<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
___________________
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
___________________
Date of report (Date of earliest event reported): April 25, 1996
BARRA, INC.
(Exact name of registrant as specified in its charter)
CALIFORNIA 0-19690 94-2993326
(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
1995 UNIVERSITY AVENUE, BERKELEY, CA 94704-1058
(Address of principal executive office) (Zip code)
Registrant's telephone number, including area code: (510) 548-5442
NONE
(Former Name or Former Address, if Changed Since Last Report)
The purpose of this Amendment is to file additional materials with the
Securities and Exchange Commission, including materials distributed to
stockholders of the target company by the registrant in connection with the
reported event.
________________________________________________________________________________
This Amendment No. 1 to Form 8-K consists of 5 pages. The Index to Exhibits is
on page 5.
<PAGE>
This Amendment No. 1 amends Items 5 and 7 of the Form 8-K Current Report
pursuant to Section 13 or 15(d) of the Securities Act of 1934, as amended (the
"Exchange Act"), filed with the Securities and Exchange Commission (the
"Commission") on April 26, 1996, relating to a merger agreement entered into
between BARRA, Inc. (the "Company") and Rogers, Casey & Associates, Inc. ("RCA")
which provides for the exchange of approximately 540,000 shares of the Company's
common stock for all of the outstanding shares of RCA.
ITEM 5. OTHER EVENTS
On June 28, 1996, the Company and RCA mailed to stockholders of RCA a
Notice of Consent to Merger and an Information Memorandum in connection with the
proposed merger of the Company and RCA. Included as Exhibits to this report are
complete copies of the Notice of Consent and Information Memorandum.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(c) Exhibits
<TABLE>
<CAPTION>
Reference to Prior Filing
Exhibit Description or Exhibit No. Attached Hereto
- - ------- ----------- ------------------------------
<S> <C> <C>
23.1 Consent of Deloitte & Touche LLP. 23.1
99.2 Notice of Consent to Merger 99.2
and Rights of Appraisal.
99.3 Letter of Transmittal, dated 99.3
June 28, 1996.
99.4 Information Memorandum dated 99.4
June 28, 1996 concerning the
merger of RCA Acquisition Corp.
a wholly owned subsidiary of
BARRA, Inc. with and into Rogers,
Casey & Associates, Inc. in
exchange for BARRA Common Stock.
99.5 Financial Statements of RCA 99.5
and its Subsidiaries.
99.6 The Company's Annual Report Filed with the Commission
to Shareholders for fiscal by the Company (File No.
year ended March 31, 1996. 0-19690) pursuant to the
Exchange Act and is
incorporated by reference
in this Amendment No. 1
to Form 8-K.
99.7 Proxy Statement filed in Filed with the Commission
connection with the Annual by the Company (File No.
Report for the Annual Meeting 0-19690) pursuant to the
of Shareholders to be held on Exchange Act and is
July 25, 1996. incorporated by reference
in this Amendment No. 1
to Form 8-K.
99.8 Annual Report on Form 10-K Filed with the Commission
for the fiscal year ended by the Company (File No.
March 31, 1996. 0-19690) pursuant to the
Exchange Act and is
incorporated by reference
in this Amendment No. 1
to Form 8-K.
<PAGE>
99.9 The Company and its 99.9
Subsidiaries Pro Forma
Condensed Combining Financial
Information.
99.10 Agreement and Plan of 99.10
Reorganization, dated April
25, 1996, by and among the
Company, RCA, Stephen Rogers,
and John F. Casey.
99.11 Section 262 of the Delaware 99.11
General Corporation Law.
</TABLE>
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
BARRA, INC.
Date: June 27, 1996 By /s/ JAMES D. KIRSNER
--------------------------------
Name: James D. Kirsner
Title: Chief Financial Officer
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit Description Sequentially Numbered Pages
- - ------- ----------- ---------------------------
<S> <C> <C>
23.1 Consent of Deloitte & Touche LLP.
99.2 Notice of Consent to Merger
and Rights of Appraisal.
99.3 Letter of Transmittal, dated
June 28, 1996.
99.4 Information Memorandum dated
June 28, 1996 concerning the
merger of RCA Acquisition
Corp. a wholly owned
subsidiary of BARRA, Inc.
with and into Rogers, Casey &
Associates, Inc. in exchange
for BARRA Common Stock.
99.5 Financial Statements of RCA
and its Subsidiaries.
99.6 The Company's Annual Report Filed with the Commission
to Shareholders for fiscal by the Company (File No.
year ended March 31, 1996. 0-19690) pursuant to the
Exchange Act and is
incorporated by reference
in this Amendment No. 1
to Form 8-K.
99.7 Proxy Statement filed in Filed with the Commission
connection with the Annual by the Company (File No.
Report for the Annual Meeting 0-19690) pursuant to the
of Shareholders to be held on Exchange Act and is
July 25, 1996. incorporated by reference
in this Amendment No. 1
to Form 8-K.
99.8 Annual Report on Form 10-K Filed with the Commission
for the fiscal year ended by the Company (File No.
March 31, 1996. 0-19690) pursuant to the
Exchange Act and is
incorporated by reference
in this Amendment No. 1
to Form 8-K.
99.9 The Company and its
Subsidiaries Pro Forma
Condensed Combining Financial
Information.
99.10 Agreement and Plan of
Reorganization, dated April
25, 1996, by and among the
Company, RCA, Stephen Rogers,
and John F. Casey.
99.11 Section 262 of the Delaware
General Corporation Law.
</TABLE>
<PAGE>
EXHIBIT 23.1
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in this report on Form 8-K of
BARRA, Inc. of our report dated May 17, 1996, appearing in the 1996 Annual
Report to the Shareholders of BARRA, Inc. and incorporated by reference in the
Annual Report on Form 10-K of BARRA, Inc. for the year ended March 31, 1996.
Deloitte & Touche LLP
June 28, 1996
Seattle Washington
<PAGE>
EXHIBIT 99.2
<PAGE>
[LETTERHEAD]
NOTICE OF CONSENT TO MERGER
AND RIGHTS OF APPRAISAL
TO: Rogers, Casey & Associates Stockholders
NOTICE IS HEREBY GIVEN pursuant to Sections 228(d) and 262(d) of the
Delaware General Corporation Law (the "Delaware Law") that on June 24, 1996,
holders of common stock, $0.10 par value per share ("RCA Shares") of Rogers,
Casey & Associates, Inc. ("RCA"), having not less than the minimum number of
votes necessary pursuant to the Delaware Law and the Certificate of
Incorporation and By-Laws of RCA, approved the transactions contemplated in
the Agreement and Plan of Reorganization among BARRA, Inc. ("BARRA"), RCA and
certain shareholders of RCA, dated April 25, 1996 (the "Reorganization
Agreement"), including the merger of a BARRA subsidiary with and into RCA
such that RCA will become a wholly owned subsidiary of BARRA (the "Merger").
RCA and BARRA anticipate that the Merger will become effective on or about
July 18, 1996. Pursuant to the terms of the Reorganization Agreement, each
issued and outstanding RCA Share shall be converted into 4.955 fully paid and
nonassessable shares of common stock, no par value of BARRA ("BARRA Shares"),
subject to adjustment in accordance with the terms of the Reorganization
Agreement.
Stockholders of RCA may, on or prior to July 17, 1996, seek appraisal for
part or all of their RCA Shares by complying with the requirements of Section
262 of the Delaware Law including making a demand for appraisal on RCA.
The accompanying Information Memorandum and Letter of Transmittal contain
important information relating to the terms and background of the Merger,
including the procedures that stockholders must follow to receive BARRA
Shares and the procedure (including the text of Section 262 of the Delaware
Law) that stockholders must follow to make a valid demand for appraisal
("Special Factors -- Appraisal Rights" and Annex E). Each stockholder is
urged to review the Information Memorandum (including all Annexes) and Letter
of Transmittal carefully in order to make an informed decision.
/s/ Alan J. Resler
-----------------------------------
Alan J. Resler, Chief Financial Officer
Darien, Connecticut
June 26, 1996
<PAGE>
EXHIBIT 99.3
<PAGE>
LETTER OF TRANSMITTAL
TO EXCHANGE SHARES OF COMMON STOCK
OF
ROGERS, CASEY & ASSOCIATES, INC.
PURSUANT TO THE AGREEMENT AND PLAN OF REORGANIZATION
DATED APRIL 25, 1996
FOR SHARES OF BARRA, INC.
- - --------------------------------------------------------------------------------
THIS LETTER OF TRANSMITTAL MUST BE COMPLETED, SIGNED AND SUBMITTED,
TOGETHER WITH YOUR RCA SHARE CERTIFICATE(S), TO THE TRANSFER AGENT:
The Transfer Agent for the Exchange is:
WELLS FARGO BANK, N.A.
IF BY MAIL: (CERTIFIED) IF BY MESSENGER/OVERNIGHT COURIER:
Wells Fargo Bank, N.A. Wells Fargo Bank, N.A.
Exchange Agent Exchange Agent
Corporate Trust Department Corporate Trust Department
P.O. Box 4177 15821 Ventura Boulevard, Suite 670
Woodland Hills, CA 91365-4177 Encino, CA 91436
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE
WILL NOT CONSTITUTE A VALID DELIVERY.
THE INSTRUCTIONS ACCOMPANYING THIS LETTER OF TRANSMITTAL SHOULD BE READ
CAREFULLY BEFORE THIS LETTER OF TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be completed by shareholders if certificates
for RCA Shares (as defined below) are to be forwarded herewith.
1.
<PAGE>
DESCRIPTION OF RCA SHARES SURRENDERED
<TABLE>
<CAPTION>
- - -----------------------------------------------------------------------------------------------------------------------------
Name(s) and Address(es)
of Registered Holder(s)
(Please fill in, if blank, exactly as Share Certificate(s) and Share(s) Surrendered
name(s) appear(s) on Share Certificate(s)) (Attach additional list, if necessary)
- - -----------------------------------------------------------------------------------------------------------------------------
- - -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Total Number of Shares
Share Certificate Represented by Share
Number(s) Certificate(s)
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
------------------------------------------------------------
Total Shares
------------------------------------------------------------
</TABLE>
NOTE: SIGNATURE(S) MUST BE PROVIDED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
LADIES AND GENTLEMEN:
The undersigned hereby delivers to BARRA, Inc., a California corporation
("BARRA" or the "Company"), the above-described shares of common stock, par
value $.10 per share (the "RCA Shares"), of Rogers, Casey & Associates, Inc., a
Delaware corporation ("RCA"), in exchange for 4.955 fully paid and nonassessable
shares of common stock of BARRA, no par value per share (the "BARRA Shares") for
each RCA Share delivered, subject to adjustment and upon the terms and subject
to the conditions set forth in the Agreement and Plan of Reorganization, dated
April 25, 1996 (the "Reorganization Agreement"), by and among BARRA, RCA and
certain shareholders of RCA (the "RCA Shareholders").
Pursuant to the terms of the Reorganization Agreement, a BARRA subsidiary,
RCA Acquisition Corp. will be formed under Delaware law (the "Merger Sub") and
will be merged with and into RCA such that RCA will become a wholly-owned
subsidiary of BARRA (the "Merger"), and each issued and outstanding RCA Share
(other than fractional shares or any shares as to which dissenters' rights have
been perfected) shall be converted into 4.955 fully paid and nonassessable BARRA
Shares, subject to adjustment in accordance with the Reorganization Agreement.
In addition, ten percent (10%) of the BARRA Shares (the "Escrow Shares") shall
be held in escrow (the "Escrow") as security for the joint and several indemnity
obligations of RCA and the shareholders of RCA (collectively the "Shareholders"
and each individually, a "Shareholder") until the publication of BARRA's audited
financial statements for the fiscal year in which the closing (the "Closing") of
the transactions contemplated in the Reorganization Agreement occurs. Because
BARRA's fiscal year ends on March 31, the Escrow Shares are not expected to be
released until on or about June 30, 1997.
2.
<PAGE>
THIS LETTER OF TRANSMITTAL MUST BE ACCOMPANIED
BY PHYSICAL DELIVERY OF THE RCA SHARE CERTIFICATES
In accordance with and pursuant to the terms of the Reorganization
Agreement, the undersigned registered holder(s) of the RCA Shares to be
exchanged, or the transferee or assignee of such registered holder(s), hereby
surrenders to you, as Transfer Agent, the RCA Shares in exchange for BARRA
Shares previously described to be issued.
The undersigned understands that surrender is not made in acceptable form
until receipt by the Transfer Agent of the RCA Share Certificates AND this
Letter of Transmittal, duly completed and signed (with signature guaranteed, if
required), together with all accompanying stock powers or other evidences of
authority, if required, in form satisfactory to BARRA (which may delegate power
in whole or in part to the Transfer Agent). All questions as to validity, form
and eligibility of any surrender of the RCA Shares hereunder will be determined
by BARRA (which may delegate such power in whole or in part to the Transfer
Agent), and such determination shall be final and binding.
REPRESENTATIONS AND WARRANTIES
The undersigned represents that the undersigned has full authority to
surrender the RCA Shares, free and clear of all liens, claims and encumbrances.
The undersigned, upon request, will execute and deliver any additional documents
reasonably deemed appropriate or necessary by the Transfer Agent in connection
with the surrender of the RCA Shares. All authority conferred or agreed to be
conferred in this Letter of Transmittal shall be binding upon the successors,
assigns, heirs, executors, administrators and legal representatives of the
undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned.
The undersigned further hereby represents and warrants that:
(a) The BARRA Shares received by the undersigned pursuant to the terms of
the Reorganization Agreement (the "Securities") will be acquired for the
undersigned's own account, not as a nominee or agent, and not with a view to the
distribution of any part thereof.
(b) The undersigned has had the opportunity to investigate BARRA's
business, management and financial condition and to receive and read the Notice
of Merger and Information Memorandum delivered to the Shareholders by BARRA and
RCA and has had access to such other information about BARRA as the undersigned
has deemed necessary or desirable to reach an informed and knowledgeable
decision to acquire the Securities.
(c) The undersigned understands that the Securities have not been
registered under the Securities Act of 1933, as amended (the "Securities Act")
by reason of reliance upon certain exemptions therefrom, and that the reliance
of BARRA on such exemptions is predicated upon, among other things, the bona
fide nature of the undersigned's investment intent as expressed herein.
(d) The undersigned is knowledgeable in business and financial matters and
is capable of evaluating the merits and risks of an investment in BARRA. The
undersigned acknowledges that it has the ability to bear the economic risk of
its investment pursuant to the Reorganization Agreement.
(e) The undersigned understands that the Securities being purchased
hereunder are restricted securities within the meaning of Rule 144 under the
Securities Act and that the Securities are not registered and must be held
indefinitely unless they are subsequently registered or an exemption from such
registration is available.
3.
<PAGE>
(f) Each certificate representing the Securities when delivered to the
undersigned shall be endorsed with the following, or a substantially similar,
legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR
HYPOTHECATED (I) IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THESE SECURITIES UNDER THE 1933 ACT, AND
AN EFFECTIVE REGISTRATION OR QUALIFICATION OF THESE SECURITIES
FOR SALE UNDER ANY APPLICABLE STATE SECURITIES LAW; (II) IN THE
ABSENCE OF AN OPINION OF COUNSEL SATISFACTORY TO BARRA, INC. THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED; OR (III)
UNLESS SOLD PURSUANT TO RULE 144 OR OTHER APPLICABLE PROVISIONS
OF THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAW.
The undersigned agrees not to attempt any transfer of the Securities
without first complying with the substance of said legend, and agrees that
satisfaction of legend conditions may depend in part upon an opinion of counsel
reasonably acceptable in form and substance to BARRA, or such other equivalent
evidence satisfactory to BARRA.
APPOINTMENT OF ATTORNEY-IN-FACT
The undersigned hereby appoints John F. Casey as the irrevocable attorney-
in-fact, authorized and empowered to act for and on behalf of the Shareholders
(including without limitation, the undersigned) in connection with the indemnity
provisions of the Reorganization Agreement, as they relate to the Shareholders
generally, the Escrow Agreement to be entered into by and among BARRA, RCA, the
RCA Shareholders, the Holder's Agent (as defined below) and The Bank of San
Francisco (the "Escrow Agreement"), the notice provisions of the Reorganization
Agreement and such other matters as are reasonably necessary for the
consummation of the transactions contemplated by the Reorganization Agreement
and the Merger. John F. Casey, as well as any subsequent representative of the
Shareholders appointed by him, or after his death or incapacity elected by vote
of holders of a majority of the RCA Shares outstanding immediately prior to the
Effective Date, shall be referred to as the "Holder's Agent." The powers of the
Holder's Agent include, without limitation, the power to act as the
representative of the Shareholders (including without limitation, the
undersigned) to review and authorize all set-offs, claims and other payments
authorized or directed by the Escrow Agreement and to dispute or question the
accuracy thereof, to compromise on their behalf with BARRA any claims asserted
thereunder and to authorize payments to be made with respect thereto and to take
such further actions as are authorized in the Reorganization Agreement. The
Holder's Agent shall not be liable to any of the Shareholders or BARRA, and its
respective affiliates, or any other person with respect to any action taken or
omitted to be taken by the Holder's Agent under or in connection with the
Reorganization Agreement or the Escrow Agreement unless such action or omission
results from or arises out of fraud, gross negligence, willful misconduct or bad
faith on the part of the Holder's Agent. BARRA and its affiliates (including,
after the Closing, RCA) shall be entitled to rely on such appointment and to
treat such Holder's Agent as the duly appointed attorney-in-fact of each
Shareholder (including without limitation, the undersigned). The undersigned,
by delivering this Letter of Transmittal and his or her RCA Shares and by
acceptance of BARRA Shares in connection with the Merger, without any further
action, confirms such appointment and authority and acknowledges and agrees that
such appointment is irrevocable and coupled with an interest. The undersigned
understands that the willingness of BARRA to enter into the Reorganization
Agreement is based, in part, on the appointment of a representative to act on
behalf of the Shareholders.
4.
<PAGE>
The undersigned further understands that delivery of the BARRA Shares in
exchange for surrendered RCA Shares will be made as promptly as practicable
after the receipt of such RCA Shares by the Transfer Agent. Unless otherwise
indicated under "SPECIAL ISSUANCE INSTRUCTIONS" or "SPECIAL DELIVERY
INSTRUCTIONS" set forth below, the Transfer Agent will deliver the BARRA Shares
to the undersigned at the first address set forth above.
- - --------------------------------------------------------------------------------
SPECIAL ISSUANCE INSTRUCTIONS
(See Instruction 2)
TO BE COMPLETED ONLY IF CERTIFICATES FOR BARRA SHARES ARE TO BE ISSUED IN THE
NAME OF SOMEONE OTHER THAN THE UNDERSIGNED.
Issue BARRA Shares and any Cash Payments to:
Name
---------------------------------------------------------------------------
(Please Print)
Address
-----------------------------------------------------------------------
- - -------------------------------------------------------------------------------
(Include zip code)
- - -------------------------------------------------------------------------------
(Tax Identification or
Social Security Number)
(See Substitute Form W-9)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 2)
TO BE COMPLETED ONLY IF CERTIFICATES FOR BARRA SHARES ARE TO BE MAILED TO
SOMEONE OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT AN ADDRESS OTHER
THAN THAT APPEARING UNDER "DESCRIPTION OF CERTIFICATES SURRENDERED."
Mail BARRA Shares and any Cash Payments to:
Name
---------------------------------------------------------------------------
(Please Print)
Address
-----------------------------------------------------------------------
- - -------------------------------------------------------------------------------
(Include zip code)
- - --------------------------------------------------------------------------------
5.
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SIGN HERE: SIGNATURE(S) OF OWNER(S). SEE INSTRUCTION 2.
- - --------------------------------------------- Date: --------------------------
- - --------------------------------------------- Date: --------------------------
(Must be signed by registered holder(s) EXACTLY as name(s) appear(s) on
Certificate(s) (or by Person(s) authorized to become registered holder(s) by the
Certificate(s) and documents transmitted herewith). If signature is by an
attorney, executor, administrator, trustee, custodian, guardian or other person
acting in a fiduciary capacity, set forth full title.
Name(s):
----------------------------------------------------------------------
Capacity (Full Title):
--------------------------------------------------------
Address:
----------------------------------------------------------------------
----------------------------------------------------------------------
Telephone Number: -------------------------------------------------------------
SIGNATURE(S) GUARANTEED BY: (WHEN REQUIRED - SEE INSTRUCTION 2)
Authorized Signature: --------------------------------- Date: ----------------
Name of Firm: ----------------------------------------- Date: ----------------
Address: ---------------------------------------------- Date: ----------------
- - -------------------------------------------------------------------------------
Telephone Number: ------------------------------------- Date: ----------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
6.
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE REORGANIZATION AGREEMENT
1. DELIVERY OF LETTER OF TRANSMITTAL AND SECURITIES. This Letter of
Transmittal, completed and signed (with signature guaranteed, if required), must
be used in connection with the delivery and surrender of the RCA Shares. A
LETTER OF TRANSMITTAL AND THE RCA SHARES MUST BE RECEIVED BY THE TRANSFER AGENT,
IN SATISFACTORY FORM, IN ORDER TO MAKE AN EFFECTIVE SURRENDER. The method of
delivery of the RCA Shares and other documents is at the election and risk of
the holder. If such delivery is by mail, registered or certified mail with
return receipt requested, properly insured, is required. Surrender may be made
by mail or hand delivery (messenger or overnight courier) to the Transfer Agent
at the respective addresses shown on the face of this Letter of Transmittal. A
mailing envelope addressed to the Transfer Agent is enclosed for your
convenience.
2. SIGNATURE ON LETTER OF TRANSMITTAL, STOCK POWERS AND ENDORSEMENTS. If
this Letter of Transmittal is signed by the registered holder(s) of the RCA
Shares, the signature(s) on this Letter of Transmittal must be EXACTLY the same
as the name(s) appearing on the face of the RCA Shares Certificate, without
alteration or any change whatsoever.
In the case of endorsement or signatures by attorneys, executors,
administrators, trustees, guardians, agents or others acting in a fiduciary or
representative capacity, the person signing must give such person's full title
in such capacity, and the RCA Shares must be accompanied by evidence
satisfactory to the Transfer Agent of the authority of such person to make the
endorsement together with all supporting documents necessary to validate the
surrender.
The RCA Shares delivered for exchange by an assignee of the registered
holder(s) thereof must be endorsed or accompanied by a properly executed stock
power with the signatures guaranteed, in either case, by a commercial bank or
trust company having an office or correspondent in the United States which is a
member of a Medallion Signature Program approved by the Securities Transfer
Association, Inc. (an "Eligible Institution"). The RCA Shares submitted by the
registered holder(s) thereof should not be endorsed or assigned for transfer.
No signature guarantee is required on this Letter of Transmittal if it is
signed by, and the BARRA Shares are to be issued in the name of, the registered
holder(s) of the RCA Shares delivered for exchange, or if such RCA Shares are
delivered for the account of an Eligible Institution. In all other cases, all
signatures on this Letter of Transmittal must be guaranteed by an Eligible
Institution.
3. TRANSFER TAXES. RCA will pay all transfer taxes applicable to the
exchange of the RCA Shares, except in the case of a delivery of the BARRA Shares
to any person(s) other than the registered holder(s) of the RCA Shares.
4. VALIDITY OF SURRENDER; IRREGULARITIES. All questions as to validity,
form and eligibility of any surrender of the RCA Shares hereunder will be
determined by BARRA (which may delegate power in whole or in part to the
Transfer Agent), and such determination shall be final and binding. BARRA
reserves the right to waive any irregularities or defects in the surrender of
any RCA Share Certificate, and its interpretations of the terms and conditions
of the Reorganization Agreement and of this Letter of Transmittal (including
these instructions) with respect to such irregularities or defects shall be
final and binding. A surrender will not be deemed to have been made until all
irregularities have been cured or waived.
5. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. If the BARRA Shares are
to be issued in the name of a person other than the signatory to this Letter of
Transmittal, or if the BARRA Shares are to be sent to someone other than the
signatory to this Letter of Transmittal, or to an address other than the first
address shown above, the
7.
<PAGE>
appropriate sections of this Letter of Transmittal must be completed. Please
see Instruction 2 regarding required signature guarantees and stock powers in
connection with the Special Issuance and Special Delivery option.
6. INADEQUATE SPACE. If the space provided in this Letter of Transmittal
is inadequate, the identification numbers of the RCA Share Certificate(s) and
the number of RCA Shares should be listed on a separate, signed schedule affixed
hereto.
7. LETTER OF TRANSMITTAL REQUIRED; SURRENDER OF CERTIFICATES; LOST
CERTIFICATES. No person shall receive any BARRA Shares unless such person has
delivered this Letter of Transmittal, duly completed and signed, to the Transfer
Agent, together with the RCA Share Certificate(s) and any required accompanying
evidence of authority in form satisfactory to BARRA. If the RCA Share
Certificate(s) have been lost or destroyed, such loss or destruction should be
indicated on the face of this Letter of Transmittal. In such event, the
Transfer Agent will forward additional documentation necessary to surrender
effectively such lost or destroyed RCA Share Certificate(s).
8. SUBSTITUTE FORM W-9. Holders must complete the Substitute Form W-9,
provided under "Important Tax Consequences" below.
9. MISCELLANEOUS. If any of the RCA Share Certificate(s) are registered
in different forms of the holder's name (E.G., "Jane Doe" and "J. Doe"), such
holder must complete, sign and submit as many separate Letters of Transmittal as
there are different registrations.
10. FRACTIONAL SHARES. The Company will not issue fractions of shares on
the exchange of certificates. In lieu thereof, each such holder entitled to a
fraction of a share of BARRA Shares shall receive an amount in cash as described
in the Reorganization Agreement.
11. ADDITIONAL COPIES AND FURTHER INFORMATION. Requests for additional
copies of this Letter of Transmittal, or any questions pertaining to the
exchange procedures generally, may be directed to Maria Hekker, General Counsel
at BARRA, Inc., 1995 University Avenue, Berkeley, CA 94704-1058, or to the
Exchange Agent at (800) 522-6645.
IMPORTANT TAX CONSEQUENCES
GENERAL. The Merger is intended to qualify as a tax-free reorganization
within the meaning of the provisions of Section 368 of the Internal Revenue Code
(the "Code"). If the Merger does so qualify as a tax-free reorganization, the
following income tax consequences will result (i) the Merger will constitute a
reorganization within the meaning of Section 368(a)(1)(A) of the Code by reason
of Section 368(a)(2)(E) of the Code; (ii) BARRA, Merger Sub, and RCA will each
be a party to the reorganization within the meaning of Section 368(b) of the
Code; (iii) the Merger will not result in the recognition of a gain or loss to
BARRA, Merger Sub, RCA, or the Shareholders, other than any cash paid in
connection with the exercise of dissenters' rights; (iv) the adjusted basis of
each of the former Shareholders in the BARRA Shares received in the Merger will
be the same as the adjusted basis of the RCA Shares surrendered in exchange
therefor; and (v) the holding period of the BARRA Shares received by the
Shareholders will include the holding period of the RCA Shares surrendered in
exchange therefor. The foregoing represents BARRA's and RCA's best judgment as
to the expected federal income tax consequences of the Merger and is not binding
on the Internal Revenue Service ("IRS"). The IRS may challenge the conclusions
stated herein, and the Shareholders may incur the cost and expense of defending
positions taken by them with respect to the Merger.
CONSEQUENCES OF FAILED REORGANIZATION. If the Merger does not qualify as a
reorganization under Section 368 of the Code, the transaction will be treated
for federal income tax purposes as a purchase of the RCA
8.
<PAGE>
Shares from the undersigned by BARRA in exchange for the BARRA Shares. In such
event, the undersigned would recognize gain or loss equal to the difference
between the fair market value of the BARRA Shares received and the undersigned's
adjusted basis in its RCA Shares, which gain or loss would be long-term capital
gain or loss if such stock has been held for more than one year, provided the
stock has been held as a capital asset. Additionally, the undersigned would
recognize income or gain to the extent it receives any cash in connection with
the exercise of dissenters' rights or for payment in lieu of receiving
fractional BARRA Shares. Neither BARRA nor RCA would recognize gain or loss in
such event.
BACKUP WITHHOLDING. Federal income tax law requires that a holder of the
RCA either provide RCA with its correct taxpayer identification number (which,
in the case of a Shareholder who is an individual, is his or her social security
number), or, establish a basis for exemption from backup withholding. Exempt
holders (including, among others, corporations and certain foreign individuals)
are not subject to backup withholding and reporting requirements. If the
correct taxpayer identification number or an adequate basis for exemption is not
provided, the shareholder will be subject to withholding of 31.0% of the cash
(if any) received with respect to dividends paid or the proceeds of a sale,
exchange or redemption of BARRA Shares.
To prevent backup withholding, each Shareholder must complete the
Substitute Form W-9 provided below and must certify under penalties of perjury
(i) that the taxpayer identification number provided is correct (or that such
Shareholder is awaiting a taxpayer identification number), and (ii) that the
Shareholder is not subject to backup withholding because (a) such Shareholder is
exempt from backup withholding, (b) the Shareholder has not been notified by the
IRS that such Shareholder is subject to backup withholding as a result of the
failure to report all interest or dividends, or (c) the IRS has notified such
Shareholder that it is no longer subject to backup withholding. The Substitute
Form W-9 should be completed, signed, and returned with this Letter of
Transmittal. In order for a Shareholder who is a foreign individual to qualify
as an exempt recipient, that Shareholder must submit a statement, signed under
penalties of perjury, attesting to that individual's exempt status. Such a
statement can be obtained from the Transfer Agent.
9.
<PAGE>
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
SUBSTITUTE PART 1 - Social Security Number OR
FORM W-9 PLEASE PROVIDE Employer Identification Number:
-------------------------------------------------------
Payer's Request for
Taxpayer Identification PART 2 - CHECK THE BOX IF YOU ARE NOT SUBJECT TO BACKUP
Number (TIN) WITHHOLDING UNDER THE PROVISIONS OF SECTION 3406(A)(i)
OF THE INTERNAL REVENUE CODE BECAUSE (1) YOU HAVE NOT
BEEN NOTIFIED THAT YOU ARE SUBJECT TO BACKUP
WITHHOLDING AS A RESULT OF FAILURE TO REPORT ALL
INTEREST OR DIVIDENDS OR (2) THE INTERNAL REVENUE
SERVICE HAS NOTIFIED YOU THAT YOU ARE NO LONGER SUBJECT
TO BACKUP WITHHOLDING.
/ /
-------------------------------------------------------
PART 3 -
CHECK IF AWAITING TIN / /
-------------------------------------------------------
Department of the CERTIFICATION - UNDER THE PENALTIES OF PERJURY, I
Treasury Internal CERTIFY THAT THE INFORMATION PROVIDED ON THIS FORM IS
Revenue Service TRUE, CORRECT AND COMPLETE.
Signature ------------------------- Date --------------
Address -----------------------------------------------
-------------------------------------------------------
(Include Zip Code)
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
10.
<PAGE>
EXHIBIT 99.4
<PAGE>
CONFIDENTIAL
Copy No. ____
INFORMATION MEMORANDUM
CONCERNING THE MERGER OF
RCA ACQUISITION CORP.
A WHOLLY OWNED SUBSIDIARY OF
BARRA, INC.
WITH AND INTO
ROGERS, CASEY & ASSOCIATES, INC.
IN EXCHANGE FOR BARRA COMMON STOCK
This information memorandum (the "Memorandum") relates to the exchange
of all issued and outstanding shares, $0.10 par value per share (the "RCA
Shares") of common stock of Rogers, Casey & Associates, Inc. ("RCA") into up to
540,000 shares, no par value per share (the "BARRA Shares") of common stock of
BARRA, Inc. ("BARRA" or the "Company") pursuant to the terms of an Agreement and
Plan of Reorganization among BARRA, RCA, Stephen Rogers and John F. Casey (the
"RCA Shareholders"), dated April 25, 1996 (the "Reorganization Agreement").
Pursuant to the terms of the Reorganization Agreement, a BARRA
subsidiary, RCA Acquisition Corp. will be formed under Delaware law (the "Merger
Sub") and will be merged with and into RCA such that RCA will become a wholly
owned subsidiary of BARRA (the "Merger"), and each issued and outstanding RCA
Share (other than fractional shares or any shares as to which dissenters' rights
have been perfected) shall be converted into 4.955 fully paid and nonassessable
BARRA Shares, subject to adjustment in accordance with the Reorganization
Agreement. In addition, ten percent (10%) of the BARRA Shares (the "Escrow
Shares") shall be held in escrow (the "Escrow") as security for the joint and
several indemnity obligations of RCA and the shareholders of RCA (the
"Shareholders") until the publication of BARRA's audited financial statements
for the fiscal year in which the closing (the "Closing") of the transactions
contemplated in the Reorganization Agreement occurs. Because BARRA's fiscal
year ends on March 31, the Escrow Shares are not expected to be released until
on or about June 30, 1997.
THE SHARES TO BE ISSUED PURSUANT TO THE REORGANIZATION AGREEMENT HAVE
NOT BEEN REGISTERED WITH OR APPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
(THE "COMMISSION" OR THE "SEC") OR ANY SECURITIES REGULATORY AUTHORITY OF ANY
STATE, NOR HAS THE COMMISSION OR ANY SUCH STATE AUTHORITY PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS MEMORANDUM OR THE TERMS OF THE REORGANIZATION
AGREEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THE BARRA
SHARES WILL BE ISSUED PURSUANT TO EXEMPTIONS PROVIDED BY THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND VARIOUS STATE SECURITIES LAWS AND
CERTAIN RULES AND REGULATIONS PROMULGATED PURSUANT THERETO.
SEE "CERTAIN CONSIDERATIONS" FOR A DISCUSSION OF CERTAIN FACTORS THAT
SHOULD BE CONSIDERED BY SHAREHOLDERS.
BARRA's common stock (the "BARRA Common Stock") is listed on the
Nasdaq National Market and is traded under the symbol "BARZ." On June 20, 1996,
the last sales price of BARRA's Common Stock as reported on the Nasdaq National
Market was $28.25.
The Date of this Memorandum is June 28, 1996.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
AVAILABLE INFORMATION....................................................... 1
INCORPORATION OF DOCUMENTS BY REFERENCE...................................... 1
CERTAIN CONSIDERATIONS....................................................... 2
Integration of the Business.............................................. 2
Accounting Treatment..................................................... 2
Volatility of Stock Price................................................ 2
Control by Current Management............................................ 2
Restrictions on Resale and Transferability of the BARRA Shares........... 2
Shares Eligible for Future Sale.......................................... 3
Authorization and Issuance of Preferred Stock............................ 3
SPECIAL FACTORS.............................................................. 3
Background of the Merger................................................. 3
Reasons for the Merger; Approvals of the BARRA Board and the RCA Board... 4
Effects of the Merger.................................................... 6
Interests of Certain Persons in the Merger............................... 7
Accounting Treatment..................................................... 7
Federal Income Tax....................................................... 7
Regulatory Approvals..................................................... 9
Federal Securities Laws Consequences..................................... 9
Appraisal Rights......................................................... 9
THE AGREEMENT AND PLAN OF REORGANIZATION..................................... 12
The Merger............................................................... 12
Effective Time of the Merger............................................. 12
Manner and Basis for Converting Shares................................... 12
Terms of the Reorganization Agreement.................................... 14
Termination and Expenses................................................. 16
The Holder's Agent....................................................... 16
ROGERS, CASEY & ASSOCIATES, INC. CONSOLIDATED FINANCIAL INFORMATION.......... 17
ROGERS, CASEY & ASSOCIATES, INC. PERCENTAGE INFORMATION...................... 18
RCA MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS............................ 19
BUSINESS OF RCA.............................................................. 20
DESCRIPTION OF RCA STOCK..................................................... 22
In General............................................................... 22
Common Stock............................................................. 22
COMPARISON OF SHAREHOLDER RIGHTS............................................. 23
Authorized Stock......................................................... 23
Directors................................................................ 24
Shareholder Action By Written Consent.................................... 24
Amendment to Articles.................................................... 25
Amendment to Bylaws...................................................... 25
Liability of Directors; Indemnification.................................. 25
Cumulative Voting........................................................ 26
Supermajority Voting..................................................... 27
i.
<PAGE>
TABLE OF CONTENTS
-----------------
(continued)
Page
----
Financial Statements of Rogers, Casey & Associates, Inc.
and Subsidiaries.................................................... Annex A
Reports and Statements filed with the Securities and Exchange
Commission by BARRA................................................. Annex B
BARRA, Inc. and Subsidiaries
Pro Forma Condensed Combining Financial Information................. Annex C
Agreement and Plan of Reorganization.................................... Annex D
Section 262 of the Delaware General Corporation Law..................... Annex E
ii.
<PAGE>
NOTICE TO THE SHAREHOLDERS
THE SHARES TO BE ISSUED PURSUANT TO THE REORGANIZATION AGREEMENT HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OR THE SECURITIES LAWS OF ANY STATE
AND ARE BEING ISSUED IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION
REQUIREMENTS OF SAID ACT AND SUCH LAWS. THE SHARES ARE SUBJECT TO RESTRICTIONS
ON TRANSFERABILITY AND RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS
PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR EXEMPTION
THEREFROM. THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE COMMISSION,
ANY STATE SECURITIES COMMISSION OR OTHER REGULATORY AUTHORITY, NOR HAVE ANY OF
THE FOREGOING AUTHORITIES PASSED UPON OR ENDORSED THE MERITS OF THIS OFFERING OR
THE ACCURACY OR ADEQUACY OF THE MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY
IS UNLAWFUL.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITY. FURTHERMORE, THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
THIS MEMORANDUM DOES NOT CONSTITUTE AN OFFER OR SOLICITATION BY ANYONE
IN ANY JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS NOT AUTHORIZED, OR
IN WHICH THE PERSON MAKING SUCH AN OFFER IS NOT QUALIFIED TO DO SO, OR TO ANY
PERSON TO WHOM IT IS UNLAWFUL TO MAKE AN OFFER OR SOLICITATION.
NEITHER THE INFORMATION CONTAINED HEREIN, NOR ANY PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT COMMUNICATION SHOULD BE CONSTRUED BY ANY OF THE
SHAREHOLDERS AS LEGAL OR TAX ADVICE. EACH OF THE SHAREHOLDERS SHOULD CONSULT
HIS OR HER OWN LEGAL AND TAX ADVISORS TO ASCERTAIN THE MERITS AND RISKS OF THE
TRANSACTIONS DESCRIBED HEREIN.
<PAGE>
AVAILABLE INFORMATION
BARRA is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith, files reports, proxy statements, and other information with the
Commission. Such reports, proxy statements and other information filed by the
Company can be inspected and copied at the Commission's public reference room at
450 Fifth Street, N.W., Washington, D.C. 20549, as well as the Regional Office
of the Commission located at 500 West Madison Street, Chicago, Illinois 60621
and 7 World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material can also be obtained by mail from the Public Reference Section of the
Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, upon payment of
the fees prescribed by the Commission. The BARRA Common Stock is traded on the
Nasdaq National Market. Reports and other information concerning BARRA can also
be obtained at the offices of the National Association of Securities Dealers,
Inc., Market Listing Section, 1735 K Street, N.W., Washington, D.C. 20006.
Exhibits required to be filed with the Commission as part of any of
the above will be furnished at reasonable cost upon receipt of a written request
therefor. Such request should be sent to: BARRA, Inc., 1995 University Avenue,
Suite 400, Berkeley, California 94704, Attention: Maria Hekker, General Counsel.
INCORPORATION OF DOCUMENTS BY REFERENCE
The following reports and statements filed with the Commission by
BARRA (File No. 0-19690) pursuant to the Exchange Act are incorporated by
reference in this Memorandum:
1. Annual Report to shareholders for the fiscal year ended March 31,
1996;
2. Proxy Statement filed in connection with the Annual Report for
the annual meeting of shareholders to be held on July 25, 1996;
3. Annual Report on Form 10-K for the fiscal year ended March 31,
1996;
4. Current Report on Form 8-K, dated April 25, 1996 (reporting the
public announcement of the signing of the Reorganization
Agreement); and
5. Form 8-A, dated November 26, 1991, as amended December 9, 1991
(containing a description of the BARRA Common Stock).
Copies of (1) the Annual Report to shareholders for the fiscal year
ended March 31, 1996, (2) the Proxy Statement filed in connection with the
Annual Report for the annual meeting of shareholders to be held on July 25,
1996, and (3) the Annual Report on Form 10-K for the fiscal year ended March 31,
1996, without exhibits, are included in this Memorandum as Annex B.
All reports, statements or other information filed by BARRA pursuant
to Section 13(a) or 15(d) of the Exchange Act after the date of this Memorandum
and prior to the date of the Closing (the "Closing Date") shall be deemed to be
incorporated by reference in this Memorandum and to be a part hereof from the
date of filing of such reports, statements or other information. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein shall be deemed to be modified or superseded for purposes of this
Memorandum to the extent that a statement contained herein or in any
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, except as so superseded, to
constitute a part of this Memorandum.
Capitalized terms not defined in this Memorandum have the meanings
ascribed to them in the Reorganization Agreement.
1.
<PAGE>
CERTAIN CONSIDERATIONS
IN ADDITION TO OTHER INFORMATION CONTAINED IN THIS MEMORANDUM, BARRA'S
ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1996 (INCLUDED
IN ANNEX B), OR INCORPORATED BY REFERENCE OR ATTACHED AS AN ANNEX HERETO, THE
FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN CONNECTION WITH THE
REORGANIZATION AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THE REORGANIZATION
AGREEMENT, INCLUDING THE MERGER. THIS MEMORANDUM CONTAINS CERTAIN FORWARD
LOOKING STATEMENTS ABOUT THE BUSINESS, OPERATIONS AND FINANCIAL CONDITION OF
BARRA AND RCA, INCLUDING VARIOUS STATEMENTS CONTAINED IN "RCA MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS"
CONTAINED HEREIN, AND IN "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS" WHICH IS INCORPORATED HEREIN BY REFERENCE
FROM BARRA'S ANNUAL REPORT ON FORM 10-K FOR THE FISCAL YEAR ENDED MARCH 31, 1996
AND INCLUDED IN ANNEX B. THE ACTUAL RESULTS OF BARRA AND RCA COULD DIFFER
MATERIALLY FROM THOSE FORWARD LOOKING STATEMENTS.
INTEGRATION OF THE BUSINESS
The Merger involves the integration of two companies that have
previously operated independently. As soon as practicable following the Merger,
BARRA intends to integrate certain aspects of the operations of the combined
company. However, there can be no assurance that BARRA will successfully
integrate the operations of RCA with those of BARRA or that all of the benefits
expected from such integration will be realized. Any delays or unexpected costs
incurred in connection with such integration could have an adverse effect on the
combined company's business, operating results or financial condition.
Furthermore, there can be no assurance that the operations, management and
personnel of the two companies will be compatible or that BARRA or RCA will not
experience the loss of key personnel.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for
accounting and financial reporting purposes. Under this method of accounting,
the assets and liabilities of BARRA and RCA will be combined based on the
respective carrying values of the accounts in the historical financial
statements of each entity. See "Special Factors -- Accounting Treatment." In
the event the Merger were not permitted to be accounted for as a pooling of
interests, it would be accounted for under the purchase method which would
result in the recording of a significant amount of goodwill (the excess of the
value of the BARRA Common Stock exchanged in the Merger over the fair value of
the net assets of RCA). Depending upon the amount of goodwill recorded and the
amortization period selected, the future net income of the combined company
could be reduced by $350,000 (if amortization is over 20 years) to $700,000 (if
amortization is over 10 years) per year under the purchase method of accounting.
VOLATILITY OF STOCK PRICE
The market price for the BARRA Common Stock is volatile and could be
subject to additional significant fluctuations in response to variations in
BARRA's operating results and other factors, including without limitation,
investor perceptions of BARRA, RCA and the industry in which they operate,
developments in BARRA's relationships with its customers, and general market
conditions. Consequently, there can be no assurance that the market value of
shares of the BARRA Common Stock will be maintained subsequent to the Merger.
CONTROL BY CURRENT MANAGEMENT
As of May 31, 1996, the management and directors of BARRA owned
approximately 42% of the issued and outstanding shares of the BARRA Common
Stock. In addition, BARRA has an option plan pursuant to which options for up
to 2,200,000 shares of Common Stock may be granted to its employees and non-
employee directors or consultants. As of March 31, 1996, options for
approximately 1,509,020 shares of the BARRA Common Stock were outstanding of
which 431,880 were exercisable.
RESTRICTIONS ON RESALE AND TRANSFERABILITY OF THE BARRA SHARES
The BARRA Shares to be received by the Shareholders in exchange for
the RCA Shares in the Merger have not been registered under the Securities Act
or under the securities laws of any state, and may not be resold unless they are
subsequently registered under the Securities Act. See "Special Factors --
Federal Securities Laws Consequences." Pursuant to the Reorganization
Agreement, BARRA shall, within 45 days after the effective
2.
<PAGE>
date of the Merger, file a registration statement on Form S-8 with the
Commission covering the BARRA Shares to be issued under the RCA 1992 Stock
Option and Restricted Stock Purchase Plan (the "RCA Option Plan"), or take such
other steps as necessary to ensure that such BARRA Shares, when issued upon
exercise of RCA options, shall be registered under the Securities Act. See "The
Agreement and Plan of Merger -- Manner and Basis of Converting Shares."
SHARES ELIGIBLE FOR FUTURE SALE
As of May 31, 1996, 7,840,364 shares of the BARRA Common Stock were
issued and outstanding, virtually all of which are either freely tradeable
without restriction under the Securities Act or saleable in the public market
pursuant to Rule 144 under the Securities Act. In addition, as of March 31,
1996, options for approximately 1,509,020 shares of the BARRA Common Stock were
outstanding of which 431,880 were exercisable. BARRA maintains an effective
registration statement under the Securities Act on its option plan and, as a
consequence shares issued upon exercise of options are either freely tradable
or, if held by affiliates, salable in the public market pursuant to Rule 144
under the Securities Act.
AUTHORIZATION AND ISSUANCE OF PREFERRED STOCK
BARRA's Amended and Restated Articles of Incorporation ("Articles")
authorize the issuance of up to 10,000,000 shares of Preferred Stock with such
rights and preferences as may be determined from time to time by the BARRA
Board. Accordingly, under the Articles, the BARRA Board may, without
shareholder approval, issue Preferred Stock with dividend, liquidation,
conversion, voting, redemption or other rights which could adversely affect the
voting power or other rights of the holders of the BARRA Common Stock. The
issuance of any shares of Preferred Stock having rights superior to those of the
BARRA Common Stock may result in a decrease of the value or market price of the
BARRA Common Stock and could further be used by the BARRA Board as a device to
prevent a change in control of BARRA. Holders of the Preferred Stock may have
the right to receive dividends and conversion rights. No shares of Preferred
Stock had been issued or were outstanding as of the date of this Memorandum.
See "Comparison of Shareholder Rights -- BARRA Preferred Stock."
SPECIAL FACTORS
BACKGROUND OF THE MERGER
Both BARRA and RCA have had a long standing familiarity with one
another. RCA has been a subscriber to BARRA analytical software, data and
services. In addition, some of BARRA's U.S. plan sponsor clients are also
consulting and special assets advisory clients of RCA.
On July 24, 1995, an article in PENSIONS & INVESTMENTS, based upon an
interview with RCA's Chairman, Stephen Rogers, and President and Chief Executive
Officer, John Casey, confirmed that during 1994 and 1995, RCA made a series of
changes to its traditional structure by expanding its staff, passing more
responsibility on to members of management and adding non-employee outsiders to
its Board of Directors. The article also noted that, during that same period,
many of RCA's consulting firm competitors had begun to move into the higher
margin investment management industry and, as a result, RCA was studying its
future and contemplating the possibility of a strategic alliance with various
complimentary organizations. Mr. Rogers specifically highlighted a technology
company as a "logical area for such alliances."
During roughly the same time period, BARRA management had been
exploring various strategies for increasing its presence in the plan sponsor
market and had decided to pursue the acquisition of a significant firm in the
plan sponsor consulting business.
BARRA's Chairman and Chief Executive Officer, Andrew Rudd, eventually
contacted Mr. Casey regarding a potential transaction. On November 1, 1995,
Dr. Rudd and Mr. Casey met at the San Francisco, California offices of BARRA's
money management subsidiary Symphony Asset Management, Inc. ("Symphony") to
discuss potential interests. Jeffrey L. Skelton, President and Chief Executive
Officer of Symphony, also attended the meeting. At that meeting Mr. Casey
informed Dr. Rudd that the principals of RCA would be interested in pursuing
areas of mutual interest with BARRA.
On November 2, 1995, Dr. Rudd sent Mr. Casey a letter informing him
that he was very encouraged by the November 1 meeting and was interested in
pursuing opportunities to maximize jointly the interests
3.
<PAGE>
of BARRA and RCA. With that letter, Dr. Rudd sent Mr. Casey a letter agreement
governing the disclosure of certain RCA information to BARRA and BARRA's
undertaking to keep such information confidential (the "RCA Confidentiality
Letter").
The RCA Confidentiality Letter was fully executed by both BARRA and
RCA on December 12, 1995, and on December 18, 1995, various principals of RCA
visited BARRA in Berkeley, California, for the purpose of further discussions
and explorations of a potential transaction.
In December 1995 and January 1996, the parties engaged in several
telephone conversations and meetings and exchanged some general financial and
business information. During that time, BARRA also used the services of
Hambrecht & Quist LLC ("H&Q") to assist it in structuring and pricing the
transaction.
On February 3 and 4, 1996, Messrs. Rogers and Casey met with Dr. Rudd
and BARRA's President, Kamal Duggirala, Chief Financial Officer, James D.
Kirsner, and Chief Operating Officer, Robert L. Honeycutt at the offices of H&Q
in San Francisco, California. David Golden, Managing Director of H&Q, also
attended the meetings. At those meetings, the parties decided to explore a
pooling transaction. Because a pooling would involve the issuance of the BARRA
Common Stock, it was determined that BARRA would need to provide RCA with
certain confidential information. On February 15, 1996, BARRA and RCA executed
a letter agreement governing the disclosure of certain BARRA information to RCA
and RCA's undertaking to keep such information confidential (the "BARRA
Confidentiality Letter").
On February 29, 1996, the Board of Directors of RCA met and discussed
at length a prospective transaction with BARRA. Approval to pursue a
transaction was given by RCA's Board of Directors at that time.
Following the execution of the BARRA Confidentiality Letter, the
parties began to exchange detailed due diligence information and engaged in
several meetings and visits. Mr. Kirsner and BARRA's General Counsel, Maria L.
Hekker, visited RCA from March 6 to 8, 1996 to conduct due diligence interviews
with several members of RCA's management team. Dr. Rudd, Mr. Duggirala and
BARRA's Director of Sponsor Services, Lisa Baker Stanton, visited RCA on March
12 and 13, 1996, and Mr. Casey met with Drs. Rudd and Skelton, at Symphony's
offices on March 21, 1996.
On March 18, 1996, BARRA provided RCA with the first draft of the
Reorganization Agreement. During the period from March 18, 1996 to April 25,
1996, the parties negotiated the terms of the Reorganization Agreement.
On April 19, 1996, the Board of Directors of BARRA met and discussed
the terms of the transaction as then contemplated and as set forth in a draft of
the Reorganization Agreement then presented, and the Reorganization Agreement
and the transactions set forth therein and contemplated thereby, including the
Merger, were unanimously approved. Following the April 19, 1996 special meeting
of BARRA's Board of Directors, RCA and BARRA negotiated certain changes to the
Reorganization Agreement. At its regularly scheduled quarterly meeting on April
25, 1996, BARRA's Board of Directors discussed and unanimously approved the
revised Reorganization Agreement and the transactions set forth therein and
contemplated thereby, including the Merger.
On April 25, 1996, the Board of Directors of RCA reviewed and
unanimously approved the Reorganization Agreement and the transactions set forth
therein and contemplated thereby.
Immediately following those meetings, the Reorganization Agreement was
executed by BARRA and RCA.
On June 24, 1996, holders of RCA Common Stock having not less than the
minimum number of votes necessary pursuant to the Delaware Corporation Law and
the Certificate of Incorporation, as amended, and By-Laws of RCA approved the
transactions contemplated in the Reorganization Agreement, including the Merger.
REASONS FOR THE MERGER; APPROVALS OF THE BARRA BOARD AND THE RCA BOARD
The respective Boards of Directors of BARRA and RCA (referred to
respectively herein as the "BARRA Board" and the "RCA Board") have unanimously
approved the Reorganization Agreement and the Merger based upon their
determination that the Merger is in the best interests of their respective
companies and shareholders. The principal factors considered by the BARRA Board
and the RCA Board in approving the transaction are set forth below.
4.
<PAGE>
BARRA. In reaching its conclusion to approve unanimously the
Reorganization Agreement and the transactions contemplated thereby, including
the Merger, the BARRA Board considered a number of factors. The BARRA Board did
not assign any relative or specific weights to the factors considered. Among
other things, the BARRA Board considered the following:
/ / Merging with RCA is a cost effective means of supplementing
BARRA's core business as a provider of analytical software, data
and services to the investment community with the consulting and
special assets advisory business of RCA;
/ / Merging with RCA will enable BARRA to offer a full range of plan
sponsor services including asset/liability analysis, manager
search, manager evaluation and risk analysis;
/ / The Merger will increase the number of U.S. plan sponsors
represented by BARRA and thereby create the possibility of
increasing distribution of BARRA products, while BARRA's client
base will provide a corresponding opportunity to expand the
services offered by RCA;
/ / BARRA will make a determination, prior to the Closing, that the
Merger meets the criteria for a pooling of interests in
accordance with generally accepted accounting principles and all
published rules, regulations and policies of the Commission;
/ / 10% of the Merger Consideration shall be held in escrow as
security for the joint and several indemnity obligations of RCA
and the Shareholders contained in the Reorganization Agreement;
and
/ / The BARRA Board's review, with its legal and financial advisers,
of the provisions of the Reorganization Agreement.
RCA. In reaching its conclusion to approve unanimously the
Reorganization Agreement and the transactions contemplated thereby, including
the Merger, the RCA Board considered a number of factors. The RCA Board did not
assign any relative or specific weights to the factors considered. Among other
things, the RCA Board considered the following:
/ / The combined entity will be in a position to offer a full range
of plan sponsor services including asset/liability analysis,
manager search, manager evaluation and risk analysis;
/ / The opportunity to expand RCA's consulting services in
conjunction with BARRA's international marketing efforts;
/ / The market liquidity afforded by the fact that BARRA's Common
Stock is listed on the Nasdaq National Market and that, after the
expiration of required holding periods under Rule 144 of the
Securities Act, the non-affiliate Shareholders will have a better
opportunity to realize liquidity from the BARRA Shares received
in the Merger as compared to the closely held restricted stock of
RCA the Shareholders currently hold;
/ / The fact that BARRA has agreed in the Reorganization Agreement to
file a registration statement under the Securities Act covering
the BARRA Shares to be issued under the RCA Option Plan;
/ / RCA will make a determination, prior to the Closing, that the
Merger meets the criteria for a pooling of interests in
accordance with generally accepted accounting principles and all
published rules, regulations and policies of the Commission;
/ / The RCA Board's review, with its legal and financial advisers, of
the provisions of the Reorganization Agreement;
/ / The price and volume history of BARRA's Common Stock on the
Nasdaq National Market; and
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/ / The fact that the due diligence examination of BARRA conducted by
representatives of RCA indicated that BARRA has strong
management, capital, revenue and earnings potential; the RCA
Board's belief that holders of RCA Common Stock who exchange
their shares may have enhanced prospects for long-term growth in
their investment than in RCA; and the financial condition,
results of operations, current business and expansion
opportunities and constraints, and prospects of future
performance and earnings of RCA are expected to be better than on
a stand-alone basis.
EFFECTS OF THE MERGER
CONVERSION OF RCA COMMON STOCK AND TREATMENT OF OPTIONS. Pursuant to
the Reorganization Agreement, among other things, Merger Sub will be merged with
and into RCA, and RCA will become a wholly owned subsidiary of BARRA. In the
Merger, each outstanding share of RCA Common Stock (other than shares held by
the dissenting Shareholders who properly exercise their dissenters' rights) will
be converted into 4.955 shares of the BARRA Common Stock, subject to adjustment
in accordance with the terms of the Reorganization Agreement. See "The
Reorganization Agreement."
ADJUSTMENTS TO THE MERGER CONSIDERATION. The aggregate number of
shares of the BARRA Common Stock to be issued as consideration in the Merger
(the "Merger Consideration") is subject to adjustment, as of the Closing Date,
in the following events:
1. The repurchase of the RCA Shares under Section 7(g) of the
Reorganization Agreement;
2. Certain RCA Expenses, as defined in Section 7(j) of the
Reorganization Agreement, exceed $233,000;
3. The outstanding amount on RCA's lines of credit exceeds $650,000;
4. The enforcement by BARRA of the joint and several indemnity
obligations of RCA and the Shareholders pursuant to the terms of
the Reorganization Agreement, but only to the extent of ten
percent (10%) of the Merger Consideration held in escrow as
security for such indemnity obligations.
ESCROW OF SHARES. As security for the joint and several indemnity
obligations of RCA and the Shareholders contained in the Reorganization
Agreement, BARRA shall on the Closing Date place in escrow, approximately 54,000
of the BARRA Shares, subject to rounding as provided in the Reorganization
Agreement, representing ten percent (10%) of the Merger Consideration, i.e., the
Escrow Shares. The Escrow shall terminate, and the Escrow Shares shall be
released pro rata to the Shareholders, unless otherwise relinquished to BARRA
pursuant to the terms of the Escrow Agreement and the Reorganization Agreement,
on the business day following publication of BARRA's audited financial
statements for the fiscal year in which the Closing occurs. All claims for
indemnification made by BARRA pursuant to the Reorganization Agreement (except
for claims of fraud or willful misconduct) shall be brought and recovered by
BARRA solely by the return to BARRA of one or more of the Escrow Shares from the
Escrow.
SHAREHOLDERS PERCENTAGE INTEREST IN BARRA. Subsequent to the Merger,
Shareholders will hold an aggregate of approximately 540,000 shares of the
BARRA Common Stock (including the Escrow Shares), representing approximately
6.44% of the outstanding BARRA Common Stock at that time, assuming that no
additional shares of the BARRA Common Stock are issued prior to the filing of a
Certificate of Merger with the Delaware Secretary of State (the "Effective
Date").
6.
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INTERESTS OF CERTAIN PERSONS IN THE MERGER
RCA Shareholders. In considering the approval of the RCA Board of the
transactions contemplated by the Reorganization Agreement, the Shareholders
should be aware that as of June 21, 1996, the following members of the RCA Board
were beneficial owners of the following shares of RCA Common Stock:
Name of Beneficial Owner Shares of RCA Percentage of
- - ------------------------ Common Stock Outstanding RCA
Beneficially Owned Common Stock
------------------ ---------------
John F. Casey 49,903 51.46%
Stephen Rogers 31,601 32.59%
------ -----
Total Held by RCA Board 81,504 84.05%
Members
BARRA BOARD OF DIRECTORS. Pursuant to an understanding between BARRA
and RCA, following the Closing, BARRA intends to increase the size of its Board
of Directors from five (5) to six (6) and to elect John F. Casey to fill the
newly created position.
ACCOUNTING TREATMENT
The Merger is intended to qualify as a pooling of interests for
accounting and financial reporting purposes. Under this method of accounting,
the assets and liabilities of BARRA and RCA will be combined based on the
respective carrying values of the accounts in the historical financial
statements of each entity. Results of operations of the combined company will
include income of BARRA and RCA for the entire fiscal period in which the
combination occurs, and the historical results of operations of the separate
companies for the fiscal years prior to the Merger will be adjusted to a March
31 year to conform with BARRA's fiscal year and will be combined and reported as
the results of operations of the combined company.
As a condition to the obligations of BARRA under the Reorganization
Agreement, BARRA shall have received on or prior to the Closing, a report from
Deloitte & Touche LLP ("D&T"), and BARRA and RCA shall have received on or prior
to the Closing, a report from Coopers & Lybrand L.L.P. ("C&L"), based on facts
represented to each of D&T and C&L by BARRA and RCA, that D&T and C&L agree with
management of BARRA and RCA that the Merger meets the criteria for a pooling of
interests in accordance with generally accepted accounting principles and all
published rules, regulations and policies of the Commission. C&L's report will
relate only to matters affecting RCA. In the event the Merger were not
permitted to be accounted for as a pooling of interests, it would be accounted
for under the purchase method which would result in the recording of a
significant amount of goodwill (the excess of the value of the BARRA Common
Stock exchanged in the Merger over the fair value of the net assets of RCA).
Depending upon the amount of goodwill recorded and the amortization period
selected, the future net income of the combined company could be reduced by
$350,000 (if amortization is over 20 years) to $700,000 (if amortization is over
10 years) per year under the purchase method of accounting.
FEDERAL INCOME TAX
This section summarizes the material federal income tax consequences
which are expected to result from the Merger and the issuance of the securities
offered by this Memorandum. It is impracticable to comment on all aspects of
federal, state, local and foreign laws that may affect the tax consequences of
the transactions contemplated hereby as they relate to the particular
circumstances of each shareholder or potential shareholder. The federal income
tax discussion set forth below applies only to holders of shares of BARRA,
Merger Sub, RCA or the surviving corporation (the "Surviving Corporation") who
hold such shares as capital assets. The federal income tax consequences to any
particular shareholder may be affected by matters not discussed below. For
example, certain types of holders (including foreign persons, life insurance
companies, tax exempt organizations and taxpayers who may be subject to the
alternative minimum tax) may be subject to special rules not addressed herein.
Furthermore, the discussion may not be applicable with respect to shares
received pursuant to the exercise of employee stock options or otherwise as
compensation.
7.
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This summary is based on the current provisions of the Internal
Revenue Code (the "Code"), existing and proposed Treasury regulations thereunder
and current administrative rulings and court decisions, all of which are subject
to changes that may or may not be retroactively applied. Many of the provisions
of the Code which have been recently enacted or amended have not been
interpreted by the courts or the Internal Revenue Service (the "IRS").
No assurance can be provided that opinions and statements set forth
herein (which do not bind the IRS or the courts) will not be challenged by the
IRS or would be sustained by a court if so challenged.
THE DISCUSSION SET FORTH BELOW ADDRESSES THE MATERIAL FEDERAL INCOME
TAX CONSEQUENCES OF GENERAL APPLICABILITY WHICH ARE EXPECTED TO RESULT FROM THE
MERGER. SHAREHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS TO DETERMINE THE TAX
CONSEQUENCES OF THE MERGER, THE HOLDING AND DISPOSITION OF THE SECURITIES ISSUED
PURSUANT TO THIS MEMORANDUM, AND THE APPLICABILITY AND EFFECT OF FEDERAL, STATE,
LOCAL, AND FOREIGN INCOME AND OTHER TAX LAWS WITH RESPECT TO THEIR OWN
PARTICULAR CIRCUMSTANCES.
GENERAL. The Merger is intended to qualify as a tax-free
reorganization within the meaning of the provisions of Section 368 of the Code.
If the Merger does so qualify as a tax-free reorganization, the following income
tax consequences will result (i) the Merger will constitute a reorganization
within the meaning of Section 368(a)(1)(A) of the Code by reason of Section
368(a)(2)(E) of the Code; (ii) BARRA, Merger Sub, and RCA will each be a party
to the reorganization within the meaning of Section 368(b) of the Code; (iii)
the Merger will not result in the recognition of a gain or loss to BARRA, Merger
Sub, RCA, or the Shareholders except for any cash paid in connection with the
exercise of dissenters' rights; (iv) the adjusted basis of each of the former
Shareholders in the BARRA Common Stock received in the Merger will be the same
as the adjusted basis of the RCA Common Stock surrendered in exchange therefor;
and (v) the holding period of the BARRA Common Stock received by the
Shareholders will include the holding period of the RCA Common Stock surrendered
in exchange therefor. The foregoing represents BARRA's and RCA's best judgment
as to the expected federal income tax consequences of the Merger and is not
binding on the IRS. The IRS may challenge the conclusions stated herein, and
the Shareholders may incur the cost and expense of defending positions taken by
them with respect to the Merger.
The position of BARRA and RCA that the Merger will qualify as a tax-
free reorganization within the meaning of Section 368(a)(1)(A) of the Code by
reason of Section 368(a)(2)(E) of the Code, is based on the assumption that, as
of the Effective Date, there is no plan or intention by the Shareholders to
sell, exchange or dispose of their RCA Common Stock received in the Merger. If
the above-described representation is not accurate, it is possible that the
Merger will instead be treated as a taxable acquisition of RCA Common Stock by
BARRA. See "Consequences of Failed Reorganization," below.
CONSEQUENCES OF FAILED REORGANIZATION. If the Merger does not qualify
as a reorganization under Section 368 of the Code, the transaction will be
treated for federal income tax purposes as a purchase of RCA Common Stock from
the Shareholders by BARRA in exchange for the BARRA Common Stock. In such
event, each of the Shareholders would recognize gain or loss equal to the
difference between the fair market value of the BARRA Common Stock received and
each such Shareholder's adjusted basis in its RCA Common Stock, which gain or
loss would be long-term capital gain or loss if such stock has been held for
more than one year, provided the stock has been held as a capital asset.
Additionally, the Shareholders would recognize income or gain to the extent they
receive any cash in connection with the exercise of dissenter's rights. Neither
BARRA nor RCA would recognize gain or loss in such event.
BACKUP WITHHOLDING. Federal income tax law requires that a holder of
RCA Common Stock provide RCA with its correct taxpayer identification number,
which, in the case of a shareholder who is an individual, is his or her social
security number, or, in the alternative, establish a basis for exemption from
backup withholding. Exempt holders (including, among others, corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. If the correct taxpayer identification number or an
adequate basis for exemption is not provided, the shareholder will be subject to
withholding of 31.0% of the cash (if any) received with respect to dividends
paid or the proceeds of a sale, exchange or redemption of the BARRA Common
Stock.
To prevent backup withholding, each Shareholder must complete the
Substitute Form W-9 provided by RCA with the Letter of Transmittal and certify
under penalties of perjury (i) that the taxpayer identification number provided
is correct (or that such shareholder is awaiting a taxpayer identification
number), and (ii) that the shareholder is not subject to backup withholding
because (a) such shareholder is exempt from backup withholding,
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(b) the shareholder has not been notified by the IRS that such shareholder is
subject to backup withholding as a result of the failure to report all interest
or dividends, or (c) the IRS has notified such shareholder that it is no longer
subject to backup withholding. The Substitute Form W-9 should be completed,
signed, and returned to RCA. In order for a shareholder who is a foreign
individual to qualify as an exempt recipient, that shareholder must submit a
statement, signed under penalties of perjury, attesting to that individual's
exempt status. Such statements can be obtained from RCA.
REGULATORY APPROVALS
Based on information available to them, BARRA and RCA believe that the
Merger can be effected in compliance with federal and state antitrust laws.
However, there can be no assurance that a challenge to the consummation of the
Merger on antitrust grounds will not be made or that, if such challenge were
made, BARRA or RCA would prevail or would not be required to accept certain
conditions, possibly including certain divestures in order to consummate the
Merger. See "The Merger Agreement -- Terms of the Merger Agreement --
Conditions to the Merger."
FEDERAL SECURITIES LAWS CONSEQUENCES
The BARRA Shares issued to the Shareholders in the Merger have not
been registered under the Securities Act or under the securities laws of any
state and are therefore "restricted securities" as that term is defined by Rule
144 under the Securities Act. The BARRA Shares may not be resold unless they
are subsequently registered, an exemption from registration is available, or
unless sales are made pursuant to Rule 144.
In general, under Rule 144 as currently in effect, a Shareholder of
RCA who receives the BARRA Shares in the Merger will not be permitted to sell
such BARRA Shares until such person has beneficially owned the BARRA Shares for
at least two years (including the holding period of any prior owner except an
affiliate). After the two-year period has elapsed, such person may sell within
any three-month period a number of shares that does not exceed the greater of:
(i) one percent of the number of shares of the BARRA Common Stock then
outstanding; or (ii) the average weekly trading volume of the BARRA Common Stock
during the four calendar weeks preceding the filing on Form 144 with respect to
such sale. Sales under Rule 144 are also subject to certain manner of sale
provisions and notice requirements and to the availability of current public
information about BARRA. Under Rule 144(k), a person who is not deemed to have
been an affiliate of BARRA at any time during the 90 days preceding a sale, and
who has beneficially owned the shares proposed to be sold for at least three
years (including the holding period of any prior owner except an affiliate), is
entitled to sell such shares without complying with the manner of sale, public
information volume limitation or notice provisions of Rule 144.
The Reorganization Agreement provides that BARRA shall, within 45 days
after the Effective Date, file a registration statement on Form S-8 with the
Commission covering the BARRA Shares to be issued under the RCA Option Plan, or
take such other steps as necessary to ensure that such BARRA Shares, when issued
upon exercise of the RCA Options, shall be registered under the Securities Act.
Accordingly, the BARRA Shares issued upon exercise of RCA Options and registered
under such registration statement will, subject to Rule 144 volume limitations
applicable to affiliates, be available for sale in the open market.
APPRAISAL RIGHTS
If the Merger is consummated, a holder of record of the RCA Shares on
the date of making a demand for appraisal, as described below, who continues to
hold such shares through the Effective Date and who strictly complies with the
procedures set forth under Section 262 of the Delaware General Corporation Law
("Section 262") will be entitled to have such shares appraised by the Delaware
Court of Chancery under Section 262 and to receive payment of the "fair value"
of such shares in lieu of the BARRA Shares to be issued as Merger Consideration
pursuant to the Reorganization Agreement. This Memorandum is being sent to all
holders of the RCA Shares and constitutes notice of the appraisal rights
available to such holders under Section 262. THE STATUTORY RIGHT OF APPRAISAL
GRANTED BY SECTION 262 REQUIRES STRICT COMPLIANCE WITH THE PROCEDURES SET FORTH
IN SECTION 262. FAILURE TO FOLLOW ANY OF SUCH PROCEDURES MAY RESULT IN A
TERMINATION OR WAIVER OF DISSENTERS' RIGHTS UNDER SECTION 262. The following is
a summary of certain of the provisions of Section 262 and is qualified in its
entirety by reference to the full text of Section 262, a copy of which is
attached to this memorandum as Annex E.
A holder of the RCA Shares electing to exercise appraisal rights under
Section 262 must deliver a written demand for appraisal of such stockholder's
shares to RCA on or before July 18, 1996. Such written demand
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must reasonably inform RCA of the identity of the stockholder of record and of
such stockholder's intention to demand appraisal of his or her shares.
Only a holder of the RCA Shares on the date of making such written
demand for appraisal who continuously holds such shares through the Effective
Date is entitled to seek appraisal. Demand for appraisal must be executed by or
for the holder of record, fully and correctly, as such holder's name appears on
the holder's stock certificates representing the RCA Shares. If the RCA Shares
are owned of record by more than one person, as in a joint tenancy or tenancy in
common, the demand should be made by or for all owners of record. An authorized
agent, including one or more joint owners, may execute the demand for appraisal
for a holder of record; however, such agent must identify the record owner or
owners and expressly disclose in such demand that the agent is acting as agent
for the record owner or owners of such shares.
Unless a demand for appraisal specifies a number of shares, such
demand will be presumed to cover all the RCA Shares held in the name of such
record owner.
Within 120 days after the Effective Date, BARRA or any stockholder who
has complied with the requirements of Section 262 may file a petition in the
Delaware Court of Chancery demanding a determination of the fair value of the
RCA Shares held by all stockholders seeking appraisal. A dissenting stockholder
must serve a copy of such petition on BARRA. If no petition is filed by either
BARRA or a dissenting stockholder within such 120-day period, the rights of all
dissenting stockholders to appraisal shall cease. Any Shareholders seeking to
exercise appraisal rights should not assume that BARRA will file a petition with
respect to the appraisal of the fair value of their shares or that BARRA will
initiate any negotiations with respect to the fair value of such shares. BARRA
is under no obligation to and has no present intention to take any action in
this regard. Accordingly, any Shareholder who wishes to seek appraisal of his
or her shares should initiate all necessary action with respect to the
perfection of his or her appraisal rights within the time periods and in the
manner prescribed in Section 262. FAILURE TO FILE THE PETITION ON A TIMELY
BASIS WILL CAUSE THE SHAREHOLDER'S RIGHT TO AN APPRAISAL TO CEASE.
Within 120 days after the Effective Date, any stockholder who has
complied with subsections (a) and (d) of Section 262 is entitled, upon written
request, to receive from BARRA a statement setting forth the aggregate number of
the RCA Shares with respect to which demands for appraisal have been received by
RCA and the number of holders of such shares. Such statement must be mailed
within 10 days after the written request therefor has been received by BARRA or
within 10 days after expiration of the time for delivery of demands for
appraisal under Section 262, whichever is later.
If a petition for an appraisal is timely filed, at the hearing on such
petition, the Delaware Court of Chancery will determine which stockholders are
entitled to appraisal rights and will appraise the RCA Shares owned by such
stockholders, determining the fair value of such shares, exclusive of any
element of value arising from the accomplishment or expectation of the Merger,
together with a fair rate of interest to be paid, if any, upon the amount
determined to be the fair value. In determining fair value, the court is to
take into account all relevant factors. The Delaware Supreme Court has stated
that "proof of value by any techniques or methods which are generally considered
acceptable in the financial community and otherwise admissible in court" should
be considered in the appraisal proceedings. The Delaware Supreme Court has
stated that, in making this determination of fair value, the court must consider
"market value, asset value, dividends, earnings prospects, the nature of the
enterprise and any other facts which were known or which could be ascertained as
of the date of the merger which throw any light on future prospects of the
merged corporation." The Delaware Supreme Court has also held that "elements of
future value, including the nature of the enterprise, which are known or
susceptible of proof as of the date of the merger and not the product of
speculation, may be considered." In addition, Delaware courts have decided that
the statutory appraisal remedy, depending on factual circumstances, may or may
not be a dissenter's exclusive remedy.
Stockholders considering seeking appraisal should consider that the
fair value of their shares determined under Section 262 could be more, the same,
or less than the value of the consideration to be received pursuant to the
Reorganization Agreement without the exercise of appraisal rights. The cost of
the appraisal proceeding may be determined by the Court of Chancery and assessed
against the parties as the court deems equitable in the circumstances. Upon
application of a dissenting stockholder, the court may order that all or a
portion of the expenses incurred by any dissenting stockholder in connection
with the appraisal proceeding (including, without limitation, reasonable
attorney fees and the fees and expenses of experts) be charged pro rata against
the value of all the RCA Shares entitled to appraisal. In the absence of such a
determination or assessment, each party bears its own expenses.
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Any stockholder who has fully demanded appraisal in compliance with
Section 262 will not, after the Effective Date, be entitled to receive payment
of dividends or other distribution on the RCA Shares except for dividends or
distributions payable to stockholders of record at a date prior to the Effective
Date.
Any Shareholder may withdraw a demand for appraisal and accept the
terms of the Merger at any time within 60 days after the Effective Date, or
thereafter may withdraw such demand with the written approval of BARRA. In the
event an appraisal proceeding is properly instituted, such proceeding may not be
dismissed as to any stockholder without the approval of the Delaware Court of
Chancery, and any such approval may be conditioned on the terms the Court of
Chancery deems just.
IN VIEW OF THE COMPLEXITY OF THESE PROVISIONS OF DELAWARE LAW, ANY
SHAREHOLDER WHO IS CONSIDERING EXERCISING APPRAISAL RIGHTS SHOULD CONSULT HIS OR
HER LEGAL ADVISOR.
See "Certain Federal Income Tax Consequences" for a brief description
of certain federal income tax consequences resulting from the receipt of the
fair value of appraised shares.
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THE AGREEMENT AND PLAN OF REORGANIZATION
THE FOLLOWING IS A BRIEF SUMMARY OF THE MATERIAL PROVISIONS OF THE
REORGANIZATION AGREEMENT, THE FULL TEXT OF WHICH IS ATTACHED HERETO AND
INCORPORATED BY REFERENCE AS ANNEX D. THE FOLLOWING DISCUSSION IS QUALIFIED IN
ITS ENTIRETY BY REFERENCE TO THE REORGANIZATION AGREEMENT.
THE MERGER
The Reorganization Agreement provides that, subject to the terms and
conditions thereof and the Merger Agreement (the form of which is attached as
Exhibit B to the Reorganization Agreement), on the Effective Date, Merger Sub
will be merged into RCA, and the separate corporate existence of Merger Sub
shall thereupon cease. RCA will be the Surviving Corporation in the Merger, and
the corporate existence of RCA shall continue unaffected and unimpaired by the
Merger. The Surviving Corporation shall be deemed to be the same entity as each
of RCA and the Merger Sub and shall be subject to all of their duties and
liabilities of every kind and description.
EFFECTIVE TIME OF THE MERGER
The Reorganization Agreement provides that the Merger will become
effective, subject to the terms and conditions of the Reorganization Agreement
and the Merger Agreement, upon the filing with the Delaware Secretary of State
of a duly executed Certificate of Merger as prescribed by Section 251 of the
Delaware General Corporation Law.
MANNER AND BASIS FOR CONVERTING SHARES; INDEMNIFICATION
On the Effective Date, each issued and outstanding RCA Share (other
than fractional shares or any shares as to which dissenters' rights have been
perfected) shall be converted into up to 4.955 fully paid and nonassessable
shares of common stock, without par value, of BARRA (the "BARRA Common Stock" or
"BARRA Shares"), as determined by, and subject to adjustment in accordance with,
the Exchange Ratio attached as Schedule A to the Reorganization Agreement (the
"Exchange Ratio").
Certificates previously representing the RCA Shares shall be exchanged
for certificates representing whole shares of the BARRA Common Stock issued in
consideration therefor upon the surrender of such certificates in accordance
with the terms set forth in the Reorganization Agreement.
Prior to the Effective Date, BARRA shall appoint Wells Fargo Bank,
N.A. or its successor, or any other bank or trust company mutually acceptable to
RCA and BARRA, as exchange agent (the "Exchange Agent") for the purpose of
exchanging certificates representing the BARRA Shares. At and after the
Effective Date, BARRA shall issue and deliver to the Exchange Agent certificates
representing ninety percent (90%) of the number of the BARRA Shares determined
in accordance with Section 2.1 of the Reorganization Agreement, rounded up to
the nearest whole share. A certificate representing ten percent (10%) of the
number of the BARRA Shares shall be placed in the Escrow, i.e., the Escrow
Shares. The Escrow Shares shall be held in escrow pursuant to the terms of an
escrow agreement, and the provisions of Section 10 of the Reorganization
Agreement as security for the joint and several indemnity obligations of the
Shareholders.
Section 10 of the Reorganization Agreement contains provisions by
which, among other things, RCA and the RCA Shareholders shall indemnify BARRA
against any losses relating to, INTER ALIA, any breaches of or
misrepresentations in the Reorganization Agreement, or, under certain
circumstances, the failure of RCA or any RCA subsidiary to register as an
investment advisor in any jurisdiction in which BARRA, upon reasonable advice of
counsel, deems a registration to be necessary (the "Shareholders'
Indemnification"). BARRA agrees to indemnify the RCA Shareholders against any
losses relating to, INTER ALIA, any breaches of or misrepresentations in the
Reorganization Agreement ("BARRA's Indemnification"). RCA also agrees to
indemnify BARRA against any losses relating to any breaches of or
misrepresentations concerning RCA's representations, warranties, and agreements
as to the absence of inquiries, discussions and negotiations by RCA with other
parties relating to proposed business combinations ("RCA's Indemnification").
As used in the Reorganization Agreement, the term business combination
("Business Combination") means any tender or exchange offer, proposal for a
merger, consolidation, acquisition of assets or other takeover proposal
involving any party to the Reorganization Agreement (other than as explicitly
contemplated by the Reorganization Agreement) or any offer or proposal to
acquire in any manner a five percent (5%) or greater interest in, or a
substantial portion of any party to the Reorganization Agreement (other than the
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transactions contemplated by the Reorganization Agreement). The specific terms
and conditions relating to these indemnification provisions, together with the
procedures by which the parties can make a claim under these provisions, are set
forth in greater detail in Section 10 of the Reorganization Agreement.
As security for the indemnity obligations of the parties, BARRA shall
on the Closing Date place in escrow, with an escrow agent, under the terms of
the Escrow Agreement, approximately 54,000 of the BARRA Shares (the "Escrow
Shares").
All claims for indemnification pursuant to the Shareholders'
Indemnification (but excluding all losses, claims, damages, penalties,
liabilities, fines, injuries, costs and expenses (including attorneys' fees,
administrative expenses, prejudgment interest and court costs) resulting from a
judgment of fraud or willful misconduct) shall be brought and recovered by BARRA
solely by the return to BARRA of one or more of the Escrow Shares from the
Escrow. Without limiting the generality of the foregoing, BARRA shall not have
any recourse against any Shareholder individually, or any Shareholder's assets
or property, for claims for indemnification pursuant to the Shareholder
Indemnification except for recovery against the Escrow pursuant to the terms of
the Reorganization Agreement and the Escrow Agreement, and except for claims of
fraud or willful misconduct. A distribution of Escrow Shares from the Escrow
shall be done so as to reduce each Shareholder's interest in the Escrow Shares
on a pro rata manner based on the Shareholder's respective ownership interests
in the Escrow Shares in the Escrow.
Claims for indemnity made by the parties pursuant to the provisions of
the Reorganization Agreement (but excluding all losses, claims, damages,
penalties, liabilities, fines, injuries, costs and expenses (including
attorneys' fees, administrative expenses, prejudgment interest and court costs)
resulting from a judgment of fraud or willful misconduct shall be limited to the
Agreed Price (as defined on Schedule A to the Reorganization Agreement)
multiplied by 54,000 (or such other number as represents ten percent (10%) of
the Merger Consideration as adjusted pursuant to Schedule A).
As soon as practicable after the Effective Date, and upon each
Shareholder surrendering to the Exchange Agent certificate(s) representing such
Shareholder's RCA Shares for cancellation and a signed transmittal letter
containing the representations and warranties set forth in Section 6 of the
Reorganization Agreement and in a form satisfactory to BARRA and RCA (the
"Transmittal Letter"), BARRA shall cause the Exchange Agent to deliver to each
such Shareholder, and each such Shareholder shall be entitled to receive, a
certificate representing ninety percent (90%) of such Shareholder's number of
the BARRA Shares determined in accordance with Section 2.1 of the Reorganization
Agreement, rounded up to the nearest whole share.
No fractional shares of the BARRA Common Stock shall be issued to the
Shareholders. In lieu thereof, each such holder entitled to a fraction of a
share of the BARRA Common Stock shall receive, at the time of surrender of the
certificate or certificates representing such holder's RCA Shares and an
executed Transmittal Letter, an amount in cash equal to the Agreed Price, as
determined in accordance with the Exchange Ratio (multiplied by the fraction of
a share of the BARRA Common Stock to which such holder otherwise would be
entitled.) No such holder shall be entitled to dividends, voting rights,
interest on the value of, or any other rights in respect of a fractional share.
No dividends or other distributions of any kind which are declared
payable to shareholders of record of the BARRA Shares after the Effective Date
will be paid to Shareholders entitled to receive such certificates for the BARRA
Shares until such persons surrender their certificates representing the RCA
Shares and execute and deliver a Transmittal Letter. Upon surrender of such
certificate representing the RCA Shares and execution and delivery of a
Transmittal Letter, BARRA shall pay the holder thereof, without interest, any
dividends or other distributions with respect to the BARRA Shares (including the
Escrow Shares) as to which the record date and payment date occurred on or after
the Effective Date and on or before the date of surrender.
All dividends or distributions, and any cash to be paid in lieu of
fractional shares, if held by the Exchange Agent for payment or delivery to the
holders of unsurrendered certificates representing the RCA Shares and unclaimed
at the end of one year from the Effective Date, shall (together with any
interest earned thereon) at such time be paid or redelivered by the Exchange
Agent to BARRA, and after such time any holder of a certificate representing the
RCA Shares who has not surrendered such certificate to the Exchange Agent and
executed and delivered a Transmittal Letter shall, subject to applicable law,
look as a general creditor only to BARRA for payment or delivery of such
dividends or distributions or cash, as the case may be.
On the Effective Date, the stock transfer books of RCA shall be closed
and no transfer of the RCA Shares theretofore outstanding shall thereafter be
made.
13.
<PAGE>
Each person holding one or more options to purchase the RCA Shares
pursuant to the RCA 1992 Stock Option and Restricted Stock Purchase Plan (the
"RCA Option Plan") shall have the right, in his or her discretion, to: (1)
exercise any vested options granted under the RCA Option Plan to acquire the RCA
Shares prior to the Effective Date; and/or (2) have any options, whether or not
vested, that are not exercised, converted into options to purchase shares of the
BARRA Common Stock on the terms set forth in Section 2.6 of the Reorganization
Agreement. BARRA shall, within 45 days after the Effective Date, file a
registration statement on Form S-8 with the SEC covering the BARRA Shares to be
issued under the RCA Option Plan, or take such other steps as necessary to
ensure that such BARRA Shares, when issued upon exercise of the RCA Options,
shall be registered under the Securities Act.
TERMS OF THE REORGANIZATION AGREEMENT
CONVERSION OF RCA STOCK. Under the terms of the Reorganization
Agreement, on the Effective Date, each issued and outstanding RCA Share (other
than fractional shares or any shares as to which dissenters' rights have been
perfected) shall be converted into 4.955 fully paid and nonassessable shares of
the BARRA Common Stock, as determined by, and subject to adjustment in
accordance with, the Reorganization Agreement.
REPRESENTATIONS. The Reorganization Agreement contains various
representations and warranties of the parties, including but not limited to such
matters as their organization; corporate status; authorization, validity and due
execution of the Reorganization Agreement; absence of conflict with charter
documents or agreements by which the parties are bound or any orders, ruling,
decrees or judgments applicable to the parties; the binding legal effect of the
Reorganization Agreement on the parties; capitalization; the absence of material
adverse changes; governmental approvals and third party consents; and the
accuracy of each parties' representations and warranties.
The Reorganization Agreement also contains representations by RCA,
including but not limited to such matters as its subsidiaries and other equity
interests; financial statements; government regulation; code of ethics of
registered Investment Advisers; tax returns; the absence of undisclosed
liabilities; real property holdings and leases; intellectual property rights and
interests; material contracts; employment contracts and benefits; compliance
with ERISA requirements; collective bargaining and employments agreements;
officer and employee compensation; legal actions and proceedings; insurance; and
trading in the BARRA Common Stock.
The Reorganization Agreement also contains representations made by the
RCA Shareholders, including but not limited to such matters as the BARRA Shares
to be received by the RCA Shareholders pursuant to the Merger are being acquired
for the RCA Shareholders' own accounts; the RCA Shareholders' decisions to
acquire the BARRA securities are informed and knowledgeable; the investment
experience of the RCA Shareholders; and that the BARRA securities being acquired
are restricted securities and that they have not been registered under the
Securities Act.
The representations, warranties, and agreements made in the
Reorganization Agreement shall survive any investigation made by the parties.
Moreover, the representations and warranties made in the Reorganization
Agreement shall survive the Closing of the transactions contemplated therein
until the publication of BARRA's audited financial statements for the fiscal
year in which the Closing occurs.
RCA's representations, warranties, and agreements as to the absence of
inquiries, discussions and negotiations with other parties relating to proposed
Business Combinations and RCA's indemnification obligation shall survive (i) if
a Closing shall occur, until the publication of BARRA's audited financial
statements for the fiscal year in which the Closing occurs or (ii) if the
Reorganization Agreement is terminated, until one year after the termination of
the Reorganization Agreement. BARRA's confidentiality covenants shall expire on
the Closing Date; RCA's confidentiality covenants shall survive the Closing.
CONDITIONS TO THE MERGER. Pursuant to the Reorganization Agreement,
the obligations of BARRA under the Reorganization Agreement will be subject, at
BARRA's option, to the fulfillment at or prior to the Effective Date, of the
conditions that, among other things: (i) the representations and warranties made
by RCA and the RCA Shareholders shall be true and correct in all material
respects as of the Effective Date; (ii) RCA and each RCA Shareholder shall have
performed and complied in all material respects with all terms of the
Reorganization Agreement required to be performed or complied with by it at or
prior to the Effective Date; (iii) except as disclosed to BARRA in writing prior
to the date of the Reorganization Agreement, no materially adverse change shall
have occurred since December 31, 1995, in the business, financial condition or
results of operations of RCA and the RCA Subsidiaries (as defined in the
Reorganization Agreement) taken as a whole, and neither RCA nor any RCA
14.
<PAGE>
Subsidiary shall be a party to or threatened with, any legal action or other
proceeding before any court, any arbitrator of any kind or any government agency
if, in the reasonable judgment of BARRA, such legal action or proceeding could
materially adversely affect RCA and the RCA Subsidiaries, taken as a whole, or
the business, financial condition, results of operations or prospects of RCA and
all of the RCA's subsidiaries taken as a whole; (iv) the Reorganization
Agreement and the Merger shall have been duly approved by the affirmative vote
of the holders of a majority of the outstanding shares of RCA common stock in
accordance with the provisions of Section 228 of the Delaware Code; (v) BARRA
shall have received a certificate, dated the Effective Date, signed on behalf of
RCA by its Chief Executive Officer and by its Chief Financial Officer, to the
effect that certain specified conditions set forth in the Reorganization
Agreement have been satisfied; (vi) RCA shall have delivered to BARRA an opinion
of counsel in a form acceptable to both RCA and BARRA; (vii) no temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect; (viii)
subject to the limitations set forth in Section 7(h) of the Reorganization
Agreement, all government approvals shall be in effect, and all conditions or
requirements prescribed by law or by any such government approval shall have
been satisfied; (ix) the aggregate number of shares of RCA common stock held by
persons who have taken all of the steps prior to Closing required to perfect
their right (if any) to be paid the value of such shares under the Delaware Code
("Dissenting Shares") shall not exceed nine percent (9%) of the outstanding
shares of RCA common stock; (x) BARRA shall have received such certificates and
other closing documents as counsel for BARRA shall reasonably request; (xi) RCA
shall have received, or BARRA shall have satisfied itself that RCA will receive,
all consents of other parties to and required by all material mortgages, notes,
leases, franchises, agreements, licenses and permits applicable to RCA and the
RCA Subsidiaries, including, without limitation, any consents required pursuant
to the Advisers Act or Company Act and for any mortgages, notes, leases,
franchises, agreements, licenses and permits listed in the RCA Disclosure
Statement for RCA or any RCA Subsidiary, in each case in form and substance
reasonably satisfactory to BARRA, and no such consent or license or permit shall
have been withdrawn or suspended; (xii) BARRA and RCA shall have received
accountants' reports as to whether the proposed Merger would meet the criteria
for a pooling of interests in accordance with generally accepted accounting
principles and all published rules, regulations, and policies of the SEC, and
there shall have been no determination by any court, tribunal, regulatory agency
or other government entity, that the Merger fails or will fail to qualify for
pooling-of-interests accounting treatment; (xiii) each employee of RCA shall
have executed an agreement regarding confidentiality and proprietary
information; (xiv) no suit, action, investigation, claim or proceeding commenced
or to the best knowledge of RCA is to be commenced by any party based in whole
or in part on an argument or assertion that BARRA, due to the Reorganization
Agreement, the negotiations leading up to the Reorganization Agreement, the
Merger, or related agreements or activities, interfered or is interfering with
any contractual relations of RCA or any RCA Subsidiary or any party with whom
RCA or any RCA Subsidiary is, or has been, or may be engaged in business
discussions; (xv) the Merger Agreement shall have been duly executed by RCA;
(xvi) RCA shall have consummated the repurchase of RCA common stock from Ruth
Hughes-Guden and Robert Moore if so required to do so prior to the Effective
Date pursuant to agreements previously entered into between RCA and such
Shareholders; (xvii) RCA shall have provided to BARRA its audited consolidated
financial statements for the fiscal years ended December 31, 1994 and 1995 no
later than five business days before the Closing Date, and BARRA shall have
reasonably approved such financial statements in writing pursuant to the
provisions of Section 11(b)(iii) of the Reorganization Agreement; and (xviii)
all agreements between or among RCA, any RCA Subsidiary and any of the
Shareholders, which provide for restrictions on transfer of RCA securities,
and/or repurchase or redemption provisions, including but not limited to the
Shareholders' Agreement dated December 1, 1992, and pursuant to the 1993 Stock
Bonus and Restricted Stock Plan, shall have been cancelled.
Pursuant to the Reorganization Agreement, the obligations of RCA under
the Reorganization Agreement will be subject, at RCA's option, to the
fulfillment at or prior to the Effective Date, of the conditions that, among
other things: (i) the representations and warranties made by BARRA shall be true
and correct in all material respects as of the Effective Date; (ii) BARRA and
its subsidiaries shall have performed and complied in all material respects with
all of the terms of the Reorganization Agreement required to be performed or
complied with by them at or prior to the Effective Date; (iii) no materially
adverse change shall have occurred since December 31, 1995, in the business,
financial condition, results of operations or properties of BARRA and its
subsidiaries taken as a whole, and BARRA shall not be engaged in, or a party to
or so far as BARRA is aware, threatened with, and to BARRA's knowledge there is
no reasonable basis for, any legal action or other proceeding before any court,
any arbitrator of any kind or any government agency which, in the reasonable
judgment of RCA, could materially adversely affect BARRA or its business,
financial condition, results of operations or assets taken as a whole; (iv) RCA
shall have received a certificate, dated the Effective Date, signed on behalf of
BARRA by its President or Chief Executive Officer and Chief Financial Officer,
certifying to the fulfillment of certain conditions stated in the Reorganization
Agreement; (v) BARRA shall have delivered to RCA an opinion of its counsel in a
form acceptable to both RCA and BARRA; (vi) all conditions or requirements
prescribed by law or by any Government Approval shall have been satisfied; (vii)
RCA shall have received such certificates and other closing documents as counsel
for
15.
<PAGE>
RCA shall reasonably request; (viii) no temporary restraining order, preliminary
or permanent injunction or other order issued by any court of competent
jurisdiction or other legal or regulatory restraint or prohibition preventing
the consummation of the Merger shall be in effect; and (ix) the Merger Agreement
shall have duly executed by BARRA and the Merger Sub.
AMENDMENT. The Reorganization Agreement and the Merger Agreement may
be amended by the mutual consent of the Boards of Directors of BARRA and RCA and
the RCA Shareholders at any time prior to the Effective Date.
TERMINATION. The Reorganization Agreement and the Merger Agreement
may be terminated (i) by the mutual consent of the boards of directors of BARRA
and RCA at any time prior to the consummation of the Merger; (ii) by the Board
of Directors of BARRA on or after November 1, 1996, if (a) any of the
conditions in the Reorganization Agreement to which the obligations of BARRA are
subject have not been fulfilled, or (b) such conditions have been fulfilled by
RCA or waived by BARRA, but RCA shall have failed to complete the Merger; (iii)
by the Board of Directors of BARRA if, within one year from the date of the
Reorganization Agreement, RCA, or any RCA Subsidiary, shall have entered into a
letter of intent, term sheet or agreement, or made an announcement relating to,
or otherwise engaged in a Business Combination; or (iv) by the Board of
Directors of RCA on or after November 1, 1996, if (a) any of the conditions
contained in the Reorganization Agreement to which the obligations of RCA and
the RCA Shareholders are subject have not been fulfilled, or (b) such conditions
have been fulfilled by BARRA or waived by RCA, but BARRA shall have failed to
complete the Merger.
TERMINATION AND EXPENSES
If the Reorganization Agreement shall be terminated by BARRA within
one year of the date of the Reorganization Agreement on the ground that RCA, or
any RCA Subsidiary, shall have entered into a letter of intent, term sheet or
agreement, or made an announcement relating to, or otherwise engaged in a
Business Combination, RCA shall pay to BARRA, on demand, the sum of $1,000,000,
and such payment will be BARRA's exclusive remedy in such event. Such payment
shall be paid no more than two (2) business days after demand by wire transfer
of immediately available funds. RCA, the RCA Shareholders and BARRA agree that,
except with respect to a termination by the Board of Directors of BARRA as just
described, any other termination of the Reorganization Agreement shall not in
any manner release or be construed as so releasing the nonterminating party or
parties from any liability or damage to the other party or parties arising out
of, in connection with or otherwise relating to, directly or indirectly, such
party's failure in performance of any of its covenants or agreements under the
Reorganization Agreement, including without limitation, any obligations arising
under the indemnification provisions of the Reorganization Agreement.
THE HOLDER'S AGENT
John F. Casey shall be irrevocably appointed attorney-in-fact and
authorized and empowered to act, for and on behalf of any or all of the
Shareholders in connection with the indemnity provisions of the Reorganization
Agreement, as they relate to the Shareholders generally, the Escrow Agreement,
the notice provisions of the Reorganization Agreement and such other matters as
are reasonably necessary for the consummation of the transactions contemplated
by the Reorganization Agreement and the Merger. John F. Casey, as well as any
subsequent representative of the Shareholders appointed by him or after his
death or incapacity elected by vote of holders of a majority of RCA Common Stock
outstanding immediately prior to the Effective Date, shall be referred to as the
"Holder's Agent". The Holder's Agent's powers include, without limitation, the
power to act as the representative of the Shareholders to review and authorize
all set-offs, claims and other payments authorized or directed by the Escrow
Agreement and dispute or question the accuracy thereof, to compromise on their
behalf with BARRA any claims asserted thereunder and to authorize payments to be
made with respect thereto and to take such further actions as are authorized in
this Agreement. The Holder's Agent shall not be liable to any Shareholder or
BARRA and their respective affiliates or any other person with respect to any
action taken or omitted to be taken by the Holder's Agent under or in connection
with the Reorganization Agreement or the Escrow Agreement unless such action or
omission results from or arises out of fraud, gross negligence, willful
misconduct or bad faith on the part of the Holder's Agent. BARRA and its
affiliates (including, after the Closing, RCA) shall be entitled to rely on such
appointment and treat such Holder's Agent as the duly appointed attorney-in-fact
of each Shareholder. Each Shareholder who receives the BARRA Shares in
connection with the Merger, by acceptance thereof and without any further
action, confirms such appointment and authority and acknowledges and agrees that
such appointment is irrevocable and coupled with an interest, it being
understood that the willingness of BARRA to enter into this Agreement is based,
in part, on the appointment of a representative to act on behalf of the
Shareholders.
16.
<PAGE>
<TABLE>
<CAPTION>
ROGERS, CASEY & ASSOCIATES, INC. CONSOLIDATED FINANCIAL INFORMATION
(In Thousands, Except Per Share Data)
Three Months
Ended March 31 Year Ended December 31
-------------------------------- ----------------------------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
(Historical) (Historical) (Historical) (Historical) (Historical)
<S> <C> <C> <C> <C> <C>
SELECTED INCOME STATEMENT DATA:
Revenues $ 4,378,256 $3,373,350 $15,758,226 $12,436,599 $10,184,193
Operating Expenses:
Compensation and Benefits 2,678,013 2,524,488 10,364,831 8,265,802 7,243,552
Selling, General and
Administrative 1,493,345 1,182,625 6,054,812 4,382,376 2,981,277
------------ ------------ ------------- ------------- -------------
Total Operating Expenses 4,171,358 3,707,113 16,419,643 12,648,178 10,224,829
------------ ------------ ------------- ------------- -------------
Operating Income (Loss) $206,898 ($333,763) ($661,417) ($211,579) ($40,636)
Interest Expense (Income) $58,291 $21,928 $131,054 $20,838 ($12,177)
------------ ------------ ------------- ------------- -------------
Income (Loss) Before Income Taxes $148,607 ($355,691) ($792,471) ($232,417) ($28,459)
Income Tax (Benefit) $85,000 ($26,090) ($58,128) ($63,912) $13,117
------------ ------------ ------------- ------------- -------------
Net Income (Loss) $ 63,607 ($ 329,601) ($734,343) ($168,505) ($41,576)
------------ ------------ ------------- ------------- -------------
------------ ------------ ------------- ------------- -------------
</TABLE>
- - --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
As of March 31 As of December 31
------------------------- -----------------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
SELECTED BALANCE SHEET DATA:
Total Assets $ 6,452,063 $ 5,078,649 $ 6,287,546 $ 5,075,752 $ 3,027,284
Current Liabilities 5,248,691 3,151,201 5,135,790 2,939,644 1,461,417
Long-Term Liabilities 409,784 930,308 480,775 958,015 384,475
Shareholders' Equity 793,588 997,140 670,981 1,178,093 1,181,392
</TABLE>
17.
<PAGE>
The following information should be read in conjunction with Rogers, Casey &
Associates, Inc. historical consolidated financial data.
ROGERS, CASEY & ASSOCIATES, INC. PERCENTAGE INFORMATION
The following table presents certain categories of Rogers, Casey & Associates,
Inc.'s financial data as a percentage of net revenues for fiscal 1995, 1994,
1993 and 1992 and for the three months ended March 31, 1996 and 1995.
<TABLE>
<CAPTION>
Percentage of Net Revenues
------------------------------------------------------------------------
Three Months
Ended March 31 Year Ended December 31
------------------------- ------------------------------------------
1996 1995 1995 1994 1993
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0% 100.0%
Operating Expenses:
Compensation and Benefits 61.2% 74.8% 65.8% 66.5% 71.1%
Selling, General and Administrative 34.1% 35.1% 38.4% 35.2% 29.3%
---------- ---------- ---------- ---------- ----------
Total Operating Expenses 95.3% 109.9% 104.2% 101.7% 100.4%
---------- ---------- ---------- ---------- ----------
Operating Income (Loss) 4.7% -9.9% -4.2% -1.7% -0.4%
Interest Expense (Income) 1.3% 0.7% 0.8% 0.2% -0.1%
---------- ---------- ---------- ---------- ----------
Income (Loss) Before Income Taxes 3.4% -10.6% -5.0% -1.9% -0.3%
Income Tax (Benefit) 1.9% -0.8% -0.4% -0.5% 0.1%
---------- ---------- ---------- ---------- ----------
Net Income (Loss) 1.5% -9.8% -4.6% -1.4% -0.4%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
</TABLE>
18.
<PAGE>
RCA MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION AND ANALYSIS SHOULD BE READ IN CONNECTION WITH
RCA'S CONSOLIDATED FINANCIAL STATEMENTS AND NOTES THERETO INCLUDED IN THE
MEMORANDUM AS ANNEX A.
THREE MONTHS ENDED MARCH 31 1996 COMPARED TO THREE MONTHS ENDED MARCH 31, 1995
REVENUES
Total revenues increased $1,004,906 or 29.8% for the three months
ended March 31, 1996 from the three months ended March 31, 1995. The revenue
increase was attributable to several factors. Revenues generated from RCA's
traditional retainer and project business grew by $500,000 (30%) reflecting a
continued strong growth rate in the firm's core business. Revenues generated
from the Manager Services business unit increased $200,000 (30%) due to the
increased demand by the investment management industry for such services.
Revenues generated from RCA's assets-based fee businesses increased $400,000
(14%) due to increased assets under management. Offsetting these increases was
$100,000 received in 1995 for a corporate life insurance policy maintained on
one of RCA's senior employees who passed away in late 1994.
OPERATING EXPENSES
COMPENSATION & BENEFITS. The $153,525 increase in compensation and
benefits or 6% from the three-month period ended March 31, 1996 over the three-
month period ended March 31, 1995 is due to two factors. Net employee headcount
increased by 12 (15%) reflecting the need to meet the expanding business
opportunities. This headcount increase plus employee merit increases resulted
in compensation and benefits to increase $300,000 (17%). Offsetting this
increase is a $100,000 (20%) decrease in the first quarter accrued bonus
relative to the three months ended March 31, 1995.
SELLING, GENERAL & ADMINISTRATIVE. S, G & A cost increased $310,720
or 26.3% from the three-month period ended March 31, 1995. This increase is
primarily due to the continued development and marketing costs associated with
the InvestWorks product which increased $200,000 as well as $100,000 spent on
professional costs related to our prospective merger.
FISCAL YEAR 1995 COMPARED TO FISCAL YEAR 1994
REVENUES
Total revenues increased $3,321,627 or 26.7% in fiscal 1995 over
fiscal 1994. The revenue increase was attributable to several factors. The
increasing need for investment firms to look for ways to better manage their
businesses led to a $1.2 million (73%) increase in the revenues generated by
Manager Services. Fees generated from assets under management increased
$900,000 (42%). Revenues generated from RCA's traditional retainer and project
business grew by $1.1 million (17%) reflecting RCA's continued success at
attracting new business. Finally, RCA generated $100,000 in revenues from its
new software subscription program, InvestWorks.
OPERATING EXPENSES
COMPENSATION & BENEFITS. The $2,099,029 increase in compensation and
benefits or 25.4% over fiscal 1994 is due to two factors. Net employee
headcount increased by 12 (14%), reflecting the need to meet the increased
client workload. This headcount increase plus employee merit increases resulted
in $1.0 million (14%) of the increase. In addition, bonuses paid to employees
increased $1.1 million (90%) reflecting the fact that bonuses paid in 1994 were
significantly reduced (see 1994 explanation) and that the 1995 bonuses were
brought in line with the competitive market.
SELLING, GENERAL & ADMINISTRATIVE. S, G & A costs increased
$1,672,436 or 38.2% in fiscal 1995 over fiscal 1994. This increase was
primarily the result of $1.2 million spent on the development and initial launch
of RCA's software program InvestWorks. Exclusive of these costs, total S, G & A
costs only increased $500,000 (6%), despite a revenue increase of 26.7%. This
was a direct result of management's intention to hold down these costs as much
as possible so that investments could be made in the InvestWorks product as well
as increasing the employee base of the firm.
19.
<PAGE>
FISCAL 1994 COMPARED TO FISCAL 1993
REVENUES
Total revenues increased $2,252,406 or 22.1% in fiscal 1994 over
fiscal 1993. The revenue increase was primarily attributable to several
factors. In 1994, RCA recognized the increasing potential of providing
strategic consulting advice to the Investment Management Industry and the
potential to provide consulting services relating to alternative types of
investments and niche investment products. As a result, RCA committed increased
resources and management time to grow the Manager Services, Alternative
Investment and Strategic Investment businesses. The primary reasons for the
increase in revenues resulted from Manager Services increasing revenues by
$400,000 (27%), Alternative Investments increasing revenue by $400,000 (36%) and
Strategic Investments increasing revenues by $300,000 (50%). Revenues generated
from RCA's traditional retainer and project business grew by $1 million (18%)
reflecting RCA's reputation in the industry.
OPERATING EXPENSES
COMPENSATION & BENEFITS. The $1,022,250 increase in compensation and
benefits or 14.1% over fiscal 1993 is the result of a combination of factors.
Net employee headcount increased by 15 (22%) due to the commitment to build the
various business units to meet the increases in their businesses. This
headcount increase plus normal merit increases resulted in an increase in base
compensation and benefits of $1.5 million (26%). Offsetting this increase was a
decrease in bonuses paid to employees of $500,000 (28%).
SELLING, GENERAL & ADMINISTRATIVE. S, G & A costs increased
$1,401,099 or 47% over fiscal 1993. This increase was primarily the result of
investments RCA made in 1994 in order to strengthen the business as a whole.
The principal reasons for this change included investment increases of $300,000
(20%) in marketing and promotion to better promote the image of the firm,
$200,000 (40%) for travel and entertainment primarily in the areas of new
business generation, $500,000 (60%) for rent, supplies and depreciation in order
to move the firm to a new facility providing 66% more space and $200,000 (100%)
in outside consultants in order to provide needed manpower until full time
employees could be hired and to provide specific expertise.
BUSINESS OF RCA
GENERAL
RCA is in the business of providing institutional investment services.
It has worked with institutional investors -- including corporations, public
funds, endowments, foundations, other large assets pools, and investment
management organizations -- to design, implement, and monitor investment
programs since 1976. The corporate headquarters of RCA are in Darien,
Connecticut. RCA has approximately 130 plan sponsor clients with assets in
excess of $300 billion and roughly 30 investment manager clients managing over
$300 billion in assets.
Defined benefit consulting to pension funds was the original focus of
RCA in 1976. Since then, RCA has expanded its business units.
Today RCA is composed of five primary business groups: Investment
Consulting; Fund Investments; Alternative Investments; Manager Services, and
InvestWorks. A Research Group focuses on the coverage of asset classes and
managers and works directly with each of the foregoing business groups.
The Investment Consulting Group helps plan sponsor and wholesale
distribution clients create, implement, and monitor efficient investment
programs. Specifically, RCA makes recommendations to clients on asset
allocation (in classes such as U.S. stocks, international bonds, real estate,
etc.) and identifies and hires qualified investment managers to meet these
objectives. RCA monitors the performance of the investment managers and service
providers against the investment objectives and portfolio benchmarks on an on-
going basis and reports the results formally on a quarterly basis. In addition,
RCA serves as a resource on all investment issues and activities.
The Fund Investments and Alternative Investments Groups were created
to help clients invest money in niche opportunities in both the public and
private markets, respectively. Both groups derive significant amounts of
revenue from assets under management. RCA works with clients on a discretionary
(Emerging Markets
20.
<PAGE>
and MicroCap Funds) and non-discretionary (or advisory) basis. Investment
specialists cover emerging markets, venture capital, LBOs, oil and gas, and real
estate.
RCA's Manager Service Group provides consulting on business strategy
to U.S. and foreign investment management companies. Services include strategic
business planning, product assessment and competitive positioning, client
service strategy, marketing and distribution strategy, and mergers and
acquisitions. The demand for these services has been growing as the investment
industry faces macro issues such as industry maturation, consolidation,
globalization, and technology advancements.
Beginning in September, 1995, RCA's proprietary database has been
publicly available in a new software product called InvestWorks. This product
delivers a simple and organized format that enables investment managers,
consultants, and plan sponsors to compare investment manager performance and to
conduct manager searches.
The Research Group is made up of specialists who have expertise in and
responsibility for coverage of asset classes and managers. The Research Group
interviews over 1,200 portfolio managers annually, and analyzes investment
firms' processes and styles as well as the dynamics of the capital markets.
THE INDUSTRY
The U.S. investment industry has evolved and grown rapidly over the
past decade. According to Greenwich Associates, the large pension fund market
(i.e., corporate and public funds and endowments with over $100 million in
assets) has grown from approximately $900 billion in 1984 to almost $3 trillion
in 1995. The number of firms (i.e., investment managers, bank custodians,
investment management consultants, actuaries, etc.) providing investment-related
services and the number of products and asset classes available to institutional
investors have also increased dramatically.
This changing landscape has created opportunities for institutional
investors such as corporate and public pension funds, endowments, foundations,
and hospitals to earn higher returns and diversify their portfolios across a
variety of investment strategies and products. The result is greater challenges
in designing the overall investment program and selecting the best investment
opportunities. In management's judgment, major factors which motivate these
investors to use a consultant for assistance with decisions such as asset
allocation and manager search and selection include: (a) the need for additional
resources due to downsizing of in-house staffs; (b) heightened concern about
risk; (c) the need for directed advice; and, (d) the need for someone who can
serve as a catalyst, facilitator, idea generator or gatekeeper.
Revenues in the consulting industry are generated from retainer
relationships and project work. They are based on the size and complexity of
the fund, and may be a fixed amount or a percentage of the fund's assets (in
basis points).
COMPETITION
RCA competes with a large number of investment service firms. The
types of competitors include independent consulting, custodian, actuarial,
benefits consulting, and investment management firms as well as banks and mutual
fund companies. Many of these organizations have substantially greater capital
and other resources and some of which offer a wider range of financial services
than RCA.
RCA believes that the most important factors affecting its competitive
position in the investment consulting industry are the abilities and reputations
of the investment professionals and the continuing development of new investment
strategies and information technologies.
Barriers to entry are low and firms are relatively long-lived in the
investment services business. A new firm has very low capital requirements.
Maintaining the business of RCA requires the continued advancement of
competitive competencies to add value through proprietary data, advanced
technologies, global coverage, and superior professional servicing.
21.
<PAGE>
DESCRIPTION OF RCA STOCK
IN GENERAL
As of the date hereof, RCA's authorized capital stock consists of
200,000 shares of Common Stock, of which 96,979 shares are outstanding. All
outstanding shares are subject to the restrictions contained in the
Shareholders' Agreement, by and among RCA and certain Shareholders, dated
December 1, 1992 (the "Shareholders' Agreement"). The following is a summary
of the terms of the RCA Common Stock which does not purport to be complete and
is subject to and qualified in its entirety by reference to the RCA Certificate
of Incorporation, as amended ("Certificate"), Bylaws and Shareholders'
Agreement.
COMMON STOCK
Holders of RCA Common Stock are entitled to one vote for each share
held of record on all matters submitted to a vote of shareholders. Holders do
not have a right to cumulate their votes. In all matters which require
Shareholder approval, other than the election of directors, there must be, in
addition to any quorum or voting requirements imposed by law, a quorum
consisting of sixty-six and two-thirds percent (66-2/3%) of the holders of the
outstanding RCA Common Stock, either in person or by proxy at any meeting at
which such matters shall be considered, and the approval of sixty-six and two-
thirds percent (66-2/3%) of the votes cast at such meeting.
Holders of RCA Common Stock are entitled to receive ratably such
dividends, if any, as may be declared by the RCA Board out of funds legally
available therefor. However, before payment of any dividends, the RCA Board may
set aside out of any funds available for the payment of dividends such sum(s) as
the RCA Board may, in its absolute discretion, deem proper as a reserve fund to
meet contingencies or for equalizing dividends or to repair or maintain property
or to serve any other purpose conducive to RCA's interests.
Upon the liquidation, sale or winding up of RCA, the holders of RCA
Common Stock are entitled to share ratably in all assets remaining after payment
of liabilities. Holders of RCA Common Stock have no preemptive rights or rights
to convert their RCA Common Stock into any other securities. There are no
redemption or sinking fund provisions applicable to the RCA Common Stock. All
outstanding shares of RCA Common Stock are fully paid and nonassessable.
RCA Common Stock is subject to the transfer restrictions and
repurchase obligations set forth in the Shareholders' Agreement. Additionally,
all RCA Common Stock received pursuant to the exercise of any options granted
pursuant to the RCA Option Plan are subject to the Shareholders' Agreement and,
thus, restricted.
The sale or transfer of RCA Common Stock in violation of the terms of
the Shareholders' Agreement is void and of no effect. Permitted transfers
include (i) the transfer of shares by a Shareholder to one or more of the
Shareholder's children, provided that (a) such child has completed three full
years of employment with RCA, and (b) upon making the gift, the aggregate number
of RCA Common Stock held by such child (excluding shares received by the child
from RCA for being a key employee) shall not exceed five percent (5%) of the
total number of issued and outstanding shares of RCA Common Stock at such time,
and (ii) the assignment of shares, or the right to acquire shares, by a
Shareholder who is a participant in an RCA pension, profit sharing or other
retirement plan, to the administrator of such plan, subject to certain
requirements set forth in the Shareholders' Agreement. Additionally, a
Shareholder may transfer or sell RCA Common Stock if the holders of more than
50% of the shares subject to the Shareholders' Agreement consent in writing to
such transfer or sale.
Subject to certain requirements set forth in Section 3 of the
Shareholders' Agreement, a holder of more than 10% of the issued and outstanding
RCA Common Stock (a "Principal Shareholder") who is permitted, by shareholder
approval, to sell all of his or her shares, may compel the other Shareholders to
sell their shares to such person. However, a Principal Shareholder, permitted
by shareholder approval, to sell his or her shares, shall not accept an offer to
sell his or her shares until a similar offer upon the same terms and conditions
has been made to each Shareholder for the purchase of all or the same pro rata
portion of his or her shares of RCA Common Stock.
Additionally, and subject to certain terms and conditions set forth in
the Shareholders' Agreement, upon the happening of specified events, referred to
in the Shareholders' Agreement as "Mandatory Purchase Events," RCA has the
obligation to purchase all or a portion of outstanding RCA Common Stock. The
Mandatory Purchase Events include, without limitation, the death of a
Shareholder, the retirement of a Shareholder as an employee of RCA, the
termination of the employment of a Shareholder, the permanent disability of a
Shareholder, the performance
22.
<PAGE>
of services by a Shareholder, with or without compensation, for a competitor of
RCA and the personal bankruptcy of a Shareholder.
COMPARISON OF SHAREHOLDER RIGHTS
If the Merger is consummated, all the Shareholders (other than those who
properly exercise their dissenters' rights) immediately prior to the Effective
Date will become shareholders of BARRA. The following is a summary of the
material differences between the rights and other terms related to the capital
stock of BARRA, a California corporation, and such rights and terms related to
the capital stock of RCA, a Delaware corporation. These differences also arise
from the various provisions of the RCA Certificate and Bylaws, and the BARRA
Articles and Bylaws.
AUTHORIZED STOCK
BARRA CAPITAL STOCK. Pursuant to BARRA's Articles, BARRA authorized
capital stock consists of 40,000,000 shares of BARRA Common Stock and 10,000,000
shares of preferred stock ("BARRA Preferred Stock").
THE BARRA COMMON STOCK. Subject to preferences that may be applicable
to any BARRA Preferred Stock outstanding at the time, the holders of outstanding
shares of the BARRA Common Stock are entitled to receive ratably dividends out
of assets legally available therefor at such times and in such amounts as the
BARRA Board may from time to time determine. Each shareholder is entitled to
one vote for each share of the BARRA Common Stock held. Except as may be
required by applicable law, the vote required by shareholders to take action is
the affirmative vote of a majority of the shares represented and voting at a
duly held meeting at which a quorum is present. Shareholders may each cumulate
their votes for the election of directors so long as at least one shareholder
has given notice at the meeting prior to the voting of that shareholder's
intention to cumulate votes and the candidate shall have been placed in
nomination prior to the voting of the shareholder's vote to cumulate his or her
vote. Holders of the BARRA Common Stock are not entitled to preemptive rights
or conversion rights and the BARRA Common Stock is not subject to redemption.
Upon liquidation, dissolution or winding up of BARRA, holders of Common Stock
are entitled to share ratably in the distribution of all assets remaining after
payment of BARRA's liabilities and the liquidation preference of any outstanding
BARRA Preferred Stock. All the outstanding shares of the BARRA Common Stock are
fully paid and nonassessable. The rights, preferences and privileges of holders
of the BARRA Common Stock are subject to, and may be adversely affected by, the
rights of the holders of any series of BARRA Preferred Stock which BARRA may
issue in the future.
As of May 31, 1996, 7,840,364 shares of the BARRA Common Stock were
issued and outstanding.
BARRA PREFERRED STOCK. The BARRA Board is authorized, subject to any
limitations prescribed by California law, to provide for the issuance of up to
10,000,000 shares of BARRA Preferred Stock in one or more series, to establish
from time to time the number of shares to be included in each such series, to
fix or alter the rights, preferences and privileges of the shares of each wholly
unissued series and any restrictions thereon and to increase or decrease the
number of shares of any such series (but not below the number of shares of such
series then outstanding) without any further vote or action by the shareholders.
The BARRA Board may authorize and issue BARRA Preferred Stock with voting,
conversion or other rights that could adversely affect the voting power or other
rights of the holders of the BARRA Common Stock. In addition, the issuance of
BARRA Preferred Stock may have the effect of delaying, deferring or preventing a
change in control of BARRA. BARRA has no current plans to issue any shares of
BARRA Preferred Stock.
As of the date hereof, no shares of BARRA Preferred Stock have been
issued.
RCA CAPITAL STOCK. As of the date hereof, RCA's authorized capital
stock consists of 200,000 shares of Common Stock, of which 96,979 shares are
outstanding. All outstanding shares are subject to the restrictions contained
in the Shareholders' Agreement. Of the shares of outstanding RCA Common Stock,
1,167 shares are Common Stock subject to additional restrictions pursuant to the
RCA 1993 Stock Bonus Plan. See "Description of RCA Stock," above.
23.
<PAGE>
DIRECTORS
NUMBER AND TERM. Pursuant to BARRA's Articles and Bylaws, the number
of directors of BARRA shall not be less than four (4) nor more than seven (7),
the actual number to be five (5) until changed by amendment of the BARRA
Articles or Bylaws. The RCA Bylaws provide that the number of directors shall
not be less than one (1) nor more than nine (9), the actual number of which is
to be fixed by the Board or Shareholders.
RESIGNATION AND REMOVAL. The BARRA Bylaws provide that any director
may resign upon giving written notice to the chairman of the board, the
president, secretary or BARRA Board. The BARRA Board may remove any director
who has been declared of unsound mind by order of court, or who has been
convicted of a felony. Any or all of the directors may be removed without cause
by an affirmative vote of a majority of the outstanding shares entitled to vote
at an election of directors, provided, however, that unless the entire board is
removed, no individual director may be removed when the votes cast against
removal, or not consenting in writing to such removal, would be sufficient to
elect such director if voted cumulatively at an election at which the same total
number of votes were cast and the entire number of directors authorized at the
time of the director's most recent election were then being elected.
The RCA Bylaws provide that, unless specified by contract, any
director may resign or be removed at any time. A director intending to resign
shall give written notice to RCA's president or secretary. Removal of a
director, with or without cause, may be effected by an affirmative vote of the
majority of shares entitled to vote.
Delaware law permits a classified board of directors, in which case,
absent a charter provision to the contrary, directors may be removed only for
cause. However, the RCA Board is not classified. Delaware and California law
are similar in allowing the removal of directors by shareholder vote, with and
without cause, subject to certain qualifications.
VACANCIES. Section 305 of the California Corporations Code provides
that, unless otherwise provided in the articles of incorporation or bylaws,
vacancies on the board may be filled by the approval of the board. However, a
vacancy created by removal of a director may be filled by the board only if so
authorized by the corporation's articles of incorporation or a bylaw adopted by
the corporation's shareholders. Shareholders may elect a director at any time
to fill any vacancy not filled by the directors. Certain other provisions under
Section 305 come into play if a greater number of directors have been elected by
other directors than by the shareholders. Under Delaware law, vacancies and
newly created directorships may be filled by a majority of directors then in
office unless otherwise provided in the certificate of incorporation or bylaws.
The BARRA Bylaws provide that, except for a vacancy created by removal
of a director, vacancies in the board may be filled by a majority of the
remaining directors, whether or not less than a quorum, or by a sole remaining
director, and each director so elected shall hold office until the next annual
meeting of shareholders and until a successor has been elected. The
shareholders shall elect a director to fill a vacancy created by removal, and
shareholders may elect a director at any time to fill a vacancy not filled by
the board.
The RCA Bylaws provide that any vacancy occurring in the RCA board,
including a vacancy resulting from an increase in the number of directors, may
be filled by an affirmative vote of a majority of the remaining directors, even
if less than a quorum of the board. A director elected to fill a vacancy shall
be elected for the unexpired term of his or her predecessor and until his or her
successor is duly chosen.
SHAREHOLDER ACTION BY WRITTEN CONSENT
The BARRA Bylaws provide that, generally, any action that may be taken
at a meeting of shareholders may be taken without a meeting and prior notice if
a consent in writing is signed by the holders of outstanding shares having no
less than the minimum number of votes that would be necessary to take such
action at a meeting at which all shares entitled to vote thereon were present
and voted. Directors may not be elected by written consent except by unanimous
written consent of all shares entitled to vote at their election, provided,
however, that when filling a vacancy not filled by directors, except for a
vacancy created by removal, a director may be elected by written consent of a
majority of outstanding shares entitled to vote.
Section 228 of the Delaware law states that unless otherwise provided
in the certificate of incorporation, any stockholder action may be taken without
a meeting if a consent in writing, setting forth the action so taken, is signed
by the holders of the outstanding shares having not less than the minimum number
of votes which would be necessary to authorize or take the action at a meeting
at which all shares entitled to vote were present and
24.
<PAGE>
voted. The RCA Certificate does not prohibit the taking of actions by the
Shareholders by written consent in conformance with Section 228.
AMENDMENT TO ARTICLES
Section 902 of the California Corporations Code provides that, after
the issuance of shares, the articles of incorporation of a corporation may
generally only be amended by approval of both the board of directors and by the
outstanding shares.
The RCA Certificate provides that the certificate of incorporation may
be amended as provided by Delaware law. To amend a corporation's certificate of
incorporation after payment for shares has been received, the Delaware law
requires the recommendation of the corporation's board of directors and, unless
the corporation's certificate of incorporation provides for a greater vote,
approval by each of (1) a majority of the votes entitled to be cast on the
amendment by each voting group with respect to which the amendment creates
dissenters' rights; and (2) a majority of the votes cast by every other voting
group entitled to vote on the amendment, and a certificate executed setting
forth the amendment and certifying that such amendment has been duly adopted.
Amendment of the RCA Certificate would require approval of at least sixty-six
and two-thirds percent (66 2/3%) of the stockholder votes.
AMENDMENT TO BYLAWS
The BARRA Bylaws may be amended by an affirmative vote of a majority
of outstanding shares entitled to vote (or written assent of shareholders
entitled to vote). Moreover, the BARRA Bylaws may be amended, other than
provisions changing the maximum or minimum number of authorized directors or
changing from a variable or fixed number of directors or vice versa, by the
BARRA Board.
The RCA Bylaws provide that the Bylaws may be amended, altered or
repealed by the Shareholders at any annual or special meeting or by the RCA
Board at any meeting, provided that notice of such amendment, repeal or adoption
of new bylaws be included in the notice of such meeting.
LIABILITY OF DIRECTORS; INDEMNIFICATION
Section 309 of the California Corporations Code sets forth the
standard of care applicable to directors: that each director shall perform his
or her duties "...in good faith, in a manner such director believes to be in
the best interests of the corporation and its shareholders and with such care,
including reasonable inquiry, as an ordinarily prudent person in a like position
would use under similar circumstances." Section 309 also sets forth sources of
information and opinions, etc. which may be relied upon by directors in the
performance of their duties.
Delaware has no statutory provisions setting forth the standard of
care applicable to directors. However, Delaware court cases have set forth as a
general standard that directors must use such care which ordinarily careful and
prudent men would use in similar circumstances.
California and Delaware have similar laws respecting indemnification
by a corporation of its officers, directors, employees and other agents. The
laws of both states permit a corporation to adopt a provision in its articles of
incorporation or certificate of incorporation eliminating liability of a
director to the corporation or its shareholders for monetary damages for breach
of the director's fiduciary duty of care. There are nonetheless certain
differences between the laws of the two states respecting indemnification and
limitation of liability.
California law does not permit the elimination of monetary liability
where such liability is based on: (i) intentional misconduct or knowing and
culpable violations of law; (ii) acts or omissions that a director believes
contrary to the best interests of the corporation or its shareholders, or that
involve the absence of good faith on the part of the director; (iii) receipt of
an improper personal benefit; (iv) acts or omissions that show reckless
disregard for the director's duty to the corporation or its shareholders, where
the director in the ordinary course of performing a director's duties should be
aware of a risk of serious injury to the corporation or its shareholders; (v)
acts or omissions that constitute an unexcused pattern of inattention that
amounts to an abdication of the director's duty to the corporation and its
shareholders; (vi) interested transactions between the corporation and a
director in which a director has a material financial interest; or (vii)
liability for improper distributions, loans or guarantees.
Delaware law does not permit the elimination or limitation of a
director's monetary liability for: (i) breaches of the director's duty of
loyalty to the corporation or its stockholders; (ii) acts or omissions not in
good faith or involving intentional misconduct or knowing violations of law;
(iii) the payment of unlawful dividends or unlawful
25.
<PAGE>
stock repurchases or redemptions; or (iv) transactions in which the director
received an improper personal benefit. The limitation of liability provisions
in a Delaware corporation also may not limit a director's liability for
violations of, or otherwise relieve the corporation or its directors from the
necessity of complying with, federal or state securities laws, or affect the
availability of nonmonetary remedies such as injunctive relief or rescission.
California law permits indemnification of expenses incurred in
derivative or third-party actions, except that with respect to derivative
actions (i) no indemnification may be made without court approval when a person
is adjudged liable to the corporation in the performance of that person's duty
to the corporation or its shareholders, unless a court determines such person is
entitled to indemnity for expenses, and then such indemnification may be made
only to the extent that the court so determines, and (ii) no indemnification may
be made without court approval in respect of amounts paid or expenses incurred
in settling or otherwise disposing of a threatened or pending action or in
respect of amounts incurred in defending a pending action which is settled or
otherwise disposed of without court approval.
Indemnification is permitted in California law only for acts taken in
good faith and believed to be in the best interests of the corporation and its
shareholders, as determined by a majority vote of a disinterested quorum of the
directors, independent legal counsel (if a quorum of independent directors is
not obtainable), a majority vote of a quorum of the shareholders (excluding
shares owned by the indemnified party), or the court handling the action.
California law requires indemnification when the individual has successfully
defended the action on the merits (as opposed to Delaware law which requires
indemnification relating to any successful defense, whether on the merits or
otherwise).
Delaware law generally permits indemnification of expenses (including
attorneys' fees) incurred in the defense or settlement of a derivative or third-
party action, provided there is a determination by a disinterested quorum of the
directors, by independent legal counsel or by a majority vote of a quorum of the
stockholders, that the person seeking indemnification acted in good faith and in
a manner reasonably believed to be in or (in contrast to California law) not
opposed to the best interests of the corporation. Without court approval,
however, no indemnification may be made in respect of any derivative action in
which such person is adjudged liable for negligence or misconduct in the
performance of his or her duty to the corporation. Delaware law also requires
indemnification of expenses when the individual being indemnified has
successfully defended the action on the merits or otherwise.
Both California and Delaware corporations may include in their
articles of incorporation a provision which extends the scope of indemnification
available to directors, officers and other agents through agreements, bylaws or
other corporate action beyond that specifically authorized by statute.
The BARRA Articles provide that liability of the directors of the
company will be eliminated to the fullest extent permissible under California
law. They further authorize the corporation to indemnify corporate agents for
breach of duty to the corporation and its stockholders through bylaw provisions
or agreements with said agents, in excess of the indemnification otherwise
permitted by Section 317 of the California Corporations Code. The BARRA Bylaws
provide for indemnification to the fullest extent possible under Section 317 and
provide that the corporation shall advance the expenses reasonably expected to
be incurred by the indemnified agent upon the receipt of an undertaking pursuant
to Section 317(f).
The RCA Certificate provides that no RCA director shall have any
personal liability to the Corporation or its stockholders for any monetary
damages for breach of fiduciary duty as director, excluding, however, liability
for (i) any breach of the director's duty of loyalty to the corporation or its
stockholders; (ii) acts or omissions not in good faith or involving intentional
misconduct or knowing violations of law; (iii) the payment of unlawful dividends
or unlawful stock repurchases or redemptions; or (iv) transactions in which the
director received an improper personal benefit.
CUMULATIVE VOTING
The BARRA Bylaws provide that cumulative voting is permitted with
respect to the election of directors, provided that at least one shareholder has
given notice at the meeting prior to the voting of that shareholder's intention
to cumulate votes and the candidate shall have been placed in nomination prior
to the voting of the shareholder's vote to cumulate his vote.
Section 708 of the California Corporations Code requires cumulative
voting for directors, provided that "listed corporations" may amend their
articles of incorporation to eliminate cumulative voting. Delaware law
26.
<PAGE>
does not require cumulative voting. Cumulative voting is available to
shareholders of a Delaware corporation only if authorized in the certificate of
incorporation.
SUPERMAJORITY VOTING
There is no provision in the BARRA Bylaws or Articles requiring or
providing for supermajority voting.
The RCA Certificate, as amended, requires that in all matters which
require stockholder approval, other than the election of directors, there shall
be required, in addition to any other quorum or voting requirements, imposed by
law, a quorum consisting of sixty-six and two-thirds percent (66 2/3%) of the
holder of the outstanding RCA Common Stock, either in person or by proxy, at any
meeting of shareholders at which such matters shall be considered, and the
approval of sixty-six and two-thirds percent (66 2/3%) of the votes cast at the
meeting at which such quorum is present.
27.
<PAGE>
EXHIBIT 99.5
<PAGE>
ANNEX A
<PAGE>
INDEX TO FINANCIAL STATEMENTS OF ROGERS CASEY & ASSOCIATES, INC. AND
SUBSIDIARIES
INTERIM STATEMENTS FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED):
Condensed Consolidated Balance Sheet, March 31, 1996
Condensed Consolidated Statement of Operations, For the three months
ended March 31, 1996 and 1995
Condensed Consolidated Statement of Cash Flows, For the three months
ended March 31, 1996 and 1995
Notes to Condensed Consolidated Financial Statements
ANNUAL STATEMENTS FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994:
Report of Independent Accountants
Consolidated Balance Sheets, December 31, 1995 and 1994
Consolidated Statements of Operations, for the years ended
December 31, 1995 and 1994
Consolidated Statements of Changes in Stockholders' Equity,
For the years ended December 31, 1995 and 1994
Consolidated Statements of Cash Flows, For the years ended
December 31, 1995 and 1994
Notes to Consolidated Financial Statements
ANNUAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 1993 (UNAUDITED):
Consolidated Balance Sheet, December 31, 1993
Consolidated Statement of Operations, For the year ended
December 31, 1993
Consolidated Statement of Changes in Stockholders'
Equity, For the year ended December 31, 1993
Consolidated Statement of Cash Flows, For the
year ended December 31, 1993
Notes to Consolidated Financial Statements
<PAGE>
ROGERS, CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
INTERIM CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEET, MARCH 31, 1996
(UNAUDITED)
ASSETS:
Current Assets:
Cash and cash equivalents $ 522,179
Receivable from employees 115,398
Accounts receivable 1,695,596
Unbilled receivables 1,988,821
Prepaid expenses & other 205,593
----------
Total current assets 4,527,587
----------
Fixed Assets:
Office Equipment 1,423,670
Furniture & Fixtures 893,871
Leasehold Improvements 314,890
----------
2,632,431
Less, Accumulated depreciation and amortization 1,681,635
----------
Total fixed assets, net 950,796
----------
Intangible assets:
Organization costs, net of accumulated amortization of $117,495 0
Goodwill, net of accumulated amortization of $86,296 294,292
----------
Total intangible assets 294,292
----------
Other non-current assets 679,388
----------
Total assets $6,452,063
----------
----------
LIABILITIES and STOCKHOLDERS' EQUITY:
Current Liabilities:
Short-term debt $1,825,000
Long-term debt, current portion 466,938
Notes payable to related parties, current portion 154,779
Accounts payable 713,038
Accrued expenses 1,725,986
Deferred revenues 362,950
----------
Total current liabilities 5,248,691
Deferred Taxes 30,444
Long-term debt 0
Deferred rent payable 253,933
Note payable to related parties 125,407
----------
Total Liabilities 5,658,475
----------
Stockholders' equity:
Common Stock, $.10 par value; 200,000 shares authorized;
112,156 shares issued; 100,169 shares outstanding 11,215
Capital in excess of par 3,046,895
Accumulated deficit (1,145,692)
Treasury Stock, at cost, 11,987 shares (1,075,841)
Unamortized deferred compensation (42,989)
----------
Total stockholders' equity 793,588
----------
Total liabilities and stockholders' equity $6,452,063
----------
----------
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
1996 1995
---------- ----------
Revenues $4,378,256 $3,373,350
---------- ----------
Operating Expenses:
Compensation and benefits 2,678,013 2,524,488
Selling, general and administrative 1,493,345 1,182,625
---------- ----------
Total operating expenses 4,171,358 3,707,113
---------- ----------
Operating income (loss) 206,898 (333,763)
Interest income 2,186 7,365
Interest expense (60,477) (29,293)
---------- ----------
Income (loss) before income taxes 148,607 (355,691)
Income tax benefit (expense) (85,000) 26,090
---------- ----------
Net income (loss) $63,607 ($329,601)
---------- ----------
---------- ----------
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------- ----------
<S> <C> <C>
Cash flows from operating activities:
Net income (loss) $63,607 ($329,601)
Adjustments to reconcile net income (loss) to cash
provided by (used in) operating activities:
Depreciation and amortization 83,733 97,010
Increase in vested options and common stock 59,000 56,070
Changes in current assets and liabilities:
Decrease (increase) in receivable from employees 26,693 64,377
Decrease (increase) in accounts receivable (146,320) (139,611)
Decrease (increase) in unbilled receivables 88,106 (36,934)
Decrease (increase) in prepaid expenses and other 133,412 (89,246)
Increase (decrease) in accounts payable (233,971) (324,061)
Increase (decrease) in accrued expenses (71,254) 152,580
Increase (decrease) in deferred revenue 14,609 8,034
Decrease (increase) in other non-current operating assets 13,455 (33,844)
---------- ----------
Net cash provided by (used in) operating activities 31,070 (575,226)
---------- ----------
Cash flows from investing activities:
Acquisition of fixed assets (4,458) (41,201)
---------- ----------
Net cash used by investing activities (4,458) (41,201)
---------- ----------
Cash flows from financing activities:
Increase in short-term debt and long-term debt, current portion 372,765 375,000
Repayment of long-term debt (27,703) (27,703)
Repayment of note payable to related party (12,404) 0
Proceeds from subscribed stock notes receivable 0 92,578
---------- ----------
Net cash provided by financing activities 332,658 439,875
---------- ----------
Net increase (decrease) in cash and cash equivalents 359,270 (176,552)
Cash and cash equivalents, January 1, 162,909 136,040
---------- ----------
Cash and cash equivalents, March 31, $522,179 ($40,512)
---------- ----------
---------- ----------
Supplemental disclosure of cash flow information:
Cash paid during the three months for:
Interest $68,755 $21,073
Income taxes $3,000 $2,700
</TABLE>
<PAGE>
ROGERS, CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The accompanying condensed consolidated financial statements include
Rogers, Casey & Associates, Inc. (the "Company") and its subsidiaries,
Rogers, Casey Consulting, Inc., Rogers, Casey Alternative Investment,
Inc., Rogers, Casey Investment Advisors, Inc. and Rogers, Casey
Manager Services, Inc.
In the opinion of management, the accompanying unaudited condensed
consolidated financial statements include all adjustments (consisting
of normal recurring entries) necessary to present fairly the financial
position of the Company as of March 31, 1996 and 1995 and the results
of its operations and cash flows for the periods presented in
conformity with generally accepted accounting principles. The results
of operations for each interim period is not necessarily indicative of
results of operations for a full year. It is suggested that these
condensed consolidated financial statements be read in conjunction
with Management's Discussion and Analysis of Financial Condition and
Results of Operations and the annual financial statement.
<PAGE>
COOPERS & LYBRAND L.L.P.
ROGERS CASEY & ASSOCIATES, INC. and SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<PAGE>
[LETTERHEAD]
REPORT of INDEPENDENT ACCOUNTANTS
To the Stockholders' of
Rogers Casey & Associates, Inc. and Subsidiaries:
We have audited the accompanying consolidated balance sheets of Rogers Casey &
Associates, Inc. and Subsidiaries (the "Company") as of December 31, 1995 and
1994, and the related consolidated statements of operations, changes in
stockholders' equity, and cash flows for the years then ended. The financial
statements as of and for the year ended December 31, 1994 have been restated as
described in Note 11. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Rogers Casey &
Associates, Inc. and Subsidiaries as of December 31, 1995 and 1994, and the
consolidated results of their operations and their cash flows for the years then
ended in conformity with generally accepted accounting principles.
/s/ Coopers & Lybrand L.L.P.
New York, New York
April 2, 1996, except for Note 12,
as to which the dates are April 24 and April 25, 1996.
1
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS, DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
ASSETS: 1995 1994
---------- ----------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 162,909 $ 136,040
Receivable from employees 142,091 154,986
Accounts receivable 1,549,408 1,513,830
Unbilled receivables 2,076,927 1,419,432
Prepaid expenses and other 339,005 231,105
---------- ----------
Total current assets 4,270,340 3,455,393
---------- ----------
Fixed assets:
Office equipment 1,423,670 1,203,685
Furniture and fixtures 889,413 855,667
Leasehold improvements 314,890 299,410
---------- ----------
2,627,973 2,358,762
Less, Accumulated depreciation and amortization 1,600,280 1,210,833
---------- ----------
Total fixed assets, net 1,027,693 1,147,929
Intangible assets:
Organization costs, net of accumulated amortization of $117,345 in 1994 - 150
Goodwill, net of accumulated amortization of $83,918 and $44,403
in 1995 and 1994, respectively 296,670 336,185
---------- ----------
Total intangible assets 296,670 336,335
---------- ----------
Other non-current assets 692,843 136,095
---------- ----------
Total assets $6,287,546 $5,075,752
---------- ----------
---------- ----------
LIABILITIES and STOCKHOLDERS' EQUITY:
Current liabilities:
Short-term debt $1,475,000 $ 200,000
Long-term debt, current portion 413,289 129,996
Note payable to related parties, current portion 154,779 139,054
Accounts payable 947,009 621,710
Accrued payroll 1,164,968 707,590
Accrued expenses 632,404 506,676
Deferred revenue 348,341 634,618
---------- ----------
Total current liabilities 5,135,790 2,939,644
Deferred taxes 30,444 1,173
Long-term debt 63,383 476,672
Deferred rent payable 249,137 234,749
Note payable to related parties 137,811 245,421
---------- ----------
Total liabilities 5,616,565 3,897,659
---------- ----------
Commitments and contingencies
Stockholders' equity:
Common stock, $.10 par value; 200,000 shares authorized;
112,156 shares issued; 100,169 and 95,511 shares outstanding
at December 31, 1995 and 1994, respectively 11,215 11,215
Capital in excess of par 2,996,895 2,829,330
Common stock subscribed, 7,814 shares - (315,224)
Accumulated deficit (1,209,299) (474,956)
Treasury stock, at cost, 11,987 and 8,831 shares
at December 31, 1995 and 1994, respectively (1,075,841) (763,568)
Unamortized deferred compensation (51,989) (108,704)
---------- ----------
Total stockholders' equity 670,981 1,178,093
---------- ----------
Total liabilities and stockholders' equity $6,287,546 $5,075,752
---------- ----------
---------- ----------
</TABLE>
2
<PAGE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
1995 1994
------------ ------------
Revenues $ 15,758,226 $ 12,436,599
------------ ------------
Operating expenses:
Compensation and benefits 10,364,831 8,265,802
Selling, general and administrative 6,054,812 4,382,376
------------ ------------
Total operating expenses 16,419,643 12,648,178
------------ ------------
Operating loss (661,417) (211,579)
Interest income 27,739 38,891
Interest expense (158,793) (59,729)
------------ ------------
Loss before income taxes (792,471) (232,417)
Income tax (benefit) (58,128) (63,912)
------------ ------------
Net loss $ (734,343) $ (168,505)
------------ ------------
------------ ------------
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS of CHANGES in STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
Capital in Common Unamortized Total
Common Excess of Stock Accumulated Treasury Deferred Stockholders'
Stock Par Subscribed Deficit Stock Compensation Equity
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1993 $ 11,215 $ 2,730,839 $ (325,224) $ (306,451) $ (763,568) $ (165,419) $ 1,181,392
------------ ------------ ------------ ------------ ------------ ------------ ------------
Net loss - - - (168,505) - - (168,505)
Stock option compensation - 98,491 - - - - 98,491
Vesting of restricted stock - - - - 56,715 56,715
Proceeds from subscribed
stock notes receivable - - 10,000 - - - 10,000
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1994 11,215 2,829,330 (315,224) (474,956) (763,568) (108,704) 1,178,093
Net loss - - - (734,343) - - (734,343)
Stock option compensation - 175,505 - - - - 175,505
Treasury stock purchased - - - - (312,273) - (312,273)
Proceeds from subscribed
stock notes receivable - - 315,224 - - - 315,224
Vesting of restricted stock - - - - - 48,775 48,775
Restricted stock forfeited - (7,940) - - - 7,940 0
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1995 $ 11,215 $ 2,996,895 $ - $ (1,209,299) $ (1,075,841) $ (51,989) $ 670,981
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 1995 AND 1994
<TABLE>
<CAPTION>
1995 1994
----------- -----------
<S> <C> <C>
Cash flows from operating activities:
Net loss $ (734,343) $ (168,505)
Adjustments to reconcile net loss to cash (used in)
provided by operating activities:
Depreciation and amortization 454,199 252,203
Loss on disposal of fixed assets - 10,491
Deferred tax (benefit) provision (60,235) 1,173
Increase in vested options and common stock 224,280 155,206
Increase in deferred rent payable 14,388 234,749
Changes in current assets and liabilities:
Decrease in receivable from employees 12,895 -
(Increase) in accounts receivable (35,578) (993,451)
(Increase) in unbilled receivables (657,495) (290,109)
Increase in prepaid expenses and other (18,394) (84,449)
Increase in accounts payable 325,299 528,617
Increase in accrued expenses and payroll 583,106 581,127
(Decrease) increase in deferred revenue (286,277) 32,124
(Increase) decrease in other non-current operating assets (68,545) 21,679
----------- -----------
Net cash (used in) provided by operating activities (246,700) 280,855
----------- -----------
Cash flows from investing activities:
Acquisition of fixed assets (269,211) (986,701)
Increase in other non-current assets (510,290) (118,916)
----------- -----------
Net cash (used in) activities (779,501) (1,105,617)
----------- -----------
Cash flows from financing activities:
Increase in short-term debt and long-term debt, current portion 1,558,293 200,000
Proceeds from issuance of long-term debt - 650,000
Repayment of long-term debt (130,000) (43,332)
Reclassification of long-term debt to current (283,293) -
Issuance of note payable to related party 47,169 -
Repayment of note payable to related party (139,054) (182,691)
Proceeds from subscribed stock notes receivable 185,781 10,000
Acquisition of treasury stock (185,826) -
----------- -----------
Net cash provided by financing activities 1,053,070 633,977
----------- -----------
Net increase (decrease) in cash and cash equivalents 26,869 (190,785)
Cash and cash equivalents, beginning of year 136,040 326,825
----------- -----------
Cash and cash equivalents, end of year $ 162,909 $ 136,040
----------- -----------
----------- -----------
Supplemental disclosure of cash flow information:
Interest paid $ 135,836 $ 55,300
Income taxes paid $ 8,200 $ 5,400
</TABLE>
6
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
The accompanying notes are an integral part of the consolidated financial
statements.
7
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ORGANIZATION
Rogers Casey & Associates, Inc. (the "Company") was formed through the
acquisition of a subsidiary company of Rogers Casey & Barksdale, Inc. The
acquisition was completed by means of a tax-free reorganization finalized
on February 3, 1989.
The Company offers a broad scope of investment related services to its
clients, primarily located in the United States, who consist of pension
funds or major corporations acting on behalf of their pension funds, who
have responsibility for administering large pools of assets in pension
funds and defined contribution programs. The services include full service
investment consulting, consulting in the area of alternative investments,
special advisory programs and investment manager diagnostics.
The Company's subsidiaries are as follows:
Rogers Casey Consulting, Inc. - Provides services and consultation to
build a strong investment program to meet client goals. The firm
assists in financial planning, developing the appropriate asset mix,
conducting special studies as needed, assisting in manager and fund
selection, and monitoring performance.
Rogers Casey Alternative Investments, Inc. - Assists clients with
asset allocation and evaluation of specific investment vehicles within
the alternative asset sectors. This subsidiary offers specialized
consulting and managerial services including real estate, venture
capital, oil and gas, LBOs, and special situation funds.
Rogers Casey Investment Advisors, Inc. - Manages a limited number of
investment programs. Investment programs currently offered include:
segregated programs that follow a multiple-manager approach for
retirement, thrift and 401(k) plan assets, Fulfillment funds, Style
Funds and Development Funds.
Rogers Casey Manager Services, Inc. - Assists investment managers in
formulating strategic business plans. Also offers advisory services
to those interested in evaluating investment managers for potential
mergers and/or acquisitions.
2. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION:
The consolidated financial statements include all wholly-owned
subsidiaries. All significant intercompany balances and transactions have
been eliminated.
GENERAL:
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the dates of
CONTINUED 8
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
the financial statements and the reported amounts or revenues and expenses
during the reporting periods. Actual results may differ from those
estimates.
CONTINUED 9
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
RECLASSIFICATIONS:
Certain reclassifications were made to the 1994 financial statements to
conform to the current year presentation.
DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
The carrying amounts of cash, receivables from employees, accounts
receivable, unbilled receivables, prepaid expenses and other, accounts
payable, accrued expenses and deferred revenue approximate fair value
because of the short maturity of these items.
The carrying amounts of short-term and long-term debt, and notes payable to
related parties approximate fair value because interest rates on these
instruments change with market interest rates.
FIXED ASSETS:
Fixed assets are recorded at cost and are depreciated over five to seven
years using an accelerated method. Leasehold improvements are amortized
over the lesser of the lease terms or the estimated useful lives of the
improvements.
Expenditures for maintenance and repairs are charged to expense as
incurred. Expenditures which materially increase values, change capacities
or extend useful lives are capitalized. Upon sale or retirement, the costs
and related accumulated depreciation or amortization are eliminated from
the respective accounts and the resulting gain or loss is included in
operations.
INTANGIBLE ASSETS:
Organization costs have been amortized using the straight-line method over
five years and are fully amortized at December 31, 1995.
Goodwill represents the excess of the purchase price over the fair value of
certain net assets acquired from Berg Fiduciary Consultants, Inc. on April
27, 1990. Goodwill is being amortized on a straight-line basis over a
fifteen year period. The Company periodically reviews goodwill to assess
its recoverability and to determine whether any impairment has occurred.
In making such determination, the Company evaluates the performance, on an
undiscounted basis, of the underlying business which gave rise to such
amount.
CAPITALIZED SOFTWARE COSTS:
Certain costs of internally developed software to be sold or otherwise
marketed have been capitalized and are being amortized over the shorter of
its economic useful life or five years.
During 1995, the Company incurred approximately $121,000 of research and
development expenses related to its software product. All research and
development costs have been expensed.
CONTINUED 10
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
CASH AND CASH EQUIVALENTS:
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three months or
less from the date of acquisition to be cash equivalents.
REVENUE RECOGNITION:
Revenues related to performing investment advisory services and delivering
business publications or software subscriptions are recognized at the time
services are performed or publications are mailed. Deferred revenues
represent proceeds received in advance of performing services or mailing
publications.
INCOME TAXES:
The Company utilizes the asset and liability method of accounting for
deferred income taxes. This method requires the recognition of deferred
tax assets and liabilities for the expected future tax consequence of
differences between tax and financial reporting bases of assets and
liabilities.
The provision for income taxes differs from the amounts currently payable
because of temporary differences in the recognition of certain income and
expense items for financial reporting and tax reporting purposes, primarily
depreciation and amortization related to leasehold improvements. In
addition, income tax expense includes the effect of changes in the
Company's assessment of the recoverability of its net deferred tax assets,
if any.
CONCENTRATIONS:
The Company generated approximately 11% of its revenues from one customer
for the year ended December 31, 1995. The Company maintains all of its
cash and cash equivalents with, and obtains all of its financing from, one
financial institution.
NEWLY ISSUED ACCOUNTING STANDARDS
The Company does not intend to adopt the measurement provisions of
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-
Based Compensation".
CONTINUED 11
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
3. OTHER NON-CURRENT ASSETS
Other non-current assets for the years ended December 31, 1995 and 1994
consist of the following:
1995 1994
---------- ----------
Cash surrender value of life insurance $ 173,944 $ 109,772
Capitalized software costs, net of accumulated
amortization of $25,087 in 1995 497,556 16,960
Other 21,343 9,363
---------- ----------
$ 692,843 $ 136,095
---------- ----------
---------- ----------
4. LONG-TERM DEBT AND REVOLVING CREDIT LINE
As of December 31, 1995 and 1994, long-term debt consisted of a term loan
agreement maturing August 1, 1999, providing for monthly installments of
$10,833 or $130,000 annually. The note bears interest at .50% above the
bank's prime rate (8.50% at December 31, 1995 and 1994). Interest expense
related to the term loan agreement was $50,707 and $21,829 in 1995 and
1994, respectively. Aggregate maturities of long-term debt and related
party notes (Note 5) are as follows: 1996 - $284,779; 1997 - $252,088;
1998 - $145,723 and 1999 - $86,672.
The Company has a revolving credit line maturing June 15, 1996 with a bank
which is renewable each year. The maximum borrowing capability under the
revolving credit line is $2,000,000 and $500,000 as of December 31, 1995
and 1994, respectively. As of December 31, 1995 and 1994, there was
$1,475,000 and $200,000 outstanding under this credit line.
The revolving credit line bears interest at .50% above the bank's prime
rate (8.50% at December 31, 1995 and 1994). Interest expense related to
the revolving credit line was $70,535 and $3,844 for the years ended
December 31, 1995 and 1994, respectively. The Company's assets were
pledged as collateral under these agreements subject to a State of
Connecticut lien on certain property.
Under the long term debt agreement, the Company is required to comply with
certain covenants. These covenants require the Company to not cause or
permit the following: incur or permit any lien, mortgage or encumbrance
against any of its assets; incur any indebtedness; sell, lease, pledge or
dispose of any collateral; assume or guarantee obligations of others; merge
or consolidate with any corporation; acquire stocks or obligations of
another entity or declare a dividend or other distribution. In addition,
the Company is required to maintain certain levels of working capital and
tangible net worth along with certain financial ratios.
The Company failed to meet certain financial ratios required under its
long-term debt agreement as of December 31, 1995.
CONTINUED 12
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
On April 2, 1996, the Company refinanced its revolving credit line and
long-term debt with a new financial institution with the following terms:
A revolving credit line, payable on demand, maximum of $1,250,000,
expiring on April 15, 1997. Borrowings are limited to eligible
accounts receivable.
A term note for $476,000, with equal monthly principal payments of
$10,833, beginning on April 15, 1996. Any remaining balance on the
loan is payable in full no later than August 15, 1999.
A term loan for $1,000,000, with equal monthly principal payments of
$52,632, beginning on June 15, 1996. Any remaining balance is payable
in full no later than December 31, 1997.
Interest on all of these loans is based upon the financial institution's
prime lending rate, plus 50 basis points. The rate on April 2, 1996 was
8.25%. All of the Company's assets are pledged as collateral under this
agreement, subject to a State of Connecticut lien on certain property.
Aggregate maturities of long-term debt and related party notes (Note 5)
after refinancing are as follows: 1996 - $568,068; 1997 - $936,292; 1998 -
$145,719 and 1999 - $118,511.
The borrowing agreement establishes several financial covenants including:
Minimum current ratio of 1.10 to 1.00, where the numerator is defined
as current assets, and the denominator is defined as current
liabilities.
Minimum Working Capital of $1,000,000 on December 31, 1996 and
thereafter. Working Capital is defined as total current assets minus
total current liabilities.
Minimum debt service ratio shall be 1.20 to 1.00 measured quarterly,
beginning March 31, 1996. The numerator is defined as net income plus
depreciation and amortization minus capital expenditures, while the
denominator is defined as current maturities of long-term debt plus
current obligations under capital leases.
Minimum capital funds (tangible net worth plus subordinated debt)
shall not be less than $2,500,000 at December 31, 1996 and thereafter.
Total liabilities minus subordinated debt to tangible net worth plus
subordinated debt will not be more than 1.50 to 1.00 at any time after
December 31, 1996.
The Borrower will receive at least $1,500,000 in additional capital no
later than December 31, 1996.
Management intends to implement various cost control measures to return the
Company to profitability, and seek additional equity capital from current
and/or external investors to meet the financial requirements of its new
debt agreement.
CONTINUED 13
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
5. NOTES PAYABLE TO RELATED PARTIES
The Company repurchased 3,156 shares of its stock in 1995 from former
officers of the Company. The shares of stock were purchased at fair market
value of $312,273 for a combination of cash and notes payable, determined
in accordance with the Company's Employee Stock Purchase Plan. Balances of
notes payable for all related party stock repurchases at December 31, 1995
and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
--------- ---------
<S> <C> <C>
Note payable to related party, due in annual installments
of $20,245 through September 27, 1996 $ 20,245 $ 40,489
Note payable to related party, due in annual installments
of $12,448 through July 30, 1996 12,448 24,895
Note payable to related party, due with a single payment
of $150,000 on August 1, 1994 and then in annual
installments thereafter of $106,364 through August 1, 1997 212,728 319,091
Note payable to related party, due in annual installments
of $12,404 through March 15, 1998 37,211 -
Note payable to related party, due in annual installments
of $3,319 through September 15, 1998 9,958 -
--------- ---------
292,590 384,475
Less, Current portion (154,779) (139,054)
--------- ---------
$ 137,811 $ 245,421
--------- ---------
--------- ---------
</TABLE>
The notes bear interest at prime (8.50% at December 31, 1995 and 1994).
Interest expense related to the notes was $32,000 and $34,055 in 1995 and
1994, respectively. The notes are subordinate to the revolving credit line
agreement.
6. COMMITMENTS AND CONTINGENCIES
In 1994, the Company moved its operations to a new location subject to a
noncancellable operating lease which expires on May 24, 2004. There were
no costs to the Company to terminate its existing lease.
Future minimum rental commitments under the new lease are as follows:
Years ending December 31:
1996 $ 542,520
1997 542,520
1998 542,520
1999 616,500
2000 616,500
Thereafter 2,106,375
------------
$ 4,966,935
------------
------------
CONTINUED 14
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
Rent expense under the new operating lease was $581,606 and $336,826 for
the years ended December 31, 1995 and 1994, respectively.
Rent expense, including storage space under the old operating lease was
$205,811 for the year ended December 31, 1994.
The Company entered into an Incentive Compensation Agreement with one of
its employees in 1990, which entitled the employee to receive commissions
for generating new clients. The agreement was terminated June 30, 1994.
As a result of the termination, the Company agreed to pay commissions to
the employee for clients generated as of June 30, 1994. The amount due to
the employee as of December 31, 1995 was $154,139. In addition, the
Company is obligated to pay future commissions to this employee subject to
on going relationships with such customers through December 31, 1997, with
a maximum future obligation of approximately $125,000.
The Company has other commitments as described in Notes 8 and 11.
7. GRANTS
During 1994, the Company received a grant from the State of Connecticut.
The grant of $175,000 was to be used for the purchase of capital equipment
and to offset the cost of other allowable moving expenditures, as specified
by the grant. As of December 31, 1994, the Company recognized $125,000 of
the grant as income to offset allowable moving expenditures. As of
December 31, 1995 and 1994, the Company recognized $16,326 and $5,000 as an
offset to depreciation expense for allowable capital equipment purchases.
The remaining portion of the grant has been deferred and will be used to
offset future depreciation expense.
The Company is required to repay, in whole, the grant plus accrued interest
at 7.5% per year in the event that the Company does not meet certain
conditions through December 31, 2004. These conditions require the Company
to maintain its primary operations in the State of Connecticut, through
December 31, 2004, and employ a total of 108 full-time positions in the
State by June 11, 1996. The State of Connecticut has stated its intention
to extend the date for the employment condition if the Company is unable to
meet the deadline. Under the grant agreement, the State of Connecticut has
been given a first lien on certain furniture, fixtures and computer
equipment acquired after March 15, 1994, up to a value of $219,000 which
represents 125% of the grant amount.
8. COMMON STOCK SUBSCRIBED
On December 20, 1990, five employees entered into an agreement with the
Company to purchase the Company's common stock at fair market value
determined in accordance with the Company's Shareholders' Agreement (the
"Plan"). The Plan contains, among other provisions,
CONTINUED 15
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
limitations on the transfer of shares and mandatory repurchase requirements
by the Company upon the occurrence of certain events such as death,
disability, retirement, termination of employment and performance of
services for compensation for any competitor of the Company.
Notes relating to these purchases totaled $307,197 payable to the Company
in installments through March 1, 1995 plus annual interest at the prime
rate plus 1% based upon the rate at March 1 of the prior year. Payments
for these notes, amounted to $55,294 for the year ended December 31, 1995.
Interest income related to these notes was $4,861 and $3,870 in 1995 and
1994, respectively. These notes were collateralized by the common stock
purchased.
On December 28, 1993, 19 employees entered into agreements with the Company
to purchase the Company's common stock under the terms described above.
Twelve of the employees executed notes totalling $269,931 payable to the
Company due in installments through December 28, 1995, plus annual interest
at the prime rate based upon the prime rate at December 28 of the prior
year. Payments for these notes amounted to $259,931 and $10,000 for the
years ended December 31, 1995 and 1994, respectively. Interest income
related to these notes was $12,813 and $16,196 in 1995 and 1994,
respectively. These notes were collateralized by the common stock
purchased.
9. EMPLOYEE BENEFIT PLANS
The Company has two qualified defined contribution retirement plans. The
401(k) plan consists of contributions by the employees with a discretionary
Company match of $80,851 and $65,995 in 1995 and 1994, respectively.
The Company has a profit sharing and savings plan covering substantially
all of its full-time employees. Company contributions to this plan are
approved annually by the plan trustees and are distributed to participants
in accordance with the terms of the plan. Contributions by the Company to
the plan for 1995 and 1994 amounted to $300,000 per year.
CONTINUED 16
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
10. INCOME TAXES
The provision (benefit) for income taxes for the years ended December 31,
1995 and 1994 consisted of the following:
1995 1994
---------- ----------
Current:
Federal $ - $ (63,696)
State and local 2,107 (1,389)
---------- ----------
2,107 (65,085)
---------- ----------
Deferred:
Federal (60,235) 4,481
State and local - (3,308)
---------- ----------
(60,235) 1,173
---------- ----------
$ (58,128) $ (63,912)
---------- ----------
---------- ----------
The consolidated effective tax rate differs from the statutory U.S. federal
tax rate for the following reasons and by the following percentages:
1995 1994
PERCENT PERCENT
------- -------
Statutory U.S. federal tax rate 35.00 % 35.00 %
Goodwill amortization (1.75) (1.43)
Stock compensation plans (10.00) (22.18)
Business meals and entertainment (2.23) (8.79)
State taxes net of federal benefit - (2.34)
Valuation of temporary differences (9.46) -
Grant revenue - 18.82
Other (4.22) 8.42
------- --------
$ 7.34 % $ 27.50 %
------- --------
------- --------
CONTINUED 17
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
The significant components of the Company's deferred tax assets and
liabilities at December 31 are as follows:
1995 1994
---------- ---------
Deferred tax assets:
Operating losses $ 210,507 $ 48,049
Research and experimentation credits 31,450 46,000
Depreciation of fixed assets 8,556 28,418
---------- ---------
Total deferred tax assets 250,513 122,467
Valuation allowance (75,000) -
---------- ---------
Net deferred tax assets 175,513 122,467
---------- ---------
Deferred tax liabilities:
Grant revenue (39,000) (50,000)
---------- ---------
Net deferred tax asset $ 136,513 $ 72,467
---------- ---------
---------- ---------
For tax reporting purposes, the net operating loss carryforwards expire as
follows: $55,000 in 2009 and $156,000 in 2010. The research and
experimentation credits expire in 2010.
Included in prepaid expense is a receivable of $166,957 which reflects the
carryback of $24,487 and carryforward of $111,020 of operating losses, and
$31,450 for the carryback of research and experimentation tax credits.
The valuation allowance for the current year of $75,000 reflects the
ongoing assessment of the recoverability of deferred tax assets by the
Company.
11. STOCK OPTION AND RESTRICTED STOCK PLANS
On December 1, 1992, the Board of Directors and Shareholders approved a
Stock Option and Restricted Stock Plan Agreement. The plan is intended to
advance the interests of the Company by providing employees with an
additional incentive, encouraging stock ownership, increasing their
proprietary interest in the success of the Company, and encouraging them to
remain employees of the Company. The aggregate number of shares that may
be issued pursuant to the plan is 30,000. All employees are eligible to
participate in the plan.
CONTINUED 18
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
As of December 31, 1995 and 1994, the Company had the following outstanding
options:
<TABLE>
<CAPTION>
1995 1994
------------------------- -----------------------
OPTIONS OPTIONS
EXERCISE VESTING TOTAL VESTED AND TOTAL VESTED AND
ISSUE DATE PRICE PERIOD OPTIONS EXERCISABLE OPTIONS EXERCISABLE
- - ------------------------- -------- ------- ------- ----------- ------- -----------
<S> <C> <C> <C> <C> <C> <C>
December 1, 1992 $ 77.81 5 years 8,836 5,302 9,298 3,719
December 1, 1993 89.55 5 years 335 134 445 89
------- ------- ------- -------
9,171 5,436 9,743 3,808
------- ------- ------- -------
------- ------- ------- -------
</TABLE>
Options once exercised are subject to the Company's Shareholder's
Agreement, including the limitations on the transfer of shares and
mandatory repurchase requirements by the Company. In 1995, 295 (185 shares
at $77.81; 110 shares at $89.55) vested options were exercised and 277
options were forfeited, due to death or termination of certain employees.
As required, the Company repurchased the exercised options in the amount of
$31,245. No options were exercised in 1994. During 1995 and 1994, the
Company recognized $98,491 and $175,505 of compensation expense related to
vested options.
On December 1, 1993 the Company granted and issued 1,900 shares of common
stock to certain employees under a Stock Bonus and Restricted Stock
Agreement. The shares vest over a three year period and are subject to the
Company's Shareholders' Agreement. As of December 31, 1995 and 1994,
compensation expense recognized for these shares amounted to $48,775 and
$56,715, respectively.
The financial statements as of and for the year ended December 31, 1994,
have been restated to recognize compensation expense for the Company's
Stock Option and Restricted Stock plans. The cumulative effect of these
adjustments increased the accumulated deficit by $127,263 at December 31,
1993. The effect on 1994, was an increase in the net loss of $155,206.
CONTINUED 19
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
12. SUBSEQUENT EVENT
As of April 2, 1996, the Company was not in compliance with the minimum
current ratio of its new borrowing agreement. The Company received a
waiver from the bank on April 24, 1996, amending the requirement to 1.0 to
1.0 through January 1, 1997. On April 25, 1996, the Company entered into a
definitive agreement to merge with Barra, Inc.
20
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET, DECEMBER 31, 1993
(UNAUDITED)
ASSETS:
Current Assets:
Cash and cash equivalents $326,825
Accounts receivable 625,365
Unbilled receivables 1,129,323
Prepaid expenses & other 146,656
------------
Total current assets 2,228,169
------------
Fixed Assets:
Office Equipment 1,013,057
Furniture & Fixtures 359,006
Leasehold Improvements 95,546
------------
1,467,609
Less, Accumulated depreciation and amortization 1,055,868
------------
Total fixed assets, net 411,741
------------
Intangible assets:
Organization costs, net of accumulated amortization of $114,679 2,816
Goodwill, net of accumulated amortization of $34,888 345,700
------------
Total intangible assets 348,516
------------
Deposits 38,858
------------
Total assets $3,027,284
------------
------------
LIABILITIES and STOCKHOLDERS' EQUITY:
Current Liabilities:
Notes payable to related parties, current portion 182,691
Accounts payable 89,975
Accrued expenses 636,256
Deferred revenues 552,495
------------
Total current liabilities 1,461,417
Note payable to related parties 384,475
------------
Total Liabilities 1,845,892
------------
Stockholders' equity:
Common Stock, $.10 par value; 200,000 shares
authorized; 112,156 shares issued; 103,325
shares outstanding 11,215
Capital in excess of par 2,730,839
Common Stock Subscribed, 7,814 shares (325,224)
Accumulated deficit (306,451)
Treasury Stock, at cost, 8,831 shares (763,568)
Unamortized deferred compensation (165,419)
------------
Total stockholders' equity 1,181,392
------------
Total liabilities and stockholders' equity $3,027,284
------------
------------
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
Revenues $10,184,193
------------
Operating Expenses:
Compensation and benefits 7,243,552
Selling, general and administrative 2,981,277
------------
Total operating expenses 10,224,829
------------
Operating loss (40,636)
Interest income 26,638
Interest expense (14,461)
------------
Loss before income taxes (28,459)
Income tax provision (13,117)
------------
Net loss ($41,576)
------------
------------
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
<TABLE>
<CAPTION>
Capital Common Unamortized Total
Common in Excess Stock Accumulated Treasury Deferred Stockholders'
Stock of Par Subscribed Deficit Stock Compensation Equity
------------ ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Balance, December 31, 1992 $10,735 $2,263,232 ($509,292) ($264,875) ($140,494) $0 $1,359,306
Net loss (41,576) (41,576)
Treasury stock purchased (623,074) (623,074)
Issuance of
Restricte stock 190 169,955 (170,145) 0
Vesting of
Restricted Stock 4,726 4,726
Proceeds from sale
of stock 290 259,496 259,786
Proceeds from
subscribed stock
notes receivable 184,068 184,068
Stock option compensation 38,156 38,156
------------ ------------ ------------ ------------ ------------ ------------ ------------
Balance, December 31, 1993 $11,215 $2,730,839 ($325,224) ($306,451) ($763,568) ($165,419) $1,181,392
------------ ------------ ------------ ------------ ------------ ------------ ------------
------------ ------------ ------------ ------------ ------------ ------------ ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
ROGERS CASEY & ASSOCIATES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 1993
(UNAUDITED)
Cash flows from operating activities
Net loss ($41,576)
Adjustments to reconcile net loss to cash
provided by operating activities:
Depreciation and amortization 219,377
Increase in vested options and common stock 38,156
Changes in current assets and liabilities:
Decrease in accounts receivable 23,855
Increase in unbilled receivables (267,285)
Decrease in prepaid expenses and other 23,832
Decrease in accounts payable (12,759)
Increase in accrued expenses 9,363
Increase in deferred revenue 117,008
Decrease in deposits 1,429
------------
Net cash provided by operating activities 111,400
------------
Cash flows from investing activities:
Acquisition of fixed assets (248,991)
------------
Net cash used by investing activities (248,991)
------------
Cash flows from financing activities:
Repayment of long-term debt (70,833)
Repayment of note payable to related party (20,244)
Proceeds from sale of unrestricted stock 264,512
Repayment of capitalized lease obligations (12,752)
Proceeds from subscribed stock notes receivable 184,068
Acquisition of treasury stock (116,641)
------------
Net cash provided by financing activities 228,110
------------
Net increase in cash and cash equivalents 90,519
Cash and cash equivalents, beginning of year 236,306
------------
Cash and cash equivalents, end of year $326,825
------------
------------
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $8,608
Income taxes $99,775
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. ORGANIZATION
Rogers, Casey & Associates, Inc. (the "Company") was formed through the
acquisition of a subsidiary company of Rogers, Casey & Barksdale, Inc.
This was completed by means of a tax-free reorganization finalized on
February 3, 1989.
The Company offers a broad scope of investment related services to its
clients, who primarily consist of pension funds or major corporations on
behalf of their pension funds, who have responsibility for administering
large pools of assets in pension funds and defined contribution programs.
The services includes full service investment consulting, consulting in the
area of alternative investments, special advisory programs and investment
manager diagnostics.
The Company wholly-owns the following subsidiaries:
Rogers, Casey Consulting, Inc. - Provides services and needed
involvement in order to build a strong investment program meeting
client goals. The firm assists in financial planning, developing the
appropriate asset mix, conducting special studies as needed, assisting
in manager and fund selection, and monitoring performance.
Rogers, Casey Alternative Investments, Inc. - Assists clients to
allocate assets and evaluate specific investment vehicles within the
alternative asset sectors. This subsidiary offers specialized
consulting and managerial services in areas including real estate,
venture capital, oil and gas, LBO's, and special situation funds.
Rogers, Casey Investment Advisors, Inc. - Manages a limited number of
investment programs. Investment programs currently offered included:
segregated programs that follow a multiple-manager approach for
retirement, thrift and 401(k) plan assets, Fulfillment funds, Style
Funds and Development Funds.
Rogers, Casey Manager Services, Inc. - Assists investment managers to
formulate strategic business plans. Also offers advisory services to
those interested in evaluating investment managers for potential
merger and/or acquisition.
2. SIGNIFICANT ACCOUNTING POLICIES
Consolidated:
The consolidated financial statements include all wholly-owned
subsidiaries. All significant intercompany balances and transactions
have been eliminated.
1
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
Fixed Assets:
Fixed assets are recorded at cost and are depreciated over five to
seven years using the same methods that are used for the tax method of
accounting except for leasehold improvements which are amortized over
the lesser of the lease terms or the estimated useful lives of the
improvements.
Expenditures for maintenance and repairs are charged to expense as
incurred. Expenditures which materially increase values, change
capacities or extend useful lives are capitalized. Upon sale or
retirement, the costs and related accumulated depreciation or
amortization are eliminated from the respective accounts and the
resulting gain or loss is included in operations.
Intangible Assets:
Organization costs are being amortized using the straight-line method
over five years.
Goodwill represents the excess of the purchase price over the fair
value of certain net assets acquired from Berg Fiduciary Consultants,
Inc. on April 27, 1990. Goodwill is being amortized on a straight-
line basis over a forty-year period.
Cash and Cash Equivalents:
For purposes of the statement of cash flows, the Company considers all
highly liquid debt instruments purchased with a maturity of three
months or less to be cash equivalents.
Revenue Recognition:
Revenues related to performing investment advisory services and
delivering business publications is recognized at the time services
are performed or publications are mailed. Deferred revenues represent
proceeds received in advance of performing services or mailing
publications.
Income Taxes:
The Company utilizes the asset and liability method of accounting for
deferred income taxes. This method requires the recognition of
deferred tax assets and liabilities for the expected future tax
consequence of differences between tax and financial reporting bases
of assets and liabilities.
The provision for income taxes differs from the amounts currently
payable because of temporary differences in the recognition of certain
income and expense items for
2
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
financial reporting and tax reporting purposes, primarily depreciation
and amortization related to leasehold improvements. In addition,
income tax expense includes the effect of changes in the Company's
assessment of the recoverability of its net deferred tax assets, if
any.
Effective January 1, 1993, the Company adopted the provisions of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" (SFAS 109). Accordingly, for the year ended December
31, 1993, all disclosures are in accordance with the new rules. Under
the provisions of SFAS 109, the company elected not to restate prior
year's consolidated financial statements. The cumulative effect of
initial adoption on prior year's retained earnings was not
significant. Additionally, the effect of the adoption of SFAS 109 on
net loss was not significant.
Concentration of Credit Risk:
The company generated approximately 8% of its revenues from one
customer for the year ended December 31, 1993. The Company maintains
all of its cash and cash equivalents with, and obtains all of its
financing from, one financial institution.
3. LONG-TERM DEBT AND REVOLVING CREDIT LINE
Long-term debt consisted of a term loan agreement providing for monthly
installments of $4,167. The note bears interest at .50% above the bank's
prime rate (6.00% at December 31, 1993). The Company's assets were pledged
as collateral under the agreement. During 1993, the Company paid off the
entire balance.
Interest expense related to the term loan agreement was $1,859.
The Company has a revolving credit line maturing June 1, 1994 with a bank
which is renewable each year. The maximum borrowing capability under the
revolving credit line is $400,000 as of December 31, 1993. As of December
31, 1993, there were no amounts outstanding.
The revolving credit line bears interest at .50% above the bank's prime
rate (6.00% at December 31, 1993). The Company's assets are pledged as
collateral under the agreement.
Interest expense related to the revolving credit line was $-0- for 1993.
Under the revolving credit line agreement, the Company is required to
comply with certain covenants. These covenants require the Company to not
cause or permit the following: incur or permit any lien, mortgage or
encumbrance against any of its assets;
3
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
incur any indebtedness; sell, lease, pledge or dispose of any collateral;
assume or guarantee obligations of others; merge or consolidate with any
corporation; acquire stocks or obligations of another entity or declare a
dividend or other distribution. In addition, the Company is required to
maintain certain levels of working capital and tangible net worth along
with certain financial ratios.
4. RELATED PARTY
During 1993, the Company repurchased 6,958 shares of its stock from former
officers of the Company at fair market value of $623,074 for a combination
of cash and notes payable, determined in accordance with the Company's
Employee Stock Purchase Plan. Balances of notes payable at December 31,
1993 are as follows:
Note payable to related party, due in annual
installments of $20,244 through
September 27, 1996 $ 60,733
Note payable to related party, due in annual
installments of $12,447 through July 30, 1996 37,342
Note payable to related party, due with a single
payment of $150,000 on August 1, 1994 and
then in annual installments thereafter of
$106,364 through August 1, 1997 469,091
---------
567,166
Less, Current portion (182,691)
---------
$ 384,475
---------
---------
The notes bear interest at prime (6.00% at December 31, 1993). Interest
expense related to the notes were $10,711 in 1993. The notes are
subordinate to the revolving credit line agreement, which is discussed in
Note 3.
4
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
5. CAPITALIZED LEASE OBLIGATIONS AND OTHER LEASE COMMITMENTS
Capitalized Lease Obligations:
Machinery and equipment at December 31, 1993 includes $63,412 of
equipment under leases that have been capitalized. Accumulated
depreciation for this equipment was $56,987 at December 31, 1993.
Other Lease Commitments:
The Company conducts its operations from facilities that are leased
under a noncancellable operating lease expiring March 31, 1995. There
is an option to renew the lease for an additional five years at a fair
market value monthly rental.
Future minimum lease rental commitments under this lease are as
follows: 1994, $350,448; and 1995, $87,612
Rent expense, including storage space under this operating lease was
$344,129 for the year ended December 31, 1993.
6. COMMON STOCK SUBSCRIBED
On December 20, 1990, five employees entered into an agreement with the
Company to purchase the Company's common stock at fair market value
determined in accordance with the Company's Employee Stock Purchase Plan.
The Plan contains, among other provisions, limitations on the transfers of
share and mandatory purchase requirements by the Company upon the
occurrence of certain events as defined by the agreement. Prior to 1991,
these employees executed notes totaling $307,197 payable to the Company due
in annual installments through March 1, 1995 plus annual interest at the
prime rate plus 1% based upon the rate at March 1 of the prior year. As of
December 31, 1993 $55,294 were still due on the notes. Interest income
related to these notes was $9,067 in 1993. These notes are collateralized
by the common stock purchased.
On December 28, 1993, 19 employees entered into agreements with the Company
to purchase the Company's common stock at fair market value determined in
accordance with the Company's Shareholder Agreement. The Agreement
contains, among other provisions, limitations on the transfers of share and
mandatory purchase requirements by the Company upon the occurrence of
certain events as defined by the Agreement. Portions of the stock
purchased are also subject to the Restricted Stock Agreement which
restricts the amount the Company would have to pay for the shares should
the employee leave within a three-year period. In addition, 12 employees
executed notes totaling $269,931 payable to the Company due in annual
installments through December 28, 1995, plus annual interest at the prime
rate based upon the prime rate at
5
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
December 28 of the prior year. As of December 31, 1993, $269,931 was still
due on the notes. There was no interest income in 1993. These notes are
collateralized by the common stock purchased.
7. EMPLOYEE BENEFIT PLANS
The Company has two qualified defined contribution retirement plans. The
401(k) plan consists of contributions by the employee with a Company match
of $51,493 in 1993.
The profit sharing plan covers substantially all of its employees.
Contributions are determined at year-end and are at the discretion of the
Company. Once the dollar amount has been decided by the trustees, the
funds are distributed to participants in accordance with the terms of the
Company's Profit Sharing and Savings Plan Document. The amount determined
for 1993 was $400,000.
8. INCOME TAXES
The provision for income taxes for the year ended December 31, 1993
consists of the following:
Current:
Federal $ 6,644
State and local 6,473
Deferred:
Federal -
State and local -
--------
$ 13,117
--------
--------
The difference between the benefit for Federal income taxes computed by
applying the statutory Federal income tax rate and income tax expense is
attributable to state and local taxes, officers' life insurance and other
miscellaneous items.
Deferred tax accounts as of December 31, 1993 are comprised of the
following:
Deferred tax assets $ 21,841
Deferred tax liabilities 1,632
--------
20,209
Valuation allowance (20,209)
--------
Net deferred tax balance $ -
--------
--------
6
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
The primary temporary differences giving rise to these deferred tax
balances include depreciation and contribution carry-forwards.
9. STOCK OPTION AGREEMENT
On December 1, 1992, the Board of Directors and Shareholders approved a
Stock Option and Restricted Stock Plan Agreement. The plan is intended to
advance the interests of the Company by providing employees with an additional
incentive, encouraging stock ownership by such individuals, increasing their
proprietary interest in the success of the Company and encouraging them to
remain employees of the Company. The aggregate number of shares that may be
issued pursuant to the plan is 30,000. All employees are eligible to
participate in the plan.
As of December 31, 1993, the Company had the following outstanding options:
EXERCISE TOTAL OPTION VESTING
ISSUE DATE PRICE OPTIONS VESTED PERIOD
---------- -------- ------- ------ -------
December 1, 1992 $77.81 9,298 1,860 5 Years
December 1, 1993 89.55 445 - 5 years
Options once exercised are subject to the Company's Shareholder's Agreement,
including the limitations on the transfer of shares and mandatory repurchase
requirements by the Company. During 1993, the Company recognized $38,156 of
compensation expense related to vested options.
7
<PAGE>
EXHIBIT 99.9
<PAGE>
ANNEX C
<PAGE>
INDEX TO PRO FORMA FINANCIAL INFORMATION
BARRA, INC., AND SUBSIDIARIES - PRO FORMA CONDENSED COMBINING
FINANCIAL INFORMATION:
Pro forma condensed combining balance sheet - March 31, 1996
Pro forma condensed combining consolidated income statement for the
year ended March 31, 1996 (for BARRA) and December 31, 1995 (for RCA)
Pro forma condensed combining consolidated income statement for the
year ended March 31, 1995 (for BARRA) and December 31, 1994 (for RCA)
Pro forma condensed combining consolidated income statement for the
year ended March 31, 1994 (for BARRA) and December 31, 1993 (for RCA)
<PAGE>
BARRA, INC. AND SUBSIDIARIES
PRO FORMA CONDENSED COMBINING FINANCIAL INFORMATION
The following pro forma condensed combining financial information presents
the combined financial position of BARRA, Inc. and subsidiaries ("BARRA") and
Rogers Casey & Associates, Inc. and subsidiaries ("RCA") as of March 31, 1996
and the combined results of their operations for the years ended March 31,
1996, 1995 and 1994 (for BARRA) and December 31, 1995, 1994 and 1993 (for
RCA).
The pro forma condensed combining financial information gives effect to the
acquisition using the pooling of interests method of accounting for business
combinations. The information has been prepared assuming that a total of
540,000 shares of BARRA common stock is exchanged for all of the outstanding
stock of RCA. At the time of the closing of the merger, adjustments, if any, to
the number of shares issued will be determined pursuant to the agreement between
the companies covering the terms of the acquisition. No material pro forma
adjustments are required to effect the combination. The pro forma financial
information should be read in conjunction with the separate consolidated
financial statements and notes thereto of each company.
The pro forma condensed combining income statements are not necessarily
indicative of the combined results of operations as they may be in the future
or as they might have been for the periods indicated had the acquisition
occurred at an earlier date.
<PAGE>
BARRA, Inc.
Pro Forma Condensed Combining Consolidated Balance Sheet
March 31, 1996
(In Thousands)
Unaudited
HISTORICAL
------------------- PRO FORMA
BARRA RCA COMBINED
--------- ------- --------
ASSETS
Current Assets:
Cash and cash equivalents $21,971 $522 $22,493
Accounts receivable-
Trade, net of allowances for doubtful accounts 8,867 1,811 10,678
Other, including unbilled revenue 568 1,989 2,557
Short-term investments 3,512 3,512
Prepaid expenses and other 598 206 804
------- ------ -------
Total current assets 35,516 4,528 40,044
------- ------ -------
Notes receivable 1,659 1,659
------- ------ -------
Non-marketable investments 7,300 7,300
------- ------ -------
Furniture,equipment and leasehold improvements 10,148 2,632 12,780
Less: accumulated depreciation and amortization (6,060) (1,681) (7,741)
------- ------ -------
4,088 951 5,039
------- ------ -------
Deferred tax assets 1,584 1,584
------- ------ -------
Computer software, net of amortization 499 499
------- ------ -------
Intangibles and other assets 7,295 973 8,268
------- ------ -------
$57,941 6,452 $64,393
------- ------ -------
------- ------ -------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Short-term debt $ - $2,447 $2,447
Accounts payable 1,222 713 1,935
Accrued compensation, taxes and other expenses 9,157 1,726 10,883
Unearned revenues 11,884 363 12,247
------- ------ -------
Total current liabilities 22,263 5,249 27,512
------- ------ -------
Defered tax liabilities 1,187 30 1,217
Long-term debt 407 125 532
Other 254 254
------- ------ -------
Total liabilities 23,857 5,658 29,515
------- ------ -------
Shareholders' equity:
Preferred stock - -
Common stock 10,548 3,058 13,606
Treasury stock (1,076) (1,076)
Retained earnings (accumulated deficit) 23,520 (1,145) 22,375
Unamortized deferred compensation (43) (43)
Foreign currency translation adjustment 16 16
------- ------ -------
Total shareholders' equity 34,084 794 34,878
------- ------ -------
$57,941 $6,452 $64,393
------- ------ -------
------- ------ -------
<PAGE>
BARRA, INC.
PRO FORMA CONDENSED COMBINING CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED MARCH 31, 1996 (FOR BARRA) AND DECEMBER 31, 1995
(FOR RCA)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
UNAUDITED
HISTORICAL
---------------- PRO FORMA
BARRA RCA COMBINED
------- ------ --------
Operating Revenues:
Subscription and related fees $54,206 $ - $54,206
Portfolio System for Institutional Trading 6,826 6,826
Consulting and related fees 15,758 15,758
------- ------ --------
Total operating revenues 61,0321 5,758 76,790
------- ------ --------
Operating expenses:
Compensation and benefits 29,606 10,365 39,971
Other 19,392 6,055 25,447
------- ------ --------
Total operating expenses 48,998 16,420 65,418
------- ------ --------
Operating income (loss) 12,034 (662) 11,372
Other income (expense), net 595 (130) 465
------- ------ --------
Income (loss) before taxes 12,629 (792) 11,837
Income taxes (benefit) 5,118 (58) 5,060
------- ------ --------
Net income (loss) $7,511 ($734) $6,777
------- ------ --------
------- ------ --------
Net income per share:
Primary $0.90 - $0.76
Fully diluted $0.88 - $0.75
Weighted average common and common
equivalent shares:
Primary 8,336 - 8,876
Fully diluted 8,553 - 9,093
<PAGE>
BARRA, Inc.
PRO FORMA CONDENSED COMBINING CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED MARCH 31, 1995 (FOR BARRA) AND DECEMBER 31, 1994
(FOR RCA)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
UNAUDITED
HISTORICAL
---------------- PRO FORMA
BARRA RCA COMBINED
------- ------- --------
Operating Revenues:
Subscription and related fees $46,670 $ - $46,670
Portfolio System for Institutional Trading 5,133 5,133
Consulting and related fees 12,437 12,437
------- ------- -------
Total operating revenues 51,803 12,437 64,240
------- ------- -------
Operating expenses:
Compensation and benefits 27,209 8,266 35,475
Other 17,875 4,382 22,257
------- ------- -------
Total operating expenses 45,084 12,648 57,732
------- ------- -------
Operating income (loss) 6,719 (211) 6,508
Other income (expense), net 412 (21) 391
------- ------- -------
Income (loss) before taxes 7,131 (232) 6,899
Income taxes (benefit) 3,148 (63) 3,085
------- ------- -------
Net income (loss) $3,983 ($169) $3,814
------- ------- -------
------- ------- -------
Net income per share:
Primary $0.51 - $0.46
Fully diluted $0.49 - $0.44
Weighted average common and common
equivalent shares:
Primary 7,816 8,356
Fully diluted 8,134 8,674
<PAGE>
BARRA, INC.
PRO FORMA CONDENSED COMBINING CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED MARCH 31, 1994 (FOR BARRA) AND DECEMBER 31, 1993
(FOR RCA)
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
UNAUDITED
HISTORICAL
----------------- PRO FORMA
BARRA RCA COMBINED
------- ------- --------
Operating Revenues:
Subscription and related fees $40,356 $ - $40,356
Portfolio System for Institutional Trading 4,480 4,480
Consulting and related fees 10,184 10,184
------- ------- -------
Total operating revenues 44,836 10,184 55,020
------- ------- -------
Operating expenses:
Compensation and benefits 21,330 7,244 28,574
Other 16,998 2,981 19,979
------- ------- -------
Total operating expenses 38,328 10,225 48,553
------- ------- -------
Operating income (loss) 6,508 (41) 6,467
Other income (expense), net (635) 12 (623)
------- ------- -------
Income (loss) before taxes 5,873 (29) 5,844
Income taxes 2,100 13 2,113
------- ------- -------
Net income (loss) $3,773 ($42) $3,731
------- ------- -------
------- ------- -------
Net income per share:
Primary $0.47 $0.44
Fully diluted $0.47 $0.44
Weighted average common and common
equivalent shares:
Primary 8,012 8,552
Fully diluted 8,012 8,552
<PAGE>
EXHIBIT 99.10
<PAGE>
ANNEX D
<PAGE>
- - --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF REORGANIZATION
AMONG
BARRA, INC.,
ROGERS, CASEY & ASSOCIATES, INC.
AND
CERTAIN SHAREHOLDERS OF ROGERS, CASEY & ASSOCIATES, INC.
DATED: APRIL 25, 1996
- - --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
PAGE
1. THE MERGER.............................................................. 1
1.1 Effective Date..................................................... 1
1.2 Closing............................................................ 1
1.3 Effect of the Merger............................................... 2
2. CONVERSION AND CANCELLATION OF SHARES................................... 2
2.1 Conversion of Common Stock of RCA.................................. 2
2.2 Fractional Shares.................................................. 2
2.3 Surrender of Certificates Representing RCA Shares.................. 3
2.4 No Further Transfers of RCA Shares................................. 4
2.5 Adjustments........................................................ 4
2.6 Treatment of Stock Options......................................... 4
3. COVENANTS OF THE PARTIES................................................ 5
3.1 Covenants of BARRA................................................. 5
(a) Reservation and Issuance of BARRA Common Stock................ 5
(b) Government Approvals.......................................... 5
(c) Notification of Breach of Representations, Warranties and
Covenants..................................................... 6
(d) Releases...................................................... 6
(e) Litigation Developments....................................... 6
(f) Employment.................................................... 6
(g) Profit Sharing Plan........................................... 6
3.2 Covenants of RCA, the RCA Subsidiaries and the RCA Shareholders.... 6
(a) Approval by RCA Shareholders.................................. 7
(b) Shareholder Lists and Other Information....................... 7
(c) Transactions in BARRA Common Stock............................ 7
(d) Government Approvals.......................................... 7
(e) Capital Commitments and Expenditures.......................... 7
(f) Notification of Breach of Representations, Warranties and
Covenants..................................................... 7
(g) Compensation.................................................. 8
(h) Conduct of Business in the Ordinary Course.................... 8
(i) Press Releases................................................ 9
(j) No Merger or Solicitation..................................... 9
(k) RCA 401(k) Plan............................................... 10
(l) Accounting Methods............................................ 10
(m) Additional Agreements......................................... 10
i.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
(n) Access to Properties, Books and Records....................... 10
(o) Employee Welfare Benefit Plans................................ 11
(p) Litigation Developments....................................... 11
(q) Employment.................................................... 11
3.3 Covenants of the Parties........................................... 11
4. REPRESENTATIONS AND WARRANTIES OF RCA, THE RCA SUBSIDIARIES AND THE RCA
SHAREHOLDERS............................................................ 12
(a) Corporate Status and Power to Enter Into Agreements........... 12
(b) Execution and Delivery of the Agreement....................... 12
(c) Subsidiaries and Other Equity Interests....................... 13
(d) Certificate, Bylaws, Books and Records........................ 13
(e) Compliance with Laws, Regulations and Decrees................. 14
(f) Capitalization................................................ 14
(g) Financial Statements.......................................... 15
(h) Government Regulation......................................... 17
(i) Code of Ethics................................................ 18
(j) Tax Returns................................................... 19
(k) Material Adverse Change....................................... 19
(l) No Undisclosed Liabilities.................................... 19
(m) Properties and Leases......................................... 20
(n) Patents, Copyrights, Trademarks............................... 21
(o) Material Contracts............................................ 22
(p) Employment Contracts and Benefits............................. 22
(q) Compliance With ERISA......................................... 23
(r) Collective Bargaining and Employment Agreements............... 24
(s) Compensation of Officers and Employees........................ 24
(t) Legal Actions and Proceedings................................. 24
(u) Retention of Broker or Consultant............................. 25
(v) Insurance..................................................... 25
(w) Transactions with Affiliates.................................. 25
(x) Trading in BARRA Common Stock................................. 25
(y) No Departing Employees........................................ 26
(z) No Loss of Customers.......................................... 26
(aa) Communications with Shareholders.............................. 26
(ab) Accuracy of Representations and Warranties.................... 26
(ac) Proposed Business Combination................................. 26
5. REPRESENTATIONS AND WARRANTIES OF BARRA................................. 27
(a) Corporate Status and Power to Enter Into Agreements........... 27
(b) Certificate, Bylaws, Books and Records........................ 27
(c) Properties.................................................... 27
(d) BARRA SEC Documents........................................... 27
(e) Material Adverse Change....................................... 28
ii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
(f) Execution and Delivery of the Agreement....................... 28
(g) Accuracy of Representations and Warranties.................... 29
(h) Capitalization................................................ 29
(i) Authorized Issuances.......................................... 29
(j) Retention of Broker or Consultant............................. 29
6. INVESTMENT REPRESENTATION............................................... 29
7. CONDITIONS TO THE OBLIGATIONS OF BARRA.................................. 31
(a) Representations and Warranties................................ 31
(b) Compliance and Performance Under Agreement.................... 31
(c) Material Adverse Change....................................... 31
(d) Approval of Agreement......................................... 31
(e) Officer's Certificate......................................... 31
(f) Opinion of Counsel............................................ 32
(g) No Injunctions or Restraints; Illegality...................... 32
(h) Government Approvals.......................................... 32
(i) Dissenting Shares............................................. 32
(j) Expenses...................................................... 32
(k) Closing Documents............................................. 33
(l) Consents...................................................... 33
(m) Pooling-of-Interests Accounting Treatment..................... 33
(n) Employee Confidentiality Agreements........................... 33
(o) Third Party Actions........................................... 33
(p) Merger Agreement.............................................. 34
(q) Stock Repurchases............................................. 34
(r) Financial Statements.......................................... 34
(s) Share Restrictions............................................ 34
8. CONDITIONS TO THE OBLIGATIONS OF RCA AND THE RCA SHAREHOLDERS........... 34
(a) Representations and Warranties................................ 34
(b) Compliance and Performance Under Agreement.................... 34
(c) Material Adverse Change....................................... 35
(d) Officers Certificate.......................................... 35
(e) Opinion of Counsel............................................ 35
(f) Government Approvals.......................................... 35
(g) Closing Documents............................................. 35
(h) No Injunctions or Restraints; Illegality...................... 35
(i) Merger Agreement.............................................. 35
iii.
<PAGE>
TABLE OF CONTENTS
(CONTINUED)
9. EXPENSES................................................................ 35
10. SURVIVAL; INDEMNIFICATION AGAINST LOSS.................................. 36
10.1 Survival........................................................... 36
10.2 Shareholders' Indemnification...................................... 36
10.3 BARRA's Indemnification............................................ 37
10.4 RCA's Indemnification.............................................. 37
10.5 Indemnification Procedures......................................... 37
10.6 Escrow of Shares................................................... 39
10.7 Holder's Agent..................................................... 39
10.8 Limitation on Indemnification Claims............................... 40
10.9 Liability Limited to Indemnification............................... 40
11. AMENDMENT; TERMINATION.................................................. 41
(a) Amendment..................................................... 41
(b) Termination................................................... 41
(c) Notice........................................................ 41
(d) Termination and Expenses...................................... 42
12. MISCELLANEOUS........................................................... 42
(a) Notices....................................................... 42
(b) Binding Agreement............................................. 43
(c) Consent to Jurisdiction and Forum Selection................... 43
(d) Governing Law................................................. 43
(e) Attorneys' Fees............................................... 43
(f) Entire Agreement; Severability................................ 43
(g) Counterparts.................................................. 44
(h) Waivers....................................................... 44
Exhibit A - Merger Agreement
Exhibit B - Certificate of Merger
Exhibit C - [Intentionally deleted]
Exhibit D - Form of Proprietary Rights and Confidentiality Agreement
iv.
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION, dated as of April 25, 1996
("Agreement"), is among BARRA, INC., a California corporation ("BARRA"), ROGERS,
CASEY & ASSOCIATES, INC., a Delaware corporation ("RCA"), and each of Stephen
Rogers and John F. Casey (herein individually an "RCA Shareholder" and
collectively, the "RCA Shareholders").
W I T N E S S E T H:
A. The Boards of Directors of BARRA and RCA deem it advisable and in the
best interests of BARRA, RCA and their respective shareholders to consummate the
business combination provided for herein whereby a BARRA subsidiary would be
merged with and into RCA (the "Merger") such that on the effective date of the
Merger, RCA will be a wholly-owned subsidiary of BARRA.
B. This Agreement and the Merger Agreement, as defined herein, have been
approved by the Boards of Directors of BARRA and RCA, and will be submitted for
approval of the shareholders of RCA (the "Shareholders") by written consent.
C. The Merger is intended to qualify as a tax-free reorganization within
the meaning of the provisions of Section 368 of the Internal Revenue Code of
1986, as amended (the "IRC").
D. Pursuant to the Merger and subject to the terms and conditions herein,
each holder of common stock of RCA will receive, in exchange for common stock of
RCA, BARRA common stock in accordance with the Exchange Ratio, as defined
herein.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements provided for or contained
herein, the parties hereto agree as follows:
1. THE MERGER.
1.1 EFFECTIVE DATE. Subject to the terms and conditions of this Agreement
and the Merger Agreement, the form of which is attached hereto as Exhibit A (the
"Merger Agreement"), on the date of the filing with the Delaware Secretary of
State (the "Effective Date") of a duly executed Certificate of Merger
substantially in the form attached hereto as Exhibit B (the "Certificate of
Merger") prescribed by Section 251 of the Delaware General Corporation Law (the
"Delaware Code"), the Merger shall become effective.
1.2 CLOSING. The closing of the Merger (the "Closing") will take place on
the Effective Date (the "Closing Date"), at the offices of Graham & James LLP,
One
1.
<PAGE>
Maritime Plaza, Suite 300, San Francisco, California 94111-3492, unless another
date or place is agreed to in writing by the parties hereto.
1.3 EFFECT OF THE MERGER. Subject to the terms and conditions of this
Agreement and the Merger Agreement, on the Effective Date, RCA shall be merged
with a wholly-owned subsidiary of BARRA (the "Merger Sub") and RCA shall be the
surviving corporation (the "Surviving Corporation") in the Merger. All of the
rights, privileges, powers and franchises as well of a public as of a private
nature, goodwill, immunities, powers, and interests of RCA and the Merger Sub in
and to every type of property (real, personal and mixed) and choses in action,
and all the restrictions, disabilities and duties of RCA and the Merger Sub, and
all debts due to either RCA or the Merger Sub on whatever account, as well for
stock subscriptions as all other things in action or belonging to RCA or the
Merger Sub, as they exist as of the Effective Date, shall pass and be
transferred to and vest in the Surviving Corporation by virtue of the Merger
without any deed, conveyance or other transfer. The separate existence of the
Merger Sub shall cease and the corporate existence of RCA as the Surviving
Corporation shall continue unaffected and unimpaired by the Merger; and the
Surviving Corporation shall be deemed to be the same entity as each of RCA and
the Merger Sub and shall be subject to all of their duties and liabilities of
every kind and description.
2. CONVERSION AND CANCELLATION OF SHARES.
2.1 CONVERSION OF COMMON STOCK OF RCA. On the Effective Date, by virtue
of the Merger and without any action on the part of the holder of any common
stock of RCA (an "RCA Share" or "RCA Shares"):
Each issued and outstanding RCA Share (other than fractional shares or
any shares as to which dissenters' rights have been perfected) shall be
converted into 4.955 fully paid and nonassessable shares of common stock,
without par value, of BARRA (the "BARRA Common Stock" or "BARRA Shares"), as
determined by, and subject to adjustment in accordance with, Schedule A attached
hereto (the "Exchange Ratio"). All such RCA Shares shall no longer be
outstanding and shall automatically be canceled and retired and shall cease to
exist, and each certificate previously representing any such shares shall
thereafter represent the BARRA Shares into which such RCA Shares have been
converted. Certificates previously representing RCA Shares shall be exchanged
for certificates representing whole shares of BARRA Common Stock issued in
consideration therefor upon the surrender of such certificates in accordance
with Section 2.3. From and after the Effective Date, the holders of
certificates formerly representing RCA Shares shall cease to have any rights
with respect thereto other than: (i) the right to receive BARRA Shares as set
forth in this Section 2.1 and the right to receive a cash payment in lieu of
fractional shares as set forth in Section 2.2, or (ii) any dissenters' rights
they have perfected pursuant to Section 262 of the Delaware Code.
2.2 FRACTIONAL SHARES. Notwithstanding any other provision hereof, no
fractional shares of BARRA Common Stock shall be issued to the Shareholders. In
lieu thereof, each such holder entitled to a fraction of a share of BARRA Common
Stock
2.
<PAGE>
shall receive, at the time of surrender of the certificate or certificates
representing such holder's RCA Shares and an executed Transmittal Letter, as
defined in Section 2.3, an amount in cash equal to the Agreed Price, as
determined in accordance with Schedule A attached hereto, multiplied by the
fraction of a share of BARRA Common Stock to which such holder otherwise would
be entitled. No such holder shall be entitled to dividends, voting rights,
interest on the value of, or any other rights in respect of a fractional share.
2.3 SURRENDER OF CERTIFICATES REPRESENTING RCA SHARES.
(a) Prior to the Effective Date, BARRA shall appoint First Interstate
Bank of California or its successor, or any other bank or trust company mutually
acceptable to RCA and BARRA, as exchange agent (the "Exchange Agent") for the
purpose of exchanging certificates representing the BARRA Shares and at and
after the Effective Date BARRA shall issue and deliver to the Exchange Agent
certificates representing ninety percent (90%) of the number of BARRA Shares
determined in accordance with Section 2.1 of this Agreement, rounded up to the
nearest whole share. A certificate representing ten percent (10%) of the number
of BARRA Shares determined in accordance with Section 2.1, rounded down to the
nearest whole share, shall be placed in escrow (the "Escrow Shares") in
accordance with the provisions of Section 10.6 and the escrow agreement (the
"Escrow Agreement) contemplated by Section 10.6, in a form to be agreed upon by
RCA and BARRA (the "Escrow Shares"). The Escrow Shares shall be held in escrow
pursuant to the terms of the Escrow Agreement and the provisions of Section 10
as security for the joint and several indemnity obligations of the Shareholders.
Such indemnity obligations are limited to the value of the Escrow Shares, as
determined in accordance with Schedule A, except with respect to fraud or
willful misconduct and shall be satisfied, if necessary, solely by the
relinquishment of the Escrow Shares to BARRA pursuant to the provisions of
Section 10.6. If all of the Escrow Shares are not relinquished to BARRA to
satisfy the indemnity obligations within the time period set forth in the Escrow
Agreement, such Escrow Shares not so relinquished shall be released from escrow
and delivered to each Shareholder, and each Shareholder shall be entitled to
receive its pro rata portion of the balance of the Escrow Shares determined in
accordance with Section 2.1 and a payment in cash with respect to fractional
shares, if any, determined in accordance with the provisions of Section 2.2. As
soon as practicable after the Effective Date, BARRA shall cause the Exchange
Agent to deliver to each Shareholder, and each Shareholder shall be entitled to
receive upon surrender to the Exchange Agent of one or more certificates for
such Shareholder's RCA Shares for cancellation and a signed transmittal letter
containing the representations and warranties set forth in Section 6 of this
Agreement and in a form satisfactory to BARRA and RCA (the "Transmittal
Letter"), a certificate representing ninety percent (90%) of such Shareholder's
number of BARRA Shares determined in accordance with Section 2.1, rounded up to
the nearest whole share.
3.
<PAGE>
(b) No dividends or other distributions of any kind which are
declared payable to shareholders of record of the BARRA Shares after the
Effective Date will be paid to Shareholders entitled to receive such
certificates for BARRA Shares until such persons surrender their certificates
representing RCA Shares and execute and deliver a Transmittal Letter pursuant
to Section 2.3(a). Upon surrender of such certificate representing RCA
Shares and execution and delivery of a Transmittal Letter, BARRA shall pay
the holder thereof, without interest, any dividends or other distributions
with respect to the BARRA Shares (including the Escrow Shares) as to which
the record date and payment date occurred on or after the Effective Date and
on or before the date of surrender.
(c) If any certificate for BARRA Shares is to be issued in a name
other than that in which the certificate for RCA Shares surrendered in exchange
therefor is registered, it shall be a condition of such exchange that the person
requesting such exchange shall pay to the Exchange Agent any transfer costs,
taxes or other expenses required by reason of the issuance of certificates for
such BARRA Shares in a name other than the registered holder of the certificate
surrendered, or such persons shall establish to the satisfaction of BARRA and
the Exchange Agent that such costs, taxes or other expenses have been paid or
are not applicable.
(d) All dividends or distributions, and any cash to be paid pursuant
to Section 2.2 in lieu of fractional shares, if held by the Exchange Agent for
payment or delivery to the holders of unsurrendered certificates representing
RCA Shares and unclaimed at the end of one year from the Effective Date, shall
(together with any interest earned thereon) at such time be paid or redelivered
by the Exchange Agent to BARRA, and after such time any holder of a certificate
representing RCA Shares who has not surrendered such certificate to the Exchange
Agent and executed and delivered a Transmittal Letter shall, subject to
applicable law, look as a general creditor only to BARRA for payment or delivery
of such dividends or distributions or cash, as the case may be.
2.4 NO FURTHER TRANSFERS OF RCA SHARES. On the Effective Date, the stock
transfer books of RCA shall be closed and no transfer of RCA Shares theretofore
outstanding shall thereafter be made.
2.5 ADJUSTMENTS. If, between the date of this Agreement and the Effective
Date, the outstanding shares of BARRA common stock shall have been changed into
a different number of shares or a different class by reason of any
reclassification, recapitalization, split up, combination, exchange of shares or
readjustment, or a stock dividend thereon shall be declared with a record date
within such period, the number of BARRA Shares to be issued and delivered in the
Merger in exchange for each outstanding RCA Share shall be correspondingly
adjusted with the result that the holders of RCA Shares shall receive the same
economic benefit set forth in Section 2.1 above.
2.6 TREATMENT OF STOCK OPTIONS. Each person holding one or more options
to purchase RCA Shares pursuant to the RCA 1992 Stock Option and Restricted
Stock Purchase Plan (the "RCA Option Plan") shall have the right, in his or her
discretion, to:
4.
<PAGE>
(a) Exercise any vested options granted under the RCA Option Plan to
acquire RCA Shares prior to the Effective Date and RCA will facilitate the
exercise of those options by allowing the options to be exercised and taxes to
be paid by RCA withholding the appropriate number of shares from the shares
subject to the options or by any other method permitted by applicable law;
and/or
(b) Have any options whether or not vested that are not exercised
converted into options to purchase shares of BARRA common stock on the following
terms.
Following the Effective Date, shares of BARRA common stock shall be
substituted under the options for RCA Shares based on the Exchange Ratio
pursuant to the RCA Option Plan, which may be modified by BARRA consistent with
the provisions of this Section 2.6(b). Specifically, each option shall be
deemed to continue as an option to purchase the number of shares of BARRA common
stock equal to the Exchange Ratio multiplied by the number of RCA Shares
previously covered by such option at an option exercise price for each such
share of BARRA common stock equal to the previous option exercise price for each
RCA Share divided by the Exchange Ratio. Each RCA stock option shall otherwise
continue as a BARRA stock option on terms and conditions that are consistent
with those that were applicable immediately before the Effective Date, as set
forth in the RCA Option Plan. Within 45 days after the Effective Date, but in
no event before June 27, 1996, BARRA shall file a registration statement on
Form S-8 with the Securities and Exchange Commission (the "SEC") covering the
BARRA Shares to be issued under the RCA Option Plan, or take such other steps as
necessary to ensure that such BARRA Shares, when issued upon exercise of the RCA
Options, shall be registered under the Securities Act of 1933, as amended.
3. COVENANTS OF THE PARTIES.
3.1 COVENANTS OF BARRA. Unless otherwise expressly indicated below and
unless the Agreement is not earlier terminated pursuant to Section 11, from the
date of this Agreement to the Effective Date, BARRA hereby covenants as follows:
(a) RESERVATION AND ISSUANCE OF BARRA COMMON STOCK. BARRA shall
reserve and make available for issuance in connection with the Merger and in
accordance with the terms of this Agreement (i) the BARRA Shares; and (ii) the
maximum number of shares of common stock of BARRA to which the option holders of
RCA may be entitled pursuant to Section 2.6 above, at or after the Effective
Date.
(b) GOVERNMENT APPROVALS. BARRA, with the cooperation of RCA, shall
use its best efforts in good faith to take or cause to be taken as promptly as
practicable all such steps as shall be necessary to obtain all consents and
approvals of government agencies as are required by law or otherwise (the
"Government Approvals") and shall do any and all acts reasonably necessary or
appropriate in order to cause the
5.
<PAGE>
Merger to be consummated on the terms provided in this Agreement as promptly as
practicable.
(c) NOTIFICATION OF BREACH OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. BARRA shall promptly give written notice to RCA upon becoming aware
of the occurrence or impending or threatened occurrence of any event which would
cause or constitute a breach of any of the representations, warranties or
covenants of BARRA contained or referred to in the Merger Agreement or this
Agreement and shall use its best efforts to prevent the same or remedy the same
promptly.
(d) PRESS RELEASES. BARRA shall not issue any press release or
written statement for general circulation to the public relating to the Merger,
this Agreement or the Merger Agreement unless previously provided to RCA for
review and approval (which approval will not be unreasonably withheld or
delayed) and shall cooperate with RCA in the development and distribution of all
news releases and other public information disclosures with respect to this
Agreement or the Merger, provided that BARRA may, without the consent of RCA,
make any disclosure with regard to this Agreement or the Merger that it
determines is required under any applicable law or regulation, provided that, if
practicable, BARRA shall provide to RCA an opportunity to review and comment on
the content of any such disclosure prior to such disclosure being publicly
distributed.
(e) LITIGATION DEVELOPMENTS. BARRA agrees to promptly advise RCA
with respect to any and all material legal actions or other material proceedings
or investigations against BARRA relating to this transaction and to promptly
advise RCA with respect to any significant developments arising in connection
with said actions, proceedings or investigations.
(f) EMPLOYMENT. Subject to Section 11(d), BARRA shall not directly
or indirectly solicit, induce or recruit any of the officers or employees of RCA
or any RCA Subsidiary (as defined in Section 4(a)), to leave their employment
with RCA or any RCA Subsidiary without obtaining the prior written consent of
RCA.
(g) PROFIT SHARING PLAN. Following the Effective Date, BARRA will
cause the Surviving Corporation to make an appropriate contribution to the RCA
Profit Sharing and Savings Plan dated March 11, 1992 when required by the terms
of such plan in an amount not to exceed $300,000 for 1995 obligations, unless
RCA has made such contribution prior to the Effective Date.
3.2 COVENANTS OF RCA, THE RCA SUBSIDIARIES AND THE RCA SHAREHOLDERS.
Unless otherwise expressly indicated below and unless this Agreement is earlier
terminated pursuant to Section 11, from the date of this Agreement to the
Effective Date, RCA, on behalf of itself and each RCA Subsidiary and the RCA
Shareholders, as applicable hereby covenant to BARRA as follows. (The RCA
Subsidiaries are identified separately in these covenants for clarification only
and not by way of limitation; each
6.
<PAGE>
covenant made herein by RCA is made equally on behalf of any RCA Subsidiary for
which the covenant is relevant and applicable.)
(a) APPROVAL BY RCA SHAREHOLDERS. RCA shall cause the Merger, this
Agreement and the Merger Agreement to be submitted promptly for the approval of
its Shareholders by written consent pursuant to Section 228 of the Delaware Code
and in accordance with RCA's Certificate of Incorporation, By-laws and
applicable laws. Each RCA Shareholder hereby agrees to vote all of his
respective RCA Shares for approval of the Merger, this Agreement and the Merger
Agreement.
(b) SHAREHOLDER LISTS AND OTHER INFORMATION. RCA and each RCA
Subsidiary shall from time to time make available to BARRA, upon request, a list
of its Shareholders and their addresses, a list showing all transfers of the RCA
common stock and/or common stock of each RCA Subsidiary and such other
information as BARRA shall reasonably request regarding both the ownership and
prior transfers of the RCA common stock and common stock of each RCA Subsidiary.
(c) TRANSACTIONS IN BARRA COMMON STOCK. RCA and each RCA Shareholder
hereby agrees not to, directly or indirectly, buy or sell, or otherwise effect
any trade in, any shares of BARRA common stock, or any security derivative of
the BARRA common stock, from the date hereof through and including the Effective
Date unless the Agreement is earlier terminated. RCA and each RCA Shareholder
represents that as of the date hereof, the total number of shares of BARRA
Common Stock beneficially owned by each is as follows: RCA, 0 shares; Mr.
Casey, 0 shares; and Mr. Rogers, 0 shares.
(d) GOVERNMENT APPROVALS. RCA and the RCA Shareholders shall
cooperate in good faith and in all reasonable respects with BARRA in its
undertaking pursuant to Section 3.1(b) to obtain the Government Approvals and
RCA and the RCA Shareholders further agree to take such actions in good faith as
may be reasonably requested by BARRA to cause the Merger to be consummated on
the terms provided in the Merger Agreement and this Agreement as promptly as is
practicable.
(e) CAPITAL COMMITMENTS AND EXPENDITURES. After the execution of
this Agreement, no new capital commitments in excess of $10,000 individually or
$50,000 in the aggregate shall be entered into, and no capital expenditures in
excess of $10,000 individually or $50,000 in the aggregate shall be made by RCA
without the prior written approval of BARRA. Neither RCA nor any RCA Subsidiary
shall enter into any acquisitions or leases of real property, including both new
leases and lease extensions without the prior written approval of BARRA.
(f) NOTIFICATION OF BREACH OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. RCA and/or the RCA Shareholders shall promptly give written notice
to BARRA upon becoming aware of the occurrence or impending or threatened
occurrence of any event which would cause or constitute a breach of any of the
representations, warranties or covenants of RCA and/or the RCA Shareholders
7.
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contained or referred to in this Agreement and shall use commercially reasonable
efforts to prevent the same or remedy the same promptly.
(g) COMPENSATION. Neither RCA nor any of the RCA Subsidiaries shall
make or approve any increase in the compensation payable or to become payable by
RCA or any of the RCA Subsidiaries to any of its directors, officers, employees
or agents with annual salaries in excess of $30,000 at the date hereof
(including but not limited to compensation through any profit sharing, pension,
retirement, severance, incentive or other employee benefit program or
arrangement), nor shall any bonus payment or any agreement or commitment to make
a bonus payment be made (except with BARRA's prior approval which shall not be
unreasonably withheld), nor shall any material amendment to an existing employee
benefit plan or arrangement or any new employee benefit plan or arrangement be
adopted, nor shall any stock option, warrant or other right to acquire capital
stock be granted, or employment agreement (other than any such employment
agreement that may arise by operation of law upon the hiring of any new
employee) or consulting agreement be entered into by RCA or any of the RCA
Subsidiaries with any such directors, officers, employees or agents unless BARRA
has given its prior written consent. Nothing herein shall prevent the payment
to RCA and RCA Subsidiary employees (with salaries of $30,000 or less at the
date hereof) of regular salary increases, consistent with past practices in
connection with regular salary reviews consistent with past practices, as
heretofore disclosed to BARRA. Without the prior consent of BARRA, neither RCA
nor any of the RCA Subsidiaries shall hire any new employee at an annual rate in
excess of current customary practice or, in any event, in excess of $30,000 per
year, except with the prior written consent of BARRA. RCA has previously
delivered to BARRA a comprehensive list of employees as of the date hereof (the
"Employee List"), setting forth in detail the compensation payable to each and
all of RCA's and the RCA Subsidiaries' directors, officers, employees and
agents.
(h) CONDUCT OF BUSINESS IN THE ORDINARY COURSE. RCA and each RCA
Subsidiary shall conduct its business in the ordinary course as heretofore
conducted. For purposes of this Agreement the "Ordinary Course of Business"
shall consist of the consulting, investment management and other business
presently conducted by RCA and the RCA Subsidiaries. Prior to the Effective
Date RCA shall use reasonable efforts to maintain satisfactory relationships
with licensors, suppliers, distributors and customers, all in accordance with
its Ordinary Course of Business. Prior to the Effective Date, RCA shall not,
without the prior written consent of BARRA or except as specifically listed on
Schedule 3.2(h) of the RCA Disclosure Statement:
(1) amend its Certificate of Incorporation or Bylaws;
(2) authorize for issuance, issue, deliver or sell any
additional shares of its capital stock of any class, or securities convertible
into shares of such stock, or issue or grant any rights, options or other
commitments for the issuance of shares of such stock or such convertible
securities (other than the issuance of RCA common stock upon the exercise of
Options granted under the RCA Option Plan);
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(3) split, combine or reclassify any shares of its capital stock
or declare, set aside or pay any dividend (whether in cash, stock or property)
in respect to its capital stock or redeem or otherwise acquire any of its
capital stock other than the repurchase of shares issued to employees pursuant
to the terms of employee restricted stock purchase agreements, all of which
agreements are listed hereto as Schedule 3.2(h)(3) of the RCA Disclosure
Statement;
(4) dispose of or acquire any material properties or assets
except in the Ordinary Course of Business;
(5) engage in any activities or transactions that are outside
the Ordinary Course of Business;
(6) incur any indebtedness for borrowed money, other than
amounts borrowed pursuant to and in accordance with the terms and conditions of
its existing lines of credit; provided, however, that amounts outstanding under
its lines of credit on the Effective Date shall not exceed $650,000 (the
approximate amount outstanding on the date hereof) and shall not exceed $900,000
at any time prior to the Effective Date. In the event that the outstanding
amount on RCA's lines of credit on the Effective Date exceeds $650,000, there
shall be an adjustment to the Merger Consideration in accordance with the
provisions of Schedule A. Attached hereto as Schedule 3.2(h)(6) of the RCA
Disclosure Statement is a list of all material debt obligations of RCA and each
RCA Subsidiary as of the date hereof.
(i) PRESS RELEASES. RCA shall not issue any press release or written
statement for general circulation relating to this Agreement or the Merger
unless previously provided to BARRA for review and approval (which approval will
not be unreasonably withheld or delayed) and shall cooperate with BARRA in the
development and distribution of all news releases and other public information
disclosures with respect to this Agreement or the Merger, provided that RCA may,
without the consent of BARRA, make any disclosure with regard to this Agreement
or the Merger that is required under any applicable law or regulation, provided
that, if practicable, RCA shall provide to BARRA an opportunity to review and
comment on the content of any such disclosure prior to such disclosure being
publicly distributed.
(j) NO MERGER OR SOLICITATION.
(i) Neither RCA, the RCA Subsidiaries nor the RCA Shareholders
shall effect or agree to effect any Business Combination, acquire or agree to
acquire any of the capital stock of RCA, other than RCA Restricted Shares
pursuant to repurchase obligations contained in the RCA Shareholders Agreement
nor shall RCA or any RCA Subsidiary acquire or agree to acquire the capital
stock or assets (except in the Ordinary Course of Business) of any other entity,
or commence any proceedings for winding up and dissolution affecting any of
them. As used in this Agreement, "Business Combination" shall mean any tender
or exchange offer, proposal for a merger, consolidation, acquisition of assets
or other takeover proposal involving any party hereto
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(except as explicitly contemplated in this Agreement) or any offer or
proposal to acquire in any manner a five percent (5%) or greater interest in,
or a substantial portion of any party hereto other than transactions
contemplated hereunder.
(ii) Neither RCA, any RCA Subsidiary, any RCA Shareholder, nor
any officer, director or affiliate of RCA, nor any investment banker, attorney,
accountant or other agent, advisor or representative retained by RCA shall
(A) solicit or encourage, directly or indirectly, any inquiries, discussions or
proposals for, continue, propose or enter into discussions or negotiations
looking toward, or enter into any agreement or understanding providing for, any
Business Combination; or (B) in connection with a potential Business Combination
or otherwise than in the Ordinary Course of Business disclose, directly or
indirectly, any nonpublic information to any corporation, partnership, person or
other entity or group concerning the business and properties of RCA or afford
any such party access to the properties, books or records of RCA or otherwise
assist or encourage any such party in connection with the foregoing, or
(C) furnish or cause to be furnished any information concerning the business,
financial conditions operations, properties or prospects of RCA to another
person, having any actual or prospective role with respect to any such
transaction. The foregoing will be subject, at all times, to the right and
ability of the directors of RCA to satisfy their fiduciary obligations.
(iii) RCA shall notify BARRA of the details of any indication of
interest of any person, corporation, firm, association or group to acquire by
any means a five percent (5%) or greater interest in, or a substantial portion
of RCA or any RCA Subsidiary or engage in any Business Combination with RCA
within two business days of any such indication of interest.
(k) RCA 401(K) PLAN. RCA agrees the RCA Profit Sharing and Savings
Plan (the "RCA 401(k) Plan") may be continued or merged into the BARRA 401(k)
Plan, on or after the Effective Date, as determined by BARRA in its sole
discretion, subject to compliance with applicable law and the terms of the RCA
401(k) Plan.
(l) ACCOUNTING METHODS. Neither RCA nor any RCA Subsidiary shall
change its methods of accounting in effect at December 31, 1995, except as
required by changes in GAAP as concurred in by its independent auditors.
(m) ADDITIONAL AGREEMENTS. In case at any time after the Effective
Date any further action is necessary to vest the Surviving Corporation with all
rights of RCA in all properties, assets, rights, approvals, immunities and
franchises of RCA, the proper officers and directors of each party to this
Agreement, including the RCA Subsidiaries and the RCA Shareholders, shall take
all such necessary action.
(n) ACCESS TO PROPERTIES, BOOKS AND RECORDS. Prior to the Effective
Date, RCA and the RCA Subsidiaries shall give BARRA and its counsel and
accountants full access, during normal business hours and upon reasonable
request, to
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all of its properties, books, contracts, commitments and records including, but
not limited to, the corporate, financial and operational records, papers,
reports, instructions, procedures, tax returns and filings, tax settlement
letters, material contracts or commitments, regulatory examinations and
correspondence and shall allow BARRA to make copies of such materials (to the
extent not legally prohibited) and shall furnish BARRA with all such information
concerning its affairs as BARRA may reasonably request. RCA shall also use its
best efforts to cause Coopers & Lybrand LLP to make available to BARRA, its
accountants, counsel and other agents, to the extent reasonably requested in
connection with such review, Coopers & Lybrand LLP work papers and documentation
relating to its work papers and its audits and reviews of the books and records
of RCA. Client files that are protected pursuant to confidentiality agreements
signed with RCA, pursuant to fiduciary obligations to maintain confidentiality
of the Advisers Act (as defined in Section 4(a)(i)) or are subject to attorney-
client privilege, shall not be subject to this Section 3.2(n) ("Confidential
Files"). Notwithstanding the foregoing, RCA shall disclose to BARRA the general
subject matter of the Confidential Files, and any matter therein which would
have a material adverse effect on this transaction.
(o) EMPLOYEE WELFARE BENEFIT PLANS. RCA agrees that RCA's employee
welfare benefit plans, as used in Section 3(1) of Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), may be continued or merged into
BARRA's welfare benefit plans, on or after the Effective Date, as determined by
BARRA in its sole discretion, subject to compliance with applicable law and the
terms of the plans. Attached hereto as Schedule 3.2(o) of the RCA Disclosure
Statement is a list of all of RCA's employee welfare benefit plans.
(p) LITIGATION DEVELOPMENTS. RCA and each RCA Subsidiary agree to
promptly advise BARRA with respect to any and all material legal actions or
other material proceedings or investigations against RCA or such subsidiaries
and to promptly advise BARRA with respect to any significant developments
arising in connection with said actions, proceedings or investigations.
(q) EMPLOYMENT. Subject to Section 11(d), neither RCA, the RCA
Shareholders, nor any RCA Subsidiary shall solicit any of the officers or
directors of BARRA or its subsidiaries to leave their employment with BARRA or
its subsidiaries, without obtaining the prior written consent of BARRA.
3.3 COVENANTS OF THE PARTIES. Each party shall use its best efforts to
cause its officers, directors, employees, auditors, agents, and attorneys to
cooperate with the other in the reasonable requests for information by the other
parties hereto. In addition, the parties acknowledge and confirm the terms of
confidentiality letters dated November 2, 1995 and February 15, 1996 between
BARRA and RCA, which provisions shall remain in effect in accordance with their
terms.
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4. REPRESENTATIONS AND WARRANTIES OF RCA, THE RCA SUBSIDIARIES AND THE
RCA SHAREHOLDERS.
(The RCA Subsidiaries are identified separately in these representations
and warranties for clarification only and not by way of limitation; each
representation and warranty made herein by RCA is made equally by RCA on behalf
of each RCA Subsidiary for which the representation and warranty is relevant and
applicable.)
RCA (on behalf of itself and, to the extent applicable, each RCA
Subsidiary) and each of the RCA Shareholders jointly and severally represents
and warrants to BARRA that except as disclosed to BARRA in writing on a separate
disclosure statement attached hereto (the "RCA Disclosure Statement") which RCA
Disclosure Statement shall be deemed to be representations and warranties to the
appropriately cross-referenced sections as if made hereunder:
(a) CORPORATE STATUS AND POWER TO ENTER INTO AGREEMENTS. Each of RCA
and its wholly-owned subsidiaries, Rogers, Casey Management Services, Inc.
("RCMS"), a Delaware corporation, Rogers, Casey Investment Advisers, Inc.
("RCIA"), a Delaware corporation, Rogers, Casey Consulting, Inc. ("RCC"), a
Delaware corporation, and Rogers, Casey Alternative Investments, Inc. ("RCAI"),
a Delaware corporation (collectively, the "RCA Subsidiaries" and individually,
an "RCA Subsidiary") (i) is a corporation duly organized, validly existing and
in good standing under the laws of its respective jurisdiction of organization,
(ii) subject to the approval of this Agreement and the transactions contemplated
hereby by the Shareholders of RCA, RCA has all necessary corporate power to
enter into this Agreement and to carry out all of the terms and provisions
hereof and thereof to be carried out by it, (iii) is not subject to any order
(formal or informal) or agreement, of the SEC or any other regulatory authority
having jurisdiction over its business or any of its assets or properties, and
(iv) is in full compliance with any agreements, understandings or orders of the
SEC or any other regulatory authority having jurisdiction over its business or
any of its assets or properties. RCA and each RCA Subsidiary is duly qualified
to do business as a foreign corporation under the laws of each jurisdiction in
which the conduct of its business requires such qualification or license, and
where failure to be so qualified would have a material adverse effect on it, and
each such jurisdiction is set forth on Schedule 4(a) of the RCA Disclosure
Statement.
(b) EXECUTION AND DELIVERY OF THE AGREEMENT.
(i) The execution and delivery of this Agreement has been duly
authorized by the Board of Directors of RCA and, when this Agreement and the
Merger have been duly approved by the affirmative vote of the holders of a
majority of the outstanding shares of RCA common stock by written consent of the
Shareholders in accordance with Section 228 of the Delaware Code, this Agreement
and the Merger will be duly and validly authorized by all necessary corporate
action on the part of RCA.
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(ii) This Agreement has been, and as of the Effective Date the
Merger Agreement and the Escrow Agreement will have been, duly executed and
delivered by RCA and (assuming due execution and delivery by and enforceability
against BARRA) constitutes legal and binding obligations of RCA, enforceable in
accordance with their terms, except as enforcement may be limited by applicable
bankruptcy laws or other similar laws effecting creditors' rights generally, and
except that the availability of equitable remedies may be limited.
(iii) The execution and delivery by RCA of this Agreement and
the consummation of the transactions described herein (A) do not violate any
provision of the Certificate of Incorporation or Bylaws of RCA or any RCA
Subsidiary, any provision of federal or state law or any governmental rule or
regulation (assuming (1) receipt of the Government Approvals, (2) receipt of the
requisite RCA shareholder approval referred to in Section 3.2(a) hereof,
(3) receipt of appropriate permits or approvals under applicable federal and
state securities laws, and (4) accuracy of the representations of BARRA set
forth herein), and (B) do not require any consent of any person under, conflict
with or result in a breach of, or accelerate the performance required by any of
the terms of any material debt instrument, lease, license, covenant, agreement
or understanding to which RCA or any RCA Subsidiary is a party or by which it is
bound or any order, ruling, decree, judgment, arbitration award or stipulation
to which RCA or any RCA Subsidiary is subject, or constitute a material default
thereunder or result in the creation of any lien, claim, security interest,
encumbrance, charge, restriction or similar right of any third party upon any of
the properties or assets of RCA or any RCA Subsidiary.
(iv) Each RCA Shareholder has now, and will have at the Closing
Date, all requisite legal and (if applicable) corporate, trust or partnership
power to enter into this Agreement, to receive the BARRA Shares in exchange for
RCA Shares hereunder and to perform its obligations under the terms of this
Agreement.
(v) This Agreement when executed and delivered by each RCA
Shareholder will constitute a valid and legally binding obligation of such RCA
Shareholder, enforceable in accordance with its terms, except as enforcement may
be limited by applicable bankruptcy laws or other similar laws affecting
creditors' rights generally, and except that the availability of equitable
remedies may be limited.
(c) SUBSIDIARIES AND OTHER EQUITY INTERESTS. Except as set forth in
Section 4(a), RCA does not own, directly or indirectly, any interest in any
other corporation, partnership, association, joint venture or other business
entity.
(d) CERTIFICATE, BYLAWS, BOOKS AND RECORDS. The copies of the
Certificate of Incorporation and Bylaws of RCA and each RCA Subsidiary to be
delivered to BARRA prior to the date hereof are complete and accurate copies
thereof as in effect on the date hereof. The minute books of RCA and each RCA
Subsidiary made available to BARRA contain an accurate record of all resolutions
of the Board of Directors (and committees thereof) and shareholders of RCA and
each RCA subsidiary.
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The Certificate of Incorporation and Bylaws of RCA and each RCA Subsidiary and
all amendments thereto have been duly approved by all requisite corporate action
and by the appropriate regulatory authority to the extent required by law and
each Certificate of Incorporation has been duly filed with all appropriate
governmental agencies
(e) COMPLIANCE WITH LAWS, REGULATIONS AND DECREES. Except as set
forth on Schedule 4(e) of the RCA Disclosure Statement, RCA and each RCA
Subsidiary (i) has the corporate power to own or lease its properties and to
conduct its business as currently conducted, (ii) has complied with, and is not
in default of any laws, regulations, ordinances, orders or decrees applicable to
the conduct of its business and the ownership of its properties, other than
where such noncompliance or default is not likely to result in a material
limitation on the conduct of its business or is not likely to otherwise have a
material adverse effect on RCA taken as a whole or any RCA Subsidiary (iii) has
not failed to file with the proper federal, state, local or other authorities
any material report or other document required to be so filed, (iv) has all
material approvals, authorizations, consents, licenses, clearances and orders
of, and has currently effective all registrations with, all governmental and
regulatory authorities which are necessary to the business and operations of RCA
and each RCA Subsidiary as now being conducted, and (v) since January 1, 1993
has received no notification, formally or informally, from any agency or
department of any federal, state or local government or any regulatory agency or
the staff thereof (A) asserting that RCA or any RCA Subsidiary is not in
material compliance with any of the statutes, regulations or ordinances which
such government or regulatory authority enforces, or (B) threatening to revoke
any licenses, franchise, permit or governmental authorization of RCA or any RCA
Subsidiary, and for the period prior to January 1, 1993, to the best of RCA's
knowledge, RCA did not receive any notifications described in Section 4(e)(v)
pertaining to issues that remain unresolved as of the date hereof.
(f) CAPITALIZATION. (i) As of the date hereof, the authorized
capital stock of RCA consists of 200,000 shares of RCA common stock, $0.10 par
value, of which 100,169 are duly authorized, validly issued, fully paid and
nonassessable and currently outstanding. Included in the outstanding shares of
RCA common stock are 1,567 RCA Restricted Shares, which are subject to transfer
restrictions and a risk of forfeiture pursuant to a 1993 Stock Restriction
Agreement dated December 28, 1993, a copy of which is attached hereto as
Schedule 4(f) of the RCA Disclosure Statement. Said stock has been issued in
compliance with all applicable registration or qualification provisions of state
and federal securities laws. No other equity securities of RCA are outstanding.
As of the date hereof, there are outstanding options to purchase 8,811 shares of
RCA common stock, at a weighted average exercise price of $78.26 per share,
issued pursuant to the RCA Option Plan. Said options were issued and, upon
issuance in accordance with the terms of the outstanding options, shares issued
prior to the Closing upon exercise of outstanding options were issued, in
compliance with all applicable registration or qualification provisions of state
and federal securities laws. Other than as set forth in this subsection, there
are no outstanding (i) options, agreements, calls or commitments of any
character which would obligate RCA to issue, sell, pledge, assign or otherwise
encumber or dispose of, or to purchase, redeem or
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otherwise acquire, any RCA common stock or any other equity security of RCA, or
(ii) warrants or options relating to, rights to acquire, or debt or equity
securities convertible into, shares of RCA common stock or any other equity
security of RCA. Attached hereto on Schedule 4(f) of the RCA Disclosure
Statement is a list as of the date of this Agreement of (i) all Shareholders of
RCA and each of such Shareholders who hold RCA Restricted Shares, including the
vesting schedule for such RCA Restricted Shares, and (ii) all option holders and
the number of vested options held.
(ii) The authorized capital stock of RCMS consists of 1,000
shares of RCMS common stock, $0.10 par value, of which 1,000 shares are duly
authorized, validly issued, fully paid and nonassessable and currently
outstanding. Such stock has been issued in compliance with all applicable
registration or qualification provisions of state and federal securities laws.
No other equity securities of RCMS are outstanding.
(iii) The authorized capital stock of RCIA consists of 1,000
shares of RCIA's common stock, $0.10 par value, of which 1,000 shares are duly
authorized, validly issued, fully paid and nonassessable and currently
outstanding. Such stock has been issued in compliance with all applicable
registration or qualification provisions of state and federal securities laws.
No other equity securities of RCIA have been issued or are outstanding.
(iv) The authorized capital stock of RCC consists of 1,000 shares
of RCIA's common stock, $0.10 par value, of which 1,000 shares are duly
authorized, validly issued, fully paid and nonassessable and currently
outstanding. Such stock has been issued in compliance with all applicable
registration or qualification provisions of state and federal securities laws.
No other equity securities of RCC have been issued or are outstanding.
(v) The authorized capital stock of RCAI consists of 1,000 shares
of RCAI's common stock, $0.10 par value, of which 1,000 shares are duly
authorized, validly issued, fully paid and nonassessable and currently
outstanding. Such stock has been issued in compliance with all applicable
registration or qualification provisions of state and federal securities laws.
No other equity securities of RCAI have been issued or are outstanding.
(g) FINANCIAL STATEMENTS.
(i) RCA has delivered to BARRA at least 5 business days prior
to the Closing Date true and correct copies of consolidated statements of
income, changes in shareholders' equity and statements of cash flows for the
fiscal years ended December 31, 1995, 1994 and 1993, and consolidated balance
sheets at December 31, 1995, 1994 and 1993. Such consolidated financial
statements at December 31, 1995 and 1994, and for the fiscal years ended
December 31, 1995 and 1994, have been audited by Coopers & Lybrand LLP as
independent public accountants for RCA during the relevant periods, and include
or shall include an opinion of such accounting firm to the
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effect that such financial statements have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis during
the periods involved ("GAAP") and present fairly, in all material respects, the
consolidated financial position, results of operations and cash flows of RCA at
the dates indicated and for the periods then ending. The opinion of such
accounting firm does not and shall not contain any qualifications. Such
consolidated financial statements at December 31, 1993, and for the fiscal years
ended December 31, 1993, have been reviewed by Coopers & Lybrand LLP and have
been prepared in accordance with GAAP and present fairly, in all material
respects, the consolidated financial position, results of operations and cash
flows of RCA at the dates indicated and for the periods then ending.
(ii) RCA has delivered to BARRA at least 5 business days prior
to the Closing Date true and correct copies of unaudited consolidated statements
of income, changes in shareholders' equity and statements of cash flows for the
one-month periods ended January 31, 1996, February 29, 1996, and March 31, 1996,
and unaudited consolidated balance sheets at January 31, 1996, February 29,
1996, and March 31, 1996. From the date hereof through the Effective Date, RCA
will continue to prepare unaudited consolidated financial statements on a
monthly basis and will deliver the same to BARRA no later than 30 days after the
end of each month. All such unaudited monthly consolidated financial statements
have been prepared in accordance with GAAP and present fairly, in all material
respects, the consolidated financial position, results of operation and cash
flows of RCA at the dates indicated and for the periods then ending subject to
normal year-end adjustments, none of which will be material, and the absence of
certain notes thereto.
(iii) RCA has delivered to BARRA on the date hereof a
certificate (the "Note Certificate"), signed on behalf of RCA by the Chairman of
the Board and Chief Financial Officer of RCA, identifying each of the notes
payable (the "Notes") of RCA, which shall have been used to calculate the
Exchange Ratio, as set forth on Schedule A. The Note Certificate accurately
presents the outstanding balance of each of the Notes as of the date hereof.
(iv) RCA has delivered or shall deliver to BARRA true and
complete copies of RCA's communications addressed solely to Shareholders during
the last three years.
(v) RCA has delivered or shall deliver to BARRA true and
complete copies of the budget and projections, and the assumptions underlying
the projections (the "Projections") for the year ending December 31, 1996 for
RCA and the RCA Subsidiaries taken as a whole. The assumptions underlying the
Projections are reasonable and the Projections have been carefully prepared from
such assumptions.
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(h) GOVERNMENT REGULATION.
(i) Except as set forth on Schedule 4(h)(i) of the RCA
Disclosure Statement, RCA is and has been since January 13, 1989 duly registered
as an investment adviser under the Investment Advisers Act of 1940 (the
"Advisers Act"). RCMS has never been registered as an investment adviser under
the Advisers Act. RCIA is and has been since November 24, 1989 duly registered
as an investment adviser under the Advisers Act. RCC is and has been since
December 5, 1991 duly registered as an investment adviser under the Advisers
Act. RCAI is and has been since November 26, 1990 duly registered as an
investment adviser under the Advisers Act. RCA and each RCA Subsidiary is
registered as an investment adviser in the states referenced in item 7, Part I
of each respective current Form ADV and is in compliance with all state laws
requiring registration, licensing or qualification as an investment adviser.
Each such registration is in full force and effect. Prior to the Effective
Date, RCA will have delivered to BARRA a true and complete copy of its Forms ADV
and the Forms ADV for each RCA Subsidiary, as amended to date, filed by RCA and
each RCA Subsidiary with the SEC since December 31, 1993; copies of all state
registration forms, likewise as amended to date have been made available to
BARRA; and copies of all current reports required to be kept by RCA and each RCA
Subsidiary pursuant to the Advisers Act and rules promulgated thereunder, and
required pursuant to applicable state statutes have been made available to
BARRA. The information contained in such forms and reports was true and
complete at the time of filing in all material respects. RCA and each RCA
Subsidiary has filed all amendments required to be filed to its Form ADV and
state registration forms under federal and state law. Except as set forth on
Schedule 4(h)(i) of the RCA Disclosure Statement, RCA and each RCA Subsidiary
have filed all reports required to be filed by it under the Exchange Act
(including Sections 13(d), (f) and (g) thereof) and rules promulgated thereunder
and all applicable state laws and regulations. All filings required to be made
by RCA and each RCA Subsidiary as described in this Section 4(h) are hereafter
referred to as the "RCA SEC Documents." Attached hereto as Schedule 4(h)(i) of
the RCA Disclosure Statement is a schedule which identifies the examination
and/or certification qualifications of each adviser representative of RCA and
each RCA Subsidiary. The RCA SEC Documents complied in all material respects
with the applicable requirements of the 1940 Acts, and none of the RCA SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary in order to make the
statements made therein, in light of the circumstances under which they were
made, not misleading except to the extent corrected by a subsequently filed RCA
SEC Document. To the extent financial statements are required in the RCA SEC
Documents, such financial statements of RCA included in the RCA SEC Documents
comply as to form in all material respects with applicable accounting
requirements and with the published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except as may be
indicated in the notes thereto or, in the case of unaudited statements, as
permitted by the rules and regulations of the SEC) and fairly present the
consolidated financial position of RCA and its consolidated subsidiaries as at
the dates thereof and the consolidated results of their operations and
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changes in financial position for the periods then ended (subject in the case of
unaudited statements, to normal recurring audit adjustments).
(ii) Neither RCA nor any RCA Subsidiary is an "investment
company" within the meaning of the Investment Company Act of 1940 (the "Company
Act"), which is required to be registered under the Company Act in order to
engage in the transactions described in Section 7 of that Act. Neither RCA nor
any RCA Subsidiary is a "broker" or "dealer" within the meaning of the Exchange
Act. Copies of all inspection reports or similar documents furnished to RCA
and/or any RCA Subsidiary by the SEC or state regulatory authorities since
January 1, 1993, are listed on Schedule 4(h)(ii) of the RCA Disclosure Statement
and copies thereof have been provided to BARRA. RCA is not required to disclose
any information to clients under Rule 206(4)-4 promulgated under the Advisers
Act.
(iii) Except with respect to the entities listed on
Schedule 4(h)(iii)(A) of the RCA Disclosure Statement attached hereto (each a
"Fund" and collectively the "Funds"), neither RCA nor any RCA Subsidiary acts as
investment adviser or subadviser to any "investment company," as defined in the
Company Act, which is registered under such Act. RCA and each RCA Subsidiary
has a written investment advisory agreement with each Fund pursuant to which RCA
or the applicable RCA Subsidiary serves as investment adviser to each Fund and
has delivered to BARRA true and complete copies of such agreements; attached
hereto as Schedule 4(h)(iii)(B) of the RCA Disclosure Statement is a list of all
such agreements. Each of such agreements is in full force and effect, neither
RCA nor any RCA Subsidiary is not in default thereunder and, to the best
knowledge of RCA, no Fund that is a party thereto is in default thereunder.
(iv) Neither RCA nor any RCA Shareholder nor any other
"interested person" of RCA as such term is defined in the Advisers Act, receives
or is entitled to receive any compensation directly or indirectly (a) from any
person in connection with the purchase or sale of securities or other property
to, from or on behalf of any of the Funds, other than bona fide ordinary
compensation as principal underwriter for the Funds or (b) from the Funds or its
security holders for other than bona fide investment advisory services, or other
services.
(i) CODE OF ETHICS. RCIA has adopted a formal code of ethics, a
true, complete and accurate copy of which is attached hereto as Schedule 4(i) of
the RCA Disclosure Statement. RCA and the remaining RCA Subsidiaries have not
adopted a formal code of ethics and they do not believe that a formal code of
ethics is necessary to their businesses. Their failure to have a formal code of
ethics shall not have a materially adverse effect on the business of RCA or such
RCA Subsidiaries. The policies of RCA and each RCA Subsidiary (except RCMS)
with respect to avoiding conflicts of interest are as set forth in their
respective Forms ADV, as amended, which has been delivered to BARRA. To the
best of RCA's knowledge, there have been no material instances of non-compliance
with such policies since their adoption, except as listed on the RCA Disclosure
Statement.
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(j) TAX RETURNS. RCA and each RCA Subsidiary has timely filed all
federal, state, and all material county, local and foreign tax returns required
to be filed by it, including without limitation, estimated tax, use tax, excise
tax, real property and personal property tax reports and returns, employer's
withholding tax returns, other withholding tax returns and Federal Unemployment
Tax Returns, and all other reports or other information required or requested to
be filed by it, and each such return, report or other information was, when
filed, complete and accurate in all material respects. Since January 1, 1989,
RCA and each RCA Subsidiary has paid all taxes, fees and other governmental
charges, including any interest and penalties thereon, when they have become due
and payable, except those that are being contested in good faith, which
contested matters are identified and described on Schedule 4(j) of the RCA
Disclosure Statement attached hereto. Neither RCA nor any RCA Subsidiary has
given any currently effective waivers extending the statutory period of
limitation applicable to any tax return required to be filed by it for any
period. There are no claims pending against RCA or any RCA Subsidiary for any
alleged deficiency in the payment of any taxes, and no pending or threatened
audits, investigations or claims for unpaid taxes or relating to any liability
in respect of any taxes.
(k) MATERIAL ADVERSE CHANGE. Except as reflected on RCA's financial
statements issued prior to the date hereof and listed and described on
Schedule 4(k) of the RCA Disclosure Statement attached hereto or as otherwise
disclosed in writing by RCA to BARRA prior to the date hereof, since December
31, 1995, there has been (i) no adverse change which is material to the
business, assets, licenses, permits, franchises, results of operations or
financial condition of RCA and the RCA Subsidiaries taken as a whole (whether or
not in the ordinary course of business), (ii) no change in any of the assets,
licenses, permits or franchises of RCA or any RCA Subsidiary or that has had or,
to RCA's knowledge, can reasonably be expected to have a material adverse effect
on any of the items listed in clause (h) above, (iii) no damage, destruction or
other casualty loss (whether or not covered by insurance) that has had or can
reasonably be expected to have a material adverse effect on any of the items
listed in clause (h) above, (iv) no amendment, modification, or termination of
any existing, or entering into of any new, contract, agreement, plan lease,
license, permit or franchise that is material to the business, financial
condition, assets, liabilities or operations of RCA and the RCA Subsidiaries
taken as a whole, except in the Ordinary Course of Business; (v) no disposition
by RCA or any RCA Subsidiary of one or more assets that, individually or in the
aggregate, are material to RCA and the RCA Subsidiaries taken as a whole, except
sales of assets in the Ordinary Course of Business.
(l) NO UNDISCLOSED LIABILITIES. Except for items for which reserves
have been established in the audited consolidated balance sheets of RCA as of
December 31, 1995, and listed on Schedule 4(l) of the RCA Disclosure Statement
attached hereto, since such date neither RCA nor any RCA Subsidiary has incurred
or discharged, and is not legally obligated with respect to, any indebtedness,
liability (including, without limitation, a liability arising out of an
indemnification, guarantee, hold harmless or similar arrangement) or obligation
(accrued or contingent, whether due
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or to become due, and whether or not subordinated to the claims of its general
creditors), other than as a result of operations in the Ordinary Course of
Business. Neither RCA nor any RCA Subsidiary is in default under any
outstanding debt obligation. No agreement pursuant to which any assets have
been or will be sold by RCA or any RCA Subsidiary entitles the buyer of such
assets, unless there is material breach of a representation or covenant by RCA
or any RCA Subsidiary, to cause RCA or any RCA Subsidiary to repurchase such
asset or to pursue any other form of recourse against RCA or any RCA Subsidiary.
Neither RCA nor any RCA Subsidiary has made nor shall make any representations
or covenants in any such agreement that contained or shall contain any untrue
statement of a material fact or omitted or shall omit to state a material fact
necessary in order to make the statements contained therein, in light of the
circumstances under which such representations and/or covenants were made or
shall be made, not misleading. No cash, stock or other dividend or any other
distribution with respect to the stock of RCA or any RCA Subsidiary has been
declared, set aside or paid, nor have any shares of the stock of RCA or any RCA
Subsidiary been purchased, redeemed or otherwise acquired, directly or
indirectly, by RCA or any RCA Subsidiary since December 31, 1995.
(m) PROPERTIES AND LEASES.
(i) RCA and each RCA Subsidiary has good and marketable title,
free and clear of all liens and encumbrances and the right of possession,
subject to existing leaseholds, to all real properties and good title to all
other tangible property and assets, reflected in the RCA consolidated balance
sheet as of December 31, 1995 (except property held as lessee under leases
entered into since December 31, 1995 and as set forth on Schedule 4(m)(i) of the
RCA Disclosure Statement attached hereto and except personal property sold or
otherwise disposed of since December 31, 1995 in the Ordinary Course of
Business). All tangible properties of RCA and each RCA Subsidiary conform in
all material respects with all applicable ordinances, regulations and zoning
laws. All material tangible properties of RCA and each RCA Subsidiary are in a
good state of maintenance and repair and are adequate for the current business
of RCA and each RCA Subsidiary. No properties of RCA or any RCA Subsidiary, and
no properties in which it holds a collateral or contingent interest or purchase
option, are the subject of any pending or threatened investigation, claim or
proceeding relating to the use, storage or disposal on such property of or
contamination of such property by any toxic or hazardous waste material or
substance. Neither RCA nor any RCA Subsidiary owns, possesses or has a
collateral or contingent interest or purchase option in any properties or other
assets which contain or have located within or thereon any hazardous or toxic
waste material or substance unless the location of such hazardous or toxic waste
material or other substance or its use thereon conforms in all material respects
with all federal, state and local laws, rules, regulations or other provisions
regulating the discharge of materials into the environment. As to any asset not
owned or leased by RCA, RCA has not controlled, directed or participated in the
operation or management of any such assets or any facilities or enterprise
conducted thereon, such that it has become an owner or operator of such asset
under applicable environmental laws.
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(ii) All properties held by RCA and each RCA Subsidiary under
leases are held under valid, binding and enforceable leases, assuming such
leases have been duly authorized by all necessary corporate action on the part
of the other parties to such leases, with such exceptions as are not material
and do not interfere with the conduct of the business of RCA or any RCA
Subsidiary, and RCA and each RCA Subsidiary enjoys quiet and peaceful possession
of such leased property. A list of each property held by RCA and each RCA
Subsidiary under lease is attached hereto as Schedule 4(m)(ii) of the RCA
Disclosure Statement. Neither RCA nor any RCA Subsidiary is in default in any
material respect under any material lease, agreement or obligation regarding its
properties to which it is a party or by which it is bound.
(iii) Except as disclosed to BARRA on Schedule 4(m)(ii) of the
RCA Disclosure Statement, all of RCA's rights and obligations under the leases
referred to in Section 4(m)(ii) above do not require the consent of any other
party to the transaction contemplated by this Agreement. Where such consent is
required, RCA shall use all commercially reasonable efforts to obtain, prior to
the Effective Date, the consent of all parties to any such transactions.
(n) PATENTS, COPYRIGHTS, TRADEMARKS. RCA and each RCA Subsidiary has
exclusive right, title and interest in and to, or adequate licenses, rights,
purchase options, assignments and/or releases with respect to the foregoing, all
of the intangible property, including all patents, trademarks, service marks,
trade names, copyrights, trade secrets and other proprietary rights
(collectively, "Proprietary Rights"), necessary for its business as now
conducted and as currently proposed to be conducted, and neither RCA nor any RCA
Subsidiary has received any notice or claim of, nor does it have any knowledge
of, any material infringement or misappropriation by RCA or any RCA Subsidiary
of the asserted rights of others. All assignments and agreements relating to
Proprietary Rights to which RCA or any RCA Subsidiary is a party constitute
legal, valid and binding obligations of the respective parties thereto and are
enforceable in accordance with their respective terms, assuming such assignments
and agreements have been duly authorized by all necessary corporate action on
the part of the other parties to such assignments and agreements, and except as
limited by bankruptcy and other laws of general application affecting the rights
and remedies of creditors generally and except insofar as the availability of
equitable remedies may be limited. Neither RCA nor any RCA Subsidiary is aware
of any material infringement or misappropriation by others of any of its
Proprietary Rights. RCA and each RCA Subsidiary have taken substantially all
steps necessary to establish and maintain its ownership of or interest in the
Proprietary Rights. Attached hereto as Schedule 4(n) of the RCA Disclosure
Statement is a true and correct list of all material: (i) Proprietary Rights
(excluding trade secrets); (ii) registrations and applications for RCA's and
each RCA Subsidiary's copyrights and trademarks; (iii) the trademarks under
which, and the countries in which, RCA or any RCA Subsidiary sells or intends to
sell products; (iv) all availability searches conducted for RCA or each RCA
Subsidiary's trademarks; and (v) all Office Actions issued by the U.S. Patent
and Trademark Office and any equivalent office outside the U.S. relating to
RCA's and each RCA Subsidiary's trademarks. The material products and processes
in
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which RCA or the RCA Subsidiaries claim trade secret protection have been
independently disclosed in writing to BARRA as of the date hereof.
(o) MATERIAL CONTRACTS. Except as set forth on Schedule 4(o) of the
RCA Disclosure Statement attached hereto, neither RCA nor any RCA Subsidiary is
a party to or bound by any contract or other agreement made in the Ordinary
Course of Business which involves aggregate future payments by or to it of
$50,000 or more, and which is made for a fixed period expiring more than one
year from the date hereof, and neither RCA nor any RCA Subsidiary is a party to
or bound by any agreement not made in the Ordinary Course of Business which is
to be performed at or after the date hereof. Each of the contracts and
agreements disclosed to BARRA pursuant to this Section 4(o) is a legal and
binding obligation of RCA or an RCA Subsidiary (subject to applicable
bankruptcy, insolvency and similar laws affecting creditors' rights generally
and subject, as to enforceability, to equitable principles of general
applicability), and no material breach or default by RCA or an RCA Subsidiary,
to the best of RCA's knowledge, exists with respect thereto. No power of
attorney or similar authorization given directly or indirectly by RCA or any RCA
Subsidiary is currently outstanding.
(p) EMPLOYMENT CONTRACTS AND BENEFITS.
(i) Attached hereto as Schedule 4(p) of the RCA Disclosure
Statement is an accurate list setting forth all bonus, incentive compensation,
profit-sharing, pension, retirement, stock purchase, stock option, deferred
compensation, severance, hospitalization, medical, dental, vision, group
insurance, death benefits, disability and other fringe benefit plans, trust
agreements, arrangements and commitments of RCA (including but not limited to
such plans, agreements, arrangements and commitments applicable to former
employees or retired employees, or for which such persons are eligible), if any.
Copies of all such plans, agreements, arrangements and commitments that are
documented and in effect on the date hereof and any and all contracts of
employment in effect on the date hereof have been delivered to BARRA.
(ii) With respect to each employee benefit plan (as defined in
Section 3(3) of ERISA) which is listed on Schedule 4(p) of the RCA Disclosure
Statement and which is subject to the reporting, disclosure and record retention
requirements set forth in the IRC and Part I of Subtitle B of Title I of ERISA
and the regulations thereunder, each of such requirements has been fully met in
all material respects and on a timely basis.
(iii) With respect to each employee benefit plan (as defined in
Section 3(3) of ERISA) which is listed on Schedule 4(p) of the RCA Disclosure
Statement and which is subject to Part 4 of Subtitle B of Title I of ERISA, none
of the following now exists or has existed within the six-year period ending on
the date hereof:
(A) Any act or omission constituting a material violation
of Section 402 of ERISA;
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(B) Any act or omission constituting a violation of
Section 403 of ERISA;
(C) Any act or omission by RCA or any of its subsidiaries,
or by any director, officer or employee thereof, constituting a violation of
Sections 404 and 405 of ERISA;
(D) To the best of RCA's knowledge, any act or omission by
any other person constituting a violation of Sections 404 or 405 of ERISA;
(E) Any act or omission which constitutes a material
violation of Sections 406 or 407 of ERISA and is not exempted by Section 408 of
ERISA or which constitutes a violation of Section 4975(c) of the IRC and is not
exempted by Section 4975(d) of the IRC; or
(F) Any act or omission constituting a violation of
Sections 503, 510 or 511 of ERISA.
(iv) All contributions, premiums or other payments due from RCA
and the RCA Subsidiaries as of February 29, 1996 to (or under) any plan listed
on Schedule 4(p) of the RCA Disclosure Statement have been fully paid or
adequately provided for on the unaudited financial statements of RCA for the
period ended February 29, 1996. All accruals thereon (including, where
appropriate, proportional accruals for partial periods) have been made in
accordance with GAAP consistently applied on a reasonable basis.
(v) Each plan listed on Schedule 4(p) of the RCA Disclosure
Statement complies in all material respects with all applicable requirements of
(A) the Age Discrimination in Employment Act of 1967, as amended, and the
regulations thereunder and (B) Title VII of the Civil Rights Act of 1964, as
amended, and the regulations thereunder.
(vi) Each plan listed on Schedule 4(p) of the RCA Disclosure
Statement complies in all material respects with all applicable requirements of
the health care continuation coverage provisions of the Consolidated Omnibus
Budget Reconciliation Act of 1985, and the regulations thereunder.
(vii) Attached hereto as Schedule 4(p) of the RCA Disclosure
Statement is a list of the names of each director, officer and employee of RCA
and each RCA Subsidiary.
(q) COMPLIANCE WITH ERISA. RCA has not either maintained or
contributed to an employee pension benefit plan, as defined in Section 3(2) of
ERISA, including multiemployer plans, other than the 401(k) Plan and a true and
accurate copy of which has been provided to BARRA. A summary of the RCA 401(k)
Plan is
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attached hereto as Schedule 4(q) of the RCA Disclosure Statement. With respect
to the 401(k) Plan and its related trust (the "Trust"), as of the Effective
Date, (i) the 401(k) Plan will in all material respects be (and currently is) in
compliance with all the applicable requirements of Section 401(a) of the IRC,
and the Trust will be exempt from income tax under Section 501(a) of the
Internal Revenue Code ("IRC"); (ii) the 401(k) Plan represents the adoption of a
standardized prototype plan that received a favorable opinion letter ("Opinion
Letter") from the Internal Revenue Service ("IRS") as to its form dated April 1,
1992; (iii) RCA relies on such Opinion Letter as authorized under IRS Revenue
Procedure 89-9 as support for the fact that the 401(k) Plan is qualified under
section 401(a) of the IRC; (iv) no contributions have exceeded the limitations
set forth in Section 415 of the IRC; (v) all required filings with the IRS,
Department of Labor and any other governmental agencies with respect to the
401(k) Plan and the Trust for all periods ending at or prior to the Effective
Date will have been made on a timely basis by RCA and the plan administrator;
(vi) there shall have been no material violation of Parts 1 and 4 of Subtitle B
of Title I of ERISA or of Section 4975 of the IRC; and (vii) there shall have
been no action, claim or demand of any kind known to RCA brought or threatened
by any potential claimant or representative of such claimant under the 401(k)
Plan or Trust where RCA may be either (A) liable directly on such action, claim
or demand, or (B) obligated to indemnify any person, group of persons or entity
with respect to such action, claim or demand, unless such action, claim or
demand is covered by adequate reserves reflected in RCA's December 31, 1995
financial statements or an insurer of RCA has agreed to defend against and pay
the amount of any resulting liability without reservation.
(r) COLLECTIVE BARGAINING AND EMPLOYMENT AGREEMENTS. RCA does not
have any union or collective bargaining or written employment agreements,
contracts or other agreements with any labor organization or with any member of
management, or any management or consultation agreement not terminable at will
by RCA without liability and no such contract or agreement is under discussion
by management with, any group of employees, any member of management or any
other person. There are no material controversies pending between RCA and any
current or former employees, and to the best of RCA's knowledge, there are no
efforts presently being made by any labor union seeking to organize any of such
employees.
(s) COMPENSATION OF OFFICERS AND EMPLOYEES. Except as set forth on
the Employee List, which has been delivered to BARRA pursuant to Section 3.2(g),
(i) no officer or employee of RCA is receiving aggregate direct remuneration at
a rate exceeding $40,000 per annum, and (ii) the consummation of the
transactions contemplated by this Agreement will not (either alone or upon the
occurrence of any additional or further acts or events) result in any payment
(whether of severance pay or otherwise) becoming due from RCA, or BARRA to any
employee of RCA, except for the acceleration of vesting of outstanding options.
(t) LEGAL ACTIONS AND PROCEEDINGS. Except as set forth on
Schedule 4(t) of the RCA Disclosure Statement attached hereto, neither RCA nor
any RCA Subsidiary is a party to, or threatened with, any legal action or other
proceeding or
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investigation before any court, any arbitrator of any kind or any government
agency, and to the best of RCA's knowledge, neither RCA nor any RCA Subsidiary
is subject to any potential adverse claim, the outcome of which could involve
the payment or receipt by RCA or any RCA Subsidiary of any amount in excess of
$50,000, or $100,000 for all claims in the aggregate. There is no labor
dispute, strike, slow-down or stoppage pending or, to the best of the knowledge
of RCA, threatened against RCA or any RCA Subsidiary.
(u) RETENTION OF BROKER OR CONSULTANT. No broker, agent, finder,
consultant or other party (other than legal, compliance, loan auditors and
accounting advisors) has been retained by RCA or any RCA Subsidiary or is
entitled to be paid based upon any agreements, arrangements or understandings
made by RCA or any RCA Subsidiary in connection with any of the transactions
contemplated by this Agreement.
(v) INSURANCE. RCA is, and has been continuously since January 1,
1993, insured with reputable insurers against all risks normally insured against
by companies similarly situated, and all of the insurance policies and bonds
maintained by RCA are in full force and effect, RCA and each RCA Subsidiary is
not in default thereunder and all material claims thereunder have been filed in
due and timely fashion. In the judgment of the management of RCA, such
insurance coverage is adequate for RCA and each RCA Subsidiary. Since December
31, 1995, there has not been any damage to, destruction of, or loss of any
assets of RCA or any RCA Subsidiary not covered by insurance except as set forth
on Schedule 4(v) of the RCA Disclosure Statement attached hereto.
(w) TRANSACTIONS WITH AFFILIATES. Except as set forth on
Schedule 4(w) of the RCA Disclosure Statement attached hereto, since
December 31, 1995, neither RCA nor any RCA Subsidiary has extended credit,
committed to extend credit, or transferred any asset to or assumed or guaranteed
any liability of the employees or directors of RCA or any RCA Subsidiary, or any
spouse or child of any of them, or to any of their "affiliates" or "associates"
as such terms are defined in Rule 405 under Regulation C of the Securities Act,
except for ordinary course business expenses not to exceed $5,000 in each
individual instance. Schedule 4(w) of the RCA Disclosure Statement attached
hereto sets forth and itemizes to date the amount of credit outstanding which
RCA or any RCA subsidiary has extended, and the guaranties entered into by RCA
or any RCA Subsidiary which are still in effect. Since December 31, 1995,
neither RCA nor any RCA Subsidiary has entered into any other transactions with
the employees or directors of RCA or any RCA Subsidiary or any spouse or child
of any of them, or any of their affiliates or associates, except as disclosed in
writing to BARRA on Schedule 4(w) of the RCA Disclosure Statement. Any such
transactions have been on terms no less favorable than those which would prevail
in an arm's-length transaction with an independent third party.
(x) TRADING IN BARRA COMMON STOCK. RCA, the RCA Shareholders and the
RCA Subsidiaries severally but not jointly represent that they have not, during
the period constituting twenty (20) trading days prior to the date hereof,
either directly
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or indirectly, bought or sold, or otherwise effected any trade in any shares of
BARRA Common Stock, or any security derivative of BARRA Common Stock.
(y) NO DEPARTING EMPLOYEES. Since December 31, 1995, no employee who
is significant to the operations of RCA or any RCA Subsidiary has left the
employ of RCA or has given notice to RCA of his or her intention to leave the
employ of RCA nor does RCA have any knowledge that any current employee who is
significant to the operations of RCA or any RCA subsidiary intends to leave the
employ of RCA, due to the transactions contemplated by this Agreement or
otherwise.
(z) NO LOSS OF CUSTOMERS. Since December 31, 1995, to the best
knowledge of RCA, neither RCA nor any RCA Subsidiary has lost any customer or
customers which accounted individually for two percent (2%) or more, or in the
aggregate, five percent (5%) or more, of the gross revenues of RCA for the
fiscal year ended December 31, 1995.
(aa) COMMUNICATIONS WITH SHAREHOLDERS. RCA has not made any written
communications addressed solely to its Shareholders during the last three years.
(ab) ACCURACY OF REPRESENTATIONS AND WARRANTIES. No representation or
warranty by RCA, any RCA Subsidiary or any of the RCA Shareholders, and no
statement by RCA, any RCA Subsidiary or any of the RCA Shareholders in any
certificates, agreements, schedules or other documents furnished in connection
with the transactions contemplated by this Agreement, contain or will contain
any untrue statement of a material fact or omit or will omit to state any
material fact necessary to make such representation, warranty or statement not
misleading to BARRA; PROVIDED, HOWEVER, that information provided in writing to
BARRA and approved by BARRA in writing as of a later date shall automatically
modify information as of an earlier date.
(ac) PROPOSED BUSINESS COMBINATION. Except with respect to the
transactions contemplated by this Agreement, since January 1, 1995: (i) RCA has
not had any inquiries, discussions, or negotiations, nor has it received any
proposals, letters of intent, term sheets or agreements with any third party,
other than State Street Bank, in connection with any proposed or potential
Business Combination, as that term is defined in Section 3.2(j); (ii) RCA has
not entered into any letter of intent, term sheet or agreement with any third
party or made any public announcement in connection with a proposed, potential
or actual Business Combination; and (iii) to the best of RCA's knowledge,
neither the execution of this Agreement, nor the consummation of the
transactions contemplated hereby, will result in any suit, action,
investigation, claim or proceeding being commenced against BARRA, RCA, any RCA
Subsidiary, or the Surviving Corporation or their respective officers,
directors, employees, agents or subsidiaries, or successors in interest by State
Street Bank or its successors in interest.
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5. REPRESENTATIONS AND WARRANTIES OF BARRA.
BARRA represents and warrants to RCA that:
(a) CORPORATE STATUS AND POWER TO ENTER INTO AGREEMENTS. BARRA is a
corporation duly organized, validly existing and in good standing under the laws
of California and, subject to the approval of this Agreement and the
transactions contemplated hereby, has all necessary corporate power to enter
into this Agreement, the Merger Agreement and the Escrow Agreement and to carry
out all of the terms and provisions hereof and thereof to be carried out by it.
(b) CERTIFICATE, BYLAWS, BOOKS AND RECORDS. The copies of the
Articles of Incorporation and Bylaws of BARRA to be delivered to RCA prior to
the date hereof are complete and accurate copies thereof as in effect on the
date hereof. The Articles of Incorporation and Bylaws of BARRA and all
amendments thereto have been duly approved by all requisite corporate action and
said Certificate of Incorporation and all amendments thereto have been duly
filed with the California Secretary of State.
(c) PROPERTIES. BARRA and each of its subsidiaries each has the
corporate power to own or lease its properties and to conduct its business as
currently conducted.
(d) BARRA SEC DOCUMENTS. Prior to the Effective Date, BARRA will
have furnished to RCA true and complete copies of all documents (other than
preliminary material) that BARRA has filed with the SEC since December 31, 1993
and shall furnish to RCA true and complete copies of all documents that BARRA
shall file with the SEC after the date hereof (collectively, the "BARRA SEC
Documents") pursuant to the applicable requirements of the Securities Act of
1933, as amended (the "Securities Act"), the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), the Investment Advisers Act of 1940, as amended,
and the Investment Company Act of 1940 (collectively, the "1940 Acts"), as
amended. The BARRA SEC Documents complied in all material respects with the
applicable requirements of the Securities Act, the Exchange Act and the 1940
Acts, and none of the BARRA SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements made therein, in light of the
circumstances under which they were made, not misleading except to the extent
corrected by a subsequently filed BARRA SEC Document. The financial statements
of BARRA included in the BARRA SEC Documents comply as to form in all material
respects with applicable accounting requirements and with the published rules
and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP (except as may be indicated in the notes thereto or, in the
case of unaudited statements, as permitted by the rules and regulations of the
SEC) and fairly present the consolidated financial position of BARRA and its
consolidated subsidiaries as at the dates thereof and the consolidated results
of their operations and changes in financial position for the periods then ended
(subject in the case of unaudited statements, to normal recurring audit
adjustments). Except as disclosed in the BARRA SEC
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Documents filed prior to the execution of this Agreement, or except as
contemplated by this Agreement or on account of the transactions contemplated
hereby, since the date of the most recent BARRA SEC Document, there has not been
any material adverse change in the results of operations, financial condition,
assets or business of BARRA and its subsidiaries taken as a whole.
(e) MATERIAL ADVERSE CHANGE. Other than a change in financial
condition which will result from the consummation of the transactions
contemplated by this Agreement, there has been no material adverse change in the
financial condition, results of operation or assets of BARRA from the financial
condition, results of operation or assets indicated in the financial statements
of BARRA at December 31, 1995, which financial statements have been heretofore
provided to RCA.
(f) EXECUTION AND DELIVERY OF THE AGREEMENT.
(i) The execution and delivery of this Agreement has been duly
and validly authorized by the Board of Directors of BARRA and this Agreement
will be duly and validly authorized by all necessary corporate action on the
part of BARRA.
(ii) This Agreement has been, and as of the Effective Date the
Merger Agreement and the Escrow Agreement will have been, duly executed and
delivered by BARRA and (assuming due execution and delivery by and
enforceability against RCA) constitute legal and binding obligations of BARRA,
enforceable in accordance with their terms, except as enforcement may be limited
by applicable bankruptcy laws and other similar laws affecting creditors' rights
generally, and except that the availability of equitable remedies may be
limited.
(iii) The execution and delivery by BARRA of this Agreement and
the consummation of the transactions described herein (A) do not and will not
violate any provision of the Articles of Incorporation or Bylaws of BARRA, any
provision of federal or state law or any governmental rule or regulation
(assuming (1) receipt of the Government Approvals, (2) receipt of the requisite
RCA Shareholder approval pursuant to Section 3.2(a) hereof, (3) receipt of
appropriate permits or approvals under applicable state securities laws, and
(4) accuracy of the representations and warranties of RCA, the RCA Subsidiaries
and the RCA Shareholders set forth herein and of each of the Shareholders as set
forth in the Transmittal Letter), and (B) do not require any consent of any
person under, conflict with or result in a breach of, or accelerate the
performance required by any of the terms of, any material debt instrument,
lease, license, covenant, agreement or understanding to which BARRA is a party
or by which it is bound or any order, ruling, decree, judgment, arbitration
award or stipulation to which BARRA is subject, or constitute a material default
thereunder or result in the creation of any lien, claim, security interest,
encumbrance, charge, restriction or similar right of any third party of any kind
whatsoever upon any of the properties or assets of BARRA.
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(g) ACCURACY OF REPRESENTATIONS AND WARRANTIES. No representation or
warranty by BARRA and no statement by BARRA in any certificate, agreement,
schedule or other document furnished in connection with the transactions
contemplated by this Agreement or the Merger Agreement, contains or will contain
any untrue statement of material fact or omit or will omit to state any material
fact necessary to make such representation, warranty or statement not misleading
to RCA; PROVIDED, HOWEVER, that information as of a later date shall be deemed
to modify information as of an earlier date.
(h) CAPITALIZATION. As of March 31, 1996, the authorized capital
stock of BARRA consisted of (i) 40,000,000 shares of common stock, no par value,
of which 7,819,120 shares were issued and outstanding and (ii) 10,000,000 shares
of preferred stock, no par value, of which none were issued and outstanding. As
of March 31, 1996, there were 2,200,000 shares of BARRA Common Stock, no par
value, authorized for issuance upon exercise of stock options granted or to be
granted pursuant to BARRA's 1991 Stock Option Plan, and options to purchase
1,494,020 shares were outstanding. Other than as set forth in this subsection,
or in the BARRA SEC Documents, there are no outstanding (i) options, agreements,
calls or commitments of any character which would obligate BARRA to issue, sell,
pledge, assign or otherwise encumber or dispose of, or to purchase, redeem or
otherwise acquire, any BARRA common stock or any other equity security of BARRA,
or (ii) warrants or options relating to, rights to acquire, or debt or equity
securities convertible into, shares of BARRA common stock or any other equity
security of BARRA.
(i) DULY AUTHORIZED ISSUANCES. All BARRA Shares will, when issued
and delivered pursuant to and in accordance with the terms of this Agreement, be
duly authorized, validly issued, fully paid and nonassessable.
(j) RETENTION OF BROKER OR CONSULTANT. Except for Hambrecht &
Quist LLC, no broker, agent, finder, consultant or other party (other than
legal, compliance, loan auditors and accounting advisors) has been retained by
BARRA or is entitled to be paid based upon any agreements, arrangements or
understandings made by BARRA in connection with any of the transactions
contemplated by this Agreement.
6. INVESTMENT REPRESENTATION.
(a) The BARRA Shares received by the RCA Shareholders pursuant
to the terms of this Agreement (the "Securities") will be acquired for the RCA
Shareholders' own account, not as a nominee or agent, and not with a view to the
distribution of any part thereof.
(b) Each RCA Shareholder has investigated BARRA's business,
management and financial condition, has received and read the SEC Documents and
has had access to such other information about BARRA as such RCA Shareholder has
deemed necessary or desirable to reach an informed and knowledgeable decision to
acquire the Securities.
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(c) Each RCA Shareholder understands that the Securities have
not been registered under the Securities Act by reason of reliance upon certain
exemptions therefrom, and that the reliance of BARRA on such exemptions is
predicated upon, among other things, the bona fide nature of each RCA
Shareholder's investment intent as expressed herein.
(d) Each RCA Shareholder is experienced in evaluating and
investing in securities and has made investments in securities other than those
of RCA. Each RCA Shareholder is knowledgeable in business and financial matters
and is capable of evaluating the merits and risks of an investment in BARRA.
Each RCA Shareholder acknowledges that it has the ability to bear the economic
risk of its investment pursuant to this Agreement.
(e) Each RCA Shareholder understands that the Securities being
purchased hereunder are restricted securities within the meaning of Rule 144
under the Securities Act; that the Securities are not registered and must be
held indefinitely unless they are subsequently registered or an exemption from
such registration is available.
(f) Each certificate representing the Securities when
delivered to the RCA Shareholders at the Closing may be endorsed with the
following or substantially similar legend:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"1933 ACT"), OR QUALIFIED UNDER APPLICABLE STATE SECURITIES LAWS
AND MAY NOT BE SOLD, OFFERED FOR SALE, TRANSFERRED, PLEDGED OR
HYPOTHECATED (I) IN THE ABSENCE OF A REGISTRATION STATEMENT IN
EFFECT WITH RESPECT TO THESE SECURITIES UNDER THE 1933 ACT, AND
AN EFFECTIVE REGISTRATION OR QUALIFICATION OF THESE SECURITIES
FOR SALE UNDER ANY APPLICABLE STATE SECURITIES LAW; (II) IN THE
ABSENCE OF AN OPINION OF COUNSEL SATISFACTORY TO BARRA, INC. THAT
SUCH REGISTRATION AND QUALIFICATION ARE NOT REQUIRED; OR (III)
UNLESS SOLD PURSUANT TO RULE 144 OR OTHER APPLICABLE PROVISIONS
OF THE 1933 ACT AND ANY APPLICABLE STATE SECURITIES LAW.
Each RCA Shareholder agrees not to attempt any transfer of any such
securities without first complying with the substance of said legend, and agrees
that satisfaction of the issuer may, if BARRA so requests, depend in part upon
an opinion of counsel reasonably acceptable in form and substance to the issuer,
or equivalent evidence. Each of the undersigned RCA Shareholders acknowledges,
without limitation, that the
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foregoing agreement and representation shall apply to BARRA Shares delivered to
such person as a result of the Closing.
7. CONDITIONS TO THE OBLIGATIONS OF BARRA.
The obligations of BARRA under this Agreement are, at its option, subject
to fulfillment at or prior to the Effective Date of each of the following
conditions; PROVIDED, HOWEVER, that any one or more of such conditions may be
waived in writing by BARRA at any time at or prior to the Effective Date:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties in Sections 4 and 6 hereof shall be true and correct in all material
respects on the date hereof and as of the Effective Date, with the same effect
as though such representations and warranties had been made on and as of such
date except as to any representation or warranty which specifically relates to a
specified date, and the representations and warranties shall not contain any
material inaccuracies or omissions the circumstances as to which either
individually or in the aggregate have, or reasonably could be expected to have,
a material adverse effect on RCA or any RCA Subsidiary.
(b) COMPLIANCE AND PERFORMANCE UNDER AGREEMENT. RCA, and each RCA
Shareholder shall have performed and complied in all material respects with all
terms of this Agreement required to be performed or complied with by it at or
prior to the Effective Date, including, without limitation, each of the
covenants set forth in Section 3.2.
(c) MATERIAL ADVERSE CHANGE. Except as disclosed to BARRA in writing
prior to the date hereof, no materially adverse change shall have occurred since
December 31, 1995, in the business, financial condition or results of operations
of RCA and the RCA Subsidiaries taken as a whole, and neither RCA nor any RCA
Subsidiary shall be a party to or threatened with, any legal action or other
proceeding before any court, any arbitrator of any kind or any government agency
if, in the reasonable judgment of BARRA, such legal action or proceeding could
materially adversely affect RCA and the RCA Subsidiaries, taken as a whole, or
the business, financial condition, results of operations or prospects of RCA and
all of the RCA's subsidiaries taken as a whole.
(d) APPROVAL OF AGREEMENT. This Agreement and the Merger shall have
been duly approved by the affirmative vote of the holders of a majority of the
outstanding shares of RCA common stock in accordance with the provisions of
Section 228 of the Delaware Code.
(e) OFFICER'S CERTIFICATE. BARRA shall have received a certificate,
dated the Effective Date, signed on behalf of RCA by its Chief Executive Officer
and by its Chief Financial Officer, to the effect that the conditions in this
Section 7(a), (b), (c), (d), (g) (to the best of RCA's knowledge), (h), (i),
(o), (p), (q) and (r) have been satisfied.
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(f) OPINION OF COUNSEL. RCA shall have delivered to BARRA an opinion
of counsel in a form acceptable to both RCA and BARRA.
(g) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(h) GOVERNMENT APPROVALS. All Government Approvals shall be in
effect, and all conditions or requirements prescribed by law or by any such
Government Approval shall have been satisfied; PROVIDED, HOWEVER, that no
Government Approval shall be deemed to have been received if it shall require
the divestiture or cessation of any of the present businesses or operations
conducted by either of the parties hereto or shall impose any other condition or
requirement, which divestiture, cessation, condition or requirement BARRA, in
its reasonable judgment shall deem to be materially burdensome (in which case
BARRA shall promptly notify RCA). For purposes of this Agreement no condition
shall be deemed to be "materially burdensome" if such condition would not
(A) require the taking of any action materially inconsistent with the manner in
which BARRA or RCA has conducted its business previously, (B) have a material
adverse effect upon the business, financial condition or results of operations
of BARRA or RCA, or (C) preclude satisfaction of any of the material conditions
to consummation of the transactions contemplated by this Agreement.
(i) DISSENTING SHARES. The aggregate number of shares of RCA common
stock held by persons who have taken all of the steps prior to Closing required
to perfect their right (if any) to be paid the value of such shares under the
Delaware Code ("Dissenting Shares") shall not exceed nine percent (9%) of the
outstanding shares of RCA common stock.
(j) EXPENSES. On or before the date hereof, all attorneys,
accountants, consultants, investment bankers and other advisors and agents for
RCA shall have submitted to RCA (with a copy to BARRA): (i) estimates of and
all invoices for their fees and expenses for all services rendered in any
respect in connection with the transactions contemplated hereby, and the related
audit of the consolidated financial statements of RCA and the RCA Subsidiaries
for the fiscal years ended December 31, 1994, and 1995, and (ii) a final invoice
for any and all fees relating to RCA's negotiations with State Street Bank (as
described in Section 4(ac)) to the extent not already paid (collectively, the
"RCA Expenses"). Based on such RCA Expenses, RCA shall have prepared and
submitted to BARRA on the date hereof a summary of such fees and expenses as of
the date hereof (the "Expense Summary"). At least five (5) business days prior
to the Effective Date, such advisors shall have submitted their final bills for
such fees and expenses to RCA for services rendered, with a copy to be delivered
to BARRA, and based on such summary, RCA shall have prepared and submitted to
BARRA a final Expense Summary dated as of the Effective Date.
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(k) CLOSING DOCUMENTS. BARRA shall have received such certificates
and other closing documents as counsel for BARRA shall reasonably request.
(l) CONSENTS. RCA shall have received, or BARRA shall have satisfied
itself that RCA will receive, all consents of other parties to and required by
all material mortgages, notes, leases, franchises, agreements, licenses and
permits applicable to RCA and the RCA Subsidiaries, including, without
limitation, any consents required pursuant to the Advisers Act or Company Act
and for any mortgages, notes, leases, franchises, agreements, licenses and
permits listed on the Schedules 4(b)(iii)(B) and 4(o) of the RCA Disclosure
Statement for RCA or any RCA Subsidiary, in each case in form and substance
reasonably satisfactory to BARRA, and no such consent or license or permit shall
have been withdrawn or suspended.
(m) POOLING-OF-INTERESTS ACCOUNTING TREATMENT.
(i) BARRA shall have received a report from Deloitte & Touche
LLP ("DT") as to whether the proposed merger would meet the criteria for a
pooling of interests in accordance with generally accepted accounting principles
and all published rules, regulations, and policies of the SEC. DT's engagement
to report on the proposed accounting for the pending merger will be conducted in
accordance with standards established by the American Institute of Certified
Public Accountants and DT's report will be based on the provisions of this
Agreement, the facts, circumstances, assumptions, and conclusions relevant to
the proposed transaction as provided by the management of BARRA and RCA.
(ii) BARRA and RCA shall have received a report from Coopers &
Lybrand LLP ("CL") as to whether the proposed merger would meet the criteria for
a pooling of interests in accordance with generally accepted accounting
principles and all published rules, regulations, and policies of the Securities
and Exchange Commission. CL's engagement to report on the proposed accounting
for the pending merger will be conducted in accordance with standards
established by the American Institute of Certified Public Accountants. CL's
report will relate only to matters affecting RCA and will be based on the
provisions of this Agreement, the facts, circumstances, assumptions, and
conclusions relevant to the proposed transaction as provided by the management
of RCA.
(iii) In addition, there shall have been no determination by any
court, tribunal, regulatory agency or other government entity, that the Merger
fails or will fail to qualify for pooling-of-interests accounting treatment.
(n) EMPLOYEE CONFIDENTIALITY AGREEMENTS. Each employee of RCA shall
have executed an agreement regarding confidentiality and proprietary
information, the form of which is attached hereto as Exhibit D.
(o) THIRD PARTY ACTIONS. No suit, action, investigation, claim or
proceeding commenced or to the best knowledge of RCA is to be commenced by any
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party based in whole or in part on an argument or assertion that BARRA, due to
this Agreement, the negotiations leading up to this Agreement, the Merger, or
related agreements or activities, interfered or is interfering with any
contractual relations of RCA or any RCA Subsidiary or any party with whom RCA or
any RCA Subsidiary is, or has been, or may be engaged in business discussions.
(p) MERGER AGREEMENT. The Merger Agreement shall have been duly
executed by RCA.
(q) STOCK REPURCHASES. RCA shall have consummated the repurchase of
RCA common stock from Ruth Hughes-Guden and Robert Moore if so required to do so
prior to the Effective Date pursuant to agreements previously entered into
between RCA and such Shareholders.
(r) FINANCIAL STATEMENTS. RCA shall have provided to BARRA its
audited consolidated financial statements for the fiscal years ended December
31, 1994 and 1995 no later than five business days before the Closing Date, and
BARRA shall have reasonably approved such financial statements in writing
pursuant to the provisions of Section 11(b)(iii).
(s) SHARE RESTRICTIONS. All agreements between or among RCA, any RCA
Subsidiary and any of the Shareholders, which provide for restrictions on
transfer of RCA securities, and/or repurchase or redemption provisions,
including but not limited to the Shareholders' Agreement dated December 1, 1992,
and pursuant to the 1993 Stock Bonus and Restricted Stock Plan, shall have been
cancelled.
8. CONDITIONS TO THE OBLIGATIONS OF RCA AND THE RCA SHAREHOLDERS.
The obligations of RCA and the RCA Shareholders under this Agreement are
subject to the fulfillment at or prior to the Effective Date of each of the
following conditions; PROVIDED, HOWEVER, that any one or more of such conditions
may be waived in writing by RCA or by a majority in interest of the RCA
Shareholders at any time prior to the Effective Date:
(a) REPRESENTATIONS AND WARRANTIES. The representations and
warranties of BARRA in Section 5 hereof shall be true and correct in all
material respects on the date hereof and as of the Effective Date, with the same
effect as though such representations and warranties had been made on and as of
such date except as to any representation or warranty which specifically relates
to a specified date and does not contain any inaccuracies or omissions the
circumstances as to which either individually or in the aggregate have, or
reasonably could be expected to have, a material adverse effect on BARRA.
(b) COMPLIANCE AND PERFORMANCE UNDER AGREEMENT. BARRA and its
subsidiaries shall have performed and complied in all material respects with all
of the
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terms of this Agreement required to be performed or complied with by them at or
prior to the Effective Date.
(c) MATERIAL ADVERSE CHANGE. No materially adverse change shall have
occurred since December 31, 1995, in the business, financial condition, results
of operations or properties of BARRA and its subsidiaries taken as a whole, and
BARRA shall not be engaged in, or a party to or so far as BARRA is aware,
threatened with, and to BARRA's knowledge there is no reasonable basis for, any
legal action or other proceeding before any court, any arbitrator of any kind or
any government agency which, in the reasonable judgment of RCA, could materially
adversely affect BARRA or its business, financial conditions results of
operations or assets taken as a whole.
(d) OFFICERS CERTIFICATE. RCA shall have received a certificate,
dated the Effective Date, signed on behalf of BARRA by its President or Chief
Executive Officer and Chief Financial Officer, certifying to the fulfillment of
the conditions stated in Sections 8(a)-(c), (f), (h) (to the best of BARRA's
knowledge), and (i).
(e) OPINION OF COUNSEL. BARRA shall have delivered to RCA an opinion
of its counsel in a form acceptable to both RCA and BARRA.
(f) GOVERNMENT APPROVALS. All conditions or requirements prescribed
by law or by any Government Approval shall have been satisfied.
(g) CLOSING DOCUMENTS. RCA shall have received such certificates and
other closing documents as counsel for RCA shall reasonably request.
(h) NO INJUNCTIONS OR RESTRAINTS; ILLEGALITY. No temporary
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal or regulatory restraint or
prohibition preventing the consummation of the Merger shall be in effect.
(i) MERGER AGREEMENT. The Merger Agreement shall have duly executed
by BARRA and the Merger Sub.
9. EXPENSES.
BARRA and RCA agree to pay, without right of reimbursement from the other
party and whether or not the transactions contemplated by this Agreement or the
Merger Agreement shall be consummated, the costs incurred by each such party
incident to the preparation and negotiation of this Agreement, performance of
its obligations under this Agreement and the consummation of the transactions
contemplated hereby and thereby, including the fees and disbursements of
attorneys, accountants, consultants, investment bankers and other advisors
employed by such party in connection therewith and RCA shall pay the RCA
Expenses; provided, however, that in the event the RCA Expenses as of the
Closing Date are in an amount exceeding $233,000 in the aggregate (the total RCA
Expenses listed in the Expense Summary as of the date of this
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Agreement), there shall be an adjustment to the Merger Consideration in
accordance with the provisions of Schedule A.
10. SURVIVAL; INDEMNIFICATION AGAINST LOSS.
10.1 SURVIVAL. The representations, warranties, and agreements made
herein, including but not limited to the indemnification provisions of
Sections 10.2, 10.3 and 10.4, shall survive any investigation made by any party
hereto. The representations and warranties made herein shall survive the
Closing of the transactions contemplated hereby until the publication of BARRA's
audited financial statements for the fiscal year in which the Closing occurs.
The representations, warranties, indemnifications and agreements made pursuant
to Section 4(ac) and Section 10.4 shall survive (i) if a Closing shall occur,
until the publication of BARRA's audited financial statements for the fiscal
year in which the Closing occurs or (ii) if this Agreement is terminated, until
one year after the termination of this Agreement. The confidentiality covenants
of BARRA contained in Section 3.3 shall expire on the Closing Date.
10.2 SHAREHOLDERS' INDEMNIFICATION.
(a) RCA and all of the Shareholders shall jointly and severally
defend and indemnify BARRA against, and jointly and severally agree to indemnify
and hold BARRA harmless from, any and all losses, claims, damages, penalties,
liabilities, fines, injuries, costs and expenses (including attorneys' fees,
administrative expenses, prejudgment interest and court costs), incurred or
suffered by BARRA relating to or arising out of or in connection with any or all
of the following: (i) any breach or non-fulfillment of or any inaccuracy in any
representation, warranty or covenant made by RCA or any RCA Shareholder or
failure by RCA or any RCA Shareholder to perform any obligation or covenant to
be performed by it or them pursuant to this Agreement or any document delivered
by RCA or any Shareholder at the Closing; (ii) the failure by RCA or any RCA
Subsidiary to register as an investment adviser in any jurisdiction in which
BARRA, upon the reasonable advice of counsel, deems a registration to be
necessary. Notwithstanding the foregoing, neither RCA nor any of the
Shareholders shall have any liability under this Section 10.2(a)(ii): (A) to the
extent that such registration is necessary because of a change since the
Effective Date in the applicable law, rules or regulations requiring such
registration, (B) to the extent such registration is necessary because of a
change since the Effective Date in the business or activities of RCA or any RCA
Subsidiary, or (C) with respect to any administrative or filing fees (but not
penalties) for registrations by RCA or any RCA Subsidiary as an investment
adviser in any jurisdiction after the Closing Date.
(b) Claims for indemnity made by BARRA pursuant to the provisions of
Section 10.2 must total $50,000 in the aggregate before BARRA can seek
reimbursement for such claims from the Shareholders (once the $50,000 threshold
is met, BARRA can seek reimbursement for all additional indemnity claims, but
only to the extent such claims are limited by Section 10.8).
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10..3 BARRA'S INDEMNIFICATION.
(a) BARRA shall defend and indemnify the Shareholders against and
agrees to indemnify and hold each of them harmless from any and all losses,
claims, damages, penalties, liabilities, fines, injuries, costs and expenses
(including attorneys' fees, administrative expenses, prejudgment interest and
court costs), incurred or suffered by any of them relating to or arising out of
or in connection with any breach or non-fulfillment of or any inaccuracy in any
representation, warranty or covenant made by BARRA or failure by BARRA to
perform any obligation or covenant to be performed by it pursuant to this
Agreement or any document delivered by BARRA at the Closing.
(b) Claims for indemnity made by the Shareholders pursuant to the
provisions of Section 10.3(a) must total $50,000 in the aggregate before BARRA
can seek reimbursement for such claims from BARRA (once the $50,000 threshold is
met, the Shareholders can seek reimbursement for all additional indemnity
claims, but only to the extent such claims are limited by Section 10.8).
10.4 RCA'S INDEMNIFICATION.
(a) RCA shall defend and indemnify BARRA against and agrees to
indemnify and hold BARRA harmless from any and all losses, claims, damages,
penalties, liabilities, fines, injuries, costs and expenses (including
attorneys' fees, administrative expenses, prejudgment interest and court costs),
incurred or suffered by BARRA relating to or arising out of or in connection
with any breach or any inaccuracy in the representations and warranties of RCA
and the RCA Shareholders contained in Section 4(ac).
(b) Claims for indemnity made by BARRA pursuant to the provisions of
Section 10.4(a) must total $50,000 in the aggregate before BARRA can seek
reimbursement for such claims from RCA (once the $50,000 threshold is met, BARRA
can seek reimbursement for all additional indemnity claims, but only to the
extent such claims are limited by Section 10.8).
10.5 INDEMNIFICATION PROCEDURES.
(a) Promptly upon obtaining knowledge of any claim, event, statement
of facts or demand which has given rise to, or could reasonably give rise to, a
claim for indemnification hereunder, any party seeking indemnification under
this Article 10 (an "Indemnified Party") shall give written notice of such claim
or demand ("Notice of Claim") to the party from which indemnification is sought
(an "Indemnifying Party"), setting forth the amount of the claim. The
Indemnified Party shall furnish to the Indemnifying Party in reasonable detail,
such information as it may have with respect to such indemnification claim
(including copies of any summons, complaint or other pleading which may have
been served on it and any written claim, demand, invoice, billing or other
document evidencing or asserting the same). No failure or delay by the
Indemnified Party in the performance of the foregoing shall reduce or otherwise
affect
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the obligation of the Indemnifying Party to indemnify and hold the
Indemnified Party harmless, except to the extent that such failure or delay
shall have adversely affected the Indemnifying Party's ability to defend
against, settle or satisfy any liability, damage, loss, claim or demand for
which the Indemnified Party is entitled to indemnification hereunder.
(b) Promptly after receipt of notice of any claim by a third party
which might give rise to indemnification hereunder, the Indemnified Party shall
notify the Indemnifying Party in writing specifying in reasonable detail the
nature and amount of the claim. The Indemnifying Party shall be entitled to
assume and have the sole control of the defense and settlement of such action or
claim; PROVIDED, HOWEVER, that:
(i) the Indemnified Party shall be entitled to participate in
the defense of such claim and, in connection therewith, to employ counsel at its
own expense;
(ii) without the prior written consent of the Indemnified
Party, which consent shall not be unreasonably withheld, the Indemnifying Party
shall not consent to the entry of any judgment or enter into any settlement that
requires any action by the Indemnified Party other than the payment of money.
(c) In the event the Indemnifying Party elects to assume control of
the defense of any such action in accordance with the foregoing provisions, (i)
the Indemnifying Party shall not be liable to the Indemnified Party for any
legal fees, costs and expenses incurred by the Indemnified Party in connection
with the defense thereof after the date on which the Indemnifying Party notifies
the Indemnified Party of such election and (ii) the Indemnified Party shall
fully cooperate with the Indemnifying Party in such defense. If the
Indemnifying Party does not assume control of the defense of such claim in
accordance with the foregoing provisions, the Indemnified Party shall have the
right to defend such claim, in which case the Indemnifying Party shall pay all
reasonable costs and expenses of such defense. The Indemnified Party shall
conduct such defense in good faith and shall have the right to settle the matter
with the prior written consent of the Indemnifying Party which consent shall not
be unreasonably withheld.
(d) Except for third-party claims being defended in good faith, the
Indemnifying Party shall satisfy its obligations hereunder within thirty (30)
days after the Date of the Notice of Claim, provided, however, that, with
respect to third-party claims or otherwise, if BARRA is the Indemnified Party,
the Holder's Agent, as the representative of the Indemnifying Party, may choose,
pursuant to Section 10, to relinquish Escrow Shares in full satisfaction of the
indemnity obligations hereunder.
(e) The term "Date of the Notice of Claim" as used in this Article 10
shall mean either: (i) the third business day after the date of the postmark on
the registered or certified mail containing the Notice of Claim; or (ii) if the
Notice of Claim is personally delivered, the date of such personal delivery.
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10.6 ESCROW OF SHARES. As security for the indemnity obligations
contained herein, BARRA shall on the Closing Date place in escrow (the "Escrow")
with an escrow agent reasonably satisfactory to BARRA and RCA as escrowee, under
the terms of the escrow agreement in a form to be agreed upon by RCA and BARRA
(the "Escrow Agreement"), approximately 54,000 of the BARRA Shares subject to
rounding pursuant to Section 2.3 and adjustments pursuant to Schedule A,
representing ten percent (10%) of the number of BARRA Shares determined in
accordance with Section 2.1 (the "Escrow Shares"). Pursuant to the terms of the
Escrow Agreement, the Escrow shall terminate, and the Escrow Shares shall be
released pro rata to the Shareholders, unless otherwise relinquished to BARRA
pursuant to the provisions of Section 10.6, on the business day following
publication of BARRA's audited financial statements for the fiscal year in which
the Closing occurs. All claims for indemnification pursuant to Section 10.2
hereof (but excluding all losses, claims, damages, penalties, liabilities,
fines, injuries, costs and expenses (including attorneys' fees, administrative
expenses, prejudgment interest and court costs) resulting from a judgment of
fraud or willful misconduct) shall be brought and recovered by BARRA solely by
the return to BARRA of one or more of the Escrow Shares from the Escrow.
Without limiting the generality of the foregoing, BARRA shall not have any
recourse against any Shareholder individually, or any Shareholder's assets or
property, for claims for indemnification pursuant to Section 10.2 hereof, except
for recovery against the Escrow pursuant to the terms of this Agreement and the
Escrow Agreement, and except for claims of fraud or willful misconduct. BARRA,
the Surviving Corporation, the RCA Shareholders and the Holder's Agent
acknowledge and agree that any distribution of Escrow Shares from the Escrow to
satisfy a claim for indemnification pursuant to Section 10.2 hereof shall be
done so as to reduce each Shareholder's interest in the Escrow Shares in the
Escrow in a pro rata manner based on the Shareholder's respective ownership
interests in the Escrow Shares in the Escrow.
10.7 HOLDER'S AGENT. John F. Casey shall, by virtue of the Merger and
the resolutions to be adopted by RCA approving the Merger, be irrevocably
appointed attorney-in-fact and authorized and empowered to act, for and on
behalf of any or all of the Shareholders (with full power of substitution in the
premises) in connection with the indemnity provisions of Section 10 as they
relate to the Shareholders generally, the Escrow Agreement, the notice
provisions of this Agreement and such other matters as are reasonably necessary
for the consummation of the transactions contemplated hereby including, without
limitation, to act as the representative of the Shareholders to review and
authorize all set-offs, claims and other payments authorized or directed by the
Escrow Agreement and dispute or question the accuracy thereof, to compromise on
their behalf with BARRA any claims asserted thereunder and to authorize payments
to be made with respect thereto and to take such further actions as are
authorized in this Agreement (the above named representative, as well as any
subsequent representative of the Shareholders appointed by him or after his
death or incapacity elected by vote of holders of a majority of RCA Common Stock
outstanding immediately prior to the Effective Date being referred to herein as
the "Holder's Agent"). The Holder's Agent shall not be liable to any
Shareholder or BARRA and their respective affiliates or any
39.
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other person with respect to any action taken or omitted to be taken by the
Holder's Agent under or in connection with this Agreement or the Escrow
Agreement unless such action or omission results from or arises out of fraud,
gross negligence, willful misconduct or bad faith on the part of the Holder's
Agent. BARRA and its affiliates (including, after the Closing, RCA) shall be
entitled to rely on such appointment and treat such Holder's Agent as the duly
appointed attorney-in-fact of each Shareholder. Each Shareholder who receives
BARRA Shares in connection with the Merger, by acceptance thereof and without
any further action, confirms such appointment and authority and acknowledges and
agrees that such appointment is irrevocable and coupled with an interest, it
being understood that the willingness of BARRA to enter into this Agreement is
based, in part, on the appointment of a representative to act on behalf of the
Shareholders.
10.8 LIMITATION ON INDEMNIFICATION CLAIMS.
(a) Claims for indemnity made by BARRA pursuant to the provisions of
Sections 10.2 and 10.4 or otherwise pursuant to this Agreement (but excluding
all losses, claims, damages, penalties, liabilities, fines, injuries, costs and
expenses (including attorneys' fees, administrative expenses, prejudgment
interest and court costs) resulting from a judgment of fraud or willful
misconduct) shall be limited to the Agreed Price (as defined on Schedule A)
multiplied by 54,000 (or such other number as represents ten percent (10%) of
the Merger Consideration as adjusted pursuant to Schedule A).
(b) Claims for indemnity made by the Shareholders pursuant to the
provisions of Section 10.3 or otherwise pursuant to this Agreement (but
excluding all losses, claims, damages, penalties, liabilities, fines, injuries,
costs and expenses (including attorneys' fees, administrative expenses,
prejudgment interest and court costs) resulting from a judgment of fraud or
willful misconduct) shall be limited to the Agreed Price (as defined on
Schedule A) multiplied by 54,000 (or such other number as represents ten percent
(10%) of the Merger Considration as adjusted pursuant to Schedule A).
10.9 LIABILITY LIMITED TO INDEMNIFICATION.
(a) The consideration paid by BARRA and Merger Sub to the
Shareholders to acquire RCA in the Merger and the other terms of the Merger have
been established by the parties hereto based on the allocation of risk and
rights of recovery hereunder.
(b) BARRA has had an opportunity to do due diligence of RCA and
accordingly has agreed to limit its right to recourse as set forth in this
Section 10. Except for claims of fraud or willful misconduct, BARRA, Merger
Sub, the Surviving Corporation and the affiliates of each shall have no claim or
cause of action, whether in contract, tort, under statute or otherwise, for
monetary damages arising out of, or relating to, this Agreement, the
representations and warranties herein or any of the transactions contemplated
hereby apart from the right to indemnification pursuant to Section 10 hereof.
40.
<PAGE>
(c) The Shareholders have had an opportunity to do due diligence of
BARRA and accordingly have agreed to limit their right to recourse as set forth
in this Section 10. Except for claims of fraud or willful misconduct, each of
the Shareholders and the affiliates of each shall have no claim or cause of
action, whether in contract, tort, under statute or otherwise, for monetary
damages arising out of, or relating to, this Agreement, the representations and
warranties herein or any of the transactions contemplated hereby apart from the
right to indemnification pursuant to Section 10 hereof.
11. AMENDMENT; TERMINATION.
(a) AMENDMENT. This Agreement and the Merger Agreement may be
amended by the mutual consent of the boards of directors of BARRA and RCA, and
the RCA Shareholders at any time prior to the Effective Date with respect to any
of their terms.
(b) TERMINATION. This Agreement and the Merger Agreement may be
terminated as follows:
(i) By the mutual consent of the boards of directors of BARRA
and RCA at any time prior to the consummation of the Merger.
(ii) By the Board of Directors of BARRA on or after November 1,
1996, if (A) any of the conditions in Section 7 to which the obligations of
BARRA are subject have not been fulfilled, or (B) such conditions have been
fulfilled by RCA or waived by BARRA, but RCA shall have failed to complete the
Merger.
(iii) By the Board of Directors of BARRA on or prior to the
Closing, if it has not approved, pursuant to the provisions of Section 7(r), the
audited consolidated financial statements of RCA for the fiscal years ended
December 31, 1994 and December 31, 1995 within five (5) business days of their
receipt.
(iv) By the Board of Directors of BARRA if, within one year
from the date hereof, RCA, or any RCA Subsidiary, shall have entered into a
letter of intent, term sheet or agreement, or made an announcement relating to,
or otherwise engaged in a Business Combination, as that term is defined in
Section 3.2(j).
(v) By the Board of Directors of RCA on or after November 1,
1996, if (A) any of the conditions contained in Section 8 to which the
obligations of RCA and the RCA Shareholders are subject have not been fulfilled,
or (B) such conditions have been fulfilled by BARRA or waived by RCA, but BARRA
shall have failed to complete the Merger.
41
<PAGE>
(c) NOTICE. The power of termination hereunder may be exercised by
BARRA or RCA, as the case may be, only by giving written notice to the other
party in accordance with the provisions of Section 12.
(d) TERMINATION AND EXPENSES. Termination of this Agreement shall
not terminate or affect the obligations of the parties to pay expenses as
provided in Section 9, to maintain the confidentiality of the other party's
information pursuant to Section 3.3, or the provisions of this Section 11(d), of
Section 10.4 or of Sections 12(a), (c), (d), (e) or (f) or the second sentence
of Section 12(b) below and shall not affect any agreement after such
termination. The obligations of BARRA under Section 3.1(f) and of RCA under
Sections 3.2(q) and 10.4 shall survive for one (1) year following any
termination of this Agreement. If this Agreement shall be terminated by BARRA
pursuant to Section 11(b)(iv), RCA shall pay to BARRA, on demand, the sum of
$1,000,000, and such payment will be BARRA's exclusive remedy in such event.
Any payment required pursuant to the preceding sentence shall be paid no more
than two (2) business days after demand by wire transfer of immediately
available funds. RCA, the RCA Shareholders and BARRA agree that, except with
respect to a termination by the Board of Directors of BARRA pursuant to
Section 11(b)(iv), any other termination of this Agreement shall not in any
manner release or be construed as so releasing the nonterminating party or
parties from any liability or damage to the other party or parties arising out
of, in connection with or otherwise relating to, directly or indirectly, such
parties' failure in performance of any of its covenants or agreements hereunder,
including without limitation, any obligations arising under Section 10 of this
Agreement.
12. MISCELLANEOUS.
(a) NOTICES. Any notice or other communication required or Permitted
under this Agreement shall be effective only if it is in writing and delivered
personally, or by overnight express (DHL or Federal Express) or by facsimile or
sent by first class United States mail, postage prepaid, registered or certified
mail, addressed as follows:
To BARRA: To RCA:
Dr. Andrew Rudd, Chairman Mr. Stephen Rogers
BARRA, Inc. Rogers, Casey & Associates
1995 University Avenue One Parklands Drive
Berkeley, California 94704-1058 Darien, CT 06820
cc: General Counsel
With a copy to: With a copy to:
Nicholas Unkovic, Esq. Peter M. Rosenblum, Esq.
Graham & James LLP Foley, Hoag & Eliot
One Maritime Plaza, Suite 300 One Post Office Square
San Francisco, California 94111-3492 Boston, MA 02109
42.
<PAGE>
or to such other address as either party may designate by notice to the other,
and shall be deemed to have been given upon receipt.
(b) BINDING AGREEMENT. This Agreement is binding upon and is for the
benefit of BARRA, RCA, the RCA Shareholders, the other Shareholders of RCA and
their respective successors and permitted assigns. This Agreement is not made
for the benefit of any person, firm, corporation or association not a party
hereto, and no other person, firm, corporation or association shall acquire or
have any right under or by virtue of this Agreement. No party may assign this
Agreement or any of its rights, privileges, duties or obligations hereunder
without the prior written consent of the other parties to this Agreement.
(c) CONSENT TO JURISDICTION AND FORUM SELECTION. The parties hereto
agree that all actions or proceedings arising in connection with this Agreement
shall be tried and litigated exclusively in the State and Federal courts located
in the County of San Francisco, State of California. The aforementioned choice
of venue is intended by the parties to be mandatory and not permissive in
nature, thereby precluding the possibility of litigation between the parties
with respect to or arising out of this Agreement in any jurisdiction other than
that specified in this paragraph. Each party hereby waives any right it may
have to assert the doctrine of forum non conveniens or similar doctrine or to
object to venue with respect to any proceeding brought in accordance with this
paragraph, and stipulates that the State and Federal courts located in the
County of San Francisco, State of California shall have in personam jurisdiction
and venue over each of them for the purpose of litigating any dispute,
controversy, or proceeding arising out of or related to this Agreement. Each
party hereby authorizes and accepts service of process sufficient for personal
jurisdiction in any action against it as contemplated by this paragraph by
registered or certified mail, return receipt requested, postage prepaid, to its
address for the giving of notices as set forth in this Agreement, or in the
manner set forth in Section 12(a) of this Agreement for the giving of notice.
Any final judgment rendered against a party in any action or proceeding shall be
conclusive as to the subject of such final judgment and may be enforced in other
jurisdictions in any manner provided by law.
(d) GOVERNING LAW. This Agreement shall be governed by and construed
in accordance with the substantive laws of the State of California, without
giving effect such state's choice-of-law principles.
(e) ATTORNEYS' FEES. In any action at law or suit in equity in
relation to this Agreement, the prevailing party in such action or suit shall be
entitled to receive a reasonable sum for its attorneys' fees and all other
reasonable costs and expenses incurred in such action or suit.
(f) ENTIRE AGREEMENT; SEVERABILITY. This Agreement and the
Confidentiality Agreements by and between RCA and BARRA, dated November 2, 1995
and February 15, 1996 and the documents, certificates, agreements, letters,
schedules and exhibits attached or required to be delivered pursuant hereto set
forth the entire
43.
<PAGE>
agreement and understanding of the parties in respect of the transactions
contemplated hereby, and supersede all prior agreements, arrangements and
understandings relating to the subject matter hereof. Each provision of this
Agreement shall be interpreted in a manner to be effective and valid under
applicable law, but if any provision hereof shall be prohibited or ruled invalid
under applicable law, the validity, legality and enforceability of the remaining
provisions shall not, except as otherwise required by law, be affected or
impaired as a result of such prohibition or ruling.
(g) COUNTERPARTS. This Agreement may be executed in several
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(h) WAIVERS. Prior to or on the Effective Date, each of BARRA, RCA
and the RCA Shareholders shall have the right to waive any default in the
performance of any term of this Agreement by BARRA, RCA, and the RCA
Shareholders, to waive or extend the time for the compliance or fulfillment by
the other of any and all of the other's obligations under this Agreement and to
waive any or all of the conditions precedent to its obligations under this
Agreement. No failure to exercise and no delay in exercising any right, remedy
or power hereunder shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, remedy or power hereunder preclude any other or
further exercise thereof or the exercise of any other right, remedy or power
provided herein or by law or in equity. The waiver by any party of the time for
performance of any act or condition hereunder does not constitute a waiver of
the act or condition itself.
44.
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IN WITNESS WHEREOF, BARRA, RCA and the RCA Shareholders have each caused
this Agreement and Plan of Reorganization to be signed, effective as of the date
written above.
BARRA, INC.
By: /s/ Andrew Rudd
--------------------------------
Title: Chairman and CEO
-----------------------------
ROGERS, CASEY & ASSOCIATES, INC.
By: /s/ John Casey
--------------------------------
Title: President
-----------------------------
The RCA Shareholders:
/s/ Stephen Rogers
- - -----------------------------------
Stephen Rogers
/s/ John Casey
- - -----------------------------------
John F. Casey
45.
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Schedule A
Determination of Exchange Ratio
The Exchange Ratio is determined by dividing the Merger Consideration, as
herein defined, by the aggregate number of RCA Shares issued and outstanding on
the date of this Agreement, plus all RCA Shares that would be issued upon the
exercise of all vested and unvested options or other rights to purchase RCA
Shares minus the number of RCA Shares repurchased prior to the Effective Date
pursuant to Section 7(q). The aggregate number of shares of BARRA Common Stock
to be issued as consideration in the Merger (the "Merger Consideration") shall
equal $15.5 million minus all RCA Notes payable as reflected in the Note
Certificate delivered to BARRA pursuant to Section 3.2(g) of the Agreement (as
later adjusted to reflect any RCA indebtedness created pursuant to the
repurchase of any RCA Shares under Section 7(q)) (the "Base Price"), divided by
$24.23835 (the "Agreed Price").
The following formulae illustrate the foregoing provisions:
Exchange Ratio Merger Consideration
----------------------------
= all RCA Shares and options
$15.5 M - Notes Payable
----------------------------
Merger Consideration = Agreed Price
EFFECTIVE DATE ADJUSTMENTS TO MERGER CONSIDERATION:
++ In the event that the RCA Expenses as defined in Section 7(j), on the
Effective Date, exceed $233,000 (after giving effect to any recoveries
by RCA of any such RCA Expenses prior to the Effective Date), the Base
Price shall be decreased by the amount of such excess.
++ In the event that RCA's borrowings under its lines of credit exceed
the $650,000 maximum established in Section 3.2(h)(6) on the Effective
Date, the Base Price shall be decreased by the amount of such excess.
1.
<PAGE>
EXHIBIT 99.11
<PAGE>
ANNEX E
<PAGE>
DELAWARE GENERAL CORPORATION LAW
SECTION 262
SECTION 262. APPRAISAL RIGHTS.
(a) Any stockholder of a corporation of this State who holds shares of
stock on the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares through
the effective date of the merger or consolidation, who has otherwise complied
with subsection (d) of this section and who has neither voted in favor of the
merger or consolidation nor consented thereto in writing pursuant to Section 228
of this title shall be entitled to an appraisal by the Court of Chancery of the
fair value of his shares of stock under the circumstances described in
subsections (b) and (c) of this section. As used in this section, the word
"stockholder" means a holder of record of stock in a stock corporation and also
a member of record of a nonstock corporation; the words "stock" and "share" mean
and include what is ordinarily meant by those words and also membership or
membership interest of a member of a nonstock corporation; and the words
"depository receipt" mean a receipt or other instrument issued by a depository
representing an interest in one or more shares, or fractions thereof, solely of
stock of a corporation, which stock is deposited with the depository.
(b) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation to be
effected pursuant to Section 251, 252, 254, 257, 258, 263 or 264 of this title:
(1) Provided, however, that no appraisal rights under this section
shall be available for the shares of any class or series of stock, which stock,
or depository receipts in respect thereof, at the record dated fixed to
determine the stockholders entitled to receive notice of and to vote at the
meeting of stockholders to act upon the agreement of merger or consolidation,
were either (i) listed on a national securities exchange or designated as a
national market system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or (ii) held of record by more
than 2,000 holders; and further provided that no appraisal rights shall be
available for any shares of stock of
<PAGE>
the constituent corporation surviving a merger if the merger did not require for
its approval the vote of the holders of the surviving corporation as provided in
SUBSECTIONS (f) OR (g) of Section 251 of this title.
(2) Notwithstanding paragraph (1) of this subsection, appraisal
rights under this section shall be available for the shares of any class or
series of stock of a constituent corporation if the holders thereof are required
by the terms of an agreement of merger or consolidation pursuant to Sections
251, 252, 254, 257, 258, 263 and 264 of this title to accept for such stock
anything except:
a. Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect thereof;
b. Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock or depository receipts at the
effective date of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market system security
on an interdealer quotation system by the National Association of Securities
Dealers, Inc. or held of record by more than 2,000 holders;
c. Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of this paragraph;
or
d. Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository receipts described in
the foregoing subparagraphs a., b. and c. of this paragraph.
(3) In the event all of the stock of a subsidiary Delaware
corporation party to a merger effected under Section 253 of this title is not
owned by the parent corporation immediately prior to the merger, appraisal
rights shall be available for the shares of the subsidiary Delaware corporation.
(c) Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate of
incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the assets of
the corporation. If the certificate of incorporation contains such a provision,
the procedures of this section, including those set forth in subsections (d) and
(e) of this section shall apply as nearly as is practicable.
<PAGE>
(d) Appraisal rights shall be perfected as follows:
(1) If a proposed merger or consolidation for which appraisal rights
are provided under this section is to be submitted for approval at a meeting of
stockholders, the corporation, not less than 20 days prior to the meeting, shall
notify each of its stockholders who was such on the record date for such meeting
with respect to shares for which appraisal rights are available pursuant to
subsections (b) or (c) hereof that appraisal rights are available for any or all
of the shares of the constituent corporations, and shall include in such notice
a copy of this section. Each stockholder electing to demand the appraisal of
his shares shall deliver to the corporation, before the taking of the vote on
the merger or consolidation, a written demand for appraisal of his shares. Such
demand will be sufficient if it reasonably informs the corporation of the
identity of the stockholder and that the stockholder intends thereby to demand
the appraisal of his shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder electing to
take such action must do so by a separate written demand as herein provided.
Within 10 days after the effective date of such merger or consolidation, the
surviving or resulting corporation shall notify each stockholder of each
constituent corporation who has complied with this subsection and has not voted
in favor of or consented to the merger or consolidation of the date that the
merger or consolidation has become effective; or
(2) If the merger or consolidation was approved pursuant to Section
228 or 253 of this title, the surviving or resulting corporation, either before
the effective date of the merger or consolidation or within 10 days thereafter,
shall notify each of the stockholders entitled to appraisal rights of the
effective date of the merger or consolidation and that appraisal rights are
available for any or all of the shares of the constituent corporation, and shall
include in such notice a copy of this section. The notice shall be sent by
certified or registered mail, return receipt requested, addressed to the
stockholder at his address as it appears on the records of the corporation. Any
stockholder entitled to appraisal rights may, within 20 days after the date of
mailing of the notice, demand in writing from the surviving or resulting
corporation the appraisal of his shares. Such demand will be sufficient if it
reasonably informs the corporation of the identity of the stockholder and that
the stockholder intends thereby to demand the appraisal of his shares.
<PAGE>
(e) Within 120 days after the effective date of the merger or
consolidation the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise entitled to
appraisal rights, may file a petition in the Court of Chancery demanding a
determination of the value of the stock of all such stockholders.
Notwithstanding the foregoing, at any time within 60 days after the effective
date of the merger or consolidation, any stockholder shall have the right to
withdraw his demand for appraisal and to accept the terms offered upon the
merger or consolidation. Within 120 days after the effective date of the merger
or consolidation, any stockholder who has complied with the requirements of
subsections (a) and (d) hereof, upon written request, shall be entitled to
receive from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares not voted
in favor of the merger or consolidation and with respect to which demands for
appraisal have been received and the aggregate number of holders of such shares.
Such written statement shall be mailed to the stockholder within 10 days after
his written request for such a statement is received by the surviving or
resulting corporation or within 10 days after expiration of the period for
delivery of demands for appraisal under subsection (d) hereof, whichever is
later.
(f) Upon the filing of any such petition by a stockholder, service of a
copy thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the Register in
Chancery in which the petition was filed a duly verified list containing the
names and addresses of all stockholders who have demanded payment for their
shares and with whom agreements as to the value of their shares have not been
reached by the surviving or resulting corporation. If the petition shall be
filed by the surviving or resulting corporation, the petition shall be
accompanied by such a duly verified list. The Register in Chancery, if so
ordered by the Court, shall give notice of the time and place fixed for the
hearing of such petition by registered or certified mail to the surviving or
resulting corporation and to the stockholders shown on the list at the
addresses therein stated. Such notice shall also be given by 1 or more
publications at least 1 week before the day of the hearing, in a newspaper of
general circulation published in the City
<PAGE>
of Wilmington, Delaware or such publication as the Court deems advisable. The
forms of the notices by mail and by publication shall be approved by the Court,
and the costs thereof shall be borne by the surviving or resulting corporation.
(g) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become entitled to
appraisal rights. The Court may require the stockholders who have demanded an
appraisal for their shares and who hold stock represented by certificates to
submit their certificates of stock to the Register in Chancery for notation
thereon of the pendency of the appraisal proceedings; and if any stockholder
fails to comply with such direction, the Court may dismiss the proceedings as to
such stockholder.
(h) After determining the stockholders entitled to an appraisal, the
Court shall appraise the shares, determining their fair value exclusive of
any element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any, to be
paid upon the amount determined to be the fair value. In determining such
fair value, the Court shall take into account all relevant factors. In
determining the fair rate of interest, the Court may consider all relevant
factors, including the rate of interest which the surviving or resulting
corporation would have had to pay to borrow money during the pendency of the
proceeding. Upon application by the surviving or resulting corporation or by
any stockholder entitled to participate in the appraisal proceeding, the
Court may, in its discretion, permit discovery or other pretrial proceedings
and may proceed to trial upon the appraisal prior to the final determination
of the stockholder entitled to an appraisal. Any stockholder whose name
appears on the list filed by the surviving or resulting corporation pursuant
to subsection (f) of this section and who has submitted his certificates of
stock to the Register in Chancery, if such is required, may participate fully
in all proceedings until it is finally determined that he is not entitled to
appraisal rights under this section.
(i) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation to the
stockholders entitled thereto. Interest may be simple or compound, as the Court
may direct. Payment shall be so made to each such stockholder, in the case of
holders of uncertificated stock
<PAGE>
forthwith, and the case of holders of shares represented by certificates upon
the surrender to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court of Chancery may
be enforced, whether such surviving or resulting corporation be a corporation of
this State or of any state.
(j) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and the
fees and expenses of experts, to be charged pro rata against the value of all
the shares entitled to an appraisal.
(k) From and after the effective date of the merger or consolidation, no
stockholder who has demanded his appraisal rights as provided in subsection (d)
of this section shall be entitled to vote such stock for any purpose or to
receive payment of dividends or other distributions on the stock (except
dividends or other distributions payable to stockholders of record at a date
which is prior to the effective date of the merger or consolidation); provided,
however, that if no petition for an appraisal shall be filed within the time
provided in subsection (e) of this section, or if such stockholder shall deliver
to the surviving or resulting corporation a written withdrawal of his demand for
an appraisal and an acceptance of the merger or consolidation, either within
60 days after the effective date of the merger or consolidation as provided in
subsection (e) of this section or thereafter with the written approval of the
corporation, then the right of such stockholder to an appraisal shall cease.
Notwithstanding the foregoing, no appraisal proceeding in the Court of Chancery
shall be dismissed as to any stockholder without the approval of the Court, and
such approval may be conditioned upon such terms as the Court deems just.
(l) The shares of the surviving or resulting corporation to which the
shares of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of authorized and
unissued shares of the surviving or resulting corporation. (Last amended by
Ch. 79, L. '95, eff. 7-1-95.)
