merger
Agreement, or any other communication to shareholders or the investing public
directly or indirectly without first making a good faith attempt to obtain the
other parties' prior approval of, or concurrence in, the contents of such
announcement, which approval or concurrence will not be unreasonably withheld or
delayed; provided, that nothing in the Merger Agreement will prevent any party
from commenting on prior public announcements or from making any announcement,
acknowledgment or statement required by law or the rules of any securities
exchange on which its stock is listed.
Pooling Letters. Pursuant to the Merger Agreement, ADP's and ADP
Mergerco's obligations to consummate the Merger are conditioned upon, among
other things, ADP's receipt of an agreement, in form and substance reasonably
satisfactory to it, from each "affiliate" of Sandy within the meaning of such
term as used in Rule 145 under the Securities Act (an "Affiliate") to the effect
that (i) in accordance with applicable rules with respect to sales of securities
by affiliates in pooling-of-interests transactions, no disposition of ADP Common
Stock received in the Merger will be made by such Affiliate of Sandy until such
time as financial results covering at least 30 days of post-Merger combined
operations have been published, and (ii) such Affiliate of Sandy has not
theretofore taken (and, if such agreement is delivered prior to the Closing
Date, will not take during the remaining period prior thereto) any action
(including, without limitation, selling or otherwise disposing of Sandy Common
Stock owned by such Affiliate of Sandy) that would prevent the Merger from being
accounted for as a pooling of interests.
CONDITIONS TO THE MERGER
Conditions to ADP Mergerco's and ADP's Obligations. The obligations of ADP
Mergerco and ADP to consummate the Merger are subject to the fulfillment of each
of the following conditions:
(i) Representations and Warranties. The representations and
warranties of Sandy contained in the Merger Agreement and the information
contained in the accompanying schedules shall be true and correct on and as
of the Closing Date. Sandy shall have performed in all material respects
all obligations and complied in all material respects with all agreements,
covenants and conditions required by the Merger Agreement to be performed
or complied with by it at or prior to the Closing Date.
27
<PAGE> 34
(ii) No Injunctions or Restraints. There shall not be any judgment,
decree, injunction, ruling or order of any court, governmental department,
commission, agency or instrumentality outstanding against ADP Mergerco, ADP
or Sandy which prohibits or materially restricts or delays the consummation
of the Merger.
(iii) Stockholder Approval. The Merger Agreement shall have been
approved and adopted by the requisite vote of the holders of the
outstanding shares of Sandy Common Stock in accordance with the MBCA and
Sandy's Articles of Incorporation and By-laws.
(iv) Consents Obtained. All authorizations, consents and permits
required by Sandy to perform the Merger Agreement shall have been obtained
and shall be in form and substance satisfactory to ADP Mergerco and ADP.
(v) Delivery of Documents. Sandy will have delivered, or will have
caused to be delivered, to ADP Mergerco and ADP (a) a copy of the
resolutions of the Sandy Board approving the adoption, execution,
performance, and delivery of the Merger Agreement and authorizing all
necessary or proper action to enable Sandy to comply with the terms
thereof, (b) a copy of the resolutions duly adopted by Sandy's shareholders
authorizing the adoption, execution, performance, and delivery of the
Merger Agreement and approving the Merger in accordance with the MBCA, and
(c) the opinion of Honigman Miller Schwartz and Cohn, counsel to Sandy,
regarding certain matters pertaining to Sandy.
(vi) Effectiveness of Registration Statement. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued or proceeding for such purpose instituted or threatened, and ADP
shall have received all state blue sky or securities law permits and other
authorizations necessary to consummate the Merger.
(vii) Amendment of Employment and Consulting Agreement. The
Employment and Consulting Agreement between Sandy and William H. Sandy, as
amended through and including the date of the Merger Agreement, shall be in
full force and effect and shall not have been subsequently amended without
the prior written consent of ADP.
(viii) Employment Agreements. Sandy shall have entered into
employment agreements, effective as of the Closing Date, in form and
substance reasonably satisfactory to ADP, with certain key employees of
Sandy to be specified by ADP, and such employees' existing employment
agreements with Sandy shall have been terminated as of the Closing Date.
(ix) Financial Statements. ADP shall have received a complete and
correct copy of Sandy's audited financial statements for the one-year
period ending August 31, 1995, in the form specified in the Merger
Agreement.
(x) Balance Sheets. ADP shall have receive unaudited consolidated
balance sheets and income statements for each complete calendar month from
June 30, 1995 through the last full month immediately prior to the Closing
Date, in each case certified by Sandy's chief financial officer.
(xi) Opinion of Counsel. Sandy shall have received the opinion of
Honigman Miller Schwartz and Cohn, in form and substance reasonably
satisfactory to Sandy and ADP, to the effect that the Merger qualifies for
federal income tax purposes as a reorganization within the meaning of
Section 368 of the Code.
(xii) Agreement with Affiliates of Sandy. ADP shall have received an
agreement, in form and substance reasonably satisfactory to it, from each
affiliate of Sandy regarding certain securities law issues and
pooling-of-interests stock holding requirements.
(xiii) Pooling. ADP shall have received notification from Deloitte &
Touche LLP, in form and substance reasonably satisfactory to it, that the
Merger may properly be accounted for as a pooling of interests.
28
<PAGE> 35
(xiv) Credit Agreement. All amounts owing under the Amended and
Restated Revolving Credit Agreement dated June 23, 1993, between Sandy and
Comerica Bank, as amended, shall have been paid in full, and such credit
agreement shall have been terminated by Sandy.
(xv) Lease Agreement. The Lease shall have been amended on terms
mutually satisfactory to ADP and 1500 Limited Partnership and as stated in
the Merger Agreement. (This condition has been satisfied as of the date of
this Proxy Statement/Prospectus as a result of the Lease amendment
described above under "The Merger -- Interests of Certain Persons in the
Merger.")
(xvi) Net Worth of Sandy. ADP shall have received evidence, in form
and substance reasonably acceptable to it, that the "Sandy Adjusted Net
Worth" as of the "Test Date" (both as defined in Section 5.1(q) of the
Merger Agreement) shall be no less than $10,101,187.
Conditions to Sandy's Obligations. The obligations of Sandy to consummate
the Merger is subject to the fulfillment of each of the following conditions:
(i) Representations and Warranties. The representations and
warranties of ADP Mergerco and ADP contained in the Merger Agreement shall
be true and correct on and as of the Closing Date. ADP Mergerco and ADP
shall have performed in all material respects all obligations and complied
in all material respects with all agreements, covenants and conditions
required by the Merger Agreement to be performed or complied with by it at
or prior to the Closing Date.
(ii) Delivery of Resolutions. The delivery to Sandy of a copy of the
resolutions duly adopted by the Board of Directors of ADP Mergerco or a
duly authorized committee thereof approving the execution and delivery of
the Merger Agreement and authorizing all necessary or proper action to
enable ADP Mergerco to comply with the terms of the Merger Agreement.
(iii) No Injunctions or Restraints. There shall not be any judgment,
decree, injunction, ruling or order of any court, governmental department,
commission, agency or instrumentality outstanding against ADP Mergerco, ADP
or Sandy which prohibits or materially restricts or delays the consummation
of the Merger.
(iv) Shareholder Approval. The approval by Sandy's shareholders, in
accordance with the MBCA and Sandy's Articles of Incorporation and By-laws,
of the Merger Agreement and authorizing all necessary or proper action to
enable Sandy to comply with the terms thereof.
(v) Delivery of Merger Consideration. The delivery by ADP of the
Merger Consideration to the Exchange Agent for the conversion of Sandy
Common Stock as set forth in the Plan of Merger.
(vi) Opinion of Counsel. The receipt by Sandy of the opinion of James
B. Benson, General Counsel of ADP, regarding certain matters pertaining to
ADP.
TERMINATION
Termination Events. The Merger Agreement may be terminated and the Merger
may be abandoned at any time prior to the Effective Time, whether before or
after approval by the shareholders of Sandy:
(i) by mutual action of the Board of Directors of each of ADP
Mergerco, ADP and Sandy;
(ii) by the Board of Directors of each of ADP Mergerco, ADP or Sandy
if the Merger does not take place on or before January 31, 1996; or
(iii) by the Sandy Board if Sandy receives a written proposal
regarding any proposed (a) merger of Sandy with or into any third party,
(b) sale of substantially all of the assets of Sandy, (c) sale of more than
one percent of the outstanding shares of Sandy Common Stock, or (d)
consolidation or other business combination involving Sandy or any division
of Sandy (an "Acquisition Transaction") which offers more consideration to
the shareholders of Sandy than that offered by ADP and the Sandy Board
recommends to the shareholders of Sandy that such shareholders accept
and/or approve such Acquisition Transaction.
29
<PAGE> 36
Termination Fee. If the Sandy Board terminates the Merger Agreement
pursuant to (iii) above, Sandy shall pay to ADP, within one business day after
such termination, a fee equal to 4% of the aggregate purchase price which the
third party indicated it would pay in connection with the proposed Acquisition
Transaction which was the basis for such termination.
AMENDMENT AND WAIVER
The Merger Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties thereto; provided, however, that after
approval of the Merger by the shareholders of Sandy, no amendment may be made
which decreases the consideration to which the shareholders of Sandy are
entitled pursuant to the Merger Agreement or otherwise materially adversely
affects the shareholders of Sandy without the further approval of the
shareholders of Sandy.
At any time prior to the Effective Time, whether before or after any
meeting of Sandy's shareholders, any party to the Merger Agreement may (a) in
the case of ADP Mergerco and ADP, extend the time for the performance of any of
the obligations or other acts of Sandy or, subject to the Merger Agreement,
waive compliance with any of the agreements of Sandy or with any conditions to
the respective obligations of ADP Mergerco or ADP, or (b) in the case of Sandy,
acting through its Chairman, extend the time for the performance of any of the
obligations or other acts of ADP Mergerco or ADP or, subject to the Merger
Agreement, waive compliance with any of the agreements of ADP Mergerco or ADP or
with any conditions to its own obligations. Any agreement on the part of a party
to the Merger Agreement shall be valid if set forth in an instrument in writing
signed on behalf of such party by a duly authorized officer.
INDEMNIFICATION AND INSURANCE
Pursuant to the Merger Agreement, for a period of six years after the
Closing Date, ADP shall, or shall cause the Surviving Corporation to, indemnify
and hold harmless each present and former director or officer of Sandy from and
against any and all claims arising out of or in connection with activities in
such capacity or on behalf of, or at the request of, Sandy, occurring on or
prior to the Closing Date ("Claims"), to the fullest extent permitted under
applicable law and, in addition (if not prohibited by applicable law), to the
fullest extent provided in the Sandy Articles and the Sandy By-laws in effect at
the date of the Merger Agreement.
Pursuant to the Merger Agreement, after the Effective Time, ADP shall, or
shall cause the Surviving Corporation to, maintain Sandy's existing officers'
and directors' liability insurance in respect of Claims, or other insurance
(including a run-off policy) in respect of Claims, no less favorable in scope
and amount of coverage, in full force and effect without reduction of coverage
for a period of three years after the Closing Date; provided, however, that ADP
will not be required to pay an annual premium therefor in excess of two times
the last annual premium paid by Sandy prior to the date of the Merger Agreement,
and if ADP is unable to purchase the insurance required by the Merger Agreement,
it shall purchase as much comparable insurance as can be obtained for an annual
premium equal to such maximum amount.
30
<PAGE> 37
SELECTED FINANCIAL DATA
SANDY
The table below sets forth selected consolidated financial data of Sandy
and should be read in conjunction with the consolidated financial statements and
notes thereto that are incorporated by reference into this Proxy
Statement/Prospectus. The selected financial data as of August 31, 1995, 1994,
1993, 1992 and 1991 and for each of the years then ended are derived from
Sandy's financial statements for such years.
<TABLE>
<CAPTION>
YEAR ENDED AUGUST 31
-------------------------------------------------------
1995 1994 1993 1992 1991
------- ------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Revenue.................................. $50,247 $42,866 $34,975 $37,768 $34,866
Costs and expenses....................... 47,412 40,442 33,153 35,190 33,629
------- ------- ------- ------- -------
Operating income....................... 2,835 2,424 1,822 2,578 1,237
Other income (expense), net.............. (407) 141 118 (2) (387)
------- ------- ------- ------- -------
Income before income taxes and
cumulative effect of change in
accounting principle................ 2,428 2,565 1,940 2,576 850
Income taxes............................. 1,044 890 618 771 63
------- ------- ------- ------- -------
Income before cumulative effect of
change in accounting principle...... 1,384 1,675 1,322 1,805 787
Cumulative effect of the change in
accounting for income taxes......... -- -- -- 164 --
------- ------- ------- ------- -------
Net Income............................... $ 1,384 $ 1,675 $ 1,322 $ 1,969 $ 787
======= ======= ======= ======= =======
Net Income per common share:
Income before cumulative effect of
change in accounting principle...... $ 0.58 $ 0.71 $ 0.57 $ 0.78 $ 0.35
Cumulative effect of change in
accounting principle................ -- -- -- 0.07 --
------- ------- ------- ------- -------
Net Income per share*.................... $ 0.58 $ 0.71 $ 0.57 $ 0.85 $ 0.35
======= ======= ======= ======= =======
Cash dividends per share................. $ 0.16 $ 0.13 $ 0.09 $ 0.00 $ 0.00
======= ======= ======= ======= =======
BALANCE SHEET DATA:
Working Capital.......................... $11,382 $10,118 $ 9,039 $ 7,740 $ 5,122
Total Assets............................. 22,882 20,342 18,392 15,548 12,746
Deferred income taxes.................... (201) (298) (199) (59) 15
Long-term debt........................... 0 0 0 0 17
Stockholders' equity..................... 12,097 10,965 9,615 8,498 6,419
</TABLE>
- ---------------
* Based on weighted average common and common equivalent shares. See note H of
notes to consolidated financial statements, which are incorporated by
reference into this Proxy Statement/Prospectus.
31
<PAGE> 38
ADP
The table below sets forth selected consolidated financial data of ADP and
should be read in conjunction with the consolidated financial statements and
notes thereto that are incorporated by reference into this Proxy
Statement/Prospectus. The selected financial data as of June 30, 1995, 1994,
1993, 1992 and 1991 and for each of the years then ended are derived from the
ADP's financial statements for such years. The references to per share earnings
and dividends and other references with respect to ADP Common Stock in the
following table do not reflect the increased number of shares of ADP Common
Stock that would be outstanding after giving effect to the ADP Stock Split.
<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------------------------------------------
1995 1994 1993 1992 1991
---------- ---------- ---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Revenue.......................... $2,893,742 $2,468,966 $2,223,374 $1,940,571 $1,771,751
---------- ---------- ---------- ---------- ----------
Cost of operations............... 2,335,122 2,001,796 1,816,995 1,586,725 1,463,952
Interest expense................. 24,340 20,840 19,819 12,266 8,169
---------- ---------- ---------- ---------- ----------
2,359,462 2,022,636 1,836,814 1,598,991 1,472,121
---------- ---------- ---------- ---------- ----------
Earnings before income taxes and
cumulative effect of accounting
changes........................ 534,280 446,330 386,560 341,580 299,630
Provision for income taxes....... 139,450 112,210 92,360 85,400 71,940
---------- ---------- ---------- ---------- ----------
Net earnings before cumulative
effect of accounting changes... 394,830 334,120 294,200 256,180 227,690
Cumulative effect of accounting
changes........................ -- (4,800) -- -- --
---------- ---------- ---------- ---------- ----------
Net earnings..................... $ 394,830 $ 329,320 $ 294,200 $ 256,180 $ 227,690
---------- ---------- ---------- ---------- ----------
Earnings per share:
Before cumulative effect of
accounting changes.......... $ 2.77 $ 2.37 $ 2.08 $ 1.84 $ 1.63
Cumulative effect of accounting
changes..................... -- (.03) -- -- --
---------- ---------- ---------- ---------- ----------
Net earnings................... $ 2.77 $ 2.34 $ 2.08 $ 1.84 $ 1.63
========== ========== ========== ========== ==========
Average number of common shares
outstanding.................... 142,556 140,890 141,327 139,045 139,936
---------- ---------- ---------- ---------- ----------
Cash dividends per share......... $ .625 $ .54 $ .475 $ .415 $ .3625
---------- ---------- ---------- ---------- ----------
Return on equity*................ 20.9% 21.0% 20.9% 22.1% 21.9%
At year end:
Cash, cash equivalents and
marketable securities....... $1,291,889 $1,062,190 $ 886,452 $ 741,357 $ 432,141
Working capital................ $ 667,920 $ 507,243 $ 355,047 $ 366,752 $ 299,488
Total assets................... $3,201,096 $2,711,751 $2,439,400 $2,169,300 $1,564,930
Long-term debt................. $ 390,177 $ 372,959 $ 347,583 $ 333,192 $ 49,052
Shareholders' equity........... $2,096,615 $1,691,251 $1,494,456 $1,296,728 $1,052,620
</TABLE>
- ---------------
* Before cumulative effect of accounting changes in 1994 (see notes to ADP's
consolidated financial statements, which are incorporated by reference into
this Proxy Statement/Prospectus).
32
<PAGE> 39
MARKET PRICE PER SHARE DATA
SANDY
Sandy Common Stock is listed on the American Stock Exchange under the
symbol SDY. The following table sets forth (i) the high and low closing prices
per share of Sandy Common Stock as reported on the American Stock Exchange and
the dividends per share paid on Sandy Common Stock for the quarterly periods
presented below, which periods correspond to Sandy's quarterly fiscal periods
for financial reporting purposes and (ii) the market value of Sandy Common Stock
(on an historical and equivalent basis) on August 21, 1995, the date preceding
public announcement of the Merger.
<TABLE>
<CAPTION>
FISCAL 1994 HIGH LOW DIVIDENDS
----------- ----- ----- ---------
<S> <C> <C> <C>
1st Quarter............................................... $6 5/8 $4 5/8 $0.03
2nd Quarter............................................... 7 1/4 5 5/8 0.03
3rd Quarter............................................... 9 3/8 5 5/8 0.03
4th Quarter............................................... 8 3/8 5 5/8 0.04
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1995 HIGH LOW DIVIDENDS
------------ ----- ----- ---------
<S> <C> <C> <C>
lst Quarter............................................... $ 8 3/8 $5 7/8 $0.04
2nd Quarter............................................... 8 5 5/8 0.04
3rd Quarter............................................... 10 7 0.04
4th Quarter............................................... 11 7/8 9 3/4 0.04
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1996 HIGH LOW DIVIDENDS
----------- ------ ----- ---------
<S> <C> <C> <C>
1st Quarter.............................................. $12 5/8 $11 1/4 --
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL EQUIVALENT
---------- ----------
<S> <C> <C>
AUGUST 21, 1995.......................................... $10 3/4 $ 11.13
</TABLE>
ADP
ADP Common Stock is listed and traded on the New York Stock Exchange under
the symbol AUD. The following table sets forth (i) the high and low sales prices
per share of ADP Common Stock as reported on the NYSE Composite Tape, and the
dividends per share paid on ADP Common Stock for the quarterly periods presented
below, which periods correspond to ADP's quarterly fiscal periods for financial
reporting purposes and (ii) the market value of ADP Common Stock (on an
historical basis) on August 21, 1995, the date preceding public announcement of
the Merger, in each case without giving effect to the ADP Stock Split.
<TABLE>
<CAPTION>
FISCAL 1994 HIGH LOW DIVIDENDS
----------- ----- ----- ---------
<S> <C> <C> <C>
1st Quarter............................................... $52 5/8 $47 $0.13
2nd Quarter............................................... 56 7/8 49 5/8 0.13
3rd Quarter............................................... 55 1/2 50 1/4 0.13
4th Quarter............................................... 55 1/4 47 5/8 0.15
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1995 HIGH LOW DIVIDENDS
----------- ----- ----- ---------
<S> <C> <C> <C>
lst Quarter............................................... $56 7/8 $50 3/4 $ 0.15
2nd Quarter............................................... 59 3/4 52 1/2 0.15
3rd Quarter............................................... 65 1/2 57 1/2 0.15
4th Quarter............................................... 66 60 1/2 0.175
</TABLE>
<TABLE>
<CAPTION>
FISCAL 1996 HIGH LOW DIVIDENDS
----------- ----- ----- ---------
<S> <C> <C> <C>
1st Quarter............................................... $70 3/4 $61 7/8 $0.175
2nd Quarter (through November 30)......................... 79 5/8 68 --
</TABLE>
<TABLE>
<CAPTION>
HISTORICAL
----------
<S> <C>
AUGUST 21, 1995........................................... $66 5/8
</TABLE>
33
<PAGE> 40
COMPARATIVE PER SHARE DATA
SANDY
<TABLE>
<CAPTION>
AUGUST 31, AUGUST 31, AUGUST 31, AUGUST 31,
1993 1994 1995 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
SANDY HISTORICAL
Book value per share as of August 31, 1995.... (a) (a) $ 5.20 $ 5.20
Cash dividends per share for the years ended
August 31.................................. $ .09 $.13 $ .16 $ .16
Net earnings per share for the years ended
August 31.................................. $ .57 $.71 $ .58 $ .58
SANDY EQUIVALENT PROFORMA
Book value per share as of August 31, 1995.... (a) (a) $ 2.44(b) $ 2.43(c)
Cash dividends per share for the years ended
August 31.................................. $ .079(b) $.09(b) $ .104(b) $ .104(c)
Net earnings per share for the years ended
August 31.................................. $ .35(b) $.39(b) $ .46(b) $ .42(c)
</TABLE>
- ---------------
(a) Not required
(b) Gives effect to the proforma combination of ADP and Sandy (combining the
June 30 financials of ADP and the August 31 financials of Sandy) expressed
in equivalent ADP shares using an assumed exchange ratio of 0.1670771 ADP
shares to 1 Sandy share before giving effect to the ADP Stock Split. The
assumed exchange ratio is based on the market value of ADP Common Stock on
November 30, 1995 (the last business day before the date of this Proxy
Statement/Prospectus).
(c) Gives effect to the proforma combination of ADP, Sandy and GSI (combining
the June 30 financials of ADP and GSI and the August 31 financials of Sandy
expressed in equivalent ADP shares using an assumed exchange ratio of
0.1670771 ADP shares to 1 Sandy share before giving effect to the ADP Stock
Split. The assumed exchange ratio is based on the market value of ADP
Common Stock on November 30, 1995 (the last business day before the date of
this Proxy Statement/Prospectus).
ADP
The data in the following table does not reflect the increased number of
shares of ADP Common Stock that would be outstanding after giving effect to the
ADP Stock Split.
<TABLE>
<CAPTION>
JUNE 30, JUNE 30, JUNE 30, JUNE 30,
1993 1994 1995 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
ADP HISTORICAL
Book value per share as of June 30, 1995........... (a) (a) $ 14.55 $ 14.53 (c)
Cash dividends per share for the years ended June
30.............................................. $ .475 $ .54 $ .625 $ .625(c)
Net earnings per share for the years ended
June 30......................................... $ 2.08 $ 2.34 $ 2.77 $ 2.52 (c)
ADP PROFORMA
Book value per share as of June 30, 1995........... (a) (a) $ 14.58(b) $ 14.56 (d)
Cash dividends per share for the years ended June
30.............................................. $ .475(b) $ .54(b) $ .625(b) $ .625(d)
Net earnings per share for the years ended
June 30......................................... $ 2.08(b) $ 2.34(b) $ 2.77(b) $ 2.52 (d)
</TABLE>
- ---------------
(a) Not required.
(b) Gives effect to the proforma combination of ADP and Sandy (combining the
June 30 financials of ADP and the August 31 financials of Sandy).
(c) Gives effect to the proforma combination of ADP and GSI. Book value, cash
dividends and net earnings per share would be $7.26, $.3125 and $1.26,
respectively, after giving effect to the ADP Stock Split.
(d) Gives effect to the proforma combination of ADP, Sandy and GSI. Book value,
cash dividends, and net earnings per share would be $7.28, $.3125 and
$1.26, respectively, after giving effect to the ADP Stock Split.
34
<PAGE> 41
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information with respect to the
beneficial ownership of Sandy Common Stock (i) by each person who is known by
Sandy to own beneficially more than 5% of the outstanding Shares of Sandy Common
Stock, (ii) by each of Sandy's Directors, (iii) by each of the executive
officers of Sandy named as such in Sandy's Annual Report on Form 10-K for the
fiscal year ended August 31, 1995, and (iv) by all of Sandy's executive officers
and directors, as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENTAGE OF
COMMON STOCK BENEFICIALLY SHARES OUTSTANDING
NAME OF OWNED AS OF AS OF NOVEMBER 20,
BENEFICIAL OWNER NOVEMBER 20, 1995(1) 1995(1)
------------------ ---------------------------- ------------------
<S> <C> <C>
Richard J. Burstein................................ 2,000(2) *
Steven A. Cohen.................................... 225,800(6) 9.7%
George J. Forrest.................................. 57,500(2)(3) 2.5%
David A. Gugala.................................... 1,000 *
Raymond A. Ketchledge.............................. 83,891(4) 3.6%
Alan V. Kidd....................................... 60,000 2.6%
Jay W. Lorsch...................................... 2,710(2) *
Alan M. Sandy...................................... 65,300 2.8%
Lewis G. Sandy..................................... 44,600 1.9%
William H. Sandy................................... 450,522(5) 19.4%
John T. Sheehy..................................... 21,500(2) *
Frederic H. Strickland............................. 0 --
Richard T. White................................... 0 --
</TABLE>
- ---------------
* Less than 1%.
(1) "Beneficial Ownership" is deemed to include shares for which an individual,
directly or indirectly, has or shares voting or investment power, or both.
(2) Includes 2,000 shares that the individual would have the right to acquire
within 60 days of November 20, 1995 pursuant to stock options exercisable
within such period.
(3) Includes 55,500 shares held by George J. Forrest as trustee for the benefit
of George J. Forrest under a trust agreement dated April 28, 1978. Does not
include 129,900 shares beneficially owned by adult children of Mr. Forrest.
(4) Includes 30,000 shares that Mr. Ketchledge would have the right to acquire
within 60 days of November 20, 1995 pursuant to stock option exercisable by
him within such period.
(5) Includes 430,422 shares held by William H. Sandy under a trust agreement
dated November 25, 1978; 12,300 shares owned outright by William H. Sandy;
and 7,800 shares owned by Marjorie M. Sandy (Mr. Sandy's wife). Mr. William
H. Sandy's address is 1500 W. Big Beaver Road, Troy, Michigan 48084.
(6) Includes 155,800 shares owned directly by Mr. Cohen and 70,000 shares owned
by S.A.C. Capital Management, L.P., a limited partnership in which Mr. Cohen
is a general partner. Mr. Cohen's address is 520 Madison Avenue, 7th Floor,
New York, NY 10022. This information is taken from Schedule 13D, as filed
with the Securities and Exchange Commission, Washington, D.C., on April 11,
1995.
All directors and officers as a group beneficially owned 789,023 shares
(33.5%) of Common Stock as of November 20, 1995, including 38,000 shares subject
to stock options which may be exercised within 60 days of November 20, 1995.
35
<PAGE> 42
COMPARISON OF STOCKHOLDER RIGHTS
At the Effective Time, the shareholders of Sandy will become stockholders
of ADP. As shareholders of Sandy, their rights are currently governed by
Michigan law and by the Sandy Articles and the Sandy By-laws. As stockholders of
ADP, their rights will be governed by Delaware law and by the Amended and
Restated Certificate of Incorporation of ADP (the "ADP Certificate") and the
By-laws of ADP (the "ADP By-laws"). The following discussion summarizes the
material differences between the rights of holders of Sandy Common Stock and
holders of ADP Common Stock and certain of the differences between the Sandy
Articles and the ADP Certificate and between the Sandy By-laws and the ADP
By-laws. This summary does not purport to be complete and is qualified in its
entirety by reference to the Sandy Articles and Sandy By-laws, the ADP
Certificate and ADP By-laws and the relevant provisions of Michigan and Delaware
law.
SPECIAL MEETING OF SHAREHOLDERS
Michigan law provides that special meetings of shareholders may be called
by the board or by officers, directors or shareholders as provided in a
corporation's by-laws. In addition, a special meeting may be called by a court
on application of the holders of not less than 10% of the shares entitled to
vote at a meeting. The Sandy By-laws provide that special meetings of the
shareholders may be called by the Chairman of the Board, by the President, by a
majority of the Board of Directors or at the request in writing of the holders
of not less than ten percent of all shares entitled to vote at a meeting.
Delaware law provides that special meetings of stockholders may be called only
by the directors or by any other person as may be authorized by the
corporation's certificate of incorporation or by-laws. The ADP By-laws provide
that special meetings may be called by the President or the Secretary upon
requisition in writing from two directors, or holders of one-third of the issued
and outstanding shares of ADP Common Stock, or by resolution of the Board of
Directors.
INSPECTION RIGHTS
Inspection rights under Michigan and Delaware law are substantially
similar. In both states, stockholders, upon the demonstration of a proper
purpose, have the right to inspect a corporation's stock ledger, stockholder
list and other books and records.
ACTION BY CONSENT OF SHAREHOLDERS
Under Michigan law, the articles of incorporation may provide that any
action to be taken by the shareholders may be taken without a meeting, without
prior notice, and without a vote, if consents in writing, setting forth the
action so taken, are signed by the holders of outstanding shares having not less
than the minimum number of votes that would be necessary to authorize or take
the action at a meeting at which all shares entitled to vote on the action were
present. The Sandy Articles do not provide otherwise, except that any action
taken by written consent of the shareholders will not be effective unless the
proposed action is approved by the Board of Directors before the consent of
shareholders is executed. Delaware law similarly allows action without a
stockholders' meeting absent a provision to the contrary in the certificate of
incorporation. The ADP Certificate does not provide otherwise.
CUMULATIVE VOTING
Under Michigan and Delaware law, a corporation may provide in its charter
for cumulative voting by stockholders in elections of directors (i.e., each
stockholder casts as many votes for directors as he or she has shares of stock
multiplied by the number of directors to be elected). The Sandy Articles do not
provide for cumulative voting. The ADP Certificate does not provide for
cumulative voting.
DIVIDENDS AND REPURCHASE OF STOCK
Under Michigan law, subject to restriction by the articles of
incorporation, a corporation may pay dividends to its shareholders unless after
such a distribution the corporation would not be able to pay its debts as they
became due in the usual course of business, or the corporation's total assets
would be less than the sum of total liabilities plus the amount that would be
needed to satisfy the dissolution rights of shareholders whose
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preferential rights are superior to those receiving the distribution. The Sandy
Articles do not provide for dividend restrictions beyond those imposed by
Michigan law. Under Delaware law, a corporation generally is permitted to
declare and pay dividends out of surplus or out of net profits for the current
and/or preceding fiscal year, provided that such dividends will not reduce
capital below the aggregate amount of capital represented by the issued and
outstanding stock of all classes having a preference upon the distribution of
assets.
Also, under Delaware law, a corporation may generally redeem or repurchase
shares of its stock if such redemption or repurchase will not impair the capital
of the corporation. Under Michigan law, a corporation may acquire its own shares
subject to restrictions imposed by its articles of incorporation. The Sandy
Articles do not impose any such restrictions.
CLASSIFICATION OF THE BOARD OF DIRECTORS
Michigan and Delaware law permit (but do not require) classification of a
corporation's board of directors into one, two or three classes. The Sandy
Articles do not provide for the creation of more than one class of director. The
ADP Certificate also does not provide for the creation of more than one class of
director.
REMOVAL OF DIRECTORS
Under Michigan and Delaware law, unless the charter provides otherwise,
stockholders may generally remove directors with or without cause by a majority
vote. In Delaware, however, stockholders may remove members of classified boards
only for cause unless the certificate of incorporation provides otherwise. The
Sandy Articles do not provide otherwise. The ADP By-laws provide for removal of
directors at any time, with or without cause, by the vote of the holders of a
majority of the shares of ADP Common Stock.
VACANCIES ON THE BOARD OF DIRECTORS
Under both Michigan and Delaware law, unless otherwise provided in the
charter or by-laws, vacancies on the board of directors and newly created
directorships resulting from any increase in the authorized number of directors
may be filled by the remaining directors or by the shareholders. The Sandy
Articles and the Sandy By-laws do not provide otherwise. The ADP By-laws provide
that any vacancy may be filled by the majority vote of the remaining directors
at any regular or special meeting of the Board of Directors, or by the
stockholders at the next annual or at any special meeting called for such
purpose.
EXCULPATION OF DIRECTORS
Michigan and Delaware law have substantially similar provisions relating to
exculpation of directors. Each state's law permits, and the ADP Certificate and
the Sandy Articles provide that no director shall be personally liable to the
corporation or any of their respective stockholders for monetary damages for
breaches of fiduciary duty except where such exculpation is expressly
prohibited. Both Michigan and Delaware law prohibit exculpation (i) for a breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or that involve intentional misconduct
or knowing violation of law, (iii) for unlawful payments of dividends or (iv)
for any transaction from which the director derived an improper personal
benefit. Michigan also prohibits exculpation (x) for unlawful loans to the
directors, officers or employees of the corporation or its subsidiary and (y)
for unlawful distributions to shareholders during or after dissolution of the
corporation without paying or providing as required for the debts, obligations
and liabilities of the corporation. Delaware also prohibits exculpation for
unlawful redemptions of capital stock.
INDEMNIFICATION OF DIRECTORS, OFFICERS AND OTHERS
Both Michigan and Delaware law generally permit indemnification of
directors and officers for expenses incurred by them by reason of their position
with the corporation, if the director or officer has acted in good faith with
the reasonable belief that his conduct was in the best interest of the
corporation and not unlawful. However, Delaware law, unlike Michigan law, does
not permit a corporation to indemnify persons against judgments in actions
brought by or in the right of the corporation unless the Delaware Court of
Chancery
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approves the indemnification. The Sandy By-laws provide that its officers,
directors, employees and agents shall be indemnified to the fullest extent
authorized or permitted by the MBCA. The ADP Certificate provides that its
officers and directors shall be indemnified to the full extent permitted under
Delaware Law.
INTERESTED DIRECTOR TRANSACTION
Michigan and Delaware have substantially similar laws with regard to
interested director transactions. Both states provide that no transaction
between a corporation and one or more of its directors or officers or an entity
in which one or more of its directors or officers are directors or officers or
have a financial interest shall be void or voidable solely for that reason, or
solely because the director or officer is present at, participates in or votes
at the meeting of the board of directors or committee which authorizes the
transaction. In order that such a transaction not be found void or voidable, it
must, after disclosure of material facts, be approved by the disinterested
directors, a committee of disinterested directors or the stockholders, or the
transaction must be fair as to the corporation.
SALE, LEASE OR EXCHANGE OF ASSETS AND MERGERS
Michigan law requires approval of a merger by the holders of a majority of
the outstanding shares of the corporation entitled to vote on the plan of
merger, and, if a class or series is entitled to vote on the plan as a class, a
majority of these shareholders as well. For a sale, lease or exchange of all or
substantially all of a corporation's property in the usual and regular course of
its business, Michigan law does not require shareholder approval. However, where
such a sale, lease or exchange is not in the usual and regular course of
business Michigan law requires approval by holders of a majority of the
outstanding shares of the corporation entitled to vote. The Sandy Articles do
not provide otherwise.
Delaware law requires the approval of the directors and the vote of holders
of a majority of the outstanding stock entitled to vote thereon for the sale,
lease or exchange of all or substantially all of a corporation's property and
assets or a merger or consolidation of the corporation into any other
corporation, although the certificate of incorporation may require a higher
stockholder vote. The ADP Certificate does not require a higher vote.
AMENDMENTS TO CHARTER
Under both Michigan and Delaware law, charter amendments require the
approval of the holders of a majority of the outstanding stock and a majority of
each class of stock outstanding and entitled to vote thereon as a class, unless
the certificate of incorporation requires a greater proportion. The Sandy
Articles do not require a greater proportion. The ADP certificate does not
require a greater proportion.
AMENDMENTS TO BY-LAWS
Under Michigan law, the board or the shareholders may amend a corporation's
by-laws, unless the articles of incorporation reserve this power exclusively to
the shareholders. The Sandy Articles do not reserve this power exclusively to
the shareholders. Delaware law provides that stockholders may amend a
corporation's by-laws and, if provided in its charter, the board of directors
also has the power. The ADP Certificate confers amending power on the Board of
Directors subject to further amendment by the stockholders.
APPRAISAL RIGHTS
The rights of dissenting stockholders to obtain the fair value of their
shares (so-called "appraisal rights") are similarly limited under Michigan and
Delaware law. Michigan law allows appraisal rights by statute for a statutory
merger, a sale or exchange of all or substantially all of the property of the
corporation other than in the usual and regular course of business and for some
amendments to the articles of incorporation. However, Michigan law, similar to
Delaware law, does not allow appraisal rights where the corporation's shares are
listed on a national securities exchange or held of record by not less than
2,000 persons; nor are appraisal rights available in a transaction where
shareholders receive cash or shares that satisfy this standard. Given that the
Sandy Common Stock is listed on a national securities exchange, and that the ADP
Common Stock that
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Sandy shareholders are to receive in this Merger is listed on a national
securities exchange as well, no appraisal rights are available to Sandy
shareholders under Michigan law.
Under Delaware law, appraisal rights may be available in connection with a
statutory merger or consolidation in certain specific situations. Appraisal
rights are not available under Delaware law when a corporation is to be the
surviving corporation and no vote of its stockholders is required to approve the
merger. In addition, unless otherwise provided in the charter, no appraisal
rights are available under Delaware law to holders of shares of any class of
stock which is either: (a) listed on a national securities exchange or
designated as a national market system security on an inter-dealer quotation
system by the National Association of Securities Dealers, Inc. or (b) held of
record by more than 2,000 stockholders, unless such stockholders are required by
the terms of the merger to accept anything other than: (i) shares of stock of
the surviving corporation; (ii) shares of stock of another corporation which are
or will be so listed on a national securities exchange or designated as a
national market system security on an inter-dealer quotation system by the
National Association of Securities Dealers, Inc. or held of record by more than
2,000 stockholders; (iii) cash in lieu of fractional shares of such stock; or
(iv) any combination thereof. Appraisal rights are not available under Delaware
law in the event of sale, lease or exchange of all or substantially all of a
corporation's assets or the adoption of an amendment to its certificate of
incorporation, unless such rights are granted in the corporation's certificate
of incorporation. The ADP Certificate does not grant such rights. No appraisal
rights are available to ADP stockholders pursuant to this Merger.
"ANTI-TAKEOVER" STATUTES
Business Combination Statute. Chapters 7A and 7B of the MBCA restrict the
ability of certain persons to acquire control of a Michigan corporation. In
general, under Chapter 7A, "business combinations" (defined to include, among
other transactions, certain mergers, dispositions of assets or shares and
recapitalizations) between covered Michigan business corporations or their
subsidiaries and an "interested shareholder" (defined as the direct or indirect
beneficial owner of at least 10% of the voting power of a covered corporation's
outstanding shares) can be consummated only if approved by at least 90% of the
votes of each class of the corporation's shares entitled to vote and by at least
two-thirds of such voting shares not held by the interested shareholder or such
shareholder's affiliates, unless five years have elapsed after the person
involved became an "interested shareholder" and unless certain price and other
conditions are satisfied. The board of directors may exempt "business
combinations" with a particular "interested shareholder" by resolution adopted
prior to the time the "interested shareholder" attained that status. ADP is not
an "interested shareholder" as defined in Chapter 7A and therefore this
provision does not apply to the transactions contemplated by the Merger.
Delaware's business combination statute provides that, if a person acquires
15% or more of the stock of a Delaware corporation without the approval of the
board of directors of that corporation (an "interested stockholder") he may not
engage in certain transactions with the corporation for a period of three years.
The Delaware statute includes certain exceptions to this prohibition; for
example, if the board of directors approves the acquisition of stock or the
transaction prior to the time that the person became an interested stockholder,
or if the interested stockholder acquires 85% of the voting stock of the
corporation (excluding voting stock owned by directors who are also officers and
certain employee stock plans) in one transaction, or if the transaction is
approved by the board of directors and by the affirmative vote of two-thirds of
the outstanding voting stock which is not owned by the interested stockholder.
Control Share Acquisition. Under Chapter 7B of the MBCA, an entity that
acquires "Control Shares" of a corporation may vote the Control Shares on any
matter only if a majority of all shares, and of all non "Interested Shares," of
each class of shares entitled to vote as a class, approve such voting rights.
Interested Shares are shares owned by officers of a corporation,
employee-directors of a corporation and the entity making the Control Share
Acquisition. Control Shares are shares that, when added to shares already owned
by an entity, would give the entity voting power in the election of directors
over any of three thresholds: one-fifth, one-third and a majority. The effect of
the statute is to condition the acquisition of voting control of a corporation
on the approval of a majority of the pre-existing disinterested shareholders.
Chapter 7B provides that the acquisition of any shares of an issuing public
corporation does not constitute a control share
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acquisition if the issuing public corporation is a party to an agreement of
merger. Chapter 7B therefore does not apply to the transactions contemplated by
the Merger.
Delaware does not have a control share statute.
OTHER MATTERS
It is not expected that any matters other than those described in this
Proxy Statement/Prospectus will be brought before the Sandy Special Meeting. If
any other matters are presented, however, it is the intention of the persons
named in the Sandy proxy to vote the proxy in accordance with the discretion of
the persons named in such proxy.
LEGAL MATTERS
Certain legal matters with respect to the validity of the securities
offered hereby will be passed upon for ADP by James B. Benson, Esq., Corporate
Vice President and General Counsel of ADP. As of the date hereof, Mr. Benson
beneficially owns 15,881 shares of ADP Common Stock. Certain legal matters in
connection with the Merger will be passed upon for Sandy by Honigman Miller
Schwartz and Cohn, Detroit, Michigan. Partners of Honigman Miller Schwartz and
Cohn beneficially own an aggregate of 42,061 shares of Sandy Common Stock.
EXPERTS
The financial statements and the related financial statement schedule
incorporated in this Proxy Statement/Prospectus by reference from the ADP Annual
Report on Form 10-K for the fiscal year ended June 30, 1995 have been audited by
Deloitte & Touche LLP, independent auditors, as stated in their reports, which
are incorporated herein by reference, and have been so incorporated in reliance
upon the reports of such firm given upon their authority as experts in
accounting and auditing.
The financial statements and the related financial statement schedule
incorporated in this Proxy Statement/Prospectus by reference from the Sandy
Annual Report on Form 10-K for the fiscal year ended August 31, 1995 have been
audited by Deloitte & Touche LLP, independent auditors, as stated in their
report which is incorporated herein by reference, and have been so incorporated
in reliance upon the report of such firm given upon their authority as experts
in accounting and auditing.
Representatives of Deloitte & Touche LLP expect to be present at the Sandy
Special Meeting, and, while they do not plan to make a statement at the Sandy
Special Meeting, such representatives will be available to respond to
appropriate questions from shareholders in attendance.
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ANNEX A
<PAGE> 48
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ADP MERGERCO, INC.,
A MICHIGAN CORPORATION
AND
AUTOMATIC DATA PROCESSING, INC.,
A DELAWARE CORPORATION
AND
SANDY CORPORATION,
A MICHIGAN CORPORATION
DATED AS OF
AUGUST 22, 1995
<PAGE> 49
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 1
THE MERGER.............................................................................. 1
1.1 The Merger....................................................................... 1
1.2 Effect on Outstanding Shares of Sandy Common Stock; ADP Mergerco Common Stock.... 2
1.3 Exchange Ratio................................................................... 2
1.4 Rights of Holders of Sandy Common Stock; ADP Common Stock........................ 2
1.5 No Fractional Shares............................................................. 3
1.6 Procedure for Exchange of Stock.................................................. 3
1.7 Stock Options.................................................................... 4
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ADP MERGERCO AND ADP.................................. 5
2.1 Due Organization................................................................. 5
2.2 Due Authorization................................................................ 5
2.3 Assets and Liabilities........................................................... 5
2.4 Compliance with Laws............................................................. 6
2.5 Claims and Proceedings........................................................... 6
2.6 Financial Statements and Reports................................................. 6
2.7 Capitalization................................................................... 7
2.8 ADP Common Stock................................................................. 7
2.9 Options.......................................................................... 7
2.10 Additional Rights................................................................ 7
2.11 Dividends and Stock Purchases.................................................... 7
2.12 Shareholder Notice............................................................... 7
2.13 Brokers and Finders.............................................................. 7
2.14 Reorganization................................................................... 7
ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SANDY................................................. 8
3.1 Due Organization................................................................. 8
3.2 Due Authorization................................................................ 8
3.3 No Consents...................................................................... 8
3.4 Assets and Liabilities........................................................... 8
3.5 Properties....................................................................... 8
3.6 Licenses and Permits............................................................. 9
3.7 Intellectual Rights.............................................................. 9
3.8 Compliance with Laws............................................................. 9
3.9 Employee Plans................................................................... 9
3.10 Contracts and Agreements......................................................... 11
3.11 Claims and Proceedings........................................................... 11
3.12 Insurance........................................................................ 11
3.13 Financial Statements and Reports................................................. 11
3.14 Taxes............................................................................ 12
3.15 Business Relations............................................................... 12
3.16 Brokers and Finders.............................................................. 13
3.17 Notes and Accounts Receivable.................................................... 13
</TABLE>
i
<PAGE> 50
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3.18 Information Furnished to ADP..................................................... 13
3.19 Capitalization................................................................... 13
3.20 Options.......................................................................... 13
3.21 Sandy Dividends and Stock Purchases.............................................. 13
3.22 Subsidiaries..................................................................... 13
3.23 Customers........................................................................ 13
3.24 Submission to Vote............................................................... 14
3.25 Information to be Provided....................................................... 14
3.26 Shareholder Vote................................................................. 14
3.27 Labor Matters.................................................................... 14
3.28 Ordinary Course.................................................................. 14
3.29 Chapter 7A and Chapter 7B of MBCA................................................ 14
3.30 Pooling of Interests............................................................. 14
3.31 Fixed Assets; Sufficiency of Assets.............................................. 14
3.32 Leased Properties................................................................ 14
3.33 Licensed Properties.............................................................. 14
3.34 Loan Agreements, Debt Instruments and Guarantees................................. 15
3.35 Employees; Employment Practices; Compensation and Vacations...................... 15
3.36 Capital Expenditures............................................................. 15
3.37 Bank Accounts and Safe Deposit Boxes; Powers of Attorney......................... 15
3.38 Casualty Losses.................................................................. 15
3.39 Transactions with Affiliates..................................................... 15
3.40 Reorganization................................................................... 15
ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS..................................................... 16
4.1 Conduct of Sandy's Business...................................................... 16
4.2 Conduct of Business by ADP....................................................... 17
4.3 Shareholder Approval............................................................. 17
4.4 Other Agreements................................................................. 18
4.5 Notification of Certain Matters.................................................. 18
4.6 Access to Information............................................................ 18
4.7 Public Announcements............................................................. 18
ARTICLE 5
CLOSING................................................................................. 19
5.1 Conditions to ADP Mergerco's and ADP's Obligations............................... 19
5.2 Conditions to Sandy's Obligations................................................ 22
5.3 Closing and Effective Time....................................................... 23
ARTICLE 6
TERMINATION AND ABANDONMENT............................................................. 24
6.1 Termination and Abandonment...................................................... 24
6.2 Effect of Termination............................................................ 24
</TABLE>
ii
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<TABLE>
<CAPTION>
PAGE
----
<S> <C>
ARTICLE 7
MISCELLANEOUS........................................................................... 24
7.1 Entire Agreement................................................................. 24
7.2 Amendment........................................................................ 24
7.3 Waiver........................................................................... 24
7.4 Intentionally Left Blank......................................................... 24
7.5 Successors and Assigns........................................................... 24
7.6 Fees and Expenses................................................................ 24
7.7 Severability..................................................................... 25
7.8 Waiver........................................................................... 25
7.9 Notices.......................................................................... 25
7.10 Non-Survival of Representations, Warranties, and Covenants....................... 26
7.11 Fiduciary Duties................................................................. 26
7.12 Indemnification and Insurance.................................................... 26
7.13 Knowledge........................................................................ 27
7.14 Governing Law.................................................................... 27
7.15 Headings......................................................................... 27
7.16 Sections; Exhibits............................................................... 27
7.17 Number and Gender of Words....................................................... 27
7.18 Counterparts..................................................................... 27
7.19 Definitions...................................................................... 27
</TABLE>
EXHIBIT A -- Plan of Merger
SCHEDULES
<TABLE>
<S> <C>
SCHEDULE 3.3 -- Consents
SCHEDULE 3.6 -- Licenses
SCHEDULE 3.7 -- Intellectual Rights
SCHEDULE 3.9 -- Employee Plans
SCHEDULE 3.10 -- Contracts and Agreements
SCHEDULE 3.11 -- Sandy Claims and Proceedings
SCHEDULE 3.12 -- Insurance
SCHEDULE 3.13 -- Acquisition Expenses
SCHEDULE 3.14 -- Taxes
SCHEDULE 3.15 -- Business Relations
SCHEDULE 3.17 -- Notes and Accounts Receivables
SCHEDULE 3.20 -- Options
SCHEDULE 3.21 -- Sandy Dividends and Stock Purchases
SCHEDULE 3.22 -- Subsidiaries
SCHEDULE 3.23 -- Customers
SCHEDULE 3.32 -- Leased Properties
SCHEDULE 3.33 -- Licensed Properties
SCHEDULE 3.34 -- Debt Instruments
SCHEDULE 3.35 -- Employees
SCHEDULE 3.36 -- Capital Expenditures
SCHEDULE 3.37 -- Bank Accounts
</TABLE>
iii
<PAGE> 52
AGREEMENT AND PLAN OF MERGER
This Agreement and Plan of Merger (this "Agreement") is made and entered
into as of August 22, 1995, by and among ADP Mergerco, Inc., a Michigan
corporation ("ADP Mergerco"), Automatic Data Processing, Inc., a Delaware
corporation and owner of all of the outstanding capital stock of ADP Mergerco
("ADP") and Sandy Corporation, a Michigan corporation ("Sandy").
R E C I T A L S
WHEREAS, the respective boards of directors of ADP Mergerco and Sandy have
approved the merger of ADP Mergerco with and into Sandy (the "Merger") under the
Michigan Business Corporation Act (the "MBCA") in accordance with the provisions
of this Agreement and the Plan of Merger (the "Plan") in substantially the form
attached hereto as Exhibit A.
NOW, THEREFORE, in consideration of the respective representations,
warranties, covenants, agreements and conditions set forth in this Agreement,
and in order to set forth the terms and conditions of the Merger and the mode of
carrying the Merger into effect, the parties agree as follows:
ARTICLE 1
THE MERGER
1.1 The Merger.
(a) Upon the terms and subject to the conditions set forth in this
Agreement and the Plan, and in accordance with the MBCA, at the Effective Time
(such term and all other capitalized terms used herein having the respective
meanings set forth in Section 7.19 hereof), ADP Mergerco will be merged with and
into Sandy. As a result of the Merger, the separate corporate existence of ADP
Mergerco will cease and Sandy shall continue as the surviving corporation of the
Merger (the "Surviving Corporation") under its present corporate name.
(b) On the Closing Date, or as soon thereafter as practicable, the parties
will execute and file with the Department of Commerce of the State of Michigan,
a Certificate of Merger in accordance with the MBCA. The Merger will become
effective upon the filing of such Certificate of Merger in accordance with
Sections 131 and 707 of the MBCA (the "Effective Time"). At the Effective Time,
ADP Mergerco will be merged with and into Sandy.
(c) The Articles of Incorporation and Bylaws of ADP Mergerco in effect
immediately prior to the Effective Time shall be the Articles of Incorporation
and Bylaws of the Surviving Corporation until thereafter amended in accordance
with the provisions therein and as provided by the MBCA. The initial directors
of the Surviving Corporation shall be the directors of ADP Mergerco immediately
prior the Effective Time, in each case until their successors are elected and
qualified, and the initial officers of the Surviving Corporation shall be the
officers of ADP Mergerco immediately prior to the Effective Time, in each case
until their successors are duly elected and qualified.
(d) The parties will structure the Merger so that it will be accounted for
by ADP and Sandy as a pooling of interests in accordance with generally accepted
accounting principles ("GAAP") and applicable rules and regulations of the
Securities and Exchange Commission (the "SEC"). Subject to the terms and
conditions hereof, each party will use its best efforts and will take all
actions and do all things necessary or appropriate to obtain such accounting
treatment.
(e) The parties intend to structure the Merger so that it will be treated
for federal income tax purposes as a tax-free reorganization pursuant to Section
368 of the Internal Revenue Code and, subject to the terms and conditions
hereof, each party will take all reasonable actions to obtain such tax
treatment.
<PAGE> 53
1.2 Effect on Outstanding Shares of Sandy Common Stock; ADP Mergerco Common
Stock.
To effectuate the Merger, and subject to the terms and conditions of this
Agreement and the Plan, at the Effective Time:
(a) each share of Sandy common stock, par value $.01 per share (the "Sandy
Common Stock"), which is issued and outstanding immediately prior to the
Effective Time shall be converted into and exchangeable for shares of common
stock, par value $.10 per share, of ADP ("ADP Common Stock") at the Exchange
Ratio and ADP shall issue to holders of Sandy Common Stock shares of ADP Common
Stock based on the Exchange Ratio in exchange for the outstanding shares of
Sandy Common Stock, and pay cash in lieu of any fractional share as provided in
Section 1.5 hereof;
(b) each share of Sandy Common Stock held as treasury stock of Sandy
immediately prior to the Effective Time shall be canceled, retired and cease to
exist, and no exchange or payment shall be made in respect thereof; and
(c) each share of common stock, par value $.01 per share, of ADP Mergerco
which is issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable share
of common stock of the Surviving Corporation.
1.3 Exchange Ratio.
(a) If the Average ADP Stock Price is equal to or greater than $58.764 and
less than or equal to $71.823, then the Exchange Ratio shall be (rounded to the
seventh decimal place) (i) $12.00, divided by (ii) the Average ADP Common Stock
Price (the "Exchange Ratio"). The "Average ADP Common Stock Price" means the
average of the daily closing sales prices of ADP Common Stock as reported on the
New York Stock Exchange ("NYSE") (as reported by The Wall Street Journal or, if
not reported thereby, as reported by another authoritative source as mutually
agreed by ADP and Sandy) for the 10 consecutive full trading days ending on the
Determination Date. The "Determination Date" shall mean the third business day
immediately prior to the later of (i) the date (as originally scheduled in the
notice mailed to Sandy's shareholders, and without giving effect to any
adjournments or postponements) of the Sandy meeting of shareholders to obtain
the shareholder approval referred to in Section 4.3 hereof and (ii) the date on
which the last regulatory approval required to consummate the Merger has been
obtained and all statutory or regulatory waiting periods in respect thereof have
expired or been terminated.
(b) If the Average ADP Stock Price is less than $58.764, then the Exchange
Ratio shall be 0.2042054.
(c) If the Average ADP Stock Price is greater than $71.823, then the
Exchange Ratio shall be 0.1670771.
(d) If, from and including the date hereof through the Effective Time,
shares of ADP Common Stock shall be changed into a different number of shares or
a different class of shares by reason of any reclassification, recapitalization,
split-up, combination, exchange of shares or readjustment, or if a stock
dividend thereon shall be declared with a record date within such period, then
the computation of the Average ADP Common Stock Price shall be appropriately and
proportionately adjusted.
1.4 Rights of Holders of Sandy Common Stock; ADP Common Stock.
(a) At and after the Effective Time and until surrendered for exchange,
each outstanding stock certificate which immediately prior to the Effective Time
represented shares of Sandy Common Stock shall be deemed for all purposes,
except as contemplated by Section 1.6(c), to evidence ownership of and to
represent the number of whole shares of ADP Common Stock into which such shares
of Sandy Common Stock shall have been converted, and the record holder of such
outstanding certificate shall, after the Effective Time, be entitled to vote the
shares of ADP Common Stock into which such shares of Sandy Common Stock shall
have been converted on any matters on which the holders of record of ADP Common
Stock, as of any date subsequent to the Effective Time, shall be entitled to
vote. In any matters relating to such certificates theretofore evidencing shares
of outstanding Sandy Common Stock, ADP may rely conclusively upon the
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<PAGE> 54
record of shareholders maintained by Sandy containing the names and addresses of
the holders of record of Sandy Common Stock immediately prior to the Effective
Time.
(b) At and after the Effective Time, ADP shall reserve a sufficient number
of authorized but non-outstanding shares of ADP Common Stock for issuance or
exchange in connection with the conversion of Sandy Common Stock into ADP Common
Stock.
1.5 No Fractional Shares. No fractional shares of ADP Common Stock, and no
certificates representing such fractional shares, shall be issued upon the
surrender for exchange of certificates representing Sandy Common Stock. In lieu
of any fractional share, ADP shall pay to each holder of Sandy Common Stock who
otherwise would be entitled to receive a fractional share of ADP Common Stock an
amount of cash (without interest) determined by multiplying (a) the Average ADP
Common Stock Price times (b) the fractional share interest to which such holder
would otherwise be entitled.
1.6 Procedure for Exchange of Stock.
(a) After the Effective Time, holders of certificates theretofore
evidencing outstanding shares of Sandy Common Stock, upon surrender of such
certificates to Chemical-Mellon Shareholder Services, as exchange agent (in such
capacity, the "Exchange Agent"), shall be entitled to receive, (i) certificates
representing the number of whole shares of ADP Common Stock into which shares of
Sandy Common Stock theretofore represented by the certificates so surrendered
shall have been converted as provided in Section 1.2(a) hereof and (ii) cash
payments in lieu of fractional shares, if any, as provided in Section 1.5
hereof. As soon as practicable after the Effective Time, ADP shall cause the
Exchange Agent to mail appropriate and customary transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Sandy Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent) to each
holder of Sandy Common Stock of record as of the Effective Time advising such
holder of the effectiveness of the Merger and the procedure for surrendering to
the Exchange Agent outstanding certificates formerly evidencing Sandy Common
Stock in exchange for new certificates for ADP Common Stock and cash in lieu of
fractional shares. ADP shall not be obligated to deliver or cause the Exchange
Agent to deliver the consideration to which any former holder of shares of Sandy
Common Stock is entitled as a result of the Merger until such holder surrenders
the certificate or certificates representing such shares for exchange as
provided in such transmittal materials and this Section 1.6(a). Upon surrender
to the Exchange Agent of a certificate formerly representing shares of Sandy
Common Stock, together with duly executed transmittal materials, ADP shall
promptly (i) issue or cause to be issued to the persons entitled thereto a
certificate representing the number of whole shares of ADP Common Stock that
such persons are entitled to receive pursuant to Section 1.2 hereof and (ii)
distribute or cause to be distributed to the persons entitled thereto cash in
lieu of fractional shares in the amount determined pursuant to Section 1.5
hereof. Upon surrender, each certificate theretofore evidencing Sandy Common
Stock shall be cancelled. If any certificate evidencing shares of ADP Common
Stock is to be issued to a person other than the person in whose name the
certificate surrendered is registered, it shall be a condition to the issuance
of ADP Common Stock that the certificate so surrendered shall be properly
endorsed or be otherwise in proper form for transfer and that the person
requesting such exchange shall pay all transfer or other taxes required by
reason of the payment to a person other than the registered holder of the
certificate surrendered (or establish to the satisfaction of ADP that such tax
has been paid or is not applicable).
(b) At or promptly after the Effective Time, ADP shall deposit with the
Exchange Agent, for exchange in accordance with this Section 1.6, certificates
representing the shares of ADP Common Stock and cash in lieu of fractional
shares (such certificates and cash are hereinafter referred to as the "Exchange
Fund") to be issued or paid by ADP pursuant to this Article 1 in connection with
the Merger. After the Effective Time, ADP shall, on each payment or distribution
date, tender to the Exchange Agent as an addition to the Exchange Fund all
dividends and other distributions applicable to certificates held in the
Exchange Fund.
(c) Until outstanding certificates formerly representing Sandy Common Stock
are surrendered as provided in Section 1.6(a) hereof, no dividend or
distribution payable to holders of record of ADP Common Stock shall be paid to
any holder of such outstanding certificates, but upon surrender of such
outstanding certificates by such holder there shall be paid to such holder out
of the Exchange Fund the amount of any
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dividends or distributions (without interest) theretofore payable with respect
to such whole shares of ADP Common Stock, but not paid to such holder, and which
dividends or distributions had a record date occurring subsequent to the
Effective Time.
(d) After the Effective Time, there shall be no further registration of
transfers on the records of Sandy of outstanding certificates formerly
representing shares of Sandy Common Stock, and if a certificate formerly
representing such shares is presented to Sandy or ADP, it shall be forwarded to
the Exchange Agent for cancellation and exchange for certificates representing
shares of ADP Common Stock as herein provided.
(e) All shares of ADP Common Stock and cash for any fractional shares
issued and paid upon the surrender for exchange of certificates theretofore
evidencing shares of Sandy Common Stock in accordance with the above terms and
conditions shall be deemed to have been issued and paid in full satisfaction of
all rights pertaining to the underlying shares of Sandy Common Stock.
(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof or any ADP Common Stock) that remains unclaimed by the
holders of Sandy Common Stock for 12 months after the Effective Time shall be
returned or repaid to ADP. Any holders of certificates theretofore evidencing
shares of Sandy Common Stock who have not theretofore complied with this Section
1.6 shall thereafter look only to ADP for payment of their shares of ADP Common
Stock, cash in lieu of fractional shares and any unpaid dividends and
distributions on the ADP Common Stock deliverable in respect of each share of
Sandy Common Stock that such holder holds as determined pursuant to this
Agreement, in each case, without any interest thereon. If outstanding
certificates for shares of Sandy Common Stock are not surrendered or the payment
for them not claimed prior to the date on which such payments would otherwise
escheat to or become the property of any governmental unit or agency, the
unclaimed items shall, to the extent not prohibited by abandoned property and
any other applicable law, become the property of ADP (and to the extent not in
its possession shall be paid over to it), free and clear of all claims or
interest of any person previously entitled to such claims. Notwithstanding the
foregoing, none of ADP, the Exchange Agent or any other person shall be liable
to any former holder of Sandy Common Stock for any amount delivered to a public
official pursuant to applicable abandoned property, escheat or similar laws.
(g) In the event any certificate for Sandy Common Stock shall have been
lost, stolen or destroyed, the Exchange Agent shall issue and pay in exchange
for such lost, stolen or destroyed certificate, upon the making of an affidavit
of that fact by the holder thereof, such shares of ADP Common Stock and cash for
fractional shares, if any, as may be required pursuant to this Agreement,
provided, however, that ADP, in its discretion and as a condition precedent to
the issuance and payment thereof, may require the holder of such lost, stolen or
destroyed certificate to deliver a bond in such sum as it may direct as
indemnity against any claim that may be made against ADP, Sandy, the Exchange
Agent or any other party with respect to the certificate alleged to have been
lost, stolen or destroyed.
1.7 Stock Options.
(a) All stock options outstanding at the Effective Time (i) under Sandy's
1985 Performance Incentive Plan, 1989 Performance Incentive Plan or Director
Stock Option Plan or (ii) pursuant to the nonqualified stock option agreement
dated August 8, 1988 between Sandy and Raymond Ketchledge or the amended
nonqualified stock option agreement dated September 1, 1992 between Sandy and
Raymond Ketchledge (collectively, the "Sandy Options") shall, by virtue of the
Merger and without any action on the part of the holders of such options, be
converted into and become options to purchase shares of ADP Common Stock
("Substitute Options") as follows:
(i) each Substitute Option will cover the number of shares of ADP
Common Stock (rounded down to the nearest whole share) which the holder of
the Sandy Option being replaced would have been entitled to receive in the
Merger had such holder exercised, immediately prior to the Effective Time,
the Sandy Option which the Substitute Option is replacing;
(ii) each Substitute Option will be exercisable for a purchase price
per share (rounded down to the nearest cent) determined by dividing (x) the
purchase price per share of Sandy Common Stock payable upon exercise of the
Sandy Option which the Substitute Option replaced, multiplied by the number
of
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shares of Sandy Common Stock covered by the Sandy Option, by (y) the number
of shares of ADP shares of Sandy Common Stock covered by the Substitute
Option, as determined in accordance with clause (i) above; and
(iii) each Substitute Option will be exercisable, over each time
period during which the Sandy Option it replaced would have been
exercisable (taking into account any acceleration in vesting brought about
by the Merger), with respect to that number of shares of ADP Common Stock
(rounded down to the nearest whole share) determined by multiplying (x) the
number of shares of Sandy Common Stock with respect to which the Sandy
Option would have been exercisable during that time period by (y) a
fraction, the numerator of which is the total number of shares of ADP
Common Stock covered by the Substitute Option and the denominator of which
is the total number of shares of Sandy Common Stock covered by the replaced
Sandy Option.
(b) Subject to the foregoing requirements, the terms of each Substitute
Option will be substantially equivalent to the terms of the Sandy Option that it
replaces.
ARTICLE 2
REPRESENTATIONS AND WARRANTIES OF ADP MERGERCO AND ADP
ADP Mergerco and ADP hereby jointly and severally represent and warrant to
Sandy as follows (with the understanding that Sandy is relying materially on
each representation and warranty in entering into and performing this
Agreement):
2.1 Due Organization. ADP Mergerco and ADP are corporations validly
existing and in good standing under the laws of the State of Michigan and the
State of Delaware, respectively, and have full power and authority and are
entitled to own or lease their properties and to carry on their business as, and
in the places where, such properties are owned or leased and such business is
conducted.
2.2 Due Authorization. ADP Mergerco and ADP have full power and authority
to enter into and perform their obligations under this Agreement and each
agreement, instrument and document required to be executed by ADP Mergerco or
ADP in accordance with this Agreement. The execution, delivery, and performance
by ADP Mergerco and ADP of this Agreement and the agreements, documents, and
instruments required to be executed and delivered by ADP Mergerco and ADP in
accordance with this Agreement (i) have been duly authorized by the Boards of
Directors of ADP Mergerco and ADP, respectively, and (ii) do not require the
consent of the shareholders of ADP. This Agreement has been and the agreements,
documents, and instruments required to be executed and delivered by ADP Mergerco
and ADP in accordance with this Agreement on the Closing Date will have been
duly and validly executed and delivered by ADP Mergerco and ADP and constitute,
or will constitute, valid and binding obligations of ADP Mergerco and ADP,
enforceable against ADP Mergerco and ADP in accordance with their respective
terms, except that (i) such validity, binding effect and enforceability may be
subject to applicable bankruptcy, insolvency, fraudulent transfer, or other
laws, now or hereafter in effect, affecting creditors' rights generally, and
(ii) the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses (including commercial
reasonableness, good faith, and fair dealing) and to the discretion of the court
before which any proceeding therefor may be brought. None of the execution,
delivery or performance of this Agreement or any other agreement, instrument, or
document to be executed by ADP Mergerco or ADP in accordance with this Agreement
will (a) violate any foreign, federal, state, county, or local law, rule, or
regulation or any order, writ, injunction, or decree of any court, agency or
governmental body applicable to ADP Mergerco or ADP or their properties, (b)
violate or conflict with, or permit the cancellation of, any agreement to which
ADP Mergerco or ADP is a party, or by which either of them or any of their
properties are bound, or result in the creation of any lien, security interest,
charge, or encumbrance upon any of such properties, or (c) violate or conflict
with any provision of the Certificate of Incorporation or the Bylaws of either
ADP Mergerco or ADP.
2.3 Assets and Liabilities. ADP has good and marketable title to, or a
valid leasehold or other possessory interest in, the properties and assets (the
"Assets") owned or used by it, located on its premises, or
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shown on the ADP Financial Statements or acquired after March 31, 1995, except
for properties and assets disposed of in the ordinary course of business,
consistent with past practice, since March 31, 1995. ADP does not have any
obligations or liabilities, absolute or contingent, including without
limitation, mortgages, liens, pledges, charges, encumbrances or other third
party security interests ("Liabilities"), except for those Liabilities which
have been (i) reflected and appropriately reserved against in accordance with
GAAP consistently applied in the ADP Financial Statements or (ii) incurred in
the ordinary course of business, consistent with past practice, after March 31,
1995.
2.4 Compliance with Laws. To ADP's knowledge, ADP and its use and
occupancy of its Assets and properties, wherever located, have complied, and are
complying, with all foreign, federal, state, county, and local laws,
regulations, and orders that are applicable to ADP's business, and ADP has filed
with the proper authorities all statements and reports required by the laws,
regulations, and orders to which it or its properties or operations are subject,
except where such noncompliance or failure to file, individually and/or in the
aggregate, would not have a MAE. When used with respect to ADP or Sandy, "MAE"
means any material adverse effect on the financial condition, assets,
liabilities, results of operations or business of ADP and its subsidiaries or
Sandy and its subsidiary, as the case may be, in each case taken as a whole. No
claim has been made by any governmental authority (and, to the best of ADP's
knowledge, no such claim is anticipated) to the effect that the business
conducted by ADP fails to comply with any law, rule, regulation, or ordinance,
except for any such noncompliance which would not have a MAE. Without limiting
the foregoing, ADP has complied with all judicial and governmental requirements
relating to pollution and environmental control and regulation and employee
health and safety including, but not limited to, laws, rules, regulations,
ordinances, and orders related to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport, handling, presence, emission,
discharge, release, or threatened release into or on the air, land, surface,
water, groundwater, personal property, or structures, wherever located, of any
contaminants, hazardous materials, hazardous or toxic substances, or wastes as
defined under any federal, state, or local laws, regulations, or ordinances,
except for any such noncompliance which would not have a MAE.
2.5 Claims and Proceedings. There are no claims, actions, suits,
proceedings, or investigations pending or, to the best of ADP Mergerco's and
ADP's knowledge, threatened against or affecting ADP Mergerco or ADP or any of
their Assets, at law or in equity, or before or by any court, municipal, or
other governmental department, commission, board, agency, or instrumentality,
except (a) those claims, actions, suits, proceedings or investigations which, if
concluded in a manner adverse to ADP or ADP Mergerco, would not have a MAE or
(b) as set forth in any of the ADP SEC Filings or the ADP Financial Statements.
No inquiry, action, or proceeding has been instituted or, to the best of ADP
Mergerco's and ADP's knowledge, threatened to restrain or prohibit the carrying
out of the transactions contemplated by this Agreement or to challenge the
validity of any part of such transactions or seeking damages on account thereof.
2.6 Financial Statements and Reports. ADP has previously furnished Sandy
with true and correct copies (with exhibits) of (a) its Annual Report on Form
10-K for the fiscal year ended June 30, 1994, as filed with the SEC; (b) its
Quarterly Reports on Form 10-Q for the three, six and nine months ended
September 30, 1994, December 31, 1994 and March 31, 1995, as filed with the SEC;
(c) the definitive proxy statements relating to all meetings of its shareholders
during the three years preceding the date of this Agreement; and (d) all other
reports and registration statements filed by ADP with the SEC since June 30,
1992 (collectively, the "ADP SEC Filings"). As of their respective dates, the
ADP SEC Filings did not contain any untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, except any such
statement or omission therein which has been corrected or otherwise disclosed or
updated in a subsequent filing with the SEC. Since June 30, 1991, ADP has filed
with the SEC all reports and registration statements and all other filings
required to be filed with the SEC under the rules and regulations of the SEC.
ADP has also delivered to Sandy a complete and correct copy of ADP's audited
financial statements for the three year period ended June 30, 1994, audited by
Deloitte & Touche, LLP, certified public accountants, and ADP's unaudited
balance sheets, statements of cash flows, and earnings statements at and for the
three-month, six-month and nine-month periods ended September 30, 1994, December
31, 1994 and March 31, 1995 (which unaudited balance sheets, statements of cash
flows, and earnings statements may be subject to normal
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recurring year-end and audit adjustments, which, in the aggregate are not
reasonably expected to be material) (the "ADP Financial Statements"). The ADP
Financial Statements have been prepared in accordance with GAAP applied on a
consistent basis with prior periods and each of the ADP Financial Statements
fairly presents in all material respects the financial position, results of
operations, or changes in financial position, as the case may be, of ADP as of
the indicated date or for the indicated period. Since June 30, 1994, there has
been no material adverse change in the financial condition, assets, liabilities,
results of operations or business of ADP and its subsidiaries taken as a whole.
2.7 Capitalization. The authorized capital stock of ADP consists of (i)
500,000,000 shares of ADP Common Stock, of which 143,826,080 shares were issued
and outstanding as of July 31, 1995 and (ii) 300,000 shares of preferred stock,
par value $1.00 per share, of which no shares are issued and outstanding as of
the date hereof. All issued and outstanding shares of ADP Common Stock were
validly issued and are fully paid and non-assessable and free of preemptive
rights, and 13,291,336 shares were held by ADP in its treasury as of July 31,
1995.
2.8 ADP Common Stock. The shares of ADP Common Stock to be delivered in
connection with the Merger (i) have been duly authorized and when delivered
pursuant to this Agreement, will be validly issued, fully paid and
non-assessable, and (ii) will be covered by an effective registration statement
on Form S-4, pursuant to which the issuance of such shares of ADP Common Stock
to Sandy's shareholders will be registered.
2.9 Options. Except (i) as disclosed in the ADP SEC Filings, (ii) for
stock options granted after March 31, 1995 in the ordinary course of business
pursuant to ADP's stock option plans, and (iii) for commitments to issue an
immaterial number of shares of ADP Common Stock in connection with acquisitions
completed prior to the date hereof, there are no outstanding options, rights
(including stock appreciation and similar rights), warrants, calls or
commitments (including, without limitation, any statutory or other legal
commitments) relating to ADP's capital stock or obligating ADP to issue or
dispose of any shares of its capital stock.
2.10 Additional Rights. Except as contemplated hereby, the consummation of
the Merger will not obligate ADP to issue any additional equity interest in ADP,
to declare any dividend or make any distributions of any property or assets, or
to redeem, purchase, acquire, or offer to acquire any shares of capital stock of
ADP in accordance with the Certificate of Incorporation of ADP or any contract
or agreement to which ADP is a party.
2.11 Dividends and Stock Purchases. Except (i) as disclosed in the ADP SEC
Filings, (ii) for regular quarterly dividends and (iii) for repurchases of
shares pursuant to ADP's Board of Directors' approved repurchase program, from
March 1, 1994 through the date of this Agreement, ADP has not declared, set
aside or made payment of any dividend or distribution of assets to the holders
of ADP Common Stock, nor has it repurchased any shares of ADP Common Stock.
2.12 Shareholder Notice. The Registration Statement will not, at the time
it becomes effective, contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading, except that no
representation is made by ADP with respect to information supplied by Sandy or
any Affiliate thereof which relates to Sandy or any Affiliate or associate of
Sandy.
2.13 Brokers and Finders. ADP has not caused any liability to be incurred
to any finder, broker, or sales agent in connection with the execution,
delivery, or performance of, or the transactions contemplated by, this
Agreement.
2.14 Reorganization. It is the present intention of ADP to continue at
least one significant historic business line of Sandy after the Merger, or to
use at least a significant portion of Sandy's historic business assets in a
business after the Merger, in each case within the meaning of Treas. Reg sec.
1.368-1(d).
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ARTICLE 3
REPRESENTATIONS AND WARRANTIES OF SANDY
Sandy hereby represents and warrants to ADP Mergerco and ADP as follows
(with the understanding that ADP Mergerco and ADP are relying materially on each
such representation and warranty in entering into and performing this Agreement)
(for purposes of this Article 3, the term "Sandy" shall mean Sandy Corporation
and its subsidiary):
3.1 Due Organization. Sandy is a corporation validly existing and in good
standing under the laws of the State of Michigan, and has full power and
authority to own or lease its properties and to carry on its business as, and in
the places where, such properties are owned or leased and such business is now
conducted. Sandy is duly qualified as a foreign corporation to do business, and
is in good standing, in each jurisdiction in which the character of its
properties owned or leased or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a MAE. Sandy has previously delivered to ADP true and correct copies of
Sandy's Articles of Incorporation and Bylaws as in effect on the date hereof.
3.2 Due Authorization. Sandy has full power and authority to enter into
and perform its obligations under this Agreement and each agreement, instrument,
and document required to be executed by Sandy in accordance with this Agreement,
subject to approval of its shareholders. This Agreement has been, and the
agreements, documents and instruments required to be executed and delivered by
Sandy in accordance with this Agreement on the Closing Date will have been, duly
and validly authorized, executed and delivered by Sandy, and constitute, or will
constitute, valid and binding obligations of Sandy, enforceable against Sandy in
accordance with their respective terms, except that (i) such validity, binding
effect and enforceability may be subject to applicable bankruptcy, insolvency,
fraudulent transfer, or other laws, now or hereafter in effect, affecting
creditors' rights generally, and (ii) the remedy of specific performance and
injunctive and other forms of equitable relief may be subject to equitable
defenses (including commercial reasonableness, good faith, and fair dealing) and
to the discretion of the court before which any proceeding therefor may be
brought. None of the execution, delivery, or performance of this Agreement or
any other agreement, instrument, or document to be executed by Sandy in
accordance with this Agreement will, (a) violate any foreign, federal, state,
county, or local law, rule, or regulation or any order, writ, injunction, or
decree of any court, agency or governmental body applicable to Sandy or any of
their properties, (b) violate or conflict with, or permit the cancellation of,
any agreement to which Sandy is a party, or by which it or any of its properties
are bound, or result in the creation of any lien, security interest, charge, or
encumbrance upon any of such properties, or (c) violate or conflict with any
provision of the Articles of Incorporation or the Bylaws of Sandy.
3.3 No Consents. Except as described on Schedule 3.3 and except for (a)
the approval of the transaction by Sandy's shareholders under the provisions of
the MBCA, (b) filings made pursuant to the Exchange Act and the rules and
regulations promulgated thereunder, (c) the filing of premerger notification,
and the expiration or early termination of the waiting period required under,
the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR")
and (d) the filing of a Certificate of Merger with the Department of Commerce of
the State of Michigan, no consent or approval of any governmental agency and no
material consent or approval of any third party is required in order for Sandy
to enter into and perform this Agreement or any agreement, instrument, or
document executed or to be executed by Sandy in accordance with this Agreement.
3.4 Assets and Liabilities. Sandy has good and marketable title to, or a
valid leasehold or other possessory interest in, the Assets owned or used by it,
located on its premises, or shown on the Sandy Financial Statements or acquired
after May 31, 1995, except for properties and assets disposed of in the ordinary
course of business, consistent with past practice, since May 31, 1995. Sandy
does not have any Liabilities, except for those Liabilities which have been (i)
reflected and appropriately reserved against in accordance with GAAP
consistently applied in the Financial Statements or (ii) incurred in the
ordinary course of business, consistent with past practice, after May 31, 1995.
3.5 Properties. The operation of the properties and business of Sandy in
the manner in which they are now operated does not violate any zoning
ordinances, municipal regulations, or other rules, regulations, or
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laws, except for violations which would not have a MAE. No covenants, easements,
rights-of-way, or regulations impair in any material respect the use of Sandy's
Assets for the purposes for which they are now operated. There are no pending
or, to the best of Sandy's knowledge, threatened condemnation or similar
proceedings or assessments affecting its Assets.
3.6 Licenses and Permits. Sandy has obtained all licenses, permits and
other authorizations, and has taken all actions, necessary to comply in all
material respects with applicable laws or governmental regulations in connection
with its business as now conducted. Schedule 3.6 lists all foreign, federal,
state, county, and local governmental licenses, authorizations, accreditations,
certificates, permits, and orders held or applied for by Sandy which are
material to the conduct of the business of Sandy, taken as a whole. Sandy has
complied, and is complying, in all material respects with the terms and
conditions of all such licenses, authorizations, accreditations, certificates,
permits, and orders, and no material violation of any such licenses,
authorizations, accreditations, certificates, permits, or orders, or the laws or
rules governing the issuance or continued validity thereof, has occurred. No
claim has been made by any governmental authority (and, to the best knowledge of
Sandy, no such claim is anticipated) to the effect that any license,
authorization, accreditation, certificate, permit, or order in addition to those
listed on Schedule 3.6 is necessary with respect to the business conducted by
Sandy.
3.7 Intellectual Rights. Schedule 3.7 lists all trademarks and service
marks (registered or unregistered), trade names, patents and copyrights and
applications therefor, and other intellectual property owned or used by or
registered in the name of Sandy or in which Sandy has any right, license, or
interest which are material to the business conducted by Sandy. Except for the
documents listed on Schedule 3.7, Sandy is not a party to any license
agreements, either as licensor or licensee, with respect to any trademarks,
service marks, trade names, patents or copyrights or applications therefor,
trade secrets, know-how, processes or other intellectual property which are
material to the business conducted by Sandy. Sandy has good and marketable title
to or the right to use such assets and all inventions, processes, designs,
formulae, trade secrets, and know-how necessary for the conduct of Sandy's
business, without the payment of any royalty or similar payment. To the best of
Sandy's knowledge, Sandy is not infringing any patent, trademark, service mark,
trade name, copyright, trade secret, know-how, process or other intellectual
property rights of others and there are no infringements by others of any such
rights owned by or licensed to Sandy. No patents, trademarks and service marks,
trade names, copyrights, trade secrets, know-how, processes or other
intellectual property rights or interest therein or license thereof, other than
those set forth in Section 3.7, are necessary for the conduct of Sandy's
business as now conducted.
3.8 Compliance with Laws. To Sandy's knowledge, subject to the matters
discussed in Section 3.14 hereof, Sandy and its use and occupancy of its Assets
and properties, wherever located, have complied, and are complying, with all
foreign, federal, state, county, and local laws, regulations, and orders that
are applicable to its business and has filed with the proper authorities all
statements and reports required by the laws, regulations, and orders to which it
or its properties or operations are subject, except where such noncompliance or
failure to file, individually and/or in the aggregate, would not have a MAE. No
claim has been made by any governmental authority (and, to the best of Sandy's
knowledge, no such claim is anticipated) to the effect that the business
conducted by Sandy fails to comply with any law, rule, regulation, or ordinance,
except for any such noncompliance which would not have a MAE. Without limiting
the foregoing, Sandy has complied with all judicial and governmental
requirements relating to pollution and environmental control and regulation and
employee health and safety including, but not limited to, laws, rules,
regulations, ordinances, and orders related to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport, handling, presence,
emission, discharge, release, or threatened release into or on the air, land,
surface, water, groundwater, personal property, or structures, wherever located,
of any contaminants, hazardous materials, hazardous or toxic substances, or
wastes as defined under any federal, state, or local laws, regulations, or
ordinances, except for any such noncompliance which would not have a MAE.
3.9 Employee Plans.
(a) Sandy does not maintain or have any actual or potential liability or
obligation with respect to any employee benefit, policy, arrangement or
agreement (including without limitation, any savings, retirement,
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fringe benefit, stock option, bonus, incentive compensation, deferred
compensation, excess, supplemental executive compensation, employee stock
purchase, vacation, sickness or disability, severance or separation, restricted
stock plan, policy or arrangement) or employment or consulting contracts or
agreements (including without limitation, any "employee benefit plan," as
defined in the Employee Retirement Income Security Act of 1974, as amended
("ERISA")), whether or not subject to ERISA, whether written or oral ("Employee
Plans"), other than those set forth on Schedule 3.9(a). With respect to each
Employee Plan, Sandy has heretofore delivered to ADP true and complete copies of
the following documents, where applicable: (i) the text of the Employee Plan
(including any amendments thereto) and of any trust or insurance contract
maintained in connection therewith, (ii) the three most recent annual reports
(IRS Form 5500 series), together with required schedules filed with the IRS and
any financial statements or opinions required under ERISA, (iii) the most recent
summary plan description and all modifications, and (iv) the most recent
determination letter issued by the Internal Revenue Service ("IRS").
(b) Neither Sandy nor any corporation or other trade or business which is
or has been under common control with Sandy (as determined under Section 414(b),
(c), (m) or (o) of the Internal Revenue Code of 1986, as amended (the "Code"))
has ever maintained, contributed to or incurred any obligation or liability with
respect to (i) any "multiemployer plan", as defined in Section 3(37) or
4001(a)(3) of ERISA or Section 414(f) of the Code (either as an employer or a
joint employer) or (ii) any other plan covered by Title IV of ERISA or subject
to the requirements of Section 412 of the Code and Sandy has no actual or
contingent liability under Title IV of ERISA or Section 412 of the Code to any
person or entity, including the Pension Benefit Guaranty Corporation, the IRS,
any such plan or the participants (or their beneficiaries) in any such plan and
there is no basis for any such liability as the result of or after the
consummation of the transactions contemplated by this Agreement.
(c) Each Employee Plan that is intended to be qualified under Section 401
of the Code is, to Sandy's best knowledge, so qualified and has been so
qualified during the period from its adoption to date, and each trust forming a
part thereof is exempt from tax pursuant to Section 501 of the Code and all
contributions made thereto have been deductible by Sandy. A favorable
determination letter has been issued by the IRS with respect to each such plan
and trust, which letter includes a determination with respect to the
qualification of the plan under the Tax Reform Act of 1986 and subsequent tax
legislation (or if such letter has not yet been received, an application has
been made to the IRS for such determination within the remedial amendment period
so that such letter will have retroactive effect to the effective date of such
legislation) and there are no facts and nothing has occurred that would
adversely affect the qualification of such plan.
(d) No Employee Plan is a "voluntary employees' beneficiary association"
within the meaning of Section 501(c)(9) of the Code and there have been no other
"welfare benefit funds" within the meaning of Section 419 of the Code relating
to Employees. Except as set forth on Schedule 3.9(d), no Employee Plan provides
health, dental, life insurance or other welfare benefits (whether on an insured
or self-insured basis) to Employees after their retirement or other termination
of employment from Sandy (other than continuation coverage required under
Section 601 through 609 of ERISA and Section 4980B of the Code which may be
purchased at the sole expense of the Employee).
(e) To Sandy's best knowledge, each Employee Plan has, in all material
respects, been maintained and administered in compliance with its terms and with
the requirements prescribed by any and all statutes, orders, rules and
regulations, including, but not limited to, ERISA and the Code, which are
applicable to such plan and there is no audit, investigation, dispute,
arbitration, claim, suit, or grievance, pending or threatened, involving an
Employee Plan (other than routine claims for benefits), and, to the best
knowledge of Sandy, there is no basis for such a claim. To Sandy's best
knowledge, there have been no "prohibited transactions" (within the meaning of
Section 4975 of the Code or Section 406 of ERISA) with respect to any Employee
Plan.
(f) All contributions have been, or prior to the Effective Time will be,
made under, and all obligations to Employees (including vacation entitlements)
have been, or prior to the Effective Time will be, satisfied with respect to,
each Employee Plan for all periods up to the Effective Time, except as shown in
the Financial
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Statements. Except as disclosed in Schedule 3.9(f), the costs of all Employee
Plans are fully accrued and reflected in the Financial Statements.
(g) Except as otherwise indicated on Schedule 3.9(g), none of the Employee
Plans provides for the payment of separation, severance, termination or
similar-type benefits to any person or the acceleration of any rights to
benefits under any Employee Plan or obligates Sandy to pay separation,
severance, termination or similar-type benefits solely as a result of any
transaction contemplated by this Agreement or as a result of a "change in
control" (within the meaning of such term under Section 280G of the Code).
3.10 Contracts and Agreements. Schedule 3.10A sets forth a complete and
accurate list of all written or oral contracts, commitments, leases, and other
agreements, to which Sandy is a party or by which it or its properties or assets
may be bound which (a) relate to the leasing of real property, (b) provide for
payments in any one year in excess of $100,000 or (c) are otherwise material to
the operation of Sandy's business. Sandy has afforded to ADP and its officers,
attorneys, and other representatives the opportunity to review complete and
correct copies of all such contracts, commitments, leases, and other agreements
to which Sandy is a party or by which Sandy or its properties are bound. Sandy
is not and, to the best of Sandy's knowledge, no other party thereto is, in
default (and no event has occurred which, with the passage of time or the giving
of notice, or both, would constitute a default) under any contract, commitment,
lease, or other agreement to which Sandy is a party or by which it or its
properties or assets may be bound, and Sandy has not waived any material right
under any such contract, commitment, lease, or other agreement. Sandy has not
received any notice of default or termination under any such contract,
commitment, lease, or other agreement, and Sandy has not assigned or otherwise
transferred any rights under any such contract, commitment, lease, or other
agreement. As of July 31, 1995, there were no written or oral contracts,
commitments, or other agreements pursuant to which or in connection with which
Sandy has accepted payment of more than $50,000 for services or goods yet to be
performed or provided by Sandy to a third party other than those set forth in
Schedule 3.10B (including a list of such contracts, commitments or agreements).
3.11 Claims and Proceedings. There are no claims, actions, suits,
proceedings, or investigations pending against or affecting Sandy or any of its
Assets or against or affecting any Employee Plans or any fiduciary for or assets
of any such plans, at law or in equity, or before or by any court, municipal, or
other governmental department, commission, board, agency, or instrumentality,
nor is there any reasonable basis for any such claims, suits, proceeding or
investigations, except as set forth in Schedule 3.11 and except for claims,
actions, suits, proceedings or investigations which (i) are filed or instituted
after the date hereof and (ii) seek damages or other amounts (including costs
and expenses) in an amount less than $50,000, individually, or $100,000, in the
aggregate. No inquiry, action, or proceeding has been instituted to restrain or
prohibit the carrying out of the transactions contemplated by this Agreement or
to challenge the validity of any part of such transactions or seeking damages on
account thereof, nor is there any reasonable basis for any such inquiry, action
or proceeding.
3.12 Insurance. Schedule 3.12 lists all policies of insurance, other than
title insurance policies, held by or on behalf of Sandy and each outstanding
claim thereunder in excess of $10,000. All policies of insurance set forth on
Schedule 3.12 are in full force and effect, and no notice of cancellation has
been received or, to Sandy's knowledge, has been sent by the insurance carrier
thereof. In the reasonable judgment of Sandy's management, the policies are in
amounts which are adequate in relation to the business and properties of Sandy
(but in any event in amounts not less than the amounts generally purchased by
other similar businesses), and all premiums to date have been paid in full.
3.13 Financial Statements and Reports. Sandy has previously furnished ADP
with true and correct copies (with exhibits) of (a) its Annual Report on Form
10-K for the fiscal year ended August 31, 1994, as filed with the SEC; (b) its
Quarterly Reports on Form 10-Q for the three months ended November 30, 1994,
February 28, 1995 and May 31, 1995, as filed with the SEC; (c) all of its
Current Reports on Form 8-K filed with the SEC subsequent to August 31, 1994;
(d) the definitive proxy statements relating to all meetings of its shareholders
during the three years preceding the date of this Agreement; and (e) all other
reports and registration statements filed by Sandy with the SEC since August 31,
1992 (collectively, the "Sandy SEC Filings"). As of their respective dates, the
Sandy SEC Filings did not contain any untrue statement of a
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material fact or omit to state any material fact necessary to make the
statements therein, in light of the circumstances in which they were made, not
misleading, except any such statement or omission therein which has been
corrected or otherwise disclosed or updated in a subsequent filing with the SEC.
Since August 31, 1991, Sandy has filed with the SEC all reports and registration
statements and all other filings required to be filed with the SEC under the
rules and regulations of the SEC. Sandy has also delivered to ADP a complete and
correct copy of Sandy's audited financial statements for the three year period
ended August 31, 1994, audited by Deloitte & Touche, LLP, certified public
accountants, and Sandy's unaudited balance sheet, statement of cash flows, and
income statement at and for the nine-month period ended May 31, 1995 (which
unaudited balance sheet, statement of cash flows, and income statement may be
subject to normal recurring year-end and audit adjustments, which, in the
aggregate are not reasonably expected to be material) (the "Sandy Financial
Statements"). The Sandy Financial Statements have been prepared in accordance
with GAAP applied on a consistent basis with prior periods and each of the Sandy
Financial Statements fairly presents in all material respects the financial
position, results of operations, or changes in financial position, as the case
may be, of Sandy as of the indicated date or for the indicated period. Since
August 31, 1994, except for expenses incurred in connection with the
transactions contemplated by this Agreement and in connection with the
consideration of a transaction with Westcott Communications, Inc. ("Westcott"),
there has been no material adverse change in the financial position, assets,
liabilities, results of operations or business of Sandy and its subsidiaries
taken as a whole. A true and complete list of all expenses heretofore incurred
and hereafter expected to be incurred by Sandy in connection with the
transactions contemplated hereby and in connection with the consideration of a
transaction with Westcott is contained in Schedule 3.13.
3.14 Taxes. Except as set forth on Schedule 3.14A, all federal, foreign,
state, county, and local tax (including, without limitation, income, gross
receipts, excise, property, franchise, license, sales, use, withholding,
estimated, occupancy, capital, profits, employment, unemployment compensation,
payroll related, import duties and other governmental charges and assessments),
whether or not measured in whole or in part by net income, and including
deficiencies, interest, additions to tax or interest, and penalties with respect
thereto, and including expenses associated with contesting any proposed
adjustment related to any of the foregoing (collectively, "Taxes" or,
individually, a "Tax") returns, reports, and declarations of estimated tax
(collectively, "Returns" or, individually a "Return") which were required to be
filed by Sandy on or before the date hereof have been filed within the time and
in the manner provided by law, and all such Returns are true and correct and
accurately reflect, in all material respects, the Tax liabilities of Sandy. All
Returns required to be filed by Sandy after the date hereof and on or before the
Effective Time shall be prepared and timely filed, in a manner consistent with
prior years and applicable laws and regulations. All Taxes required to be paid
on or before the date hereof have been timely paid or adequately accrued in the
Financial Statements. Any Taxes required to be paid after the date hereof and on
or before the Effective Time shall be timely paid. Schedule 3.14B lists all of
the jurisdictions in which Sandy has filed Returns during the 1994, 1993 and
1992 calendar years. Sandy has provided to ADP true and complete copies of all
such Returns. Except as set forth on Schedule 3.14C, Sandy has not executed any
presently effective waiver or extension of any statute of limitations against
assessments and collections of Taxes. There are no current, pending or, to the
best of Sandy's knowledge, threatened, claims, assessments, notices, proposals
to assess, deficiencies, or audits (collectively, "Sandy Tax Actions") with
respect to any Taxes owed or allegedly owed by Sandy which remain unpaid and for
which, in the reasonable judgment of Sandy's management, adequate provision has
not been made in the Financial Statements. Except as set forth on Schedule
3.14D, to the best of Sandy's knowledge, there is no basis for any Sandy Tax
Actions. There are no tax liens on any of the assets of Sandy except for liens
for current taxes not yet due and payable. Except as set forth on Schedule
3.14D, proper and accurate amounts (other than immaterial amounts) have been
withheld and remitted by Sandy from and in respect of its Employees for all
periods in full and complete compliance in all material respects with the tax
withholding provisions of all applicable laws and regulations. Sandy is, and
since 1986 has been, a C corporation as defined in Section 1361 of the Code.
Sandy has not agreed to nor is Sandy required to make any adjustments under
Section 481(a) of the Code by reason of change in accounting method or
otherwise. Sandy has not been nor is a party to any tax sharing agreement.
3.15 Business Relations. Except as set forth on Schedule 3.15, to the
knowledge of Sandy, since August 31, 1994, Sandy has not received notice that
any customer, client, or supplier of Sandy will cease or
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otherwise refuse to do business with Sandy in the same manner as such business
had been previously conducted with Sandy.
3.16 Brokers and Finders. Sandy has not caused any liability to be
incurred to any finder, broker, or sales agent in connection with the execution,
delivery, or performance of, or the transactions contemplated by, this
Agreement, except for fees not to exceed $500,000 paid or to be paid to its
financial advisor, Bear, Stearns & Co., Inc. ("Bear, Stearns"), for which Sandy
will be responsible. Sandy has heretofore delivered to ADP a true and complete
copy of the agreement(s) pursuant to which Bear, Stearns has provided and will
provide service to Sandy in connection with the transactions contemplated by
this Agreement.
3.17 Notes and Accounts Receivable. Schedule 3.17 lists all of the notes
and accounts receivable of Sandy at May 31, 1995. Except as listed on Schedule
3.17, (a) all of the notes and accounts receivable are free and clear of any
security interests, liens, encumbrances, or other charges and are, in the
reasonable judgment of Sandy's management, adequately reserved for on Sandy's
balance sheet as of May 31, 1995; (b) to the best of Sandy's knowledge, none of
the notes or accounts receivable is subject to any offset or claims of offset,
other than normal credits and returns in the ordinary course of business; and
(c) none of the obligors on the notes or accounts receivable has given notice
that they will or may refuse to pay the full amount thereof or any portion
thereof. This Section 3.17 does not constitute a warranty by Sandy that any of
the notes or accounts receivable will be collected by Sandy following the
transactions contemplated hereby.
3.18 Information Furnished to ADP. Sandy has made available to ADP and its
officers, attorneys, accountants, and representatives true and correct copies of
all agreements, documents, and other items listed on the schedules to this
Agreement and all books and records of Sandy. The books and records of Sandy
accurately reflect in all material respects the transactions to which Sandy is a
party or by which its properties are subject or bound.
3.19 Capitalization. The authorized capital stock of Sandy consists of
8,000,000 shares of Sandy Common Stock and 2,000,000 shares of preferred stock,
$.01 par value per share, of which 2,326,783 shares of Sandy Common Stock and no
shares of preferred stock are issued and outstanding as of the date hereof. Each
share of Sandy Common Stock is entitled to one vote for purposes of approving
the Merger. All issued and outstanding shares of Sandy Common Stock were validly
issued and are fully paid and nonassessable and free of preemptive rights, and
no shares are held by Sandy in its treasury. 146,000 shares of Sandy Common
Stock, and no shares of preferred stock, are reserved for issuance upon the
exercise of outstanding Sandy Options as of the date hereof.
3.20 Options. Except as set forth on Schedule 3.20, (a) there are no
outstanding options, rights (including stock appreciation and similar rights),
warrants, calls, commitments (including, without limitation, any statutory or
other legal commitments) or written agreements relating to Sandy's capital stock
or obligating Sandy to issue or dispose of any shares of its capital stock.
3.21 Sandy Dividends and Stock Purchases. Except as set forth on Schedule
3.21, since March 31, 1994, Sandy has not declared, set aside or made payment of
any dividend or distribution of assets to the holders of Sandy Common Stock, nor
has it repurchased any shares of Sandy Common Stock.
3.22 Subsidiaries. Sandy has no direct or indirect subsidiaries and no
stock or other equity or ownership interests (whether controlling or not) in any
corporation, association, partnership, joint venture, or other entity, other
than as set forth in Schedule 3.22. Sandy Corporation of Canada is an inactive
corporation which has no material assets and conducts no business.
3.23 Customers. Schedule 3.23 accurately sets forth as of June 30, 1995
the name of each existing customer of Sandy, which, in the past 12 months,
purchased more than $50,000 of goods or services from Sandy, and a list of any
written agreement between Sandy and such customer, if the agreement is effective
and obligates Sandy to future performance over more than 6 months or for more
than $25,000 in the next three months relating to the customer.
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3.24 Submission to Vote. Based in part on the financial analysis performed
by its financial advisors, the Board of Directors of Sandy has adopted a
resolution recommending that the Merger and the other transactions contemplated
herein be submitted to and approved by Sandy's shareholders.
3.25 Information to be Provided. None of the information supplied by Sandy
for inclusion in the Registration Statement will, at the time the Registration
Statement is filed with the SEC or the Merger Proxy Statement is mailed to Sandy
shareholders, contain any untrue statement of a material fact or omit to state
any material fact necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading.
3.26 Shareholder Vote. The affirmative vote of the holders of a majority
of the outstanding shares of Sandy Common Stock is the only vote of the holders
of any class or series of stock of Sandy necessary to approve the Merger.
3.27 Labor Matters. Sandy is not a party to any collective bargaining
agreement or other labor union contract applicable to persons employed by Sandy.
At no time since July 1, 1993 has Sandy been involved in any labor discussions
with any unit or group seeking to become a bargaining unit for any of its
employees. There are no material controversies, strikes, work stoppages or
disputes pending or threatened between Sandy and any of the employees or former
employees of Sandy ("Employees").
3.28 Ordinary Course. Since August 31, 1994, Sandy has conducted its
business only in the ordinary course, consistent with its past practice, except
(a) as expressly permitted by this Agreement or in connection with the
transactions contemplated by this Agreement, (b) as set forth in any of the
Sandy SEC Filings or any of the Sandy Financial Statements, and (c) in
connection with Sandy's dealings with Westcott.
3.29 Chapter 7A and Chapter 7B of MBCA. Section 780 of Chapter 7A of the
MBCA does not apply to any business combination (as defined in Chapter 7A of the
MBCA) between Sandy and ADP Mergerco or any of its affiliates, and Chapter 7B of
the MBCA does not apply to control share acquisitions (as defined in Chapter 7B
of the MBCA) of shares of Sandy.
3.30 Pooling of Interests. To Sandy's best knowledge, Sandy has not taken,
failed to take, or agreed to take or not to take any action which would
disqualify the Merger as a pooling of interests for accounting purposes.
3.31 Fixed Assets; Sufficiency of Assets. The physical and intangible
assets of Sandy, whether owned, licensed or leased by it, are sufficient to
provide all services currently offered or committed by Sandy to its customers.
There are no assets or property necessary for the conduct of the business of
Sandy as presently utilized or conducted which are not owned, leased, or
licensed by Sandy.
3.32 Leased Properties. Schedule 3.32 contains a list of all outstanding
realty and material personalty leases to which Sandy is a party or by which it
is bound, whether as lessee or lessor, on the date hereof. Sandy has heretofore
provided ADP with true and complete copies of all such leases. Sandy occupies or
uses all of the real and personal property leased by it under and in accordance
with such leases, and has neither assigned its interests under any such lease
nor further subleased the property which is the subject of any such lease. All
of such leases are in full force and effect and the transactions contemplated by
this Agreement will not effect a termination of or otherwise interfere with
Sandy's rights under each such lease, nor violate any term or provision of any
such lease or incur any additional charge thereunder. Sandy has not made any
material alterations to, or installed any fixtures at, the leased premises set
forth in Schedule 3.32 such that it will have an obligation to retrofit any such
leased premises.
3.33 Licensed Properties. Schedule 3.33 contains a list of all outstanding
licenses to which Sandy is a party or by which it is bound, whether as licensee
or licensor, on the date hereof (including without limitation any software
licenses other than commercial, off-the-shelf software used in the ordinary
course of business). Sandy has heretofore provided ADP with true and complete
copies of all such licenses. Except as otherwise set forth in Schedule 3.33: (a)
Sandy has the right to use all of the property licensed by it under any such
licenses, and (b) any license granted by Sandy to others is non-exclusive and
any such licensees are not and shall not be entitled to further sublicense,
assign or transfer the licensed property to others. All of such licenses are in
full
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force and effect, and the transactions contemplated by this Agreement will not
effect a termination of or otherwise interfere with Sandy's rights under any
license agreement as to which it is the licensee, nor violate any term or
provision of any such license or incur any additional charge thereunder.
3.34 Loan Agreements, Debt Instruments and Guarantees. Schedule 3.34
contains a true and complete list of all loan agreements, debt instruments,
guarantees, or any related documents of any nature whatsoever which are
outstanding on the date hereof and to which Sandy is a party or by which it is
bound. Sandy has heretofore provided ADP with true and complete copies of all
such documents. Except as otherwise set forth in Schedule 3.34, all outstanding
liabilities and debts of Sandy may be prepaid in whole or in part at any time
without penalty, all of such liabilities and debts shall continue as liabilities
and debts of Sandy notwithstanding the transactions contemplated by this
Agreement without mandatory prepayment, penalty or points, and no event has
occurred prior to the date hereof which with the lapse of time or the giving of
notice or both would constitute a default of either party under any such loan
agreement, debt instrument, guaranty, or any related document.
3.35 Employees; Employment Practices; Compensation and Vacations. Schedule
3.35 contains a true and complete listing of all employees of Sandy during the
one-year period ending on the date hereof, their annual salary, date of hire,
date of next review, date of last review and, if applicable, their dates of
termination. Schedule 3.35 also contains a separate true and complete listing of
all independent contractors engaged by Sandy during the one-year period ending
on the date hereof, together with the terms of the compensation arrangements
applicable to each such independent contractor. Since August 31, 1994, except in
the ordinary course of business and consistent as to timing and amount with past
practices, Sandy has not: (a) increased the compensation payable or to become
payable to or for the benefit of any of its employees or independent
contractors, (b) provided any of its employees with increased security or tenure
of employment, (c) increased the amount payable to any of its employees upon the
termination of any such person's employment, or (d) increased, augmented or
improved benefits granted to or for the benefit of any of its employees under
any bonus, stock option, profit sharing, pension, retirement, deferred
compensation, insurance or other direct or indirect benefit plan or arrangement.
3.36 Capital Expenditures. Except as set forth in Schedule 3.36, there are
no capital projects or capital expenditures currently committed for or
undertaken by Sandy which are not paid for on the date hereof.
3.37 Bank Accounts and Safe Deposit Boxes; Powers of Attorney. Schedule
3.37 contains: (a) the names of all banks in which Sandy has an account
(including without limitation any trust account) or safe deposit box, and (b)
the names of all persons or entities, if any, holding powers of attorney from
Sandy.
3.38 Casualty Losses. Since August 31, 1994, there has not been any
material loss, damage or destruction to or of any of the assets, property or
business of Sandy (other than as to which all necessary repairs or replacements
have been made or will be covered by insurance proceeds when made) nor have any
of such assets, properties or business of Sandy been affected as a result of
fire, accident or other casualty, war, civil strife or act of God (other than in
any immaterial respect and as to which all necessary repairs or replacements
have been made or will be covered by insurance proceeds when made).
3.39 Transactions with Affiliates. Sandy has heretofore provided ADP with
true and complete copies of all contracts or agreements of any nature
whatsoever, whether written or oral, between Sandy and any director, executive
officer or other Affiliate of Sandy, including without limitation any employment
agreement or other compensation or reimbursement arrangement, any loan or
guarantee, and any purchase or sales agreement.
3.40 Reorganization. Sandy operates at least one significant historic
business line, or owns at least a significant portion of its historic business
assets, in each case within the meaning of Treas. Reg. sec. 1.368-1(d). Sandy
has no knowledge that any shareholder of Sandy has any present plan, intention
or arrangement to dispose of any of the ADP Common Stock to be received in the
Merger in a manner that would cause the Merger to violate the continuity of
shareholder interest requirement set forth in Treas. Reg. sec. 1.368-1.
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ARTICLE 4
ADDITIONAL COVENANTS AND AGREEMENTS
4.1 Conduct of Sandy's Business. Sandy covenants and agrees that, prior to
the Effective Time, unless ADP Mergerco and ADP shall otherwise agree in writing
or as otherwise expressly contemplated by this Agreement:
(a) Sandy will carry on its businesses in the regular and ordinary
course, consistent with past practice, and, except in connection with the
transactions contemplated by this Agreement or in connection with any other
offer to acquire shares or assets of Sandy to the extent permitted by
Section 7.11 of this Agreement, use reasonable efforts to preserve intact
its present business organizations. Without limiting the foregoing Sandy
will not directly or indirectly, without the prior written consent of ADP
Mergerco and ADP and except in connection with the transactions
contemplated by this Agreement:
(i) issue, sell, pledge, dispose of or encumber its Assets, other
than through sales of goods and/or services to Sandy's customers in the
ordinary course of business, consistent with past practice;
(ii) amend Sandy's Articles of Incorporation or By-laws;
(iii) split, combine or reclassify any outstanding shares of Sandy
capital stock, or declare, set aside or pay any dividend payable in
cash, stock, property or otherwise with respect to such shares;
(iv) redeem, purchase, acquire or offer to acquire any shares of
Sandy capital stock;
(v) issue, sell, pledge or dispose of, or agree to issue, sell,
pledge or dispose of, any additional shares of, or securities
convertible or exchangeable for, or any options, warrants or rights of
any kind to acquire any shares of, Sandy capital stock of any class
whether pursuant to any rights agreement, stock plan or otherwise,
except that Sandy may issue shares of Sandy Common Stock in accordance
with currently outstanding stock options;
(vi) acquire (by merger, consolidation or acquisition of stock or
assets) or be acquired by any corporation, partnership or other business
organization or division thereof;
(vii) incur any indebtedness for borrowed money, other than in the
ordinary course of business, consistent with past practice, or issue any
debt securities;
(viii) enter into or modify any material contract, lease or
agreement, other than in the ordinary course of business, consistent
with past practice;
(ix) terminate, modify, assign, waive, release or relinquish any
material contract rights or amend any material rights or claims except
as expressly provided in this Agreement;
(x) other than pursuant to previously existing written plans,
written agreements or regular budgets and standard policies, grant any
increase in the salary or other compensation or benefits to Sandy's
directors, officers or employees or grant any bonus to any employee or
enter into any employment agreement, or make any loan to or enter into
any material transaction of any other nature with any officer, director
or employee of Sandy; provided, that Sandy may pay fiscal 1995 bonuses
based on earnings before merger-related costs;
(xi) take any action to institute any new severance or termination
pay practices with respect to any directors, officers or employees of
Sandy or to increase the benefits payable under its severance or
termination pay practices;
(xii) hire new employees, other than in the ordinary course of
business, consistent with past practice;
(xiii) adopt or amend, in any respect, except as may be required by
applicable law or regulation (in which case Sandy will notify ADP
Mergerco and ADP of such amendment or adoption and the
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reasons therefor), any bonus, profit sharing, compensation, stock
option, restricted stock, pension, retirement, deferred compensation,
employment or other employee benefit plan, agreement, trust, fund, plan
or arrangement for the benefit or welfare of any directors, officers or
employees;
(xiv) except as set forth on Schedule 3.36, make any capital
expenditures or capital commitments in amounts greater than $100,000 in
the aggregate;
(xv) make any election for federal income tax purposes;
(xvi) settle or compromise any litigation involving the payment of,
or enter into a settlement agreement to pay over time, an amount in
cash, notes or other property in excess of $50,000; or
(xvii) enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
(b) Sandy will use reasonable efforts, to the extent not prohibited by
the foregoing provisions of this Section 4.1, to maintain its relationships
with its suppliers and customers, and, if requested by ADP Mergerco or ADP,
(i) Sandy will use reasonable efforts to make reasonable arrangements as
reasonably requested by ADP Mergerco or ADP for representatives of ADP
Mergerco or ADP to meet with customers and suppliers of Sandy (provided
however that ADP Mergerco or ADP will give Sandy reasonable notice of such
meetings), and (ii) Sandy will schedule, as reasonably requested by ADP
Mergerco or ADP, meetings of representatives of ADP Mergerco or ADP with
executive officers of Sandy.
4.2 Conduct of Business by ADP. From the date of this Agreement to the
Effective Time, unless Sandy shall otherwise agree in writing or as otherwise
expressly contemplated or permitted by other provisions of this Agreement,
including but not limited to, this Section 4.2:
(a) Neither ADP nor any subsidiary of ADP shall amend its Certificate
of Incorporation (or other such governing document) or bylaws in a manner
which would materially adversely affect the rights of holders of ADP Common
Stock or the ability of ADP to consummate the transactions contemplated
hereby in a timely manner;
(b) Neither ADP nor any subsidiary of ADP shall make any acquisition
or take any other action that individually or in the aggregate would
materially adversely affect the ability of ADP or ADP Mergerco to
consummate the transactions contemplated hereby in a timely manner; and
(c) Other than regular quarterly cash dividends which are not in
excess of $.25 per share of ADP Common Stock and any stock split effected
as a stock dividend, ADP shall not declare, set aside, make or pay any
dividend or distribution (whether in cash, stock or property or any
combination thereof) in respect of the ADP Common Stock; and
(d) ADP shall not agree to do any of the foregoing.
4.3 Shareholder Approval.
(a) As soon as reasonably practicable following the date hereof, Sandy will
take all action necessary in accordance with the Exchange Act, the laws of the
State of Michigan and Sandy's Articles of Incorporation and Bylaws to call, give
notice of, and convene a meeting of Sandy shareholders (the "Meeting") to
consider and vote upon the approval and adoption of this Agreement and the Plan,
and for such other purposes as Sandy may deem necessary or desirable. As of the
date of this Agreement, the Board of Directors of Sandy has determined, based in
part upon the financial analysis performed by its financial advisors, that the
Merger is advisable and in the best interest of the shareholders of Sandy and,
subject to their fiduciary duties, shall recommend that Sandy's shareholders
vote to approve and adopt this Agreement and the Plan and any other matters to
be submitted to Sandy's shareholders in connection therewith. Sandy shall use
reasonable efforts to solicit and secure from its shareholders such approval and
adoption, subject to the fiduciary duties of the directors of Sandy, which
efforts shall include without limitation diligently soliciting shareholder
proxies therefor and advising ADP Mergerco and ADP upon request from time to
time as to the status of the shareholder vote then tabulated. Nothing in this
Section shall in any way bind or obligate any officers or
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directors of Sandy to act in any way in their capacities as shareholders of
Sandy. The Meeting will take place as soon after the date hereof as permitted
under applicable law and as is reasonably practicable.
(b) As promptly as reasonably practicable following the execution of this
Agreement, ADP and Sandy shall file with the SEC a registration statement on
Form S-4 (the "Registration Statement") covering the issuance and delivery of
the ADP Common Stock to the shareholders of Sandy and containing preliminary
proxy materials which comply with the requirements of the Exchange Act with
respect to the transactions contemplated hereby and will use their best efforts
to cause such Registration Statement to be declared effective and such
preliminary proxy materials to be cleared by the SEC. Sandy and ADP will
cooperate fully in the preparation and filing of the Registration Statement and
such preliminary proxy materials and any amendments and supplements thereto.
(c) Promptly after the Registration Statement (including the definitive
proxy statement contained therein (the "Merger Proxy Statement")) becomes
effective, Sandy shall cause the Merger Proxy Statement to be mailed to its
stockholders to solicit their approval of the transactions contemplated herein
and therein. Sandy shall not use any proxy material in connection with the
Meeting without ADP's prior approval.
4.4 Other Agreements. Subject to the terms and conditions herein provided
and to the fiduciary duties of the Boards of Directors of Sandy and ADP, each of
the parties hereto agrees to use all reasonable efforts to take, or cause to be
taken, all action and to do, or cause to be done, all things necessary, proper
or advisable to consummate and make effective as promptly as practicable the
transactions contemplated by this Agreement, including without limitation, using
all reasonable efforts to obtain all necessary waivers, consents and approvals
and to effect all necessary registrations and filings, including, but not
limited to, filings required under the Exchange Act and the HSR; except that the
foregoing shall not require ADP Mergerco, ADP or Sandy to agree to make any
divestiture of a significant asset in order to obtain any waiver, consent or
approval. Subject to the terms and conditions herein provided, ADP, as the
parent corporation of ADP Mergerco, will cause ADP Mergerco to take all
reasonable actions and to do, or cause to be done, all things reasonably
necessary, proper or advisable to consummate and make effective as promptly as
possible the transactions contemplated by this Agreement.
4.5 Notification of Certain Matters. Sandy shall give prompt notice to ADP
Mergerco and ADP, and ADP Mergerco and ADP shall give prompt notice to Sandy, of
(i) the occurrence, or failure to occur, of any event which such party believes
would be likely to cause any of its representations or warranties contained in
this Agreement (including as it relates to information contained in the
schedules prepared pursuant to Articles 2 and 3) to be untrue or inaccurate in
any material respect at any time from the date hereof to the Effective Time and
(ii) any material failure of Sandy, ADP or ADP Mergerco, as the case may be, or
any officer, director, employee or agent thereof, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; provided, however, that failure to give such notice shall not
constitute a waiver of any defense that may be validly asserted. No disclosure
of changes to the Article 3 schedules pursuant to this Section 4.5 will be
deemed to amend or supplement the schedules or prevent or cure any
misrepresentation, breach of warranty, or breach of any covenant thereunder.
4.6 Access to Information. Sandy will, and will cause Sandy's officers,
directors, employees and agents, including attorneys and accountants, to afford,
from the date hereof to the Effective Time, the officers, employees and agents
of ADP Mergerco and ADP complete access at all reasonable times to Sandy's
officers, employees, agents, properties, books, records and workpapers, and
shall furnish ADP Mergerco and ADP all financial, operating and other data and
information as ADP Mergerco and ADP may reasonably request. ADP Mergerco and ADP
will use reasonable efforts not to disrupt Sandy's business.
4.7 Public Announcements. None of ADP Mergerco, ADP or Sandy will make,
issue or release any oral or written public announcement or statement
concerning, or acknowledgment of the existence of, or reveal the terms,
conditions or status of, the transactions contemplated by this Agreement and the
Plan, or any other communication to shareholders or the investing public,
directly or indirectly (including without limitation press releases and
statements to securities analysts), without first making a good faith attempt to
obtain the prior approval of, or concurrence in, the contents of such
announcement, acknowledgment or statement by the other of them, which approval
or concurrence will not be unreasonably withheld or delayed; provided, that
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<PAGE> 70
nothing in this Agreement will prevent any party from commenting on prior public
announcements or from making any announcement, acknowledgement or statement
required by law or the rules of any securities exchange on which its stock is
listed.
ARTICLE 5
CLOSING
5.1 Conditions to ADP Mergerco's and ADP's Obligations. Notwithstanding
any other provision herein to the contrary, the obligations of ADP Mergerco and
ADP to consummate the transactions contemplated hereby are subject to the
fulfillment of each of the following conditions:
(a) The representations and warranties of Sandy contained herein and
the information contained in the schedules prepared pursuant to Article 3
shall be true and correct on and as of the Closing Date with the same force
and effect as though such representations and warranties had been made and
such information had been given on and as of the Closing Date, except to
the extent waived in writing by ADP; Sandy shall have performed in all
material respects all obligations and complied in all material respects
with all agreements, covenants and conditions required by this Agreement to
be performed or complied with by it at or prior to the Closing Date.
(b) There shall not be any judgment, decree, injunction, ruling or
order of any court, governmental department, commission, agency or
instrumentality outstanding against ADP Mergerco, ADP or Sandy which
prohibits or materially restricts or delays the consummation of the Merger.
(c) This Agreement and the Plan shall have been approved and adopted
by the requisite vote of the holders of the outstanding shares of Sandy
Common Stock in accordance with the MBCA and Sandy's Articles of
Incorporation and Bylaws.
(d) All authorizations, consents and permits required by Sandy to
perform this Agreement and the Plan shall have been obtained and shall be
in form and substance satisfactory to ADP Mergerco and ADP. The required
statutory waiting period under the HSR shall have expired or been
terminated and no condition shall have been imposed with respect thereto
which is not acceptable to ADP Mergerco and ADP.
(e) Sandy will have delivered, or will have caused to be delivered, to
ADP Mergerco and ADP the following:
(i) A copy of the resolutions duly adopted by Sandy's Board of
Directors approving the adoption, execution, performance, and delivery
of this Agreement and the Plan and authorizing all necessary or proper
action to enable Sandy to comply with the terms hereof and thereof.
(ii) A copy of the resolutions duly adopted by Sandy's shareholders
authorizing the adoption, execution, performance, and delivery of this
Agreement and the Plan and approving the Merger in accordance with the
MBCA.
(iii) The opinion of Honigman Miller Schwartz and Cohn to the
effect that:
(A) Sandy is a corporation validly existing and in good standing
under the laws of the state of its incorporation and is duly
qualified to do business within the jurisdictions set forth therein;
(B) Sandy has the corporate power and authority to execute,
deliver, and perform its obligations under this Agreement and the
Plan; the execution, delivery, and performance by Sandy of its
obligations under this Agreement and the Plan have been duly
authorized by all necessary corporate action on the part of Sandy;
and this Agreement and the Plan have been duly executed and delivered
by Sandy and constitute the valid and binding obligations of Sandy,
enforceable against Sandy in accordance with their respective terms,
except that (1) such validity, binding effect and enforceability may
be subject to applicable bankruptcy, insolvency,
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<PAGE> 71
fraudulent transfer, reorganization, moratorium or other laws, now or
hereafter in effect, affecting creditors' rights generally, and (2)
the remedy of specific performance and injunctive and other forms of
equitable relief may be subject to equitable defenses (including
commercial reasonableness, good faith, and fair dealing) and to the
discretion of the court before which any proceeding therefor may be
brought;
(C) The execution, delivery, and performance by Sandy of its
obligations under this Agreement and the Plan (i) do not violate (a)
Sandy's Articles of Incorporation or Bylaws or (b) any law known to
counsel to be applicable to Sandy where such violation would
reasonably be expected to have a material adverse effect upon the
validity, performance or enforceability of any of the terms of this
Agreement applicable to Sandy, or (c) based solely on a review of the
results of a litigation search in the United States District Court
for the Eastern District of Michigan, Southern Division, dated within
two weeks of the Closing Date, and the Oakland County, Michigan
Circuit Court, dated within two weeks of the Closing Date (the
"Searches") and a certificate of officers of Sandy, any of Sandy's
obligations under any judgment, decree, or order of any court or any
other agency of government and (ii) do not constitute a breach of, or
a default under, any of the agreements listed as exhibits to Sandy's
most recent Annual Report on Form 10-K filed with the SEC or any
subsequent Quarterly Reports on Form 10-Q and any other material
agreements of Sandy actually known to counsel (collectively, the
"Agreements");
(D) No approval, authorization, or other action by, or filing
with, any governmental authority of the United States of America or
the State of Michigan is required for the execution, delivery and
performance by Sandy of this Agreement or the Plan (other than under
state "blue sky" laws, the SEC approvals contemplated by Section
4.3(b) hereof, the approval of the U.S. Department of Justice and the
Federal Trade Commission pursuant to the HSR and the filing of a
Certificate of Merger with the Department of Commerce of the State of
Michigan);
(E) Subject to compliance with applicable federal and state
securities laws (as to which counsel need express no opinion), all of
the outstanding shares of Sandy Common Stock have been duly
authorized, validly issued and fully paid, and are nonassessable and
free of any preemptive rights created by the Articles of
Incorporation or Bylaws of Sandy or created by any of the Agreements;
(F) This Agreement and the Plan were duly and validly approved
by the shareholders of Sandy in accordance with the MBCA and Sandy's
Articles of Incorporation and Bylaws, and, assuming that this
Agreement and the Plan were duly and validly approved by ADP Mergerco
in accordance with the MBCA and ADP Mergerco's Articles of
Incorporation and Bylaws, upon filing a Certificate of Merger with
the Department of Commerce of the State of Michigan the Merger will
become effective under the laws of the State of Michigan;
(G) Based solely on the Searches, the results of an inquiry to
members of such counsel's firm and a certificate of officers of
Sandy, such counsel shall confirm to ADP and ADP Mergerco that to its
actual knowledge (i) there are no claims, actions, suits, proceedings
or investigations pending or threatened in writing against Sandy or
any Employee Plans, at law or in equity, before any court or
governmental agency, except as set forth in Section 3.11 hereof and
(ii) no action or proceeding has been instituted or threatened in
writing to restrain or prohibit the performance of any party's
obligations under this Agreement or to challenge the validity of any
part of this Agreement or seeking damages on account thereof; and
(H) The treatment of the Sandy Stock Options contemplated by
Section 1.8 will not result in the breach of any of the Sandy Stock
Options or the stock option plans pursuant to which such options were
granted or violate any law, rule, regulation or order.
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(iv) A Certificate from the Chairman of Sandy, solely in his
capacity as an officer of Sandy, to the effect that the Company has
complied with Section 4.1 of this Agreement and the representations and
warranties in Article 3 are true and correct in all respects on the
Closing Date.
(f) The Registration Statement shall have become effective and no stop
order suspending the effectiveness of the Registration Statement shall have
been issued and no proceeding for that purpose and no similar proceeding in
respect of the Merger Proxy Statement shall have been initiated or
threatened by the SEC. ADP shall have received all state blue sky or
securities law permits and other authorizations necessary to consummate the
Merger.
(g) The Employment and Consulting Agreement dated November 4, 1985
between Sandy and William H. Sandy, as heretofore amended and as amended on
the date hereof (the "Employment and Consulting Agreement"), shall be in
full force and effect and shall not have been subsequently amended without
the prior written consent of ADP.
(h) Sandy shall have entered into employment agreements, in form and
substance reasonably satisfactory to ADP, with certain key employees of
Sandy to be specified by ADP, and such employees' existing employment
agreements with Sandy shall have been terminated.
(i) ADP shall have received a complete and correct copy of Sandy's
audited financial statements for the one-year period ending August 31,
1995, reported on without a "going concern" or like qualification or
exception, or qualification arising out of the scope of the audit, by
Deloitte & Touche, LLP or other certified public accountants of nationally
recognized standing.
(j) ADP shall have received unaudited consolidated balance sheets and
income statements for each complete calendar month from June 30, 1995
through the last full month immediately prior to the Closing Date, in each
case certified by Sandy's chief financial officer as being prepared in
accordance with Sandy's books and records and consistent with past
practices.
(k) Sandy shall have received the opinion of Honigman Miller Schwartz
and Cohn, in form and substance reasonably satisfactory to Sandy and ADP,
to the effect that the Merger qualifies for federal income tax purposes as
a reorganization within the meaning of Section 368 of the Code.
(l) All amounts owing under the Amended and Restated Revolving Credit
Agreement, dated June 23, 1993, between Sandy and Comerica Bank, as
amended, shall have been paid in full, and such credit agreement shall have
been terminated by Sandy.
(m) ADP shall have received an agreement, in form and substance
reasonably satisfactory to it, from each "affiliate" of Sandy within the
meaning of such term as used in Rule 145 under the Securities Act (an
"Affiliate") to the effect that (i) no disposition of ADP Common Stock
received in the Merger will be made by such persons except within the
limits and in accordance with the applicable provisions of (x) said Rule
145, as amended from time to time, or except in a transaction which, in the
opinion of legal counsel reasonably satisfactory to ADP, is exempt from
registration under the Securities Act of 1933 and (y) Securities Act
Release No. 5312 with respect to sales of ADP Common Stock by Affiliates
until such time as financial results covering at least 30 days of
post-merger combined operations have been published, provided that ADP
agrees to publish promptly financial statements reflecting such combined
operations and (ii) such person has not theretofore taken (and, if such
agreement is delivered prior to the Closing Date, will not take during the
remaining period prior thereto) any action (including, without limitation,
selling or otherwise disposing of Sandy Common Stock beneficially owned by
such person) that would prevent the Merger from being accounted for as a
pooling of interests.
(n) ADP shall have received evidence from Deloitte & Touche LLP, in
form and substance reasonably satisfactory to it, that the Merger may
properly be accounted for as a pooling of interests.
(o) In consideration of ADP's guaranty of the obligations of the
Surviving Corporation under the lease agreement dated February 1, 1994
between Sandy and 1500 Limited Partnership, such lease shall have been
amended, on terms mutually satisfactory to ADP and 1500 Limited
Partnership, (i) to add an additional improvements allowance of $200,000
thereunder to be available to the Surviving Corporation
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immediately after the Effective Time and until December 31, 1996, (ii) to
accelerate the availability of the last $100,000 of the improvements
allowance thereunder from February 1, 2000 to the Closing Date so that such
$100,000 allowance shall be available immediately after the Effective Time
and until December 31, 1996 and (iii) to permit the Surviving Corporation
to self-insure under Sections 11.2, 11.3, 11.4 and 11.5 of such lease in
accordance with ADP's standard policy.
(q) ADP shall have received evidence, in form and substance reasonably
satisfactory to it, that the Sandy Adjusted Net Worth as at the Test Date
shall be no less than $10,101,187. The "Sandy Adjusted Net Worth" means the
stockholders' equity of Sandy, calculated in a manner consistent with that
used to calculate stockholders' equity in the Sandy Financial Statements,
provided that: (i) the Sandy Adjusted Net Worth shall be calculated as if
all amounts payable to William Sandy under the Employment and Consulting
Agreement and the $190,000 in additional expenses and fees used by the
parties in calculating the $10,101,187 figure are deductible for federal
income tax purposes at the statutory corporate rate, and (ii) the Sandy
Adjusted Net Worth shall be calculated as if all amounts payable to William
Sandy under the Employment and Consulting Agreement had been paid as of the
Test Date. The "Test Date" means the last day of the calendar month ending
more than ten but less than forty-one days before the Closing Date.
5.2 Conditions to Sandy's Obligations. Notwithstanding any other provision
herein to the contrary, the obligation of Sandy to consummate the transactions
contemplated hereby is subject to the fulfillment of each of the following
conditions:
(a) The representations and warranties of ADP Mergerco and ADP
contained herein shall be true and correct on and as of the Closing Date
with the same force and effect as though such representations and
warranties had been made on and as of the Closing Date, except to the
extent waived in writing by Sandy and except that any representations and
warranties made as of a specified date will be deemed true and correct as
of the Closing Date if they were true and correct on the specified date.
ADP Mergerco and ADP shall have performed in all material respects all
obligations and complied in all material respects with all agreements,
covenants and conditions required by this Agreement to be performed or
complied with by either of them at or prior to the Effective Time.
(b) The delivery to Sandy of a copy of the resolutions duly adopted by
ADP Mergerco's Board of Directors or a duly authorized committee thereof
approving the execution and delivery of this Agreement and the Plan and
authorizing all necessary or proper action to enable ADP Mergerco to comply
with the terms hereof.
(c) There shall not be any judgment, decree, injunction, ruling or
order of any court, governmental department, commission, agency or
instrumentality outstanding against ADP Mergerco, ADP or Sandy which
prohibits or materially restricts or delays the consummation of the Merger.
(d) The approval by Sandy's shareholders, in accordance with the MBCA
and Sandy's Articles of Incorporation and Bylaws, of this Agreement and the
Plan and authorizing all necessary or proper action to enable Sandy to
comply with the terms hereof.
(f) The delivery by ADP of the Exchange Fund to the Exchange Agent for
the conversion of the Sandy Common Stock as set forth in the Plan.
(g) The opinion of James B. Benson, General Counsel of ADP, to the
effect that:
(A) ADP is a corporation validly existing and in good standing
under the laws of the State of Delaware;
(B) ADP has the corporate power and the corporate authority to
execute, deliver, and perform its obligations under this Agreement
and the Plan; the execution, delivery, and performance by ADP of its
obligations under this Agreement and the Plan have been duly
authorized by all necessary corporate action on the part of ADP; and
this Agreement and the Plan have been duly executed and delivered by
ADP and constitute the valid and binding agreements of ADP,
enforceable against ADP in accordance with their respective terms,
except
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that (1) such enforcement may be subject to applicable bankruptcy,
insolvency, fraudulent transfer, reorganization, moratorium, or other
laws, now or hereafter in effect, affecting creditors' rights
generally, and (2) the remedy of specific performance and injunctive
and other forms of equitable relief may be subject to equitable
defenses (including commercial reasonableness, good faith, and fair
dealing) and to the discretion of the court before which any
proceeding therefor may be brought;
(C) The execution, delivery, and performance by ADP of its
obligations under this Agreement and the Plan (i) do not violate (a)
ADP's Certificate of Incorporation or Bylaws or (b) any law known to
counsel to be applicable to ADP where such violation would reasonably
be expected to have a material adverse effect upon the validity,
performance or enforceability of any of the terms of this Agreement
applicable to ADP, or (c) any of ADP's obligations under any
judgment, decree, or order of any court or any other agency of
government known to counsel that is applicable to ADP or its
properties and (ii) do not constitute a breach of, or a default
under, any of the agreements listed as exhibits to ADP's most recent
Annual Report on Form 10-K filed with the SEC or any subsequent
Quarterly Reports on Form 10-Q and any other material agreements of
ADP actually known to counsel;
(D) No approval, authorization, or other action by, or filing
with, any governmental authority of the United States of America or
the State of Delaware is required in connection with the execution,
delivery and performance by ADP of this Agreement or the Plan (other
than under state "blue sky" laws, the SEC approvals contemplated by
Section 4.3(b) and the approval of the U.S. Department of Justice and
the Federal Trade Commission pursuant to the HSR);
(E) This Agreement and the Plan were duly and validly approved
by the shareholders of ADP Mergerco in accordance with ADP Mergerco's
Certificate of Incorporation and Bylaws;
(F) The Registration Statement has become effective under the
Securities Act of 1933, as amended, and, to the best knowledge of
such counsel, no stop order suspending the effectiveness of the
Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or contemplated;
(G) The shares of ADP Common Stock to be issued in connection
with the Merger have been duly authorized and when issued in
accordance with the terms of this Agreement and the Plan will be
validly issued, fully paid and nonassessable; and
(H) Subject to compliance with applicable federal and state
securities laws (as to which counsel need express no opinion), all of
the outstanding shares of ADP Common Stock have been duly authorized,
validly issued and fully paid, and are nonassessable and free of any
preemptive rights created by the Articles of Incorporation or Bylaws
of ADP or created by any of the agreements referred to in clause
(C)(ii) above.
5.3 Closing and Effective Time. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the offices
of Sandy, 1500 West Big Beaver Road, Troy, Michigan 48084 at 10:00 a.m. local
time as soon as practicable after the satisfaction of the conditions precedent
to the Closing, or at such other time and place as mutually agreed by ADP
Mergerco, ADP and Sandy (the "Closing Date").
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ARTICLE 6
TERMINATION AND ABANDONMENT
6.1 Termination and Abandonment. This Agreement may be terminated and the
Merger may be abandoned at any time prior to the Effective Time, whether before
or after approval by the shareholders of Sandy:
(a) by mutual action of the Boards of Directors of ADP Mergerco, ADP
and Sandy;
(b) by the Board of Directors of ADP Mergerco, ADP or Sandy if the
Merger does not take place on or before January 31, 1996; or
(c) by the Board of Directors of Sandy pursuant to Section 7.11
hereof.
6.2 Effect of Termination. Except as provided in Section 7.6 hereof with
respect to fees and expenses and in Section 7.1 hereof with respect to
confidentiality, in the event of the termination of this Agreement and the
abandonment of the Merger, this Agreement shall thereafter become void and have
no effect, and no party hereto shall have any liability to any other party
hereto or its shareholders or directors or officers in respect thereof, except
that nothing herein shall relieve any party from liability for any breach
hereof.
ARTICLE 7
MISCELLANEOUS
7.1 Entire Agreement. This Agreement (together with the schedules
contemplated herein and the documents delivered in connection herewith)
supersedes all prior documents, understandings, and agreements, oral or written,
relating to this transaction and constitutes the entire understanding among the
parties with respect to the subject matter hereof; provided, however, that the
Confidentiality Agreement dated May 2, 1995 and the Non-Disclosure Agreement
dated May 2, 1995 shall each survive the execution, delivery and termination of
this Agreement.
7.2 Amendment. This Agreement may not be amended except by an instrument
in writing signed on behalf of each of the parties hereto; provided, however,
that after approval of the Merger by the shareholders of Sandy, no amendment may
be made which decreases the consideration to which the shareholders of Sandy are
entitled pursuant to this Agreement or otherwise materially adversely affects
the shareholders of Sandy without the further approval of the shareholders of
Sandy.
7.3 Waiver. At any time prior to the Effective Time, whether before or
after any meeting of Sandy's shareholders, any party hereto may (a) in the case
of ADP Mergerco and ADP, extend the time for the performance of any of the
obligations or other acts of Sandy or, subject to the provisions contained in
Section 7.2 hereof, waive compliance with any of the agreements of Sandy or with
any conditions to the respective obligations of ADP Mergerco or ADP, or (b) in
the case of Sandy, acting through its Chairman, extend the time for the
performance of any of the obligations or other acts of ADP Mergerco or ADP, or
waive compliance with any of the agreements of ADP Mergerco or ADP or with any
conditions to its own obligations. Any agreement on the part of a party hereto
to any such extension or waiver shall be valid if set forth in an instrument in
writing signed on behalf of such party by a duly authorized officer.
7.4 Intentionally Left Blank.
7.5 Successors and Assigns. No rights or obligations of any party hereto
under this Agreement may be assigned. Any assignment in violation of the
foregoing shall be null and void. Subject to the preceding sentence of this
Section 7.5, the provisions of this Agreement shall be binding upon and inure to
the benefit of the parties hereto and their respective heirs, legal
representatives, successors and assigns.
7.6 Fees and Expenses.
(a) Except as otherwise provided in subsection (b) below, regardless of
whether the Merger is consummated, each of the parties hereto shall pay its own
respective costs and expenses (including, but not
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limited to, attorneys' fees) incurred in connection with this Agreement and the
transactions contemplated hereby.
(b) If the Board of Directors of Sandy terminates this Agreement pursuant
to Section 7.11(d) hereof, then Sandy shall pay to ADP, within one business day
after such termination, a fee equal to four percent of the aggregate purchase
price which the third party indicated it would pay in connection with the
proposed Acquisition Transaction which was the basis for such termination.
7.7 Severability. If any provision of this Agreement is held to be
illegal, invalid, or unenforceable under present or future laws effective during
the term hereof, such provision shall be fully severable; this Agreement shall
be construed and enforced as if such illegal, invalid, or unenforceable
provision had never comprised a part hereof; and the remaining provisions shall
remain in full force and effect and shall not be affected by the illegal,
invalid, or unenforceable provision or by its severance herefrom. Furthermore,
in lieu of such illegal, invalid, or unenforceable provision, there shall be
added automatically as a part of this Agreement a provision as similar in terms
to such illegal, invalid, or unenforceable provision as may be possible and be
legal, valid, and enforceable.
7.8 Waiver. No failure or delay on the part of any party in exercising any
right, power, or privilege hereunder or under any of the documents delivered in
connection with this Agreement shall operate as a waiver of such right, power,
or privilege; nor shall any single or partial exercise of any such right, power,
or privilege preclude any other or future exercise thereof or the exercise of
any other right, power, or privilege.
7.9 Notices. Any notices required or permitted to be given under this
Agreement (and, unless otherwise expressly provided therein, under any document
delivered in connection with this Agreement) will be sufficient if given in
writing and shall be deemed received: (a) when personally delivered to the
relevant party at such party's address as set forth below, (b) when confirmed if
delivered by facsimile or similar device, (c) if sent by mail, on the third day
following the date when deposited in the United States mail, certified or
registered mail, postage prepaid, to the relevant party at its address indicated
below or (d), if sent by recognized overnight courier, on the day following the
date when delivered to the courier, postage prepaid, addressed to the relevant
party at its address indicated below:
<TABLE>
<S> <C>
If to ADP or ADP Automatic Data Processing, Inc.
Mergerco: 1950 Hassell Road
Hoffman Estates, Illinois 60195
Attention: President, Dealer Services Group
Phone: 708/397-1700
FAX: 708/885-3099
with a copy to, in the case of notices to either ADP Mergerco or ADP (which
shall not constitute notice):
Automatic Data Processing, Inc.
One ADP Boulevard
Roseland, New Jersey 07068
Attention: General Counsel
Phone: 201/994-5750
FAX: 201/535-6199
If to Sandy: Sandy Corporation
1500 West Big Beaver Road
Troy, Michigan 48084
Attention: Chairman
Phone: 810/649-0800
FAX: 810/649-2080
</TABLE>
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<TABLE>
<S> <C>
with a copy to (which shall not constitute notice):
Honigman Miller Schwartz and Cohn
2290 First National Building
Detroit, Michigan 48226
Attention: Donald J. Kunz, Esq.
Phone: 313/256-7704
FAX: 313/962-0176
</TABLE>
Each party may change its address for purposes of this Section 7.9 by proper
written notice to the other parties.
7.10 Non-Survival of Representations, Warranties, and Covenants. Except as
provided in Section 7.12 hereof, regardless of any investigation at any time
made by or on behalf of any party hereto or of any information any party may
have in respect thereof, all covenants, agreements, representations, and
warranties made hereunder or pursuant hereto or in connection with the
transactions contemplated hereby shall automatically terminate (without further
action) at the Effective Time.
7.11 Fiduciary Duties. Sandy will immediately cease any and all
discussions and negotiations with any and all third parties regarding any
proposed (i) merger of Sandy with or into any third party, (ii) sale of
substantially all of the assets of Sandy, (iii) sale of more than one percent of
the outstanding shares of Sandy Common Stock, or (iv) consolidation or other
business combination involving Sandy or any division of Sandy (an "Acquisition
Transaction"). Except as set forth below in this Section 7.11, Sandy will not,
and will not permit any of its officers, directors, investment bankers,
attorneys or accountants to, and will not authorize any of its employees, agents
or representatives to, directly or indirectly, (i) encourage, solicit or
initiate discussions or negotiations with, or provide any non-public information
to, any person or entity other than ADP or its affiliates (or any group in which
ADP or its affiliates participates) concerning an Acquisition Transaction or
(ii) otherwise encourage, solicit or initiate inquiries or the submission of any
proposal contemplating an Acquisition Transaction. Sandy may, without liability
for breach of this Agreement, (a) furnish information and engage in discussions
or negotiations with any person if Honigman Miller Schwartz and Cohn or other
independent legal counsel to Sandy advises the Board of Directors of Sandy that
failure to furnish such information or engage in such discussions or
negotiations is likely to be considered a breach by the Board of Directors of
Sandy of its fiduciary duties, (b) take and disclose to Sandy's shareholders a
position with respect to a tender offer by a third party (a "Third Party Offer")
pursuant to Rules 14d-9 and 14e-2(a) promulgated under the Exchange Act or make
such disclosure to Sandy's shareholders that, in the good faith judgment of the
Board of Directors of Sandy based upon the advice of Honigman Miller Schwartz
and Cohn or other independent legal counsel to Sandy, may be required under
applicable law, (c) take action to provide that Chapter 7A or 7B of the MBCA
does not apply to acquisitions of shares of Sandy Common Stock pursuant to any
Third Party Offer at a value or consideration per share which, after
consultation with Sandy's financial advisors, the Board of Directors of Sandy
determines is higher than the Exchange Ratio, approve any such Third Party Offer
and the transactions contemplated thereby, or otherwise take any similar action
which, in the good faith judgment of the Board of Directors based upon the
advice of Honigman Miller Schwartz and Cohn or other independent legal counsel
to Sandy, may be required by the directors' fiduciary duties with respect to any
such Third Party Offer or (d) terminate this Agreement if Sandy receives a
written proposal regarding an Acquisition Transaction which offers more
consideration to the shareholders of Sandy than that offered hereunder by ADP
and the Board of Directors of Sandy recommends to the shareholders of Sandy that
such shareholders accept and/or approve such Acquisition Transaction.
7.12 Indemnification and Insurance.
(a) For six years after the Closing Date, ADP shall, or shall cause the
Surviving Corporation to, indemnify and hold harmless each present and former
director or officer of Sandy (the "Indemnified Parties") from and against any
and all claims arising out of or in connection with activities in such capacity
or on behalf of, or at the request of, Sandy, occurring on or prior to the
Closing Date ("Claims"), to the fullest extent permitted under applicable law
and, in addition (if not prohibited by applicable law), to the fullest extent
provided in Sandy's charter and bylaws in effect at the date hereof. If any
Claim or Claims asserted or made
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within such six year period, all rights to indemnification in respect of any
such Claim or Claims shall continue until disposition of any and all such
Claims. Without limiting the foregoing, after the Effective Time ADP shall, or
shall cause the Surviving Corporation to, advance expenses incurred with respect
to the foregoing, as they are incurred, to the fullest extent permitted under
applicable law, provided that the person on whose behalf the expenses are
advanced provides an undertaking (which need not be secured) to repay such
advances if it is ultimately determined in a final, non- appealable judicial
proceeding that such person is not entitled to indemnification.
(b) After the Effective Time, ADP shall, or shall cause the Surviving
Corporation to, maintain Sandy's existing officers' and directors' liability
insurance in respect of Claims, or other insurance (including a run-off policy)
in respect of Claims, no less favorable in scope and amount of coverage, in full
force and effect without reduction of coverage for a period of three years after
the Closing Date; provided, however, that ADP will not be required to pay an
annual premium therefor in excess of two times the last annual premium paid by
Sandy prior to the date hereof and if ADP is unable to purchase the insurance
required by this Section 7.12 it shall purchase as much comparable insurance as
can be obtained for an annual premium equal to such maximum amount.
7.13 Knowledge.
(a) When used in this Agreement, the term "knowledge" (or any variation
thereof) of Sandy shall refer to the actual knowledge of or notice to William H.
Sandy, Raymond A. Ketchledge, John Zimmerman or any other executive officer of
Sandy, and the term "best knowledge" of Sandy shall refer to the actual
knowledge of or notice to any of such persons after due inquiry by all of such
persons.
(b) When used in this Agreement, the term "knowledge" (or any variation
thereof) of ADP or ADP Mergerco shall refer to the actual knowledge of or notice
to Josh Weston, Art Weinbach, Peter Leger or any other executive officer of ADP
or ADP Mergerco, and the term "best knowledge" of ADP or ADP Mergerco shall
refer to the actual knowledge of or notice to any of such persons after due
inquiry by all of such persons.
7.14 Governing Law. This agreement shall be governed by and construed in
accordance with the laws of the State of Michigan without regard to its choice
of laws principles.
7.15 Headings. The headings and captions used in this Agreement are,
unless specified otherwise, for convenience only and shall not be deemed to
limit, amplify, or modify the terms of this Agreement or affect the meaning
hereof.
7.16 Sections; Exhibits. All references to "sections", "schedules", and
"exhibits" herein are, unless specifically indicated otherwise, references to
sections, schedules, and exhibits of and to this Agreement.
7.17 Number and Gender of Words. Whenever herein the singular number is
used, the same shall include the plural where appropriate, and words of any
gender shall include each other gender where appropriate.
7.18 Counterparts. This Agreement may be executed in multiple
counterparts; provided however, that all such counterparts together shall be
deemed to constitute one agreement. This Agreement may be executed by facsimile
signatures.
7.19 Definitions. For purposes of this Agreement, the term:
<TABLE>
<S> <C>
(a) "Acquisition Transaction" has the meaning set forth in Section 7.11 hereof;
(b) "ADP" has the meaning set forth in the preamble to this Agreement;
(c) "ADP Sandy Common Stock" has the meaning set forth in Section 1.2(a) hereof;
(d) "ADP Financial Statements" has the meaning set forth in Section 2.6 hereof;
(e) "ADP Mergerco" has the meaning set forth in the preamble to this Agreement;
(f) "ADP SEC Filings" has the meaning set forth in Section 2.6 hereof;
</TABLE>
27
<PAGE> 79
<TABLE>
<S> <C>
(g) "Affiliate" has the meaning set forth in Section 5.1(n) hereof;
(h) "Affiliate Stockholder" has the meaning set forth in Section 5.1(l) hereof;
(i) "Affiliate Stockholders' Agreement" has the meaning set forth in Section 5.1(l)
hereof;
(j) "Agreement" has the meaning set forth in the preamble to this Agreement;
(k) "Assets" has the meaning set forth in Section 2.3 hereof;
(l) "Average ADP Common Stock Price" has the meaning set forth in Section 1.3(a)
hereof;
(m) "Best Knowledge" has the meaning set forth in Section 7.13 hereof;
(n) "Claim" and "Claims" have the meanings set forth in Section 7.12(a) hereof;
(o) "Closing" has the meaning set forth in Section 5.3 hereof;
(p) "Closing Date" has the meaning set forth in Section 5.3 hereof;
(q) "Code" has the meaning set forth in Section 3.9(c) hereof;
(r) "Sandy Common Stock" has the meaning set forth in Section 1.2(a) hereof;
(s) "Determination Date" has the meaning set forth in Section 1.3(a) hereof;
(t) "Effective Time" has the meaning set forth in Section 1.1(b) hereof;
(u) "Employees" has the meaning set forth in Section 3.27 hereof;
(v) "Employee Plans" has the meaning set forth in Section 3.9(b) hereof;
(w) "Employment and Consulting Agreement" has the meaning set forth in Section
5.1(g) hereof;
(x) "ERISA" has the meaning set forth in Section 3.9(b) hereof;
(y) "Escrow Agent" has the meaning set forth in Section 5.1(l) hereof;
(z) "Escrow Agreement" has the meaning set forth in Section 5.1(b) hereof;
(aa) "Exchange Agent" has the meaning set forth in Section 1.6(a) hereof;
(bb) "Exchange Fund" has the meaning set forth in Section 1.6(b) hereof;
(cc) "Exchange Ratio" has the meaning set forth in Section 1.3(a) hereof;
(dd) "Exhibits" has the meaning set forth in Section 7.16 hereof;
(ee) "GAAP" has the meaning set forth in Section 1.1(d) hereof;
(ff) "HSR" has the meaning set forth in Section 3.3 hereof;
(gg) "Indemnified Parties" has the meaning set forth in Section 7.12(a);
(hh) "IRS" has the meaning set forth in Section 3.9 hereof;
(ii) "Knowledge" has the meaning set forth in Section 7.13 hereof;
(jj) "Liabilities" has the meaning set forth in Section 2.3 hereof;
(kk) "MAE" has the meaning set forth in Section 2.4 hereof;
(ll) "MBCA" has the meaning set forth in the Recitals of this Agreement;
(mm) "Meeting" has the meaning set forth in Section 4.3(a) hereof;
(nn) "Merger" has the meaning set forth in the preamble of this Agreement;
(oo) "Merger Proxy Statement" has the meaning set forth in Section 4.3(c) hereof;
</TABLE>
28
<PAGE> 80
<TABLE>
<S> <C>
(pp) "NYSE" has the meaning set forth in Section 1.3(a) hereof;
(qq) "Plan" has the meaning set forth in the Recitals of this Agreement;
(rr) "Registration Statement" has the meaning set forth in Section 4.3(b) hereof;
(ss) "Return" and "Returns" have the meanings set forth in Section 3.14 hereof;
(tt) "Sandy" has the meaning set forth in the preamble of this Agreement;
(uu) "Sandy Financial Statements" has the meaning set forth in Section 3.13 hereof;
(vv) "Sandy Adjusted Net Worth" has the meaning set forth in Section 5.1(q) hereof;
(ww) "Sandy Options" has the meaning set forth in Section 1.8(a) hereof;
(xx) "Sandy SEC Filings" has the meaning set forth in Section 3.13 hereof;
(yy) "Sandy Tax Actions" has the meaning set forth in Section 3.14 hereof;
(zz) "Schedules" has the meaning set forth in Section 7.16 hereof;
(aaa) "SEC" has the meaning set forth in Section 1.1(d) hereof;
(bbb) "Sections" has the meaning set forth in Section 7.16 hereof;
(ccc) "Stockholders' Representative" has the meaning set forth in Section 1.7 hereof;
(ddd) "Substitute Options" has the meaning set forth in Section 1.8(a) hereof;
(eee) "Surviving Corporation" has the meaning set forth in Section 1.1(a) hereof;
(fff) "Tax" and "Taxes" have the meanings set forth in Section 3.14 hereof;
(ggg) "Test Date" has the meaning set forth in Section 5.1(q) hereof;
(hhh) "Third Party Offer" has the meaning set forth in Section 7.11 hereof; and
(iii) "Westcott" has the meaning set forth in Section 3.13 hereof.
</TABLE>
29
<PAGE> 81
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the day and year first above written.
ADP MERGERCO, INC.
By: /s/ JAMES B. BENSON
-----------------------------------
Its: President
AUTOMATIC DATA PROCESSING, INC.
By: /s/ JAMES B. BENSON
-----------------------------------
Its: Corporate Vice President
SANDY CORPORATION
By: /s/ WILLIAM H. SANDY
-----------------------------------
Its: Chairman -- C.E.O.
30
<PAGE> 82
EXHIBIT "A"
PLAN OF MERGER
OF
ADP MERGERCO, INC.
(A MICHIGAN CORPORATION)
WITH AND INTO
SANDY CORPORATION
(A MICHIGAN CORPORATION)
This Plan of Merger (this "Plan") is made, entered into, and agreed to as
of , 1995, by and among ADP MERGERCO, INC., a Michigan corporation
("ADP Mergerco"), AUTOMATIC DATA PROCESSING, INC., a Delaware corporation
("ADP") and SANDY CORPORATION, a Michigan corporation ("Sandy").
RECITALS
A. Sandy, ADP Mergerco and ADP are parties to an Agreement and Plan of
Merger, dated as of August 22, 1995 (the "Merger Agreement"), providing for the
Merger (the "Merger") of ADP Mergerco with and into Sandy in accordance with the
Michigan Business Corporation Act (the "MBCA") and this Plan. Sandy and ADP
Mergerco are hereinafter sometimes referred to as the "Constituent
Corporations."
B. The Boards of Directors of the Constituent Corporations deem it
advisable and in the best interests of the Constituent Corporations and in the
best interests of their respective shareholders that ADP Mergerco be merged with
and into Sandy.
NOW, THEREFORE, the Constituent Corporations hereby agree as follows:
AGREEMENT
1. Merger. The Constituent Corporations shall effect the Merger on the
terms and conditions set forth in this Plan.
(a) Pursuant to MBCA Section 450.1701(2)(a), at the Effective Time and
in accordance with the MBCA, ADP Mergerco shall be merged with and into
Sandy, the separate corporate existence of ADP Mergerco (except as it may
be continued by operation of law) shall cease, and Sandy shall continue as
the surviving corporation under its present corporate name. Sandy as it
exists from and after the Effective Time is sometimes referred to
hereinafter as the "Surviving Corporation."
(b) Consistent with MBCA Section 450.1724, upon the effectiveness of
the Merger, the Surviving Corporation shall possess all the rights,
privileges, immunities and franchises, as well of a public as of a private
nature, and be subject to all the restrictions, disabilities and duties, of
each of the Constituent Corporations; and all property, real, personal and
mixed, and all debts due to any of the Constituent Corporations on whatever
account, including subscriptions to shares, and all other things in action
and all and every other interest, of or belonging to each of the
Constituent Corporations, shall be vested in the Surviving Corporation
without further act or deed and without any transfer or assignment having
occurred; and all property, rights, privileges, immunities and franchises,
and all and every other interest shall be thereafter as effectually the
property of the Surviving Corporation as they were of the Constituent
Corporations, and the title to any real estate vested by deed or otherwise
in either of the Constituent Corporations shall not revert or be in any way
impaired by reason of the Merger; but all rights of creditors and all liens
upon any property of either of the Constituent Corporations shall be
preserved unimpaired, and all debts, liabilities and duties of the
Constituent Corporations shall thenceforth attach to the Surviving
Corporation, and may be enforced against it to the same extent as if said
debts, liabilities and duties had been incurred or contracted by it; and
all other effects of the Merger specified in the MBCA shall result
therefrom.
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<PAGE> 83
(c) Pursuant to MBCA Section 450.1707, as soon as practicable after
the satisfaction or waiver of the conditions to the Merger contained in the
Merger Agreement, the parties hereto will cause the Merger to be
consummated by filing with the Department of Commerce of the State of
Michigan a properly executed Certificate of Merger incorporating this Plan
of Merger (the time of filing of a Certificate of Merger relating to the
Merger being the "Effective Time").
2. Shares Entitled to Vote on the Merger. Pursuant to MBCA Section
450.1703(a)(1) and (2), this Plan shall be submitted for and become effective
upon approval of the shareholders of each of the Constituent Corporations.
Pursuant to MBCA Section 450.1703(a), the designation and number of outstanding
shares of each class and series of shares entitled to vote on the Merger, and
each class and series of shares entitled to vote as a class on the Merger, for
each Constituent Corporation, is set forth below:
[to be provided]
3. Articles of Incorporation: By-Laws: Directors and Officers. The
Articles of Incorporation and Bylaws of ADP Merger in effect immediately prior
to the Effective Time shall be the Articles of Incorporation and Bylaws of the
Surviving Corporation, until thereafter amended in accordance with the
provisions therein and as provided by the MBCA. The initial directors of the
Surviving Corporation shall be the directors of ADP Mergerco immediately prior
the Effective Time, in each case until their successors are elected and
qualified, and the initial officers of the Surviving Corporation shall be the
officers of ADP Mergerco immediately prior to the Effective Time, in each case
until their successors are duly elected and qualified.
4. Conversion of Securities. At the Effective Time, by virtue of the
Merger and without any action on the part of ADP Mergerco or ADP, Sandy or any
holder of any shares of capital stock of Sandy or ADP Mergerco:
(a) each issued and outstanding share of Sandy common stock, par value
$.01 per share (the "Sandy Common Stock"), shall be converted into and
exchangeable for shares of ADP common stock, par value $.10 per share (the
"ADP Common Stock"), at the Exchange Ratio as defined in Section 1.3 of the
Merger Agreement and ADP shall, subject to Section 1.7 of the Merger
Agreement, issue to holders of Sandy Common Stock shares of ADP Common
Stock based on the Exchange Ratio in exchange for the outstanding shares of
Sandy Common Stock, and holders of Sandy Common Stock shall be paid cash in
lieu of any fractional share as provided in Section 1.5 of the Merger
Agreement;
(b) each share of Sandy Common Stock held as treasury stock of Sandy
shall be canceled, retired and cease to exist, and no exchange or payment
shall be made in respect thereof; and
(c) each share of ADP Mergerco common stock, par value $.01 per share,
which is issued and outstanding immediately prior to the Effective Time
shall be converted into and become one validly issued, fully paid and
nonassessable share of common stock of the Surviving Corporation.
5. Stock Options.
(a) All stock options outstanding at the Effective Time under Sandy's 1985
Performance Incentive Plan, 1989 Performance Incentive Plan, or pursuant to the
nonqualified stock option agreement dated September 1988 between Sandy and
Raymond Ketchledge or the amended nonqualified stock option agreement dated
September 1, 1992 between Sandy and Raymond Ketchledge (collectively, the "Sandy
Options") shall, by virtue of the Merger and without any action on the part of
the holders of such options, be converted into and become options to purchase
shares of ADP Common Stock ("Substitute Options") as follows:
(i) each Substitute Option will cover the number of shares of ADP
Common Stock (rounded down to the nearest whole share) which the holder of
the Sandy Option being replaced would have been entitled to receive in the
Merger had such holder exercised, immediately prior to the Effective Time,
the Sandy Option which the Substitute Option is replacing;
(ii) each Substitute Option will be exercisable for a purchase price
per share (rounded down to the nearest cent) determined by dividing (x) the
purchase price per share of Sandy Common Stock payable
2
<PAGE> 84
upon exercise of the Sandy Option which the Substitute Option replaced,
multiplied by the number of shares of Sandy Common Stock covered by the
Sandy Option, by (y) the number of shares of ADP shares of Sandy Common
Stock covered by the Substitute Option, as determined in accordance with
clause (i) above; and
(iii) each Substitute Option will be exercisable, over each time
period during which the Sandy Option it replaced would have been
exercisable (taking into account any acceleration in vesting brought about
by the Merger), with respect to that number of shares of ADP Common Stock
(rounded down to the nearest whole share) determined by multiplying (x) the
number of shares of Sandy Common Stock with respect to which the Sandy
Option would have been exercisable during that time period by (y) a
fraction, the numerator of which is the total number of shares of ADP
Common Stock covered by the Substitute Option and the denominator of which
is the total number of shares of Sandy Common Stock covered by the replaced
Sandy Option.
(b) Subject to the foregoing requirements, the terms of each Substitute
Option will be substantially equivalent to the terms of the Sandy Option that it
replaces.
6. Merger Payment Procedure.
(a) After the Effective Time, holders of certificates theretofore
evidencing outstanding shares of Sandy Common Stock, upon surrender of such
certificates to an exchange agent appointed by ADP (the "Exchange Agent"), shall
be entitled to receive, (i) certificates representing the number of whole shares
of ADP Common Stock into which shares of Sandy Common Stock theretofore
represented by the certificates so surrendered shall have been converted as
provided in Section 1.2(a) of the Merger Agreement and (ii) cash payments in
lieu of fractional shares, if any, as provided in Section 1.5 of the Merger
Agreement. As soon as practicable after the Effective Time, ADP shall cause the
Exchange Agent to mail appropriate and customary transmittal materials (which
shall specify that delivery shall be effected, and risk of loss and title to the
certificates theretofore representing shares of Sandy Common Stock shall pass,
only upon proper delivery of such certificates to the Exchange Agent) to each
holder of Sandy Common Stock of record as of the Effective Time advising such
holder of the effectiveness of the Merger and the procedure for surrendering to
the Exchange Agent outstanding certificates formerly evidencing Sandy Common
Stock in exchange for new certificates for ADP Common Stock. ADP shall not be
obligated to deliver the consideration to which any former holder of shares of
Sandy Common Stock is entitled as a result of the Merger until such holder
surrenders the certificate or certificates representing such shares for exchange
as provided in such transmittal materials and Section 1.6(a) of the Merger
Agreement. Upon surrender, each certificate evidencing Sandy Common Stock shall
be canceled.
(b) On or promptly after the Effective Time, ADP shall deposit with the
Exchange Agent, for exchange in accordance with this Section 6, certificates
representing the shares of ADP Common Stock and cash in lieu of fractional
shares (such certificates and cash are hereinafter referred to as the "Exchange
Fund") to be issued or paid by ADP pursuant to Article 1 of the Merger Agreement
in connection with the Merger. After the Effective Time, ADP shall, on the
payment or distribution date, tender to the Exchange Agent as an addition to the
Exchange Fund all dividends and other distributions applicable to certificates
held in the Exchange Fund.
(c) Until outstanding certificates formerly representing Sandy Common Stock
are surrendered as provided in Section 6(a) hereof, no dividend or distribution
payable to holders of record of ADP Common Stock shall be paid to any holder of
such outstanding certificates, but upon surrender of such outstanding
certificates by such holder out of the Exchange Fund there shall be paid to such
holder the amount of any dividends or distributions (without interest)
theretofore payable with respect to such whole shares of ADP Common Stock, but
not paid to such holder, and which dividends or distributions had a record date
occurring subsequent to the Effective Time.
7. Return of Exchange Fund by Exchange Agent. Any portion of the Exchange
Fund (including the proceeds of any investments thereof or any ADP Common Stock)
that remains unclaimed by the holders of Sandy Common Stock for six months after
the Effective Time shall be returned or repaid to ADP. Any
3
<PAGE> 85
holders of certificates theretofore evidencing shares of Sandy Common Stock who
have not theretofore complied with Section 1.6 of the Merger Agreement shall
thereafter look only to ADP for payment of their shares of ADP Common Stock,
cash in lieu of fractional shares and any unpaid dividends and distributions on
the ADP Common Stock deliverable in respect of each share of Sandy Common Stock
that such holder holds as determined pursuant to the Merger Agreement, in each
case, without any interest thereon. If outstanding certificates for shares of
Sandy Common Stock are not surrendered or the payment for them not claimed prior
to the date on which such payments would otherwise escheat to or become the
property of any governmental unit or agency, the unclaimed items shall, to the
extent not prohibited by abandoned property and any other applicable law, become
the property of ADP (and to the extent not in its possession shall be paid over
to it), free and clear of all claims or interest of any person previously
entitled to such claims. Notwithstanding the foregoing, none of ADP, the
Exchange Agent or any other person shall be liable to any former holder of Sandy
Common Stock for any amount delivered to a public official pursuant to
applicable abandoned property, escheat or similar laws.
8. Closing of Sandy Transfer Books. At the Effective Time, the stock
transfer books of Sandy shall be closed and no transfer of shares of Sandy
Common Stock shall thereafter be made.
IN WITNESS WHEREOF, the parties hereto have caused this Plan of Merger to
be duly executed as of the date first above written.
ADP MERGERCO, INC.
By:
----------------------------------
Its: _________________________________
AUTOMATIC DATA PROCESSING, INC.
By:
----------------------------------
Its: _________________________________
SANDY CORPORATION
By:
----------------------------------
Its: _________________________________
4
<PAGE> 86
ANNEX B
<PAGE> 87
[BEAR, STEARNS & CO. INC. LETTERHEAD]
November 30, 1995
Board of Directors
Attention: William Sandy, Chairman
Dear Sirs;
We understand that Sandy Corporation ("Sandy") and Automatic Data
Processing, Inc. ("ADP") have entered into an agreement and plan of merger dated
as of August 22, 1995 (the "Merger Agreement"), whereby Sandy will merge into
ADP (the "Transaction"). Pursuant to the Merger Agreement, each share of Sandy
will be exchanged for a number of shares determined by dividing $12.00 by the
average closing price of ADP for the ten trading days ending three days prior to
the Sandy shareholders meeting, but not less than 0.1670771 nor more than
0.2042054 shares, before ADP's pending two-for-one stock split. You have
provided us with the proxy statement/prospectus, which includes the Merger
Agreement, in substantially the form to be sent to the shareholders of Sandy
(the "Proxy Statement").
You have asked us to render our opinion as to whether the Transaction is
fair, from a financial point of view, to the shareholders of Sandy.
In the course of our analyses for rendering this opinion, we have;
1. reviewed the Proxy Statement;
2. reviewed Sandy's Annual Reports to Shareholders and Annual Reports on
Form 10-K for the fiscal years ended August 31, 1993 through 1995;
3. reviewed ADP's Annual Reports to Shareholders and Annual Reports on Form
10-K for the fiscal years ended June 30, 1994 and 1995, its Current
Reports on Form 8-K filed with the Securities and Exchange Commission
(the "Commission") September 1, 1995 and November 6, 1995, its Current
Reports on Form 8-K/A filed with the Commission on November 13 and
November 22, 1995, and its Quarterly Report on Form 10-Q for the quarter
ended September 30, 1995;
4. reviewed certain operating and financial information provided to us by
management relating to Sandy's business and prospectus;
5. met with certain members of Sandy's senior management to discuss its
operations, historical financial statements and future prospects;
6. reviewed the historical prices and trading volumes of the common shares
of Sandy and ADP;
7. reviewed publicly available financial data and stock market performance
data of companies which we deemed generally comparable to Sandy; and
7. reviewed publicly available financial date and stock market performance
data of companies which we deemed generally comparable to Sandy; and
8. conducted such other studies, analyses, inquiries and investigations as
we deemed appropriate.
In the course of our review, we have relied upon and assumed the accuracy
and completeness of the financial and other information provided to us by Sandy
and ADP. We have not assumed any responsibility for the information provided to
us and we have further relied upon the assurances of the managements of Sandy
and ADP that they are unaware of any facts that would make the information or
projections provided to us incomplete or misleading. In arriving at our opinion,
we have not performed or obtained any independent appraisal of the assets of
Sandy or ADP. Our opinion is necessarily based on economic, market and other
conditions, and the information made available to us, as of the date thereof.
<PAGE> 88
Based on the foregoing, it is our opinion that the Transaction is fair,
from a financial point of view, to the shareholders of Sandy.
Very truly yours,
BEAR, STEARNS & CO. INC.
By: /s/ G.E. MATTHEWS
------------------------------------
Managing Director
2
<PAGE> 89
ANNEX C
<PAGE> 90
[HONIGMAN MILLER SCHWARTZ AND COHN LETTERHEAD]
November 28, 1995
Ladies and Gentlemen:
We have acted as counsel to Sandy Corporation, a Michigan corporation
("Sandy"), with respect to the merger of ADP Mergerco, Inc. ("ADP Mergerco"), a
Michigan corporation and a wholly-owned subsidiary of Automatic Data Processing,
Inc., a Delaware corporation ("ADP"), with and into Sandy, pursuant to an
Agreement and Plan of Merger (the "Agreement"), dated as of August 22, 1995, by
and among ADP Mergerco, ADP and Sandy (the "Merger"). Capitalized terms not
otherwise defined herein shall have the meaning assigned to them in the
Agreement.
You have requested our opinion with respect to certain of the federal
income tax consequences of the Merger. For purposes of rendering this opinion,
we have reviewed the Agreement and such other documents as we have deemed
necessary or appropriate. As a basis for this opinion, we have received and
expressly rely upon representations set forth below made on behalf of Sandy and
ADP by an officer of each corporation.
Based on the foregoing, we advise Sandy and the shareholders of Sandy that,
if the Merger is consummated pursuant to the Agreement, we are of the opinion
that, under currently applicable federal income tax law:
1. The Merger will qualify as a reorganization within the meaning of
Section 368(a)(1)(A) and Section 368(a)(2)(E) of the Code, and ADP, ADP
Mergerco, and Sandy will each be a party to the reorganization within the
meaning of Section 368(b) of the Code;
2. No gain or loss will be recognized by either ADP, ADP Mergerco, or Sandy
as a result of the consummation of the Merger;
3. No gain or loss will be recognized by a holder of Sandy Common Stock
upon the exchange of shares of Sandy Common Stock for shares of ADP Common Stock
pursuant to the Merger, except with respect to cash received in lieu of a
fractional share interest in ADP Common Stock, as discussed below;
4. The receipt of cash in lieu of fractional shares of ADP Common Stock
will be treated as if the fractional shares were distributed as part of the
exchange and then were redeemed by ADP. Under Section 302 of the Code, this
deemed redemption generally will result in a Sandy shareholder recognizing gain
or loss measured by the difference between (i) the amount of cash received, and
(ii) the tax basis allocable to the fractional share. Any gain or loss
recognized will be capital gain or loss, assuming that the fractional share of
the ADP Common Stock would have been a capital asset in the hands of the Sandy
shareholder, and such gain or loss will be long-term capital gain or loss if the
surrendered Sandy Common Stock has been held for more than one year as of the
date of the Merger;
5. The adjusted tax basis of the ADP Common Stock received by a holder of
Sandy Common Stock (including any fractional share of the ADP Common Stock
deemed received) pursuant to the Merger will be the same as the adjusted tax
basis of the shares of Sandy Common Stock surrendered in exchange therefor; and
6. The holding period of the ADP Common Stock received by a holder of Sandy
Common Stock as a result of the Merger will include the holding period of the
shares of Sandy Common Stock surrendered in exchange therefor, provided that
such Sandy Common Stock is held as a capital asset as of the date of the Merger.
<PAGE> 91
Sandy Corporation
November 28, 1995
Our opinion is based on the following representations made on behalf of
Sandy and/or ADP by an officer of each corporation:
1. To the best of the knowledge of the management of Sandy, there is no
plan or intention by the shareholders of Sandy to sell, exchange, or otherwise
dispose of a number of shares of ADP Common Stock received in the Merger that
would reduce the Sandy shareholders' ownership of such ADP Common Stock to a
number of shares having a value, as of the date of the Merger, of less than 50%
of the value of all of the formerly outstanding stock of Sandy as of the date of
the Merger. For purposes of this representation, (i) shares of Sandy Common
Stock exchanged for cash or other property will be treated as outstanding Sandy
stock on the date of the Merger, and (ii) shares of Sandy stock and shares of
ADP stock held by Sandy shareholders and otherwise sold, redeemed or disposed of
before or after the Merger and in contemplation of the Merger will be
considered. For purposes of this representation, moreover, shares of ADP Common
Stock received in exchange for shares of Sandy Common Stock acquired pursuant to
the exercise of outstanding warrants or options of Sandy or acquired in
contemplation of the Merger will not be considered as owned by the Sandy
shareholders.
2. There will be no dissenters to the Merger.
3. On the date of the Merger, the fair market value of the assets of Sandy
will exceed the sum of its liabilities plus the amount of liabilities, if any,
to which the assets of Sandy are subject.
4. Sandy is not under the jurisdiction of a court in a "Title 11 or similar
case" within the meaning of Section 368(a)(3)(A) of the Code, and neither Sandy,
ADP, nor ADP Mergerco is an "investment company" within the meaning of Section
368(a)(2)(F)(iii) and (iv) of the Code.
5. None of the compensation received by any shareholder-employee or
shareholder-consultant of Sandy pursuant to any employment, consulting or
similar agreement or arrangement will be separate consideration for, or
allocable to, any of his or her shares of Sandy stock. None of the shares of ADP
Common Stock received by any shareholder-employee or shareholder-consultant of
Sandy pursuant to the Merger will be separate consideration for, or allocable
to, any such employment, consulting, or similar agreement or arrangement. The
compensation paid to each shareholder-employee or shareholder-consultant of
Sandy will be for services actually rendered and will be commensurate with
amounts paid to third parties bargaining at arm's length for similar services.
6. The fair market value of the ADP Common Stock and other consideration to
be received by each Sandy shareholder pursuant to the Merger will be
approximately equal to the fair market value of the Sandy Common Stock
surrendered in the exchange.
7. Pursuant to the Merger, except for payments of cash in lieu of
fractional shares of ADP Common Stock, Sandy stock will be exchanged solely for
ADP Common Stock.
8. Following the Merger, Sandy will hold (i) at least 90% of the fair
market value of its net assets and at least 70% of the fair market value of its
gross assets held immediately prior to the Merger, and (ii) at least 90% of the
fair market value of ADP Mergerco's net assets and at least 70% of the fair
market value of ADP Mergerco's gross assets held immediately prior to the
Merger. For purposes of this representation, amounts paid by Sandy or ADP
Mergerco to Sandy shareholders who receive cash or other property, amounts used
by Sandy or ADP Mergerco to pay expenses incurred in connection with the Merger,
and redemptions and distributions (except for regular, normal dividends) made by
Sandy or ADP Mergerco in connection with the Merger will be included as assets
held by Sandy and ADP Mergerco, respectively, immediately prior to the Merger.
9. Before the Merger, ADP will be in control of ADP Mergerco within the
meaning of Section 368(c) of the Code.
2
<PAGE> 92
Sandy Corporation
November 28, 1995
10. ADP has no plan or intention (i) to liquidate Sandy, (ii) to merge
Sandy with or into another corporation, (iii) to sell or otherwise dispose of
the stock of Sandy except for transfers of stock to corporations controlled by
ADP within the meaning of Section 368(c) of the Code, or (iv) to cause Sandy to
sell or otherwise dispose of any of its assets or of any of the assets acquired
from ADP Mergerco, except for dispositions made in the ordinary course of
business or transfers of assets to a corporation controlled by Sandy within the
meaning of Section 368(c) of the Code.
11. There is no plan or intention for Sandy to issue additional shares of
its stock following the Merger that would result in ADP losing control of Sandy
within the meaning of Section 368(c) of the Code.
12. ADP Mergerco will have no liabilities assumed by Sandy, and will not
transfer to Sandy any assets subject to liabilities, in the Merger.
13. Following the Merger, Sandy will continue its historic business or use
a significant portion of its historic business assets in a business.
14. ADP, ADP Mergerco, Sandy and the shareholders of Sandy will pay their
respective expenses, if any, incurred in connection with the Merger.
15. There is no intercorporate indebtedness existing between ADP and Sandy
or between ADP Mergerco and Sandy that was issued, acquired, or will be settled
at a discount.
16. In the Merger, shares of Sandy stock representing control of Sandy, as
defined in Section 368(c) of the Code, will be exchanged solely for ADP Common
Stock. For purposes of this representation, shares of Sandy stock exchanged for
cash or other property (including cash or other property originating with ADP or
Sandy) will be treated as outstanding Sandy stock on the date of the Merger.
17. At the time of the Merger, Sandy will not have outstanding any
warrants, options, convertible securities, or any other type of right pursuant
to which any person or persons could acquire stock in Sandy that, if exercised
or converted, would affect ADP's acquisition or retention of control of Sandy
within the meaning of Section 368(c) of the Code.
18. The payment of cash in lieu of fractional shares of ADP Common Stock is
solely for the purpose of avoiding the expense and inconvenience to ADP of
issuing fractional shares and does not represent separately bargained for
consideration.
19. The total cash consideration that will be paid in the Merger to Sandy
shareholders instead of issuing fractional shares of ADP Common Stock will not
exceed 1% of the total consideration that will be issued or paid in the Merger
to Sandy shareholders in exchange for their shares of Sandy stock.
20. The fractional share interest of each Sandy shareholder will be
aggregated and no Sandy shareholder will receive, in exchange for his Sandy
stock, cash in an amount equal to or greater than the value of one full share of
ADP Common Stock.
21. ADP has no plan or intention to reacquire any of its stock issued in
the Merger.
22. All representations and warranties made by Sandy, ADP, and ADP Mergerco
in the Agreement were true and correct in all material respects as of the date
of the Agreement, and all such representations and warranties will be true and
correct in all material respects at the time of the Merger.
Our opinion is limited to the matters expressly addressed above. No opinion
is expressed, and none should be inferred, as to any other matter. Our opinion
may not be applicable to persons who acquired Sandy Common Stock pursuant to
exercise of employee stock options or to persons subject to other special
circumstances. Moreover, our opinion is based on existing law and currently
applicable Treasury Regulations promulgated under the Code, current published
administrative positions of the Internal Revenue Service
3
<PAGE> 93
Sandy Corporation
November 28, 1995
contained in revenue rulings and revenue procedures and judicial decisions, all
of which are subject to change either prospectively or retroactively. To the
extent changes in fact or law occur after the date hereof, our opinion is not
applicable and we undertake no obligation to update our opinion in such event.
We consent to the filing of this opinion as an exhibit to the Registration
Statement.
Very truly yours,
/s/ HONIGMAN MILLER SCHWARTZ AND COHN
--------------------------------------
Honigman Miller Schwartz and Cohn
4
<PAGE> 94
SANDY CORPORATION
PROXY SOLICITED BY THE BOARD OF DIRECTORS OF SANDY CORPORATION
Special Meeting of Shareholders - January 4, 1996
William H. Sandy, Raymond A. Ketchledge and George J. Forrest, and each of
them, are hereby authorized to represent and vote the stock of the undersigned
at the Special Meeting of Shareholders to be held January 4, 1996, and at any
adjournment or adjournments thereof.
The undersigned hereby revokes any proxy or proxies heretofore given to vote
such stock, and hereby ratifies and confirms all that said attorneys and
proxies, or other substitutes, may do by virtue hereof. If only one attorney
and proxy shall be present and acting, then that one shall have and may
exercise all the powers of said attorneys and proxies.
HAS YOUR ADDRESS CHANGED? DO YOU HAVE ANY COMMENTS?
- ------------------------------------ ----------------------------------------
- ------------------------------------ ----------------------------------------
SANDY
- ------------------------------------ -----------------------------------
<PAGE> 95
/X/ PLEASE MARK VOTES
AS IN THIS EXAMPLE
SANDY CORPORATION
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 1:
For Against Abstain
1. The proposal to adopt the / / / / / /
Agreement and Plan of Merger, by
and among Sandy Corporation,
ADP Mergerco, Inc. and Automatic
Data Processing, Inc.
2. In their discretion with respect to any other matters that may properly
come before the meeting.
The shares represented by this proxy will be voted in accordance with
the specifications made herein. If no specifications are made, this
proxy will be voted FOR proposal 1.
The undersigned hereby acknowledges receipt of the Notice of
Special Meeting of Shareholders and Proxy Statement/Prospectus with
respect to the January 4, 1996 Special Meeting.
RECORD DATE SHARES:
_____________________
Please be sure to sign and date this Proxy. / Date /
__________________________________________________________________
Stockholder sign here__________________Co-owner sign here_________
__________________________________________________________________
Mark box at right if comments or address change have / /
been noted on the reverse side of this card.
- -------------------------------------------------------------------------------
DETACH CARD DETACH CARD
<PAGE> 96
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Provision for indemnification of directors and officers is made in Section
145 of the Delaware General Corporation Law.
Article Fifth, Sections 3 and 4 of ADP's Amended and Restated Certificate
of Incorporation provide as follows:
"The Corporation shall indemnify all directors and officers of the
Corporation to the full extent permitted by the General Corporation Law of
the State of Delaware (and in particular Paragraph 145 thereof), as from
time to time amended, and may purchase and maintain insurance on behalf of
such directors and officers. In addition, the Corporation shall, in the
manner and to the extent as the By-laws of the Corporation shall provide,
indemnify to the full extent permitted by the General Corporation Law of
the State of Delaware (and in particular Paragraph 145 thereof), as from
time to time amended, such other persons as the By-laws shall provide, and
may purchase and maintain insurance on behalf of such other persons."
"A director of the Corporation shall not be held personally liable to
the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for
acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from
which the director derived an improper personal benefit. Any repeal or
modification of this paragraph by the stockholders of the Corporation shall
not adversely affect any right or protection of any director of the
Corporation existing at the time of, or for or with respect to any acts or
omissions occurring prior to, such repeal or modification."
Finally, Article XIV, Section 6 of ADP's By-laws provides as follows:
"Section 6. Indemnification of directors and Officers and Others: The
Corporation shall indemnify all directors and officers of the Corporation
to the full extent permitted by the General Corporation Law of the State of
Delaware (and in particular Section 145 thereof), as from time to time
amended, and may purchase and maintain insurance on behalf of such
directors and officers. This indemnification applies to all directors and
officers of the Corporation who sit on the boards of non-profit
corporations in keeping with the Corporation's philosophy."
"The Corporation shall indemnify any other person or employee who may
have served at the request of the Corporation to the full extent permitted
by the General Corporation Law of the State of Delaware (and in particular
Section 145 thereof) so long as such person or employee 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, further, so long as his actions were
not in violation of corporate policies and directives."
As permitted by Section 145 of the General Corporation Law of the State of
Delaware and ADP's Amended and Restated Certificate of Incorporation and
By-laws, ADP also maintains a directors and officers liability insurance policy
which insures, subject to certain exclusions, deductibles and maximum amounts,
directors and officers of ADP against damages, judgments, settlements and costs
incurred by reason of certain acts committed by such persons in their capacities
as directors and officers.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) A list of exhibits included as part of this Registration Statement is
set forth in the Exhibit Index which immediately precedes such exhibits and is
hereby incorporated by reference herein.
II-1
<PAGE> 97
(B) FINANCIAL STATEMENT SCHEDULES
Financial Statement Schedules have been omitted in accordance with Item 601
of Regulation S-K (incorporated by reference to ADP's Annual Report on Form 10-K
for the fiscal year ended June 30, 1995).
ITEM 22. UNDERTAKINGS.
The undersigned 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 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 Registrant undertakes: (1) To file, during any period in which offers
or sales are being made, a post-effective amendment to this Registration
Statement: (i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933; (ii) To reflect in the prospectus any facts or events
arising after the effective date of the Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in the
Registration Statement; (iii) To include any material information with respect
to the plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the Registration
Statement;
Provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3 or Form S-8 and the information required
to be included in a post-effective amendment by those paragraphs is contained in
periodic reports filed by the Registrant pursuant to section 13 or section 15(d)
of the Securities Exchange Act of 1934 that are incorporated by reference in the
Registration Statement.
(2) That, for the purpose 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 herein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.
Prior to any public reoffering 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(e), 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 paragraph immediately preceding, or (ii) that purports to meet the
requirements of Section 10(a)(3) of the 1993 Act and is used in connection with
an 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 initial bona fide offering thereof.
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 foregoing provisions, 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 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 by such
director, officer or controlling person in connection with the
II-2
<PAGE> 98
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 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: (1) for purposes of
determining any liability under the Securities Act of 1933, the information
omitted from the form of prospectus filed as part of this Registration Statement
in reliance upon Rule 430A and contained in a form of prospectus filed by the
Registrant pursuant to Rule 424(b)(1) or (4) or 497(h) under the Securities Act
shall be deemed to be part of this Registration Statement as of the time it was
declared effective; and (2) for the purpose of determining any liability under
the Securities Act of 1933, each post-effective amendment that contains a form
of prospectus 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
Item 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 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.
II-3
<PAGE> 99
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement, or amendment thereto, to be signed
on its behalf by the undersigned, thereunto duly authorized, in the City of
Roseland, State of New Jersey, on the 1st day of December, 1995.
AUTOMATIC DATA PROCESSING, INC.
(Registrant)
By /s/ JOSH S. WESTON
------------------------------------
Josh S. Weston
Chairman and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement, or amendment thereto, has been signed below by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ JOSH S. WESTON Chairman of the Board and Director December 1, 1995
- ---------------------------------------- (Principal Executive Officer)
(Josh S. Weston)
/s/ FRED D. ANDERSON, JR. Chief Financial Officer and December 1, 1995
- ---------------------------------------- Corporate Vice President
(Fred D. Anderson, Jr.) (Principal Financial Officer)
/s/ RICHARD J. HAVILAND Controller and Corporate Vice December 1, 1995
- ---------------------------------------- President
(Richard J. Haviland) (Principal Accounting Officer)
/s/ JOSEPH A. CALIFANO, JR. Director December 1, 1995
- ----------------------------------------
(Joseph A. Califano, Jr.)
/s/ GEORGE H. HEILMEIER Director December 1, 1995
- ----------------------------------------
(George H. Heilmeier)
/s/ LEON G. COOPERMAN Director December 1, 1995
- ----------------------------------------
(Leon G. Cooperman)
Director
- ----------------------------------------
(Edwin D. Etherington)
Director
- ----------------------------------------
(Ann Dibble Jordan)
/s/ HARVEY M. KRUEGER Director December 1, 1995
- ----------------------------------------
(Harvey M. Krueger)
</TABLE>
II-4
<PAGE> 100
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ CHARLES P. LAZARUS Director December 1, 1995
- ----------------------------------------
(Charles P. Lazarus)
Director
- ----------------------------------------
(Frederic V. Malek)
/s/ HENRY TAUB Director December 1, 1995
- ----------------------------------------
(Henry Taub)
/s/ LAURENCE A. TISCH Director December 1, 1995
- ----------------------------------------
(Laurence A. Tisch)
/s/ ARTHUR F. WEINBACH Director December 1, 1995
- ----------------------------------------
(Arthur F. Weinbach)
</TABLE>
II-5
<PAGE> 101
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ ------------------------------------------------------------------------------------
<S> <C>
2 Agreement and Plan of Merger, dated as of August 22, 1995, by and among the
Registrant, ADP Mergerco, Inc. and Sandy Corporation (included as Annex A to the
Proxy Statement/Prospectus)
3.1 Amended and Restated Certificate of Incorporation of the Registrant (incorporated by
reference to Exhibit (3)-#1 to Registrant's Annual Report on Form 10-K for the
fiscal year ended June 30, 1995)
3.2 Bylaws of the Registrant, as currently in effect (incorporated by reference to
Exhibit (3)-#2 to Registrant's Annual Report on Form 10-K for the fiscal year ended
June 30, 1991)
3.3 Form of the Registrant's Common Stock Certificate (incorporated by reference to
Exhibit 4.4 to Registrant's Registration Statement on Form S-3 (Registration No.
33-45150) filed with the Commission on January 21, 1992)
4.1 Indenture, dated as of February 20, 1992, between the Registrant and Bankers Trust
Company, as trustee, regarding the Liquid Yield Option Notes due 2012 of the
Registrant (incorporated by reference to Exhibit (4)-#1 to the Registrant's Annual
Report on Form 10-K for the fiscal year ended June 30, 1992)
4.2 Voting Agreement, dated August 22, 1995, between the Registrant and William H. Sandy
4.3 Amended and Restated Irrevocable Proxy Agreement, dated October 31, 1995, between
the Registrant and William H. Sandy
5 Opinion of James B. Benson, Esq., relating to the legality of the securities being
offered
8 Opinion of Honigman Miller Schwartz and Cohn, relating to certain tax matters
(included as Annex C to the Proxy Statement/Prospectus)
10.1 Employment and Consulting Agreement, effective November 4, 1985, between William H.
Sandy and Sandy Corporation, as amended on August 22, 1995
10.2 Lease Agreement, dated February 1, 1994, between Sandy Corporation and 1500 Limited
Partnership, as amended on August 22, 1995
*23.1 Consent of Deloitte & Touche LLP, relating to financial statements of the Registrant
*23.2 Consent of Deloitte & Touche LLP, relating to financial statements of Sandy
Corporation
23.3 Consent of James B. Benson, Esq. (included in Exhibit 5)
23.4 Consent of Honigman Miller Schwartz and Cohn (included in Exhibit 8)
23.5 Consent of Bear, Stearns & Co. Inc.
</TABLE>
- ---------------
* Previously filed.
<PAGE> 1
EXHIBIT 4.2
VOTING AGREEMENT
THIS VOTING AGREEMENT (the "Voting Agreement") is made as of August 22,
1995, by and between WILLIAM H. SANDY ("Shareholder"), MARJORIE M. SANDY and
AUTOMATIC DATA PROCESSING, INC., a Delaware corporation ("ADP").
RECITALS:
A. ADP, ADP Mergerco, Inc., a Michigan corporation and a wholly-owned
subsidiary of ADP ("Mergerco"), and Sandy Corporation, a Michigan corporation
(the "Company"), are concurrently herewith entering into an Agreement and Plan
of Merger, dated the date hereof (the "Merger Agreement"), which provides for
the merger of Mergerco with and into the Company (the "Merger").
B. Shareholder owns beneficially and of record 442,722 shares (the
"Aggregate Shares") of Company common stock, par value $.01 per share ("Sandy
Common Stock").
C. Shareholder is a party to a Shareholder Agreement dated November 4,
1985 executed by and among various shareholders of the Company (the
"Shareholder Agreement"), which provides that Shareholder, as the
Representative (as such term is defined in the Shareholder Agreement), has the
sole right until November 26, 1995 to direct the vote or written consent of a
portion of the Aggregate Shares (the "Owned Shares") and 584,548 shares of
Sandy Common Stock owned by others, 20,000 shares of which are covered by stock
options (all of such shares are referred to herein collectively, as the
"Controlled Shares"), on all matters presented for action to the Company's
shareholders.
D. To induce ADP and Mergerco to enter into the Merger Agreement,
Shareholder is willing to enter into this Voting Agreement.
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree as follows:
1. Agreement to Vote.
(a) Subject to all of the terms and conditions set forth in this Voting
Agreement, to induce ADP and Mergerco to enter into the Merger Agreement,
Shareholder hereby irrevocably agrees to vote on and after the date hereof the
Owned Shares and all of the Controlled Shares which he has the right and
authority as the Representative to vote under the Shareholder Agreement, if
any, and any and all securities issued or issuable in respect thereof (all of
such shares are referred to collectively herein as the "Voting Shares"), in
favor of adopting the Merger Agreement (and the related Plan of Merger) and
approving the Merger at any meeting of the Company's shareholders (including
adjournments thereof) or by written consent.
<PAGE> 2
(b) If after the execution of this Voting Agreement Shareholder shall
die or become incapacitated, cease to have appropriate power or authority, or
if any other such event or events shall occur, this Voting Agreement shall be
binding upon Marjorie M. Sandy, as successor representative under the
Shareholder Agreement.
2. Representations and Warranties of Shareholder. Shareholder hereby
represents and warrants to ADP as follows:
(a) Due Authorization. Shareholder has full legal power to enter into
this Voting Agreement and perform his obligations hereunder. This Voting
Agreement has been duly executed and delivered by Shareholder and constitutes
the valid and binding obligation of Shareholder enforceable against Shareholder
in accordance with its terms.
(b) Conflicting Instruments. The execution and delivery of this Voting
Agreement by Shareholder does not, and the performance of this Voting Agreement
by Shareholder will not, (i) require the consent, waiver, approval or license or
authorization of or any filing with any person or public authority or (ii) with
or without the giving of notice or the lapse of time, or both, conflict with or
result in a breach of any terms or provisions of, or result in the creation or
imposition of any lien, claim, charge or encumbrance upon any of the Voting
Shares under, any agreement or other instrument to which Shareholder is a party
or by which any of Shareholder's property is bound (including, without
limitation, the Shareholder Agreement) or any existing applicable law, rule,
regulation, judgment, decree or order of any governmental instrumentality, court
or administrative body having jurisdiction over Shareholder or any of
Shareholder's property.
(c) Ownership. Except as provided in the Shareholder Agreement or this
Voting Agreement, (i) Shareholder is the record and beneficial owner of the
Owned Shares with sole power to direct the voting and disposition of such
shares, and (ii) the Owned Shares are owned by Shareholder free and clear of
all security interests, liens, claims, encumbrances, charges, restrictions on
transfer, proxies and voting and other agreements.
(d) Shareholder Agreement. Shareholder (i) is presently the
Representative under the Shareholder Agreement, and (ii) has taken no action to
terminate the Shareholder Agreement, make the Shareholder Agreement
unenforceable or otherwise diminish his right and authority as the
Representative to vote the Controlled Shares.
3. Representations and Warranties of ADP. ADP hereby represents and
warrants to Shareholder as follows:
(a) Due Authorization. ADP has full legal power to enter into this
Voting Agreement. This Voting Agreement has been duly executed and delivered by
ADP and constitutes the valid and binding obligation of ADP enforceable against
ADP in accordance with its terms.
-2-
<PAGE> 3
(b) Judgments, Decrees, etc. As of the date hereof, ADP is not
aware of any judgment, decree, injunction, ruling or order of any court,
governmental department, commission, agency or instrumentality outstanding
against Mergerco or ADP which would prohibit or materially restrict or delay the
consummation of the Merger.
(c) Reorganization. As of the date hereof, ADP is not aware of any
facts or circumstances that would suggest that the Merger would not qualify for
federal income tax purposes as a reorganization within the meaning of Section
368 of the Internal Revenue Code of 1986, as amended.
(d) Pooling. As of the date hereof, ADP is not aware of any facts
or circumstances that would suggest that the Merger may not be properly
accounted for as a pooling of interests.
4. Conditions to Obligations. Notwithstanding any other
provision in this Voting Agreement to the contrary, the obligations and
undertakings of Shareholder and Marjorie M. Sandy under this Voting Agreement
are hereby subject to the fulfillment of the following condition:
(a) Pooling. ADP shall have received evidence from Deloitte &
Touche, LLP, in form and substance reasonably satisfactory to ADP, that the
Merger may properly be accounted for as a pooling of interests.
5. Adjustments. If the number of issued and outstanding shares of
Sandy Common Stock is increased, decreased or changed by reason of stock
dividends, split-ups, recapitalizations, combinations, conversions, exchanges
of shares or the like, the number and kind of Voting Shares subject to this
Voting Agreement shall be adjusted appropriately.
6. Covenants of Shareholder. Shareholder hereby covenants and
agrees that neither he nor Marjorie M. Sandy, his wife, shall, without the
prior written consent of ADP, directly or indirectly:
(i) sell, assign, pledge, grant any option or proxy with
respect to, or otherwise transfer or dispose of any of, or enter into
any voting or other agreements with respect to, the Voting Shares, or
deposit the Voting Shares in a voting trust, or take or omit to take or
permit any action which would or might result in any of the foregoing or
otherwise prevent or disable Shareholder from performing his obligations
hereunder; provided, however, that Shareholder may sell, transfer or
dispose of, or permit the sale, transfer or disposition of, the Voting
Shares to a third party who agrees in writing to be bound by the terms
and conditions of this Voting Agreement; or
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<PAGE> 4
(ii) vote the Voting Shares on any matter referred to in
Section 1(a) hereof in a manner inconsistent with this Voting Agreement.
7. Expiration. This Voting Agreement shall expire at the earlier of (i)
the Effective Time (as defined in the Merger Agreement) and (ii) one business
day following the date of termination of the Merger Agreement in accordance
with the terms thereof; provided, however, that notwithstanding anything to the
contrary contained herein, with respect to those Voting Shares other than the
Owned Shares only, this Voting Agreement shall expire at the earlier of (i)
the Effective Time, (ii) one business day following the date of termination of
the Merger Agreement in accordance with the terms thereof and (iii) the date of
the expiration or termination of the Shareholder Agreement.
8. Miscellaneous.
(a) Severability. If any term, provision, covenant or restriction of
this Voting Agreement is held by a court of competent jurisdiction to be
invalid, void or unenforceable, the remainder of the terms, provisions,
covenants and restrictions of this Voting Agreement shall remain in full force
and effect and shall in no way be affected, impaired or invalidated.
(b) Assignment. This Voting Agreement shall survive the death or
incapacity of Shareholder and shall be binding upon and inure to the benefit of
the parties hereto. Neither this Voting Agreement nor any rights hereunder
shall be assigned by any party hereto without the prior written consent of the
other parties hereto, except that ADP may assign its rights to a direct or
indirect subsidiary at least 50% owned by ADP (in which case all references to
ADP shall be deemed to mean such subsidiary).
(c) Amendments. This Voting Agreement may not be modified, amended,
altered or supplemented except upon the execution and delivery of a written
agreement executed by ADP and Shareholder.
(d) Notices. All notices, requests, claims, demands and other
communications hereunder shall be in writing and shall be given (and shall be
deemed to have been duly received if so given) by delivery in person or by
certified or registered mail (postage prepaid, return receipt requested) to the
respective parties as follows:
If to Shareholder:
William H. Sandy
596 Rudgate
Bloomfield Hills, Michigan 48304
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<PAGE> 5
With a copy to:
Jaffe, Raitt, Heuer & Weiss
Professional Corporation
One Woodward Avenue
Suite 2400
Detroit, Michigan 48226
Attn: Ira J. Jaffe, Esq.
If to ADP:
Automatic Data Processing, Inc.
One ADP Boulevard
Roseland, New Jersey 07068
Attn: General Counsel
or to such other address as any party may have furnished to the other in
writing in accordance herewith.
(e) Governing Law. This Voting Agreement shall be governed by and
construed in accordance with the laws of the State of Michigan.
(f) Counterparts. This Voting Agreement may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
(g) Effect of Headings. The section headings herein are for
convenience only and shall not affect the construction hereof.
(h) Specific Performance. Shareholder acknowledges that performance
of its obligations hereunder will confer a unique benefit on ADP and,
accordingly, that a failure of performance by Shareholder is not compensable by
money damages.
IN WITNESS WHEREOF, the parties hereto have caused this Voting
Agreement to be duly executed as of the day and year first above written.
AUTOMATIC DATA PROCESSING, INC.
By: /s/ James B. Benson
-----------------------------------
Title: Corporate Vice President
-------------------------------
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<PAGE> 6
/s/ William H. Sandy
--------------------------------
WILLIAM H. SANDY
/s/ Marjorie M. Sandy
--------------------------------
MARJORIE M. SANDY
The Sandy Corporation hereby acknowledges the existence of this Voting
Agreement and agrees to act in accordance herewith.
SANDY CORPORATION
By: /s/ Raymond A. Ketchledge
----------------------------
Title: President
-------------------------
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<PAGE> 1
EXHIBIT 4.3
AMENDED AND RESTATED
IRREVOCABLE PROXY AGREEMENT
THIS AMENDED AND RESTATED IRREVOCABLE PROXY AGREEMENT (the "Proxy
Agreement") is made as of October 31, 1995, by and between WILLIAM H. SANDY, THE
WILLIAM H. SANDY TRUST (together with William H. Sandy, "Shareholders"),
MARJORIE M. SANDY and AUTOMATIC DATA PROCESSING, INC., a Delaware corporation
("ADP").
RECITALS:
A. ADP, ADP Mergerco, Inc., a Michigan corporation and a
wholly-owned subsidiary of ADP ("Mergerco"), and Sandy Corporation, a Michigan
corporation (the "Company"), have entered into an Agreement and Plan of Merger,
dated as of August 22, 1995 (the "Merger Agreement"), which provides for the
merger of Mergerco with and into the Company (the "Merger").
B. Shareholders own of record 442,722 shares of Company common
stock, par value $.01 per share (the "Owned Shares").
C. Pursuant to the Merger Agreement, ADP has agreed to purchase
the Owned Shares from Shareholders in connection with the Merger at the
effective time of the Merger.
D. A portion of the Owned Shares (the "Restricted Shares") is
subject to certain restrictions contained in the Shareholder Agreement dated
November 4, 1985 by and among various shareholders of the Company, including
Shareholders (the "Shareholder Agreement"), and the remainder of the Owned
Shares is not subject to the provisions of the Shareholder Agreement (the
"Unrestricted Shares").
E. The Shareholder Agreement shall terminate on November 26, 1995
(the "Termination Date") and the Restricted Shares shall thereafter become free
and clear of any and all restrictions imposed thereon pursuant thereto.
F. On August 22, 1995, William H. Sandy, Marjorie M. Sandy and ADP
entered into an Irrevocable Proxy Agreement (the "Original Irrevocable Proxy
Agreement") intended to grant to ADP an irrevocable proxy for the sole purpose
of directing the vote or written consent of the Owned Shares, which irrevocable
proxy was to become effective as to the Unrestricted Shares on and after the
date thereof and as to the Restricted Shares on and after the Termination Date,
upon the terms and subject to the conditions set forth therein.
G. The parties hereto wish to amend and restate the Original
Irrevocable Proxy Agreement to bind William H. Sandy to the terms and
provisions thereof not only in his individual capacity but also as trustee of
The William H. Sandy Trust.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and the mutual
covenants and agreements set forth herein, the parties hereto agree that the
Original Irrevocable Proxy Agreement is hereby amended and restated to read as
follows:
1. GRANT OF IRREVOCABLE PROXY.
(a) Upon the terms and subject to the conditions set forth
herein, to induce ADP and Mergerco to enter into and perform the Merger
Agreement, Shareholders hereby irrevocably make, constitute and appoint ADP to
act, effective as to the Unrestricted Shares as of and after August 22, 1995
and as to the Restricted Shares on and after the Termination Date, as true and
lawful proxy and attorney-in-fact in the name and on behalf of Shareholders
with full power to appoint a substitute or substitutes, and direct ADP, and ADP
hereby agrees, to vote the Owned Shares (and any and all securities issued or
issuable in respect thereof) at any meeting of the shareholders of the Company
(including adjournments thereof) or by written consent in the place and stead
of Shareholders in favor of adopting the Merger Agreement (and the related Plan
of Merger) and approving the Merger. By giving this irrevocable proxy,
Shareholders hereby revoke any other proxy heretofore granted by Shareholders
to vote any of the Unrestricted Shares (or such other securities issued or
issuable in respect thereof) on or after the date hereof and any of the
Restricted Shares (or such other securities issued or issuable in respect
thereof) on or after the Termination Date.
(b) All power and authority hereby conferred is coupled with
an interest and, except as otherwise provided in Section 5 hereof, is
irrevocable, shall not be terminated by any act of either Shareholder or by
operation of law, by death or incapacity of William H. Sandy or any trustee or
beneficiary of The William H. Sandy Trust, by lack of appropriate power or
authority, or by the occurrence of any other event or events and shall be
binding upon all beneficiaries, heirs at law, legatees, distributees,
successors, assigns and legal representatives of Shareholders. If after the
execution of this Proxy Agreement, William H. Sandy or any trustee or
beneficiary of The William H. Sandy Trust shall die or become incapacitated,
cease to have appropriate power or authority, or if any other such event or
events shall occur, ADP is nevertheless authorized and directed to vote the
Owned Shares in accordance with the terms of this Proxy Agreement as if such
death, incapacity, lack of appropriate power or authority or other event or
events had not occurred and regardless of notice thereof.
2. REPRESENTATIONS AND WARRANTIES OF SHAREHOLDER. Shareholders
hereby represent and warrant to ADP as follows:
(a) DUE AUTHORIZATION. Shareholders have full legal power
to enter into this Proxy Agreement and perform their obligations hereunder.
This Proxy Agreement has been duly executed and delivered by Shareholders.
(b) CONFLICTING INSTRUMENTS. The execution and delivery of
this Proxy Agreement by Shareholders does not, and the performance of this
Proxy Agreement by Shareholders will not, (i) require the consent, waiver,
approval or license authorization of
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<PAGE> 3
or any filing with any person or public authority or (ii) with or without the
giving of notice or the lapse of time, or both, conflict with or result in a
breach of any terms or provisions of, or result in the creation or imposition of
any lien, claim, charge or encumbrance upon any of the Owned Shares under, any
agreement or other instrument to which either Shareholder is a party or by which
any of such Shareholder's property is bound (including, without limitation, the
Shareholder Agreement) or any existing applicable law, rule, regulation,
judgment, decree or order of any governmental instrumentality, court or
administrative body having jurisdiction over either Shareholder or any of such
Shareholder's property.
(c) OWNERSHIP. Except as provided in the Shareholder Agreement and
in this Proxy Agreement, (i) Shareholders are the record owners of the Owned
Shares with sole power to direct the voting and disposition of such shares, and
(ii) the Owned Shares are beneficially owned by William H. Sandy and/or the
beneficiary(ies) of The William H. Sandy Trust, free and clear of all security
interests, liens, claims, encumbrances, charges, restrictions on transfer,
proxies and voting and other agreements.
3. ADJUSTMENTS. If the number of Owned Shares increases, decreases
or otherwise changes by reason of stock dividends, split-ups, recapitalizations,
combinations, conversions, exchanges of shares or the like, the number and kind
of Owned Shares subject to this Proxy Agreement shall be adjusted appropriately.
4. COVENANTS OF SHAREHOLDERS. Shareholders and Marjorie M. Sandy
each hereby covenants and agrees that such person shall not, without the prior
written consent of ADP, directly or indirectly:
(i) sell, assign, pledge, grant any option or proxy with
respect to, or otherwise transfer or dispose of any of, or enter into any
voting or other agreements with respect to, the Owned Shares, or deposit the
Owned Shares in a voting trust, or take or omit to take or permit any action
which would or might result in any of the foregoing or otherwise prevent or
disable Shareholders from performing their obligations hereunder; provided,
however, that Shareholders may sell, transfer or dispose of any of the Owned
Shares to a third party who agrees in writing to be bound by the terms and
conditions of this Proxy Agreement; or
(ii) vote the Unrestricted Shares on or after the date
hereof or the Restricted Shares on or after the Termination Date on any matter
referred to in Section 1(a) hereof.
5. EXPIRATION. The irrevocable proxy granted hereby shall become
effective as to the Unrestricted Shares as of August 22, 1995 and as to the
Restricted Shares on the Termination Date and shall expire at the earlier of
(i) the Effective Time (as defined in the Merger Agreement) and (ii) one
business day following the date of termination of the Merger Agreement in
accordance with the terms thereof.
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<PAGE> 4
6. MISCELLANEOUS.
(a) SEVERABILITY. If any term, provision, covenant or
restriction of this Proxy Agreement is held by a court of competent
jurisdiction to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Proxy Agreement shall remain in
full force and effect and shall in no way be affected, impaired or invalidated.
(b) ASSIGNMENT. This Proxy Agreement shall survive the
death or incapacity of William H. Sandy or any trustee or beneficiary of the
William H. Sandy Trust and shall be binding upon and inure to the benefit of
the parties hereto and their respective successors, heirs, personal
representatives and assigns, but neither this Proxy Agreement nor any rights
hereunder shall be assigned by any party without the prior written consent of
the other parties hereto, except that ADP may assign its rights to a direct or
indirect subsidiary at least 50% owned by ADP (in which case all references to
ADP shall be deemed to mean such subsidiary).
(c) AMENDMENTS. This Proxy Agreement may not be modified,
amended, altered or supplemented except upon the execution and delivery of a
written agreement executed by all of the parties hereto.
(d) NOTICES. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be given (and
shall be deemed to have been duly received if so given) by delivery in person
or by certified or registered mail (postage prepaid, return receipt requested)
to the respective parties as follows:
If to either Shareholder William H. Sandy/Marjorie M. Sandy
or Marjorie M. Sandy: 596 Rudgate
Bloomfield Hills, Michigan 48304
With a copy to: Jaffe, Raitt, Heuer & Weiss
Professional Corporation
One Woodward Avenue
Suite 2400
Detroit, Michigan 48226
Attn: Ira J. Jaffe, Esq.
If to ADP: Automatic Data Processing, Inc.
One ADP Boulevard
Roseland, New Jersey 07068
Attn: General Counsel
or to such other address as any party may have furnished to the others in
writing in accordance herewith.
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<PAGE> 5
(e) GOVERNING LAW. This Proxy Agreement shall be governed by
and construed in accordance with the laws of the State of Michigan.
(f) COUNTERPARTS. This Proxy Agreement may be executed in
several counterparts, each of which shall be an original, but all of
which together shall constitute one and the same agreement.
(g) EFFECT OF HEADINGS. The section headings herein are for
convenience only and shall not affect the construction hereof.
(h) SPECIFIC PERFORMANCE. Shareholders acknowledge that
performance of their obligations hereunder will confer a unique benefit
on ADP and, accordingly, that a failure of performance by either
Shareholder is not compensable by money damages.
IN WITNESS WHEREOF, the parties hereto have caused this Proxy Agreement
to be duly executed as of the day and year first above written.
AUTOMATIC DATA PROCESSING, INC.
By: /s/ James B. Benson
---------------------------------
Its:
--------------------------------
/s/ William H. Sandy
-------------------------------------
WILLIAM H. SANDY
THE WILLIAM H. SANDY TRUST
By: /s/ William H. Sandy
----------------------------------
Its: Trustee
---------------------------------
FOR PURPOSES OF SECTION 4 ONLY
/s/ Marjorie M. Sandy
--------------------------------------
MARJORIE M. SANDY
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<PAGE> 6
The Sandy Corporation hereby acknowledges the existence of this Proxy Agreement
and agrees to act in accordance herewith.
SANDY CORPORATION
By: /s/ Raymond A. Ketchledge
----------------------------------
Its: President
----------------------------------
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<PAGE> 1
EXHIBIT 5
November 28, 1995
Board of Directors
Automatic Data Processing, Inc.
One ADP Boulevard
Roseland, NJ 07068
Re: Registration Statement on Form S-4 Filed on November 28, 1995
Ladies and Gentlemen:
In connection with the Registration Statement on Form S-4 (the
"Registration Statement") filed by Automatic Data Processing, Inc. (the
"Company") with the Securities and Exchange Commission on November 28, 1995
pursuant to the Securities Act of 1933, as amended (the "Act"), and the rules
and regulations promulgated thereunder (the "Rules"), you have requested that I
furnish you with my opinion as to the legality of the 1,009,912 shares of the
Company's common stock, $.10 par value (the "Shares"), which are registered
under the Registration Statement.
In this regard, I have examined originals, or copies authenticated to my
satisfaction, of the Company's Amended Restated Certificate of Incorporation,
the Company's By-Laws, as amended, and the Company's records of corporate
proceedings. In addition, I have made such other examinations of law and fact as
I considered necessary in order to form a basis for the opinions hereinafter
expressed. I am also familiar with the Agreement and Plan of Merger, dated as of
August 22, 1995, by and among the Company, ADP Mergerco, Inc. and Sandy
Corporation pursuant to which the Shares covered by the Registration Statement
will be issued.
Based upon the foregoing, I am of the opinion that (a) when the
applicable provisions of the Act and such "Blue Sky" or securities laws as may
be applicable shall have been complied with and (b) when issued in the manner
contemplated in the Registration Statement, the Shares so issued will be duly
and validly authorized, fully paid and non-assessable.
I hereby consent to the filing of this opinion as an exhibit to the
Registration Statement and to the use of my name under the caption "Legal
Matters" in the Joint Proxy Statement/Prospectus
<PAGE> 2
included in the Registration Statement. In giving this consent, I do not
thereby admit that I come within the category of persons whose consent is
required by the Act or the Rules.
Very truly yours,
/s/ James B. Benson
James B. Benson
General Counsel
<PAGE> 1
EXHIBIT 10.1
EMPLOYMENT AND CONSULTING AGREEMENT
THIS AGREEMENT (the "Agreement") made November 4, 1985, by and between
Sandy Corporation, a Michigan corporation, (hereinafter called "Corporation")
and William H. Sandy (hereinafter called "Employee").
R E C I T A L S:
A. Employee is President and Chief Executive Officer of
Corporation.
B. Corporation and Employee desire to set forth in this Agreement
the terms and conditions pursuant to which Employee accepts continued
employment with Corporation.
NOW, THEREFORE, the parties hereto agree as follows:
1. Active Employment
Corporation agrees to employ Employee as President and Chief Executive
Officer for a period of 10 years commencing November 1, 1985 through October
31, 1995. Such employment period as it may be extended or reduced pursuant to
paragraph 6(b) hereof is referred to as the "Active Employment Period".
Employee accepts this employment and agrees during the Active Employment Period
to devote his entire time and energy during usual business hours to the affairs
of Corporation. The duties and responsibilities of Employee during the Active
Employment Period shall be to manage and direct the affairs of Corporation, and
shall be rendered in the Troy, Michigan area.
2. Compensation During Active Employment Period
During the Active Employment Period, Corporation shall pay to Employee
compensation as follows:
(a) A minimum salary of $210,000 per year payable in equal
bi-weekly installments (the "base salary").
<PAGE> 2
(b) An annual bonus award calculated as follows:
(i) Employee shall receive an annual bonus during the Active
Employment Period equal to 25% of his base salary for each fiscal year
of Corporation during which the Corporation's net income (as determined
in accordance with generally accepted accounting principles, including
charges for compensation paid or accrued hereunder) exceeds zero;
(ii) Employee shall also receive an annual bonus during the
Active Employment Period equal to 8% of the amount by which the
Corporation's pre-tax income (as determined in accordance with generally
accepted accounting principles consistently applied) during each fiscal
year of the Corporation exceeds 12% of shareholders' equity (as
determined in accordance with generally accepted accounting principles,
including charges for compensation paid or accrued hereunder) as of the
beginning of such fiscal year;
(iii) In no event shall the sum of the bonuses provided in
clauses (i) and (ii), above, exceed 150% of Employee's base salary for
such fiscal year.
(c) Notwithstanding anything contained in paragraph 2(a) to the
contrary, Employee shall also receive increases in his base salary and such
additional or other incentive compensation as the Board of Directors deems
appropriate, taking into account the growth of Corporation, its profitability
and Employee's performance, and all other benefits generally available to the
officers of Corporation, which benefits shall not aggregate less in annual
financial value to Employee than the benefits presently available to him. The
base salary shall be adjusted on
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<PAGE> 3
November 1 of each year to reflect percentage increases in the National
Consumer Price Index.
(d) During each year of the Active Employment Period, Employee
shall receive life insurance coverage in an amount at least equal to
300% of Employee's total compensation during the prior fiscal year.
3. Consulting Period
Upon the termination of the Active Employment Period for any reason
(including voluntary termination by Employee) other than death, disability or
termination by Corporation for cause pursuant to paragraph 6(a), Employee shall
continue to be employed for a period of 5 additional years (the "Consulting
Period") as a consultant to Corporation. The compensation payable to Employee
during the Consulting Period shall be at the following percentages of the
average of Employee's total annual compensation for the prior three years at the
termination of the Active Employment Period, payable by-weekly:
Year Percent
---- -------
1 90%
2 80%
3 75%
4 75%
5 60%
The duties of Employee during the Consulting Period shall be to consult with
senior officers of Corporation concerning the general operations and affairs of
Corporation, and shall be performed by Employee as reasonably requested by
senior officers of Corporation. Corporation shall reimburse Employee for his
reasonable expenses in rendering any consulting services, and during the
Consulting Period he shall receive all other benefits generally available to
officers of Corporation.
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<PAGE> 4
4. Retirement Payments
Upon the termination of Employee's Active Employment Period and
Consulting Period, Employee shall be entitled to receive annual retirement
payments equal to 40% of the base salary to which he was entitled during the
last year of the Active Employment Period, up until his death; after Employee's
death such payments shall be made to Employee's wife, until her death. The
obligation of Corporation pursuant to this paragraph 4 shall not be funded by
Corporation, shall be paid out of the general assets of Corporation and shall
not take precedence over any other general debts of Corporation.
5. Disability or Death
(a) In the event that during the Active Employment Period or Consulting
Period Employee becomes unable by reason of physical or mental disability to
render the services required hereunder and such disability continues for a
period of 18 months, the employment of Employee hereunder shall terminate.
Commencing at the date of termination of employment for disability, Employee
shall receive annually a sum of equal to 35% of his annual compensation at the
time of termination of employment, including base salary and additional or
incentive compensation paid with respect to the preceding fiscal year, in
monthly installments, until he attains age 65, or his death if earlier. Employee
benefits for Employee shall also continue until Employee attains age 65, or
until his death if earlier. Upon attaining age 65, Employee shall receive
retirement payments as provided in paragraph 4, above. In the event that the
parties disagree as to the disability of Employee, the judgment of a physician
chosen by a physician designated by the Company and by a physician designated by
Employee shall be conclusive, subject to paragraph 10
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<PAGE> 5
hereof. Disability payments hereunder shall be reduced by the amount of other
Corporation financed disability benefits made available to Employee through
insurance or otherwise.
(b) In the event that the Active Employment Period hereunder is
terminated by death, Employee's designated beneficiary shall receive:
(i) continuation of base salary at the rate paid at the time
of death and bonus and incentive compensation at the rate for the
preceding fiscal year, payable for a period of 6 months after death and
at 50% of those amounts for an additional 18 months after the expiration
of the six month period;
(ii) continuation of employee benefit coverage for a period of 24
months; and
(iii) life insurance proceeds from insurance provided by the
Corporation in accordance with Paragraph 2(d) hereof.
6. Termination and Renewal
(a) Corporation shall have the right to terminate the employment of
Employee hereunder for cause upon 30 days written notice to Employee. As used
in this Agreement "cause" shall mean intentional and material dishonesty
adversely affecting Corporation, intentional gross neglect of duties, or
competitive activities in violation of paragraph 7 hereof.
(b) The Active Employment Period may be terminated by Employee at any
time during the Active Employment Period if Employee shall give Corporation
written notice of termination at least 120 days prior to the date of such
termination. The Active Employment Period shall be automatically extended for
an additional one year term on November 1 of each year commencing with 1995
unless written notice of termination is given either by
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<PAGE> 6
Corporation or by Employee to the other party at least 120 days prior to the
applicable November 1.
7. Noncompetition
During the Active Employment Period and Consulting Period, Employee
shall not engage directly or indirectly, as a director, officer, employee,
agent, consultant, stockholder (except as owner of less than 2% of a
corporation's outstanding publicly traded shares) or partner in any business
activity which competes with a significant portion of the business of
Corporation or its subsidiaries as then conducted. In addition to its other
remedies, Corporation shall be entitled to injunctive relief to protect its
interests hereunder.
8. No Mitigation
Employee shall not be obligated to seek other employment in mitigation
of amounts payable or arrangements made under the provisions of this Agreement
and the obtaining of any such other employment shall in no event affect any
reduction of the Corporation's obligations to make the payments and
arrangements required to be made under this Agreement.
9. Non-Assignability
Employee may not anticipate, alienate or assign any of his rights
under this Agreement, and any attempt to do so shall be void.
10. Arbitration
Any dispute under this Agreement shall be settled by submission of such
dispute to binding arbitration in Detroit, Michigan pursuant to the Commercial
Arbitration Rules of the American Arbitration Association. Corporation shall
pay all costs associated with any such arbitration.
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<PAGE> 7
11. Successors
This Agreement shall inure to the benefit of and be binding upon
Corporation, its successors and assigns, including any corporation or other
business or entity that shall purchase all or substantially all of the business
and assets of Corporation, or shall succeed to such business through merger,
liquidation or otherwise.
IN WITNESS WHEREOF, the parties have executed this Agreement on the
date written above.
SANDY CORPORATION
By: /s/ George J. Forrest
---------------------------------
Its: Treasurer
---------------------------
("Corporation")
WILLIAM H. SANDY
/s/ William H. Sandy
-------------------------------------
("Employee")
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<PAGE> 8
FIRST AMENDMENT TO
EMPLOYMENT AND CONSULTING AGREEMENT
THIS FIRST AMENDMENT TO EMPLOYMENT AND CONSULTING AGREEMENT (the
"Amendment") made April 1, 1986, by and between Sandy Corporation, a Michigan
corporation (hereinafter called "Corporation"), and William H. Sandy
(hereinafter called "Employee").
R E C I T A L S:
A. Employee is President and Chief Executive Officer of Corporation.
B. Corporation and Employee entered into that certain Employment and
Consulting Agreement (the "Agreement") on November 4, 1985.
C. Corporation and Employee desire to amend the Agreement to partially
revise the terms and conditions pursuant to which Employee accepts continued
employment with Corporation.
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment of Section 2(d) of the Agreement.
Section 2(d) of the Agreement is hereby amended to provide in its
entirety as follows:
"During each year of the Active Employment Period, Employee shall
receive, at his option, either (i) life insurance coverage in an amount
at least equal to 300% of Employee's total compensation during the prior
fiscal year or (ii) cash in the amount of the annual premium which the
Corporation would otherwise be required to pay for such life insurance
coverage."
<PAGE> 9
2. No Other Modifications.
Except as provided in Section 1 of this Amendment, all provisions of
the Agreement shall remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date written above.
SANDY CORPORATION
By: /s/ George J. Forrest
---------------------------------
Its: Senior Vice President
("Corporation")
WILLIAM H. SANDY
/s/ William H. Sandy
---------------------------------------
("Employee")
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<PAGE> 10
AMENDMENT TO EMPLOYMENT AND
CONSULTING AGREEMENT
This Amendment to Employment and Consulting Agreement (this
"Amendment") dated as of August 31, 1994, by and among Sandy Corporation, a
Michigan corporation (hereinafter called the "Corporation"), William H. Sandy
(hereinafter called "Employee"), and Marjorie M. Sandy (hereinafter called
"Mrs. Sandy").
RECITALS:
A. Employer is Chairman and Chief Executive Officer of the Corporation.
B. The Corporation and Employee entered into an Employment and Consulting
Agreement (the "Agreement") dated as of November 4, 1985, pursuant to
which Employer is and has been employed by the Corporation.
C. Section 4 of the Agreement provides for annual retirement payments to be
made to Employee and to his spouse upon termination of Employee's Active
Employment Period (as that term is defined in the Agreement) and
Consulting Period (as that term is defined in the Agreement).
D. The Corporation has accrued, as of the date of this Amendment, the sum
of $652,650 as an expense related to the retirement payments scheduled
to be paid under the Agreement, and is scheduled to accrue an additional
$91,820 on August 31, 1995 related to the retirement payments scheduled
to be paid in the Agreement.
E. The Corporation and Employee wish to amend the Agreement, to provide for
certain payments to be made by the Corporation to Employee in lieu of
the retirement payments provided for in the Agreement.
F. Mrs. Sandy consents to the actions being taken by and in this
Amendment.
NOW, THEREFORE, the parties hereto agree as follows:
1. Payment of Accrued Amounts
On the date of this Amendment, the Corporation is paying Employee the
sum of $652,650. On August 31, 1995, the Corporation shall pay Employee the
sum of $91,820. Each such payment shall be treated by the Corporation and by
Employee as compensation for federal and state income tax purposes.
2. Extinguishment of Retirement Payment Obligations
The payments described in Section 1 of this Amendment should be in lieu
of the retirement payments provided in Section 4 of the Agreement. Section 4
of the Agreement is hereby deleted from the Agreement, and shall be of no
further force and effect.
<PAGE> 11
3. Consent of Mrs. Sandy
Mrs. Sandy consents to the actions being taken by this Agreement, including
specifically the termination of Employee's retirement payments under the
Agreement which in certain circumstances could be payable to her.
4. Effect on Agreement
Except to the extent modified herein, the Agreement shall remain binding on
the Corporation and Employee and in full force and effect.
IN WITNESS WHEREOF, the parties have executed this Amendment on the date
first written above.
SANDY CORPORATION, a Michigan corporation
By: /s/ Raymond A. Ketchledge
------------------------------------
Raymond A. Ketchledge, President
/s/ William H. Sandy
----------------------------------------
William H. Sandy
/s/ Marjorie M. Sandy
----------------------------------------
Marjorie M. Sandy
-2-
<PAGE> 12
THIRD AMENDMENT TO EMPLOYMENT
AND CONSULTING AGREEMENT
THIS THIRD AMENDMENT TO EMPLOYMENT AND CONSULTING AGREEMENT (this
"Amendment") is made as of August 22, 1995, by and among SANDY CORPORATION, a
Michigan corporation (the "Corporation"), WILLIAM H. SANDY ("Employee"), and
MARJORIE M. SANDY ("Mrs. Sandy").
R E C I T A L S:
A. Employee is Chairman and Chief Executive Officer of the Corporation.
B. The Corporation and Employee entered into an Employment and
Consulting Agreement dated as of November 4, 1985, as amended by a First
Amendment to Employment and Consulting Agreement dated as of April 1, 1986, and
by an Amendment to Consulting Agreement dated as of August 31, 1994 (such
Employment and Consulting Agreement, as amended, being referred to herein as
the "Agreement"), pursuant to which Employee is and has been employed by the
Corporation.
C. Section 2 of the Agreement provides that Employee is to receive from
the Corporation an annual bonus award during the Active Employment Period (as
that term is defined in the Agreement).
D. Employee's Active Employment Period shall terminate upon the date of
the closing (the "Closing Date") of the merger of ADP Mergerco, Inc., a
Michigan corporation, with and into the Corporation (the "Merger"), which
Closing Date shall occur during the Corporation's 1996 fiscal year.
E. Section 3 of the Agreement provides for Employee's retention as a
consultant to the Corporation for a period of five years (the "Consulting
Period") upon termination of Employee's Active Employment Period.
F. Employee estimates that the present value of the sum of (i) all
compensation and benefits to be paid to him under Sections 3 and 5 of the
Agreement and (ii) the bonus award, if any, payable to Employee in respect of
the period from September 1, 1995 through the Closing Date under Sections 2 and
5 of the Agreement, will be approximately $1,475,000 on the Closing Date.
G. The Corporation and Employee wish to amend the Agreement to provide
for the acceleration of certain payments to be made by the Corporation to
Employee under the Agreement and to amend certain other provisions contained in
the Agreement.
-1-
<PAGE> 13
NOW, THEREFORE, the parties hereto agree as follows:
1. Acceleration of Payments. In full and complete satisfaction of
(i) the Corporation's obligations to pay and provide compensation and benefits
to Employee under Sections 3 and 5 of the Agreement and (ii) the Corporation's
obligation, if any, to pay a bonus award to Employee in respect of the period
from September 1, 1995 through the Closing Date under Sections 2 and 5 of the
Agreement, the Corporation agrees to pay Employee the sum of $1,475,000 on the
Closing Date.
2. Termination of Active Employment Period; 1995 Bonus.
Notwithstanding anything to the contrary contained in Section 6 of the
Agreement, Employee's Active Employment Period shall terminate, and Employee's
Consulting Period shall commence, on the Closing Date. During the period from
September 1, 1995 until the Closing Date, Employee's base salary (as defined in
the Agreement) shall continue to be paid at the base salary rate paid during
the 1995 fiscal year. Any bonus due to Employee for employment during the
period of September 1, 1994 through August 31, 1995 shall be calculated based
on the Corporation's net income, as determined in accordance with generally
accepted accounting principles consistently applied (which determination shall
take into account all expenses incurred by the Corporation in connection with
the Merger and in connection with the consideration of any other business
combination).
3. Permanent Waiver of Foregone Compensation. Employee hereby
permanently and irrevocably waives any rights he may have in respect of any
amounts of compensation heretofore voluntarily deferred by him, including,
without limitation, all amounts of compensation deferred pursuant to his
July 26, 1988 letter to the Compensation Committee and his July 20, 1992
letter to Peter Steffes.
4. Effect on Agreement. Except to the extent specifically
modified herein, the Agreement shall remain binding on the Corporation and
Employee and shall remain in full force and effect.
5. Consent of Mrs. Sandy. Mrs. Sandy consents to the actions
taken by this Amendment, including specifically the amendment of any right to
health care benefits given to her under the Agreement.
6. Counterparts. This Amendment may be executed in several
counterparts, each of which shall be an original, but all of which together
shall constitute one and the same agreement.
-2-
<PAGE> 14
IN WITNESS WHEREOF, the parties have executed this Amendment on the
date first written above.
SANDY CORPORATION
By: /s/ Raymond A. Ketchledge
-----------------------------------
Its: President
-----------------------------------
/s/ William H. Sandy
----------------------------------------
William H. Sandy
/s/ Marjorie M. Sandy
----------------------------------------
Marjorie M. Sandy
-3-
<PAGE> 1
EXHIBIT 10.2
LEASE
THIS LEASE, made as of the 1st day of February, 1994, by and between
1500 Limited Partnership, a Michigan limited partnership, whose address is 1500
West Big Beaver Road, Troy, Michigan 48084 (hereinafter referred to as
"Landlord"), and Sandy Corporation, a Michigan corporation, whose address is
1500 West Big Beaver, Troy, Michigan 48084 (hereinafter referred to as
"Tenant").
WHEREAS, Landlord owns that certain office building located at 1500
West Big Beaver, Troy, Michigan (hereinafter referred to as the "Building"), as
more particularly described on Exhibit A attached hereto, together with all
buildings, structures, improvements and parking areas constructed thereon and
all easements, rights and appurtenances thereto (collectively, the "Property");
and
WHEREAS, Tenant desires to lease a portion of the Building and
Landlord agrees to lease the Leased Premises to Tenant.
NOW THEREFORE, Landlord, in consideration of the rents to be paid and
the covenants and agreements to be performed by the Tenant, does hereby lease
to the Tenant the Leased Premises defined in Section 1 hereof upon the terms
and conditions hereinafter set forth and Landlord and Tenant agree as follows:
1. Basic Lease Provisions.
The following are certain basic lease provisions, which are part of,
and in certain instances referred to in subsequent provisions of, this Lease:
A. Address and Building: 1500 West Big Beaver Road,
Troy, Michigan 48084.
B. Leased Premises: 62,772 rentable square feet of area
which space is located on the second floor and a portion of the first
floor as designated and more particularly described by the area
outlined on Exhibit "B" attached hereto (the "Leased Premises").
C. Term: From February 1, 1994 through and including
May 31, 2006
D. Commencement Date: February 1, 1994.
E. Termination Date: May 31, 2006.
F. Basic Annual Rent:
<TABLE>
<CAPTION>
Period Annual Rent
------ -----------
<S> <C>
2/1/94 - 1/31/99 $1,129,896.00
2/1/99 - 1/31/04 1,192,668.00
2/1/04 - 5/31/06 1,224,054.00
</TABLE>
G. Monthly Rental Installments:
<TABLE>
<CAPTION>
Period Monthly Rent
------ ------------
<S> <C>
2/1/94 - 1/31/99 $ 94,158.00
2/1/99 - 1/31/04 99,389.00
2/1/04 - 5/31/06 102,004.50
</TABLE>
H. Basic Monthly Expense: Tenant is responsible for all
electric costs within the Leased Premises other than heating and air
conditioning costs, as set forth in Section 6.2 of this Lease. Tenant
is also responsible for Tenant's Proportionate Share (as hereinafter
defined) of "Increased Charges," as set forth in Section 4.3 hereof.
<PAGE> 2
I. Tenant's Proportionate Share: 81.8% (subject to
decrease if the area of the Leased Premises decreases when compared to
the gross leaseable area of the Building).
J. Tenant's Use: general business offices and such
other office, medical, research, training and seminar presentation
uses (other than use by any governmental agency) as are consistent
with uses permitted in other first class office buildings in Troy,
Michigan, and are in compliance with applicable zoning ordinances.
2. Leased Premises.
2.1 Landlord does hereby lease to Tenant the space specified in
Section 1(B) of the Basic Lease Provisions, as shown on Exhibit "B" attached
hereto, together with the nonexclusive right and easement to use the parking
and certain common areas and facilities, which are furnished by the Landlord at
or in the Building, in common and conjunction with the Landlord, the other
tenants of the Building, and their respective agents, employees, customers and
invitees (the "Common Areas"). Landlord shall not reduce, alter, modify or
change in any manner the Common Areas without the consent of Tenant, which
consent shall not be unreasonably withheld or delayed, provided that: (i) the
rear portion of the parking lot area may be so altered, so long as same does
not affect Tenant's rights hereunder, and (ii) the interior hallway may be
reconfigured to accommodate a new tenant, so long as access to and visibility
of the Leased Premises is not adversely affected thereby. Tenant and its
agents, employees, customers and invitees shall continue to have the exclusive
right to use the parking spaces currently designated for Tenant's use as of the
date hereof. In the event the size of the Leased Premises is reduced in
accordance with Section 36 of the Lease, the number of parking spaces
designated for Tenant's use shall be proportionately reduced. Tenant further
acknowledges that Landlord shall have no obligation to police, monitor or
enforce the usage of Tenant's designated parking spaces.
2.2 Landlord and Tenant acknowledge that the entire Building
including the Leased Premises is currently covered by an existing lease (the
"Existing Lease") dated May 18, 1983, between Landlord, as lessor, and Tenant,
as lessee, as amended (collectively, the "Existing Lease"). Contemporaneously
herewith, Landlord and Tenant shall execute an amendment (the "Amendment") to
the Existing Lease excluding the Leased Premises from the Premises (as defined
in the Existing Lease) for purposes of the Existing Lease. Pursuant to such
Amendment, the Existing Lease will cover only those portions of the Building
currently subleased by Tenant to: (i) Henry Ford Health System/Invitro
Fertilization of Australia Partnership d/b/a Henry Ford IVF Australia Program
("HFIAP") under a Sublease dated June 15, 1992 (the "HFIAP Sublease"), and (ii)
Henry Ford Health System d/b/a Henry Ford Medical Group ("HFHS") under a
Sublease dated June 15, 1992 (the "HFHS Sublease"). The portion of the
Building covered by the HFHS Sublease (the "HFIAP Space") is also subject to a
Lease dated June 15, 1992 (the "HFIAP Lease") between Landlord and HFHS, which
HFIAP Lease commences upon expiration of the HFIAP Sublease. The portion of
the Building covered by the HFHS Sublease (the "HFHS Space") is also subject to
a Lease dated June 15, 1992 (the "HFHS Lease") between Landlord and HFHS, which
HFHS Lease commences upon expiration of the HFHS Sublease. The HFHS Space is
more particularly described in the HFHS Lease and the HFIAP Space is more
particularly described in the HFIAP Lease. From and after the date hereof,
Landlord and Tenant shall use their best efforts to obtain the consent of HFIAP
and HFHS to: (i) the immediate termination of the HFIAP Sublease and HFHS
Sublease (the "Subleases") effective as of the first day of the first month
following the granting of such consent by both HFIAP and HFHS (the "Termination
Date"), and (ii) amendments to the HFIAP Lease and the HFHS Lease (the
"Leases") such that such Leases shall commence as of the Termination Date
rather than June 1, 1996 (the "Amendments"). Upon the granting of such consent
of HFIAP and HFHS, termination of the Subleases, and the execution of the
Amendments by Landlord, HFIAP and HFHS, the Existing Lease will be terminated
and of no further force or effect. In the event that HFIAP or HFHS refuses to
grant such consent, Tenant shall assign all of its right, title, and interest
in and to the Subleases to Landlord, Landlord shall assume the obligations of
Tenant thereunder, and the Existing Lease shall be terminated and of no further
force or effect as of the date of such assignment. In the event of a conflict
between this Lease and the Existing Lease as to the Leased Premises, this Lease
shall control.
- 2 -
<PAGE> 3
2.3 Landlord and Tenant acknowledge that Landlord is entitled to
reimbursement from Tenant pursuant to the Existing Lease for all payments made
by Landlord for insurance premiums with respect to the Building during the term
of the Existing Lease. Landlord hereby waives its right to reimbursement for
all such premiums paid by Landlord other than premiums for the previous twelve
(12) months for which Landlord shall receive reimbursement from Tenant.
2.4 Landlord executed a certain letter dated February 28, 1992,
with respect to the proposed sub-tenancy of HFHS. Landlord and Tenant
acknowledge and agree that such letter is null and void and of no further force
or effect.
2.5 Tenant hereby agrees to indemnify and hold Landlord harmless
from and against any and all liabilities, claims, demands, obligations, costs
and expenses arising under the Subleases prior to the date hereof. Landlord
hereby agrees to indemnify and hold Tenant harmless from and against any and
all liabilities, claims, demands, obligations, costs and expenses arising under
the Subleases from and after the date hereof.
3. Term and Possession.
3.1 The term (the "Term") of this Lease shall be for the period
from and after the Commencement Date and ending on May 31, 2006.
3.2 Tenant accepts the Leased Premises in its "as is" condition as
of the Commencement Date.
4. Rent.
4.1 Tenant shall pay to Landlord as rent for the Leased Premises
during the Term of this Lease the sum shown in Section 1(F) of the Basic Lease
Provisions, payable in advance, in equal monthly installments in the amount
shown in Section 1(G) of the Basic Lease Provisions, upon the first day of each
and every month throughout the term of this Lease.
4.2 Rental and all other charges hereunder shall be paid promptly
without prior demand therefor and without deductions or set-offs for any reason
whatsoever, except as otherwise hereinafter provided, and overdue rent shall
bear interest from and after the tenth (10) day of each calendar month if not
previously paid at the rate of twelve percent (12%) per annum, but in no event
higher than the highest rate which may be charged without the same being
usurious, during delinquency until paid. Landlord shall have no obligation to
accept less than the full amount of all installments of rental and interest
thereon and all charges hereunder which are due and owing by Tenant to
Landlord, and if Landlord shall accept less than the full amount owing,
Landlord may apply the sums received toward any of Tenant's obligations in
Landlord's discretion.
4.3 In addition to the Basic Annual Rent set forth above, Tenant
shall pay to Landlord, as additional rent, Tenant's Proportionate Share of any
"Increased Charges" (as hereinafter defined). "Increased Charges" shall mean
that portion of the "Charges" (as hereinafter defined) incurred by Landlord
during each calendar year in excess of the Charges incurred by Landlord during
calendar year 1994. Charges for calendar year 1994 shall be calculated by
annualizing the actual charges incurred during the period from February 1, 1994
through December 31, 1994. Notwithstanding anything contained herein to the
contrary, for purposes of the calculation of Charges incurred by Landlord
during calendar year 1994, the amount of Taxes (as hereinafter defined)
incurred by Landlord during calendar year 1993 shall be substituted for the
amount of Taxes incurred by Landlord during calendar year 1994, unless the
amount of Taxes incurred in 1994 is higher, in which case 1994 Taxes shall be
used. With respect to such Increased Charges, prior to the beginning of each
calendar year during the term of this Lease or as soon thereafter as is
practicable, Landlord shall give Tenant notice of Landlord's estimate of
Tenant's Proportionate Share of Increased Charges for the ensuing calendar year
which will be based on actual charges for the previous calendar year. On or
before the first day of each month during such ensuing calendar year, Tenant
shall pay to Landlord one-twelfth (1/12) of such estimated amount, provided
that until such notice is given with respect to such calendar year, Tenant
shall
- 3 -
<PAGE> 4
continue to pay the amount then currently payable pursuant hereto until after
the month such notice is given, at which time, the following month's share of
Increased Charges shall include the shortfall in amounts paid by Tenant for
such calendar year to date. Within ninety (90) days of the close of each
calendar year, Landlord shall deliver to Tenant a statement prepared by
Landlord of the amount of the actual Tenant's Proportionate Share of Increased
Charges for the prior calendar year and reasonable evidence and background
information relating to such Increased Charges and the calculation thereof.
The amount charged to Tenant by Landlord hereunder shall not include any
profit, fee, or other mark up benefiting Landlord, but shall be based upon the
actual amounts paid by Landlord as Charges or at Tenant's option, such amount
shall be refunded to Tenant. If on the basis of such statement, Tenant owes an
amount that is less than the estimated payments made during such prior calendar
year by Tenant, Landlord shall credit such excess amount against the next
payments due from Tenant to Landlord of Increased Charges. If on the basis of
such statement, Tenant owes an amount that is more than the estimated payment
for such calendar year made by Tenant, Tenant shall pay the deficiency to
Landlord within one hundred fifty (150) days after delivery of such statement.
Tenant shall have the right to audit Landlord's calculation of Increased
Charges on an annual basis within thirty (30) days after Tenant's receipt of
Landlord's statement of the amount of the Increased Charges due.
As used herein, "Charges" shall mean the following costs of operating,
repair, maintenance and taxes incurred by Landlord in connection with the
Property.
(i) all charges for gas, steam, heat, air-conditioning,
power, water and sewer rents for the Property, electricity for the
Common Areas, and all costs of light bulbs and ballasts for the Common
Areas;
(ii) all insurance premiums incurred by Landlord for
insurance which Landlord is required to carry under this Lease;
(iii) all real estate taxes, and other taxes, assessments,
special assessments, ordinary and extraordinary (which, if permitted
by law, may be paid in installments over the longest legally allowable
term) and other governmental charges, whether of a like or different
nature, levied upon or assessed against the Property or any buildings,
structures, fixtures or improvements now or hereafter located thereon,
or arising in respect of the occupancy, use or possession thereof, any
sales taxes applicable to commercial rents, and any tax that may be
levied, assessed or imposed by the State, County or Municipality in
which the Property is located, or by any political or taxing
subdivision thereof, upon or measured by the rents hereunder or the
rental income arising from Property in lieu of or as a substitute for
any tax upon the Property (but not general income taxes of Landlord),
and including the Michigan Single Business Tax, but excluding any of
Landlord's general income taxes, capital stocks tax or other tax
imposed against Landlord for the privilege or franchise of doing
business as a corporation, or any estate, inheritance, devolution,
succession, transfer, stamp, legacy or gift tax which may be imposed
upon or with respect to any transfer of Tenant's interest in the
Property (collectively the "Taxes"); and
(iv) the following reasonable, normal and recurring
expenses of operating, maintaining and repairing the Property: the
cost of landscaping, resealing, repairing, interior painting,
lighting, cleaning, and snow removal with respect to the Common Areas;
the cost of regular preventative maintenance and repair (including
replacement of parts) to the Building utility systems, Building
mechanical systems, exterior walls and roof of the Building, and
parking lot to keep same in good condition over their useful life; the
cost of ordinary trash disposal services; the cost of routine
maintenance of the elevator system; the cost of janitorial services;
reasonable management, legal, accounting and consulting fees and
expenses incurred in connection with the management and operation of
the Building and Common Areas which are payable to parties other than
Landlord, Landlord's general partner and their respective affiliates;
reasonable actual compensation (including employment taxes and fringe
benefits) of all persons who perform duties connected with the
operation, maintenance and repair of the Building or Common Areas; and
amortization of capital improvements which are either (i)
non-structural improvements
- 4 -
<PAGE> 5
required by changes in the law enacted after the Commencement Date
which are required as a result of occupancy of space within the
Building by Tenant, or (ii) installed for the purpose of reducing
Charges over the period of such amortization, provided the amortized
amount of such capital improvement does not exceed the good faith
estimate of the amount of the Increased Charge saved in any given
calendar year.
Notwithstanding anything contained in this Lease to the contrary,
Charges shall not include the following costs and expenses relating to the
operation, maintenance, repair and replacement of the Building and the Common
Areas:
(i) Structural building and roof repair costs;
(ii) Costs incurred when due to normal wear and tear,
exposure to the elements, corrosion or obsolescene, the parking lot,
roof, HVAC rooftop units and boilers are no longer usable or
repairable (other than costs incurred in connection with regular
preventative maintenance and necessary repairs, overhauls and
replacement of parts perfomed with respect to the parking lot, roof,
HVAC rooftop units and boilers to keep same in good condition for
their useful life which costs shall be included in Charges);
(iii) Any cost or expense related to removal or cleanup of
Hazardous Materials (as defined in Section 35 hereof) (except that
Tenant remains liable for all costs of any removal or cleanup caused
by Tenant);
(iv) Landlord's debt service on any mortgage encumbering
the Property;
(v) Items which would be considered capital expenditures
by Landlord under generally accepted accounting principles relating to
the Building or the Common Areas except as otherwise specifically
included above;
(vi) Cost of repair of damage caused by casualty or
condemnation;
(vii) Costs of Landlord associated with portions of the
Building leased to other tenants;
(viii) Depreciation;
(ix) Leasing commissions fees, tenant improvement costs
and incentives to new tenants;
(x) Expenses for services provided to another tenant of
the Building but not Tenant;
(xi) Penalties or fines payable by Landlord;
(xii) Expenses for which Tenant reimburses Landlord in
accordance with other provisions of this Lease;
(xiii) Costs incurred by Landlord as a result of a violation
of another lease for space in the Building;
(xiv) Costs incurred because of Landlord's negligence or
willful act or omission; and
(xv) Overhead and profit to Landlord.
4.4 Landlord agrees to not unreasonably reduce expenditures which
would be included in Charges during calendar year 1994. In addition, with
respect to the janitorial expenses, in the event the remainder of tenants in
the Building receive janitorial services in the future, janitorial
- 5 -
<PAGE> 6
service expenses for 1994 shall be "grossed up" as if 100% of the Building was
using janitorial services in 1994 as part of the calculation of Charges.
4.5 Notwithstanding anything contained in this Lease to the
contrary, the amount of "Controllable Charges" (as hereafter defined) for which
Tenant shall pay Tenant's Proportionate Share as part of Tenant's obligation to
pay Increased Charges shall not increase each calendar year by more than five
(5%) percent per annum on a cumulative basis, so that if Charges for 1994 are
$1.00, Charges for 1995 would not be higher than $1.05, Charges for 1996 would
not be higher than $1.1025, Charges for 1997 would not be higher than $1.1576,
and so forth. The term "Controllable Charges" shall mean all Charges, except
for Taxes, insurance premiums, and utility costs.
5. Use.
5.1 The Leased Premises shall be used only for the purposes of
Tenant's Use as set forth in Section 1(I) of the Basic Lease Provisions, and
for no other purpose or purposes whatsoever, subject to the provisions of
Section 5.3 hereof. Tenant agrees, at its own cost and expense, to obtain all
necessary governmental approvals, certificates, licenses and permits, that may
be required for Tenant's use and occupancy of the Leased Premises; provided,
however, Landlord agrees to cooperate with Tenant in applying for any
certificate, license or permit required and Landlord will sign, if required,
any necessary applications and related documents.
5.2 Tenant acknowledges that (i) the Leased Premises are suitable
for Tenant's use in the conduct of its business; (ii) Tenant has inspected the
Leased Premises and the Building and both are, in all respects, satisfactory to
Tenant; (iii) Landlord has not had, and will not in the future, have any
responsibility in connection with any improvements to the Leased Premises or
the Property and Landlord has made no representations or warranties with
respect to the condition, state or workmanship of any building or improvements
on the Property or the condition, state or workmanship of the Leased Premises,
and, except for Landlord's repair obligations set forth in this Lease, arising
with respect to events or circumstances occurring subsequent to the date
hereof, if any portion of the Leased Premises shall be found to be faulty,
incomplete or unsatisfactory in any way, Tenant shall have no recourse against
Landlord, any and all rights which it may have against Landlord for any damages
or other relief in connection therewith being expressly waived. Tenant shall
not do or permit to be done in or about the Leased Premises, nor bring or keep
or permit to be brought or kept therein, anything which is prohibited by or
will in any way conflict with any law, statute, ordinance or governmental rule
or regulation now in force or which may hereafter be enacted or promulgated, or
which is prohibited by the standard form of fire insurance policy, or will in
any way increase the existing rate of or affect any fire or other insurance
upon the Building or any of its contents, or cause a cancellation of any
insurance policy covering the Building or any part thereof or any of its
contents, or adversely and demonstrably affect or interfere with any services
required to be furnished by Landlord to Tenant, or to any other tenants or
occupants of the Building, or with the proper and economical rendition of any
such service. Tenant shall not do or permit anything to be done in or about
the Leased Premises which will in any way obstruct or interfere with the rights
of other tenants or subtenants of the Building, or injure them, or use or allow
the Leased Premises to be used for any unlawful or objectionable (i.e. not
consistent, in Landlord's reasonable discretion, with the operation of a first
class office building) purpose, nor shall Tenant cause, maintain or permit any
nuisance in, on or about the Leased Premises or commit or suffer to be
committed any waste in, on or about the Leased Premises. If anything done,
omitted to be done or suffered to be done by Tenant, or kept or suffered by
Tenant to be kept in, upon or about the Leased Premises shall cause the rate of
fire or other insurance on the Building in companies acceptable to Landlord to
be increased beyond the minimum rate from time to time applicable to the
Building, Tenant shall pay the amount of any such increases. Landlord
acknowledges that Tenant's current business and current use of the Leased
Premises do not violate this Section 5.2 and will not cause an increase in any
insurance rate.
- 6 -
<PAGE> 7
6. Utilities and Services.
6.1 Provided Tenant is not in Default hereunder, and subject to
Tenant's agreement to pay Increased Charges and other charges set forth in this
Lease, Landlord agrees to furnish to the Leased Premises, at Landlord's
expense, all utilities and services currently being provided to Tenant, at
Tenant's expense, under the Existing Lease, which services are consistent with
services typically provided in first class office buildings in the Troy,
Michigan area, subject to the conditions and in accordance with the standards
set forth in this Section 6 and which services include, but are not limited to,
the following:
A. Heat and/or air conditioning on Monday through
Friday from 7 a.m. to 7 p.m., except on legal holidays, at a range
within tolerances normal in first class office buildings.
B. Water for drinking, cleaning, and lavatory purposes
only.
C. Janitorial services.
D. Maintenance and replacement of the parking areas,
sidewalks, and landscaping, as needed in the discretion of Landlord.
E. Snow removal services.
F. Other services currently being provided to Tenant as
of the date hereof, at Tenant's expense.
6.2 Tenant shall be responsible for its own electrical usage and
shall pay same within ten (10) days of a receipt of an invoice therefor from
Landlord, as additional rent. Tenant may, at its expense, arrange for the
Leased Premises to be separately metered for electricity (except for that
electricity consumed in connection with the heating and cooling systems).
Landlord and Tenant acknowledge and agree that Tenant's share of electrical
usage shall be determined by an electrical consumption consultant mutually
acceptable to Landlord and Tenant. Tenant shall also be responsible for all
costs (including electricity) incurred in connection with any heating or
cooling systems installed by Tenant relating to Tenant's unique use of the
Leased Premises.
6.3 Landlord may impose a reasonable charge (but not including
profit to Landlord) for any utilities and services, including without
limitation, heat and air conditioning provided by Landlord by reason of any use
of the Leased Premises at any time other than the hours set forth in Section
6.1 above.
6.4 Tenant agrees to pay any reasonable charge imposed by Landlord
pursuant to Section 6.3 within thirty (30) days after receipt of an invoice
from Landlord and any failure to pay any excess costs as described above shall
constitute a breach of the obligation to pay rent under this Lease and shall
entitle Landlord to the rights herein granted for such breach. Tenant's use of
electricity or water shall at no time exceed the capacity of the service to the
Building or the wiring or plumbing installation. Landlord acknowledges that
Tenant's current use of the Leased Premises does not result in usage of
electricity or water in excess of capacity.
6.5 Landlord shall not be liable for, and Tenant shall not be
entitled to any abatement or reduction of rent by reason of, Landlord's failure
to cause any of the foregoing services to be furnished when such failure is
caused by accident, breakage, repairs, riots, strikes, lockouts or other labor
disturbance or labor dispute of any character, governmental regulation,
moratorium or other governmental action, inability to obtain electricity, water
or fuel, or by any other cause beyond Landlord's control or for stoppages or
interruptions of any such services for the purpose of making necessary repairs
or improvements. Failure, stoppage or interruption of any such service shall
not be construed as an actual or constructive eviction
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or as a partial eviction against Tenant, or release Tenant from the prompt and
punctual performance by Tenant of the covenants contained herein.
6.6 Anything hereinabove to the contrary notwithstanding, Tenant
agrees that Landlord's obligation to furnish heat, electricity, and air
conditioning and/or water to the Leased Premises shall be subject to and
limited by all laws, rules, and regulations of any governmental authority
affecting the supply, distribution, availability, conservation or consumption
of energy, including, but not limited to, heat, electricity, gas, oil and/or
water. Landlord shall abide by all such governmental laws, rules and
regulations and, in so doing, Landlord shall not be in default in any manner
whatsoever under the terms of this Lease, and Landlord's compliance therewith
shall not affect in any manner whatsoever Tenant's obligation to pay the full
rental set forth in this Lease, unless utilities are not available to the
Leased Premises as a result of Landlord's negligence or intentional act, in
which event Tenant shall be entitled to an equitable abatement of rent during
the period of utility interruption.
6.7 Landlord shall replace all light bulbs and ballasts in
lighting fixtures installed within the Leased Premises at Tenant's sole cost
and expense. Tenant shall reimburse Landlord for the cost thereof within
thirty (30) days of Tenant's receipt of an invoice therefor from Landlord.
Landlord shall have no responsibility for, and Tenant shall bear all costs of
and responsibility for, all special lighting and bulbs used by Tenant in the
theater located within the Leased Premises or any other lighting used by Tenant
related to Tenant's unique use of the Leased Premises.
7. Improvements, Alterations and Repairs and Tenant Allowances.
7.1 In addition to the tenant improvement allowances set forth
below, Landlord shall pay Tenant an additional allowance of $100,000.00
immediately upon execution of this Lease and an additional allowance of
$20,000.00 on or before February 1, 2000. It is the intention of Landlord and
Tenant that these allowances be used for Tenant improvements but Tenant will
not be required to provide invoices for same.
7.2 Tenant shall not make: (i) any structural alterations,
additions or improvements to the Leased Premises, or (ii) any non-structural
alterations, additions or improvements costing in excess of $50,000.00, without
Landlord's prior written approval, which approval, in the case of interior
non-structural alterations, additions or improvements shall not be unreasonably
withheld, but which approval, with respect to exterior and structural
alterations (including electrical, mechanical, HVAC, and plumbing systems), may
be withheld by Landlord in its sole discretion, provided, however, Landlord
agrees not to unreasonably withhold its approval of alterations to the
electrical, mechanical, HVAC and plumbing systems so long as such alterations
do not negatively impact the other tenants of the Building or the appearance of
the Building. In the event of disapproval of Tenant's proposed alterations,
additions or improvements, Landlord shall give to the Tenant an itemized
statement of the reasons therefor. If Landlord does not disapprove the plans
and specifications or proposals of Tenant within fifteen (15) business days
after the same have been received by Landlord, such plans, specifications or
proposals shall be deemed to have been approved by Landlord. All alterations,
additions or improvements made by Tenant to the Leased Premises, except movable
office furniture and equipment installed at Tenant's expense, shall be the
property of Landlord and remain upon and be surrendered with the Leased
Premises at the expiration of the term hereof. During the Term hereof,
Landlord shall reimburse Tenant in an amount not to exceed $400,000.00 for any
and all alterations, renovations, and improvements to the Leased Premises made
and paid for by Tenant within ten (10) days of receipt by Landlord of
appropriate lien waivers and invoices marked paid for completed work in form
and content acceptable to Landlord. Furthermore, after February 1, 2000,
Landlord shall reimburse Tenant for any and all alterations, renovations, and
improvements made and paid for by Tenant in an additional amount not to exceed
$80,000.00 (which amount is in addition to, and not in lieu of, the $400,000.00
amount previously described) within ten (10) days of receipt of appropriate
lien waivers and invoices marked paid for completed work in form and content
acceptable to Landlord. Landlord and Tenant acknowledge that Tenant intends to
make certain alterations and improvements which will be
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identified by Tenant subsequent to the date hereof. Tenant acknowledges that
all extraordinary maintenance costs and utility costs relating to Tenant's
improvements, alterations or additions shall be paid for by Tenant.
Tenant shall only use contractors approved by Landlord for any
permitted alterations, additions or improvements to the Leased Premises and
Tenant shall obtain all necessary governmental certificates, licenses, permits
and approvals for any such alterations, additions or improvements at its sole
cost and expense. The foregoing notwithstanding Landlord shall not withhold
its consent to Tenant's choice of contractor so long as such contractor is
licensed in the State of Michigan, insurable and bondable, of a good reputation
and experience in similar types of work. Except as set forth in Sections 7.1
and 7.2 hereof, Tenant shall not be entitled to any reimbursement or
compensation resulting from its payment of the costs or expenses of
constructing any improvements, alterations or additions to the Leased Premises.
Tenant shall not permit any construction or mechanic's liens to be placed or
remain upon the Leased Premises. In the event that such construction or
mechanic's liens are placed on the Leased Premises, Tenant shall remove or bond
over same within thirty (30) days of demand by Landlord. Tenant's failure to
do so shall constitute an Event of Default hereunder giving Landlord the right,
inter alia, to terminate this Lease upon thirty (30) days prior written notice
to Tenant. In addition, Tenant shall indemnify and hold harmless Landlord from
any cost or expense whatsoever (including reasonable attorney fees) arising
from Tenant's permitting a construction or mechanic's lien to be placed on the
Leased Premises. Landlord has no obligation and has made no promise to alter,
remodel, improve, repair decorate, or paint the Leased Premises or any part
thereof. No representations with respect to the condition of the Leased
Premises or the Building have been made by Landlord to Tenant, except as
specifically herein set forth.
7.3 Subject to Tenant's payment of Increased Charges, Landlord
shall make all necessary repairs and replacements to the Building, the Common
Areas located therein and the Leased Premises, including the heating, air
conditioning and electrical systems located therein but excluding Tenant's
additions to the HVAC system made to accommodate Tenant's unique use of the
Leased Premises which shall be Tenant's responsibility, and Landlord shall also
make all other repairs to the Leased Premises; provided, however, that Tenant
shall make all repairs and replacements arising from its acts, neglect or
default. Notwithstanding anything to the contrary set forth hereinabove, the
Tenant shall not be liable to the Landlord for any loss or damage to the extent
that Landlord's insurance provides compensation therefor and Landlord receives
such compensation, regardless of causation. Except as provided above, Tenant
shall keep the Leased Premises in good condition and Tenant shall, upon the
expiration of the term of this Lease, yield and deliver up the Leased Premises
in like condition as when taken, reasonable use and wear thereof and repairs
required to be made by Landlord excepted. In the event that Landlord shall
deem it necessary, or be required by any governmental authority, to repair,
alter, remove, reconstruct or improve any part of the Leased Premises or of the
Building (unless the same results from Tenant's acts, neglect, default or mode
of operation, including, but not limited to, any remodeling, repairs, or
improvements required as a result of the use of the Leased Premises for general
office purposes, in which event Tenant shall make all such repairs, alterations
and improvements), then the same shall be made by Landlord or Landlord with
reasonable dispatch and without unreasonable interference to Tenant's
operation, and should the making of much repairs, alterations or improvements
cause any unreasonable interference with Tenant's use of the Leased Premises,
such interference shall not relieve Tenant from the performance of its
obligations hereunder, nor shall such interference be deemed an actual or
constructive eviction or partial eviction, but Tenant shall be entitled to a
rental abatement if such unreasonable interference has a material impact on
Tenant's use and occupancy of the Leased Premises over an extended period of
time.
7.4 In the event Landlord fails to pay any of the Tenant
Allowances within thirty (30) days of their due date in accordance with Section
7.1 and 7.2, Tenant shall have the right to offset such amounts against the
next monthly installments of Basic Annual Rent and Increased Charges due
hereunder, which amounts shall accrue interest from and after the
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expiration of such thirty (30) day period at the rate set forth in Section 4.2
until paid in full or offset in full against the Basic Annual Rent and
Increased Charges.
7.5 In the event Landlord refuses, neglects or fails to commence
any material and necessary repairs to the Leased Premises which are Landlord's
responsibility hereunder within thirty (30) days of Landlord's receipt of
notice from Tenant of the need for such repairs (or within a reasonable time
after such notice in the event of emergency repairs), Tenant shall have the
right to make such material and necessary repairs. Tenant shall further be
permitted to offset the cost of such repairs against the next monthly
installments of Basic Annual Rent and Increased Charges due hereunder, provided
Tenant submits evidence to Landlord prior to such offset of: (i) the prior
payment by Tenant of such repair costs to third parties; and (ii) the
reasonableness of such costs. Such amounts shall accrue interest at the rate
set forth in Section 4.2 from the date Landlord receives the evidence
identified in (i) and (ii) above until paid in full or offset against Basic
Annual Rent.
8. Signs.
8.1 Tenant agrees that no new signs or other advertising materials
or modifications to existing signs or advertising materials shall be erected,
attached or affixed to any portion of the interior or exterior of the Building
of which the Leased Premises form a part by Tenant without the express prior
written consent of Landlord, which shall not be unreasonably withheld.
8.2 The design, size, configuration of the letters and lighting
(if any) of any sign shall be subject to reasonable approval of Landlord and
the approval of the City of Troy. The full cost for all design, installation,
maintenance, permits, operation and removal of any sign shall be the
responsibility of, and borne by, Tenant, and to the extent that Tenant shares
space on any sign with any other occupant of the Building, Tenant shall pay
Tenant's pro rata share of the cost of maintenance, repair and insurance
thereof, based on the area of Tenant's identification panel in such sign as
compared to the area of all identification panels on such sign which identify
occupants of the Building.
9. Assignment and Subletting.
9.1 Tenant shall not assign or transfer this Lease or hypothecate,
pledge, encumber or mortgage the Leased Premises or sublet the Leased Premises
or any part thereof without the prior written consent of Landlord; provided
that Tenant shall have the right to assign the Lease, or sublet all or any
portion of the Leased Premises without Landlord's consent to: (i) a company
controlled by, or under common control with, or controlling Tenant, (ii) a
corporation with which Tenant merges or consolidates, (iii) a purchaser of all
or substantially all of Tenant's stock or assets; or (iv) an assignee or
sublessee of a character, reputation and integrity not inconsistent with the
quality of the Building and other first class office buildings in the Troy,
Michigan area, so long as such transferee's use of the Leased Premises does not
violate Section 5.3 hereof and Tenant remains liable under the Lease. In all
other events, Landlord's consent shall not be unreasonably withheld subject to
the terms and conditions of Section 9.2 hereof. In the event of any such
assignment, transfer or subletting with or without Landlord's consent, Tenant
shall remain fully liable to perform all of the obligations under the Lease.
In the event of any assignment, transfer (including transfers by operation of
law or otherwise), hypothecation, mortgage or subletting without such written
consent, if required, in addition to any other right or remedy Landlord may
have under the provisions of this Lease, Landlord shall have the right to
terminate this Lease and/or to re-enter and repossess the Leased Premises with
due process of law, but Landlord's right to damages shall survive and Tenant
shall in no way be released from any of its obligations under this Lease.
Consent by Landlord to one or more assignment(s) of this Lease or to one or
more subletting of said Leased Premises shall not be deemed to be a waiver of
the requirement for consent of Landlord to any future assignment or subletting.
9.2 If Tenant desires at any time to enter into an assignment or a
sublease of the Leased Premises or any portion thereof which requires
Landlord's consent, Tenant shall
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request in writing Landlord's consent to the assignment or sublease, and
provide in Tenant's notice and such assignment or sublease the following: (a)
the name of the proposed assignee, subtenant or occupant, (b) the nature of the
proposed assignee's, subtenant's or occupant's business to be carried on in the
Leased Premises, (c) sufficient financial information (which information is in
the possession of Tenant and Tenant is permitted to disclose) with respect to
the proposed assignee, subtenant or occupant to allow Landlord to reasonably
assess the financial condition of such person or entity, and (d) such other
information as Landlord may reasonably request concerning the proposed assignee
or sublessee. If Landlord receives a notice pursuant to this Section 9.2,
then, within ten (10) business days thereafter, Landlord shall by written
notice to Tenant elect either to (1) consent to the proposed assignment or
sublease, or (2) refuse to consent to the proposed assignment or sublease. If
Landlord fails to notify Tenant within the applicable time period of Landlord's
election, Landlord shall be deemed to have refused to consent to said
assignment or sublease. Landlord and Tenant agree that it shall be reasonable
for Landlord to withhold its consent if one or more of the following situations
exist or may exist: (i) the proposed transferee's use of the Leased Premises
conflicts with Tenant's permitted use under this Lease, (ii) in Landlord's
reasonable business judgment, the proposed transferee is of a character or
reputation, or engaged in a business, not consistent with the quality of the
Building or Property, (iii) Tenant is in Default under this Lease, or (iv) the
proposed transferee does not maintain the insurance required under this Lease.
Upon any refusal to give consent, Landlord shall give written notice to Tenant
within such fifteen (15) business day period, which notice shall state the
specific reasons for such refusal.
9.3 In the event Tenant shall, with Landlord's consent, sublet a
portion of the Leased Premises, or assign this Lease, to any party other than
an Affiliate, forty percent (40%) of the excess amount of all of the sums or
other economic consideration received by Tenant as a result of such subletting
or assignment whether denominated rentals or otherwise, under the Lease or
assignment over the sum of: (i) the total sum which Tenant is obligated to pay
Landlord under this Lease and (ii) all reasonable costs incurred by Tenant in
connection with such assignment or subletting shall be payable to Landlord as
additional rental under this Lease without affecting or reducing any other
obligation of Tenant hereunder. The timing of such payments shall be agreed
upon in good faith by Landlord and Tenant, with deduction from the amounts due
Landlord to reimburse Tenant for all costs expended by Tenant in connection
with such assignment or subletting.
9.4 In the event Tenant shall assign this Lease or sublet the
Leased Premises or request the consent of Landlord to any assignment or
subletting or if Tenant shall request the consent of Landlord for any act that
Tenant proposes to do, then Tenant shall pay Landlord's reasonable attorneys'
fees and processing fees incurred in connection therewith.
10. Landlord's Insurance.
10.1 Landlord shall, during the term of the Lease, provide and keep
in force or cause to be provided or kept in force fire insurance for at least
replacement value (including standard extended coverage endorsement perils and
leakage from fire protective devices) in respect of the Building, excluding
Tenant's trade fixtures, equipment and personal property. Landlord shall also
maintain the insurance policies currently carried by Landlord with respect to
the Building, copies of the binders for which insurance policies are attached
hereto as Exhibit C, and such other insurance as Landlord, in its commercially
reasonable discretion, elects to obtain. Insurance obtained by Landlord shall
be in amounts which Landlord shall from time to time determine reasonable and
sufficient, shall be subject to such deductibles and exclusions which are
commercially reasonable and shall otherwise be on such terms and conditions as
Landlord shall from time to time determine reasonable and sufficient, provided
that all of such insurance shall meet the parameters set forth in Section 11.5;
shall name the Tenant as an additional named insured; and shall not be
cancelled or amended except upon 30 days notice of Tenant.
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11. Indemnification and Tenant's Insurance.
11.1 Tenant will indemnify and defend Landlord and each of the
partners of Landlord and save it and them harmless from and against any and all
claims, actions, damages, liability and expense of any kind or nature resulting
in loss of life, personal, bodily or advertising injury and/or damage to
property arising from or out of any occurrence in, upon or at the Leased
Premises, regardless of who asserts such claim. Landlord will indemnify and
defend Tenant and save it harmless from and against any and all claims,
actions, damages, liability and expense of any kind or nature resulting in loss
of life, personal, bodily or advertising injury and/or damage to property
arising from or out of any occurrence in, upon or at the Common Areas,
regardless of who asserts such claim. All property kept, stored or maintained
in the Leased Premises shall be so kept, stored or maintained at the risk of
Tenant only. In case Landlord shall be made a party to any litigation
commenced by or against Tenant which is unrelated to the Building, the Leased
Premises or Tenant's occupancy thereof, then Tenant shall protect and hold
Landlord harmless and shall pay all costs, expenses and reasonable attorney
fees incurred or paid by Landlord in connection with such litigation. In case
Tenant shall be made a party to any litigation commenced by or against Landlord
which is unrelated to the Building, the Leased Premises or Tenant's occupancy
thereof, then Landlord shall protect and hold Tenant harmless and shall pay all
costs, expenses and reasonable attorney fees incurred or paid by Tenant in
connection with such litigation. The indemnification provisions contained in
this Section 11.1 shall survive the expiration or early termination of this
Lease.
11.2 Tenant shall procure and keep in effect comprehensive general
liability insurance, including contractual liability, with minimum limits of
liability of Five Million ($5,000,000.00) Dollars per occurrence for bodily
injury or death and for property damage. From time to time, Tenant shall
increase the limits of such policies to such higher limits as Landlord shall
reasonably require. Such insurance shall name Landlord as an additional named
insured, shall specifically include the liability assumed hereunder by Tenant,
and shall provide that it is primary insurance and not excess over or
contributory with any other valid, existing and applicable insurance in force
for or on behalf of Landlord, and shall provide that Landlord shall receive
thirty (30) days notice from the insurer prior to any cancellation or change of
coverage.
11.3 Tenant shall procure, pay for and maintain, or cause its
contractor to procure, pay for and maintain, as the case may be, during the
performance of any approved work pursuant to Section 7.1 of this Lease, the
following forms of insurance coverage:
A. Workers Compensation Insurance - statutory limits.
B. Comprehensive General Liability Insurance (including
contractors' protective liability, completed operations, contractual
liability, explosion and collapse coverage), with a combined single
limit of Five Million Dollars ($5,000,000.00) for each occurrence with
respect to bodily injury and/or property damage.
C. Comprehensive Automobile Liability Coverage
(including coverage for owned, hired and non-owned automotive
equipment), with a combined single limit One Million Dollars
($1,000,000 .00) for each occurrence for bodily injury and property
damage liability of One Hundred Thousand Dollars ($100,000.00).
11.4 Tenant shall procure and keep in effect fire insurance
(including standard extended coverage endorsement perils and leakage from fire
protective devices) for the full replacement cost of Tenant's trade fixtures,
equipment, personal property and leaseholder improvements.
11.5 Each insurance policy obtained by Tenant pursuant to this
Lease shall contain a clause that the insurer will provide Landlord with at
least thirty (30) days prior written notice of any material change, non-renewal
or cancellation of the policy and shall be in a form reasonably satisfactory to
Landlord and shall be taken out with an insurance company authorized to do
business in the State of Michigan and rated not less than Best's Financial
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Class X and Best's Policy Holder Rating "A". Each casualty insurance
certificate shall indicate that the insurer waives its rights of subrogation
against Landlord. In addition, any insurance policy obtained by Tenant shall
be written as primary policies, non-contributing with or in excess of any
coverage which Landlord may carry, with loss payable clauses reasonably
satisfactory to Landlord and in favor of Landlord and naming Landlord as an
additional insured and, subject to the foregoing, may be a "blanket" policy.
The liability limits of the above described insurance policies shall in no
manner limit the liability of Tenant under the terms of the indemnity provision
of Section 11.1. Not more frequently than every two (2) years, if, in the
reasonable opinion of Landlord, the amount of liability insurance specified in
this Section 11 is not adequate, in view of increased judgments and verdicts
granted for injury to persons or damage to property, the above-described limits
of coverage shall be reasonably adjusted by Landlord, by written notification
to Tenant, in order to maintain insurance generally comparable to that required
of tenants in the comparable Buildings; provided, however, the increase in the
amount of such insurance shall not exceed ten percent (10%) per annum
cumulative from the Commencement Date. If Tenant fails to maintain and secure
the insurance coverage required under this Section 11, then upon ten (10)
business days prior written notice to Tenant, Landlord shall have, in addition
to all other remedies provided herein and by law, the right, but not the
obligation, to procure and maintain such insurance, the cost of which shall be
due and payable to Landlord by Tenant on demand. If, on account of the failure
of Tenant to comply with the provisions of this Section 11, Landlord is deemed
a co-insurer by Landlord's insurance carrier, then any loss or damage which
Landlord shall sustain by reason thereof shall be borne by Tenant and shall be
immediately paid by Tenant upon receipt of a bill therefor and evidence of such
loss.
12. Subrogation.
12.1 Landlord and Tenant shall each obtain from their respective
insurers under all policies of fire insurance maintained by either of them at
any time during the term of this Lease insuring or covering the Building or any
portion thereof or operations therein, a waiver of all rights of subrogation
which the insurer of one party might have against the other party, and Landlord
and Tenant shall each indemnify the other against any loss or expense,
including reasonable attorneys' fees, resulting from the failure to obtain such
waiver and, so long as such waiver is outstanding, each party waives, to the
extent of the proceeds received under such policy, any right of recovery
against the other party for any loss covered by the policy containing such
waiver; provided, however, that if at any time their respective insurers shall
refuse to permit waivers of subrogation, Landlord or Tenant, in each instance,
may revoke said waiver of subrogation effective thirty (30) days from the date
of such notice, unless within such thirty (30) day period, the other is able to
secure and furnish (without additional expense) equivalent insurance with such
waivers with other companies satisfactory to the other party.
13. Destruction or Damage.
13.1 In the event the Leased Premises or any portion of the
Building necessary for Tenant's occupancy is damaged by fire, earthquake, act
of God, the elements or other casualty in each case insured against by
Landlord's fire and extended coverage insurance policies, covering the Building
and, if such damage does not occur during the last twenty-four (24) months of
the Term hereof, Landlord shall forthwith repair the same and this Lease shall
remain in full force and effect except that an abatement of Basic Annual Rent
and Increased Charges shall be allowed Tenant for such part of the Leased
Premises as shall be rendered unusable Landlord shall advise Tenant of the
length of time it will take to rebuild the Leased Premises within thirty (30)
days after such casualty. If such repairs cannot reasonably be completed
within one hundred eighty (180) days after such damage, Tenant shall have the
option to terminate this Lease effective as of the date of such fire or other
casualty, by giving written notice of such termination within thirty (30) days
after Tenant has received Landlord's notice. Further, in the event that fifty
percent (50%) or more of the Leased Premises are destroyed or rendered
untenantable by fire or other casualty during the last twenty-four (24) months
of the Term of the Lease, either Landlord or Tenant may, at its option,
terminate this Lease effective as of the date such fire or other casualty by
giving notice as hereinabove provided in this Section 13.1. If the damage or
destruction cannot be insured against,
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Landlord may elect not to make such repairs and this Lease shall terminate as
of the date of such election by the Landlord.
13.2 If the Leased Premises are to be repaired under this Section,
in no event shall Landlord be required to repair or replace Tenant's trade
fixtures, equipment and personal property, such as signs, wall coverings,
carpeting and drapes, or any improvements in the Leased Premises which have
been constructed by Tenant and Tenant shall be responsible for repairing same.
14. Eminent Domain.
14.1 If all or any part of the Leased Premises shall be taken as a
result of the exercise of the power of eminent domain, this Lease shall
terminate as to the part so taken as of the date of taking, and, in the case of
a taking more than ten percent (10%) of the Leased Premises, Tenant shall have
the right to terminate this Lease as to the balance of the Leased Premises by
notice to Landlord within thirty (30) days after such date; provided, however,
that a condition to the exercise by Tenant of such right to terminate shall be
that the portion of the Leased Premises taken shall be of such extent and
nature as substantially to handicap, impede or impair Tenant's use of the
balance of the Leased Premises as reasonably determined by Tenant. If such
portion of the Building or Common Areas is condemned or otherwise taken so as
to require, in the reasonable opinion of Landlord, a substantial alteration or
reconstruction of the remaining portions of the Building or Common Areas,
Landlord shall have the right to terminate this Lease as of the date of the
taking of possession by the condemning party, by written notice to Tenant
within sixty (60) days of Landlord's receipt of notice of such taking. If this
Lease is not so terminated, Landlord shall restore the Leased Premises. In the
event of any taking, Landlord shall be entitled to any and all compensation,
damages, income, rent, awards, or any interest therein whatsoever which may be
paid or made in connection with the Building, and Tenant shall have no claim
against Landlord for the value of any unexpired term of this Lease or
otherwise. In the event of a partial taking of the Leased Premises which does
not result in a termination of this Lease, the rental thereafter to be paid
shall be reduced on a per square foot basis. Tenant shall be entitled to claim
its own separate and independent award as a result of any such taking, so long
as such award does not, in any manner, impair the amount of award to which
Landlord is entitled. Tenant shall be entitled to claim a separate award for
loss of business, removal of trade fixtures, and moving expenses.
15. Quiet Enjoyment.
15.1 Upon Tenant paying the rental and other charges due hereunder
and performing all of Tenant's obligations under this Lease, Tenant may
peacefully and quietly enjoy the Leased Premises during the term of this Lease;
subject, however, to the provisions of this Lease and to any mortgages or
ground or underlying leases referred to in Section 16 hereof.
16. Subordination.
16.1 Landlord reserves the right to subject and subordinate this
Lease to (A) the lien of any mortgage or mortgages which may now or hereafter
affect the Building, and to all advances made or hereafter to be made upon the
security thereof and to the interest thereon, and to any agreements at any time
made modifying supplementing, extending or replacing any such mortgages, and
(B) any ground or underlying lease which may now or hereafter affect the
Building, including all amendments, renewals, modifications, consolidation,
replacements and extensions thereof. With respect to any future mortgage of
the Property, any subordination obtained shall include as a part thereof the
agreement of the mortgagee that in the event of a foreclosure or the assertion
of any other rights under the mortgage, this Lease and the rights of Tenant
hereunder shall continue in effect and shall not be terminated or disturbed so
long as Tenant continues to perform and is not in default under this Lease.
Notwithstanding the foregoing, at the request of the holder of any of the
aforesaid mortgage or mortgages or the lessor under the aforesaid ground or
underlying lease, this Lease may be made prior and superior to such mortgage or
mortgages and/or such ground or underlying lease.
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<PAGE> 15
16.2 At the request of Landlord, Tenant shall execute and deliver
such further instruments as may be reasonably required to implement the
provisions of this Section 16. Tenant hereby irrevocably, during the term of
this Lease, constitutes and appoints Landlord as Tenant's agent and
attorney-in-fact to execute any such instruments if Tenant shall fail or refuse
to execute the same within ten (10) business days after receipt of notice from
Landlord.
17. Nonliability of Landlord.
17.1 In the event the Landlord hereunder or any successor landlord
shall assign or convey its rights under this Lease, all liabilities and
obligations on the part of the original Landlord or such successor Landlord
under this Lease accruing thereafter shall terminate, and thereupon all such
liabilities and obligations shall be binding upon the new Landlord. Tenant
shall attorn to such new Landlord.
17.2 Neither Landlord nor Landlord's partners, successors and
assigns shall be responsible or liable to Tenant (i) for any loss or damage
that may be occasioned by or through the acts or omissions of persons occupying
adjoining areas or any part of the area adjacent to or connected with the
Leased Premises or any part of the Building, (ii) for any loss or damage
resulting to Tenant or its property from theft or a failure of the security
systems in the Building, or (iii) for any damage or loss of property within the
Leased Premises from any cause , except to the extent caused by reason of the
negligence or willful act of Landlord, its agents, employees or licensees, as
the case may be, and no such occurrence shall be deemed to be an actual or
constructive eviction from the Leased Premises or result in an abatement of
rental.
17.3 If Landlord shall fail to perform any covenant, term or
condition of this Lease upon Landlord's part to be performed, and, if as a
consequence of such default, Tenant shall recover a money judgment against
Landlord, such judgment shall be satisfied only against rents or other income
from the building receivable by Landlord and Landlord shall not be liable for
any deficiency. In such event, Tenant may offset any amounts so awarded
against the rent and other charges due hereunder, with interest thereon at the
rate set forth in Section 4.2 hereof.
18. Compliance with Legal Requirements.
18.1 Tenant shall promptly comply with all laws, statutes,
ordinances and governmental rules, regulations or requirements now in force or
which may hereafter be in force, with the requirements of any board of fire
underwriters or other similar body now or hereafter constituted, with any
occupancy certificate or directive issued pursuant to any law by any public
officer or officers, as well as the provisions of all recorded documents
affecting the Leased Premises, insofar as any thereof relate to or affect the
condition, use or occupancy of the Leased Premises, excluding requirements of
structural and non-structural changes to the Building and/or the Leased
Premises which are (i) not necessitated by Tenant's act; or (ii) not
necessitated by Tenant's unique use of the Leased Premises (i.e. any use other
than general office use). Landlord shall promptly comply with all laws,
statutes, ordinances and governmental rules, regulations or requirements now in
force or which may hereafter be in force, with the requirements of any board of
fire underwriters or other similar now or hereafter constituted, with any
occupancy certificate or directive issued pursuant to any law by any public
officer or officers, as well as the provisions of all recorded documents which
affect that portion of the Building which is not the Leased Premises, in so far
as any thereof affect the condition, use or occupancy of the Leased Premises.
Tenant shall comply with and pay for alterations required by the Americans with
Disabilities Act ("ADA") as it relates to Tenant's unique use of the Leased
Premises. Landlord shall be responsible for compliance with the ADA as it
relates to the Building except as set forth in the immediately preceding
sentence, but Landlord shall only be obligated therefor to the extent that
Landlord's failure to comply affects the Leased Premises or the Tenant's
interest therein.
19. Waiver.
19.1 The waiver by either party hereto of any agreement, condition
or provision herein contained shall not be deemed to be a waiver of any
subsequent breach of the same or any other agreement, condition or provision
herein contained, nor shall any custom or practice which may grow up between
the parties in the administration of the terms hereof be construed to waive or
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<PAGE> 16
to lessen the right of either party to insist upon the performance by the other
party of the terms hereof in strict accordance with said terms. The subsequent
acceptance of rental hereunder by Landlord shall not be deemed to be a waiver
of any preceding breach by Tenant of any agreement, condition or provision of
this Lease, other than the failure of Tenant to pay the particular rental so
accepted, regardless of Landlord's knowledge of such preceding breach at the
time of acceptance of such rental.
19.2 No payment by Tenant or receipt by Landlord of a lesser amount
than the monthly rent, or other charges, herein stipulated shall be deemed to
be other than on account of the earliest stipulated rent, or other charges, nor
shall any endorsement or statement on any check or any letter accompanying any
check or payment as rent be deemed an accord and satisfaction, and Landlord
shall accept such check or payment without prejudice to Landlord's right to
recover the balance of such rent or pursue any other remedy provided in this
Lease.
19.3 Landlord and Tenant hereby waive trial by jury in any action,
proceeding, or counterclaim brought by Landlord or Tenant against the other on
any matter whatsoever arising out of or in any way connected with this Lease,
the relationship of Landlord to Tenant, the use or occupancy of the Leased
Premises by Tenant or any person claiming through or under Tenant, any claim of
injury or damage, and any emergency or other statutory remedy; provided,
however, the foregoing waiver shall not apply to any action for personal injury
or property damage. If Landlord commences any summary or other proceeding for
nonpayment of rent or the recovery of possession of the Leased Premises, Tenant
shall not interpose any counterclaim of whatever nature or description in any
such proceeding, unless the failure to raise the same would constitute a waiver
thereof.
20. Entry by Landlord.
20.1 Landlord and its designees may enter the Leased Premises at
reasonable hours upon reasonable notice to (A) inspect the same, (B) exhibit
the same to prospective purchasers, lenders or tenants, (C) determine whether
Tenant is complying with all of its obligations hereunder, (D) fulfill
Landlord's obligations under this Lease, (E) post notices of
non-responsibility, and (F) make repairs required of Landlord under the terms
hereof or repairs to any adjoining space or utility services or make repairs,
alterations or improvement to any other portion of the Building; provided,
however, that all such work shall be done as promptly as reasonably possible
and any entry shall not unreasonably interfere with Tenant's use and occupancy
of the Leased Premises. Upon Tenant's request, Landlord shall make reasonable
efforts to arrange for entries to perform work to be made during nonbusiness
hours, so long as Tenant agrees to pay any additional costs incurred as a
result of performing such work during non-business hours.
20.2 Landlord shall at all times have and retain a key with which
to unlock all of the doors in, on or about the Leased Premises; and Landlord
shall have the right to use any and all means which Landlord may deem proper to
open said doors in any emergency in order to obtain entry to the Leased
Premises, and any entry to the Leased Premises obtained by Landlord by any of
said means, or otherwise, shall not under any circumstance be construed or
deemed to be a forcible or unlawful entry into or a detainer of the Leased
Premises or an eviction, actual or constructive, of Tenant from the Leased
Premises, or any portion hereof.
21. Events of Default.
21.1 The occurrence of any one or more of the following events
(hereinafter referred to as "Event of Default" or "Default") shall constitute a
breach of this Lease by Tenant: (A) if Tenant shall fail to pay the Basic
Annual Rent or any other sum when and as the same becomes due and payable and
such failure shall continue for a period of three (3) business days after
receipt by Tenant of written notice of such default from Landlord; or (B) if
Tenant shall fail to perform or observe any other term hereof to be performed
or observed by Tenant, and such failure shall continue for more than thirty
(30) days after notice thereof from Landlord, and Tenant shall not within such
thirty (30) day period commence with due diligence and dispatch the curing of
such default, or, having so commenced, shall thereafter fail or neglect to
prosecute or complete with due diligence and dispatch the curing of such
default; or (C) if Tenant shall
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<PAGE> 17
make a general assignment for the benefit of creditors, or shall admit in
writing its inability to pay its debts as they become due or shall file a
petition in bankruptcy, or shall be adjudicated as insolvent or shall file a
petition in any proceeding seeking any reorganization, arrangement,
composition, readjustment, liquidation, dissolution or similar relief under any
present or future statute, law or regulation, or shall file an answer admitting
or fail timely to contest or acquiesce in the appointment of any trustee,
receiver or liquidator of Tenant or any material part of its properties; or (D)
if within sixty (60) days after the commencement of any proceeding against
Tenant seeking any reorganization, arrangement, composition, readjustment,
liquidation, dissolution or similar relief under any present or future statute,
law or regulation, such proceeding shall not have been dismissed, or if, within
sixty (60) days after the appointment without the consent or acquiescence of
Tenant, of any trustee, receiver or liquidator of Tenant or of any material
part of its properties, such appointment shall not have been vacated; or (D) if
this Lease or any estate of Tenant hereunder shall be levied upon under any
attachment or execution and such attachment or execution is not vacated within
ten (10) days.
21.2 If, as a matter of law, Landlord has no right on the
bankruptcy of Tenant to terminate this Lease, then, if Tenant, as debtor, or
its trustee wishes to assume or assigns his Lease, in addition to curing or
adequately assuring the cure of all defaults existing under this Lease on
Tenant's part on the date of filing of the proceeding (such assurances being
defined below), Tenant, as debtor, or the trustee or assignee must also furnish
adequate assurances of future performance under this Lease (as defined below).
Adequate assurance of curing defaults means the posting with Landlord of a sum
in cash sufficient to defray the cost of such a cure. Adequate assurance of
future performance under this Lease means posting a deposit equal to three (3)
months rent, including all other charges payable by Tenant hereunder, such as
the amounts payable pursuant to Section 4 hereof, and, in the case of an
assignee, assuring Landlord that the assignee is financially capable of
assuming this Lease, and that its use of the Leased Premises will not be
detrimental to any other tenants in the Building or Landlord. In a
reorganization under Chapter 11 of the Bankruptcy Code, the debtor or trustee
must assume this Lease or assign it within one hundred twenty (120) days from
the filing of the proceeding, or the debtor or trustee shall be deemed to have
rejected and terminated this Lease.
22. Remedies.
If any of the Events of Default shall occur, then Landlord shall have
the following remedies:
A. Landlord at any time after the Event of Default, at
Landlord's option, may give to Tenant five (5) business days notice of
termination of this Lease, and in the event such notice is given, this
Lease shall come to an end and expire (whether or not the Term shall
have commenced) upon the expiration of such five (5) business days,
but Tenant shall remain liable for damages as provided in Section 23
hereof.
B. Either with or without terminating this Lease,
Landlord may immediately or at any time after the Event of Default or
after the date upon which this Lease shall expire, reenter the Leased
Premises pursuant to the order of a court of competent jurisdiction or
any part thereof, without notice, either by summary proceedings or by
any other applicable action or proceeding, and may repossess the
Leased Premises and remove any and all of Tenant's property and
effects from the Leased Premises.
C. Either with or without terminating this Lease,
Landlord may relet the whole or any part of the Leased Premises from
time to time, either in the name of Landlord or otherwise, to such
tenant or tenants, for such term or terms ending before, on or after
the Termination Date, at such rental or rentals and upon such other
conditions, which may include concessions and free rent periods, as
Landlord, in its reasonable discretion, may determine. In the event
of any such reletting, Landlord shall not be liable for the failure to
collect any rental due upon any such reletting, and no such failure
shall operate to relieve Tenant of any liability under this Lease or
otherwise to affect any such liability; and Landlord may make such
repairs, replacements, alterations, additions, improvements,
decorations and other physical changes in and to the Leased Premises
as Landlord, in its sole discretion, considers advisable or necessary
in connection with any such reletting or
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<PAGE> 18
proposed reletting, without relieving Tenant of any liability under
this Lease or otherwise affecting such liability. Landlord agrees to
take reasonable steps to attempt to relet the Leased Premises and to
otherwise mitigate its damages.
D. Landlord shall have the right to recover the rental
and all other amounts payable by Tenant hereunder as they become due
(unless and until Landlord has terminated this Lease) and all other
damages incurred by Landlord as a result of an Event of Default as
awarded by a court of competent jurisdiction.
E. The remedies provided for in this Lease are in
addition to any other remedies available to Landlord at law or in
equity by statute or otherwise. No remedy herein conferred upon or
reserved to Landlord is intended to be exclusive of any other remedy
herein or by law provided, but each shall be cumulative and shall be
in addition to every other remedy given hereunder or now or hereafter
existing at law or in equity.
23. Termination upon Default.
23.1 Upon termination of this Lease by Landlord pursuant to Section
22 hereof, Landlord shall be entitled to recover from Tenant the aggregate of
(A) the "worth at the time of award" of the unpaid rental which had been earned
at the time of termination; (B) the "worth at the time of award" of the amount
by which the unpaid rental which would have been earned after termination until
the time of award exceeds the then reasonable rental value of the Leased
Premises during such period; and (C) any other amount necessary to compensate
Landlord for all the detriment proximately caused by Tenant's failure to
perform its obligations under this Lease or which in the ordinary course of
things would be likely to result therefrom. The "worth at the time of award"
of the amounts referred to in clauses (A) and (B) above is computed from the
date such rent was due or would have been due, as the case may be, by allowing
interest at the rate of two percent (2%) in excess of the prime rate of
Comerica Bank or, if a higher rate is legally permissible, at the highest rate
legally permitted.
24. Landlord's Right to Cure Defaults.
All covenants, terms and conditions to be performed by Tenant under
any of the terms of this Lease shall be at its sole cost and expense and
without any abatement of rent. If Tenant shall fail to pay any sum of money,
other than Basic Annual Rent, required to be paid by it hereunder or shall fail
to perform any other act on its part to be performed hereunder and such failure
shall continue for thirty (30) days after notice thereof by Landlord, Landlord
may, but shall not be obligated so to do, and without waiving or releasing
Tenant from any obligations of Tenant, make any such payment or perform any
such other act on Tenant's part to be made or performed as in this Lease
provided. All sums so paid by Landlord and all necessary incidental costs paid
by Landlord shall be deemed additional rental hereunder and shall be payable to
Landlord within thirty (30) days after demand therefor, and Landlord shall have
(in addition to any other right or remedy of Landlord) the same rights and
remedies in the event of the nonpayment thereof by Tenant as in the case of
default by Tenant in the payment of Basic Annual Rent. Furthermore, all
amounts expended by Landlord hereunder shall bear interest from the date
expended until the entire amount is paid at the rate of two percent (2%) in
excess of the Prime Rate of Comerica Bank (the "Default Rate").
25. Attorneys' Fees.
25.1 If as a result of any breach or default in the performance of
any of the provisions of this Lease, either party uses the services of an
attorney in order to secure compliance with such provisions or recover damages
therefor, or to terminate this Lease or cause an eviction, the prevailing
party shall reimburse the non-prevailing party upon demand for any and all
reasonable attorneys' fees and expenses so incurred within thirty (30) days
after demand therefor, together with interest thereon from the date of demand
at the Default Rate.
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<PAGE> 19
26. Holding Over.
26.1 It is hereby agreed that in the event of Tenant holding over
after the termination of this Lease, thereafter the tenancy shall be from month
to month in the absence of a written agreement to the contrary, and Tenant
shall pay to Landlord a monthly occupancy charge equal to one hundred twenty
percent (120%) of the monthly rental specified in Section 1(G) Basic Lease
Provisions (plus all other charges payable by Tenant under this Lease) for each
month from the expiration or such illegal occupancy shall survive.
27. Entire Agreement.
27.1 This Lease (including the Exhibits which are attached to and a
part thereof) and the Sublease sets forth all of the covenants, promises,
agreements, conditions and understandings between Landlord and Tenant
concerning the Leased Premises, and Landlord and Tenant respectively
acknowledge that there are no covenants, promises, agreements, representations,
inducements, conditions or understandings, whether oral or written, between
Landlord and Tenant other than as are herein set forth. No alteration,
amendment, change or addition to this Lease shall be binding upon Landlord or
Tenant unless in a written agreement signed by both parties.
28. Broker.
Landlord and Tenant each warrant and represent to each other that they
have not dealt with any real estate broker or agent in connection with this
Lease or its negotiation. Landlord and Tenant shall each indemnify and hold
the other harmless from any cost, expense or liability (including costs of suit
and reasonable attorneys' fees) for any compensation, commission or fees
claimed by any real estate broker or agent in connection with this Lease or its
negotiation by reason of any act of the indemnifying party to this Lease.
29. Notices.
29.1 Any notice, demand, request, or other instrument which may be
or is required to be given under this Lease shall be sent by United States
certified mail, return receipt requested, postage prepaid and shall be
addressed (a) if to Landlord, 1500 West Big Beaver Road, Troy, Michigan 48084,
Attention: William Sandy, or to such other address as Landlord may designate
from time to time by written notice, and (b) if to Tenant, 1500 West Big Beaver
Road, Troy, Michigan 48084, Attention: President or Group Vice President/Chief
Financial Officer.
30. Merger.
30.1 The voluntary or other surrender of this Lease by Tenant, or a
mutual cancellation hereof, shall not work a merger, and shall, at the option
of Landlord, terminate all or any existing Leases or subtenancies, or may, at
the option of Landlord, operate as an assignment to it of any or all such
Leases or subtenancies.
31. Estoppel Certificate.
31.1 At any time and from time to time upon ten (10) business days
prior request by Landlord, Tenant will promptly execute, acknowledge and
deliver to Landlord, a certificate indicating (a) that this Lease is unmodified
and in full force and effect (or, if there have been modifications, that this
Lease is in full force and effect, as modified, and stating the date and nature
of each modification), (b) the date, if any, to which rental and other sums
payable hereunder have been paid, (c) that no notice has been received by
Tenant of any default which has not been cured, except as to defaults specified
in said certificate, and (d) such other matters as may be reasonably requested
by Landlord. Any such certificate may be relied upon by any prospective
purchaser, mortgagee or beneficiary under any deed of trust of the Property or
any part thereof.
31.2 At any time and from time to time upon ten (10) business days
prior request by Tenant, Landlord will promptly execute, acknowledge and
deliver to Tenant, a certificate indicating (a) that this Lease is unmodified
and in full force and effect (or, if there have been
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<PAGE> 20
modifications, that this Lease is in full force and effect, as modified, and
stating the date and nature of each modification), (b) the date, if any, to
which rental and other sums payable hereunder have been paid, (c) that no
notice has been received by Landlord of any default which has not been cured,
except as to defaults specified in said certificate, and (d) such other matters
as may be reasonably requested by Tenant.
32. Taxes on Tenant's Personalty.
32.1 Tenant shall pay all ad valorem and similar taxes or
assessments levied upon or applicable to all equipment, fixtures, furniture and
similar property placed by Tenant in the Leased Premises including
installations which are or become the property of Landlord, and all license and
other fees or charges imposed on the business, furniture, and similar property
placed by Tenant in the Leased Premises and all license and other fees or
charges imposed on Tenant's business.
33. Surrender.
33.1 If Tenant shall surrender the Leased Premises, or be disposed
by process of law or otherwise, any personal property belonging to Tenant and
left on the Leased Premises shall be deemed to be abandoned, or, at the option
of Landlord, may be removed by Landlord at Tenant's expense using due process
of law.
34. Corporate Authority.
34.1 Each of the persons executing this Lease on behalf of Tenant
does hereby covenant and warrant that Tenant is a fully authorized and existing
corporation, that Tenant has and is qualified to do business in Michigan, that
the corporation has full right and authority to enter into this Lease, and that
each and all of the persons signing on behalf of the corporation are authorized
to do so. Each of the persons executing this Lease on behalf of Landlord does
hereby covenant and warrant that Landlord is a fully authorized and existing
limited partnership, that Landlord is qualified to do business in Michigan, and
that the partnership has full right and authority to enter into this Lease, and
that each and all of the persons signing on behalf of the partnership are
authorized to do so.
35. Miscellaneous.
35.1 Submission of this Lease for examination or signature by
Tenant does not constitute a reservation of or option for the Leased Premises,
and it is not effective as a lease or otherwise until execution and delivery by
both Landlord and Tenant.
35.2 The agreements, conditions and provisions herein contained
shall, subject to the provisions as to assignment set forth in this Lease,
apply to and bind the successors and permitted assigns of the parties hereto.
35.3 If any provisions of this Lease shall be determined to be
illegal or unenforceable, such determination shall not affect any other
provisions of this Lease and all such other provisions shall remain in full
force and effect.
35.4 This Lease shall be governed by and construed pursuant to the
laws of the State of Michigan.
35.5 Neither Tenant nor its partners, employees, or agents shall,
by virtue of its activities or otherwise, discharge, release, generate, treat,
store, dispose of or deposit in or under the Leased Premises, or the Building,
or the Common Areas servicing same, or permit to be discharged, released,
generated, treated, stored, disposed of or deposited in, on or under the Leased
Premises, the Building, or the common areas servicing same during the term
hereof any Hazardous Materials (as hereinafter defined) regulated by any
environmental law. Tenant agrees to indemnify and hold Landlord, its officers,
directors, shareholders, employees and assigns harmless from and against any
and all claims, liabilities, damages, costs and expenses (including reasonable
attorneys' fees) incurred by Landlord relating to or arising as a result of
Tenant's
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<PAGE> 21
breach of this representation and warranty or use or operation of the Leased
Premises, including without limitation, clean-up costs and future response
costs under CERCLA (as hereinafter defined). Landlord shall indemnify and hold
Tenant harmless from and against any claims, liabilities, damages, costs and
expenses (including reasonable attorneys' fees) incurred by Tenant as a result
of the violation of any Environmental Laws resulting solely from (i) the acts
of Landlord, its employees, or agents or (ii) the acts of other tenants of the
Building to the extent Landlord is indemnified by such tenants. Landlord shall
use its best efforts to obtain such right of indemnification from all future
tenants of the Building in other than the Leased Premises.
As used in this Section 35.5, the following terms shall have
the following meanings:
(i) "Hazardous Materials" shall mean any "toxic or
hazardous substance," asbestos, urea formaldehyde
insulation, PCB's, radioactive materials, flammable
explosives, or any other hazardous or contaminated
substance which is prohibited, limited, or regulated
by any Environmental Law; and
(ii) "Environmental Law" shall mean the Comprehensive
Environmental Response Compensation and Liability Act
("CERCLA") or any other applicable federal, state, or
local statutes, regulations, or ordinances.
36. Tenant's Right to Reduce Size of Leased Premises.
Notwithstanding anything contained herein to the contrary, on
June 1, 1996, Tenant shall have the right to reduce the size of the Leased
Premises by up to 4,772 square feet by vacating any portion of the Leased
Premises which is adjacent to the HFHS space and/or the HFIAP space by giving
nine (9) months prior written notice thereof to Landlord on or before September
1, 1995 which notice shall (i) designate the size of such reduction; (ii)
include a floor plan indicating space to be vacated; and (iii) indicate the
date upon which such space will be vacated ("Landlord's Notice"). The location
of such space shall be adjacent to the HFHS space or HFIAP space and an
exterior wall of the Building, and shall be contiguous, leasable space. If,
prior to October 1, 1995, Landlord receives a bona fide third party offer to
lease any of the space adjacent to the HFHS space or the HFIAP space, Landlord
may accelerate the Tenant's exercise of its right to reduce its space to thirty
(30) days from the date on which Landlord notifies Tenant of a bona fide third
party offer for the space to be vacated. Upon receipt of such notice, Tenant
may retain the space by notifying Landlord of its waiver of its right to reduce
the size of the Leased Premises. If Tenant fails to notify Landlord of its
waiver of its right to reduce the size of the Leased Premises, Tenant shall be
deemed to have reduced the size of the Leased Premises and shall immediately
vacate the space designated by Landlord within thirty (30) days of receipt of
Landlord's Notice. Upon any reduction in the size of the Leased Premises
pursuant to this Section 36, Tenant shall be entitled to a pro rata reduction
(based on square footage) in Basic Annual Rent as a result of such reduction in
the size of the Leased Premises. If Tenant exercises its right to reduce the
space and Landlord has not accelerated, any available remaining Landlord's
improvement allowances will be reduced on a pro rata basis ($7.97 per square
foot and 1.59 per square foot, respectively, multiplied by the square footage
of the vacated premises), and Tenant will reimburse Landlord for any Tenant
improvement allowance already paid pursuant to Section 7.1 in excess of the
amount payable after the reduction. Tenant will also pay the costs incurred in
physically separating the vacated space as separate leasable space to a new
tenant. If Tenant's space reduction occurs pursuant to an acceleration by
Landlord, the allowances will be reduced as provided above and Tenant will
reimburse Landlord for excess Tenant improvement allowances previously paid
pursuant to Section 7.1 but Landlord will be responsible for costs incurred in
physically separating the vacated space as separate leasable space. In the
event the size of the Leased Premises is reduced as provided above, Tenant's
Proportionate Share shall be recalculated and shall be equal to the percentage
obtained by multiplying 100 by a fraction, the numerator of which shall be the
new actual square footage of the Leased Premises and the denominator of which
shall be the total rentable square footage of the Building.
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<PAGE> 22
IN WITNESS WHEREOF, the Landlord and Tenant have executed this Lease
as of the day and year first above written.
LANDLORD:
1500 LIMITED PARTNERSHIP,
A MICHIGAN LIMITED PARTNERSHIP
By: RUDGATE CORP., a Michigan
corporation, its general partner
By: /s/ George J. Forrest
---------------------------------
George J. Forrest, Treasurer
TENANT:
SANDY CORPORATION, A MICHIGAN CORPORATION
By: /s/ Raymond A. Ketchledge
------------------------------------
Its: President
------------------------------------
EXHIBITS A - Legal Description of Property
B - Depiction of Area of Leased Premises
C - Landlord's Insurance
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<PAGE> 23
DESCRIPTION OF PREMISES
All that certain parcel of land located in the City of Troy, County of Oakland
and State of Michigan, comprised of such parcels of land, described as follows:
LEGAL DESCRIPTION PARCEL X
Part of the Southeast 1/4 of Section 20, T.2N., R.11E., City of Troy, Oakland
County, Michigan, being more particularly described as follows: Beginning at a
point which is Due West, along the South line of Section 20, 297.00 feet, and N
00 degrees 44'29"E 102.01 feet from the Southeast corner of Section 20, T.2N.,
R.11E.; thence Due West, along the 102 foot Right-of-Way line, 433.76 feet;
thence N 00 degrees 02'02"E 348.00 feet; thence Due East 439.99 feet; thence S
00 degrees 59'17"W 250.06 feet; thence Due West 0.86 feet; thence S 00 degrees
44'29" W 97.99 feet to the point of beginning. (152,047 square feet - 3.490
acres).
* Subject to any easements of record.
LEGAL DESCRIPTION PARCEL Y
Part of the Southeast 1/4 of Section 20, T.2N., R.11E., City of Troy, Oakland
County, Michigan, being more particularly described as follows: Beginning at a
point which is Due West, along the South line of Section 20, 297.00 feet, and N
00 degrees 44'29"E 200.00 feet and Due East 0.86 feet, and N 00 degrees 59'17"E
250.06 feet from the Southeast corner of Section 20, T.2N., R.11E., thence Due
West 439.99 feet; thence N 00 degrees 02'02"E 354.62 feet; thence S 89 degrees
00'06"E 451.98 feet; thence S 00 degrees 44'29"W 273.08 feet; thence S 89
degrees 56'47"W 7.33 feet; thence S 00 degrees 59'17"W 73.70 feet to the point
of beginning. (157,186 square feet - 3.609 acres).
* Subject to any easements of record.
LEGAL DESCRIPTION PARCEL Z
Part of the Southeast 1/4 of Section 20, T.2N., R.11E., City of Troy, Oakland
County, Michigan, being more particularly described as follows: Beginning at
a point which is Due West, along the South line of Section 20, 297.00 feet, and
N 00 degrees 44'29"E 200.00 feet, and Due East 0.86 feet and N 00 degrees
59'17"E 323.76 feet and N 89 degrees 56'47"E 7.33 feet and N 00 degrees 44'29"E
89.00 feet from the Southeast corner of Section 20, T.2N., R.11E.,; thence N 00
degrees 44'29"E 105.08 feet thence S 89 degrees 00'06"E 287.40 feet; thence S
00 degrees 44'25"W along the East line of Section 20, 179.80 feet; thence S 89
degrees 56'47"W 287.42 feet to the point of beginning. (52,431 square feet -
1.204 acres)
* Subject to the rights of the public in any portion of the above property
deeded or used for Crooks Road, and subject to any easements of record.
SCHEDULE "A"
<PAGE> 24
Exhibit B
---------
Depiction of Area of Leased
Premises
(Floorplan)
<PAGE> 25
EXHIBIT C
[FIREMAN'S FUND LOGO]
Declarations SUPERCOVER(R) UMBRELLA AND EXCESS LIABILITY POLICY
================================================================================
POLICY NUMBER: XOK-000-3178-1032 FIREMAN'S FUND INSURANCE COMPANIES
POLICY PERIOD: FROM 05/01/93 TO 05/01/94 Coverage is provided
(12:01 A.M. Standard time at the address in the following
of the Named Insured as stated herein) company, a stock company.
18 THE AMERICAN INSURANCE COMPANY
NAMED INSURED AND MAILING ADDRESS:
1500 LIMITED PARTNERSHIP
1500 WEST BIG BEAVER ROAD
TROY, MI 48084
================================================================================
In return for the payment of the premium, and subject to all the terms of this
policy, we agree with you to provide the insurance as stated in this policy.
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
LIMITS OF INSURANCE
<S> <C>
$10,000,000 Each Occurrence $10,000,000 Aggregate
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
PREMIUM
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Basis of premium: Flat charge
- --------------------------------------------------------------------------------
Advance Premium: $3,500 Annual Minimum Premium: $3,500
- --------------------------------------------------------------------------------
</TABLE>
SCHEDULE OF PRIMARY INSURANCE
This schedule is described within Form No. 178199-1-86 which forms a part of
this policy's declarations.
- --------------------------------------------------------------------------------
Endorsements attached to and forming a part of this policy at inception:
<TABLE>
<S> <C>
178022 01 86 178194 07 91
178028 01 86 178200 09 90
178079 01 86
178155 05 90
178190 12 89
</TABLE>
- --------------------------------------------------------------------------------
Date of Issue: Countersignature of Authorized Agent:
05/12/1993 /s/ Arthur W. Emerson
- --------------------------------------------------------------------------------
This declarations page is issued in conjunction with and forms a part of Policy
Form 5196 09-87.
<PAGE> 26
===============================================================================
178199-1-86S SCHEDULE OF PRIMARY INSURANCE
The schedule of Primary Insurance is completed to read as follows:
- -------------------------------------------------------------------------------
ITEM 1
COMMERCIAL GENERAL LIABILITY
Company: Reliance Insurance Company
Policy No: To Be Identified
Expiration Date: 05/01/1994
<TABLE>
<CAPTION>
LIMITS OF LIABILITY
-------------------
<S> <C>
General Aggregate Limit
(Other Than Products-Completed Operations) $2,000,000
Products-Completed Operations Aggregate Limit $1,000,000
Personal & Advertising Injury Limit $1,000,000
Each Occurrence Limit $1,000,000
</TABLE>
- -------------------------------------------------------------------------------
ITEM 2
AUTOMOBILE LIABILITY
Company: Reliance Insurance Company
Policy No: To Be Identified
Expiration Date: 05/01/1994
<TABLE>
<CAPTION>
LIMITS OF LIABILITY
-------------------
<S> <C>
Bodily Injury and Property Damage
Combined Single Limit $1,000,000 Any One Accident
Hired & Non-Owned Only
</TABLE>
===============================================================================
<PAGE> 27
COMMON POLICY DECLARATIONS
[LOGO] RELIANCE
United Pacific Insurance Company
Philadelphia, PA RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- --------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- --------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- --------------------------------------------------------------------------------
NAME OF INSURED AND ADDRESS AGENCY NAME AND ADDRESS
- --------------------------------------------------------------------------------
1500 LIMITED PARTNERSHIP EMERSON-PREW INC
1500 W. BIG BEAVER ROAD 30600 TELEGRAPH RD STE 3110
TROY, MI BIRMINGHAM, MI
48084 48025
POLICY PERIOD: FROM 12:01 A.M. STANDARD TIME ON THE DATE SHOWN ABOVE AT
YOUR MAILING ADDRESS SHOWN ABOVE.
FORM OF BUSINESS: / / INDIVIDUAL / X / PARTNERSHIP / / JOINT VENTURE
/ / CORPORATION / / OTHER:
==========================================================================
IN RETURN FOR THE PAYMENT OF THE PREMIUM, AND SUBJECT TO ALL THE TERMS OF
THIS POLICY, WE AGREE WITH YOU TO PROVIDE THE INSURANCE AS STATED IN THIS
POLICY.
==========================================================================
THIS POLICY CONSISTS OF THE FOLLOWING COVERAGE PARTS FOR WHICH A PREMIUM
IS INDICATED. THIS PREMIUM MAY BE SUBJECT TO ADJUSTMENT.
<TABLE>
<CAPTION>
DEPOSIT
COVERAGE PART SEE FORM PREMIUM
----------------------------------------------------------------------
<S> <C> <C>
COMMERCIAL PROPERTY CPBI 70 00 10 91 SP $ 4,061.
COMMERCIAL INLAND MARINE CMQI 70 00 04 90 $
COMMERCIAL GENERAL LIABILITY CGQI 70 01 02 86 $ 4,236.
COMMERCIAL CRIME CRQI 70 00 11 85 $
COMMERCIAL AUTO CABI 00 02 06 92 $ 161.
WORKERS' COMPENSATION WC 00 00 01 A 11 88 $
$
----------------------------------------------------------------------
TOTAL $ 8,448.
</TABLE>
PREMIUM IS PAYABLE: $ 8,448. AT INCEPTION
FORMS APPLICABLE TO ALL COVERAGE PARTS EXCEPT AS REFERENCED IN THE FORM:
ILQP 00 17 07 88 COMMON POLICY CONDITIONS
ILBP 83 01 11 88 UP IN WITNESS
IL 02 86 12 90 MICHIGAN CHANGES - CANCELLATION AND NONRENEWAL
COUNTERSIGNED 5-24-93 BY /s/ Arthur W. Emerson
-------------- -----------------------------
(DATE) (AUTHORIZED REPRESENTATIVE)
<PAGE> 28
COMMERCIAL PROPERTY COVERAGE PART-
DECLARATIONS
[LOGO] RELIANCE
United Pacific Insurance Company
Philadelphia, PA RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- --------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- --------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- --------------------------------------------------------------------------------
NAMED INSURED: 1500 LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
DEDUCTIBLE: PER OCCURRENCE: $ 1,000
ANNUAL ACCUMULATION: $ NOT APPLICABLE
================================================================================
CAUSE OF LOSS FORM: SPECIAL
================================================================================
FOR INFORMATION APPLICABLE TO SPECIFIC LOCATIONS SEE THE LOCATION
DECLARATIONS CPBI 7001. UNLESS OTHERWISE SPECIFIED ON THE
LOCATION DECLARATIONS, THE FOLLOWING APPLIES TO ALL LOCATIONS:
================================================================================
<TABLE>
<CAPTION>
PERSONAL PROPERTY
BUILDING ( ) EXCLUDES PERSONAL
PROPERTY OF OTHERS
- --------------------------------------------------------------------------------
<S> <C> <C>
VALUATION: ( ) ACTUAL CASH VALUE ( ) ACTUAL CASH VALUE
(X) REPLACEMENT COST ( ) REPLACEMENT COST
- --------------------------------------------------------------------------------
AGREED VALUE
EXPIRATION DATE: 05/01/94 --/--/--
- --------------------------------------------------------------------------------
COINSURANCE: 90% -----
- --------------------------------------------------------------------------------
INFLATION GUARD: ----- -----
</TABLE>
================================================================================
<TABLE>
<CAPTION>
(--) BLANKET INSURANCE LIMIT OF INSURANCE
<S> <C>
BLANKET BUILDING $ -------------
BLANKET PERSONAL PROPERTY $ -------------
BLANKET BUILDING AND PERSONAL PROPERTY $ -------------
BLANKET LOCATION $ -------------
</TABLE>
================================================================================
FOR ADDITIONAL BUILDING AND PERSONAL PROPERTY COVERAGES SEE
DECLARATIONS EXTENSION (PAGES 2 AND 3 OF THIS FORM).
================================================================================
FORMS AND ENDORSEMENTS INDICATED BY AN (X) BELOW FORM A PART OF THIS COVERAGE
PART AT ISSUANCE:
<TABLE>
<S> <C>
(X) CPBP 10 30 10 91 BUILDING AND PERSONAL PROPERTY COVERAGE FORM
CAUSE OF LOSS - SPECIAL FORM
(X) CPBI 70 01 10 91 COMMERCIAL PROPERTY COVERAGE PART - LOCATION
DECLARATIONS
(X) CPBI 70 30 10 91 COMMERCIAL PROPERTY COVERAGE PART - BUSINESS INCOME
DECLARATIONS
( ) CPBI 70 50 10 91 COMMERCIAL PROPERTY COVERAGE PART - EXTRA EXPENSE
DECLARATIONS
(X) CPBP 00 30 10 91 BUSINESS INCOME COVERAGE FORM AND EXTRA EXPENSE
COVERAGE FORM
(X) CPBI 70 02 10 91 COMMERCIAL PROPERTY COVERAGE PART - FORMS LIST
( ) ---- -- -- -- --
</TABLE>
CPBI 70 00 10 91 SP 05/05/93 PAGE 1 OF 3
<PAGE> 29
[LOGO] RELIANCE
United Pacific Insurance Company
Philadelphia, PA
DECLARATIONS EXTENSION - ADDITIONAL
BUILDING AND PERSONAL PROPERTY COVERAGES
RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- --------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- --------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- --------------------------------------------------------------------------------
NAMED INSURED: 1500 LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
THIS COVERAGE PART PROVIDES ONLY THOSE ADDITIONAL COVERAGES FOR WHICH AN
AMOUNT OR THE WORD 'INCLUDED' IS SHOWN FOR THE 'LIMIT OF INSURANCE' COLUMN
BELOW. IF THE WORDS 'NOT COVERED' ARE SHOWN FOR THE 'LIMIT OF INSURANCE'
COLUMN, THE ADDITIONAL COVERAGE DOES NOT APPLY.
TO DETERMINE HOW THE LIMITS OF INSURANCE APPLY, REFER TO ADDITIONAL BUILDING
AND PERSONAL PROPERTY COVERAGES AND LOSS CONDITIONS IN THIS COVERAGE PART.
FOR LIMITATIONS OR CHANGES, IF ANY, REFER TO THE 'LIMITATIONS OR CHANGES'
COLUMN BELOW AND TO ANY CHANGE ENDORSEMENT SHOWN.
<TABLE>
<CAPTION>
================================================================================
SCHEDULE OF ADDITIONAL BUILDING AND PERSONAL PROPERTY COVERAGES
- --------------------------------------------------------------------------------
ADDITIONAL COVERAGE LIMIT OF LIMITATIONS OR CHANGES
INSURANCE IF ANY:
- --------------------------------------------------------------------------------
<S> <C> <C>
DEBRIS REMOVAL..................... INCLUDED ----------------------------
POLLUTANT CLEAN UP AND REMOVAL..... _____10,000 ----------------------------
PRESERVATION OF PROPERTY........... INCLUDED ----------------------------
FIRE DEPARTMENT SERVICE CHARGES.... INCLUDED ----------------------------
NEWLY ACQUIRED PROPERTY............ __1,000,000 ----------------------------
NEWLY ACQUIRED PERSONAL PROPERTY.. ____500,000 ----------------------------
BUILDING PROPERTY OFF PREMISES..... _____10,000 ----------------------------
BROADENED BUILDING................. INCLUDED ----------------------------
ARCHITECT FEES..................... INCLUDED ----------------------------
PAVED SURFACES..................... INCLUDED ----------------------------
BUILDING OWNER..................... INCLUDED ----------------------------
GLASS.............................. INCLUDED ----------------------------
LAWNS, TREES, SHRUBS AND PLANTS.... ______2,000 ----------------------------
RECHARGING......................... INCLUDED ----------------------------
DETACHED OUTDOOR SIGNS............. _____10,000 ----------------------------
INCIDENTAL LOCATIONS............... _____10,000 ----------------------------
PERSONAL EFFECTS................... _____10,000 ----------------------------
TRANSIT............................ ______5,000 ----------------------------
BRANDS AND LABELS.................. INCLUDED ----------------------------
WATER DAMAGE REPAIRS............... INCLUDED ----------------------------
ARSON REWARD....................... ______5,000 ----------------------------
CRIME REWARD....................... ______1,500 ----------------------------
CHANGES IN TEMPERATURE............. _____25,000 ----------------------------
VALUABLE PAPERS.................... _____25,000 ----------------------------
ACCOUNTS RECEIVABLE................ _____25,000 ----------------------------
JEWELRY AND WATCHES................ ______2,500 ----------------------------
FUR AND FUR GARMENTS............... ______2,500 ----------------------------
PATTERNS, DIES AND MOLDS........... INCLUDED ----------------------------
EXTRA EXPENSE...................... _____20,000 ----------------------------
WATER BACKUP....................... INCLUDED ----------------------------
</TABLE>
CPBI 70 00 10 91 SP 05/05/93 PAGE 2 OF 3
<PAGE> 30
DECLARATIONS EXTENSION - ADDITIONAL
BUILDING AND PERSONAL PROPERTY COVERAGES
[LOGO] RELIANCE RENEWAL POLICY
United Pacific Insurance Company **EFFECTIVE 05/01/93
Philadelphia, PA RENEWAL OF POLICY QB 8509449
- --------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- --------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- --------------------------------------------------------------------------------
NAME INSURED: 1500 LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
<TABLE>
SCHEDULE OF ADDITIONAL BUILDING AND PERSONAL PROPERTY COVERAGES CONTINUED
--------------------------------------------------------------------------
<CAPTION>
ADDITIONAL COVERAGE LIMIT OF LIMITATIONS OR CHANGES
INSURANCE IF ANY:
--------------------------------------------------------------------------
<S> <C> <C>
MONEY AND SECURITIES .......... ______5,000
MEDIA ......................... _____25,000 ---------------------------
FINE ARTS .................... _____25,000
BREAKAGE FOR FINE ARTS ...... NOT COVERED
INVENTORY OR APPRAISAL COST ... _____10,000
LOSS ADJUSTMENT ............... INCLUDED ---------------------------
ORDINANCE OR LAW
COVERAGE A ................... NOT COVERED ---------------------------
COVERAGE B ................... NOT COVERED ---------------------------
COVERAGE C ................... NOT COVERED ---------------------------
OFF PREMISES SERVICES
(DIRECT DAMAGE)............... NOT COVERED ---------------------------
==========================================================================
</TABLE>
CPBI 70 00 10 91 SP 05/05/93 PAGE 3 OF 3
<PAGE> 31
COMMERCIAL PROPERTY COVERAGE PART
SUPPLEMENTAL DECLARATIONS PAGE
[LOGO] RELIANCE
UNITED PACIFIC INSURANCE COMPANY
PHILADELPHIA, PA
RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- --------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- --------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- --------------------------------------------------------------------------------
NAMED INSURED: 1500-LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
PREMISES NO.: 001 BUILDING NO.: 01
1500 W. BIG BEAVER
TROY, MI 48084
OCCUPANCY: OFFICE
PROTECTIVE SAFEGUARDS:
================================================================================
IF NO ENTRY IS SHOWN FOR A COVERAGE PROVISION BELOW OR
ON THE COMMERCIAL PROPERTY COVERAGE PART DECLARATIONS CPBI 7000,
THE COVERAGE PROVISION DOES NOT APPLY.
================================================================================
BUILDING PERSONAL PROPERTY
- --------------------------------------------------------------------------------
LIMIT OF $7,000,000. $
INSURANCE: ( ) EXCLUDES PERSONAL
PROPERTY OF OTHERS
- --------------------------------------------------------------------------------
VALUATION: ( ) ACTUAL CASH VALUE ( ) ACTUAL CASH VALUE
( ) REPLACEMENT COST ( ) REPLACEMENT COST
- -------------------------------------------------------------------------------
AGREED VALUE
EXPIRATION DATE: -- / -- / -- -- / -- / --
- -------------------------------------------------------------------------------
COINSURANCE:
- -------------------------------------------------------------------------------
INFLATION GUARD:
===============================================================================
EXTRA EXPENSE -- LIMIT OF INSURANCE: $
( ) PERIOD OF RESTORATION LIMITATION: % % %
- -------------------------------------------------------------------------------
BUSINESS INCOME -- LIMIT OF INSURANCE: $ 875,000.
( ) WITH EXTRA ( ) COINSURANCE FORM --
EXPENSE ( ) MONTHLY LIMIT FORM -- MONTHLY LIMIT:
( ) WITH RENTAL ( ) AGREED VALUE FORM
VALUE
===============================================================================
RENTAL VALUE LIMIT OF INSURANCE: $
( ) WITH EXTRA ( ) COINSURANCE FORM --
EXPENSE ( ) MONTHLY LIMIT FORM -- MONTHLY LIMIT:
( ) AGREED VALUE FORM -----------------------------------
===============================================================================
( ) TENTATIVE RATE ----------------------------------------------------------
===============================================================================
THE FOLLOWING PREMISES SPECIFIC ENDORSEMENTS APPLY TO THIS PREMISES AND
BUILDING NUMBER:
CPBI 70 01 10 91 05/05/93
<PAGE> 32
<TABLE>
<CAPTION>
COMMERCIAL PROPERTY COVERAGE PART --
BUSINESS INCOME DECLARATIONS
[LOGO] RELIANCE
UNITED PACIFIC INSURANCE COMPANY
PHILADELPHIA, PA
RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- ---------------------------------------------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- ---------------------------------------------------------------------------------------------------------------------
NAMED INSURED: 1500 LIMITED PARTNERSHIP
- ---------------------------------------------------------------------------------------------------------------------
FOR INFORMATION APPLICABLE TO SPECIFIC LOCATIONS SEE THE LOCATION
DECLARATIONS CPBI 7001. UNLESS OTHERWISE SPECIFIED ON THE
LOCATION DECLARATIONS OR THE CHANGE ENDORSEMENT (IF ANY) SHOWN
BELOW, THE FOLLOWING APPLIES TO ALL LOCATIONS:
===============================================================================================================
BUSINESS INCOME : BUSINESS INCOME : RENTAL VALUE :
COVERAGE OPTIONS: : ( ) WITH EXTRA EXPENSE : ( ) WITH EXTRA EXPENSE :
: ( ) WITH RENTAL VALUE : :
---------------------------------------------------------------------------------------------------------------
COINSURANCE: : 100% : ---- :
---------------------------------------------------------------------------------------------------------------
MONTHLY LIMIT: : --- : --- :
---------------------------------------------------------------------------------------------------------------
AGREED VALUE : -- / -- / -- : -- / -- / -- :
---------------------------------------------------------------------------------------------------------------
( - ) BLANKET INSURANCE:
LIMIT OF INSURANCE: : $ ----------- : $ ----------- :
===============================================================================================================
SCHEDULE OF ADDITIONAL COVERAGES FOR BUSINESS INCOME OR RENTAL VALUE
===============================================================================================================
THIS COVERAGE PART PROVIDES ONLY THOSE ADDITIONAL COVERAGES FOR WHICH AN
AMOUNT OR THE WORD "INCLUDED" IS SHOWN FOR THE "LIMIT OF INSURANCE" COLUMN
BELOW. IF THE WORDS "NOT COVERED" ARE SHOWN IN THE "LIMIT OF INSURANCE"
COLUMN, THE ADDITIONAL COVERAGE DOES NOT APPLY.
TO DETERMINE HOW THE LIMITS OF INSURANCE APPLY, REFER TO ADDITIONAL
COVERAGES AND LOSS CONDITIONS IN THIS COVERAGE PART.
FOR LIMITATIONS OR CHANGES, IF ANY, REFER TO THE "LIMITATIONS OR CHANGES"
COLUMN BELOW AND TO ANY CHANGE ENDORSEMENT SHOWN.
---------------------------------------------------------------------------------------------------------------
: LIMIT OF : LIMITATIONS OR CHANGES :
ADDITIONAL COVERAGE : INSURANCE : IF ANY: :
---------------------------------------------------------------------------------------------------------------
EXPENSES TO REDUCE LOSS.......................: INCLUDED : -------------------------------------- :
CIVIL AUTHORITY...............................: INCLUDED : -------------------------------------- :
ALTERATIONS AND NEW BUILDINGS.................: INCLUDED : -------------------------------------- :
NEWLY ACQUIRED PROPERTY.......................: _____ 25,000 : -------------------------------------- :
EXTENDED PERIOD OF INDEMNITY..................: INCLUDED : 30 DAYS------------------------------- :
DEPENDENT BUSINESS PROPERTY...................: _____ 10,000 : -------------------------------------- :
LOSS ADJUSTMENT...............................: INCLUDED : -------------------------------------- :
ORDINARY PAYROLL LIMITATION...................: NOT COVERED : -------------------------------------- :
OFF PREMISES SERVICES.........................: NOT COVERED : -------------------------------------- :
ORDINANCE OR LAW..............................: NOT COVERED : -------------------------------------- :
ELECTRONIC MEDIA..............................: INCLUDED : 60 DAYS------------------------------- :
</TABLE>
- -------------------------------------------------------------------------------
CPBI 70 30 10 91 05/05/93 PAGE 1 OF 1
<PAGE> 33
COMMERCIAL PROPERTY COVERAGE PART-
FORMS LIST
[LOGO] RELIANCE
United Pacific Insurance Company
Philadelphia, PA RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- -------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- -------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- -------------------------------------------------------------------------------
NAMED INSURED: 1500 LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
THIS ENDORSEMENT PROVIDES SUPPLEMENTARY INFORMATION TO BE USED WITH THE
FOLLOWING:
COMMERCIAL PROPERTY COVERAGE PART.
THE FORMS INDICATED BY AN (X) BELOW FORM A PART OF THIS COVERAGE PART AT
ISSUANCE:
(X) CPBI 70 03 11 85 SCHEDULE OF MORTGAGEES AND LOSS PAYEES
( ) CPQI 70 15 11 85 GLASS COVERAGE FORM DECLARATIONS
( ) CPBP 00 15 10 91 GLASS COVERAGE FORM
( ) CPQI 77 00 11 85 GLASS CHANGES
( ) CPBP 13 10 10 91 VALUE REPORTING FORM
( ) CPBI 77 03 10 91 BASIC CAUSE OF LOSS ENDORSEMENT
IN ADDITION, THE FOLLOWING, IF ANY, FORM A PART OF THIS COVERAGE PART AT
ISSUANCE:
CPBP 81 02 10 91 MI MICHIGAN CHANGES
IL 01 55 10 92 MICHIGAN CHANGES
IL 00 20 11 85 EFFECTIVE TIME CHANGES
CPBI 70 02 10 91 05/05/93
<PAGE> 34
SCHEDULE OF MORTGAGEES AND LOSS PAYEES
[LOGO] RELIANCE
United Pacific Insurance Company
Philadelphia, PA
RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- --------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- --------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- -------------------------------------------------------------------------------
NAMED INSURED: 1500 LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
THIS ENDORSEMENT PROVIDES SUPPLEMENTARY INFORMATION TO BE USED WITH THE
FOLLOWING:
BUILDING AND PERSONAL PROPERTY COVERAGE FORM.
MORTGAGEES
<TABLE>
<CAPTION>
PREMISES BUILDING
NUMBER NUMBER NAME ADDRESS
<S> <C> <C> <C>
001 001 NATIONAL BANK OF DETROIT 900 TOWER DRIVE
TROY, MI 48098
001 001 ECONOMIC DEVELOPMENT 500 W. BIG BEAVER ROAD
CORPORATION OF TROY TROY, MI 48084
</TABLE>
- -------------------------------------------------------------------------------
LOSS PAYEES
<TABLE>
<CAPTION>
PREM. NAME AND ADDRESS DESCRIPTION PROVISION
NO. OF PROPERTY APPLICABLE
<S> <C> <C> <C>
( ) LOSS PAYABLE
( ) LENDER'S
LOSS PAYABLE
( ) CONTRACT OF
SALE
( ) LOSS PAYABLE
( ) LENDER'S
LOSS PAYABLE
( ) CONTRACT OF
SALE
( ) LOSS PAYABLE
( ) LENDER'S
LOSS PAYABLE
( ) CONTRACT
OF SALE
</TABLE>
CPBI 70 03 11 85 05/05/93
<PAGE> 35
COMMERCIAL GENERAL LIABILITY SCHEDULE
[LOGO] RELIANCE
UNITED PACIFIC INSURANCE COMPANY
PHILADELPHIA, PA
RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- -------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- -------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- -------------------------------------------------------------------------------
NAMED INSURED: 1500 LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PREM DESCRIPTION CLASS ESTIMATED RATE P E TRANS/ ADVANCE *
NO OF CLASS CODE EXPOSURE B B YEAR PREMIUM
<S> <C> <C> <C> <C> <C> <C>
001 BUILDINGS OR 61217 65,000 65.171 A M $4,236.
PREMISES - BANK
OR OFFICE -
MERCANTILE OR
MANUFACTURING -
MAINTAINED BY THE
INSURED (LESSOR'S
RISK ONLY) - OTHER
THAN NOT-FOR-PROFIT
INCLUDING PRODUCTS
AND/OR COMPLETED
OPERATIONS
TOTAL ADVANCE PREMIUM $4,236.
</TABLE>
* M = MINIMUM PREMIUM, R = REMAINDER OF MINIMUM PREMIUM
CGBI 70 13 11 85 05/05/93
<PAGE> 36
COMMERCIAL GENERAL LIABILITY
DECLARATIONS
[LOGO] RELIANCE
United Pacific Insurance Company
Philadelphia, PA RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- -------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- -------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- -------------------------------------------------------------------------------
NAMED INSURED: 1500 LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
LIMITS OF INSURANCE
<TABLE>
<S> <C>
GENERAL AGGREGATE LIMIT $2,000,000.
(OTHER THAN PRODUCTS-COMPLETED OPERATIONS)
PRODUCTS-COMPLETED OPERATIONS AGGREGATE LIMIT $1,000,000.
PERSONAL INJURY AND ADVERTISING INJURY LIMIT* $1,000,000.
PER OCCURRENCE LIMIT* $1,000,000.
FIRE/EXPLOSION/WATER DAMAGE LIMIT** $ 50,000.
MEDICAL EXPENSE LIMIT** ANY ONE PERSON $ 5,000.
</TABLE>
*SUBJECT TO THE APPLICABLE "AGGREGATE LIMIT"
**SUBJECT TO THE "OCCURRENCE LIMIT"
===============================================================================
FORMS AND ENDORSEMENTS FORMING A PART OF THIS COVERAGE PART AT ISSUANCE ONLY
THOSE INDICATED BY AN (X) BELOW APPLY:
(X) CGQP 00 01 11 88 COMMERCIAL GENERAL LIABILITY COVERAGE PART
(X) IL 00 21 11 85 NUCLEAR ENERGY LIABILITY EXCLUSION ENDORSEMENT
(BROAD FORM)
(X) CGQI 70 03 11 85 COMMERCIAL GENERAL LIABILITY COVERAGE PART
FORMS LIST
CGQI 70 01 02 86 05/05/93
<PAGE> 37
BUSINESS AUTO COVERAGE FORM DECLARATIONS
[LOGO] RELIANCE
UNITED PACIFIC INSURANCE COMPANY
PHILADELPHIA, PA
RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- -------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- -------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/04 0307275
- -------------------------------------------------------------------------------
NAME INSURED: 1500 LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
WHERE DED. IS SHOWN BELOW, IT SHALL MEAN DEDUCTIBLE.
=========================================================================
ITEM TWO: SCHEDULE OF COVERAGES AND COVERED AUTOS
THIS POLICY PROVIDES ONLY THOSE COVERAGES WHERE A CHARGE IS SHOWN IN THE
PREMIUM COLUMN BELOW. EACH OF THESE COVERAGES WILL APPLY ONLY TO THOSE
AUTOS SHOWN AS COVERED AUTOS. AUTOS ARE SHOWN AS COVERED AUTOS FOR A
PARTICULAR COVERAGE BY THE ENTRY OF ONE OR MORE OF THE SYMBOLS FROM THE
COVERED AUTO SECTION OF THE BUSINESS AUTO COVERAGE FORM NEXT TO THE NAME
OF THE COVERAGE.
-------------------------------------------------------------------------
COVERAGES COVERED LIMIT -- THE MOST WE PREMIUM
AUTOS* WILL PAY FOR ANY ONE
ACCIDENT OR LOSS
-------------------------------------------------------------------------
LIABILITY 8.9 $ 1,000,000 $ 161.MP
-------------------------------------------------------------------------
PERSONAL INJURY SEPARATELY STATED IN $
PROTECTION (OR EACH P.I.P. ENDORSEMENT
EQUIVALENT NO- MINUS $ DED.
FAULT COVERAGE)
-------------------------------------------------------------------------
ADDED PERSONAL SEPARATELY STATED IN
INJURY PROTEC- EACH ADDED P.I.P.
TION (OR EQUIV- ENDORSEMENT
ALENT ADDED NO-
FAULT COVERAGE)
-------------------------------------------------------------------------
PROPERTY PROTEC- SEPARATELY STATED IN THE
TION INSURANCE P.P.I. ENDORSEMENT MINUS
(MICHIGAN ONLY) $ DED. FOR EACH
ACCIDENT
-------------------------------------------------------------------------
AUTO MEDICAL $ $
PAYMENTS
-------------------------------------------------------------------------
UNINSURED $ $
MOTORISTS
-------------------------------------------------------------------------
* ENTRY OF ONE OR MORE OF THE SYMBOLS FROM THE COVERED AUTO SECTION OF THE
BUSINESS AUTO COVERAGE FORM SHOWS WHICH AUTOS ARE COVERED AUTOS.
CABI 00 02 01 87 05/05/93 PAGE 1 OF 5
<PAGE> 38
BUSINESS AUTO COVERAGE FORM DECLARATIONS
[LOGO] RELIANCE
UNITED PACIFIC INSURANCE COMPANY
PHILADELPHIA, PA
RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- -------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- -------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/04 0307275
- -------------------------------------------------------------------------------
NAME INSURED: 1500 LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
-------------------------------------------------------------------------
COVERAGES COVERED LIMIT -- THE MOST WE PREMIUM
AUTOS WILL PAY FOR ANY ONE
ACCIDENT OR LOSS
-------------------------------------------------------------------------
UNDERINSURED $ $
MOTORISTS (WHEN
NOT INCLUDED IN
UNINSURED MOTOR-
ISTS COVERAGE)
-------------------------------------------------------------------------
PHYSICAL DAMAGE ACTUAL CASH VALUE OR COST $
OF REPAIR, WHICHEVER IS
COMPREHENSIVE LESS MINUS $ DED.
COVERAGE FOR EACH COVERED AUTO BUT
NO DEDUCTIBLE APPLIES TO
LOSS CAUSED BY FIRE OR
LIGHTNING.*
-------------------------------------------------------------------------
SPECIFIED CAUSES ACTUAL CASH VALUE OR COST $
OF LOSS COVERAGE OF REPAIR, WHICHEVER IS
LESS MINUS $25 DED. FOR
EACH COVERED AUTO FOR LOSS
CAUSED BY MISCHIEF OR
VANDALISM.*
-------------------------------------------------------------------------
COLLISION ACTUAL CASH VALUE OR COST $
COVERAGE OF REPAIR, WHICHEVER IS
LESS MINUS $ DED.
FOR EACH COVERED AUTO.*
-------------------------------------------------------------------------
TOWING AND LABOR $ FOR EACH DIS-
ABLEMENT OF A PRIVATE
PASSENGER AUTO.
$
-------------------------------------------------------------------------
$
-------------------------------------------------------------------------
PREMIUM FOR ENDORSEMENTS $
-----------------------------------------
ESTIMATED TOTAL PREMIUM $ 161.MP
-----------------------------------------
* SEE ITEM FOUR FOR HIRED OR BORROWED AUTOS.
==============================================================================
CABI 00 02 01 87 05/05/93 PAGE 2 OF 5
<PAGE> 39
BUSINESS AUTO COVERAGE FORM DECLARATIONS
[LOGO] RELIANCE
UNITED PACIFIC INSURANCE COMPANY
PHILADELPHIA, PA
RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- --------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- --------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- --------------------------------------------------------------------------------
NAMED INSURED: 1500 LIMITED PARTNERSHIP
- --------------------------------------------------------------------------------
ITEM THREE -- SCHEDULE OF COVERED AUTOS YOU OWN -- SEE CABI 70 03 06 92
FORMING A PART OF THIS POLICY AT ISSUANCE, IF APPLICABLE.
ITEM FOUR SCHEDULE OF HIRED OR BORROWED COVERED AUTO COVERAGE AND PREMIUMS
LIABILITY COVERAGE -- RATING BASIS, COST OF HIRE*
- --------------------------------------------------------------------------------
ESTIMATED COST OF RATE PER EACH FACTOR (IF LIABILITY
STATE HIRE FOR EACH ST. $100 COST OF HIRE COVERAGE IS PRIMARY) PREMIUM
- --------------------------------------------------------------------------------
MI $ IF ANY .477 $ 106.MP
- --------------------------------------------------------------------------------
* IF MORE THAN ONE STATE APPLIES, SEE SUPPLEMENTAL SCHEDULE CABI 70 02 12 90
FORMING A PART OF THIS POLICY AT ISSUANCE.
CABI 00 02 01 87 05/05/93 PAGE 3 OF 5
<PAGE> 40
BUSINESS AUTO COVERAGE FORM DECLARATIONS
[LOGO] RELIANCE
United Pacific Insurance Company
Philadelphia, PA RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- -------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- -------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- -------------------------------------------------------------------------------
NAMED INSURED: 1500 LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PHYSICAL DAMAGE COVERAGE
- -------------------------------------------------------------------------------
LIMIT OF INSURANCE- ESTIMATED RATE PER
COVERAGES DEDUCTIBLE THE MOST ANNUAL COST $100 ANN. PREMIUM
WE WILL PAY OF HIRE COST OF HIRE
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
COMPREHENSIVE ACTUAL CASH VALUE, $ $
COST OF REPAIRS, OR
$ WHICHEVER
IS LESS, MINUS
$ DED. FOR
EACH COVERED AUTO.
BUT NO DEDUCTIBLE
APPLIES TO LOSS
CAUSED BY FIRE OR
LIGHTNING.
- -------------------------------------------------------------------------------
SPECIFIED CAUSES ACTUAL CASH VALUE, $ $
OF LOSS COST OF REPAIRS OR
$ WHICHEVER
IS LESS, MINUS $25
DED. FOR EACH
COVERED AUTO FOR
LOSS CAUSED BY
MISCHIEF OR
VANDALISM.
- -------------------------------------------------------------------------------
COLLISION ACTUAL CASH VALUE, $ $
COST OF REPAIRS OR
$ WHICHEVER
IS LESS, MINUS
$ DED. FOR
EACH COVERED AUTO.
- -------------------------------------------------------------------------------
TOTAL PREMIUM $
---------
</TABLE>
CABI 00 02 01 87 05/05/93 PAGE 4 OF 5
<PAGE> 41
BUSINESS AUTO COVERAGE FORM DECLARATIONS
[LOGO] RELIANCE
UNITED PACIFIC INSURANCE COMPANY
PHILADELPHIA, PA
RENEWAL POLICY
**EFFECTIVE 05/01/93
RENEWAL OF POLICY QB 8509449
- -------------------------------------------------------------------------------
POLICY NUMBER POLICY PERIOD AGENCY NUMBER
- -------------------------------------------------------------------------------
QB 8509449 52 FROM: 05/01/93 TO: 05/01/94 0307275
- -------------------------------------------------------------------------------
NAMED INSURED: 1500 LIMITED PARTNERSHIP
- -------------------------------------------------------------------------------
ITEM FIVE - SCHEDULE FOR NON-OWNERSHIP LIABILITY
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
NAMED INSURED'S BUSINESS RATING BASIS NUMBER PREMIUM
- -------------------------------------------------------------------------------
<S> <C> <C> <C>
OTHER THAN A SOCIAL SERVICE NUMBER OF EMPLOYEES 0-25 $ 55.MP
AGENCY NUMBER OF PARTNERS $
- -------------------------------------------------------------------------------
SOCIAL SERVICE AGENCY NUMBER OF EMPLOYEES $
NUMBER OF VOLUNTEERS $
- -------------------------------------------------------------------------------
</TABLE>
ITEM SIX - SCHEDULE FOR GROSS RECEIPTS OR MILEAGE BASIS - LIABILITY
COVERAGE - PUBLIC AUTO OR LEASING RENTAL CONCERNS
<TABLE>
<CAPTION>
===============================================================================
ESTIMATED YEARLY RATES PREMIUMS
( ) GROSS RECEIPTS ( ) PER $100 OF GROSS
RECEIPTS
( ) PER MILE
--------------------------------------------------------
LIABILITY AUTO MEDICAL LIABILITY AUTO MEDICAL
COVERAGE PAYMENTS COVERAGE PAYMENTS
- -------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
$ $
- -------------------------------------------------------------------------------
MINIMUM PREMIUMS $ $
----------------------------------------------
TOTAL PREMIUMS $ $
===============================================================================
</TABLE>
FORMS AND ENDORSEMENTS FORMING A PART OF THIS POLICY AT ISSUANCE:
CA 00 01 12 90 BUSINESS AUTO COVERAGE FORM
CABP 83 02 01 87 BUSINESS AUTO COVERAGE FORM DEFINITIONS - SUPPLEMENT
IL 00 21 11 85 BROAD FORM NUCLEAR EXCLUSION (NOT APPLICABLE IN NY)
CA 00 29 12 88 CHANGES IN BUSINESS AUTO AND TRUCKERS FORM - INSURED
CONTRACT
CA 01 10 10 92 MICHIGAN CHANGES
COUNTERSIGNED BY
------------------------ ------------------------------------
(DATE) (AUTHORIZED REPRESENTATIVE)
05/05/93 PAGE 5 OF 5
<PAGE> 42
CHUBB GROUP OF INSURANCE COMPANIES [CHUBB LOGO]
15 MOUNTAIN VIEW ROAD, WARREN, N.J. 07059
DECLARATIONS--ENERGY SYSTEMS POLICY
<TABLE>
<S> <C>
NAME INSURED AND MAILING ADDRESS: POLICY NUMBER 7830-83-23
1500 Limited Partnership and (Previous Policy No. )
Sandy Corporation Issued by the stock insurance company indicated by "x"
1500 West Big Beaver Road below, herein called the Company
Troy, Michigan 48084
NAME AND MAILING ADDRESS OF PRODUCER (X) FEDERAL INSURANCE COMPANY
Emerson-Prew, Inc. Incorporated under the laws of Indiana
30600 Telegraph Road, Suite 3110 ( ) PACIFIC INDEMNITY COMPANY
Birmingham, Michigan 48025 Incorporated under the laws of California
POLICY PERIOD: FROM: 05/01/92 TO: 05/01/95 ( ) GREAT NORTHERN INSURANCE COMPANY
(12:01 a.m. Standard time at your mailing address shown above) Incorporated under the laws of Minnesota
</TABLE>
In return for the payment of the premium, and subject to all the terms of this
Policy, we agree with you to provide the insurance for those coverages
indicated by a premium charge, subject to the Limits of Insurance indicated
below,and for other coverage when added.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------
COVERAGES LIMIT OF INSURANCE DEDUCTIBLE COINSURANCE PREMIUM
- ----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
PROPERTY COVERAGE $3,000,000 $1,000 NOT APPLICABLE $1,596.
Business Income/Extra $750,000 24 Hours N/A Included
Expense
- ----------------------------------------------------------------------------------------------
ENDORSEMENT(S) AND TOTAL $1,596.
FORM(S) APPLICABLE ----------
</TABLE>
43-02-0161(2-89), 43-02-0178(2-89), 43-02-0164(2-89)
- -------------------------------------------------------------------------------
DESCRIPTION AND LOCATION OF PROPERTY COVERED
- -------------------------------------------------------------------------------
Office Building located at: 1500 West Big Beaver Road
Troy, Michigan 48084
- -------------------------------------------------------------------------------
Your acceptance of this Policy terminates any prior Policy of the same number
which may have been issued to you by us, effective with the inception of this
Policy. Your Policy has been signed by the President and Secretary of the
Company, but it will not be valid unless also signed by an authorized
representative of the Company.
<TABLE>
<S> <C> <C>
FEDERAL INSURANCE COMPANY PACIFIC INDEMNITY COMPANY GREAT NORTHERN INSURANCE COMPANY
- ------------------------ ------------------------- -------------------------------
President President President
- ------------------------ ------------------------- -------------------------------
Secretary Secretary Secretary
ARTHUR W. EMERSON
---------------------------------------------------------------------
AUTHORIZED REPRESENTATIVE
These Declarations with the Property Coverage Form and any applicable
Schedule, Endorsement and Worksheet complete the above numbered Policy,
1mt-05/10/93 subject to any later Declarations and Amendments.
</TABLE>
<PAGE> 43
ENERGY SYSTEMS Chubb Group of Insurance Companies [LOGO]
POLICY 15 Mountain View Road, Warren, N.J. 07059
ENDORSEMENT=============================================================
THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY.
Annual adjustment of premium in accordance with terms as stated on
Form 43-02-0164 (2-89), Endorsement No. 2:
Term: 05/01/93 to 05/01/94
Annual Adjustment: $1,618. A/P
This Endorsement forms a part of Policy No. 7830-83-23 and is effective from
12:01 a.m. of 05/01/93
Issued By Federal Insurance Company Endorsement No. 3
Named Insured: 1500 Limited Partnership and In lieu of
Sandy Corporation
lmt-05/10/93
/s/ ARTHUR W. EMERSON
--------------------------------
AUTHORIZED REPRESENTATIVE
Form 43-02 0164 (Rev 2-89) M-41861 (15M)
<PAGE> 44
AMENDMENT TO LEASE
This Amendment to Lease (the "Amendment") is entered into as
of the 22nd day of August, 1995, by and between 1500 LIMITED PARTNERSHIP,
a Michigan limited partnership (the "Landlord"), as landlord, and SANDY
CORPORATION, a Michigan corporation (the "Tenant"), as tenant, who agree as
follows:
R E C I T A L S:
A. Landlord and Tenant entered into a certain Lease
dated as of February 1, 1994 (the "Lease"), covering certain real property and
improvements located in the City of Troy, Michigan, as more particularly
described in the Lease (the "Premises").
B. Automatic Data Processing, Inc. ("ADP"), a Delaware
corporation, has agreed to guaranty Tenant's obligations under the Lease
pursuant to a certain Lease Guaranty of even date herewith.
C. Landlord and Tenant desire to modify the Lease in
certain other respects and have agreed to enter into this Amendment in order to
evidence such modifications.
NOW, THEREFORE, for good and valuable consideration, the
receipt and adequacy of which is hereby acknowledged, the parties hereto agree
as follows:
1. Except as otherwise modified herein, the terms and
conditions of the Lease shall remain in full force and effect.
2. All capitalized terms not defined herein shall have
the meaning ascribed to them in the Lease.
3. Sections 7.1 and 7.2 of the Lease are hereby deleted
in their entirety and replaced with the following new Sections 7.1 and 7.2:
7.1 Tenant shall not make: (i) any structural
alterations, additions or improvements to the Leased Premises,
or (ii) any non-structural alterations, additions or
improvements costing in excess of $50,000.00, without
Landlord's prior written approval, which approval, in the case
of interior non-structural alterations, additions or
improvements shall not be unreasonably withheld, but which
approval, with respect to exterior and structural alterations
(including electrical, mechanical, HVAC, and plumbing
systems), may be withheld by Landlord in its sole discretion,
provided, however, Landlord agrees not to unreasonably
withhold its approval of alterations to the electrical,
mechanical, HVAC and plumbing systems so long as such
alterations do not negatively impact the other tenants of the
Building or the appearance of the Building. In the event of
disapproval of Tenant's proposed alterations, additions or
improvements, Landlord shall give to the Tenant an itemized
statement of the reasons therefor. If Landlord does not
disapprove the plans and specifications or proposals of Tenant
within fifteen (15) business days after the same have been
received by Landlord, such plans, specifications or proposals
shall be deemed to have been approved by Landlord. All
alterations, additions or improvements made by Tenant to the
Leased Premises, except movable office furniture and equipment
installed at Tenant's expense, shall be the property of
Landlord and remain upon and be surrendered with the Leased
Premises at the expiration of the term hereof. On February 1,
1994, Landlord paid Tenant an improvement allowance of
$100,000.00. At any time prior to December 31, 1996, Landlord
shall reimburse Tenant in an
<PAGE> 45
additional amount not to exceed $700,000.00 for any permitted
alterations, renovations, and improvements to the Leased
Premises made and paid for by Tenant within ten (10) days of
receipt by Landlord of appropriate lien waivers and invoices
marked paid for completed work in form and content acceptable
to Landlord. Landlord and Tenant acknowledge that Tenant
intends to make certain alterations and improvements which
will be identified by Tenant subsequent to the date hereof and
subject to the approval of Landlord as herein provided.
Tenant acknowledges that all extraordinary maintenance costs
and utility costs relating to Tenant's improvements,
alterations or additions shall be paid for by Tenant.
7.2 Tenant shall only use contractors approved by
Landlord for any permitted alterations, additions or
improvements to the Leased Premises and Tenant shall obtain
all necessary governmental certificates, licenses, permits and
approvals for any such alterations, additions or improvements
at its sole cost and expense. The foregoing notwithstanding
Landlord shall not withhold its consent to Tenant's choice of
contractor so long as such contractor is licensed in the State
of Michigan, insurable and bondable, and of a good reputation
and experience in similar types of work. Except as set forth
in Section 7.1 hereof, Tenant shall not be entitled to any
reimbursement or compensation resulting from its payment of
the costs or expenses of constructing any improvements,
alterations or additions to the Leased Premises. Tenant shall
not permit any construction or mechanic's liens to be placed
or remain upon the Leased Premises. In the event that such
construction or mechanic's liens are placed on the Leased
Premises, Tenant shall remove or bond over same within thirty
(30) days of demand by Landlord. Tenant's failure to do so
shall constitute an Event of Default hereunder giving Landlord
the right, inter alia, to terminate this Lease upon thirty
(30) days prior written notice to Tenant. In addition, Tenant
shall indemnify and hold harmless Landlord from any cost or
expense whatsoever (including reasonable attorney fees)
arising from Tenant's permitting a construction or mechanic's
lien to be placed on the Leased Premises. Landlord has no
obligation and has made no promise to alter, remodel, improve,
repair, decorate, or paint the Leased Premises or any part
thereof. No representations with respect to the condition of
the Leased Premises or the Building have been made by Landlord
to Tenant, except as specifically herein set forth.
4. Notwithstanding the provisions of Lease to the
contrary, Tenant shall be permitted to self-insure all of its insurance
obligations under Sections 11.2, 11.3, 11.4 and 11.5 of the Lease and no
insurance certificates shall be required from Tenant for such coverages which
are self-insured by Tenant, provided Tenant satisfies the following terms and
conditions:
(a) Tenant is and remains an entity controlled by ADP;
(b) ADP has a net worth equal to or in excess of
$100,000,000.00 at all times during the term of this
Lease; and
(c) ADP is and remains a guarantor of all of Tenant's
obligations under this Lease.
Upon written request of Landlord, Tenant shall deliver, or
cause ADP to deliver, to Landlord, the annual published financial statements of
ADP. In the event Tenant is able to satisfy the foregoing conditions and
elects to self-insure, Tenant hereby agrees to release, indemnify and hold
harmless Landlord from and against any and all liability for claims, costs,
expenses, losses or damages
-2-
<PAGE> 46
which Tenant incurs and which would have been covered by insurance had Tenant
maintained the insurance coverages specified in the Lease rather than electing
to self-insure.
5. Section 36 of the Lease is hereby deleted in its
entirety and is no longer of any further force or
effect.
6. Notwithstanding anything contained herein to the
contrary, the parties hereto acknowledge and agree that this Amendment shall
become effective on the effective date of the merger of ADP Mergerco, Inc. with
and into Sandy Corporation and shall be of full force and effect thereafter.
In the event that the merger of ADP Mergerco, Inc. with and into Sandy
Corporation is not effectuated on or before January 31, 1996, this Amendment
shall be null and void and of no force or effect.
7. This Amendment may be executed in two (2) or more
counterparts, each of which shall be deemed an original and all of which shall
constitute one (1) original.
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment as of the date first above written.
LANDLORD:
1500 LIMITED PARTNERSHIP,
A MICHIGAN LIMITED PARTNERSHIP
By: RUDGATE CORP., a Michigan
corporation, its general partner
By: /s/ William H. Sandy
------------------------------------
William H. Sandy, President
TENANT:
SANDY CORPORATION, A Michigan Corporation
By: /s/ Raymond A. Ketchledge
------------------------------------
Its: President
------------------------------------
Accepted and Approved by:
NBD BANK
By:
---------------------------
Its:
---------------------------
-3-
<PAGE> 1
EXHIBIT 23.5
CONSENT OF BEAR, STEARNS & CO. INC.
We hereby consent to the inclusion in the Prospectus/Proxy Solicitation
Statement forming part of this Registration Statement on Form S-4 of Automatic
Data Processing, Inc. of our opinion attached as Annex B thereto and to the
reference to such opinion and to our firm therein. We also confirm the accuracy
in all material respects of the description and summary of such fairness
opinion and the description and summary of our analyses, observations, beliefs
and conclusions relating thereto, set forth under the heading "Opinion of
Sandy's Financial Advisor" therein. In giving such consent, we do not admit
that we come within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 and the rules and regulations of the
Securities and Exchange Commission issued thereunder.
Bear, Stearns & Co. Inc.
By: /s/ G.E. Matthews
------------------------------
Managing Director
Dated: November 29, 1995
