<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
---------
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
--- SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
or
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission file number 0-6004
------
Scanforms, Inc.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 23-1704876
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
181 Rittenhouse Circle
Keystone Park, Bristol, Pa. 19007
- ---------------------------------------- ----------
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:
(215) 785-0101
--------------
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the registrant
was required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes __ X__ No _____
At May 13, 1996, 3,546,648 shares of common stock, $0.01 par value, were
outstanding.
Page 1 of 13
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PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
SCANFORMS, INC.
BALANCE SHEET
ASSETS MARCH 31, OCTOBER 1,
1996 1995
------------ -----------
(Unaudited)
Current assets:
Cash and cash equivalents $10,826,504 $ 2,910,264
Note receivable - current portion 7,024 7,747
Accounts receivable, net of allowance for
doubtful accounts of $432,602 - March 31,
1996 and $410,000 - October 1, 1995 4,658,398 3,673,623
Inventories (Note 2) 1,216,590 1,665,313
Other current assets 532,341 316,012
Deferred income taxes 232,874 266,030
----------- -----------
Total current assets 17,473,731 8,838,989
----------- -----------
Property, plant and equipment - at cost, net of
accumulated depreciation of $12,436,054
March 31, 1996 and $11,824,356 - October 1,
1995 8,106,219 7,768,880
----------- -----------
Other assets:
Note receivable - long-term portion 9,138 12,201
Other 195,390 73,136
----------- -----------
Total other assets 251,528 85,337
----------- -----------
$25,784,478 $16,693,206
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt $ 839,959 $ 730,692
Accounts payable 1,791,900 1,738,699
Customer advances 9,706,128 3,045,342
Income taxes payable 254,393 189,549
Other current liabilities 915,866 563,196
----------- -----------
Total current liabilities 13,508,246 6,267,478
----------- -----------
Long-term debt, net of current maturities 4,278,802 3,900,535
----------- -----------
Deferred income taxes 849,821 960,419
----------- -----------
Stockholders' equity:
Preferred stock, $1 par;
500,000 shares authorized; none issued
Common stock, $0.01 par; - -
6,000,000 shares authorized; issued and
outstanding 3,546,648 35,467 35,467
Capital in excess of par 1,388,462 1,388,462
Retained earnings 6,129,697 4,548,826
Less: Note receivable from stockholder (406,017) (407,981)
----------- -----------
Total stockholders' equity 7,147,609 5,564,774
----------- -----------
$25,784,478 $16,693,206
=========== ===========
See accompanying notes to financial statements.
Page 2 of 13
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Unaudited
---------
SCANFORMS, INC.
STATEMENT OF OPERATIONS AND RETAINED EARNINGS
Twenty Six Weeks Ended Thirteen Weeks Ended
March 31 April 2 March 31 April 2
1996 1995 1996 1995
----------- ----------- ---------- ----------
Net sales $16,076,498 $13,498,055 $7,510,368 $6,039,953
Cost of sales 10,818,084 9,670,393 5,077,166 4,550,361
----------- ----------- ---------- ----------
Gross profit on sales 5,258,414 3,827,662 2,433,202 1,489,592
Operating expense 2,347,501 2,058,927 1,154,523 972,559
----------- ----------- ---------- ----------
Income from operations 2,910,913 1,768,735 1,278,679 517,033
Other expenses:
Merger and acquisition
costs 277,000 - 277,000 -
Interest cost 6,913 198,329 176 110,963
----------- ----------- ---------- ----------
Income before income taxes 2,627,000 1,570,406 1,001,503 406,070
Income taxes 1,046,129 640,197 400,366 163,999
----------- ----------- ---------- ----------
Net income 1,580,871 930,209 601,137 242,071
Retained earnings-beginning 4,548,826 2,978,287 5,528,560 3,666,427
----------- ----------- ---------- ----------
Retained earnings-ending $ 6,129,697 $ 3,908,496 $6,129,697 $3,908,496
=========== =========== ========== ==========
Weighted average number of
common shares fully diluted 3,688,280 3,632,845 3,688,280 3,632,845
=========== ========== ========== ==========
Net earnings per common
share fully diluted $ 0.43 $ 0.25 $ 0.16 $ 0.07
=========== ========== ========== ==========
See accompanying notes to financial statements.
Page 3 of 13
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Unaudited
---------
SCANFORMS, INC.
STATEMENT OF CASH FLOWS
Thirteen Weeks Ended
March 31 April 2
1996 1995
-------- -------
Cash flows from operating activities:
Cash received from customers $21,828,351 $11,815,230
Cash paid to suppliers and employees (12,377,200) (11,728,383)
Interest received 213,997 84,960
Interest paid (215,119) (284,252)
Income taxes paid (1,058,725) (869,111)
----------- -----------
Net cash (used in) operating
activities 8,391,304 (981,556)
----------- -----------
Cash flows from investing activities:
Purchases of plant and equipment (158,517) (814,612)
Additional CSV on life insurance (1,811) -
Payment of vendor note receivable 3,786 -
Payment of note from stockholder 1,964 1,841
----------- -----------
Net cash (used in) investing
activities (154,578) (812,612)
----------- -----------
Cash flows from financing activities:
Issuance of common shares of
capital stock - 100
Paid in surplus on issuance of
common shares of capital stock - 2,900
Proceeds from long-term debt 35,537 1,350,737
Repayment of long-term debt (347,846) (965,934)
Principle payments under capital
lease obligations (8,177) (11,556)
----------- -----------
Net cash from (used in) financing
activities (320,486) 376,247
----------- -----------
Net increase(decrease) in cash 7,916,240 (1,418,080)
Cash:
Beginning 2,910,264 3,522,546
----------- -----------
Ending $10,826,504 $ 2,104,466
=========== ===========
See accompanying notes to financial statements.
Page 4 of 13
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Unaudited
---------
SCANFORMS, INC.
STATEMENT OF CASH FLOWS
RECONCILIATION OF NET INCOME TO NET CASH FLOWS FROM
OPERATING ACTIVITIES
Twenty Six Weeks Ended
March 31 April 2
1996 1995
-------- -------
Net Income $ 1,580,871 $ 930,210
Adjustments to reconcile net income
to net cash (used in) operating
activities:
Depreciation and amortization 629,198 531,392
Deferred finance charges 4,399 11,894
Increase in allowance for doubtful
accounts 30,004 30,004
Decrease(Increase) in assets:
Accounts receivable (1,014,779) 82,034
Inventories 448,723 (371,313)
Other current assets (216,329) (253,300)
Deferred income taxes 33,156 (666)
Other assets (124,842) (227,896)
Increase(decrease) in liabilities:
Accounts payable 53,201 307,779
Customer advances 6,660,786 (1,878,183)
Other current liabilities 352,670 84,738
Income taxes payable 64,844 (147,255)
Deferred income taxes (110,598) (80,994)
----------- -----------
Net cash (used in) operating activities $ 8,391,304 $ (981,556)
=========== ===========
SCHEDULE OF NONCASH INVESTING AND FINANCIAL ACTIVITIES
Property acquired under capital leases $ 808,020 $ -
See accompanying notes to financial statements.
Page 5 of 13
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Unaudited
---------
SCANFORMS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 1 - Basis of Presentation:
Accounting Period:
The registrant employs a fifty-two, fifty-three week year for financial
accounting purposes. Accordingly, these quarterly financial statements are for
the twenty six week and thirteen week periods ended March 31, 1996 and April 2,
1995. The fiscal year ending September 29, 1996 will consist of fifty-two weeks.
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Rule 10-01 of the
Regulation S-X. Accordingly, they do not include all of the information and
footnotes required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments (consisting
of normal recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the twenty six weeks and thirteen weeks
ended March 31, 1996 are not necessarily indicative of the results that may be
expected for the fiscal year ending September 29, 1996. For further information,
refer to the financial statements and footnotes thereto included in the
Company's annual report on Form 10-K for the fiscal year ended October 1, 1995.
Note 2 - Inventories:
Inventories consisted of the following:
March 31 October 1
1996 1995
---------- ----------
Raw materials $ 956,082 $1,288,936
Work in process 260,508 376,377
---------- ----------
$1,216,590 $1,665,313
========== ==========
Note 3 - Subsequent events:
The Board of Directors of the Company has entered into an Agreement and
Plan of Merger, dated as of February 15, 1996, as amended as of April 4, 1996
(the "Merger Agreement"), between the Company and SCFM Corp. ("SCFM"), a
Delaware corporation which is wholly owned by the President and Chairman of the
Board of Directors of the Company and a director of the Company (together, the
"Management Group"). Pursuant to the Merger Agreement, SCFM will merge with and
into the Company (the "Merger"), with the Company being the surviving
Page 6 of 13
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Unaudited
---------
SCANFORMS, INC.
NOTES TO FINANCIAL STATEMENTS
Note 3 - Subsequent events (continued):
corporation. Each outstanding share of the common stock, par value $.01 per
share, of the Company (the "Shares"), including an aggregate of approximately
277,778 Shares held by the Management Group, will be converted into the right to
receive $3.60 in cash, without interest. Each of the shares of common stock of
SCFM outstanding immediately prior to the effective time of the Merger will be
converted into one share of common stock of the surviving corporation. As a
result of the Merger, stockholders of the Company who are not members of the
Management Group will no longer have any equity interest in the Company and the
Company will be privately held by the members of the Management Group. The
Merger is conditioned upon, among other things, the approval and adoption of the
Merger Agreement by the holders of at least a majority of the Shares.
On March 22, 1996, the Chairman of the Board of Directors and Chief
Executive Officer of American Banknote Corporation ("ABN") sent a letter to the
Company's President advising him that ABN was filing a Schedule 13D with the
Securities and Exchange Commission (the "Commission") announcing that it had
acquired approximately 5.32% of the outstanding Shares and describing ABN's
potential interest in the Company, including the possibility of ABN making a
proposal relating to a merger transaction between ABN and the Company. The
letter further stated that based upon ABN's preliminary valuation of the
Company, stockholders of the Company would receive greater value in a
transaction with ABN than they would pursuant to the Merger. On April 8, 1996,
the Company and ABN entered into a confidentiality agreement. Certain of the
Company's proprietary information has been delivered to ABN under the terms of
that Agreement. The Company has had subsequent discussions with ABN in which ABN
has indicated that its interest in merging with or acquiring the Company is
conditioned upon ABN's ability to reach agreement with the Company's President
regarding his continued employment and other matters. The Company's President
has advised the Company that he has not entered into any agreement with ABN and
intends to proceed with the transactions contemplated by the Merger Agreement.
Page 7 of 13
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS: TWENTY SIX WEEKS ENDED MARCH 31, 1996 VS. TWENTY SIX
WEEKS ENDED APRIL 2, 1995
The Company's net sales increased from $13,498,055 during the twenty
six weeks ended April 2, 1995 to $16,076,498 during the twenty six weeks ended
March 31, 1996, a 19.1% increase, principally reflecting an increase in customer
demand. Gross profit increased by 37.4% from $3,827,662 to $5,258,414 in the
period. The increase in gross profit was primarily the result of the higher
sales volume and the resultant increase in production efficiency.
Operating expense was $2,347,501 and $2,058,927 for the first twenty
six weeks of fiscal 1996 and fiscal 1995, respectively. The increase of 14.0%
was due to various factors, including increased sales compensation on higher
sales volumes, other compensation expense, the payment of performance bonuses,
consulting fees and the preparation of the annual report, which factors were
offset by more delivery service charges being passed on to customers.
Merger and acquisition costs for the twenty six weeks ended March 31,
1996 are fees incurred by the Company in connection with the evaluation,
registration and preparation of proposals presented to the Company relating to
a sale or merger and costs incurred by the Management Group in connection with
the Merger which costs the Company has agreed to pay pursuant to the Merger
Agreement. These fees are primarily for evaluation and a fairness opinion by
the Company's financial advisor, together with legal and accounting fees.
Interest cost decreased from $198,329 to $6,913 during the first twenty
six weeks of fiscal 1996 as compared to the same period in fiscal 1995. The
decrease was due primarily to the reduction of interest rates under the loan
agreements with the new lending institution which were entered into in July of
1995, and the additional interest income earned as a result of higher cash
balances.
RESULTS OF OPERATIONS: THIRTEEN WEEKS ENDED MARCH 31, 1996 VS. THIRTEEN WEEKS
ENDED APRIL 2, 1995
The Company's net sales increased from $6,039,953 during the thirteen
weeks ended April 2, 1995 to $7,510,368 during the thirteen weeks ended March
31, 1996, a 24.3% increase, principally reflecting an increase in orders by a
major customer. Gross profit increased by 63.3% from $1,489,592 to $2,433,202.
The increase in gross profit was primarily the result of the higher sales
volume, and the resultant increase in production efficiency and utilization of
plant facilities.
Page 8 of 13
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (continued)
RESULTS OF OPERATIONS: THIRTEEN WEEKS ENDED MARCH 31, 1996 VS.
THIRTEEN WEEKS ENDED APRIL 2, 1995 (continued)
Operating expense was $1,154,523 and $972,559 for the second thirteen
weeks of fiscal 1996 and fiscal 1995, respectively. The increase of 18.7% was
due to increased sales compensation on the higher sales volume, advertising and
trade shows and performance bonus compensation expense, offset by the passing of
more delivery service charges on to customers.
Merger and acquisition costs for the thirteen weeks ended March 31,
1996 are fees incurred by the Company in connection with the evaluation,
registration and preparation of proposals presented to the Company relating to
a sale or merger and costs incurred by the Management Group in connection with
the Merger which costs the Company has agreed to pay pursuant to the Merger
Agreement. These fees are primarily for evaluation and a fairness opinion by
the Company's financial advisor, together with legal and accounting fees.
Interest cost decreased from $110,963 to $176 during the second
thirteen weeks of fiscal 1996 as compared to the same period in fiscal 1995. The
decrease was due primarily to the reduction of interest rates under the loan
agreements with the new lending institution which were entered into in July of
1995, and the additional interest income earned as a result of higher cash
balances.
GENERAL:
Competition in the direct mail industry continues to be strong, and
overall pricing remains somewhat depressed in selected segments of the business.
The Company, because of its investment in upgrading its press quality
performance and with the acquisition of additional personalization equipment, is
in a good position to compete.
On February 15, 1996, the Company entered into the Merger Agreement
with SCFM, a company which is wholly owned by the members of the Management
Group. The Merger Agreement provides, among other things, that the public
stockholders of the Company would receive a cash payment of $3.60 per Share in
exchange for their Shares. As a result of the Merger, the Company will be
privately held by the Management Group. The Merger is conditioned upon, among
other things, approval and adoption of the Merger Agreement by the holders of a
majority of the Shares. See Item 5 of this report and Note 3 of the financial
statements.
Page 9 of 13
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ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS - (continued)
LIQUIDITY AND CAPITAL RESOURCES:
The Company's working capital increased to $4,072,026 as of March 31,
1996, an increase of $1,500,515 or 58.4% from $2,571,511 on October 1, 1995. The
increase was the result of an increase in net income for the twenty six week
period.
Certain other significant balance sheet changes during the twenty six
weeks ended March 31, 1996 included an increase in customer advances of
$6,660,786 which will be used in the future for the purchase of postage as the
customers' mailings are delivered to the post office and for the payment of
invoices as the services are billed. An increase in accounts receivable of
$1,014,780 was due to higher billings in the second quarter of 1996, reflected
in the increased sales and decrease of $448,723 in inventories.
The Company has entered into lease agreements for computer and printing
equipment in the amount of $808,020 to be used in the personalization of the
direct mail. These leases are for five years with a fair market value purchase
price at the end of the leases. The leases will be treated as capitalized leases
and amortized over the estimated useful lives of the equipment of 5 years.
Equipment in the amount of $170,265 of which $84,460 is included in the
equipment purchases has been financed for 5 years by a term note of $169,665.
Upon delivery of the final piece of equipment in the amount of $85,805 in May of
1996, the Company will receive $81,647 in cash for reimbursement of the deposits
that were paid for the equipment purchases.
The Company is in the process of expanding the shop area for its
computer production. The anticipated cost will be $120,000 which will be paid
from working capital.
During the first twenty six weeks of 1996, the Company did not utilize
its working capital line of credit with its principal lending bank. The Company
believes that the cash flow generated from operations and the amount available
under its working capital line of credit (as of March 31, 1996, the availability
was zero due to extraordinary high customer deposits) will enable the Company to
meet its currently anticipated operating requirements during the fiscal year
1996.
Page 10 of 13
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PART II OTHER INFORMATION
Item 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on February 27,
1996. At the meeting, the Stockholders voted on the following matter:
Election of Directors - The stockholders cast 2,690,581 votes for, and
withheld authority to cast 47,034 votes for, the election of Sebastian A.
Carcioppollo. The stockholders cast 2,690,581 votes for, and withheld
authority to cast 47,034 votes for, the election of Joel R. Jacks. The
stockholders cast 2,691,281 votes for, and withheld authority to cast 46,334
votes for, the election of Robert A. Samans.
Item 5: OTHER INFORMATION
The Board of Directors of the Company has entered into an Agreement and
Plan of Merger, dated as of February 15, 1996, as amended as of April 4, 1996
(the "Merger Agreement"), between the Company and SCFM Corp. ("SCFM"), a
Delaware corporation which is wholly owned by the President and Chairman of the
Board of Directors of the Company and a director of the Company (together, the
"Management Group"). Pursuant to the Merger Agreement, SCFM will merge with and
into the Company (the "Merger"), with the Company being the surviving
corporation. Each outstanding share of the common stock, par value $.01 per
share, of the Company (the "Shares"), including an aggregate of approximately
277,778 Shares held by the Management Group, will be converted into the right to
receive $3.60 in cash, without interest. Each of the shares of common stock of
SCFM outstanding immediately prior to the effective time of the Merger will be
converted into one share of common stock of the surviving corporation. As a
result of the Merger, stockholders of the Company who are not members of the
Management Group will no longer have any equity interest in the Company and the
Company will be privately held by the members of the Management Group. The
Merger is conditioned upon, among other things, the approval and adoption of the
Merger Agreement by the holders of at least a majority of the Shares.
On March 22, 1996, the Chairman of the Board of Directors and Chief
Executive Officer of American Banknote Corporation ("ABN") sent a letter to the
Company's President advising him that ABN was filing a Schedule 13D with the
Securities and Exchange Commission (the "Commission") announcing that it had
acquired approximately 5.32% of the outstanding Shares and describing ABN's
Page 11 of 13
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PART II OTHER INFORMATION (continued):
Item 5: OTHER INFORMATION (continued)
potential interest in the Company, including the possibility of ABN making a
proposal relating to a merger transaction between ABN and the Company. The
letter further stated that based upon ABN's preliminary valuation of the
Company, stockholders of the Company would receive greater value in a
transaction with ABN than they would pursuant to the Merger. On April 8, 1996,
the Company and ABN entered into a confidentiality agreement. Certain of the
Company's proprietary information has been delivered to ABN under the terms of
that Agreement. The Company has had subsequent discussions with ABN in which ABN
has indicated that its interest in merging with or acquiring the Company is
conditioned upon ABN's ability to reach agreement with the Company's President
regarding his continued employment and other matters. The Company's President
has advised the Company that he has not entered into any agreement with ABN and
intends to proceed with the transactions contemplated by the Merger Agreement.
Item 6: EXHIBITS AND REPORTS ON FORM 8-K
a. EXHIBITS:
2 (a) Agreement and Plan of Merger dated as of February 15, 1996, as
amended as of April 4, 1996, between SCFM Corp. and the Company
27 Financial Data Schedule
b. REPORTS ON FORM 8-K:
No reports on Form 8-K were filed during the quarter for which this
report is filed.
Page 12 of 13
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SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
SCANFORMS, INC.
DATE: May 13, 1996
/s/ Robert A. Samans
----------------------------------------
Robert A. Samans, President
/s/ William P. Carey
----------------------------------------
William P. Carey, Treasurer
(Principle Financial and
Accounting Officer)
Page 13 of 13
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EXHIBIT 2(a)
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BETWEEN
SCFM CORP.
AND
SCANFORMS, INC.
April 4, 1996
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TABLE OF CONTENTS
<TABLE>
<S> <C>
I. THE MERGER....................................................................................................2
1.01. The Merger......................................................................................2
1.02. Conversion or Cancellation of Stock.............................................................3
1.03. Surrender of Share Certificates; Payment for Shares.............................................5
II. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY...........................................................................................8
2.01. Due Organization, Etc...........................................................................8
2.02. Execution and Delivery of Agreement............................................................10
2.03. Capital Stock..................................................................................12
2.04. Periodic Filings...............................................................................12
2.05. Proxy Statement................................................................................15
2.06. No Brokers.....................................................................................16
2.07. Employment, Severance and Termination Agreements, Etc..........................................16
2.08. Company Actions................................................................................16
III. REPRESENTATIONS AND WARRANTIES
OF NEWCO................................................................................................17
3.01. Due Organization, Etc..........................................................................17
3.02. Execution and Delivery of Agreement............................................................17
3.03. Financing......................................................................................19
3.04. Proxy Statement................................................................................19
3.05. No Brokers.....................................................................................20
IV. COVENANTS OF THE COMPANY....................................................................................20
4.01. Ordinary Course of Business....................................................................20
4.02. Subsequent Financial Statements................................................................24
4.03 Other Potential Bidders........................................................................25
V. ADDITIONAL AGREEMENTS........................................................................................26
5.01. Access and Information.........................................................................26
5.02. Shareholder Approvals; Proxy Statement.........................................................27
5.03. Expenses.......................................................................................28
5.04. Miscellaneous Agreements.......................................................................29
5.05. Filings........................................................................................30
</TABLE>
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<TABLE>
<S> <C>
5.06. Certain Notifications..........................................................................31
5.07. Indemnification................................................................................31
VI. CONDITIONS..................................................................................................32
6.01. Conditions to the Obligations of All Parties...................................................32
6.02. Conditions to the Obligations of Newco.........................................................33
6.03. Conditions to the Obligations of the Company...................................................34
VII. TERMINATION, AMENDMENT AND WAIVER..........................................................................35
7.01. Termination....................................................................................35
7.02. Effect of Termination..........................................................................38
7.03. Amendment......................................................................................39
7.04. Waiver.........................................................................................39
VIII. GENERAL PROVISIONS........................................................................................40
8.01. Non-Survival of Representations, Warranties and Agreements.....................................40
8.02. Closing........................................................................................40
8.03. Notices........................................................................................41
8.04. Publicity......................................................................................42
8.05. Miscellaneous..................................................................................42
8.06. Definitions....................................................................................43
</TABLE>
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<PAGE>
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER (this "Agreement") dated as of
February 15, 1996, as amended and restated as of April 4, 1996, by and between
SCFM CORP., a Delaware corporation ("Newco"), SCANFORMS, INC., a Delaware
corporation (the "Company").
WHEREAS, the Boards of Directors of Newco and of the Company
(upon the recommendation of its Special Committee, as defined in Section 2.08)
have approved the acquisition of Newco by the Company; and
WHEREAS, in furtherance of such acquisition, the Boards of
Directors of Newco and of the Company (upon the recommendation of its Special
Committee, as defined in Section 2.08) have, approved a merger (the "Merger") of
Newco with and into the Company in accordance with the laws of the State of
Delaware upon the terms and subject to the conditions set forth in this
Agreement.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements contained herein, and subject to the satisfaction or waiver of
the conditions contained herein, the parties agree as follows:
<PAGE>
I. THE MERGER
1.01. The Merger. (a) As promptly as practicable following the
date hereof, upon the terms and subject to the conditions of this Agreement,
Newco shall be merged with and into the Company in accordance with the laws of
the State of Delaware, with the Company being the surviving corporation
(sometimes referred to hereinafter as the "Surviving Corporation"), and the
separate existence of Newco shall cease. The Merger shall be effective when a
properly executed Certificate of Merger (together with any other documents
required by law to effectuate the Merger) shall be delivered to and filed with
the Secretary of State of the State of Delaware (the "Secretary of State"),
which delivery and filing shall be made as soon as practicable after the closing
of the transactions contemplated by this Agreement as provided in Section 8.02
hereof. When used in this Agreement, the term "Effective Time" shall mean the
time on the date when the Certificate of Merger is filed with the Secretary of
State.
(b) The Surviving Corporation shall have the name
"Scanforms, Inc.", and, pursuant to Section 259 of the Delaware General
Corporation Law (the "DGCL"), shall, among other things, possess all the rights,
privileges, powers and franchises of Newco and the Company and shall be subject
to all the restrictions, disabilities and duties of each of such corporations.
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<PAGE>
(c) The Certificate of Incorporation and Bylaws of
Company in effect immediately prior to the Effective Time shall be the
Certificate of Incorporation and Bylaws of the Surviving Corporation.
(d) The directors of Newco shall be the directors of
the Surviving Corporation, and the officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation, in each
case to serve until such time as their successors have been elected and have
qualified in accordance with the Certificate of Incorporation and Bylaws of the
Surviving Corporation and applicable law unless sooner removed, retired,
disqualified or deceased.
1.02. Conversion or Cancellation of Stock. At the Effective Time,
by virtue of the Merger and without any action on the part of any holder of
shares of common stock, par value $.01 per share, of the Company ("Company
Common Stock") or any holder of common stock, par value $.01 per share, of Newco
("Newco Common Stock"):
(a) Each share of Company Common Stock then owned by
SCFM or any Subsidiary (as hereinafter defined) of the Company
and each share of Company Common Stock then held in the
treasury of the Company shall be canceled and cease to exist,
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without any consideration being payable therefor. As used in
this Agreement, the term "Subsidiary" shall have the meaning
set forth for the term "majority-owned subsidiary" in Rule
12b-2 promulgated under the Securities Exchange Act of 1934,
as amended (the "Exchange Act").
(b) Each then remaining share of Company Common Stock
(other than Dissenting Shares, as hereinafter defined) shall
be converted into the right to receive $3.60 in cash, without
interest thereon (the "Merger Consideration"), upon the due
surrender of the certificate for such share of Company Common
Stock, together with an appropriate letter of transmittal and
any other documents required thereby, to a reputable banking
institution selected by the Special Committee, acting as
Paying Agent (the "Paying Agent").
(c) Each then outstanding share of Newco Common Stock
shall be converted into one share of common stock, par value
$.01 per share, of the Surviving Corporation.
(d) All then outstanding shares of Company Common
Stock held by stockholders who shall have properly exercised
appraisal rights with respect thereto under Section 262 of the
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DGCL ("Dissenting Shares") shall not be converted into the
right to receive the Merger Consideration pursuant to the
Merger, but shall be entitled to receive payment of the
appraised value of such shares in accordance with the
provisions of such Section 262, except that any Dissenting
Shares held by a stockholder who shall thereafter withdraw his
or her demand for appraisal of such shares or lose his or her
right to such payment, in both cases as provided in such
Section 262, shall be deemed converted, as of the Effective
Time, into the right to receive the Merger Consideration such
holder otherwise would have been entitled to receive as a
result of the Merger.
1.03. Surrender of Share Certificates; Payment for Shares.
(a) From time to time after the Effective Time, the
Surviving Corporation shall cause to be delivered to the Paying Agent for the
benefit of the holders of shares of Company Common Stock, funds in an aggregate
amount equal to the Merger Consideration multiplied by the number of shares of
Company Common Stock outstanding at the Effective Time other than the shares of
Company Common Stock to be canceled or converted pursuant to Sections 1.02(a) or
1.02(c) hereto. Such funds shall be provided to the Paying Agent as needed to
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make payments for shares of Company Common Stock surrendered pursuant to Section
1.02(b), hereto.
(b) As soon as practicable after the Effective Time,
the Paying Agent shall mail to each holder of record (other than (i) the Company
or any Subsidiary of the Company and (ii) Newco or the shareholders of Newco) of
a certificate or certificates which immediately prior to the Effective Time
represented outstanding shares of Company Common Stock (the "Certificates"): (i)
a form of letter of transmittal (which shall specify that delivery shall be
effected, and risk of loss and title to the Certificates shall pass, only upon
delivery of the Certificates to the Paying Agent) and (ii) instructions for use
in effecting the surrender of the Certificates for payment therefor. Upon
surrender of a Certificate for cancellation to the Paying Agent or to such other
agent or agents as may be appointed by the Surviving Corporation, together with
such letter of transmittal, duly executed, the holder of such Certificate shall
be entitled to receive promptly in payment therefor the amount of cash into
which the shares of Company Common Stock theretofore represented by the
Certificate so surrendered shall have been converted pursuant to the provisions
of this Article I and the Certificate so surrendered shall be canceled. No
interest will be paid or accrued on the cash payable upon the surrender of the
Certificates.
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(c) The appointment of the Paying Agent may be
terminated by the Surviving Corporation at any time after six (6) months
following the Effective Time. Upon termination of such appointment, all
unclaimed cash held by the Paying Agent shall be returned to the Surviving
Corporation and thereafter all Certificates shall be surrendered to, and payment
therefor delivered by, the Surviving Corporation (subject to abandoned property,
escheat or other similar laws). Notwithstanding the foregoing, the Surviving
Corporation shall not be liable to a holder of a Certificate for amounts
delivered to a public official pursuant to any applicable abandoned property,
escheat or similar laws. If Certificates are not surrendered prior to one year
after the Effective Time, unclaimed funds payable with respect to such
Certificates shall, to the extent permitted by applicable law, become the
property of the Surviving Corporation, subject to any legally enforceable claims
or interest of any person entitled thereto.
(d) If, in respect of a Certificate surrendered in
exchange for payment, such payment is to be made to any person other than the
person in whose name the Certificate surrendered in exchange therefor is
registered, it shall be a condition of such payment that the Certificate so
surrendered shall be properly endorsed and the signatures thereon properly
guaranteed and otherwise in proper form for transfer and that the person
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requesting such payment shall pay to the Paying Agent any transfer or other
taxes required by reason of the payment to any person other than the registered
holder of the Certificate surrendered, or otherwise required, or shall establish
to the satisfaction of the Paying Agent that such tax has been paid or is not
payable.
(e) After the Effective Time, there shall be no
further registration of transfers on the stock transfer books of the Surviving
Corporation of the shares of Company Common Stock which were outstanding
immediately prior to the Effective Time. If, after the Effective Time,
Certificates representing such shares are presented to the Surviving Corporation
(or the registrar or transfer agent of the Company) they shall be canceled and
exchanged for cash as provided in this Article I.
II. REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company represents and warrants to Newco that:
2.01. Due Organization, Etc. The Company and each of its
Subsidiaries is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation, and has all
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requisite corporate power and authority to own, operate and lease its properties
and to carry on its businesses as they are being conducted on the date of this
Agreement. The Company and each of its Subsidiaries is duly qualified as a
foreign corporation, and is in good standing, in each jurisdiction where the
character of its properties or the nature of its activities makes such
qualification necessary, except for such jurisdictions where the failure to so
qualify would not have a material adverse effect on the business, operations,
assets or financial condition of the Company and its Subsidiaries, taken as a
whole (a "Material Adverse Effect"). All of the outstanding shares of capital
stock of each Subsidiary of the Company are validly issued, fully paid and
nonassessable and all of such shares owned by the Company or another Subsidiary
of the Company are owned free and clear of all liens, claims or encumbrances.
The Company does not, directly or indirectly, own any material interest in any
other corporation, partnership, joint venture or other business association or
entity, except as set forth in the Company's Annual Report on Form 10-K for the
year ended October 1, 1995 (the "1995 Annual Report") or as set forth on
Schedule 2.01.
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<PAGE>
2.02. Execution and Delivery of Agreement.
(a) The Company has all requisite corporate power to
enter into this Agreement and to consummate the transactions contemplated
hereby, including the Merger. The execution and delivery of this Agreement and,
subject to the approval of the Merger by the shareholders of the Company, the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on the part of the Company. This Agreement has
been duly executed and delivered by the Company and constitutes a legal, valid
and binding obligation of the Company enforceable against the Company in
accordance with its terms.
(b) Except as set forth in Schedule 2.02, the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby will not conflict with, or result in any
violation of or default or loss of a benefit under, or permit the acceleration
of any obligation under, any provision of (i) the Certificate of Incorporation
or Bylaws of the Company or any of its Subsidiaries, (ii) any mortgage,
indenture, lease, Agreement or other instrument to which the Company or any such
Subsidiary is party or by which any of their respective properties are bound or
(iii) any permit, concession, grant, franchise, license, judgment, order,
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decrees, statute, law, ordinance, rule or regulation applicable to the Company
or any of its Subsidiaries or their respective properties, except, in the case
of clauses (ii) and (iii) above, such conflicts, violations, defaults, losses or
accelerations that would not, individually or in the aggregate, have a Material
Adverse Effect. No consent, approval, order or authorization of, or
registration, declaration or filing with, any federal, state, local or foreign
governmental or regulatory authority is required to be made or obtained by the
Company in connection with the execution and delivery of this Agreement by the
Company or the consummation by the Company of the transactions contemplated
hereby except for (a) compliance by the Company with the Exchange Act (and the
rules and regulations thereunder), (b) the delivery to and filing of the
Certificate of Merger with respect to the Merger with the Secretary of State,
(c) compliance with the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "Hart-Scott-Rodino Act"), if applicable, and (d) such consents,
approvals, orders or authorizations which if not obtained, or registrations,
declarations or filings which if not made, would not, individually or in the
aggregate, have a Material Adverse Effect.
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<PAGE>
2.03. Capital Stock. The authorized capital stock of the Company
consists of (i) 500,000 shares of preferred stock, par value $1.00 per share, of
which, as of the date of this Agreement, no shares are issued and outstanding
and (ii) 6,000,000 shares of Company Common Stock of which, as of the date of
this Agreement, 3,546,648 shares are issued and outstanding, no shares are held
in Treasury, and 205,000 shares are subject to issuance upon exercise of
outstanding options under the Option Plan. All outstanding shares of Company
Common Stock are duly authorized, validly issued, fully paid and nonassessable.
Except for options under the Option Plan outstanding on the date hereof to
purchase 205,000 shares of Company Common Stock at exercise prices ranging from
$.30 to $1.69 per share, there are not outstanding any subscriptions, options,
conversion rights, warrants or other agreements or commitments of any nature
whatsoever (either firm or conditional) obligating the Company or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued, delivered or
sold, any additional shares of the capital stock, or any securities convertible
into or exchangeable for shares of capital stock, of the Company or any
Subsidiary or obligating the Company or any of its Subsidiaries to grant, extend
or enter into any such agreement or commitment.
2.04. Periodic Filings.
(a) The Company has heretofore delivered to Newco
true and complete copies of all of its Annual Reports on Form 10-K, Quarterly
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Reports on Forms 10-Q, Current Reports on 8-K, proxy statements, and
registration statements filed by the Company with the SEC since October 1, 1994.
As of their respective dates, such reports and statements did not contain any
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The audited
consolidated financial statements and unaudited interim consolidated financial
statements of the Company included in such Annual Report and Quarterly Report
(collectively, the ("Company Financial Statements") were prepared in accordance
with generally accepted accounting principles applied on a consistent basis
(except as may be indicated in the notes thereto and except that the unaudited
interim consolidated financial statements do not contain footnotes and are
subject to normal year-end adjustments) and fairly present the financial
position of the Company and its consolidated Subsidiaries as at the dates
thereof and the results of their operations and changes in financial position
for the periods then ended.
(b) As of January 31, 1996, neither the Company nor
any of its Subsidiaries had any liabilities of any nature, whether accrued,
absolute, contingent or otherwise, and whether or not to become due
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<PAGE>
("Liabilities"), material to the Company and its Subsidiaries taken as a whole,
which were not specifically disclosed or provided for in the audited
consolidated balance sheet of the Company for the year ended October 1, 1995 or
the unaudited interim balance sheet of the Company for the quarter ended
December 31, 1995, respectively, or the notes thereto, except for Liabilities
incurred in connection with the transactions contemplated hereby. Since December
31, 1995, neither the Company nor any of its Subsidiaries has incurred any
Liabilities material to the Company and its Subsidiaries taken as a whole after
taking into account applicable insurance coverage except Liabilities incurred in
the ordinary course of business consistent with past practice and for the
Liabilities referred to in the preceding sentence.
(c) Since December 31, 1995 and except for actions
approved by the company's Board of Directors, the Company and its Subsidiaries
have conducted their respective businesses only in the ordinary and usual course
and neither the Company nor any of its Subsidiaries (A) has taken any of the
actions described in paragraphs (d) through (k) (in the case of the Company) or
paragraphs (e) and (g) through (k) (in the case of the Company's Subsidiaries)
of Section 4.01 hereof or (B) has undergone or suffered any Material Adverse
Effect.
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<PAGE>
2.05. Proxy Statement. None of the information supplied or to be
supplied by or on behalf of the Company for inclusion in (i) the Statement on
Schedule 13E-3 with respect to the Merger (the "Schedule 13E-3") or (ii) the
proxy statement of the Company with respect to the Merger, as from time to time
supplemented or amended (collectively, including any schedules thereto, as well
as the related letter to shareholders, form of proxy, notice of meeting and any
other proxy materials to be distributed to shareholders, the "Proxy Statement"),
will, at the time the Schedule 13E-3 or any amendments or supplements thereto is
filed with the SEC, at the time the Proxy Statement is mailed to shareholders of
the Company, at the time of the meeting of shareholders of the Company referred
to in Section 5.02 hereof, and at the Effective Time, contain any untrue
statement of a material fact, or omit to state any material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they are made, not misleading or to correct any
statement in any earlier communication with respect to the solicitation of any
proxy or approval for the meeting in connection with which the Proxy Statement
shall be mailed. The Proxy Statement will comply as to form in all material
respects with the provisions of the Exchange Act and the rules and regulations
promulgated thereunder.
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<PAGE>
2.06. No Brokers. All negotiations relating to this Agreement and
the transactions contemplated hereby have been carried on without the
intervention of any person acting on behalf of the Company in such manner as to
give rise to any valid claim against the Company, Newco, or any of their
respective Subsidiaries or the Surviving Corporation for any broker's, finder's
or financial advisor's fee or similar compensation in connection with the
Merger, except for compensation payable by the Company to Janney Montgomery
Scott Inc. ("Janney") pursuant to the letter agreement dated March 2, 1995, as
amended May 8, 1995.
2.07. Employment, Severance and Termination Agreements, Etc.
Neither the Company nor any of its Subsidiaries is a party to (i) any agreements
providing for severance or termination payments, or payments in connection with
any change in control of the Company or (ii) any employment agreement with any
former employee, employee, officer, consultant or director of the Company or any
of its Subsidiaries.
2.08. Company Actions. The Board of Directors of the Company, upon
recommendation of the Independent Director Committee thereof (the "Special
Committee"), has (i) duly approved this Agreement and the Merger, (ii)
determined that the Merger is fair to shareholders of the Company other than
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Newco or any affiliate of Newco and (iii) resolved to recommend acceptance of
the Merger; and Janney, has advised the Special Committee and the Company's
Board of Directors that the Merger Consideration is fair to the Company's
shareholders (other than Newco and any affiliate of Newco) from a financial
point of view.
III. REPRESENTATIONS AND WARRANTIES
OF NEWCO
Newco represents and warrants to the Company that:
3.01. Due Organization, Etc. Newco is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and is wholly owned by Robert A. Samans (51%) and Sebastian Carcioppolo
(49%) in the percentages set forth beside their respective names. Newco has not
conducted any business prior to the date hereof other than in connection with
the transactions contemplated hereby.
3.02. Execution and Delivery of Agreement.
(a) Newco has all requisite corporate power and
authority to enter into this Agreement and to consummate the transactions
contemplated hereby, including the Merger. The execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby have been
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duly authorized by all necessary corporate action on the part of Newco. This
Agreement has been duly executed and delivered by Newco and constitutes a legal,
valid and binding obligation of Newco in accordance with its terms.
(b) The execution and delivery of this Agreement and
the consummation of the transactions contemplated hereby will not conflict with,
or result in any violation of or default or loss of a benefit under, or permit
the acceleration of any obligation under, any provision of (i) the Certificate
of Incorporation or Bylaws of Newco or (ii) any mortgage, indenture, lease,
agreement or other instrument to which Newco is a party or by which any of its
respective property is bound or any permit, concession, grant, franchise,
license, judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Newco or its respective properties, other than any such conflict,
violation, default, loss or acceleration which would not have a material adverse
effect on the ability of Newco to consummate the transactions contemplated
hereby. No consent, approval, order or authorization of, or registration,
declaration or filing with, any federal, state, local or foreign governmental or
regulatory authority is required to be made or obtained by Newco in connection
with the execution and delivery of this Agreement by Newco or the transactions
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contemplated hereby except for (a) compliance by Newco with the Exchange Act
(and the rules and regulations thereunder), (b) the delivery to and filing of
the Certificate of Merger with respect to the Merger with the Secretary of
State, (c) compliance with the Hart-Scott-Rodino Act, if applicable, and (d)
consents, approvals, orders or authorizations which if not obtained, or
registrations, declarations or filings which if not made, would not materially
adversely affect the ability of Newco to consummate the transactions
contemplated hereby.
3.03. Financing. Newco has and will do any and all things
necessary to assist in assuring that all funds or appropriate commitments from
responsible financial institutions to provide funds to Company will be available
in connection with the Merger sufficient to satisfy the obligation of Company to
pay at the Effective Time to the holders of shares of Company Common Stock the
aggregate amount of cash to which such holders will be entitled.
3.04. Proxy Statement. None of the information supplied by Newco
for inclusion in the Schedule 13E-3 or the Proxy Statement, will, at the
respective times the Schedule 13E-3 or any amendments or supplements thereto is
filed with the SEC, at the time the Proxy Statement is mailed to shareholders of
the Company, at the time of the meeting of shareholders of Company referred to
in Section 5.02 hereof, and at the Effective Time, contain any untrue
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statement of a material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading or to correct any
statement in any earlier communication with respect to the solicitation of any
proxy or approval for the meeting in connection with which the Proxy Statement
shall be mailed. The Schedule 13E-3 will comply as to form in all material
respects with the provisions of the Exchange Act, and the rules and regulations
promulgated thereunder.
3.05. No Brokers. All negotiations relating to this Agreement and
the transactions contemplated hereby have been carried on without the
intervention of any person acting on behalf of Newco or any of its affiliates in
such manner as to give rise to any valid claim against the Company or any of its
Subsidiaries for any broker's, finder's or financial advisor's fee or similar
compensation in connection with the Merger.
IV. COVENANTS OF THE COMPANY
4.01. Ordinary Course of Business. During the period from the date
of this Agreement to the Effective Time, except (i) as otherwise consented to in
writing by Newco, (ii) as otherwise approved by the Board of Directors of
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the Company, (iii) as otherwise approved in writing or caused by an officer,
director or employee of the Company who is a present or former officer, director
or employee of Newco or any of its affiliates, or the Company will, and with
respect to matters identified in clauses (a), (c), (e) and (g) through (l) will
cause each of its Subsidiaries to:
(a) carry on its business in, and only in, the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent with such business, use all
reasonable efforts to preserve, intact its present business organization, keep
available the services of its present officers and employees, and preserve its
relationships with clients, customers, distributors and others having business
dealings with it so that its good will and ongoing business shall be unimpaired
at the Effective Time;
(b) promptly advise Newco in writing of any change
in its business, operations, assets or financial condition or in that of its
Subsidiaries which is or may reasonably be expected to be materially adverse to
the Company and its Subsidiaries, taken as a whole;
(c) use its best efforts to obtain (and to cooperate
with Newco in obtaining) any consent, authorization or approval of, or exemption
by, any governmental or regulatory authority or agency required to be obtained
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or made by it (or by its Subsidiaries), in connection with the Merger or the
taking of any action in connection with the consummation thereof and promptly
comply with all filing requirements which federal or state law may impose on the
Company or any of its Subsidiaries with respect to the Merger (including the
solicitation of proxies in connection with the Merger) and cooperate with and
promptly furnish information to Newco in connection with any such filing imposed
upon it or on any of its Subsidiaries in connection with the Merger;
(d) not amend its Certificate of Incorporation or
Bylaws (or other constituent documents);
(e) neither acquire nor offer to acquire by merging
or consolidating with, or purchase substantially all of the assets of, or
otherwise acquire any business of any corporation, partnership, association or
other business organization or division thereof;
(f) not split, combine or reclassify its outstanding
capital stock or declare, set aside, make or pay any dividend or other
distribution in respect of its capital stock or purchase or redeem, directly or
indirectly, any shares of its capital stock;
(g) not issue or sell (or agree to issue or sell)
any shares of its capital stock of any class or any options, warrants,
conversion or other rights to purchase any such shares or any securities
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convertible into or exchangeable for such shares, other than pursuant to
employee stock options under the Option Plan that are outstanding on the date
hereof;
(h) not, other than in the ordinary course of
business consistent with prior practice, (i) incur any indebtedness for borrowed
money or vary the terms of any existing debt securities, (ii) issue or sell any
debt securities, (iii) acquire or dispose of any substantial assets or (iv)
enter into any other material transaction;
(i) not mortgage, pledge or subject to any lien,
lease, security interest or other charge or encumbrance any of its properties or
assets, tangible or intangible, other than in the ordinary course of business
consistent with prior practice;
(j) not grant to any officer or member of the board
of directors of the Company any increase in compensation in any form, or any
severance or termination pay, or grant to any employee any increase in
compensation or any severance or termination pay, except in accordance with the
terms of an existing written Agreement disclosed to Newco pursuant to Section
2.07 or with the normal practices of the Company and its Subsidiaries consistent
with past practice, or make any loan (except in accordance with the
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normal practices of the Company) to or enter into any employment, severance,
consultancy or other agreement with any officer, director or employee;
(k) not adopt, amend in any material respect or
terminate, any bonus, profit sharing, stock option, stock appreciation rights,
employee stock ownership, pension, retirement, deferred compensation, employment
or other plan, Agreement or arrangement for the benefit of employees of the
Company or its Subsidiaries; or
(l) not agree to take any of the actions set forth
in the foregoing subparagraphs (d)-(k).
4.02. Subsequent Financial Statements. Prior to the Effective
Time, the Company will timely file with the SEC each Annual Report on Form 10-K,
Quarterly Report on Form 10-Q and Current Report on Form 8-K required to be
filed by the Company under the Exchange Act and the rules and regulations
promulgated thereunder and will promptly deliver to Newco copies of each such
report filed with the SEC. As of their respective dates, none of such reports
shall contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading. The audited consolidated financial statements and unaudited interim
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financial statements of the Company included in such reports shall be prepared
in accordance with generally accepted accounting principles applied on a
consistent basis (except as may be indicated in the notes thereto) and shall
fairly present the financial position of the Company and its consolidated
Subsidiaries as at the dates thereof and the results of their operations and
changes in financial position for the periods then ended.
4.03 Other Potential Bidders. The Company shall, directly or
indirectly, furnish information and access, in each case in response to
unsolicited requests therefor, received prior to or after the date of this
Agreement, to the same extent permitted by Section 5.01 hereof, to any person or
entity pursuant to appropriate confidentiality agreements, and may participate
in discussions and negotiate with any such person or entity concerning any
merger, sale of assets, sale of shares of capital stock or similar transaction
involving the Company or (any such transaction being referred to herein as a
"Competing Transaction"), if the Special Committee determines that such action
is appropriate in light of its fiduciary obligations to the Company's
stockholders after consultation with counsel. In addition, the Company shall
direct its officers and other appropriate personnel to cooperate with and be
reasonably available to consult with any such entity or group. Except as set
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forth above, the Company shall not solicit, participate in or initiate
discussion or negotiations with, or provide any information to, any person or
entity (other than Newco or its affiliates or associates) concerning any merger,
sale of assets, sale of shares of capital stock or similar transaction involving
the Company.
V. ADDITIONAL AGREEMENTS
5.01. Access and Information. The Company shall afford to Newco,
and to its accountants, counsel and other representatives, full access during
normal business hours during the period prior to the Effective Time to all of
its properties, books, contracts, commitments and records (including but not
limited to tax returns) and, during such period, shall furnish promptly to Newco
(a) a copy of each report, schedule and other document filed or received by the
Company during such period pursuant to the requirements of federal or state
securities laws, and (b) all other information concerning its business,
properties and personnel as Newco may reasonably request; provided, however,
that no investigation pursuant to this Section 5.01 shall affect any
representations or warranties or the conditions to the obligations of the
parties hereto to consummate the Merger. Newco shall hold confidential all
information obtained hereunder with respect to the Company, shall utilize such
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information only for purposes of evaluating the transaction contemplated hereby
and preparing for a transition from and after the Effective Time and shall, upon
any termination hereof (i) return to the Company all copies of information
obtained hereunder from the Company or its representatives and (ii) destroy any
analyses, memoranda or other documents prepared utilizing such information.
5.02. Shareholder Approvals; Proxy Statement. The Company (i)
shall promptly call a meeting of its shareholders to be held as soon as
reasonably practicable for the purpose of considering and voting upon the Merger
and related matters (the "Special Meeting"), (ii) shall, through the Board of
Directors upon recommendation of the Special Committee and subject to their
fiduciary duties, recommend in the Proxy Statement and at the Special Meeting
that its shareholders approve the Merger and (iii) subject to the Board of
Directors' fiduciary duty, shall use its best efforts to solicit the requisite
vote of approval at the Special Meeting in accordance with the applicable laws
of the State of Delaware and the Exchange Act. In connection with the Special
Meeting, each of the Company and Newco shall cooperate in preparing and filing
with the SEC, the Schedule 13E-3 and a preliminary proxy statement relating to
the Merger and shall use its best efforts to respond to the comments of the SEC
and to cause the Proxy Statement to be mailed to the Shareholders
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of the Company as soon as reasonably practicable. The Company shall notify Newco
of the receipt of the comments of the SEC and of any request by the SEC for
amendments or supplements to, the Schedule 13E-3, the preliminary proxy
statement or the Proxy Statement and shall supply Newco with copies of all
correspondence between the Company (or its representatives) and the SEC (or its
staff) with respect thereto. If at any time prior to the Special Meeting, any
event should occur relating to the Company and its Subsidiaries or Newco and its
Subsidiaries or their respective officers and directors which should be
described in an amendment or supplement to the Proxy Statement, the parties
shall promptly inform each other and shall cooperate in promptly preparing,
filing and clearing with the SEC and mailing to the Company's shareholders such
amendment or supplement.
5.03. Expenses. Whether or not the Merger is consummated, all
costs and expenses reasonably incurred by or on behalf of Newco or the
stockholders of Newco in connection with this Agreement and the transactions
contemplated hereby (including, without limitation, commitment fees paid to
lenders, and any fees and disbursements of Newco's or its stockholders'
financial advisors, accountants and attorneys) shall be paid by the Company;
provided, however, that, notwithstanding the foregoing, the Company shall have
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no obligation to pay any such costs and expenses in excess of $250,000;
provided, further, however, that nothing in this Section 5.03 shall limit the
rights of any person to indemnification or advancement of expenses under the
applicable provisions of the DGCL, the Company's Certificate of Incorporation or
its Bylaws.
5.04. Miscellaneous Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use 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 under applicable laws and
regulations, to consummate and make effective the transactions contemplated by
this Agreement (it being understood that this Section 5.04 shall not require the
Board of Directors or the Special Committee to recommend approval of the Merger
to the Company's shareholders if such recommendation is not required by Section
5.02). At the Special Meeting, Newco will vote, or cause to be voted, all shares
of Company Common Stock which it is then entitled to vote in favor of the
Merger, it being understood that such favorable vote shall not in any way limit
the rights of Newco under Article VI hereof. The Company and Newco will, and
will cause each of their respective Subsidiaries to, use their best efforts to
obtain consents of all third parties and governmental bodies necessary or
-29-
<PAGE>
advisable to consummate and make effective the transactions contemplated by this
Agreement. In case at any time after the Effective Time any further action is
necessary or desirable to carry out the purposes of this Agreement, the proper
officers or directors of the Company or Newco, as the case may be, shall take
all such necessary action.
5.05. Filings. If applicable, the Company and Newco shall, as soon
as practicable, file Notification and Report Forms under the Hart-Scott-Rodino
Act with the Federal Trade Commission and the Antitrust Division of the
Department of Justice with respect to the Merger and shall use their best
efforts to respond as promptly as practicable to all inquiries received from the
Federal Trade Commission and the Antitrust Division for additional information
or documentation. The Company and Newco will take all such action as may be
necessary under the federal and state securities laws applicable to or necessary
for, and will file and, if appropriate, use their reasonable efforts to have
declared effective or approved all documents and notifications with the SEC and
other governmental or regulatory bodies which they deem necessary or appropriate
for, the consummation of the Merger and the transactions contemplated hereby,
and each party shall give the other information reasonably requested by such
other party pertaining to it and its Subsidiaries and affiliates reasonably
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<PAGE>
necessary to enable such other party to take such actions. The Company and Newco
shall file in a timely manner all reports and documents required to be so filed
by or under the Exchange Act and other applicable laws.
5.06. Certain Notifications. At all times prior to the Effective
Time, each party shall promptly notify the other in writing of the occurrence of
any event of which any of its executive officers has knowledge which will or may
result in the failure to satisfy the conditions contained in Article VI hereof.
5.07. Indemnification. Newco and Company agree that all rights to
indemnification now existing in favor of the employees, agents, directors or
officers of the Company and the Company's Subsidiaries as provided in their
respective Certificates of Incorporation or Bylaws or otherwise in effect on the
date hereof shall survive the Merger and shall continue in full force and effect
after the Effective Time. Any permissive provision therein relating to rights of
indemnification shall be deemed to be mandatory to the maximum extent permitted
by law. To the extent necessary to provide the same insurance coverage as
currently exists, or other coverage no less favorable, Surviving Corporation
shall maintain for a period of not less than two years from the Effective Time
policies of directors' and officers' liability insurance providing the same
coverage, or other coverage no less favorable, as the policies currently
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<PAGE>
maintained by the Company for the benefit of the officers and directors of the
Company.
VI. CONDITIONS
6.01. Conditions to the Obligations of All Parties. The
obligations of each party hereto to consummate the Merger are subject to the
satisfaction or waiver (in writing) of the following conditions:
(a) Absence of Injunctions. There shall be no order
of any court or governmental, administrative or regulatory agency or authority
in effect which restrains or prohibits the consummation of the Merger.
(b) Shareholder Approval. The holders of a majority
of the shares of Company Common Stock shall have approved the Merger at the
Special Meeting.
(c) HSR. All applicable waiting periods under the
Hart-Scott-Rodino Act, if applicable, with respect to the Merger shall have
expired or been terminated.
(d) Financing. The Company (or Newco) shall have
available to it satisfactory financing commitment(s) from (a) Mellon Bank, N.A.
pursuant to its offer and Outline of Terms, each dated February 5, 1996, (b) any
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other reputable banking institution satisfactory to the Special Committee on
terms not materially different from those under (a), above, or (c) any other
source which is satisfactory to the Special Committee and the terms of which
financing are satisfactory to the Special Committee.
(e) Appraisal Rights. Dissenting shareholders'
appraisal rights pursuant to Section 262 of the DGCL shall have been perfected
by shareholders owning no more than 300,000 shares of Company Common Stock.
(f) No Legal Action. No temporary restraining
injunction or permanent injunction or other order preventing the consummation of
the Merger shall have been issued by any federal or state court and remain in
effect, nor shall any proceeding initiated by the U.S. or any state government
or any agency thereof seeking any of the foregoing be pending.
6.02. Conditions to the Obligations of Newco. The obligations of
Newco to consummate the Merger are subject to the satisfaction or waiver (in
writing) of the following conditions:
(a) Representation and Warranties True. The
representations and warranties of the Company contained in this Agreement shall
be true and correct in all material respects as of the date when made and at and
as of the Closing Date (as hereinafter defined) as if made on the Closing Date.
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<PAGE>
(b) Performance of Covenants. The Company shall have
performed and complied in all material respects with the covenants and
agreements required by this Agreement to be performed or complied with by it
hereunder prior to or on the Closing Date.
(c) Certificate. Newco shall have received from the
Company a certificate, signed in the name and on behalf of the Company by the
appropriate officers of the Company, as to compliance with the conditions set
forth in Section 6.01(b) and in Sections 6.02 (a) and (b).
6.03. Conditions to the Obligations of the Company. The obligation
of the Company to consummate the Merger is subject to the satisfaction or waiver
(in writing) of the following conditions:
(a) Representations and Warranties True. The
representations and warranties of Newco contained in this Agreement shall be
true and correct in all material respects as of the date when made and at and as
of the Closing Date as if made on the Closing Date.
(b) Performance of Covenants. Newco shall have
performed and complied in all material respects with the covenants and
agreements required by this Agreement to be performed or complied with by it
hereunder prior to or on the Closing Date.
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<PAGE>
(c) Certificate. The Company shall have received
from Newco a certificate as to compliance with the conditions set forth in
Sections 6.03(a) and (b).
(d) Opinion of Financial Advisor. The opinion of
Janney referred to in Section 2.08, shall not have been withdrawn prior to the
mailing of the Proxy Statement to the Company's shareholders.
VII. TERMINATION, AMENDMENT AND WAIVER
7.01. Termination. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of the Merger by
the shareholders of the Company:
(a) by mutual consent of the Board of Directors of
Newco and the Board of Directors of the Company (acting upon the recommendation
of the Special Committee in its sole discretion); or
(b) by either Newco or the Company (acting upon the
recommendation of the Special Committee in its sole discretion) if the Merger
shall not have been consummated on or before August 31, 1996 (other than as a
result of a breach of this Agreement by the party seeking termination); or
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<PAGE>
(c) by Newco or the Company (acting upon the
recommendation of the Special Committee in its sole discretion) if any court of
competent jurisdiction in the United States or any other United States federal,
state or local governmental body shall have issued an order, decree or ruling or
taken other action restraining, enjoining or otherwise prohibiting the Merger
and such order, decree, ruling or other action shall have become final and
nonappealable and shall not have resulted from an action by the party seeking
termination;
(d) by Newco or by the Company (acting upon the
recommendation of the Special Committee in its sole discretion) if either of
them shall reasonably determine that an Acquisition Proposal (as defined below)
constitutes a Superior Proposal (as defined below); provided, however, that the
Company may not terminate this Agreement pursuant to this clause (d) unless (i)
ten business days shall have elapsed after delivery to Newco of a written notice
of such determination and during such ten business day period the Company shall
have fully cooperated with Newco, including, without limitation, informing Newco
of the terms and conditions of such Acquisition Proposal and the identity of the
person or group making such Acquisition Proposal, (ii) at the end of such ten
business day period the Special Committee shall continue reasonably to believe
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<PAGE>
that such Acquisition Proposal constitutes a Superior Proposal, and (iii)
promptly thereafter the Company shall enter into a definitive acquisition,
merger or similar agreement to effect such Superior Proposal. As used in this
clause (d), the term "Acquisition Proposal" means any proposal or offer for, or
any expression (by public announcement of otherwise) by any person (other than
Newco) of its interest in effectuating any of the following: (i) a tender of
exchange offer of 20% or more of the equity of the Company, (ii) a merger,
consolidation or other business combination involving the Company, (iii) an
acquisition in any manner of 20% or more of the equity of, or 20% or more of the
assets of, the Company. As used in this clause (d), the term "Superior Proposal"
means a bona fide, written proposal or offer made by any person or group (other
than Newco) to effect any Acquisition Proposal (I) at a per share price higher
than $3.60 per share, (II) on terms (including price) which the Special
Committee determines in its judgment (based on the advice of independent
financial advisors), to be more favorable to the Company and its shareholders
than the transactions contemplated hereby, (III) for which any required
financing is committed or which, in the judgment of the Special Committee (based
on the advice of independent financial advisors), is reasonably capable of being
financed by such person, and (IV) which is not otherwise subject to material
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<PAGE>
conditions (other than conditions similar to those contained in Article VI
hereof) which, in the judgment of the Special Committee, render recommendation
of the Acquisition Proposal undesirable.
(e) by Newco or by the Company (acting upon the
recommendation of the Special Committee in its sole discretion) if any person
shall have acquired beneficial ownership of, or any "group" (as defined under
Section 13(d) of the Exchange Act and the rules and regulations thereunder but
not including Newco or its shareholders) shall have been formed which
beneficially owns, 50% or more of the Common Stock.
(f) by Newco or by the Company if the Board of
Directors (acting upon the recommendation of the Special Committee in its sole
discretion) determines that it is unable, consistent with its fiduciary duties,
to recommend in the Proxy Statement and at the Special Meeting that the
shareholders of the Company approve the Merger, in accordance with the
provisions of 5.02 hereof.
7.02. Effect of Termination. In the event of termination of this
Agreement by either Newco or the Company as provided above, the Merger shall be
deemed abandoned and this Agreement shall forthwith become void and there shall
be no liability on the part of any of Newco, Newco or the Company
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<PAGE>
or any of their respective officers or directors, except as set forth in the
last sentence of Section 5.01 and in Section 5.03 hereof and except for
liability arising from a material breach of this Agreement.
7.03. Amendment. This Agreement may be amended by the parties
hereto by action taken by their respective Boards of Directors (in the case of
the Company, acting upon the recommendation of the Special Committee in its sole
discretion), at any time before or after approval of the Merger by the
shareholders of the Company but, after any such shareholder approval, no
amendment shall be made which reduces the amount of cash into which shares of
Company Common Stock are to be converted as provided in this Agreement without
the further approval of such shareholders. This Agreement may not be amended
except by an instrument in writing signed on behalf of each of the parties
hereto.
7.04. Waiver. Any term or provision of this Agreement (other than
the requirement for shareholder approval, or a term or provision that expressly
provides otherwise) may be waived in writing at any time by the party which is
entitled to the benefits thereof. Any such waiver by the Company must be
authorized by the Board of Directors upon the recommendation of the Special
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<PAGE>
Committee. Any such waiver must be by an instrument in writing signed by the
party against whom enforcement is sought.
VIII. GENERAL PROVISIONS
8.01. Non-Survival of Representations, Warranties and Agreements.
No representation, warranty or Agreement of Newco or the Company in this
Agreement or in any instrument delivered by Newco or the Company pursuant to
this Agreement shall survive the Merger, except the agreements set forth in
Article I and in Sections 5.03, 5.04 and 5.07 hereof.
8.02. Closing. Unless this Agreement shall have been terminated in
accordance with the provisions of Article VII hereof and the Merger herein
contemplated shall have been abandoned, a closing (the "Closing") will be held
as soon as practicable after the Special Meeting, and the obtaining of all
consents and approvals and expiration of all waiting periods referred to in
Article VI, at the offices of Wolf, Block, Schorr and Solis-Cohen in
Philadelphia, Pennsylvania. At such time (the "Closing Date") and place the
documents referred to in Article VI will be exchanged by the parties and,
immediately thereafter, the Certificate of Merger will be delivered to the
Secretary of State for filing; provided, however, that if any of the conditions
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<PAGE>
provided for in Article VI shall not have been met or waived by the date on
which the Closing is otherwise scheduled, then, Subject to Section 7.01 hereof,
the party to this Agreement which is unable to meet such condition or conditions
shall be entitled to postpone the Closing by notice to the other parties until
such condition or conditions shall have been met (which such modifying party
will seek to cause to happen at the earliest practicable date) or waived.
8.03. Notices. All notices and other communications hereunder
shall be in writing and shall be deemed given if delivered personally or sent by
telex or facsimile to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice):
(a) if to Newco, to:
Robert A. Samans
Scanforms, Inc.
181 Rittenhouse Circle
Keystone Park
P. O. Box 602
Bristol, PA 19007
Facsimile: 215-785-1501
With a copy to:
Stephen P. Lamb, Esquire
Law Offices of Stephen P. Lamb
One Rodney Square
Fifth Floor
Wilmington, DE 19801
Facsimile: 302-984-2497
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<PAGE>
(b) If to the Company, to:
Scanforms, Inc.
181 Rittenhouse Circle
Keystone Park
P. O. Box 602
Bristol, PA 19007
Attn.: Emma M. Cocci, Secretary
Facsimile: 215-785-1501
with a copy to:
Wolf, Block, Schorr and Solis-Cohen
Packard Building
12th Floor
Philadelphia, PA 19102
Attn.: Mark K. Kessler, Esquire
Facsimile: 215-977-2776
8.04. Publicity. So long as this Agreement is in effect, neither
the Company nor Newco shall, or permit any off its Subsidiaries or
representatives to, issue or cause the publication or dissemination of any press
release or other announcement with respect to the Merger or this Agreement
except after consultation with the other party or except as may be required to
comply on a timely basis with public disclosure obligations under applicable
laws.
8.05. Miscellaneous. This Agreement, (including the documents and
instruments referred to or incorporated herein) (a) constitutes the entire
Agreement and supersedes all other prior agreements and undertakings, both
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<PAGE>
written and oral, among the parties, or any of them, with respect to the subject
matter hereof; (b) is not intended to confer upon any person other than the
parties hereto any rights or remedies hereunder; (c) shall not be assigned by
operation of law or otherwise (except that Newco may assign its rights hereunder
to any direct or indirect wholly-owned subsidiary of Subsidiary); and (d) shall
be governed in all respects, including validity, interpretation and effect, by
the laws of the State of Delaware without regard to principles of conflicts of
law. This Agreement may be executed in two or more counterparts which together
shall constitute a single Agreement.
8.06. Definitions. The following terms shall have the respective
meanings specified in the indicated Sections off the Agreement:
Term Agreement Section
---- -----------------
Acquisition Recitals
Certificates 1.03(b)
Closing 8.02
Closing Date 8.02
Company Recitals
Company Common Stock 1.02
Company Financial Statements 2.04(a)
Effective Time 1.01(a)
Exchange Act 1.02(a)
Hart-Scott-Rodino Act 2.02(b)
Liabilities 2.04(b)
Material Adverse Effect 2.01
Merger Recitals
Merger Consideration 1.02(b)
1995 Annual Report 2.01
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<PAGE>
Term Agreement Section
---- -----------------
DGCL 1.01(b)
Option Plans 1.04
Paying Agent 1.02(b)
Proxy Statement 2.05
Schedule 13E-3 2.05
SEC 2.04
Secretary of State 1.01(a)
Special Committee 2.08
Special Meeting 5.02
Subsidiary 1.02(a)
Surviving Corporation 1.01(a)
IN WITNESS WHEREOF, Newco and the Company have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
SCANFORMS, INC.
By: /s/ Joel Jacks
---------------------------------------
Joel Jacks, Chairman, Special
Committee
SCFM CORP.
By: /s/ Robert A. Samans
---------------------------------------
Robert A. Samans, President
-44-
<PAGE>
Schedule 2.02
-45-
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> OTHER
<FISCAL-YEAR-END> SEP-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 10,826,504
<SECURITIES> 0
<RECEIVABLES> 4,665,422
<ALLOWANCES> 432,602
<INVENTORY> 1,216,590
<CURRENT-ASSETS> 17,473,731
<PP&E> 20,542,273
<DEPRECIATION> 12,436,054
<TOTAL-ASSETS> 25,784,478
<CURRENT-LIABILITIES> 13,508,246
<BONDS> 0
0
0
<COMMON> 35,467
<OTHER-SE> 7,112,142
<TOTAL-LIABILITY-AND-EQUITY> 25,784,478
<SALES> 16,076,498
<TOTAL-REVENUES> 16,076,498
<CGS> 10,818,084
<TOTAL-COSTS> 10,818,084
<OTHER-EXPENSES> 2,624,501
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,913
<INCOME-PRETAX> 2,627,000
<INCOME-TAX> 1,046,129
<INCOME-CONTINUING> 1,580,871
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,580,871
<EPS-PRIMARY> 0.43
<EPS-DILUTED> 0.43
</TABLE>
